More on Asymmetrical Arbitration Clauses from the Russian Courts

uncitralIn 2012 the Supreme Commercial Courts famously voided a dispute resolution clause, which entitled only one of the parties to choose between arbitration and litigation. Now the Russian courts have to decide whether to enforce a clause, which provides that the buyer should submit all its claims to arbitration, while the supplier should litigate any claims it has against the buyer. The first instance court decided to enforce the clause.

Ironically, the same case raises another issue the Supreme Commercial Court addressed recently. The parties agreed that the claims against the seller should be submitted to arbitration in Germany under the UNCITRAL Rules. In July the Supreme Commercial Court held that a reference to arbitration rules suffices to make the clause enforceable. This has not prevented the claimant from challenging the clause’s enforceability.

Facts of the Case

In 2005 VMF PartnerSHIP GmbH (the “Supplier”) entered into a supply agreement with JSC Amursky Shipbuilding Plant (the “Buyer”). Pursuant to the agreement any disputes arising under it had to be submitted the Khabarovsk Region Commercial Court. However, the agreement went on to provide that any claims against the buyer were to be submitted to UNCITRAL arbitration seated in the supplier’s country or residence.
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In 2013 the Buyer commenced proceedings before the Khabarovsk Region Commercial Court against the Supplier seeking recovery of c. 116 million roubles (roughly 4 million euro).
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The Supplier moved to have the proceedings discontinued due to the arbitration clause. On 28 October 2013 the court upheld this motion.

Asymmetrical Clause

The Buyer argued that the court should refrain from enforcing the arbitration clause relying on the Supreme Commercial Court’s decision in RTK v. Sony Ericsson. It claimed that like in Sony Ericsson the clause deprived only one of the parties (the buyer) from submitting its claims to the state courts.

The Khabarovsk Commercial Court disagreed. It held that the court should interfere with the clause only where it provided the parties with unequal opportunities. In the case the parties simply agreed on two separate forums for two separate kinds of disputes.

The decision of the court appears to be in line with the previous court practice as well as the recent review of practice adopted by the Supreme Commercial Court. In the latter document the highest commercial court confirmed that the parties may agree to submit the dispute to an arbitral tribunal seated in the country of residence of one of the parties. The same approach may be applied to the clause in question in the case.

UNCITRAL Rules Arbitration Clause’s Enforceability

The Buyer argued that the arbitration clause in the contract was unenforceable. According to the Buyer, the failure of the parties to designate a permanent arbitral institution made it impossible to conduct an arbitration.
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Again the court disagreed.  It observed that there were a number of arbitral institutions in Germany (the country of the Supplier’s residence, the designated seat of arbitration). In addition, it noted that the UNCITRAL Rules contain a mechanism to address parties’ failure to designate an arbitral institution.

While the court did not refer to this argument, there is a more fundamental problem with the Buyer’s objection. The UNCITRAL Rules were specifically designed for ad hoc arbitration and therefore no permanent arbitral institution is required to administer the arbitration.

The court’s decision to hold the parties to their agreement to arbitrate the dispute should be welcomed.

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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