Approach of Russian Courts to International Forum Shopping

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Unlike in the United Kingdom or the United States, international forum shopping is rarely at issue in Russian case law or legal doctrine.

However, disputes related to forum shopping do arise in Russia: it happens that the same disputes fall within the jurisdiction of national courts of several states, e.g. the national court of the claimant and of the respondent. The claimants usually try to profit from such situation and file their claim in the most favourable court or tribunal (“shop” the forum).

Choosing a favourable forum may be important or even crucial for the outcome of dispute resolution. Procedural rules and the way the courts treat various types of evidence may affect the ultimate result of the proceedings. Additional considerations may also include convenience (distance of the court, visa requirements and overall legal regime), availability of qualified lawyers in the jurisdiction and of course costs.

International Treaties of the Russian Federation on Choice of Forum

The choice of forum controversies arise where an international treaty governs the issue of competence of the courts to hear international trade disputes. However, Russia is a party to only a few multilateral treaties on choice of forum. They include the Agreement on Settlement of Commercial Disputes (Kyiv, 1992) and the Convention on legal aid and legal relations in civil, family and criminal cases (Minsk, 1993) concluded by several former-USSR Member States.

The treaties determine that civil cases should pertain to the court which has the closest connection to the substance of the dispute.

The Minsk Convention provides in Art. 20 that the suits against residents of a Contracting Party shall be brought to a court of this Contracting Party. The suits against legal persons shall be filed to a court of the Contracting Party on whose territory the administration organ, representation or branch of this juridical person is placed.

If the case concerns several defendants residing in different Contracting Parties, the claimant may choose the forum. Courts of a Contracting Party shall be competent also where the defendant carries out its economic activities or the obligations of the contract which is the subject of controversy, was or must be fulfilled.

Also Russia is a party to a number of bilateral treaties on legal aid in civil and other matters. Some of them provide for the competence of courts hearing international private trade disputes. Except for that, domestic Russian procedural law establishes the competence of Russian courts to hear private commercial disputes.

National Regulation

Article 36 of the Russian Commercial Procedure Code (CPC) allows to the claimant to choose a forum in some particular cases. Thus, where the respondent resides or is located outside Russia, the claimant may file a suit in a Russian court at the place where the respondent has property. Also, where a dispute arises out of the contract indicating the place of its performance the claim may be filed at such place.

Under Article 247 of the Russian CPC Russian state commercial courts may hear cases against foreign defendants where the legal relations giving rise to the dispute have a close connection with Russia (e.g. if the defendant has assets or a representative office in Russia or the dispute arose out of the contract the performance under which was to take place in Russia).

Russian state commercial courts will refuse to consider the claim where the same case is pending in a foreign court unless the dispute falls within the exclusive jurisdiction of the Russian courts (e.g. disputes regarding property belonging to Russia or real estate located in Russia).

Russian state commercial courts will terminate the proceedings where a foreign judgment upon the same dispute has entered into force. However, this is not the case where the dispute falls within the exclusive jurisdiction of the Russian courts or the foreign judgment shall not be recognised and enforced in Russia.

Some unscrupulous parties manipulate the jurisdiction of courts in order to hear cases by artificially introducing a party into a contract merely to establish jurisdiction of another court. For example, a debtor under a loan agreement could conclude a guarantee agreement merely with the aim of creating jurisdiction of the court of the place of the guarantor’s residence or incorporation. Then the creditor would file a claim against the guarantor. Another example could be when a commercial company changes the place of incorporation to another region of Russia to enable a court in another jurisdiction to hear a corporate dispute or a bankruptcy case.

Prorogation agreements

Russian law allows the parties to provide for a forum selection clause in a prorogation agreement. However, the prorogation agreement must be sufficiently certain. There are no specific rules on the validity of prorogation agreements. However, the Plenum of the Supreme Commercial Court in 2012 held that a prorogation agreement is valid where the following conditions are met:

  • The dispute does not fall within the exclusive jurisdiction of the Russian courts;
  • It is possible to apply to a specified foreign court (i.e. the interested party bears the burden of proof that such possibility does not exist);
  • The parties have equal rights to apply at the said court. In the Sony Ericsson case the court confirmed that prorogation agreements must provide for “symmetrical” rights of the parties to choose the court.

