Enforcement of Arbitral Awards in Russia: Effect of Foreign Court Proceedings

federation towerIn April, the Federal Arbitrazh Court for the Moscow Circuit faced two opportunities to address the implications of foreign set aside proceedings on the enforcement of an award in the Russian Federation.

In the first case, it ruled that a party’s failure to raise an objection to the award in the set aside proceedings precluded it from raising this objection in the enforcement proceedings. In the second case, it confirmed that ongoing set aside proceedings do not prevent the Russian court from enforcing an award.

Conduct in Set Aside Proceedings Matters

The first case, Fujitsu Technology Solutions GmbH v. LLC RRSi (case no. А40-121292/12-29-1204), concerned the enforcement of several arbitral awards rendered by an arbitral tribunal of the Chamber of Commerce and Industry of Upper Bavaria.

The respondent argued that the award should not be enforced as: (i) the arbitration clause relied on by the tribunal does not extend to the dispute it resolved; and in any event (ii) the contract containing the clause had not  been signed by an authorised representative of the respondent.

The first instance and cassation courts dismissed both objections.

On the first objection, they began by holding that the arbitration clause conferred upon the tribunal the power to determine the scope of its jurisdiction. The respondent based its objection on the alleged expiration of the agreement containing the arbitration clause. Both the arbitral tribunal and the German court in the set aside proceedings held that the parties had agreed to extend the term of the validity of the agreement. The Russian courts decided that in these circumstances they should defer to the findings made by the arbitral tribunal and the German court.

In this respect the decision forms part of a larger trend in Russian case law to defer to arbitral tribunals’ determinations with respect to the scope of the parties’ consent. Indeed, where the parties have agreed to have their disputes resolved by an arbitral tribunal, including disputes as to the scope of the tribunal’s jurisdiction, the courts held they should hesitate to interfere with the resulting decision.

The second objection was dismissed summarily. The courts noted that it was not raised either in the arbitral proceedings or at the set aside application stage. Accordingly, the respondent was precluded from raising it at the enforcement stage. In this respect, the Russian courts follow the approach earlier articulated in Hong Kong and Singapore jurisprudence.

Russian courts have repeatedly held that if a party fails to raise an objection during the course of the arbitral proceedings it may not, in principle, rely on it during the enforcement case. However, the present case was the first time where the courts looked at the party’s conduct during the course of the set aside application proceedings. This is a welcome development as it discourages parties from coming up with new objections in each forum and encourages them to fully litigate the dispute in one place.

The full text of the Resolution of the Federal Arbitrazh Court for the Moscow Circuit is available here (in Russian).

Application to Set Aside the Award does not Preclude its Enforcement

The second case, Bouygues Batiment International S.A. v. CJSC Potok & 0458 (case no.  А40-100678/12-52-931), concerned the enforcement of an ICC award rendered in Stockholm.

The respondent objected to enforcement on various grounds including the allegedly excessive amount of the penalty interest and legal costs awarded to the claimant as well as on the basis of ongoing set aside proceedings before the Svea Court of Appeal.

The courts summarily dismissed various objections based on the amounts awarded holding that they cannot interfere with the decision of the tribunal on the merits of the dispute. Such an approach reflects a settled approach in Russian jurisprudence, which has recently been endorsed by the Presidium of the Supreme Commercial Court in its review of the court practice on the public policy defence.

With respect to the set aside proceedings the courts stressed that pursuant to the ICC Rules the award becomes final and binding upon being rendered by the tribunal. Accordingly, the court may not refuse to enforce it even if it is subject to a set aside application.

Surprisingly, the respondent had not (apparently) asked for the proceedings to be adjourned pending resolution of the set aside application (a remedy expressly envisaged both by the New York Convention and the Russian law on international commercial arbitration). There is no settled jurisprudence in Russia on the conditions that need to be satisfied for the proceedings to be adjourned and such applications are rarely made. However, at least in one instance, the Presidium of the Supreme Commercial Court adjourned the enforcement proceedings pending resolution of the set aside application – namely in the Stena RoRo v. Baltiisky Zavod case.

The full text of the Resolution of the Federal Arbitrazh Court for the Moscow Circuit is available here (in Russian).

About the Author:

Sergey Usoskin is an advocate (member of the Russian bar) and a senior associate at Ivanyan&Partners. He has experience advising clients on and representing them in commercial and investment arbitration matters as well as before the Russian court (including the Supreme Commercial Court). He is a graduate of St Petersburg State University, Faculty of Law and University College London Faculty of Laws.

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