Conference SCAI-ASA-Arbitration Association
On October 25th, 2018, a conference discussing arbitration in Switzerland and Russia was held at the Marriott Grand Hotel in Moscow on Tverskaya Street. The event was organized by the Arbitration Association, the Swiss Chambers' Arbitration Institution (SCAI) and the Swiss Arbitration Association (ASA).
In his opening speech, Xavier Favre-Bulle, partner at the law firm Lenz & Staehelin, noted that, according to ICC statistics, Swiss law is very often chosen by the parties as an applicable law for international transactions. Cities in Switzerland are also among the places of arbitration very frequently chosen in the world. Xavier Favre-Bulle recalled that Switzerland is linked with Russia by the similarity of their legal systems (civil law based) and consolidated business channels.
Opening the first session, the Arbitration Association Secretary General, Roman Zykov, noted that the aim of the first panel discussion is to look at Swiss arbitration from three different angles: from the point of view of the arbitrator, the party representative, and from the perspective of the users, i.e. the corporate lawyers.
According to the Arbitration Association surveys, Switzerland is highly ranked by Russian users as a place of arbitration and therefore there is an overall interest in this conference today.
Michael Schneider, partner at LALIVE, presented a more detailed overview of the Swiss jurisdiction and typical Swiss arbitrators behavior. He recalled that arbitration in Switzerland is governed by Chapter 12 of the Swiss Private International Law Act (PILA). An important role as a source of information about arbitration is played by the ASA - Swiss Arbitration Association. This professional association publishes arbitrators' profiles, holds seminars and conferences.
Many arbitration proceedings are submitted to the Swiss Rules of International Arbitration and administered by the Swiss Chambers’ Arbitration Institution (SCAI), which is an independent entity, owned by the main Swiss Chambers of Commerce, with offices at various locations in Switzerland.
Popular educational programs for arbitration practitioners are LL.M. in International Dispute Resolution at MIDS and Foundation for International Arbitration Advocacy (FIAA). The Universities of Neuchâtel and Lucerne also train business professionals in international commercial arbitration with the Swiss Arbitration Academy.
Michael Schneider noted the different professional approaches to arbitration in different cultures. Who is the arbitrator - a deliberately neutral referee or an active resolver of the dispute? In German and Swiss cultures, the latter is practiced, while in the English culture - it is the first.
As to the taking of evidence in Switzerland, the so-called Relevanzmethode approach is preferred, i.e. only the requests for evidence relevant to resolve the key issues will be granted. The competence of the arbitrator includes understanding that the arbitrator is appointed by the parties themselves, and therefore must act as a service provider.
The decision to appoint an arbitrator in Switzerland is often based on an assessment of his legal knowledge, knowledge of comparative law, as well as his expertise in various fields, especially when losses will need to be quantified. An arbitrator is required to understand other cultures and speak foreign languages. Naturally, the arbitrator must issue fair decisions in a timely manner.
Opening the second topic, “The secret of a successful counsel”, James Hargrove, partner at Orrick law firm, noted the high quality education of Swiss young lawyers. He pointed out some key differences between Swiss and Anglo-Saxon / common law approaches to arbitration, including document production – (for example, in America and to a slightly lesser extent England, one may expect quite wide disclosure, the regime is tighter in Switzerland), early case assessment by Swiss tribunals (very rare in the common law world), tribunal-appointed experts and the approach to witness evidence.
What distinguishes a good counsel? In his opinion, a good counsel understands the tribunal (culturally and legally), how to present the key waypoints of a case to persuade the tribunal, and to have established and to the extent possible simplified his client’s case and objectives.
Mr. Hargrove emphasized the importance of familiar offshore jurisdictions such as Cyprus, the BVI, Cayman etc, and the need to develop a thorough multi-jurisdictional plan at an early stage. Mr. Hargrove also noted that it is important for good counsel to understand the Russian business mentality, methods of doing business, and to recognize the increasing cost-consciousness of Russian clients.
Philipp Habegger, an independent arbitrator, expressed the opinion that Switzerland’s cultural diversity is very helpful in understanding other legal systems, but in order to understand the specifics of common law countries, one has to complete an LL. M. or get work experience in these countries. He also drew attention to a traditional feature in Swiss arbitrations, i.e., the involvement of arbitral tribunals' secretaries. The position of tribunal secretary, in his opinion, provides valuable experience to younger lawyers and the opportunity to be exposed to parties and institutions, facilitating their later appointment as arbitrator.
As for Russian clients, Philipp Habegger did not notice a need for any significant difference in approaches towards them or in preparing their cases compared to nationals of other countries, stressing the need to take into account the details of each particular case.