In 2014 the Supreme Commercial Court in its Information Letter “Review of Certain Issues Related to Hearing Cases Involving Foreign Persons” confirmed that a prorogation agreement may provide for the court at the country where the claimant is based (floating jurisdiction clause). The court also explained that non-Russian parties may also submit their dispute to a Russian court by their agreement. In the same Information Letter the highest court held that foreign anti-suit injunctions do not constitute a ground for Russian courts to refuse to hear the case.

As regards the certainty requirement, the Russian courts currently find an agreement to submit disputes to “Swiss courts” sufficiently certain (as decided by the 10th Circuit Appeal Court in 2009). In contrast, previously, in 1998 a cassation court (North Caucuses Circuit Commercial Court) found an agreement to submit disputes to “Istanbul courts” insufficiently certain.

Which court shall decide on validity of the prorogation agreement?

Sometimes the claimant may try to escape a prorogation agreement and even obtain a judgment of a court other than agreed by the parties.

However, Russian courts may deny enforcement of foreign judgments rendered by a court other than specified in the prorogation agreement. For example, the Russian Supreme Commercial Court in 2011 upheld a refusal to enforce a monetary judgment of the Almaty state court on the ground that the court had no competence. The assignment agreement between a Kazakh bank and a Russian company provided for dispute resolution by the court in the assignee’s state (that is, by a Russian court).

The Supreme Commercial Court invoked the 1992 Kyiv Agreement: where there is a prorogation agreement, the case shall be heard by the court agreed by the parties if one of them requests it. The creditor argued that the Almaty court judgment found the prorogation agreement void. Yet, the Supreme Commercial Court rejected this argument on the ground that the Almaty court was not competent to decide on the validity of the prorogation agreement.

It follows from the provision of the Kyiv Agreement that the prorogation agreement may be challenged only in the court agreed upon by the parties. Therefore a judgment rendered by a foreign court contrary to the international treaty and the prorogation agreement shall be unenforceable in Russia.

Russian courts reluctant to hear non-Russian cases

Recently, the Commercial Court for the Moscow Circuit (a cassation court) set some more criteria under which a prorogation agreement could be declared void even if the formal requirements are fulfilled. In one case two Cypriot companies concluded a loan agreement. It provided that all disputes between the parties arising out of the agreement were to be settled in the “commercial court of the Russian Federation upon the creditor’s choice in accordance with the current legislation of the Russian Federation”.

The respondent in that case denied jurisdiction of the Russian court and argued that under this clause the creditor had the sole right to determine the jurisdiction of the dispute (while the debtor had no such right). The respondent also argued that the dispute had no close connection with the territory of the Russian Federation.

The case reached the cassation court (the Commercial Court for the Moscow Circuit). The court on 21 November 2014 found no jurisdiction of Russian court to hear the case. In particular, it held that the prorogation agreement did not clearly determine exclusive competence of the Russian courts and invoked the principle of equal procedural rights of the parties to choose the forum. The court explained that it needed to consider all legal and factual circumstances, including a close relation of the case to Russia and the possibility of hearing the case in a foreign court. The court found no close connection of the dispute with Russia and held that the Russian commercial courts had no jurisdiction to hear the dispute between the parties.

Earlier, in the case LLC Olimpiya v. Latvian banks Parex banka, Citadele banka the Russian Supreme Commercial Court found no jurisdiction of the Russian courts to hear a claim against Latvian banks because the disputed transactions had been concluded in Latvia and thus were found to be not closely connected with Russia.

Conclusion

Russian courts are currently not keen on hearing essentially “non-Russian” cases. Also they try to avoid a conflict with foreign jurisdictions and inconsistent judgments in disputes involving foreign parties. This reduces the probability of international forum shopping in cases with Russian parties, though does not completely exclude it.

About the Author:

Based in Moscow, Dr Davydenko is the Director and a co-editor of the CIS Arbitration Forum. He is an associate professor at the Moscow State Institute of International Relations (MGIMO University), Department of Private International and Civil Law. Dmitry Davydenko has experience as an arbitrator in the ICC and other arbitral proceedings and 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 of other reputed arbitral institutions. Included in the list of best practitioners in arbitration in Russia as of the years 2017, 2018 and 2019 by Who’s Who Legal and Global Arbitration Review (GAR). He also acts as a Russian law expert on various matters related to international commerce.

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