GENERAL OVERVIEW OF THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS IN RUSSIA
Author: Roman Zykov
LEGAL FRAMEWORK
Russia, as the successor of the USSR, is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the "New York Convention").
The procedure for the recognition and enforcement of foreign arbitral awards is laid out in detail in the Russian national legislation.
Russia is a Model Law jurisdiction, which means that the Law on International Commercial Arbitration is based on the UNCITRAL Model Law. The law regulates most of the aspects of international commercial arbitration when the seat of arbitration is in Russia. In addition, the law regulates general issues related to the recognition and enforcement of foreign arbitral awards, such as the grounds for refusing the recognition and enforcement.
The Arbitrazh (Commercial) Procedure Code governs the procedural aspects of the recognition and enforcement process. It defines the filing procedure and the documents required by state courts for granting the recognition and enforcement of foreign arbitral awards.
ARBITRATION AGREEMENT
An arbitration agreement is an agreement under which the parties undertake to submit to arbitration all or any differences which have arisen, or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.
Russian law requires that arbitration agreements shall be done in writing. By the term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams. Arbitration agreements can also be concluded by reference to standard forms, such as terms of business, professional rules etc. Arbitration agreements can be included in statutory documents of companies and shareholders’ agreements.
JURISDICTION AND PROCEDURE
Applications for the recognition and enforcement of foreign arbitral awards in commercial disputes are submitted by a party to arbitration to the state Arbitrazh court of the first instance at the location of a debtor or its assets. The application for the recognition and enforcement shall be accompanied by the certified copies of the arbitral award and arbitration agreement.
A sole judge shall rule on the application within one month from the filing. The ruling can be appealed in the cassation instance within one month. Ultimately, the matter can be brought before the Supreme Court for the final resolution.
GROUNDS FOR REFUSAL
Grounds for refusal to recognize and enforce of foreign arbitral awards are laid down in Article 36 of the Law on International Commercial Arbitration which replicates the grounds provided by Article V of the New York Convention.
Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the state Arbitrazh court proof that:
(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
In addition, recognition and enforcement of an arbitral award may also be refused if the state Arbitrazh court finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of that country.
STATISTICS
On average, there are 50 applications for the recognition and enforcement of the foreign arbitral awards filed every year. Even though some several years ago only a small portion of foreign awards were recognized in Russia, the latest statistics show that Russian courts have improved substantially. In 2013, only 24 out of 43 foreign arbitral awards were recognized and enforced by Russian state commercial courts. Whereas, already in 2014, 43 out of 55 foreign arbitral awards were recognized and enforced. Similarly, in 2015, 42 out of 54 foreign arbitral awards were recognized and enforced by Russian state commercial courts, which brings the ratio of successful applications up to 78%.
The average case duration from the moment a party files its application to the date when the final ruling is issued by Russian courts comprises less than 5 months. In 2013 the average duration of proceedings was 4,6 months, in 2014 – 3 months, and in 2015 – 4,5 months.
As it was explained above, Russian courts have limited grounds for refusing the applications for the recognition and enforcement. Statistics show that the lack of notification of a party of the arbitral proceedings is the most commonly used ground leading to the refusal (Article V (1) (b) of the New York Convention). During 2013-2015 the courts issued 13 rulings denying the recognition and enforcement invoking this ground. Among other grounds invoked by debtors during the reviewed period were Article V (1) (a) – invalidity of arbitration agreement; Article V (1) (c) – excess of mandate by arbitrators; Article V (1) (e) – the award has not become binding; and Article V (2) (b) – the public policy defense.
LEGAL FRAMEWORK
Russia, as the successor of the USSR, is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the "New York Convention").
The procedure for the recognition and enforcement of foreign arbitral awards is laid out in detail in the Russian national legislation.
- The Law on International Commercial Arbitration (No. 5338-1, 7 July 1993, amended on 29 December 2015);
- The Arbitrazh (Commercial) Procedure Code.
Russia is a Model Law jurisdiction, which means that the Law on International Commercial Arbitration is based on the UNCITRAL Model Law. The law regulates most of the aspects of international commercial arbitration when the seat of arbitration is in Russia. In addition, the law regulates general issues related to the recognition and enforcement of foreign arbitral awards, such as the grounds for refusing the recognition and enforcement.
The Arbitrazh (Commercial) Procedure Code governs the procedural aspects of the recognition and enforcement process. It defines the filing procedure and the documents required by state courts for granting the recognition and enforcement of foreign arbitral awards.
ARBITRATION AGREEMENT
An arbitration agreement is an agreement under which the parties undertake to submit to arbitration all or any differences which have arisen, or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.
Russian law requires that arbitration agreements shall be done in writing. By the term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams. Arbitration agreements can also be concluded by reference to standard forms, such as terms of business, professional rules etc. Arbitration agreements can be included in statutory documents of companies and shareholders’ agreements.
JURISDICTION AND PROCEDURE
Applications for the recognition and enforcement of foreign arbitral awards in commercial disputes are submitted by a party to arbitration to the state Arbitrazh court of the first instance at the location of a debtor or its assets. The application for the recognition and enforcement shall be accompanied by the certified copies of the arbitral award and arbitration agreement.
A sole judge shall rule on the application within one month from the filing. The ruling can be appealed in the cassation instance within one month. Ultimately, the matter can be brought before the Supreme Court for the final resolution.
GROUNDS FOR REFUSAL
Grounds for refusal to recognize and enforce of foreign arbitral awards are laid down in Article 36 of the Law on International Commercial Arbitration which replicates the grounds provided by Article V of the New York Convention.
Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the state Arbitrazh court proof that:
(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
In addition, recognition and enforcement of an arbitral award may also be refused if the state Arbitrazh court finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of that country.
STATISTICS
On average, there are 50 applications for the recognition and enforcement of the foreign arbitral awards filed every year. Even though some several years ago only a small portion of foreign awards were recognized in Russia, the latest statistics show that Russian courts have improved substantially. In 2013, only 24 out of 43 foreign arbitral awards were recognized and enforced by Russian state commercial courts. Whereas, already in 2014, 43 out of 55 foreign arbitral awards were recognized and enforced. Similarly, in 2015, 42 out of 54 foreign arbitral awards were recognized and enforced by Russian state commercial courts, which brings the ratio of successful applications up to 78%.
The average case duration from the moment a party files its application to the date when the final ruling is issued by Russian courts comprises less than 5 months. In 2013 the average duration of proceedings was 4,6 months, in 2014 – 3 months, and in 2015 – 4,5 months.
As it was explained above, Russian courts have limited grounds for refusing the applications for the recognition and enforcement. Statistics show that the lack of notification of a party of the arbitral proceedings is the most commonly used ground leading to the refusal (Article V (1) (b) of the New York Convention). During 2013-2015 the courts issued 13 rulings denying the recognition and enforcement invoking this ground. Among other grounds invoked by debtors during the reviewed period were Article V (1) (a) – invalidity of arbitration agreement; Article V (1) (c) – excess of mandate by arbitrators; Article V (1) (e) – the award has not become binding; and Article V (2) (b) – the public policy defense.