1 Legal framework
1.1 What is the relevant legislation on arbitration in your jurisdiction? Are there any significant limitations on the scope of the statutory regime – for example, does it govern oral arbitration agreements?
Arbitration in Russia is governed by a number of legislative acts, including arbitration-specific laws, arbitration-related provisions of commercial and civil procedure codes and other acts, in addition to other international agreements (eg, the 1958 New York Convention).
The main statutes governing arbitration in Russia are:
- Federal Law 382-FZ of 29 December 2015 "On Arbitration (Arbitral Proceedings) in the Russian Federation" (‘Law on Arbitration'); and
- the Law of the Russian Federation 5338-I of 7 July 1993 "On International Commercial Arbitration" (‘ICA Law') (together, the ‘Arbitration Laws').
Several provisions of the Commercial (Arbitrazh) Procedure Code and the Civil Procedure Code also govern certain specific issues relating to arbitration, including the limitations on arbitrability and interaction with state courts.
The ICA Law governs international arbitrations seated in Russia. The Law on Arbitration, while primarily governing domestic arbitration, also includes a number of provisions relevant to international arbitration. The Law on Arbitration also includes several specific provisions which, among other things:
- regulate the arbitration of corporate disputes; and
- set out requirements in respect of the establishment and functioning of permanent arbitral institutions.
In terms of limitations to the statutory regime, the Law on Arbitration provides that the specifics of sports arbitration are regulated by Federal Law 329-FZ of 4 December 2007 "On Physical Culture and Sport in the Russian Federation", rather than the Law on Arbitration.
1.2 Does this legislation differentiate between domestic arbitration and international arbitration? If so, how is each defined?
As logically follows from the separation of the laws regulating domestic and international arbitrations, Russian law indeed makes such a distinction. However, following the recent reform, the two regimes are now almost identical, with some minor procedural differences.
The distinction between international and domestic arbitration is envisaged as follows. Pursuant to Article 1 of the ICA Law, an arbitration will be an international commercial arbitration where:
- the dispute arises from a civil law agreement in foreign trade or other international economic relations; and
- at least one of the parties has its commercial enterprise operations abroad; or
- the place where the majority of the respective obligations must be performed or the place that has the closest connection to the subject matter of the dispute is abroad.
The ICA Law also provides that an arbitration will be an international commercial arbitration where the dispute arises from foreign investments made in Russia or Russian investments made abroad.
The Law on Arbitration, on the other hand, provides that any arbitration that is not deemed international commercial arbitration will be considered domestic arbitration (Article 2(4)).
1.3 Is the arbitration legislation in your jurisdiction based on the UNCITRAL Model Law on International Commercial Arbitration?
The ICA Law is based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration and mirrors its provisions in respect of the cornerstone procedural issues, such as:
- the validity and interpretation of an arbitration agreement;
- the appointment of and challenges to arbitrators; and
- the rules governing the conduct of arbitration.
The same is true for the Law on Arbitration, which is also based on the UNCITRAL Model Law. In addition to regulating the arbitral procedure in line with the UNCITRAL Model Law, it includes special regulations on the establishment and functioning of permanent arbitral institutions in Russia, among other things.
In terms of the differences between the ICA Law and the UNCITRAL Model Law, the most notable pertains to the way in which ICA Law defines ‘international' arbitration. The UNCITRAL Model Law provides that arbitration is international if:
- the parties have their place of business in different states;
- the seat is situated outside the country of the parties' place of business;
- the place where a substantial part of the obligations is to be performed is outside the countries of the parties' place of business; or
- the parties agree that the subject matter of the dispute relates to more than one country.
The ICA Law, however, provides that it applies to Russia-seated arbitrations which have specific international elements (as mentioned in question 1.2), with only some provisions applicable to foreign-seated arbitrations (ie, regulating the recognition and enforcement of foreign arbitral awards).
1.4 Are all provisions of the legislation in your jurisdiction mandatory?
The rules of the Law on Arbitration and the ICA Law are mandatory to the extent that the Arbitration Laws themselves do not envisage any derogation therefrom (generally indicated by wording such as "unless agreed otherwise by the parties"). Both Arbitration Laws provide the possibility for derogation primarily with regard to various procedural issues. For instance, the ICA Law does not prevent anyone from acting as an arbitrator in a dispute due to his or her nationality, unless agreed otherwise by the parties. As a further example, the Law on Arbitration permits the parties to modify the definition of the ‘costs' of the arbitration.
Further, Russian law now permits the parties to conclude ‘direct agreements', which allow for derogation from significant legislative provisions, by concluding a separate direct (express) agreement to that effect. The parties can conclude such agreements only within arbitrations administered by permanent arbitral institutions. Such derogation shall not be effected by mere reference to the arbitration rules, but rather requires an explicit agreement by the parties.
By way of example, the parties can agree that, should a challenge to an arbitrator be rejected by the relevant designated body of a permanent arbitral institution, the parties will be barred from raising the same challenge before the state court. Furthermore, the parties can agree to limit the possibility of challenging the tribunal's jurisdiction before the state court. Most significantly, the parties can agree that an arbitral award shall be final and cannot be set aside by the state court.
1.5 Are there any current plans to amend the arbitration legislation in your jurisdiction?
The arbitration regime was comprehensively reformed between 2013 and 2016, during which the ICA Law was amended and the new Law on Arbitration was adopted; and no further major changes are expected in the near future. However, some minor amendments will be made to fine-tune the regulations, which will be introduced where necessary.
The most recent amendments introduced in 2020 include:
- the imposition of criminal liability for the bribery of an arbitrator (both for bribing an arbitrator and for an arbitrator illegally receiving money, with potential imprisonment for up to 12 years according to Article 200.7 of the Criminal Code); and
- the introduction of several procedural guarantees for persons targeted by sanctions who may be deprived of the opportunity of seeking judicial protection in foreign courts or arbitration outside Russia. In particular, the amendments to the Commercial (Arbitrazh) Procedure Code introduced the following:
- the exclusive jurisdiction of the Russian courts over disputes involving persons targeted by sanctions (as defined by the newly introduced Article 248.1 of the Commercial (Arbitrazh) Procedure Code), unless otherwise provided for by a treaty of the Russian Federation or a party agreement referring such disputes to foreign courts or arbitration seated outside Russia. Such persons may also resort to the Russian courts where an arbitration agreement involving them becomes unenforceable as a result of sanctions, thereby preventing their access to justice; and
- the rights of persons targeted by sanctions to apply to the Russian courts for anti-suit injunctions to prevent an opposing party from initiating or continuing proceedings in a foreign court or arbitration proceedings outside Russia, and for penalties for an opposing party's non-compliance with such an anti-suit injunction (Article 248.2 of the Commercial (Arbitrazh) Procedure Code).
