On 26 May 2011, the Constitutional Court issued a revolutionary resolution (Number 10-P) confirming arbitrability of real estate disputes in Russia. The resolution also clarified that the Russian courts’ previous practice of referring real estate disputes to the exclusive competence of Russian courts was illegal (see Legal update, Russian Constitutional Court confirms arbitrability of real estate disputes).

It has long been considered by commercial courts in Russia (including the Supreme Commercial Court) that real estate disputes always involve a public element, as such disputes lead to changes in the Federal real estate register, and that therefore they cannot be resolved by arbitration, which is private. However, the Constitutional Court states that reliance of the courts on the public interest element is illegal, and since there is no legislative prohibition on arbitration of real estate disputes in Russia, such disputes are arbitrable.

The court also referred to article 248 of the Russian Code of Commercial Procedure, which lists disputes with foreign elements which are within the exclusive jurisdiction of Russian courts (for example, state property or real estate property disputes in Russia). The court clearly stated that article 248 regulates conflicts of competence between Russian and foreign state courts and does not apply to arbitration.

This resolution has immense practical impact as it finally brings clarity to the long-standing issue of arbitrability of real estate disputes and, in general, the application (or otherwise) of article 248 of the Russian Code of Commercial Procedure to arbitration.

On 24 May 2011, in Sberbank v Business-Lada, Lada-Forward LLC et al (case N A55-11220/2010), the Supreme Commercial Court refused to enforce an arbitral award issued by a small arbitration institution, having found connections between the claimant in the arbitration (Sberbank) and the company which founded the arbitration institute (see Legal update, Russian Supreme Commercial Court decision on impartiality in arbitration).

The Supreme Commercial Court highlighted that the impartiality of the arbitrators needs to be checked both subjectively (behaviour of the arbitrators) and objectively (constitution of the arbitral tribunal), that is, impartiality should be observed even at the level of the creation of the arbitration institution and its list of the arbitrators. This important decision of the Supreme Commercial Court should restrict the practice whereby an arbitration institution is created by a company which then goes on to include in its contracts an arbitration clause referring all disputes to that institution.

Following this decision, lower courts have scrutinised arbitral awards issued by arbitration institutions more carefully.

On 25 January 2012, the lower chamber of the Russian Parliament passed, at its first reading, the amendments to the Law on international commercial arbitration (07.07.1993 N 5338-1). The primary changes relate to the authority of the arbitrators to grant emergency interim measures. Further, the law will state that the Russian state courts have the authority to grant interim measures in support of any arbitration taking place in Russia and abroad (see Legal update, Amendments to Russian Law on international commercial arbitration to allow emergency interim measures.

The amendments are expected to pass through the upper chamber of the Parliament in first half of 2012 to become law.