The Creation of the Arbitration Association

13 February 2014
The main purpose behind the creation of the Russian Arbitration Association (RAA) is the promotion of both domestic and international arbitration in the Russian Federation and CIS countries, the popularization of Russia as a place for arbitration, the promotion of Russian arbitrators on national and international levels and also the promotion of foreign arbitrators interested in arbitrations directly or indirectly linked with Russia ( specialists in Russian law, the Russian language or Russian parties).

The establishment of an institution of this kind was needed to address the growing concern in the professional legal community regarding arbitration in Russia. Although there are somewhere between 500 to 2 000 arbitration institutions in Russia, arbitration still is not really a preferred method of dispute resolution. This is confirmed by the statistics of state arbitrazh (commercial) courts. Thus, the number of challenges of Russian arbitral awards and applications for enforcement submitted to state courts can be measured in the thousands. At the same time, the number of commercial disputes examined by Russian state courts is in the hundreds of thousands. In comparison, the number of arbitral proceedings handled only under the rules of the American Arbitration Association comprises hundreds of thousands per year. The fact that state courts examine hundreds of times more commercial disputes than arbitration courts is a substantial indication of the lack of trust felt by the business community toward arbitration. This is caused by several factors.

Firstly, there is distrust in the business community regarding the very concept of arbitration. Unfortunately, there are quite a few so-called ‘pocket arbitration courts’ in Russia, or arbitration courts that employ very dubious procedures or are used to legalize illegal schemes. As a result, for many Russian entrepreneurs arbitration is associated with these kinds of questionable practices.

Secondly, when state courts encounter glaring examples of abuse, they react sometimes with undue severity and create negative case law, restricting the arbitrability of certain kinds of disputes. This has happened, for example, with regard to real estate or corporate disputes.

Thirdly, the quality of dispute resolution by arbitration courts in Russia is unfortunately not the best. There are no special training programs for arbitrators. It is often thought that every able lawyer is capable of being a good arbitrator, but it is not always the case. In the case of international disputes, the situation is even worse. Russian disputes (even between Russian companies) ‘escape’ abroad. Moreover, as shown by the ICC statistics, Russian companies, in resolving disputes abroad, do not appoint Russian arbitrators. The reform of civil legislation is currently being conducted throughout the country, aimed at making the Russian Civil Code friendlier to business. Hopefully this will allow for it to eventually substitute for English law which very often dominates in M&A and financial transactions.

Finally one must take into account that Russian law can be applied adequately only if a dispute based on Russian law is examined, by arbitrators familiar with Russian law. German, Swiss and English arbitrators would never apply Russian law in the same way as Russian lawyers, just as Russian arbitrators would never apply English law in the way it is expected by English lawyers, due to the big gap between the principles of Russian and English law and procedure.

These are the problems the Russian Arbitration Association is called upon to tackle.

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