1.6 Is your jurisdiction a signatory to the New York Convention? If so, have any reservations been made?
The Soviet Union, and the Russian Federation as its successor, is a party to the 1958 New York Convention. Upon ratification, the Soviet Union made the following reservation on the basis of reciprocity: "The Union of Soviet Socialist Republics shall apply the provisions of this Convention in respect of arbitral awards made in the territories of non-contracting States only to the extent to which they grant reciprocal treatment."
1.7 Is your jurisdiction a signatory to any other treaties relevant to arbitration?
In addition to the 1958 New York Convention, Russia is a signatory to the following relevant treaties:
- the 1961 European Convention on International Commercial Arbitration; and
- the 1972 Moscow Convention on the Arbitration of Civil Law Disputes Arising out of Economic, Scientific and Technological Cooperation.
In relation to investment arbitration, Russia is a signatory to the International Centre for Settlement of Investment Disputes Convention, although it has not ratified it.
Russia is also a signatory to approximately 81 bilateral investment treaties and free trade agreements with investment protection provisions (as of November 2020, according to the United Nations Conference on Trade and Development database).
2 Arbitrability and restrictions on arbitration
2.1 How is it determined whether a dispute is arbitrable in your jurisdiction?
Generally, all civil law disputes are arbitrable. An exhaustive list of exceptions to this presumption is contained in the Commercial (Arbitrazh) Procedure Code (Article 33) and the Civil Procedure Code (Article 22.1), and comprises:
- civil matters subject to ‘special proceedings' under the Civil Procedure Code (eg, filiation, emancipation of minors, amendment of civil status acts);
- family and inheritance disputes (except for matrimonial property disputes), eviction disputes and most employment disputes (except for certain sports employment disputes);
- disputes arising from the privatisation of state and municipal property, and public procurement contracts;
- personal injury disputes;
- compensation for environmental damage disputes;
- insolvency disputes;
- disputes over the registration of legal entities or individual entrepreneurs;
- disputes under the jurisdiction of the IP Court, and disputes arising from the protection of IP rights involving organisations of collective management of copyright and related rights;
- disputes concerning administrative and public matters, proceedings addressing delays in justice and the establishment of legally significant facts, and class action disputes subject to special procedures in the state courts; and
- certain corporate disputes:
- on the convocation of general shareholders' meetings;
- arising from notaries' activities in verifying share purchase agreements with regard to the shares of Russian limited liability companies;
- in relation to strategic enterprises (with some exceptions);
- on mandatory tender offers and squeeze-out procedures; and
- on the expulsion of shareholders from the company.
Other types of corporate disputes are arbitrable, subject to certain conditions (see question 2.2).
Several rulings of the Supreme Court of the Russian Federation (Rulings 305-ÝÑ17-7240 of 11 July 2018 and 307-ÝÑ19-7534 of 18 September 2019) have further confirmed that the issue of arbitrability should be decided solely through legislation, as opposed to case law.
2.2 Are there any restrictions on the choice of seat of arbitration for certain disputes?
Corporate disputes, in particular, are subject to specific rules regarding the choice of seat. With the exception of the non-arbitrable corporate disputes (listed in question 2.1), the law distinguishes between other broad categories of dispute, which can be referred to ‘conditionally arbitrable' and ‘unconditionally arbitrable'.
‘Conditionally arbitrable' disputes should be administered by permanent arbitral institutions in accordance with special rules and should be seated in Russia. They include disputes arising from:
- the establishment, reorganisation or liquidation of companies registered in Russia;
- the recovery of damages caused by management;
- the issuance of securities; and
- challenges to decisions of governing bodies of the company.
‘Unconditionally arbitrable' disputes should also be administered by permanent arbitral institutions. However, they need not be seated in Russia. They include disputes arising from the ownership of shares of companies registered in Russia, share purchase agreements and so on.
Although disputes arising from shareholders' agreements are subject to specific regulation, following recent amendments they are treated as ‘unconditionally arbitrable'. They should nevertheless be seated in Russia.
Finally, the recent Federal Law 69-FZ of 1 April 2020 "On Protection and Encouragement of Investments in the Russian Federation" (designed to facilitate domestic investments, rather than supersede the existing framework applicable to foreign investments in Russia) also allows disputes between the parties to investment contracts to be submitted to arbitration seated in Russia.
3 Arbitration agreement
3.1 What are the validity requirements for an arbitration agreement in your jurisdiction?
As a part of the arbitration reform in Russia, a presumption in favour of the validity and enforceability of an arbitration agreement was introduced in the Law on Arbitration (Article 7.8) and the ICA Law (Article 7.9). An agreement will be unenforceable only where it is impossible to determine the will of the parties from the express wording of the arbitration agreement.
However, in practice, the courts can exercise a significant degree of control over arbitration agreements – sometimes in a manner that raises questions among practitioners and commentators. Notably, in September 2018 an agreement that was nearly identical to the International Chamber of Commerce's (ICC) model arbitration clause was deemed unenforceable, as it did not specify the name of the arbitral institution administering the dispute – only the ICC rules themselves (Dredging and Maritime Management SA v Inzhtransstroy JSC, Ruling of the Russian Supreme Court of 26 September 2018). This clearly controversial result was promptly corrected by the Russian Supreme Court, which in late 2018 issued official guidelines for lower courts affirming the enforceability of arbitration clauses that follow model arbitration clauses provided by an arbitral institution.
