Every Third LCIA Case Involves a CIS-related Party

JvH PhotoCIS Arbitration Forum continues its series of interviews with representatives of major international arbitration institutions involved in disputes related to Russia and the CIS region.

The series proceeds with an interview with Jacomijn van Haersolte-van Hof, Director General of London Court of International Arbitration (LCIA).

Dmitry Davydenko: Do you see any trends in the LCIA arbitration workload related to the CIS region?

Approximately a third of the LCIA’s cases currently involve either a Russian and/or CIS-related party and/or a party ultimately controlled by a Russian/CIS entity.
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This number has been stable over the last five years, with a slight increase in the last two years, which may have been a result of the on-going economic crisis in Russia and Ukraine.

What we also see in the Russia/CIS-related cases is that there seems to be a preference for English law as the governing law of underlying agreements and London as a seat. As a result, parties tend to instruct English lawyers to represent them in LCIA arbitrations. Another feature of these arbitrations is that we have a number of arbitrations with a non-participating respondent, which requires careful case-management by the LCIA and the appointed Tribunal in respect of notification of procedural steps being taken in order to ensure enforcement of any future award and to minimise risk of a challenge to the award.  

Dmitry DavydenkoWhat is particular about arbitrations with CIS parties compared to arbitrations without such parties?

The arbitrations with parties emanating from Russia and CIS may broadly be divided in two types: (i) high-value, heavily-contested shareholders’ and financial disputes; and (ii) straight-forward debt recovery arising out of sale of goods or commodities agreements.

Dmitry DavydenkoHow often is Russian law applied to the substance of the disputes?

There are few arbitrations, which either proceed under Russian law or involve issues of Russian law requiring expert opinions being submitted in the course of such arbitrations. However, the majority of arbitrations involving Russian and CIS-based parties have English law as the governing law of an underlying agreement and London as the seat of the arbitration.
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Dmitry DavydenkoHow often the disputes are heard by Russian-qualified arbitrators?

We have recently seen nominations of Russian-qualified lawyers and academics in a small number of cases.  However, as the chosen law and seat is often English and London, respectively, the parties often nominate English QCs or English retired judges.  This preference for QCs as arbitrators is frequently specified in the arbitration agreements. Where there are issues of Russian law involved in a case and the LCIA Court is required to select arbitrators, the Court will take this factor into consideration and has appointed a number of Russian qualified lawyers in Russian/CIS-related cases.

Dmitry DavydenkoAre Russian parties mostly claimants or respondents?

They are on both sides.

Dmitry DavydenkoWhat the LCIA is doing to improve services it offers to users?

The Rules ensure that the cost are controlled and that the process is not unduly delayed. The efficiency theme permeates the 2014 Rules, which contain concrete tools for the LCIA to monitor the process and to provide efficient case-management.  For example, the 2014 has introduced emergency arbitrator provisions, which provide a tool for the parties to obtain urgent interim relief, as well as retaining the provisions for expedited formation of the Tribunal, which have been popular with our users since their introduction in 1998.

There are other provisions relating to procedure that encourage Tribunals to engage with parties about the process at an early stage and to set aside time for drafting the award before the hearing has taken place. In addition, we now ask arbitrators to provide detailed availability information to the LCIA when they are accepting appointments, in order to monitor and assess their availability.

The new provisions on party representatives’ conduct allow the Tribunal to maintain effectiveness and efficiency by minimising challenges due to a change of counsel and giving the Tribunal the power to sanction legal representatives if there is a violation of the ethical guidelines.

More recently, we have published Guidance Notes for the parties and arbitrators, which I would highly recommend reading to any party considering putting an LCIA arbitration clause in an agreement and/or intending to refer a dispute to the LCIA.  We have published a Russian translation of the LCIA Rules (2014) and are always happy to answer any queries from our users, including in Russian language, as we have native Russian-speaking Counsel in our Casework Secretariat.

Dmitry DavydenkoHave the sanctions had any impact on the arbitration workload?

The whole area of sanctions is an area where there is much lack of clarity or even disinformation. It is therefore especially important to have a transparent discussion about the impact of the sanctions. The basic answer is yes, we can administer, and we do administer such disputes.
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The reality is that the practical impact of the sanctions is quite limited for us and we are not finding that the sanctions cause practical impediments to carrying out and administrating arbitrations.

Both the sectorial sanctions and the asset-freeze sanctions may obviously impact the substance of certain cases. For example, parties may argue that a contract has been frustrated by the sanctions. The asset-freeze sanctions may impact our work more directly in the sense that we could not accept funds from an entity on the sanctions list, and could be precluded from paying arbitrators returning funds to a sanctioned entity or at least would require a license to do so. So what we need to do (and indeed do!) is to verify whether parties are captured by the sanctions in order to verify whether a license needs to be obtained. We do so in collaboration with the parties and their counsel. This implies a certain administrative burden but does not create an impediment to administrating the case. I should also point out that it is not the Russian sanctions that in practice have led to the need to obtain a license. For example the Iranian sanctions are much broader in scope and affect the banks’ willingness to accept funds regardless of the identity of the parties involved.

Dmitry DavydenkoAny new initiatives/projects related to the CIS region for the nearest future? 

The highlight of this year is the LCIA symposium in Moscow on 5 November 2015, in which a number of senior English and Russian lawyers will participate, including Justice Gloster, who delivered the judgment in the Berezovsky v Abramovich High Court case, as one of the speakers.  I am not aware of any other projects/initiatives.

We have participated in a number of seminars and conferences in Moscow this year. We cooperate on a regular basis with law firms and arbitral institutions, organise lectures, seminars and training in Russian and English. We have an internship program for young arbitration lawyers and enjoy staying in contact with our alumni.

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