Arbitration.

a. Domestic Arbitration: Selection and appointment of arbitrators.

Private arbitration tribunals are getting increasingly popular in Russia. The Russian law allows the parties to remove their existing or future disputes from the competence of the state courts by concluding an “the agreement to arbitrate” or inserting an arbitration clause in their contract. In cases pending before a state court, the agreement to arbitrate may be concluded at any time before the state court makes a decision on the merits. In such cases, the dispute will be subject to the jurisdiction of a private arbitration tribunal.

Domestic arbitration is regulated by the Federal Law on Arbitration Tribunals of 24 July 2002 No. 102-FZ. Under the provisions of this Law arbitration tribunals have the power to resolve virtually any dispute between individuals and/or legal entities both on private and commercial matters. The Law regulates domestic arbitration only. International commercial arbitration is governed by special legislation which is described below.

The Law on Arbitration Tribunals authorizes both institutional and ad hoc arbitration.

The number of arbitrators must be odd. An individual arbitrator or chairman of a panel must have the higher education degree in law. Individuals who are legally incapable or charged with a crime cannot serve as arbitrators. The possibility of an individual to hold a position of an arbitrator may be limited by its official office (e.g. judges, governmental officials, etc.). Should authorities of a judge, an advocate, an official of law-enforcement bodies be terminated due to professional misconduct such an individual may not serve as an arbitrator.

The procedure of appointment of arbitrators may be prescribed by an agreement of the parties or by the rules of the institutional arbitration tribunal. In absence of such special agreement or rules, the default procedure provided for under Art. 10 of the Federal Law on Arbitration Tribunals shall apply as follows. The panel consists of three arbitrators. Each party nominates one arbitrator and then the two arbitrators appointed by the parties nominate the third arbitrator. If within 15 days of receipt of a notice regarding appointment of an arbitrator by one party, the other party fails to appoint an arbitrator, or if within the same period the two arbitrators do not reach an agreement on the third arbitrator, the procedure is terminated and the dispute may be transferred to the state court. If the dispute shall be submitted to a sole arbitrator and within 15 days after one party had made an offer to the other party the arbitrator was not appointed, the arbitration procedure is terminated and the dispute may be submitted to the state court.

An agreement to arbitrate must be made in writing; otherwise, it is considered void.

b. Domestic Arbitration: Enforcement of arbitration awards.

In case of economic disputes, the decision of a private arbitration tribunal has to be complied with voluntarily within the period prescribed by the decision. If the decision is not complied with voluntarily within the prescribed period, the prevailing party can file the motion to issue a writ of execution with the competent court having jurisdiction over the territory where the debtor or its property (in case a domicile of a debtor is unknown) is located. Such motion must be filed within three years after the expiration of the deadline for voluntary compliance. The matter shall be resolved by a judge within one month. The motion to issue a writ of execution on the basis of the decision of a private arbitration tribunal may be denied for any of the following reasons:

1. The evidence will be represented by the party that:

• The agreement to arbitrate is invalid on the basis provided for by the federal law;

• The award of the arbitration tribunal resolved a dispute not contemplated by the terms of the arbitration agreement or contains decisions on matters beyond the scope of the arbitration agreement. At the same time the arbitration award shall be recognized and enforced in a separable part which comply with the arbitration agreement.

• The formation of the arbitration tribunal or the arbitration procedure did not conform to the arbitration agreement or provisions of the federal law; or

• The party against whom the arbitration award is invoked, was not given a proper notice of the appointment of an arbitrator or of the arbitration proceedings or was otherwise unable to present its case...

2. The competent court will on its own find out that:

• The subject matter in dispute could not be resolved by arbitration under the Russian law; or

• The award of the arbitration tribunal contradicts basic principles of the Russian Law.

c. Domestic Arbitration: Non-arbitrable issues.

Not all disputes falling under the jurisdiction of state courts may be arbitrated. The Law on Arbitration Tribunals provides for that any dispute on private or commercial matters both between individuals and legal bodies may be resolved by arbitration tribunals, unless otherwise is provided by the federal law. For instance, pursuant to Art. 33 of the Law on Insolvency (Bankruptcy), bankruptcy cases are beyond the jurisdiction of arbitration tribunals. Disputes arising from administrative governance relations, such as suits in which an act of government is challenged, are not arbitrable.

d. Domestic Arbitration: Appeal from Awards.

Under the law on Arbitration Tribunals, the arbitration award is appealable on a limited number of procedural grounds but not on the substance, unless the arbitration agreement expressly provides that the award is final (Art. 40). The party has the right to appeal within 3 months after the award of the arbitration tribunal was received by the party. The appeal may be rejected for the same reasons as the motion to issue a writ (see section “b”) The order of appeal is provided by the Chapter 30 of the APC and the Chapter 46 of the CPC. Should the award be reversed, each party has the right to bring an action to the arbitration tribunal in accordance with the arbitration agreement, except for the cases when the award is reversed under one of the following reasons: (a) the arbitration agreement is invalid, (b) the dispute is beyond the scope of the arbitration agreement or (c) the dispute is not arbitrable.

e. International commercial arbitration.

