New Rules for Commercial Court Proceedings in Russia

On 1 September 2016 a new law came into force that governs commercial and civil disputes in Russia; the law has radically changed the format of commercial and civil tribunal proceedings in Russia. Previously Russian legislation, in accordance with international agreements, was made up of two branches: tribunals for permanent or ongoing disputes and ad hoc tribunals, those for specific, one-off disputes.

The new law distinguishes between tribunals ‘administered by a permanent commercial arbitration institution’ and those performing arbitration without the administration by such institution. The latter has been named the arbitral tribunals established by parties to settle a particular dispute. Parties can choose any adjudicator in the ‘permanent’ tribunal, and not only those who included in the list prepared by the permanent commercial arbitration institution; whereas parties to the ad hoc arbitration can delegate ‘certain functions of dispute administration’ to the permanent commercial arbitration institution. Accordingly the distinction between the permanent commercial tribunals and ad hoc tribunals appears to be unclear, and the arbitration institution steps forward to perform the functions related to the arbitration organizational support (support of the procedures of selection, nomination or removal of adjudicators, record keeping, arrangement of collection and distribution of arbitration charges) but is not involved in resolving the dispute.

The requirements for arbitrators on the one hand have been weakened, but on the other hand strengthened. As such, the requirement that a sole adjudicator or the chairman of the panel of adjudicators has a legal education has been changed from mandatory requirement to optional (variable upon agreement between the parties); however, a minimum age requirement for adjudicators has also been introduced, which is 25 years old.

Much more stringent requirements are set for the recommended list of arbitrators as a whole:

• the list must have at least 30 arbitrators;
• at least one third of the arbitrators must have a degree in a scientific field included in the list, which is approved by the authorized federal executive body;
• at least half of the arbitrators must have experience in resolving civil disputes as arbitrators or arbitrators in the arbitration courts or as judges of the Federal Court, the Constitutional Court of the Russian Federation, Justices of the Peace for at least ten years prior to the date of their inclusion in the recommended list of arbitrators.
• One person cannot be included in the recommended lists of adjudicators of more than three permanent arbitration institutions. As noted above, the selection of adjudicators by the parties to the dispute cannot be determined by their inclusion in the list of recommended adjudicators, the list may remain a list of ‘figureheads’.

In spite of the functions of the permanent commercial arbitration institutions being undetermined, the procedure for its creation is extremely complicated.  The right to create them is granted by the act of the Government of the Russian Federation enacted based on the recommendation of the Council for Improvement of Arbitration Proceedings, whose members are approved by the authorized federal executive body. The requirements specified for non-profit organizations claiming the right to perform functions of the permanent commercial arbitration institution are at present rather vague: key requirements are reputation, area of expertise and nature of activity. Evaluative nature of these requirements allows granting the right to perform the functions of the permanent commercial arbitration institution or deny such right at one’s own discretion. The exceptions in terms of the creation procedure were made for the International Commercial Arbitration Court and Maritime Arbitration Commission affiliated with the Chamber of Commerce and Industry of the Russian Federation, but provisions with that effect are determined by law regardless.

Many rules of a new law are focused on increasing the enforceability of arbitration agreements. It is expressly provided for that when interpreting an arbitration agreement, any doubts shall be interpreted in favor of its validity and enforceability. It is determined that in case of a change of a party in the liability in relation to which the arbitration agreement was made, the arbitration agreement shall be valid in relation to both initial and new party.

The innovation is the new law is the right of the state courts to consider reversal or enforcement of the arbitral award, to suspend the proceedings in order for the arbitral tribunal to resume the arbitration and eliminate the reasons for reversal or refusal in enforcement of the arbitral award. In other words, even if arbitrators make fundamental mistakes, the judiciary is willing to give them an opportunity to correct them to keep the arbitration agreement effective.

The introduction of the institution of corporate dispute arbitration is undoubtedly a positive change. At the moment, corporate disputes are within the exclusive jurisdiction of the state commercial courts, and arbitral tribunals cannot settle them. Such an option has now been introduced by the law but only for the arbitral tribunals administered by the permanent commercial arbitration institutions.

Following the enactment of the new law, amendments have been made to the Law of the Russian Federation ‘On International Commercial Arbitration’, Civil and Arbitration Procedure Codes of the Russian Federation, and a whole range of other laws.

See:

the Federal Law of 29.12.2015 No. 382-FZ “On Arbitration (Arbitral Proceedings) in the Russian Federation”

the Federal Law of 29.12.2015 No. 409-FZ “On Amendments to Particular Statutory Instruments of the Russian Federation, and Invalidation of Article 6 Part 1 Clause 3 of the Federal Law “On Self-Regulatory Organizations” due to Enactment of the Federal Law “On Arbitration (Arbitral Proceedings) in the Russian Federation”.