Express Power to Sign an Arbitration Clause is not Required

Power of attorney authorizing the representative to sign a commercial contract is sufficient for such representative to sign a contract containing an arbitration clause. In a recently published decision the Presidium of the Supreme Arbitrazh Court of the Russian Federation confirmed that the provision of Article 62 of the Arbitrazh Procedure Code requiring that for a representative to be authorized to enter into an arbitration agreement the power of attorney need to contain an express power to do so, is lex specialis and applies only where a dispute is already before the state arbitrazh courts.

In the case before the court, the lessee was seeking to invalidate an arbitration clause in the lease contract. The lessee was arguing that the head of its branch office, who signed the contract, was not authorized to sign an agreement containing an arbitration clause. This was amidst a row of litigation spanning across two federal circuits, where the lessor was trying to enforce an arbitral award rendered in its favor and the lessee was trying to challenge it with another arbitration between the same parties and based on the same clause ongoing. Before the Presidium, the lessor argued that the arbitration institution provided in the clause was inherently biased, but this argument was not considered by the court in the resolution.

In the heart of the dispute were two sets of rules of Russian law governing the powers to enter into an agreement to submit the dispute to arbitration (inter alia by an arbitration clause). The Federal Law on Arbitration Courts in the Russian Federation (governing domestic arbitration) does not contain any provisions requiring a special power to sign an arbitration clause. On the other hand, Article 62 of the Arbitrazh Procedure Code requires the representative to have a power of attorney with an express provision authorizing execution of such agreements.

The scope of application of the latter provision was not entirely clear, which apparently provoked inconsistent jurisprudence across federal circuits. Last year the Presidium of the Supreme Arbitrazh Court held that a management company may sign agreements containing arbitration clauses on behalf of the managed company even where the underlying power of attorney does not contain express authorization. However, it was not entirely clear whether the same reasoning applied to representatives other then management companies (the latter essentially replacing the executive bodies of the managed company as a matter of Russian law).

However, the Presidium was quite clear in the present Resolution. It held that:

Federal Law dated 24 July 2002 No 102-FZ On [Domestic] Arbitration Courts in the Russian Federation does not require that the power of attorney of a representative contain a specific authorization to execute a commercial agreement containing an arbitration agreement (an arbitration clause). It follows that the presence of general powers to execute an agreement permits the representative to sign on behalf and in the interests of the represented [entity] an agreement containing provision for the submission of a dispute to any arbitration court.

Part 2 of Article 62 of the Arbitrazh Procedure Code of the Russian Federation should be applied to cases where a case already before [state] arbitrazh courts is submitted to arbitration. This rule is inapplicable to powers of attorney issued for execution of commercial agreements …

The decision again demonstrates the tendency of the Russian Federation to become a more arbitration-friendly jurisdiction. Notably, laws or practice of several jurisdictions applicable to domestic arbitration require an express authorization in the power of attorney for a representative to sign an agreement containing an arbitration clause.

It must finally be noted that the decision of the Supreme Arbitrazh Court considered the rules applicable to domestic arbitration. However, the underlying rationale and reasoning of the court appear to be equally applicable to international commercial arbitration.

The full text of the Resolution of the Presidium of the Supreme Arbitrazh Court No. 12311/10 dated 12 April 2011 (in Russian) is available here.

Sergey Usoskin