By 11 September, 2019 0 Comments Read More →

VIAC becomes the only European arbitral institution with ‘Permanent Arbitration Institution’ status in Russia

The recent recognition of the Vienna International Arbitral Centre as a Permanent Arbitral institution expands the choice of eligible arbitral institutions for certain categories of corporate disputes in the Russian Federation. To date, only the Hong Kong International Arbitration Centre (HKIAC) has been granted this status alongside five Russian-based arbitral institutions.

In July 2019, the Vienna International Arbitral Centre (VIAC) became the first European foreign arbitral institution recognized as a “permanent arbitral institution” (PAI) in Russia. The Ministry of Justice of the Russian Federation issued Order with such effect upon the recommendation of the Council for Enhancement of Arbitration at the Ministry of Justice (an advisory body under the Russian Federal Law on Arbitration (Arbitration Law)).

This is a welcome development as it expands the choice of eligible arbitral institutions for Russian-related commercial and corporate disputes, thus benefiting users of arbitration in Austria and Russia.

In this post, we discuss the implications of the PAI permit for VIAC to administer arbitrations in Russia. First, we briefly address the Russian arbitration reform and the rationale behind the PAI requirement. Second, we address the implications of the PAI status for corporate disputes. Third, we describe which disputes VIAC will still not be eligible to administer despite its PAI status, before concluding with an outlook of what is to come as a result of this development.


The Russian arbitration laws were reformed at the end of 2015. The main purpose of the amendments, which entered into force on 1 September 2016, consisted in sanitizing the Russian arbitral institutional markets.
online pharmacy no prescription drugstore

A large number of institutions had been operating, many of them “pocket arbitration courts” with close affiliation with their founders, while many others were mere instruments for fraud.

Following the reform, foreign and domestic arbitral institutions remain only recognized as ‘institutional‘ in Russia when they hold a PAI permit. Consequently, if a foreign institution administers an arbitration without the PAI status, it will be regarded as ‘ad hoc‘.

Although ad hoc arbitration remains permissible in Russia, certain categories of disputes, in particular corporate, must be administered by an arbitral institution recognized as a PAI. Otherwise, parties may encounter difficulties in future enforcement proceedings in Russia in relation to corporate disputes where the arbitration is seated abroad. Or, if the arbitration is seated in Russia, the award may be set aside. Additionally, if a party brings a lawsuit to a Russian court in such circumstances, the court might disregard the arbitration agreement and proceed to hear the dispute on its merits.
online pharmacy no prescription drugstore

The implications of PAI status for corporate disputes

As a part of the reform, arbitration agreements referring the corporate disputes to unaccredited institutions are unenforceable in the Russian Federation. Moreover, the new arbitration legislation clarifies the categories of disputes that qualify as “corporate disputes” and allows certain categories to be referred to arbitration as of February 2017.

A corporate dispute is a dispute that relates to the establishment or management of or participation in a Russian-incorporated company. In other words, a dispute on any corporate governance matter or any dispute in relation to any corporate transaction – including acquisitions, divestitures, mergers, joint ventures, or shareholders’ agreements.

The Russian legislator further divided corporate disputes into three categories. The first category includes disputes that involve some public element or public interest. These disputes are not arbitrable under Russian law. They include, among other things, disputes concerning public law (e.g., disputes over privatization of state property and invalidation of administrative enactments). Also, they encompass disputes concerning a Russian company deemed strategic under the country’s foreign strategic investment legislation (subject to some exceptions).

The second category includes corporate disputes that are arbitrable, provided the arbitration is administered by a PAI in accordance with special rules applicable to corporate disputes. For this category of corporate disputes, the arbitration must be seated in Russia and all shareholders of the target Russian company to which the corporate dispute relates, as well as the target company itself, must be signatories to the arbitration agreement.