In the third part, called “What parties expect from arbitration practitioners?”, Platon Guryanov, Head of Division at the Legal Department JSC "Russian Railways", noted that although his company does not often participate in arbitrations, it has developed stable practices of bilateral and/or multilateral mediation. This is due to the need for all carriers to maintain railway communication despite legal proceedings, said Guryanov.
Platon Guryanov said that a significant part of Russian Railways contracts are operational contracts with foreign companies for the carriage of goods, as well as construction contracts and related agreements, such as credit contracts. These contracts are often governed by foreign law.
He also noted that the recent decision on the dispute between Gazprom and Naftogaz had raised doubts about the impartiality of international arbitration in general for the management of various Russian state companies.
Kirill Strunnikov, Head of International Practice at RUSAL, noted that, for his company, arbitration is a favorite means of resolving disputes, since many of the aluminum producer's contracts are concluded directly with foreign governments.
Strunnikov said that in connection with the sanctions imposed on Russian individuals several years ago, he advocated for arbitration in Hong Kong and Singapore as jurisdictions free of sanctions. However, now the situation has changed. Therefore, one needs to be careful when choosing the applicable law, and an issue may arise when having to pay the arbitration fee - Asian banks are very conservative, and even paying the arbitration fee for an entity under sanctions can be very problematic. The impact of the sanctions affects Asian and other arbitration institutions, such as the ICC.
In RUSAL, the choice of a law firm and contractor to represent the interests of the company in arbitration is made through a tender procedure, but it is not a formal procedure as it is in state companies. Aspects of trust and price are one of the most important criteria for RUSAL when choosing their legal representatives.
The second session was moderated by Alexander McLin, Executive Director of ASA, the Swiss Arbitration Association, who highlighted the many institutions playing a role in the Swiss arbitration landscape, including the Swiss Chambers Arbitration Institution (SCAI), the Court of Arbitration for Sport (CAS), and the state courts.
Christopher Boog, partner at Schellenberg Wittmer, seconded McLin. Boog noted based on several cases he had conducted for Russian athletes at CAS that they have indeed in the past successfully challenged the decisions of various sports organizations against them at the CAS, despite public opinion in Russia that CAS may be a difficult forum for Russian athletes. Boog gave a short overview of the creation of CAS and the different types of cases handled by CAS. He explained that the creation of CAS was driven by the International Olympic Committee and CAS was initially quite firmly controlled. Over the years, however, several changes have been made to CAS governance and regulations to render it more independent. These changes were also driven by the case law of the Swiss Supreme Court. Today, CAS is considered a „true“ arbitral tribunal which is best suited to adjudicate international sports disputes under the supervision of the Swiss Supreme Court and the European Court of Human Rights.
Boog concluded by pointing out that in certain cases at CAS, especially those involving whistleblowing, handling the imbalance created by the whistleblower and sports federations going entirely public with their allegations on the one hand and the athletes being able to defend themselves only in proceedings that are confidential can be a real challenge, and one that CAS will have to tackle in the future. Recent case law by the European Court of Human Rights requiring CAS to hold public hearings in certain instances may alleviate that problem at least to some extent.
Mikhail Prokopets, partner at Sila International Lawyers, remarked that, although CAS is competent to resolve sports disputes, the definition of what exactly relates to sport is decided in each specific case. The CAS may be deemed competent to resolve the disciplinary dispute between the player and the football club, but may also administer the dispute from the contractors' agreement on planting artificial grass in the stadium. The most popular categories of disputes include cases of doping, disciplinary action, and disputes arising from contracts with athletes. Unlike traditional arbitrations, CAS is used to resolve disputes not by choice of the parties, but by the prescription of regulatory acts of sports associations and organizations - FIFA, UEFA, Olympic Committee. Mikhail Prokopets mentioned that every year 5-7% of the CAS cases are connected with Russian parties. He regretted that only one Russian arbitrator is listed in the CAS roster of arbitrators to date. The number of cases at CAS with Russian parties in the following years is likely to fall, noted Mikhail Prokopets.
At the session on “The Role of the SCAI Arbitration Rules in the Arbitration Process”, Christian Oetiker, partner at Vischer, and member of the SCAI Court of Arbitration, presented the “view from Switzerland”.