In late 2019, the Russian Supreme Court in its Ruling of the Plenary Session 53 "On Performance of Functions of Support and Control in Regard of Arbitral Proceedings, International Commercial Arbitration by Courts of the Russian Federation" again expressly confirmed that arbitration clauses that comply with the model clauses of an arbitral institution are valid. Even where incomplete or unclear references to an institution are included in an agreement, it should not automatically be deemed invalid; instead, the court should try to determine what institution or rules the parties intended to govern their arbitration.
3.2 Are there any provisions of legislation or any other legal sources in your jurisdiction concerning the separability of arbitration agreements?
Both the Law on Arbitration and the ICA Law enshrine the principle of separability of the arbitration agreement from the main contract. Under Article 16 of both Arbitration Laws, the arbitration agreement, which forms part of the contract, must be treated as an independent agreement from other terms of such contract. Thus, a decision on the invalidity of the main contract does not affect the validity of the arbitration agreement.
This position was recently affirmed by the Russian Supreme Court, which stated in its Ruling of the Plenary Session 53 (see question 3.1) that the grounds for the invalidity of an arbitration agreement apply only to that agreement. The court should consider such grounds separately from the grounds for the invalidity of the main contract, and there will be overlap in those grounds for invalidity only in limited specific situations (eg, if the entire contract was forged).
3.3 Are there provisions on the seat and/or language of the arbitration if there is no agreement between the parties?
The regulations on the language of the proceedings are similar for both domestic and international arbitration: the parties may choose the preferred language of the proceedings by agreement (Article 24 of the Law on Arbitration; Article 22 of the ICA Law). There are minor differences in regulation in cases where there is no agreement between the parties. While the Law on Arbitration provides that in such case Russian will be the language of the proceedings, the ICA Law leaves it to the tribunal to determine the language.
Regarding the seat, Article 20 of the ICA Law provides that the parties are free to agree on the seat (‘place' being the exact terminology used by the law, following the United Nations Commission on International Trade Law Model Law). Absent agreement, the tribunal will determine the seat.
The rules of the permanent arbitral institutions provide several variations of this principle. For example:
- the Russian Arbitration Center at the Russian Institute of Modern Arbitration mirrors the language of the ICA Law;
- the Arbitration Centre at the Russian Union of Industrialists and Entrepreneurs designates Russia as the seat unless otherwise agreed by the parties; and
- the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation designates Russia as the default seat for both domestic and international arbitrations.
4 Objections to jurisdiction
4.1 When must a party raise an objection to the jurisdiction of the tribunal and how can this objection be raised?
A party that wishes to object to the tribunal's jurisdiction should raise its jurisdictional objections before that party has put forward its first statement on the merits of the case. A challenge to the tribunal's jurisdiction to adjudicate a case must be brought as soon as the question which, in the party's view, gives rise to such a jurisdictional challenge arises in the course of the proceedings (Articles 16.2 of the Arbitration Laws).
4.2 Can a tribunal rule on its own jurisdiction?
Both the Law on Arbitration and the Law on ICA (Articles 16) recognise the principle of kompetenz-kompetenz, which establishes a tribunal's ability to rule on its own jurisdiction as a preliminary matter, either in a separate ruling or in the final award. The tribunal can do so either of its own volition or upon a party's request objecting to the tribunal's jurisdiction. As stated above, such an objection must be raised prior to that party's first statement on the merits of the case.
4.3 Can a party apply to the courts of the seat for a ruling on the jurisdiction of the tribunal? In what circumstances?
The Russian courts must respect the principle of kompetenz-kompetenz, and thus must not consider any objections to the tribunal's jurisdiction made before the tribunal itself has had the opportunity to rule on its own jurisdiction. However, if the tribunal determines jurisdiction in a separate award in bifurcated proceedings, then the parties to the arbitration can challenge such a ruling within one month of its issue (Article 16.3 of the ICA Law). However, the parties can waive such a right by express agreement.
The Russian courts can also consider the validity of an arbitration agreement. If the arbitration agreement is found to be invalid, no longer in force or incapable of performance, the court must consider the claim on its merits (Article 148.5 of the Commercial (Arbitrazh) Procedure Code; Article 222 of the Civil Procedure Code).
5 The parties
5.1 Are there any restrictions on who can be a party to an arbitration agreement?
There are no restrictions in the Arbitration Laws on who can be a party to an arbitration agreement or arbitral proceedings.
The Law on Arbitration provides an exhaustive list of parties who can be subject to an arbitration agreement: legal entities, individual entrepreneurs and natural persons who are claimants or respondents in arbitration proceedings (Article 2).
The Arbitration Rules of the Russian Arbitration Center (RAC) at the Russian Institute of Modern Arbitration (RIMA) expressly provide for the possibility of natural persons participating in arbitral proceedings. The same can be inferred from the Arbitration Rules of the Arbitration Centre at the Russian Union of Industrialists and Entrepreneurs (RSPP) and the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC) Rules of Arbitration of International Commercial Disputes. The ICAC Rules of Arbitration of Domestic Disputes (which are a different set of arbitration rules), although providing for the participation of legal entities and individual entrepreneurs, do not provide for the participation of natural persons generally.
5.2 Are the parties under any duties in relation to the arbitration?
The parties to an arbitration are subject to a number of limited duties regarding general principles in relation to conducting adversarial proceedings under Russian law. For example:
- arbitral proceedings must be carried out on the basis of independence and impartiality of the arbitrators; and
- principles governing the tribunal's discretion, adversarial proceedings and the equal treatment of parties, as enshrined in Article 18 of the Law on Arbitration, must be observed.
The ICA Law addresses this in a rather limited fashion, mentioning only the principle of equal treatment of parties.
As a further example, each party must discharge its burden of proof with respect to the facts on which it relies in substantiating its claims (Article 26 of the Law on Arbitration); and any motion, documents or other information which a party submits to the tribunal must also be submitted to the other party (Article 27.3 of the Law on Arbitration; Article 24.2 of the ICA Law).
