VI Annual Arbitration Association Conference
The sixth Annual Arbitration Association Conference was held on 25 April at the Marriott Grand Hotel in Moscow. The number of participants and speakers of the event comprised more than 150 people.
The Conference was opened by Vladimir Khvalei, Chair of the Board of the Arbitration Association. Vladimir ironically mentioned the problems that have only recently existed in Russian arbitration. He paraphrased a popular comedy program on Russian television: "We live in a beautiful country. Only we can create arbitration courts for fictitious debts." He mentioned: "If a tree fades in Russia, everyone will talk about it. If a tree blooms in Russia, no one will write about it." The Arbitration Association is trying to promote Russia as a place of arbitration, and the Association has good arguments for this. The speaker referred to a study of the Arbitration Association, according to which, for example, more than 80% of foreign arbitral awards were executed in Russia from 2008 to 2017. Vladimir reminded the audience that the Prague Rules received the Global Arbitration Review Award for the Best Innovation in 2019.
Denis Novak, Deputy Minister of Justice of the Russian Federation, noted that 2018 was rich with events in arbitration. In particular, amendments to the Law on Arbitration were adopted. Denis mentioned that the legislation has increased the attractiveness of corporate disputes.
In addition, Russia has become more attractive to foreign arbitration institutions. The criteria of the international reputation of foreign arbitration institutions that want to carry out their activities in Russia have been approved. Regular meetings of the Council for the Improvement of Arbitral Procedure have been held, the subject of which was announced to a foreign PAI – the Hong Kong International Arbitration Center (HKIAC).
The powers of the Council over the improvement of arbitration legislation have been expanded – now it is also engaged in the compilation and monitoring of judicial practice in the application of the Law on Arbitration. "In general, these changes have turned the page in the history of Russian arbitration," said Denis Novak. The speaker also noted that no repressive measures were designed against "healthy" ad hoc arbitration. Denis concluded: "The pro-arbitration turn in the judicial system is happening slowly. We are at the beginning of a long path, and members of the Council are committed to the positive development of arbitration in Russia."
Kathryn Sanger, Advisor to HKIAC, Partner of Herbert Smith Freehills in Hong Kong, talked about the reasons and procedure for submitting applications for permission to bring Russian disputes to foreign PAI. HKIAC is the first foreign institution to receive such permission, according to Sanger. This was preceded by extensive preparatory work: HKIAC representatives participated in 26 events in Moscow, St. Petersburg and Vladivostok and the Center concluded several cooperation agreements with arbitration centers in Russia. In 2017, the Center began working with the Arbitration Association. The number of Russian-speaking arbitrators has increased, now at 35. The HKIAC regulation has also been translated into Russian. HKIAC could also open a representative office in Russia.
After the introduction, Vasily Rudomino, co-founder and partner of ALRUD, opened the first session "Arbitration of domestic disputes with a foreign element".
Timur Aitkulov, Partner of Clifford Chance and Member of the Board of the Arbitration Association, gave a brief analysis of the changes in legislation that entered into force on 29 March 2019. The likely goal of changes, according to Timur, is to facilitate the consideration of corporate disputes in Russia (clause 7.1, Article 7 of the Law on Arbitration). He mentioned the new uncertainty that these changes have created. He focused on the still unclear and unresolved amendments. Timur noted that in relation to corporate disputes, there were three categories – disputes generally not transferable to arbitration, disputes in compliance with the four conditions of arbitrability, and disputes, the condition of the arbitrability of which is their administration by PAI. Timur also drew attention to the possibility of dual interpretation of the requirements of an arbitration agreement of participants in a legal entity. He noted that there is still no sufficient judicial practice on these disputes, and many issues remain unresolved. The speaker paid special attention to the case of Russian-Singapore arbitration.
Professor Kaj Hober, Chair of the Board of the Arbitration Institute of the Stockholm Chamber of Commerce, addressed the issue of the possibility of dealing with internal disputes by foreign arbitrations. Kaj said that in Sweden they do not distinguish between domestic and international arbitration – there is no distinction between the two in the Swedish Arbitration Act of 1929. And such a distinction is unlikely to be made in the future. Abuse in arbitration requires a decision, not by prohibiting the functioning of arbitration courts, but by improving the practice of states which annul dubious decisions. The authorities of state and associations of lawyers should also control the activities of arbitration courts. The very possibility of companies from one country to seek disputes in foreign arbitration is based on the freedom of contract and the autonomy of the parties and is fundamental to commercial turnover, according to the speaker.
Francisco G. Prol, Partner, Prol & Asociados, spoke about Spanish arbitration law, its recent past and present. The speaker briefly focused on the peculiarities of the settlement of disputes in Spain, the procedure for appointing arbitrators and challenging arbitration decisions in state courts. Francisco noted that, due to linguistic and cultural ties, a significant number of users of Spanish arbitration are now parties from Latin American countries. The speaker emphasized the role of Madrid as a Spanish arbitration center.
