A Pro-Arbitration Stance of the Russian Supreme Commercial Court

The Supreme Commercial Court of the Russian Federation (“the SCC”) demonstrated over the last years a general trend of SCC to interpret law in a pro-arbitration light so that to avoid formalistic and unwisely restrictive approach to applying the law. Below is just one example of such pro-arbitral approach of SCC. This case also illustrates that even apparently straightforward issues might become subject of serious debate in Russian courts making enforcement of arbitral awards in Russia a more complicated (though feasible) process.

Lower courts refused to issue a writ of execution of the award rendered by an arbitration court located in Moscow. The legal basis for that was that the arbitration agreement exceeding the limits of the powers of the debtor’s manager. The Supreme Commercial Court disagreed with this interpretation.

A Russian OOO (Limited Liability Company) “Neftegaztehnologiya” (creditor) in 2009 applied to the Arbitrazh Court of the Yamal-Nenets Autonomous District with a request for the issue of the writ of execution of the award rendered by the Arbitration Court at the Chamber of Commerce and Industry of the Moscow Region. The CJSC “NORD-Service” (debtor) objected to the recognition and enforcement of the award. It argued that the authority to run the company was transferred to a managing company which operated the company affairs through a general manager acting under a power of attorney.

The general manager of the debtor was not expressly authorized to enter into arbitration agreements. The court of the first instance found this argument persuasive and refused to enforce the award.* The award creditor referred to the court of cassation instance, Federal Arbitrazh Court of the West-Siberian Circuit, which upheld the ruling.** The court upheld the ruling for the reason of the exceeding of the limits of the powers by the general manager of the debtor.

Then the award creditor appealed to the SCC. The SCC mentioned, in particular, that in accordance with the Civil Code of the Russian Federation and Federal Law “On Joint-Stock Companies”:

the activities of the managing company as the body of the entity are the activities of the entity itself. In this case the powers of the managing company are determined by laws and by the contract of the delegation of the powers”. Therefore, the general manager acting under a general power of attorney had the powers to enter into any agreement on behalf of the company, including the arbitration agreement.

The SCC decreed that the ruling of the Arbitrazh Court of the Yamal-Nenets Autonomous District and the decree of the Federal Arbitrazh Court of the West-Siberian Circuit infringed the uniformity of the interpretation and enforcement of the laws by the arbitration courts and set aside the judgments of lower courts.***

Thus the SCC held that the legal entities cannot avoid the arbitration agreement which was entered into by the managing company or just the general manager without express powers to do so. The SCC confirmed that concluding the arbitration clause or agreement requires the sam authorities as, for instance, a sales contract or supply agreement.

In many other cases the SCC annulled lower courts formalistic or unlawful judgments hostile to arbitration. So this makes us to believe that a pro-arbitration approach still prevails.

Dmitry Davydenko, Maxim Mezentsev
Muranov, Chernyakov & Partners, Moscow

Footnotes
* Ruling of the Arbitrazh Court of the Yamal-Nenets Autonomous District of 10 September 2009, Case No. А81-4139/2009)
** Decree of 23 November 2009 No.А81-4139/2009
*** Decree of the Presidium of the High Arbitrazh Court of the Russian Federation of 1 June 2010 No. 18170/09

About the Author:

Dr Davydenko is the Director and co-editor of the CIS Arbitration Forum. He is Chief expert of Arbitration and Mediation Center at the Russian Chamber of Commerce and Industry. He also provides expert opinions on Russia-related international business law matters. He is listed as a recommended arbitrator of International Commercial Arbitration Court and Maritime Arbitration Commission at Russian Chamber of Commerce and Industry, as well as some other arbitral institutions.

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