5.3 Are there any provisions of law which deal with multi-party disputes?
The applicable laws do not contain specific provisions on multi-party disputes. However, the rules of Russian permanent arbitral institutions do provide for the possibility of multi-party disputes. The Arbitration Rules of the RAC at RIMA provide for the possibility of submitting multiple claims, consolidating arbitral proceedings and joining additional parties to an arbitration. Similarly, broad provisions on multi-party arbitrations are contained in the ICAC Rules of Arbitration, covering the consolidation of arbitral proceedings and the participation of additional and third parties. The Arbitration Rules of the Arbitration Centre at the RSPP provide for a multiplicity of parties and claims; however, their treatment of the issue is less detailed than that of the RAC at RIMA and the ICAC.
Separately, the participation of multiple parties is specifically provided for as part of the procedure for the arbitration of corporate disputes. The shareholders of a company may join arbitral proceedings involving that legal entity at any time (subject to certain limitations on their rights in such proceedings – for example, under Article 45(8) of the Law on Arbitration, a party cannot challenge any procedural steps taken before its joining, including challenging the appointment of arbitrators on grounds which have previously been considered in the proceedings).
The rules of permanent arbitral institutions may further specify the regulation of third parties' participation or its effects on the arbitral proceedings. For example, the Arbitration Rules of the RAC at RIMA provide that an arbitral award will be binding on all participants that were informed of the existence of the arbitration, but chose not to join it.
6 Applicable law issues
6.1 How is the law of the arbitration agreement determined in your jurisdiction?
Russian law does not contain specific choice of law provisions governing issues such as the formation, validity or legality of arbitration agreements. In its Ruling of the Plenary Session 53 (see question 3.1) the Russian Supreme Court elaborated that the parties are free to choose the law applicable to the arbitration agreement. Absent such choice, the arbitration agreement is governed by "the law of the country where the award has been or shall be rendered" (ie, the law of the seat of arbitration (lex loci arbitri)).
Importantly, the Russian Supreme Court also confirmed that the law governing the arbitration agreement can differ from the law applicable to the substance of the dispute (lex causae) and the law applicable to the procedural aspects of the arbitration (lex arbitri).
6.2 Will the tribunal uphold a party agreement as to the substantive law of the dispute? Where the substantive law is unclear, how will the tribunal determine what it should be?
The Law on Arbitration (Article 31) provides that domestic arbitrations are governed:
- by Russian law;
- by foreign law in cases where Russian law permits the parties to make such a choice; or
- in the absence of such choice, by the law deemed applicable by the tribunal, as determined in accordance with the applicable conflict of law provisions.
Article 31 also states that the tribunal shall decide the dispute in accordance with the terms of the relevant contract and taking into consideration the relevant trade usage.
The ICA Law (Article 28) provides that the tribunal shall decide a dispute in accordance with the law chosen by the parties, or, in the absence of such choice, the law determined in accordance with the conflict of law provisions that the tribunal deems applicable. Such choice might follow the rules of the lex arbitri or be determined by reference to the law of the place with the closest connection to the legal relationship.
Importantly, neither law provides for the possibility of the tribunal deciding the dispute ex aequo et bono or acting as amiable compositeur.
7 Consolidation and third parties
7.1 Does the law in your jurisdiction permit consolidation of separate arbitrations into a single arbitration proceeding? Are there any conditions which apply to consolidation?
Russian arbitration legislation, following the United Nations Commission on International Trade Law Model Law, is silent on this matter. However, despite the absence of express legal provisions, the consolidation of separate arbitration proceedings into a single arbitration is allowed. The parties are free to agree on arbitral procedure as they see fit and the arbitral tribunal has wide discretion to conduct the arbitration in the manner it considers appropriate (Article 19 of the ICA Law; Article 19 of the Law on Arbitration). The parties may empower the tribunal to consolidate proceedings either expressly in the arbitration agreement or by incorporating arbitration rules that provide for consolidation in certain circumstances.
The rules of Russian arbitral institutions provide for the consolidation of several arbitral proceedings (eg, Article 33 of the Arbitration Rules of the Russian Arbitration Center (RAC) at the Russian Institute of Modern Arbitration (RIMA); Article 12 of the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC) Arbitration Rules). In particular, the Arbitration Rules of the RAC at RIMA permit the consolidation of proceedings upon the agreement of all parties. If only one party applies for consolidation, the board of the RAC at RIMA may consolidate separate proceedings if they are based on either the same arbitration agreement or compatible agreements (eg, in terms of the seat and language of arbitration, and the procedure for constitution of the tribunal). If consolidated proceedings are based on compatible, but different arbitration agreements, the parties to the consolidated proceedings should be the same or the disputes should arise from the principal and ancillary or otherwise interconnected obligations.
7.2 Does the law in your jurisdiction permit the joinder of additional parties to an arbitration which has already commenced?
Similarly to consolidation, the joinder of additional parties to ongoing arbitral proceedings is not expressly regulated by Russian law. Joinder should nonetheless be possible, based on Article 19 of the ICA Law and the Law on Arbitration, which afford broad autonomy to the parties and the tribunal to conduct the proceedings as they see fit. As a general rule, a third party may join a pending arbitration with the express consent of that third party and the other parties to the proceedings. The rules of several Russian arbitral institutions expressly permit the joinder of additional parties (eg, Article 36 of the Arbitration Rules of the RAC at RIMA; Article 14 of the ICAC Arbitration Rules).
In the context of the arbitration of corporate disputes, the Law on Arbitration explicitly empowers the shareholders of a company to join the arbitration involving the company in question as a party. The arbitral institution administering the dispute must notify the company on the initiation of the proceeding so that its shareholders can join the proceedings if they wish (Article 45(8) of the Law on Arbitration).
7.3 Does an arbitration agreement bind assignees or other third parties?
An arbitration agreement will bind any successors and assignees (Article 7(11) of the ICA Law). This rule applies to all cases of succession, including universal succession (eg, reorganisation of companies, inheritance) and singular succession (eg, subrogation), as recently clarified by the Russian Supreme Court in Paragraph 25 of its Ruling of the Plenary Session 53 (see question 3.1).