Susanne Heger, lawyer and founder of Heger & Partners, emphasized that she was speaking on behalf of the Secretary General of the Vienna International Arbitration Center (VIAC), Alice Fermut-Wolf, and said that the Austrian institution was issuing an updated version of the VIAC Regulation in Russian. Susanne then focused on the criteria for defining internal disputes and their administration in Austria.
In Austrian law, there is no distinction between domestic and national disputes, which determines the criteria – the place of arbitration. This issue is settled by paragraph 577 of the Austrian Code of Civil Procedure (ZPO). According to this code, parties can freely agree on the place of arbitration. In this country, non-arbitrable family disputes, disputes over consumer protection and other disputes may be referred to arbitration. Previously, internal disputes were within the competence of local economic chambers in the federal states of Austria. Now both domestic and international disputes are within competence of the VIAC. In 2018, internal disputes dominated the VIAC. There is no licensing of arbitration institutions in Austria, as Susanne noted.
The moderator of the second session "The Arbitrability of Russian Corporate Disputes" was Stepan Guzey, Partner at Lidings.
Anton Asoskov, Professor of the Department of Civil Law, Faculty of Law, Moscow State University, gave a review of the impact of recent legislative changes on the arbitration of corporate disputes. "Arbitrability of corporate disputes is as confusing as the history of the seven kingdoms in Game of Thrones," the speaker joked. He focused on the rules of corporate arbitration and the problems of their application. Asoskov drew attention to the restriction of arbitrability of disputes for strategic business entities listed in Federal Law No. 57. The speaker also dwelt on the fact that the amendments to Federal Law No. 531, when transferring disputes from corporate contracts to arbitration, eliminated the requirement that all participants in a legal entity agree to arbitration.
Valeria Romanova, Senior Associate at Linklaters, focused on the nature of corporate disputes. Valeria noted that the practice of determining the jurisdiction of price determination cases when buying shares and shares to state and arbitration courts has now begun to take shape. The subject and basis of the claim are more and more carefully considered in their determination. As Valeria mentioned, it would be great if courts did not proceed from a formal approach, but carefully considered the goals and interests that the party pursues when filing a lawsuit.
Marina Akchurina, a lawyer from Cleary Gottlieb, focused on the practical aspects of applying arbitration clauses. According to Marina, share purchase agreements (SPAs) often include multi-stage arbitration clauses in which whether the arbitration institution received permission on the date of the request for arbitration is tested. Foreign investors indicate the place of arbitration outside of Russia, with the exception of arbitration in the ICAC, a center that imperatively envisages Moscow as the place of arbitration. The place of arbitration for disputes arising from shareholder agreements between Russian parties is imperatively set to Russia, regardless of the choice of the arbitration institution, as Marina explained.
Artem Doudko, Partner in Osborne Clarke, focused on the issues of pre-contractual documentation in English law (Heads of Terms, Memorandum of Understanding), as well as agreements on exclusivity. Artem focused on the role of directors of the company in English law: they all have equal obligations, including nominee directors. Minority shareholders have the right to file a lawsuit against the company when there is an unlawful infringement of their interests and rights, for example, when paying out veiled dividends or when trying to change the company's charter against the will of a minority shareholder. Artem concluded that the protection of the rights of minority shareholders in English law is gradually increasing.
Martin Burkhardt, Partner in Lenz & Staehelin, spoke about the arbitrability of corporate disputes in Switzerland. The Swiss IPL does not impose restrictions on the transfer of disputes to arbitration, but there are pitfalls. Among them is the consent to arbitration of third parties if they declare their procedural rights to participate in the dispute. In the absence of consent, third parties may declare their right to a fair trial on the basis of paragraph 1, Article 6 ECHR. Burchard gave an example of a case reviewed by the ECHR – Arret Suda c. Republicque Tcheque 1643 (ECHR 1643/06) dated 2009.
Agis Georgiades, Partner in Christos Georgiades & Associates LLC, highlighted the nuances of resolving Russian disputes in the jurisdiction of Cyprus. If the place of arbitration is Russia and the dispute is not arbitrable in the Russian Federation, the arbitral award will be rejected. If the place of arbitration is Cyprus, but Russian law is applied, a Cyprus court will have to analyze Russian law and seek expert advice. Judicial practice on the arbitration of Russian corporate disputes in Cyprus has yet to be determined, according to Agis. The speaker elaborated on Maksimov's case in more detail, which, in the opinion of the lawyer, is likely to be a precedent for Cypriot courts in the scope of recognition of arbitral awards.
Session 3 was moderated by Pavel Bulatov, Advisor to White & Case. Pavel noted that public procurement is an attractive niche, given its current volume. However, in public procurement there is a public element, which complicates the possibility of consideration in an arbitration court. Pavel posed the main question: "Forbidden, but after the adoption of the law, it becomes possible [to transfer disputes over public procurement to arbitration]?" He discussed with the speakers how control over the choice of an arbitration institution should be exercised in the absence of antitrust control by the state.
