The rulings were issued in separate cases brought by Frontpoint Global Emerging Markets Fund LP, Max Participations II Sarl, and ING Bank NV respectively against the same defendant, ZAO Factoring Company Eurokommerz (Eurokommerz). The cases arose out of the same loan agreement between JP Morgan Chase Bank and Eurokommerz. Certain rights under this agreement were subsequently assigned to the above banks – the claimants.

The loan agreement contained a dispute resolution clause which provided for LCIA arbitration. However, it also gave the financial parties the option to issue proceedings in any other competent court.

In Frontpoint Global Emerging Markets Fund LP v Eurokommerz (Frontpoint), the appellate court overturned the ruling of the first instance court which had struck out the proceedings because of the existence of an arbitration agreement between the parties. The Court of Appeal held that the arbitration clause did not prevent the claimant from commencing proceedings in a Moscow court because it had jurisdiction over the dispute, as a court in the claimant's place of residence. The agreement gave the claimant the right to opt for any competent court.

In Max Participations II Sarl v Eurocommerz, the appellate court upheld the first instance court’s decision to decline jurisdiction. However, the appellate court did not find the hybrid clause to be void or inoperative, upholding the decision on the ground that the loan agreement gave the financial party the right to notify the borrower that it had chosen litigation instead of arbitration. In this case, such notification was not sent until a month after the claimant had filed the claim with the court.

Interestingly, the court also considered the failure to notify the defendant in the Frontpoint case. However, in Frontpoint, it held that such failure did not prevent the claimant from applying to the court because the agreement gave the claimant the right to notify, rather than obliging it to do so.

In ING Bank NV v Eurokommerz, the court took a very similar view to that in Frontpoint. However, the court differed by holding that the fact that the claimant had sent a copy of the claim to the defendant could serve as notification that the claimant had opted for litigation.

Although these three decisions could be subject to further appeal to the Court of Cassation, for the time being they are a good sign for creditors exercising their right to choose whether to arbitrate or litigate at the time of the dispute. Note, however, that some commentators, judges and practitioners in Russia consider that hybrid clauses should be deemed void or inoperative because they violate the principle of procedural equality of the parties and do not serve as an express choice of forum.