Establishment and activity of private international arbitration tribunals in Russia is governed by the law of the Russian Federation No. 5338-1 of July 7, 1993, On the International Commercial Arbitration. This law is based on the UNCITRAL model law. Most provisions of the law have effect only for arbitration proceedings that are conducted in Russia where at least one party to a dispute is a foreign business or an “business with foreign investments” as defined by the Russian legislation.

However, provisions of Art. 8 and 9 (jurisdiction of a national court and interim measures) and Art. 35 and 36 (setting aside the award and enforcement of the award) apply also to arbitrations that have taken place abroad.

In addition, international arbitration in Russia is governed by a number of international conventions regarding international arbitration and enforcement of foreign arbitration awards. The Russian Federation is a party to New York Convention on the Enforcement of Foreign Arbitration Awards (1958) and European Convention on International Commercial Arbitration (1961). Some bilateral treaties of Russia (formerly USSR) with other countries include provisions relevant to arbitration and enforcement of arbitration awards. Two examples are the USSR-FRG Treaty On General Issues of Trade and Navigation of 25 April 1958 and the USSR-Austria Treaty on Trade and Navigation of 17 October 1955.

It is a general rule of the Russian law that an arbitration clause is a bar to conduct of a substantive proceeding by a national court. As an exception to this rule, the law On International Commercial Arbitration explicitly states that proceedings ancillary to arbitration (such as the attachment to secure the arbitration award) “are not incompatible with the agreement to arbitrate”.

Appeal from an award of an international commercial arbitration tribunal is possible as an exclusive remedy. It may be granted on a limited number of reasons listed in Art. 34 of the law. The motion to set aside the arbitration award must be filed within three months after the party moving to set the award aside was notified of the award and is processed in accordance with the rules contained in Chapter 46 of the CPC or Chapter 30 of APC.

This motion may be granted if an applicant proves that counter-party to the agreement to arbitrate (1) was legally incapable or that the agreement to arbitrate is unenforceable under the applicable law selected by the parties, and should parties fail to select such a law, under the law of the Russian Federation, (2) that the party making the motion to set aside was not given proper notice of the appointment of an arbitrator or of the arbitration proceedings or was otherwise unable to present his case, (3) the award deals with a dispute not contemplated by or not falling within the terms of the agreement to arbitrate or contains decisions on matters beyond the scope of the agreement to arbitrate, (4) the composition of the arbitration tribunal or the arbitration procedure was not in accordance with the agreement of the parties, or where such agreement was absent, not in accordance with the law on International Commercial Arbitration, (5) the state court finds that the subject matter in dispute could not be resolved by arbitration under the law of the Russian Federation, (6) the arbitration award is in conflict with the public policy of the Russian Federation.

The procedure of enforcement of international arbitration awards is governed mainly by the APC, the CPC and the law On International Commercial Arbitration. The APC provides for the procedure of enforcement of both foreign and national arbitration awards (Paragraph 2 of the Chapter 30 of the APC) and in the foreign states (Chapter 31 of the APC). If the arbitration was held in the Russian Federation, the procedure of enforcement of awards is similar to that provided for domestic arbitration tribunals (see section “b”). If the arbitration proceedings took place in the foreign states, to enforce the award one shall follow nearly the same two-step procedure as that provided for enforcement of foreign judgments. First, the domestication procedure takes place, which culminates in a judge of a court of general jurisdiction issuing a decision to order enforcement. Second, the writ of execution which is issued is enforced in accordance with the regular procedure. The Chapter 45 (Art. 416-417) of the CPC governs the procedure of enforcement of international awards irrespective of place where the proceedings were held. The choice of the procedure depends on the competence of the courts. Generally awards in commercial matters will be within the competence of the arbitrazh courts (in accordance with the APC) and awards on private matters will be within the competence of the courts of general jurisdiction (in accordance with the CPC).

The court may refuse recognition or enforcement of an arbitration award on the grounds provided for under Art. 36 of the law On International Commercial Arbitration, and also in Art. 244 of the APC and in Art. 412, 414 of the CPC which are as follows:

• a party to the arbitration agreement was 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

• the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitrator proceedings or was otherwise unable to present its case; or

• the award deals with a dispute 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

• the composition of the arbitration tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, in the absence of such agreement, was not in accordance with the law of the country where the arbitration took place; or the award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, that award was made; or

• the subject matter of the dispute is not capable of settlement by arbitration under the law of the Russian Federation; or

• the recognition or enforcement of the award would be contrary to the public policy of the Russian Federation.
It is important to underscore that provisions of the law On International Commercial Arbitration yield to international treaties. That is, if the international treaty provides for an alternative list of grounds for non-recognition, only the grounds cited in the treaty shall apply.