The Supreme Court of the Russian Federation recently confirmed the decisions of two lower courts that failed to recognise and enforce an International Chamber of Commerce (ICC) arbitral award in a dispute involving a Russian debtor. The three courts agreed with the position of the Russian debtor that the ICC was not competent to review the claim, arguing that the arbitration clause in the relevant contract did not expressly refer to the ICC International Court of Arbitration. These decisions could negatively impact the review by other Russian courts of similar arbitration clauses, leaving foreign creditors with foreign arbitral awards that are unenforceable in Russia.
In 2014, in case No. 17699/GZ/MHM/MD/TO before the ICC International Court of Arbitration, a Luxembourg company successfully recovered a debt against a Russian counterparty with interest as well as arbitration and legal costs. When the debtor did not execute this decision, the claimant appealed to the Russian courts with an application of recognition and enforcement of this award in Russia.
In a ruling* dated 8 February 2018, the Moscow Commercial Court, which initially agreed to consider the application, rejected the claimant’s application for the recognition and enforcement of the decision. Subsequently, this ruling was confirmed* by the Commercial Court of the Moscow District on 25 April 2018. When asked to review these rulings, the Supreme Court of the Russian Federation did not find* grounds for revising the decisions in this case.
One of the grounds for refusing to recognise and enforce the decision of the ICC was its statement that the standard ICC arbitration clause providing for “consideration of a case in international arbitration according to ICC rules... does not determine the specific arbitration institution that should consider the dispute”.
Based on the terms of this arbitration clause, the courts held that the parties had not identified the specific institution that would consider the dispute. The courts indicated that “in the agreement there is no express and written consent of the parties to refer all disputes to the ICC International Court of Arbitration despite the fact that such wording as ‘international arbitration’ shows all signs allowing it to be considered ambiguous and can be deemed by any of the parties as the right to appeal to another court with a similar name, which indicates the absence of expressly agreed competence of the ICC International Court of Arbitration for this dispute”.
Since this arbitration clause is widely used in existing contracts, ICC President Alexis Mourre wrote* a letter to the Chairman of the Supreme Court of the Russian Federation Vyacheslav Lebedev. To date, there is no information on any reply by the Supreme Court of the Russian Federation.
Previously, Russian courts recognised the ICC arbitration clause. Although the decisions in this case are not binding precedents in Russian law, they will certainly be taken into account by other Russian courts when deciding on similar cases.
As a result, it is highly recommended that businesses ensure that existing and newly concluded contracts with a Russian party (or with possible enforcement in Russia) contain an arbitration clause with an express reference to the consideration of the dispute by the ICC International Court of Arbitration. The corresponding “new” text of the arbitration clause has already been posted on the ICC website.
If you have any questions on the matters referred to in this eAlert, please do not hesitate to contact CMS Russia expert Sergey Yuryev or your regular contact at CMS Russia.
* In Russian