As we previously reported in our alert of 19 November 2018, the Supreme Court of Russia has in a judgment of 26 September 2018 stated that the standard ICC arbitration clause in a contract between Luxembourgish and Russian parties was not sufficiently clear evidence of the parties’ agreement that the ICC Court of International Arbitration was to administer their arbitration.
In the Russian case, the Luxembourgish claimant had obtained a favourable decision in an arbitration seated in Geneva, Switzerland. In the final arbitral award, the Russian company had been ordered to pay EUR 3.6 million in damages plus interest.
The Supreme Court of Russia denied the enforcement of the ICC award on the basis that the award was against the public policy of Russia and that the ICC Tribunal lacked jurisdiction because the arbitration clause failed to specify the arbitral institution that was to administer the arbitration.
A similar reasoning can be found in a judgement delivered by the Chinese Supreme People’s Court earlier.
Since the Russian judgement became public, the ICC issued an additional modified standard clause “in order to take account of the requirements of national laws” adding that “it is prudent for parties wishing to have an ICC Arbitration in Mainland China and Russia to include in their arbitration clause an explicit reference to the ICC International Court of Arbitration.”
However, on 26 December 2018, the Supreme Court of Russia issued a 51 page document reviewing arbitration related court practice since the entry into force of the new Russian arbitration law in 2016.
In this document the Supreme Court of Russia confirmed the enforceability of arbitration clauses that are in line with the model/standard clause of a given arbitral institution. In addition, it provided that where there is doubt, arbitration agreements should be interpreted under the Russian arbitration law in a way that makes them valid and enforceable. This review by the Supreme Court is not legally binding but we understand that the Russian arbitration community believes that it will provide guidance in judgments to follow.
In the wake of the review by the Supreme Court of Russia, the ICC has removed the express reference to Russia from its additional guidance on the ICC model clause. The reference to Mainland China is nevertheless kept.
Effect on Finnish businesses
Taking into consideration the mixed messages sent by the Supreme Court of Russia, we continue to advise Finnish parties that are considering entering into an arbitration agreement with a Russian or Chinese counterparty to amend the standard arbitration clauses of any institutions, including the FAI model clause, to state clearly that any disputes are to be referred to arbitration, administered by the named arbitration institution in accordance with the relevant institutions’ rules.
We advise clients to contact D&I’s Dispute Powerhouse team and to seek further advice regarding tailor made arbitration clauses when dealing with Russian or Chinese parties.
D&I’s Dispute Powerhouse is following up on the developments of the matter and will keep you updated.