Aftermath of II International law forum: is Russia becoming more hostile to foreign arbitration? | Practical Law

Aftermath of II International law forum: is Russia becoming more hostile to foreign arbitration? | Practical Law

Natalia Belomestnova (Senior Associate) and Tatiana Zakharova (Associate), Goltsblat BLP

Aftermath of II International law forum: is Russia becoming more hostile to foreign arbitration?

by Practical Law
Published on 05 Jul 2012 • Russian Federation
Natalia Belomestnova (Senior Associate) and Tatiana Zakharova (Associate), Goltsblat BLP
The Head of the Supreme Commercial Court of the Russian Federation recently made a speech, at the II International Legal Forum on "Unfair competition among legal systems", in which he criticised foreign arbitration and litigation proceedings. The speech has raised concerns among arbitration and dispute resolution practitioners about the implications for future court practice in Russia.
In May 2012, the II International Legal Forum took place in St.Petersburg and is among the highlights in the calendar of legal events in Russia this year. The Forum, organised by the Ministry of Justice, the Supreme Commercial Court of the Russian Federation and the President of the Russian Federation gathered practising lawyers and academics from around the country and the globe.
The speech given by the Head of the Supreme Commercial Court of the Russian Federation, Anton Ivanov, particularly attracted the attention of arbitration and dispute resolution lawyers. Mr. Ivanov was discussing the abuse of forum shopping in international dispute resolution and the need to put clear boundaries on the competence of foreign courts and arbitral tribunals, especially in cases where:
  • Foreign law is applied unfoundedly.
  • There is questionable acceptance of jurisdiction by foreign courts.
  • Foreign courts issue anti-suit injunctions which purport to prohibit litigation in other countries.
  • The existing "authority" of the arbitration community and pro-arbitration approach of state courts in some countries which makes it practically impossible to annul the arbitral award there.
  • The ignorance of foreign courts and tribunals on issues of state immunity.
Mr. Ivanov outlined the need to create, in Russia, an effective mechanism for confronting foreign courts and tribunals in the situations described above and in cases where the jurisdiction of the Russian courts is more appropriate. As possible counter-measures, he suggested introducing:
  • Damages payable by a party which wrongfully resorted to foreign jurisdiction.
  • Special governmental insurance for Russian investors who invest money abroad (having paid insurance, the Russian Federation would be, in Mr. Ivanov's opinion, legitimately able to resort to political measures against the state which violated an investor's interests).
  • In extreme cases, prohibiting entry to the Russian Federation for defendants, their employees, barristers and law firms, arbitrators and judges and other persons who were involved in a "wrongful" action or arbitration, including freezing and even confiscating their assets.
Russian Prime Minister, Dmitry Medvedev, supported Mr. Ivanov's suggestions, regarding them as a civilised way of resolving issues between jurisdictions. However, the Russian legal society views such initiatives as being potentially being harmful to the attractiveness of Russia as a place for doing business.
For now, the concepts and ideas reflected in the speech have not found their way directly into legislation or court practice. In terms of arbitration, the stance of the Head of the Supreme Commercial Court, who does not see arbitration as an independent and reliable means of dispute resolution, has been reflected in a series of recent judgments of the Supreme Commercial Court in which it was found that corporate disputes are not arbitrable (see Legal update, Russian courts consider corporate disputes to be non-arbitrable) and that alternative dispute resolution clauses are not valid (see Legal update, Validity of hybrid dispute resolution clauses to be considered by Russian Supreme Commercial Court). It can only be hoped that these are not the signs of a worsening of the arbitration climate in Russia and that the courts will be able to find a reasonable and balanced approach to alternative dispute resolution mechanisms.