Vladimir Kilinkarov has written an article for DP.ru titled “Arbitration clause as a guarantee for a concessionaire”

Vladimir Kilinkarov - PhD

Delovoy Peterburg has published a column written by Partner and Head of the PPP Practice at Maxima Legal, Vladimir Kilinkarov, which covers the topics of arbitration disputes regarding concession agreements.

In his article, Vladimir writes about the popularity of using the ‘infrastructure mortgage’, which according to the plan of the country’s leadership should lead the economy by 2020 to growth rates above the world average.  The challenging task according to Vladimir, cannot be realised without “respect for the provisions of the future programme from all three branches of power”.

As Vladimir has noted, “the commercial courts defend the interests of the budget and are less committed principles of objectivity. Which is why the first course of action for an investor is to choose an independent arbitrator or arbitration tribunal – if not an international one then a Russian one.

“It is assumed that a tribunal will not be prejudiced against a private investor in a dispute involving the Russian Federation or its regions, as every other dispute is likely to involve the recovery from the state budget of large sums of compensation pledged in an agreement as an indemnity on the return of private partner’s investments. The right of the parties to choose non-state arbitration is an important condition for the project for the private partner.

“Court practice for disputes relating to concession agreement at the present moment do not provide much optimism.  Without even time to take in the decision of the commercial courts in respect of the Orel tunnel, the professional community was shaken by the decision of the Moscow Commercial Court in the case of OJSC Glavnaya Doroga against the Avtodor Group. The Court awarded 2.5 billion roubles to be paid by the state company for concessions for the construction of a new exit to the Moscow Ring Road from the M-1, but dismissed Avtodor’s request to enforce an arbitration clause under which the dispute was to be heard by the International Commercial Arbitration Court (ICAC) of the Russian Chamber of

Industry and Commerce. The ICAC is a Russian tribunal with an impeccable reputation, under law it has the authority to consider concession disputes. However, the Commercial Court in Moscow decided that the dispute under the concession agreement is public law in nature, since the construction is aimed at satisfying a public interest and the agreement was entered into with the Russian Federation via a state company and following the results of the state tender. As such, according to the Court, the transfer of the dispute to the arbitration tribunal would violate the fundamental principles of Russian law.

We have to hope that the unprecedented decision of the Court will be corrected by the higher courts and that the market will not suffer.  Otherwise talk about the infrastructure mortgage and the attracting of private investors to public infrastructure will be viewed by investors with either irony or dismay.”

For the full version of the article, click here.