According to him, parties from more than 120 countries worldwide resort to SCAI arbitration. About 10% of the arbitrations include Russian parties. He said that according to SCAI's statistics, the consideration of a standard case takes about 11 months and 6 months if the expedited procedure applies. In the emergency relief procedure, interim measures can be decided upon before the arbitral tribunal is constituted within 15 days or less. The party asking for emergency relief prior to the constitution of an arbitral tribunal must bear in mind that it must also file a notice of arbitration within 10 days. Proof of the effectiveness of SCAI as an arbitration institution is that between 2012–2018, only eight arbitrators were challenged and only one challenge had to be upheld. Furthermore, only 14 awards rendered under the Swiss Rules were submitted to the Swiss Supreme Court for setting aside proceeding, said Christian Oetiker.
In response, Mikhail Samoilov, lawyer of the arbitration practice Egorov Puginsky, Afanasyev and Partners (EPAM), noted that Geneva and Zurich are really popular among Russian parties. However, he questioned whether it is possible to resolve disputes according to the rules of the international institutions, if the seat would be in Russia. He thought that in most cases, the answer was no, since arbitral institutions operating in Russia require a license to administer disputes. In addition, in order to administer corporate disputes, a special set of arbitration rules is required. Samoilov also noted that the self-isolation of Russian judges from the arbitration community is not the way forward. He underlined the fact that the concept of public policy popular with Russian judges is a “black hole” in which recognition of a foreign arbitral award by a Russian court may be lost.
In the session on “The Role of Swiss Courts in Arbitration”, Xavier Favre-Bulle took a look at the topic as seen “from Switzerland”. The speaker noted that Switzerland is arbitration-friendly in general and named a number of individual positive features of this jurisdiction. For example, the cantonal courts of Switzerland can assist in the appointment of arbitrators in ad hoc cases.
Arbitral awards may only be set aside based on the restricted grounds provided for by Art. 190 (2) of PILA. Arbitral decisions are most often contested on the basis of a violation of the right to be heard (Art. 182 of PILA). Only in exceptional cases can arbitral decisions be validly challenged on the basis of public policy infringement. Xavier Favre-Bulle noted that under the current Swiss law on the Supreme Court of Switzerland, documents and awards can be submitted to it in English. Under the proposed revised PILA currently under parliamentary consideration, submissions in English could even be accepted by the Swiss Supreme Court in the future.
Dmitry Pentsov, partner at FRORIEP Legal SA, presented the “look from Russia” in response. He noted that previously, for Russian parties, the key advantage of arbitration was the finality of arbitrators’ decisions. Parties could avoid the involvement of the Russian courts. But now the situation has changed and parties confidence in the domestic courts has increased. Now the fundamental interest of Russian parties in arbitration is to get a fair and objective decision. According to statistics, only about 7% of arbitral awards were set aside by the Swiss Supreme Court. Dmitry Pentsov also mentioned the case of the Russian Paralympic Committee against the International Paralympic Committee, considered by the CAS in 2016. At that time, the principle of collective responsibility was applied against Russian Paralympic athletes, and the Swiss Supreme Court did not set aside the very dubious decision of the CAS.
As a second example, Dmitry Pentsov cited the recent Russia vs. Yukos Capital Sàrl case, in which it was held that an interim award on jurisdiction may not be sought to be set aside if the arbitral tribunal has not taken a final decision on jurisdiction but merely addressed some of the jurisdictional objections in the interim award while leaving the other objections to be decided in the final award.
Caroline Ming, Executive Director and General Counsel of SCAI delivered the closing speech of the Conference. She thanked the sponsors, speakers and participants of the conference. She once again drew attention to the key issues stressed by the speakers and emphasized the key role of an arbitral institution in assisting the companies resolving their disputes in a fair, structured and timely manner, allowing companies to focus their resources on productive activities favoring global and local growth, as well as general well-being increase. According to Caroline Ming, arbitration associations’ role is to bring together different people, political regimes and cultures to share information and ideas as how to best resolve disputes and problems. Lawyers from different parts of the world need to remain open-minded and to discuss issues together to attempt to understand and learn from each other. Such conferences are indeed very helpful in this regard. She indicated that thanks to the understanding and cooperation of the Swiss government, parliament and courts, arbitration cases subject to the Swiss Rules of International Arbitration have not suffered any delay or other form of disruption because of international trade sanctions and that, to her knowledge, the new Russian Arbitration Law did not change the fact that awards issued by arbitral tribunals under the Swiss Rules of International Arbitration are still to be recognized and enforced in Russia in application of the New York Convention to which Russia is a party.
The Conference was concluded with the signing ceremony of the Cooperation Agreement between the Arbitration Association and the Swiss Chambers' Arbitration Institution (SCAI) aiming at sharing information and cooperating in view of pursuing common goals such as raising the general level of education and understanding in arbitration.