Russian Court's mistakes in recognition of foreign arbitral awards

Jul 1, 2019

On the one hand, as an English court notes, Russian courts may apply "the public policy exception to enforcement in an expansive way." [1] Therefore, "it is difficult to predict when enforcement will be refused on such grounds." [2]

On the other hand, Russian courts may error in application of the law, for example:

  • dealing with enforcement of foreign court judgements, Russian courts may apply the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) to the matter, and;

  • dealing with enforcement of foreign arbitral awards, Russian courts may apply the law aimed at the enforcement of foreign court judgements under the Arbitrazh Procedure Code, instead of the New York Convention.

There is a recent case by a Moscow court, which illustrates the second hypothesis. A party brought an action before the Arbitrazh State Court of the City of Moscow (the “Court”) seeking recognition and enforcement of a foreign arbitral award issued in Mongolia in 2017 (the “Award”).

Russia and Mongolia are the States Parties to the New York Convention. Therefore, the Court should have considered the matter in accordance with the provisions of the New York Convention. However, the Court failed to do so.

The Court mistakenly applied Article 244 (1) of the Arbitrazh Procedure Code providing for the grounds for refusing the recognition and enforcement of foreign state courts judgements. In particular, Article 244 (1)(2) of the Arbitrazh Procedure Code specifies that a Russian court refuses the enforcement of a foreign court judgement if the defendant was not given proper notice of the court proceedings in a foreign State or was unable to present his case.

Article 244 (1) of the Arbitrazh Procedure Code shall not apply in the case at hand, because it does not apply to foreign arbitral awards. Neither the applicant nor the respondent participated in the court proceedings. Consequently, the Court applied Article 244 (1) ex officio. As the result, the Court having established that the losing party in the Award was not given proper notice of the arbitration proceedings, and therefore refused to recognize and enforce the Award.

Such erroneous application has a number of negative consequences. A party seeking enforcement may not always predict the result of the court proceedings. The party believes that the matter will be examined under the New York Convention, rather than the provisions of the Arbitrazh Procedure Code related to enforcement of foreign court judgements. Hence, the Russian courts undermine the party's expectation, and foreign arbitral awards become unenforceable in Russia.

To overcome this practice, the party seeking recognition and enforcement of a foreign arbitral award shall be always represented in the state court proceedings to be ready to explain a correct application of the recognition and enforcement proceedings.

The court ruling in case А40-6300/19-19-51 dated 29 May 2019 is available in Russian here

[1] PJSC Tatneft v Bogolyubov & Ors [2019] EWHC 1400 (Comm) (EWHC (Comm)) [51].

[2] Ibid.


Mikhail Samoylov