Major Changes In The Laws Governing Functioning Of The Arbitral Tribunals In Russia - Arbitration & Dispute Resolution

The Federal Law dated 29 December 2015 No. 382-FZ 'On Arbitration in the Russian Federation' (hereinafter - the 'Arbitration Law'), became a new step in the development of legislation governing the arbitral tribunals in Russia. In particular, from the entry into force of the said regulatory legal act, provisions of the Federal Law, dated 24 July 2002, No. 102-FZ 'On arbitral tribunals in the Russian Federation' (hereinafter - the 'Law No. 102-FZ') will not apply, except for the arbitration initiated and not completed prior to the Arbitration Law commencement date.

The relevant changes to the laws become effective from 1 September 2016, and a part of the changes enters into force from 1 January 2017.

This review focuses on the most significant changes, but is not limited to them.

I. Changes in the Procedure for Formation of Arbitral Tribunals

Under the Arbitration Law, permanent arbitral tribunals can only be formed at non-profit organizations that have the right to perform the functions of a permanent arbitral institution.

Permanent arbitral institutions will be responsible for the organisational support of arbitration (in particular, ensuring selection procedures, appointment or removal of arbitrators, record keeping, organizing collection and distribution of the arbitration fees, etc.). Powers of the arbitral tribunal to resolve dispute will not be given to arbitral institutions.

The right to exercise the functions of administration of arbitration is given to non-profit organizations by the relevant act of the Government of the Russian Federation on the basis of the recommendation of the Council on improvement of arbitration proceedings.

According to the Arbitration Law, the International Commercial Arbitration Court and the Maritime Arbitration Commission at the Chamber of Commerce of the Russian Federation shall perform the functions of a permanent arbitral institution without entitlement to exercise the functions of a permanent arbitral institution by the Government of Russia.

Despite the preservation of the institution of arbitration courts formed by the parties to resolve specific disputes ('ad hoc'), the legislator chose the way of strengthening their regulation.

In particular, in the new Law the legislator introduces a range of restrictions in respect of arbitral tribunals, formed to consider a specific dispute ('ad hoc'):

arbitral tribunals created for a particular dispute cannot consider corporate disputes;
parties to 'ad hoc' arbitration proceedings are not given the right to enter into an agreement to waive the options of appealing to the competent court for assistance;
parties to 'ad hoc' arbitration proceedings do not have the right to appeal to the competent court for assistance in obtaining evidence;
the parties' agreement on the final decision of the 'ad hoc' arbitral tribunal shall be invalid.

II. Arbitration Agreement

Among the novelties it is worth mentioning the possibility of including arbitration clause in the charter of a legal entity (Article 7.7 of the Arbitration Law) in respect of corporate disputes.

In addition, the arbitration agreement may provide for the option of submitting to arbitration all or a part of disputes between participants of a legal entity established in Russia (corporate disputes).

III. Disputes to be Considered by an Arbitral Tribunal

According to Article 33.1 of the Arbitration Procedural Code of the Russian Federation (hereinafter - the 'Arbitration Code'), disputes between parties to civil law relations, which are subordinate to arbitration courts, can be submitted to the arbitral tribunals, subject to the arbitration agreement between the parties to the dispute.

Part 2 of the said Article in the new wording of Article 33 of the Arbitration Code provides that the following categories of disputes cannot be transferred to an arbitral tribunal subordinate to arbitration courts:

disputes on insolvency (bankruptcy);
disputes on the refusal of state registration, evasion of state registration of legal entities and individual businessmen;
disputes on the protection of intellectual property rights with the participation of organizations engaged in the collective management of copyright and related rights, as well as disputes falling within the jurisdiction of the Court for Intellectual Property Rights;
disputes arising from administrative and other public relations;
disputes related to the cases on the establishment of facts of legal significance;
disputes related to the cases for compensation for the infringement of the right to a trial within a reasonable time and the right to the execution of court order within a reasonable time;
disputes on the protection of the rights and interests of a group of persons;
disputes on the general meeting of participants of the legal entity;
disputes arising from the activities of notaries for the certification of transactions with shares in the charter capital of limited liability companies;
disputes related to challenging regulatory legal acts, decisions and actions (omission) of state authorities, local authorities, other authorities and organizations that are vested with certain state or other public authority by federal law, and officials;
disputes related to economic entities, which are essential for national defense and state security;
disputes related to the acquisition and redemption by a company of shares, disputes related to the invalidation of related party transactions;
disputes on the removal of participants of a legal entity;
disputes arising from relations governed by the legislation of the Russian Federation on privatization of state and municipal property;
disputes arising from relations governed by the legislation of the Russian Federation on the contract system in the procurement of goods, works and services for state and municipal needs (this paragraph shall not apply after the entry into force of the law that establishes the procedure for determining the permanent arbitral institution, which has the right to administer disputes arising from relations in the area of purchases);
disputes arising from the relationship relating to compensation for environment damage;
disputes arising from contracts concluded by a forex-dealer and individuals, who are not individual businessmen, are filed in accordance with the laws of the Russian Federation (Article 4.1.22 of the Federal Law. dated 22 April 1996, No. 39-FZ 'On Securities Market');
in the case of the mediation clause in the agreement.

