Amendments to the Russian Law “On International Commercial Arbitration” introduced in the Duma

Major amendments will be introduced to the Federal Law “On International Commercial Arbitration” in the immediate future. A bill proposed before the lower chamber of the Russian Parliament is intended to make Russian legislation on international commercial arbitration conform with the Model Law on International Commercial Arbitration, as amended by the U.N. Commission on International Trade Law (UNCITRAL) in 2006. Currently, Russian law is based on the older UNCITRAL Model Law, adopted in 1985.

The proposed amendments clarify the definition of arbitration agreement. The rules governing the form of the arbitration agreement and the timing of its conclusion are also elaborated. For example, an arbitration agreement concluded through electronic messages will be deemed to satisfy the written form requirement, so long as the contents of such messages can be accessed after-the-fact and the arbitration agreement meets the requirements for the conclusion of contracts by use of electronic messages.

Another important development relates to the authority of an arbitral tribunal to impose interim relief (provisional measures). Unless agreed to the contrary by the parties, an arbitral tribunal may now issue  provisional measures at the request of either of the parties to a dispute. Provisional measures should only be awarded if the arbitral tribunal finds the request of the petitioning party reasonable and enjoying factual basis.  The bill empowers an arbitral tribunal to award provisional measures for 20 days after the motion of a party to a dispute. A party may even move for provisional measures prior to filing a claim and without notifying the other party. Such preliminary decisions by the arbitral tribunal are compulsory on the parties, although they will not be enforceable by state courts. After the arbitral tribunal renders the preliminary order on provisional measures, it shall notify all the parties to the dispute and permit the relevant parties to seek relief if necessary.

According to the proposed amendments, an arbitral tribunal importantly has the right to alter, suspend, or withdraw an award on provisional measures. The tribunal may exercise this right either at the request of any of the parties, or at the tribunal’s own initiative, but only after notification of the parties. Moreover, an arbitral tribunal may compel a party to a dispute to disclose any significant changes in the facts which constituted grounds for the issuance of the provisional measures.

The proposed legislation also includes a number of additional points. It specifies that the interpretation of the law shall take into account that the law governs foreign relations. This means that the courts should apply the law with due regard to the differences of foreign legal systems and practices in the Russian legal system. For instance, the way corporate documents approving a transaction are formalized in a country outside Russia can differ from the way such documents are formalized in Russia. This should not lead to the foreign law’s non-applicability. The law also states that in the event  the present law fails to address an issue which may arise, such issue should be decided on the basis of general principles of international commercial arbitration law. Such amendments are intended to enhance and make more predictable and consistent the application of law by state courts and arbitral tribunals.

The proposed bill is further evidence of positive change in the Russian law regulating international commercial arbitration, and marks further steps in providing support to alternative dispute resolution in Russia.

Dmitry Davydenko and Natalia Karetnaya

Muranov, Chernyakov & Partners Law Firm