Russian public prosecution office orders investor to remove arbitration clauses from consumer contracts | Practical Law

Russian public prosecution office orders investor to remove arbitration clauses from consumer contracts | Practical Law

Natalia Belomestnova (Senior Associate), Goltsblat BLP

Russian public prosecution office orders investor to remove arbitration clauses from consumer contracts

by Practical Law
Published on 04 Apr 2012 • Russian Federation
Natalia Belomestnova (Senior Associate), Goltsblat BLP
On 27 February 2012, the public prosecution office in Saint Petersburg ordered a construction company to remove arbitration clauses from all of its contracts with its clients. The order was issued as a result of an investigation by the prosecution office into the construction company’s activity and its compliance with legislation, in particular consumer protection laws.
Among other things, the prosecution office established that the contracts for shared participation in the construction of housing, which the company had entered into with private persons, contained arbitration clauses referring all disputes to the arbitration institution at the Association of Realtors.
The prosecutors decided that such arbitration clauses in consumer contracts violated legislation for the protection of consumer rights, and ordered the company to remove them from all contracts.
Even though there are no provisions in Russian legislation regarding the non-arbitrability of consumer disputes, and even though the Russian courts have not issued any clear advice on this issue yet, the prosecutor's decision seems to be reasonably based on the general principle of ensuring maximum protection to consumer rights. Further, it recognises the exclusive power of the state courts to oversee the dispute resolution process with an often unprotected party in a transaction - a consumer.