Please note that the arbitration agreement for the transfer to an arbitral tribunal of disputes specified by Article 225.1 of the Arbitration Code, may be entered into on or after 1 February 2017, the agreements concluded before 1 February 2017 shall be unenforceable.

IV. Arbitrability of Corporate Disputes

The Arbitration Law introduces a provision, whereby disputes related to the establishment of a legal entity in the Russian Federation, management thereof or participation therein may be transferred to the arbitral tribunal (i.e., are arbitrable).

Disputes can be transferred when the following conditions are simultaneously met:

a legal entity, all members of the legal entity, as well as other persons, who are claimants or defendants in such disputes, entered into the arbitration agreement on the transfer of such dispute to an arbitral tribunal;
a dispute is submitted to arbitration administered by a permanent arbitral institution;
an arbitration institution approved, deposited and placed on its web site the rules of proceedings on corporate disputes;
the place of arbitration is the territory of the Russian Federation.

Under the Arbitration Law, the following categories of disputes cannot be transferred to an arbitral tribunal:

disputes on the general meeting of participants of the legal entity;
disputes arising from the activities of notaries for the certification of transactions with shares in the charter capital of limited liability companies;
disputes related to challenging regulatory legal acts, decisions and actions (omission) of state authorities, local authorities, other authorities and organizations that are vested with certain state or other public authority by federal law, and officials;
disputes related to economic entities, which are essential for national defense and state security;
disputes related to the acquisition and redemption by a company of shares, disputes related to the invalidation of related party transactions;
disputes on the removal of participants of a legal entity.

V. Assistance by Arbitration Court in Obtaining Evidence

Before, arbitral tribunals being not state courts were deprived of the rights granted by the arbitration courts in accordance with the procedural legislation of the Russian Federation, in particular the right to demand evidence from the parties to the dispute. The parties at own initiative provided evidence in support of claims and objections, if the arbitral tribunal concluded the insufficiency of evidence provided, it might invite the parties to submit additional evidence (Article 26 of the Law No. 102-FZ).

According to the Arbitration Law, within the arbitration administered by a permanent arbitral institution, the arbitral tribunal or a party to the dispute upon the consent of the arbitral tribunal may file a request to the court for assistance in obtaining evidence. The request shall be enforced no later than within thirty days after its receipt by the court and shall contain an indication of the circumstances to be clarified, and the evidence that is to be obtained by the arbitration court, which perform the request (Article 74.1 of the Arbitration Code).

The request will be not enforced in the following cases:

the request is aimed to obtain evidence not covered by the procedural legislation (written, material evidence and other documents and materials);
the request enforcement may violate the rights and legitimate interests of third parties not involved in the arbitration proceedings;
the request is submitted in respect of the dispute, which cannot be referred to arbitral tribunal in accordance with law;
the request allows accessing the information constituting a state secret;
the request allows accessing the information that constitutes official, commercial, banking or other secret protected by law in respect of persons, who are not involved in the arbitration proceedings.

In case of refusal to enforce the request, the court shall issue a respective ruling, which is sent to the respective arbitral tribunal. Such ruling cannot be appealed.

Besides, the parties in the arbitration proceedings may apply to the court for resolution of the following issues (Article 6 of the Arbitration Law):

appointment of an arbitrator, in accordance with the procedure specified by the Arbitration Law;
consideration of the application from a party for disqualification of an arbitrator;
consideration of the application from a party for termination of arbitrator's powers;
consideration of the application from a party for the decision on the lack of jurisdiction of the arbitral tribunal.

VI. Challenging an Arbitral Award

Pursuant to the Arbitration Law, the arbitration agreement that provides for the administration of arbitration by a permanent arbitral institution, the parties may provide by the direct agreement that the arbitral award is ultimate for the parties. An ultimate arbitral award cannot by cancelled (Article 40 of the Arbitration Law).

However, if the arbitration agreement does not stipulate that the arbitral award is ultimate, such an award can be cancelled on the grounds established by the procedural legislation of the Russian Federation.

VII. Enforcement of an Arbitral Award

The Arbitration Law in terms of enforcement of an arbitral award does not provide for significant changes as compared with the Law No. 102-FZ.

The changes covered the period of consideration of application to issue a writ of execution to enforce the arbitral award, which, according to the new wording of Article 238 of the Arbitration Code, is 1 (one) month after the receipt of the application by the court (these changes will take effect from 1 January 2017).

The Arbitration Law contains a provision, under which the decision of the arbitral tribunal (arbitral award) cannot be the basis for changes in the legally relevant registries (Unified State Register of Rights to Real Estate and Transactions Therewith, Unified State Register of Legal Entities, etc.); such changes are only possible subject to the writ of execution to enforce the arbitral award issued by the competent authority.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Russian Federation: Major Changes In The Laws Governing Functioning Of The Arbitral Tribunals In Russia