CIS Arbitration Forum

Minsk, Belarus

A consortium of law firms and universities is organising an intensive four-day training session on arbitration for practising lawyers in Minsk this summer.

Leading CIS arbitration experts from Russia, Belarus, Ukraine, Latvia and the United Kingdom will gather in Belarus on 26–29 June 2012 in the conference hall of the  ”Minsk” Hotel.

Participants will gain practical experience of how to handle an international arbitration case, covering issues ranging from the drafting of an arbitration clause to the enforcement of arbitration awards. The training will be conducted in Russian.

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Recognition and enforcement of foreign judgments in Russia remains a grey area, because according to the Arbitrazh Procedure Code foreign judgments may be enforced on the basis of a federal law or an international treaty.

There is no generally applicable law providing for enforcement of foreign judgments and there are few international treaties (particularly with Western European and North American states) providing for recognition and enforcement of judgments.

In a recently published ruling the Moscow Circuit Court confirmed a lower court’s decision to enforce several orders of the English High Court and recognise (without enforcement) the judgment of the High Court in the same case (case no. А40-119397/11-63-950).

The decision was based on several multilateral agreements between EU states and the Russian Federation, which the court held implicitly required enforcement of judgments of EU courts, as well as the general international law principle of reciprocity (international comity).

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Up until now optional arbitration clauses have come before Russian commercial courts only indirectly, in cases where lenders have chosen to exercise their option to bring claims before Russian state courts. In a line of cases decided by the Moscow Circuit Commercial Court the validity of such an option was upheld and it was held that such an option was a valid exemption from the arbitration agreement between the parties.

Optional arbitration clauses are complex devices most frequently used in financing transactions. By virtue of such a clause both parties agree that any dispute between them shall be submitted to arbitration, though one of the parties (the lender) is given an option to submit the dispute to any competent state court. The argument goes that the lender is thus assured that the most efficient remedies will be available to it if the borrower defaults on its obligations.

However, in a recently published ruling by a three-judge panel of Supreme Commercial Court (No. ВАС-1831/12 of 28 March 2012) the validity of an optional arbitration clause was questioned. According to the ruling a clause giving only one of the parties the right to choose between two fora is contrary to the fundamental principles of equality of parties and equal access to justice. The case will now be heard by the full Presidium of the Supreme Commercial Court which will decide whether to support the position taken by the panel. The hearing date has not yet been set.

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The Association for International Arbitration, the CIS Arbitration Forum and a number of co-sponsors are hosting an arbitration conference in Brussels on 21 June 2012. Speakers from various CIS jurisdictions will discuss a range of issues related to arbitration in the region.

The topics include the policy of CIS countries towards arbitration, bribery, Russia-related arbitration and investment disputes at the SCC involving parties from CIS countries. The participants will particularly focus on Russia, Kazakhstan and Ukraine.

The Ministry of Justice of Ukraine has reported that on 1 March 2012 an ICSID tribunal ordered Ukraine to pay in the region of EUR 3 million in damages to German investors.

This is the third ICSID case against Ukraine that has resulted in monetary compensation to foreign investors.

In the first case – Alpha Projektholding GmbH v Ukraine (ARB/07/16) – Ukraine was ordered to pay USD 2,979,232 with additional interest accruing from 1 July 2004 at a rate of 9.11% compounded annually. This award was successfully enforced in June 2011.

In the second – Joseph C. Lemire v Ukraine (ARB/06/18) – Ukraine was ordered to pay USD 8,717,850 in compensation for violation of the fair and equitable treatment standard defined in the USA-Ukraine BIT, USD 750,000 in compensation for the costs and expenses incurred in that arbitration and post-award interest of LIBOR + 2%. However, in July 2011 Ukraine filed a request for the institution of annulment proceedings. And on 14 February 2012 upon the respondent’s request the ad hoc Committee issued a decision to stay the enforcement of the award.

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Moscow Arbitrazh (Commercial) Court

Arbitration clauses are usually treated as one of the boilerplate terms of commercial contracts. They are frequently formulated off the top of one’s head and though major arbitration centres recommend standard clauses they are not always used.

