Powers of Attorney Regarding Future Disputes in Russia

Russian Supreme Commercial CourtThe Presidium of the Russian Supreme Commercial Court has clarified its position on the authority to conclude arbitration agreements.

The general counsel of a company branch concluded a contract with an arbitration agreement under a power of attorney authorising him to represent the company at court and in particular to settle disputes or to refer cases to arbitration. Yet he was found unauthorised to conclude an agreement on behalf of the company to arbitrate or litigate future disputes. The court finally decided the case on June 7, 2012.

The court found that a power of attorney to submit to arbitration disputes already pending at court is not enough for submitting future disputes to arbitration.

The facts of the case were as follows. A municipal institution submitted to the Russian state commercial court an application to enforce an arbitration award. The award ordered the Russian enterprise to pay a debt under a land lease contract and penalty fee for delay in such payment. The debtor argued inter alia that its representative was unauthorised to submit the dispute that had arisen from the lease contract to arbitration on its behalf.

The lower courts granted the application to enforce the award. However, the Presidium of the Supreme Commercial Court annulled the challenged lower courts’ judgments. It ruled that the lease contract containing the arbitration clause was signed on behalf of the enterprise by the head of its legal department by virtue of a power of attorney.

As the arbitration was in this case domestic, the courts applied the Federal Law “On the Arbitral Tribunals in the Russian Federation” of July 24, 2002. This law as well as the Russian Law “On International Commercial Arbitration” does not set forth a requirement to include in a power of attorney a special authority to conclude civil contracts containing a compromise clause. The general authority to conclude civil contracts implies the possibility to agree on a compromise clause as well.

However, the head of the legal department had no such general authority. The court found no evidence of its subsequent approval either.  Pursuant to the said Federal Law a dispute can be transferred to an arbitral tribunal if there is a valid arbitration clause. Therefore, the Supreme Commercial Court concluded that the lower court had erred in issuing an enforcement writ.

The power of attorney issued to the head of the legal department only provided for various procedural authorities including the power to refer disputes to the arbitral tribunal. Due to the procedural character of the authorities the power to refer disputes to the arbitral tribunal concerned only disputes already considered by the arbitration court.

Finally, the Supreme Commercial Court Presidium indicated that its above-stated legal position (i.e. that a procedural power of attorney is not enough to submit to arbitration future disputes) can be regarded as a new circumstance for the review of judicial acts in any other cases with the same facts under Article 311(3)(5) of the Russian Commercial Procedure Code.

This is how the Supreme Commercial Court interpreted the provisions of law regarding a power of attorney to conclude arbitration agreements. In particular, the court held that the mentioning in the power of attorney of a court representative’s rights to submit the cases to arbitration related only to disputes already pending at court.

Perhaps it would be short-sighted to mark this interpretation as “anti-arbitration”. It should be noted that the Supreme Commercial Court has already considered the issue of the scope of powers of attorney generally authorising the conclusion of contracts on behalf of another person. The court found that such a power of attorney constitutes sufficient authority to enter into arbitration agreements without the need to expressly mention them in its text. Thus it is rather an example of a thorough approach of the Supreme Commercial Court towards arbitration-related matters.

Dmitry Davydenko, Dinara Yalaletdinova

Muranov Chernyakov & Partners Law firm

About the Author:

Dr Davydenko is the Director and co-editor of the CIS Arbitration Forum. He is Vice Chairman of the Panel of Mediators at the Russian Chamber of Commerce and Industry and advises Russian and international clients on 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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