Keywords

RUSSIA; ARBITRATION INSTITUTION

Background

On 1 September 2016, new legislation on commercial arbitration entered into force in Russia. It hasamended the 1993 Law on International Commercial Arbitrationand createda new Law on Arbitration to regulate domestic arbitration. The changes introduced by the new legislation are aimed at improving various aspects of arbitration in Russia. They cover, among other things,the form, interpretation and validity of arbitration agreements; thepower of state courts to appoint and dismiss arbitrators at the request of a partyin the event that the other party does not act, and to obtain evidence; and the arbitrability of corporate disputes.Another, particularly notable change is the introduction of new regulations concerning permanent arbitration institutions.

Previously, Russian law laid down very liberal conditions for creating arbitral institutions. To acquire the status of a permanent arbitral institution, it wassufficient to adopt arbitration rules and deposit them with the local state commercial court. This led to a proliferation of arbitration institutions in Russia, which quickly numbered more than 1,000, and to the emergence of so-called ‘pocket arbitration courts’, which offered fast and claimant-oriented dispute resolution services.Some of these bodies adopted misleading names – such as ‘Supreme Domestic Arbitration Court’, ‘Arbitration Court of the Region ___’, ‘Arbitration Court of the Central City District ___’ – which gave users the impression they were referringtheir cases to the state courts.

The new legislation is designed to put an end to such practices by setting outspecific requirements for the authorisation/registration and operation of permanent arbitral institutions.

The new regime

Arbitral institutions maynow be established only by non-commercial entities andin the form of non-profit-making bodies. This requirement is intended to ensure that arbitral institutions are economically independent and remain free of conflicts relating to financial interests.

All permanent arbitral institutions other than the well-established International Commercial Arbitration Court and Maritime Arbitration Court of the Russian Chamber of Commerce and Industryare required to undergo state registration, which is a two-step process. The institution must submit an application, which is reviewed by the Council for the Development of Arbitration. This is a body set up under the auspices of the Ministry of Justice and is composed of around 40 individuals including government staff, representatives of the legal, academic and business communities, and chambers of commerce.A third of its members are replaced on a rotating basis every three years. The Council makesrecommendationsto the Government of the Russian Federation on whether to approve or reject applications from permanent arbitration institutions.The recommendation must be approved by at least two thirds of the Council’s members. TheGovernment of the Russian Federation thendecides whether or not to register the institution. Its decision can be appealed ina state court.

Foreign arbitration institutions wishing to administer disputes seated in Russia are required to follow this registration process, too. However, the new legislation provides a simplified procedure for ‘well-known’foreign arbitration centres,which just need to file a statement to the effect that they have an internationally recognised reputation. Ifa foreign arbitration centre does not register in Russia, the casesit administers that are seated in Russia will be treated as ad hoc arbitrations, which will deprive the tribunals and parties of the benefits of institutional arbitration .In such a situation, the parties would have to agree with a permanent arbitration institutionthat has been duly registered in Russia to keep the case materials for five years following the close of the arbitration proceedings. At the time of writing no foreign arbitration institutions have yet applied for registration under the new legislation. A permanent arbitration institution seeking state registration must:

  • prove that the information about the arbitration institution and its founders is true and correct;
  • demonstrate that the organisation has a sufficientlygood reputation and financial standing to act as an arbitrationinstitution, and that it is involved in the development of arbitration at large;
  • adopt arbitration rules that are in compliance with the arbitration law; and
  • compile a list of at least 30 recommended arbitrators, half of whom should havemore than ten years’ experience of acting as arbitrators or federal judges, and not less than a third of whom should have a Russian postgraduate research degree in named legal disciplines (e.g. civil, commercial, corporate, environmental law, civil procedure).

Concluding remark

It may be expected that the registration requirement will lead to a significant decrease in the number of domestic arbitration centresand to an improvement in their quality. It is still unclear whether foreign arbitration institutions will wish to register in Russia.