In a decision rendered on 13 March 2012 the Moscow Circuit Commercial Court confirmed the lower court’s decision to annul an award from the International Commercial Arbitration Court at the Russian Chamber of Commerce and Industry (the “ICAC”) because the arbitration clause in question provided for the resolution of disputes under the ICAC Rules. This, the courts concluded, meant that the dispute should have been resolved by an ad hoc arbitral tribunal acting under the rules of the ICAC, rather than by an ICAC tribunal.

Facts

The dispute arose out of a lease agreement signed in 2008, which was apparently drafted in two languages (English and Russian) with the English version prevailing in case of discrepancy. However, both Russian and English versions of the contract, according to the courts’ interpretation, provided that the disputes were to be submitted to arbitration in accordance with the ICAC Rules.

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Last year Belarus made a significant step towards the wider use of domestic arbitration for resolving economic disputes. In July 2011 the Belarusian Parliament passed a law “On Arbitration Courts” (the “New Law”) to promote alternative dispute resolution, the idea being that using domestic arbitration should be less costly and quicker, arbitrators would be more skilled and the awards would be conclusive and easy to enforce.

Unfortunately, the legal framework regulating the activity of arbitral tribunals has not led to their widespread use. Today in the Republic there are only three permanent international arbitral institutions: the International Arbitration Court at the Belarusian Chamber of Commerce and Industry; the Arbitration Commission at the Belarusian Universal Commodity Exchange; and the Chamber of Arbitrators under the Union of Lawyers. These tribunals can also resolve domestic disputes, but the percentage of such disputes is relatively low. However, the amendment of the New Law in December 2011 may change this situation.

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For Ukrainian arbitration practitioners the first 10 days of February 2012 was rich in arbitration events, dedicated as they were to different issues of investment, commercial and sports arbitration.

Several factors explain such a broad range of topics. Among these are: UEFA Euro 2012, which is to be co-hosted by Ukraine and Poland this summer; the growing number of international arbitrations against Ukraine and Ukrainian State entities; and the wider use of international commercial arbitration by Ukrainian companies.

“International Disputes with States and State Affiliated Companies: Legal Aspects and Practice in Ukraine” – 1 February 2012, Kyiv, Ukraine

The seminar was organised under the patronage of the Ministry of Justice of Ukraine and initiative of Sayenko Kharenko in collaboration with Egorov Puginsky Afanasiev & Partners by Centralex.

The programme of the seminar dealt with all key issues covered by this topic, ranging from the attribution of liability to the State for the conduct of its instrumentalities and analysis of BITs, to the practice of international dispute resolution involving States and State entities.

The programme was divided into two panels and a Q&A session.

The speakers of the first panel discussed why States enter into international disputes and focused on the experience and practice of Ukraine. The issues were reviewed by Tatyana Slipachuk of Sayenko Kharenko, Ukraine; Elena Trapeznikova, Head of the Administration of the Representation of the Interests of the State in International and Foreign Courts of the Ministry of Justice of Ukraine; and Michael Polkinghorne of White & Case, France.

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A recent case handed down by the Supreme Commercial Court of the Russian Federation (the “SCC”) marks a further step by it towards the favouring of arbitration in Russia.  The SCC confirmed that notifying a branch of the opposing party in arbitral proceedings is sufficient for the purposes of satisfying the due notice requirement. Also, reference by a party to the lack of authority of its attorney in arbitration is irrelevant if that party was aware of the arbitral proceedings.

Facts of the case

Recently the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry (the “ICAC”) published new rules of assistance relating to assistance available from it under the UNCITRAL Arbitration Rules. The Presidium of the Ukrainian Chamber of Commerce and Industry approved the document on 27 October 2011 (the “2011 Rules of Assistance” or “2011 Rules”).

The 2011 Rules govern the rendering of assistance in arbitral proceedings on the basis of the 2010 UNCITRAL Arbitration Rules by two Ukrainian arbitral institutions at the Ukrainian Chamber of Commerce and Industry: the “ICAC” and the Maritime Arbitration Commission (the “MAC”).

Rules of Assistance: 2011 vs 2001

The 2011 Rules of Assistance are rather similar to the old rules of assistance adopted on 29 November 2001 (the “2001 Rules of Assistance” or “2001 Rules”). The old rules were elaborated in accordance with the UNCITRAL Recommendations  (the “Recommendations”) adopted by UNCITRAL in 1982. The new 2011 Rules of Assistance follow the same approach, but take into account the revision of the UNCITRAL Arbitration Rules.

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