July 16, 2021

Russia's Favourite Arbitration Institutions

On 19 May 2021, the Russian Ministry of Justice granted the status of a permanent arbitration institution (PAI) to the International Court of Arbitration of the International Chamber of Commerce (ICC) and the Singapore International Arbitration Centre (SIAC). The first foreign arbitral institution granted PAI status was the Hong Kong International Arbitration Centre (HKIAC) on 4 April 2019, followed by the Vienna International Arbitration Centre (VIAC) on 18 June 2019.

Without PAI designation, an arbitration administered by a foreign arbitral institution is considered 'ad hoc' under Russian arbitration procedural law. While ad hoc arbitrations are permissible in Russia, the ability to enforce the award within Russia is uncertain. Moreover, an award rendered in an arbitration of a dispute relating to the establishment, management or participation in a company incorporated in Russia (for example, shareholder disputes) will only be enforceable if an accredited institution administered the arbitration.

With PAI status, an award rendered in an arbitration administered by HKIAC (and the other arbitration institutions having such status) should be recognised and enforced in Russia, thereby reducing the risks surrounding the enforcement of awards rendered by ad hoc tribunals.

PAI status also equips parties with the ability to take advantage of Russian arbitration procedural law, potentially providing court assistance and oversight benefits, including seeking interim measures or obtaining evidence. These powers are not available to parties in ad hoc proceedings.

PAI status allows the designated arbitral institution such as HKIAC to administer the following disputes[1]:

  1. international disputes where Russia is the seat of the arbitration;
  2. corporate disputes relating to the establishment, management or participation in a company incorporated in Russia; and
  3. disputes between parties from or arising out of activities in any Special Administrative Region (as defined under the Russian law)[2].

PAI status also allows the foreign arbitral institution to administer internal disputes between Russian counterparties but on the condition that the institution has a representative office in Russia. At present, neither HKIAC, VIAC, ICC or SIAC has a representative office in Russia, but this may change in the future.

In February 2020, HKIAC and VIAC jointly sought a clarification from the Russian Ministry of Justice in respect of specific issues concerning (i) corporate disputes; (ii) procurement disputes; (iii) domestic disputes; (iv) the differences between arbitrations administered by a PAI and ad hoc proceedings; and (v) the consequences of a PAI administering an arbitration that it is not authorised to administer. In May 2020, the Russian Ministry of Justice gave its response. While it does not have binding authority, it nevertheless provides helpful guidance on the benefits and limitations of PAI status. (The response is available in Russian here as well as unofficial English translation here).

Interestingly, since April 2019, HKIAC has seen an increase in arbitration involving cases with Russian parties. According to the data provided by HKIAC, in the last three years, there have been eight arbitration filings, seven of which occurred after April 2019. The average amount in dispute in HKIAC cases involving Russian parties is approximately US$20 million. The overwhelming majority of the cases were seated in Hong Kong. Interestingly, there was no nexus with Asia in some of those cases apart from the parties' choice to resolve their disputes in Hong Kong.

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