Arbitration represents a non-judicial procedure for dispute settlement where a party’s consent plays the central role in its regulation. Nevertheless, the state’s courts also play an important role as they provide support to arbitration and at the same time ensure protection of a party’s rights.
he recent reform in the regulation of arbitration in Russia has led to a number of significant changes. The issue of arbitrability of corporate disputes represents one of the key changes. The Federal Law “On Arbitration in the Russian Federation” and The Federal Law “On Changes to Certain Laws of the Russian Federation” have introduced a completely new set of rules regarding the arbitrability of corporate disputes in relation to international commercial arbitrations.
The new laws clearly state that corporate disputes are arbitrable if an arbitration agreement is concluded only after 1 February 2017. If an arbitration agreement is concluded before this date, such disputes will be considered as non-arbitrable.
The new laws set out a list of disputes that cannot be subject to arbitration:
- insolvency (bankruptcy) disputes
- disputes as regards calling a general meeting of shareholders
- disputes arising from the activities of notaries regarding certification of transactions with shares in limited liability companies
- disputes based on challenging non-regulatory acts, decisions and actions of state bodies
- all disputes regarding strategic companies, with the exception of dealings where a state’s permission is not required
- disputes based on the application of Section IX (purchase and buy-back by an entity of outstanding shares) and Section XI.I (acquisition of more than 30% of shares in a public company) of Federal Law “On Joint Stock Companies”
- disputes relating to the expulsion of participants of a legal entity.
All other corporate disputes are considered as arbitrable, however, the laws require the following conditions to be met:
- the seat of arbitration must be in Russia only
- such a dispute must be referred to institutional arbitration
- the governing arbitral institution must approve special rules for resolving corporate disputes and post them on its website
- the arbitration agreement needs to be signed by all the shareholders and by the company itself.
Only the simultaneous compliance with all these conditions allows corporate disputes to be resolved by means of arbitration. Otherwise, the award rendered without the compliance of the mentioned rules would be set aside or not enforced by a Russian court. Nevertheless, there is an exception from the main rule. Corporate disputes regarding ownership of shareholdings and securities registration are arbitrable, even if there are no special rules for resolving corporate disputes provided by a governing arbitral institution.
Overall, corporate disputes in Russia have become arbitrable. This is a substantial development in Russian legislation, allowing arbitration regulations to come into line with international practice.
However, there is still some uncertainty regarding the seat of arbitration. It is not clear what the consequences are from an award rendered by a foreign arbitration centre with a seat outside Russia. Would these laws be applicable to foreign arbitration regarding a Russian company as part of lex societatis? Would such awards be enforceable in the territory of Russia? The laws strictly limit parties’ freedom to choose a seat of arbitration in corporate disputes, which is a significant drawback as this is not in line with international arbitration practice.
Arbitration procedures rely on parties’ consent and these limitations raise more questions and uncertainty. It remains to be seen how effective these new laws are and what should be expected from the new arbitration policy.