Special rules regarding binding non-signatories of arbitration agreements are provided for the arbitration of corporate disputes. An arbitration agreement included in a company's charter will be binding by default for that company and its shareholders, as well as any new shareholders that acquire shares after the inclusion of the arbitration agreement into the charter. However, in respect of third parties (ie, counterparties of a company), an arbitration agreement in charter will be binding on a third party only with its express consent (Paragraph 23 of the 2019 Supreme Court Ruling of the Plenary Session 53 (see question 3.1)).
8 The tribunal
8.1 How is the tribunal appointed?
As a general rule, the parties are free to agree on the procedure for appointing the tribunal (Article 11(2) of the ICA Law).
Absent party agreement, the default procedure under Article 11 of the ICA Law applies, which provides as follows:
- Where the panel consists of three arbitrators, each party appoints one arbitrator and those arbitrators then appoint the third arbitrator. If any of the parties or two arbitrators fail to make an appointment within 30 days, the competent court shall do so upon a party's request.
- Where the panel consists of one arbitrator and the parties fail to agree on the candidacy of the arbitrator, upon a party's request, the competent court will appoint the arbitrator.
The parties may seek assistance from the competent court if:
- one party fails to comply with the procedure;
- the parties or the arbitrators cannot reach agreement on matters of appointment; or
- an administering arbitral institution does not fulfil its functions (Article 11(4) of the ICA Law).
Parties whose dispute is administered by a permanent arbitral institution may exclude the possibility of recourse to the competent court on appointment matters by express agreement (Article 11(5) of the Law on ICA).
8.2 Are there any requirements as to the number or qualification of arbitrators in your jurisdiction?
As a general rule, the parties may agree on the number of arbitrators, provided that this number is odd. An even number of arbitrators is allowed only where expressly provided for by law. The Rules of the Maritime Arbitration Commission (MAC), annexed to the ICA Law, is the only example containing such an exception, and it is quite common in MAC to have two-member tribunals comprising an arbitrator with a legal background and an arbitrator with industry background (usually maritime trade or insurance). Absent party agreement, the default number of arbitrators is three (Article 10 of the ICA Law).
The parties may agree on any requirements for potential arbitrators, including as regards nationality, qualification, previous experience or knowledge (Article 11(1) of the ICA Law). The arbitrators must also meet the requirements provided by law: a sole arbitrator or the president of a panel must have a higher legal education degree recognised in Russia (Article 11(6) of the Law on Arbitration). When a dispute is decided by a panel, the parties may derogate from this rule; however, at least one member of the tribunal should meet this requirement (Article 11(7) of the Law on Arbitration).
The following individuals are barred from accepting an arbitrator's mandate:
- persons under the age of 25;
- persons with limited legal capacity;
- persons with outstanding convictions;
- persons whose special status as a judge, advocate, public notary or law enforcement officer was terminated due to a breach of professional ethics; and
- persons with a status irreconcilable with an arbitrator's mandate (eg, an acting judge).
8.3 Can an arbitrator be challenged in your jurisdiction? If so, on what basis? Are there any restrictions on the challenge of an arbitrator?
An arbitrator can be challenged if:
- there are circumstances that give rise to justifiable doubts as to his or her impartiality and independence; or
- he or she does not meet the qualification requirements provided by law or agreed by the parties.
A party may challenge an arbitrator of its own appointment only on the basis of circumstances that were not known to it at the time of appointment (Article 12(2) of the ICA Law).
The parties are free to agree on the procedure for challenge. By default, any challenge should be made in writing within 15 days of the formation of the tribunal or the date on which the circumstances that gave rise to the justifiable doubts became known to the party. If the other party does not agree with the challenge or if the challenged arbitrator does not recuse himself or herself, the challenge will be decided by the other two arbitrators, unless otherwise agreed by the parties (Articles 13(1) and (2) of the ICA Law).
The challenging party may appeal the dismissal of the challenge to the state court within one month of the dismissal decision. The tribunal may proceed and render the award while the state court is deciding on such an application. If the arbitration is administered by a permanent arbitral institution, the parties may derogate from this rule and by express agreement exclude the court's ability to decide on a challenge (Article 13(3) of the ICA Law).
8.4 If a challenge is successful, how is the arbitrator replaced?
In the event of a successful challenge to an arbitrator, the new arbitrator will be appointed in the same manner as the replaced arbitrator (Article 15 of the ICA Law).
8.5 What duties are imposed on arbitrators? Are these all imposed by legislation?
Under Russian arbitration legislation, arbitrators have the following duties:
- to disclose circumstances that may lead to reasonable doubts as to the arbitrator's independence and impartiality during the proceedings (Article 12 of the ICA Law);
- to uphold the principles of the parties' autonomy, adversarial proceedings and equal treatment of the parties (Article 18 of the ICA Law);
- to resolve the dispute in accordance with the applicable rules or, if the parties have failed to determine them, in accordance with the conflict of law rules it deems applicable, as well as in accordance with the contract terms and taking into account relevant trade usage (Article 28 of the ICA Law); and
- to render an arbitral award in accordance with the requirements set out in law (Article 31 of the ICA Law).
8.6 What powers does an arbitrator have in relation to: (a) procedure, including evidence; (b) interim relief; (c) parties which do not comply with its orders; (d) issuing partial final awards; (e) the remedies it can grant in a final award and (f) interest?
(a) Procedure, including evidence?
The arbitrators have broad discretion to conduct the proceedings in the manner they deem appropriate, which includes the power to determine the admissibility, relevance, materiality and weight of any evidence (Article 19(2) of the ICA Law). An arbitrator has the following specific powers relating to evidentiary matters:
- to appoint experts to clarify certain matters and to oblige the parties to provide an expert with any relevant information, goods or property for inspection (Article 26 of the ICA Law); and
- to request assistance from the state court in the taking of evidence or (in case of institutional arbitration) to authorise the parties to resort to the state court for the taking of evidence (Article 27 of the ICA Law).
(b) Interim relief?
Unless the parties have agreed otherwise, the tribunal has the power to grant any interim measures that it deems appropriate at the request of a party, as well as to order security in connection with such interim measures (Article 17(1) of the ICA Law). By express agreement, the parties may also empower the arbitral institution to grant interim measures before the constitution of the tribunal (Article 17(2) of the ICA Law).
