The circumstances of the case were as follows. The Yakutsky republican arbitral tribunal at the NGO “Far Eastern Lawyers Guild of the Sakha Republic” heard a dispute between two Russian individuals. The dispute arose out of a contract for sale of an emporium and a garage in Yakutia. The purchaser requested the tribunal to confirm her legal title to the property.
The tribunal rendered an award satisfying the claim. Then the parties negotiated an amicable settlement agreement providing for the seller to preserve the legal title to the property and return to the purchaser the money in the agreed amount. The parties submitted their agreement to the arbitral tribunal for approval.
The tribunal approved the settlement and indicated that its previous award shall not be enforceable. Upon the purchaser’s request the tribunal ordered that she be substituted for another individual (the “claimant”) as a matter of procedural legal succession.
However subsequently the seller failed to fulfil the settlement agreement. Therefore the claimant applied to the commercial court to enforce the consent award. The courts refused to grant enforcement on the following grounds.
They found that the arbitral tribunal was not entitled to approve the amicable agreement. According to the courts, after an arbitral award is rendered the arbitral tribunal is not competent to hear the case anymore and in particular to approve the settlement agreement.
The courts held that Russian law does not allow the settlement of the dispute otherwise than within enforcement proceedings, i.e. after filing an application to the state court to obtain a writ of execution.
Furthermore the courts refused to grant the application for award enforcement because the arbitral tribunal had allegedly gone beyond the amicable agreement: the arbitral tribunal had established a term of repayment other than that which had been agreed by the parties.
However the SCC Presidium set aside the judgments of the lower courts by its Decree of June 7, 2012 (No. 16434/11). It pointed out that the Federal Law “On the Arbitral Tribunals in the Russian Federation” of July 24, 2002 does not set forth any restrictions on the approval of amicable agreements after the award has been rendered and before the issuance of the enforcement writ.
The SCC explained that another interpretation of the law’s provisions would compel the parties to apply for an enforcement writ merely in order to conclude the amicable agreement in accordance with the law.
Such an approach would contradict the legal principles of procedural economy, parties’ autonomy and optionality. Furthermore, it follows from the procedural legislation that the state courts should contribute to the reconciliation of the parties, rather than make obstacles to it. This extends to cases where the settlement has been approved by an arbitral tribunal.
The SCC also held that refusal to enforce the consent award on the ground that it exceeds the settlement agreement does not meet the objectives of the judicial protection of the rights and legitimate interests of the applicant.
The application to enforce the arbitral award signifies the applicant’s acceptance of the period of performance specified in it, even if it differs from that in the settlement agreement. Anyhow, these terms had expired before the applicant had applied for the enforcement of the award.
Finally, the Presidium indicated that judgments in any other case with similar facts where the legal provisions are interpreted otherwise than in accordance with this decree can be reviewed based on it by way of new circumstance.
The approach of this decree is reasonable, flexible and favourable for arbitrating and amicably settling disputes under Russian law. It fully corresponds with the contractual nature of arbitration. In particular, it follows that arbitral tribunals are still competent to hear the case even after the award is rendered at least for the purposes of approving a subsequent settlement agreement of the parties.
Dmitry Davydenko, Dinara Yalaletdinova