These disputes include those relating to (i) the establishment, reorganization and liquidation of legal entities; (ii) claims of shareholders for the recovery of damages in respect of a legal entity or the invalidation of transactions; (iii) the appointment and removal of directors and their liability; (iv) agreements between shareholders concerning the management of the company; (v) invalidation of the decisions of the governing bodies of a legal entity; and (vi) the issuance of securities.

However, at the end of 2018, the Russian legislator made further amendments to the Arbitration Law, making some carve-outs from this list. Under the amendments, disputes arising out of “agreements between shareholders concerning the management of the company” may now be administered by PAI institutions without application of the special corporate rules, and without the need to have the target company and all its shareholders accede to the arbitration agreement.

Therefore, following the new amendments, under the Arbitration Law VIAC will be able to administer such disputes as long as those disputes are “international”. However, it is noted that the requirements now abolished in the Arbitration Law still remain in the Arbitrazh Procedural Code of the Russian Federation. This conflict of laws is to be further resolved through either amendment to the legislation or guidance by Russia’s supreme courts.

The third category of disputes, which VIAC as a PAI became eligible to administer, comprises a narrow group of disputes. These relate to disputes over share ownership, including interest in charter capital (e.g. share purchase agreements, share pledge agreements, etc) relating to Russian companies.

It is worth noting that if an arbitration agreement provides for arbitration outside Russia, the arbitral tribunal is not necessarily bound by the Russian arbitration law. Therefore, a foreign-seated arbitral tribunal could issue an arbitral award in relation to a corporate dispute within the meaning of the Russian arbitration legislation. However, in this case, if the arbitration agreement does not comply with the Russian arbitration law, the Russian courts would refuse to enforce the arbitral award. Moreover, the arbitration agreement would not prevent a party from litigating the same dispute in the Russian courts.

Disputes not administered by VIAC

There are three categories of disputes that VIAC – even with the new PAI status – will not be able to administer. First, VIAC will not be in a position to administer purely “domestic disputes” whether corporate or not (with the exception of certain disputes relating to special administrative districts in Russia). In order to do so, it would need to establish a local Russian branch, which it has not done. It is worth noting that HKIAC also does not have a local branch.

Secondly, certain corporate disputes can only be administered by a PAI if it has specialized corporate arbitration rules. To date, such rules have only been developed by three of the Russian arbitral institutions with PAI status but not by VIAC or HKIAC. Finally, and logically, VIAC – like any other arbitral institution – will not be able to administer disputes which are not arbitrable under Russian law.


The addition of a reputable foreign institution to the list of PAIs has been generally welcomed by the Russian arbitration community given that it widens the options available to commercial parties to settle their disputes by arbitration. VIAC’s recently acquired success may encourage other arbitral institutions in addition to HKIAC to seek PAI status.

Besides the above-mentioned benefits, the parties involved in international commercial disputes, seated in Russia, administered by VIAC will be able to exclude by “express agreement” the jurisdiction of the Russian courts regarding (i) the appointment of arbitrators, (ii) consideration of a request to challenge arbitrators, (iii) termination of arbitrator’s powers, and (iv) reviewing the tribunal’s decision on jurisdiction. Thus, the parties can expressly agree that the award rendered by the arbitral tribunal is final and not subject to appeal.

An increase in the number of disputes involving Austrian and Russian parties is inevitable. Although Russians historically tended to choose arbitral institutions such as the Arbitration Institute of the Stockholm Chamber of Commerce or the London Court of International Arbitration over VIAC, a shift toward VIAC is possible in the near future.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the position of Freshfields Bruckhaus Deringer LLP or any of its affiliates.
online pharmacy no prescription drugstore

Désirée Prantl and Niamh Leinwather are attorneys at law and Principal Associates at Freshfields Bruckhaus Deringer LLP, Vienna; Sorin Dolea is Legal Trainee at Freshfields Bruckhaus Deringer LLP, Frankfurt, and Alexey Yadykin is Attorney at law and Counsel at Freshfields Bruckhaus Deringer LLP, Moscow.

Post a Comment