Under Russian law, interim measures are granted by the tribunal in the form of a procedural order and cannot be subject to challenge or enforcement proceedings in state courts.
(c) Parties which do not comply with its orders?
The Russian arbitration legislation is silent on this matter. However, the tribunal's power to deal with any non-compliance falls within its discretion to conduct the proceedings as it sees fit.
Nevertheless, certain limitations to the tribunal's discretion in this context can be found in case law. The Russian courts have consistently found that a tribunal does not have the power to impose a fine on a party for non-compliance with an order, even if the ability to impose such a fine was provided for in the arbitration agreement (eg, the ruling of the Russian Supreme Court in Case À40-131620/2015 of 14 June 2016).
(d) Issuing partial final awards?
The tribunal has the power to issue partial final awards. Currently, however, there is no clarity as to whether a partial final award can be enforced in Russia and court practice diverges on this question. In one case, the courts (including the Russian Supreme Court) decided that partial final awards cannot be enforced, as they do not fully decide on all issues in dispute (the ruling of the Russian Supreme Court in Case A40-223894/2018 of 10 June 2019). In another recent case, the courts (including the Russian Supreme Court) ruled that since a partial final award resolved part of the dispute in a final manner, it should be enforced in Russia (the ruling of the Russian Supreme Court in Case À40-61107/2019 of 13 January 2020).
(e) The remedies it can grant in a final award?
Russian arbitration legislation does not impose specific restrictions as to the remedies that may be granted by an arbitral tribunal.
The Russian Civil Code (Article 12) provides a non-exhaustive list of general remedies that a court and a tribunal can order in civil law disputes, which includes:
- the invalidation of a transaction;
- restitution; and
- termination of the legal relationship.
Russian civil law does not provide for punitive or liquidated damages; but according to court practice, if granted by an arbitral tribunal, these are generally enforceable if the amount awarded is not excessive.
The tribunal has the power to award interest.
Russian law provides for two types of interest:
- interest as a remedy for non-performance of financial obligations (Article 395 of the Civil Code); and
- statutory interest for using creditors' funds (Article 317.1 of the Civil Code).
To calculate the rate of interest, a tribunal should use the base rate of the Bank of Russia for the relevant period, unless the parties have agreed otherwise.
As a general rule, compound interest is not permitted, unless the parties' commercial agreement or law provides otherwise.
8.7 How may a tribunal seated in your jurisdiction proceed if a party does not participate in the arbitration?
The parties are free to agree on the consequences of a party's non-participation in the arbitral proceedings. The ICA Law provides the following default provisions (Article 25):
- If the claimant does not file a statement of claim without a valid reason, the tribunal should terminate the proceedings;
- If the respondent does not file a statement of defence without a valid reason, the tribunal can proceed with the case. In this situation, the tribunal should not consider such passive conduct as a cognovit or act as a respondent in the proceedings; and
- If any of the parties does not participate in the hearing or fails to submit documentary evidence, the tribunal should resolve the dispute on the basis of the available materials.
8.8 Are arbitrators immune from liability?
Arbitrators are immune from civil law liability to the parties or to permanent arbitral institutions for failure to perform the functions of an arbitrator or for improper performance (Article 51 of the Law on Arbitration). The only exception to this rule is a civil claim in a criminal case that may be filed against an arbitrator to recover losses caused by a criminal offence for which the arbitrator is found guilty (eg, fraud).
Russian law also specifies that an arbitrator may not be interrogated as a witness on information that became known to him or her during the arbitration (Article 21 of the Law on Arbitration; Article 56 of the Criminal Procedural Code; Article 56 of the Commercial (Arbitrazh) Procedure Code; and Article 69 of the Civil Procedure Code).
The latest development in Russian law in this regard is the introduction of criminal liability for bribery, both for bribing an arbitrator and for an arbitrator illegally receiving money (Article 200.7 of the Criminal Code). This was introduced to comply with Russia's international obligations relating to its accession to the Council of Europe Criminal Law Convention on Corruption, the additional protocol to the convention and the Group of States against Corruption recommendations for the criminalisation of bribery of national and foreign arbitrators. Those found guilty of bribing an arbitrator may be punished by up to eight years' imprisonment and a fine of up to 40 times the amount of the bribe; while arbitrators found guilty of accepting a bribe may be punished by imprisonment for up to 12 years and a fine of up to 50 times the amount of bribe.
9 The role of the court during an arbitration
9.1 Will the court in your jurisdiction stay proceedings and refer parties to arbitration if there is an arbitration agreement?
Under Russian law, the state court should stay the proceedings and refer the parties to arbitration if the following criteria are cumulatively met:
- There is a valid, operative and enforceable arbitration agreement;
- The dispute is arbitrable; and
- A party raised an objection to the jurisdiction of the state court in a timely manner – that is, before the submission of its position on the merits of the case (Article 8(1) of the ICA Law; Article 148(1) of the Commercial (Arbitrazh) Procedure Code; and Article 222(6) of the Civil Procedure Code). Otherwise, the party contesting the jurisdiction of the court will be deemed to have waived its right to raise jurisdictional objections.
In practice, the Russian courts may also find that such a right has been waived when the party acts as though it has consented to the court's jurisdiction – for example, where a party requested the adjournment of the hearing to review the case materials (ruling of the Commercial (Arbitrazh) Court of the Ural District in Case A60-9091/2014 of 20 August 2014).
9.2 Does the court in your jurisdiction have any powers in relation to an arbitration seated in your jurisdiction and/or seated outside your jurisdiction? What are these powers? Under what conditions are these powers exercised?
The Russian state courts have the following powers in support and oversight of arbitration seated in Russia:
- to grant interim measures (Article 9 of the ICA Law);
- to appoint an arbitrator (Articles 11(3) and (4) of the ICA Law);
- to consider a challenge to the tribunal's decision on the removal of an arbitrator (Article 13(3) of the ICA Law);
- to terminate an arbitrator's mandate if he or she becomes incapable of participating or does not participate in the proceedings for an unjustifiably long period of time and does not voluntarily resign, or if the parties cannot agree on such resignation (Article 14(1) of the ICA Law);
- to rule on the tribunal's jurisdiction if the tribunal finds, as a preliminary question, that it has jurisdiction (Article 16(3) of the ICA Law);
- to assist the tribunal and the parties with the gathering of evidence (Article 27 of the ICA Law);
- to decide on challenges to the award (Article 34 of the ICA Law);
- to stay court proceedings relating to the annulment of the award for the tribunal to eliminate the grounds for such annulment (Article 34(4) of the ICA Law); and
- to enforce a final arbitral award in the same manner as a court judgment (Articles 35 and 36 of the ICA Law).