Alexander Zamaziy, Managing Director and Chief of Staff of the Arbitration Center at the Russian Union of Industrialists and Entrepreneurs, said that the non-arbitrability of certain types of disputes, including those indicated in Federal Law No. 223, was given by the Supreme Court in connection with several cases where the procedure for choosing arbitration courts was not transparent.
The procedure for choosing a PAI for consideration of disputes from government contracts is established in the law, and the current law has resolved this problem since it checks the scale and nature of the arbitration center, according to Alexander said. He further iterated that it would be most reasonable to present the right to choose the arbitration institution (or refuse arbitral proceedings in favor of litigation) to the parties.
Answering the moderator's questions about the openness of disputes with a public element, the speaker noted that if the agreement of the parties or the law explicitly establishes the requirements for openness of the proceedings, the Arbitration Center of the Russian Union of Industrialists and Entrepreneurs should follow them.
Ivan Urzhumov, Adviser in Foley Hoag, spoke about disputes from administrative contracts in France. Arbitrability depends on whether the dispute is an internal or complicated foreign element. For internal disputes, persons under public law are prohibited from entering into arbitration clauses. A number of exceptions are provided for in the Public Procurement Code. It also provides for exceptions in the field of scientific and technical activities and transportation. Ivan gave examples of relevant cases. He also gave examples when government contracts provided for the transfer of disputes to arbitration, for example, in the construction of the Louvre analogue in Abu Dhabi. In France, the competence to review arbitral awards lies with the courts of law and administrative courts.
Alexander Bezborodov, Partner at BEITEN BURKHARDT, drew the audience's attention to a special code of administrative proceedings and the German Civil Procedure Code (ZPO), which reinforce the general arbitrability of public procurement disputes. Labor, patent and employment disputes are exceptions to the general arbitration rule. Alexander gave an example of the case of Toll Collect GmbH against the German government, which became known from WikiLeaks. Consideration of the dispute by an ad hoctribunal took 14 years. The amount of compensation and the opacity of the case sparked criticism from the country's parliament. Now in Germany, discussions are underway about the need to make disputes arising out of public contracts public.
Session 4 "Bla-bla-blyka: Short discussions from the floor" was held by Vladimir Khvalei. He introduced the speakers and briefly spoke about the role of working groups in the Arbitration Association, inviting participants to join the working groups.
Ilya Rachkov, Partner at Nektorov, Saveliev and Partners, held a short discussion on "The fate of investment disputes involving Russia." Ilya suggested the audience think over a case of a Russian bank, which was owned by the main beneficiary through a Swiss company, and the banking license was withdrawn by the State. Professor Kai Hober commented on the situation and turned to the concept of indirect expropriation.
Dmitry Ivanov, Partner at Morgan Lewis, highlighted the topic "Data protection in arbitration: Key issues." The speaker said that disclosure of the parties in the process may be necessary, but risky. There are currently several data protection initiatives in place: GDPR, as well as the ICCA and IBA initiatives. Penalties for breaking the GDPR amount to EUR 20 million. Dmitry also drew attention to the confidentiality limits in English law.
Sergey Usoskin, Attorney, Partner at Double Bridge Law, spoke about what actions state courts interpret as acceptance of jurisdiction by the parties in the discussion "Tendencies in the practice of Russian courts in relation to arbitration." Sergey's colleague in the Arbitration Association working group, Mikhail Kalinin, drew attention to the decision in the Tatneft case. Oleg Todua briefly outlined the role of pre-trial procedures and the observance of the complaints procedure if this issue has already been considered by the arbitrators. During the session, Anton Alifanov focused on the role of Rosfinmonitoring in the enforcement of arbitral awards: this government body can counteract enforcement alongside the opposing party and the court, when its experts indicate that the execution of the award may be contrary to public order.
Andrei Kostitcyn, AdHoc Arbitration, moderated the discussion on the fate of ad hoc arbitration and compared the number of warrants granted by Russian courts since the beginning of 2019 for ad hoc and permanent arbitrations institutions' awards: 19 warrants were issued for arbitration institutions awards, while for ad hoc awards, 55 warrants were granted. As Andrey iterated, this comparison suggests that ad hoc arbitration exists in Russia, but they are afraid to promote it. He further said that it is necessary to develop ad hoc arbitration together.
The discussion "Mediation: The patient is more alive than dead" was conducted by Irina Suspitsyna, foreign economic activity lawyer in Miratorg Agribusiness Holding. Maxim Zhukov, lawyer of the Belarusian law firm SBH, noted that the Ministry of Justice of the Republic of Belarus is trying to popularize mediation. According to Maxim, resorting to mediation in Belarus is possible only in the preparatory court session. Irina Butalova, a representative of the Moscow Center for Mediation and Law, gave a practical example of mediation between an oil company and contractors resolved through mediation.
The Sixth Annual Arbitration Association Conference ended with an informal discussion of participants in the lobby of the Marriott Grand Hotel. The event received very positive reviews from guests and speakers.