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CIArb News

Arbitration Reform in Russia: Insight into the Key Changes

4 October 2016 Features
By Sabina Adascalitei LLB, LLM, MCIArb, Research and Academic Affairs Coordinator

Federal Law No. 382-FZ 'On Arbitration (Arbitral Proceedings) in the Russian Federation' and Federal Law No. 409-FZ both came into effect on 1 September 2016.

The new laws are commonly referred to as the “arbitration reform”, replacing the domestic arbitration law and amending the international commercial arbitration provisions.

The reason underlying these changes revolves around the idea of making arbitration in Russia more attractive to disputing parties.

Previously, the arbitration laws were perceived as being unpredictable and as a result, the new features aim to address this concern. One of the key changes touches on the issue of arbitrability of intra-corporate disputes, which can now be submitted to arbitration if the seat of arbitration is Russia.

The changes brought by the reform cover, inter alia, the mandatory licensing of arbitral institutions, a revised list of non-arbitrable disputes, eligibility requirements for arbitrators as well as the role of local courts in assisting the arbitral proceedings.

Mandatory licensing of arbitral institutions

In the past, Russian companies have set up entities to resolve disputes arising out of their own contracts, thus giving rise to conflict of interest issues. To avoid these so-called “pocket arbitrations” the reform seeks to regulate arbitral institutions.

In this sense, existing arbitral institutions will be able to continue administering arbitrations without a license until 1 November 2017.

From that date onwards, arbitral institutions will have to be licensed by the Government at the recommendation of the Arbitration Development Council. Failure to do so will render arbitrations conducted under non-licensed institutions to be treated as ad hoc arbitrations.

Furthermore, after obtaining a license, arbitral institutions will still not be able to act as administrative bodies, unless their arbitration rules are deposited with the Ministry of Justice.

It is noteworthy to mention that the two well-known arbitral institutions, the International Commercial Arbitration Court (ICAC) and the Maritime Arbitration Commission (MAC), will automatically receive a licence by operation of law.

Non-arbitrable disputes

Before the reform, there was uncertainty with regards to the categories of disputes which could be resolved through arbitration.

This is because courts took different views on whether statutory provisions stating that certain types of disputes should be dealt with by national courts, rendered those disputes non-arbitrable.

The new reform clarifies this issue, listing the following categories of disputes as non-arbitrable: non-business (family disputes other than division of assets, probate, labour etc.), public law (annulment of acts of public authorities, recovery of taxes and levies, privatisation disputes etc.), class actions where some of the claimants are named, bankruptcy proceedings as well as certain IP disputes (patent holder contests, annulment of patents etc.).

Regulation of arbitrators

The new arbitration law sets forth certain requirements for arbitrators wishing to take part in international commercial arbitration proceedings.

Arbitrators are now required to be at least 25 years old and have the legal capacity to enter into contracts.

They should not have a criminal or disciplinary record that would attract their suspension as professionals and they should not be government officials.

Furthermore, in the cases of chairpersons or sole arbitrators, there is a further condition that requires them to have a law degree from Russia, or one officially recognised by the country.

Finally, an important change relates to the liability of arbitrators. The new provisions state that an arbitrator is immune from liability, unless the charges refer to the arbitral proceedings.  

The role of the courts. Following the reform, if Russia is chosen as the seat, the national courts will take a more active role in supporting arbitral proceedings. For instance, either the arbitral tribunal or one of the parties (as authorised by the tribunal) can ask the Russian courts to assist with the taking of evidence.

Although the court will not be able to obtain witness testimonies, it can subpoena written evidence from any person or entity in Russia.

Furthermore, under the new laws, the court is also able to assist with the appointment, challenge and termination of the mandate of an arbitrator as well as with the jurisdiction of the arbitral tribunal.

Ultimately, Russia’s arbitration reform introduces significant changes to the regulation of the arbitral process as well as to the creation and operation of arbitral institutions.

The new provisions aim to harmonise the dual system which was previously in place, enabling the creation of new arbitral institutions and supporting the development of those already in existence.