With regard to arbitrations seated abroad, the Russian courts may exercise the power:
- to stay proceedings and refer parties to arbitration;
- to grant interim measures; and
- to enforce a final arbitral award (Article 1(1) of the ICA Law; Paragraphs 7 and 36 of the 2019 Supreme Court Ruling of the Plenary Session 53 (see question 3.1)).
9.3 Can the parties exclude the court's powers by agreement?
Within the framework of institutional arbitration, the parties may exclude, by express agreement, the following powers of the court:
- assisting with the appointment of the arbitrators (Article 11(5) of the ICA Law);
- considering a challenge to the tribunal's decision on the removal of an arbitrator (Article 13(3) of the ICA Law);
- terminating an arbitrator's mandate (Article 14(1) of the ICA Law);
- ruling on the tribunal's jurisdiction where the tribunal ruled as a preliminary question that it has jurisdiction (Article 16(3) of the ICA Law); and
- annulling the arbitral award (Article 34(1) of the ICA Law).
10.1 How will the tribunal approach the issue of costs?
The tribunal shall determine the allocation of arbitration costs in the award (Article 31 of the ICA Law).
The Russian legislation on international commercial arbitration contains no specific provisions on arbitration costs. Unless the parties agree on the allocation of fees and costs, the arbitration rules will apply and the tribunal has discretion to shift fees and costs between the parties. Usually, the tribunal allocates arbitration costs according to the outcome of the case – that is, the losing party is usually ordered to pay reasonable fees and costs of the winning party.
10.2 Are there any restrictions on what the parties can agree in terms of costs in an arbitration seated in your jurisdiction?
There are no such restrictions provided by law.
11.1 Is third-party funding permitted for arbitrations seated in your jurisdiction?
There is no specific regulation of third-party funding for either arbitrations seated in Russia or Russian court proceedings. As Russian law imposes no express restrictions on funding activities or third-party funding of disputes, including of arbitrations seated in Russia, it is generally permitted as a matter of Russian law. In practice, the third-party funding market in Russia is gradually growing and there are several professional litigation funders on the market.
Several legislative amendments have also recently been introduced that may facilitate the development of third-party funding in practice. Since October 2019, Russian law has permitted class (collective) consumer actions and entitles the participants in class actions to conclude a notarised agreement for the allocation of costs and the reimbursement of expenses (Article 244.27(2) of the Civil Procedure Code). This new legal instrument has already been invoked in practice and one of the Russian professional litigation funders (PLATFORMA) is reportedly financing several consumer disputes.
Since March 2020, Federal Law 63–FZ of 31 May 2002 "On Legal Practice and Advocacy in the Russian Federation" (Article 25(4.1)) has expressly allowed contingency fees agreements for attorneys in civil cases. Previously, this issue remained unsettled and the courts would often deem such fee arrangements unenforceable.
12.1 What procedural and substantive requirements must be met by an award?
An arbitral award should be in writing and signed by the sole arbitrator or the majority of the tribunal. If the award is not signed by all tribunal members, reasons must be provided (Article 31(1) of the ICA Law).
An award, by default, should be made by the majority of the tribunal, where the dispute is resolved by an arbitration tribunal (Article 29 of the ICA Law). Although the ICA Law does not expressly provide for dissenting opinions (as distinguished from Article 34(1)) of the Law on Arbitration), the applicable arbitration rules of arbitral institutions usually cover this issue. In particular, both the Arbitration Rules of the Russian Arbitration Center (RAC) at the Russian Institute of Modern Arbitration (RIMA) (Article 52(2)) and the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC) Arbitration Rules (Paragraph 36(3)) envisage that an arbitrator who disagrees with the majority decision may deliver a dissenting opinion appended to the award.
An arbitral award must also state:
- the date;
- the seat of arbitration;
- the conclusions regarding the satisfaction or dismissal of the claims;
- the arbitration fee and arbitration-related expenses; and
- the distribution of these costs between the parties.
The ICA Law also requires that an award be reasoned and – as distinguished from Article 31(2) of the United Nations Commission on International Trade Law Model Law – does not provide an option for the parties to agree to dispose of the reasoning of an award.
12.2 Must the award be produced within a certain timeframe?
The ICA Law does not specify a particular timeframe within which to produce the award. However, the applicable arbitration rules of arbitral institutions may stipulate certain timeframes for this.
For instance, Article 26 of the Arbitration Rules of the RAC at RIMA provides that the tribunal must ensure that an award is rendered within a reasonable period after the last oral hearing or the last exchange of written documents in the case, and no later than 180 days from the constitution of the tribunal. In case of expedited arbitration, an award should be produced within 70 days of the constitution of the tribunal. These timeframes may nevertheless be extended at the request of arbitrators by the board of the RAC at RIMA for no more than 30 days.
The ICAC Arbitration Rules provide that the tribunal and the ICAC competent bodies must ensure that the arbitral proceedings are completed within 180 days of constitution of the tribunal (Paragraph 35 of the ICAC Arbitration Rules). For expedited arbitration, the timeframe is 120 days (Paragraph 33(5)). The ICAC presidium may extend these timeframes at the request of the arbitral tribunal or at its own discretion.
13 Enforcement of awards
13.1 Are awards enforced in your jurisdiction? Under what procedure?
Foreign awards are recognised and enforced in Russia on the basis of:
- the 1958 New York Convention;
- several regional conventions (the 1961 European Convention on International Commercial Arbitration and the 1972 Moscow Convention on the Arbitration of Civil Law Disputes Arising out of Economic, Scientific and Technological Cooperation);
- the ICA Law (Section VIII); and
- the Commercial (Arbitrazh) Procedure Code (Section 31) or the Civil Procedure Code (Section 45), depending on the jurisdiction of state courts.
A party to an arbitral award can enforce it in Russia within three years of the date on which the award becomes binding; although it is possible to reinstate an expired limitation period upon a party's application. The application for recognition and enforcement must be filed with a state court at the location or residence of the debtor, or where such place is unknown, at the location of the debtor's assets (Article 242 of the Commercial (Arbitrazh) Procedure Code; Article 410 of the Civil Procedure Code). The application is considered by a sole judge within one month of the date of filing. The first instance ruling may be reviewed by the cassation court within one month of the date of the decision.
The 2019 statistics of the Russian Supreme Court demonstrate that almost 60% of applications for enforcement were granted by the first instance courts. The most frequently invoked objections to the enforcement of awards were as follows:
- violation of public policy;
- lack of proper notice; and
- invalidity of the arbitration agreement.
14 Grounds for challenging an award
14.1 What are the grounds on which an award can be challenged, appealed or otherwise set aside in your jurisdiction?
Article 234 of the Commercial (Arbitrazh) Procedure Code and Article 421 of the Civil Procedure Code, as well as Article 34(2) of the ICA Law, stipulate the grounds for challenging an arbitral award. These grounds are exhaustive and generally reflect the grounds under Article V of the 1958 New York Convention. They are divided into two groups:
- Grounds for challenge that the applicant may invoke:
- A party to an arbitration agreement was incapacitated or the arbitration agreement is invalid under applicable the law chosen by the parties or, failing any indication thereon, under Russian law;
- The applicant was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise deprived of the opportunity to present its case;
- The arbitral award deals with a dispute not contemplated by, or not falling within, the scope of the arbitration agreement; or
- The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or applicable law.
- Grounds for challenge that the court can review ex officio:
- The dispute is not arbitrable; or
- The award violates public policy of the Russian Federation.
14.2 Are there are any time limits and/or other requirements to bring a challenge?
A party wishing to challenge an arbitral award must submit the challenge to the state court at the place where the award was rendered within three months of the date of receipt of the award by the applicant (Article 34(3) of the ICA Law; Article 230(4) of the Commercial (Arbitrazh) Procedure Code; and Article 418(2) of the Civil Procedure Code). The parties may also agree to change the territorial jurisdiction of the state court and opt for a state court at either party's location.
A third party whose rights and interests are allegedly affected by an award, as well as the prosecutor, in cases specifically provided by law, may also bring a challenge to an arbitral award within three months of the date on which the applicant learned or should have learned about the award (Article 230(5) of the Commercial (Arbitrazh) Procedure Code; Article 418(3) of the Civil Procedure Code).
The application to challenge an award can be filed either in hard copy or online. It should include, among other things:
- the arbitral award and the arbitration agreement (either original versions or duly certified copies); and
- a duly certified translation of the attachments in Russian.
The challenge is considered by a single judge within one month. The proceeding will involve a hearing and the participation of the parties. The result of the challenge can be reviewed by the cassation court within one month of the date of its rendering by the first instance court.
14.3 Are parties permitted to exclude any rights of challenge or appeal?
There is an option for the parties to waive the right to challenge an arbitral award by express agreement in writing. However, this option is available only within the framework of institutional arbitration administered by a permanent arbitral institution with the required governmental authorisation (Article 34(1) of the ICA Law).
The Russian Supreme Court in its Ruling of the Plenary Session 53 (see question 3.1) clarified with reference to the above provision that a term on the finality of an arbitral award may be provided only by the parties' express agreement, rather than being stipulated by the arbitration rules of a permanent arbitral institution. The Russian Supreme Court also explained that the parties' agreement on the finality of the award shall extend only to the parties themselves, and should not deprive a third party whose rights and interests an award may allegedly affect, or the prosecutor, of the right to bring a challenge to an arbitral award.
15.1 Is arbitration seated in your jurisdiction confidential? Is a duty of confidentiality found in the arbitration legislation?
The Law on Arbitration expressly provides for default confidentiality of arbitration (Article 21), while the ICA Law does not explicitly address this issue.
In practice, the principle of confidentiality is broadly invoked in arbitrations seated in Russia. The applicable arbitration rules of Russian permanent arbitral institutions generally stipulate that arbitral proceedings and awards will not be public.
For example, the Arbitration Rules of the Russian Arbitration Center (RAC) at the Russian Institute of Modern Arbitration (RIMA) set a default principle of confidentiality in arbitration and also provide detailed rules as to its scope of application and possible exceptions (Article 24). In particular, the confidentiality of arbitration should cover the following:
- the fact of existence of the arbitration;
- all pleadings, evidence and other case materials and information revealed in the course of the arbitration; and
- the award.
Similar provisions, although less comprehensive, are enshrined in the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC) Arbitration Rules (Paragraph 46).
15.2 Are there any exceptions to confidentiality?
The Law on Arbitration contains certain exceptions to confidentiality in relation to the arbitration of corporate disputes. With the aim of protecting the interests of minority shareholders, permanent arbitral institutions should publish on their website information on the initiation of corporate arbitration proceedings (Article 45(8)).
More detailed exceptions to confidentiality can be found in the rules of permanent arbitral institutions. For example, the Arbitration Rules of the RAC at RIMA envisage that confidentiality will not be violated in cases where:
- the information is publicly available;
- the award is published subject to the consent of all parties, third parties and the tribunal;
- the reasoning of the award is published, upon the removal of all identification information as to the parties, the subject matter and the circumstances of the case;
- the information on the arbitration is disclosed by a party when applying to court to have the arbitral award enforced or set aside; and
- the information on the arbitration is published or disclosed to the extent permitted by the effective legislation or the Arbitration Rules of the RAC at RIMA.
The ICAC Arbitration Rules also provide that arbitral awards and orders may be published with the consent of the ICAC presidium, provided that the names of the parties and other identifying details that may affect the legitimate interests of the parties are removed (Paragraph 46(4)).
In the context of setting-aside or enforcement proceedings, the Russian state court may request the arbitration case files that are on the record from an arbitral institution to verify certain questions in dispute (eg, proper notification of the parties).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.