Vladimir Khvalei and Irina Varyushina
- LEGISLATION AND RULES
International arbitration in Russia continues to be governed by the Law on International Commercial Arbitration. Certain issues in relation to international commercial arbitration such as requirements on arbitral institutions administering disputes in Russia and resolving corporate disputes, are governed by the Law on Arbitration in Russia (“Domestic Arbitration Law“).
June 2020 saw the amendments into the Code of Arbitrazh Procedure (CAP) that provide for the exclusive jurisdiction of Russian arbitrazh (state commercial) courts in disputes involving sanctioned entities or based on sanctions. Sanctioned entities under the provisions are not only Russian legal entities and individuals on whom sanctions were imposed, but also foreign legal entities that became subject to sanctions due to the sanctions imposed against Russian legal entities and individuals.
The new provisions enable the sanctioned entities:
(i) where no court or arbitration proceedings are pending in a foreign jurisdiction, to file a claim with a Russian state commercial court at their place of location or residence;
(ii) where such proceedings are pending or planned to be initiated, to apply to the Russian state commercial court at their place of location or residence for an injunction preventing the initiation of proceedings in the foreign court or arbitration or compelling the other party to terminate such proceedings.
When granting an injunction, the court may, upon a claimant’s application, award the amount claimed from the other party as penalties for non-complying with the injunction.
The provisions on exclusive jurisdiction also apply if the parties’ agreement on the agreed foreign forum is found unenforceable for reasons that sanctions imposed on one of the parties create obstacles to access to justice.
The above provisions on the exclusive jurisdiction of Russian courts in disputes with sanctioned entities or based on sanctions do not prevent recognition and enforcement of a foreign court judgment or award where:
(i) the sanctioned party initiated the dispute in a foreign jurisdiction, or
(ii) the sanctioned party did not object to the proceedings in a foreign jurisdiction, including by way of applying for an injunction prohibiting the initiation or continuation of proceedings in a foreign jurisdiction.
Among noteworthy legislative changes with an impact on arbitration are those related to the authority of the Constitutional court, granted further to the changes to the Russian Constitution in July 2020, to review the enforceability of foreign or international court judgments and arbitral awards (“foreign decision(s)“). The application is admissible where: (1) the enforcement allegedly contradicts Russian public policy; (2) the foreign decision imposes obligations on the Russian Federation either directly or indirectly via federal state authorities or state-owned organizations; (3) the foreign decision is based on the deviation from the usual meaning of the terms used in the underlying document, their context or the deviation from the purpose or content of the underlying document, the limits of jurisdiction were not complied with in taking the foreign decision(s), and (4) it is impossible to refuse the enforcement of the judgment/ award using the existing regular legislative mechanism.
A.2 Institutions, Rules and Infrastructure
As of February 2021 there are the following licensed Russian arbitral institutions: the ICAC and the MAC at the Russian Chamber of Commerce and Industry, Arbitration Center at Russian Union of Industrialists and Entrepreneurs, Russian Arbitration Center at the Russian Institute of Modern Arbitration (RAC)  and National Centre of Sports Arbitration at Sports Arbitration Chamber ANO. As regards foreign arbitral institutions, Hong Kong International Arbitration Centre (HKIAC) and Vienna International Arbitral Centre (VIAC) have obtained the status of permanent arbitral institutions and are able to administer international arbitration proceedings seated in Russia.
In February 2020 HKIAC and VIAC filed a joint request for clarification of certain provisions of the applicable arbitration laws and respective clarifications were issued in May 2020. The legal force of this document is far from clear, while one can not, nevertheless, exclude that Russian courts will take guidance from it.
It was clarified that the following types of corporate disputes may be administered without special rules for corporate disputes: (a) disputes relating to the rights to shares and encumbrances thereof; (b) disputes arising out of the recording by registrars of rights to shares; and (c) disputes arising out of shareholder agreements. Thus, both HKIAC and VIAC, being licensed arbitral institutions in Russia are able to administer corporate disputes in relation to Russian legal entities that do not require special rules for corporate disputes (neither HKIAC nor VIAC have enacted such rules). At the same time, the disputes not requiring special rules may be closely connected to those corporate disputes that require the special rules. For example, disputes out of shareholder agreements can be connected to disputes regarding the appointment, election, termination or suspension of the powers and liability of a legal entity’s management bodies and those latter disputes can only be resolved using special rules for corporate disputes. One is yet to see how such issues will be resolved in practice. As of February 2021, there were no corporate disputes under special rules for corporate disputes reported by Russian licensed arbitral institutions having enacted special rules for corporate disputes.
The issue of corporate disputes as well as other notable state courts’ practice on matters related to arbitration proceedings and application of foreign law were considered in the Review of Russian case law on arbitration matters and transboundary legal proceedings, prepared by Russian Arbitration Association.
B.1 Claim for invalidation of an arbitration clause due to public interest, corporate nature of the clause and sanctions
In this case, JSC “NPK “Uralvagonzavod” in its capacity as a shareholder of JSC “Uraltransmash” (“Uraltransmash“) (both entities were subject to EU and US sanctions) filed a claim with a Russian court against Uraltransmash and its counterparty under a contract for delivery of city tram carriages – Pojazdy Szynowe PESA Bydgoszcz SA (“PESA“) – for rendering an SCC arbitration clause in the contract invalid and unenforceable.
The courts evaluated the claimants’ arguments that there was a violation of public interest inter alia because the contract had been entered into pursuant to the Law on Procurement by State Legal Entities for state and municipal needs, involved a strategic enterprise (Uraltransmash JSC) and the spending of public funds. The courts established that Uraltransmash was as at the date of concluding the said contract an independent commercial legal entity and was not owned at over 50% by the Russian Federation, its constituent entities or municipalities as required by the Law on Procurement by State Legal Entities. Uraltransmash did not perform functions of a legal body or represented the interests of the Russian Federation. As regards the status of Uraltransmash as a strategic enterprise, the subject-matter of the contract was for delivery of city tram carriages and thus was neither within the scope of the Federal Law “On State Defense Order” or Federal Law “On making foreign investments into commercial entities of strategic importance for ensuring the defense and security of the state” (“Law on Foreign Investments into Strategic Companies”). The court ruled that this means the dispute is not of a public law nature. On a general note, the court opined that the status of Uraltransmash as a strategic enterprise does not impact the validity of the arbitration clause as neither the Law on International Commercial Arbitration, nor the Law on Foreign Investments into Strategic Companies expressly prohibits strategic enterprises from concluding arbitration agreements. The court established that the contract under review did not specify that the delivery was made for state or municipal needs or pursuant to a state program of the city of Moscow. At that, the court examined that there had been an agreement between Uraltransmash and Transportation and Road Infrastructure Department of the City of Moscow for delivery of tram carriages, and ruled that it was this agreement that provided for payment with budget funds. The court further established that payments under the disputed contract were made from Uraltransmash ordinary bank account with the use of loans rather than from special ledger accounts of budgetary units, opened with the Federal Treasury. The above considerations made the court rule that the disputed contract was an ordinary commercial contract between independent commercial parties entered into separately from the agreement with the Transportation and Road Infrastructure Department of the City of Moscow, not involving the spending of federal or city funds and thus the disputes out of the contract were not of public nature. The court’s reasoning echoes the findings of the Supreme Court in its ruling discussed earlier where the Supreme Court, though finding disputes out of the Law on Procurement by State Legal Entities to be arbitrable, noted that the courts also have a right to ensure the balance between private and public interests “for the purposes of public policy protection” and one such example would be the excessive spending of public funds. Generally, the public interest argument is frequently used by Russian parties to claim inarbitrabilty of a dispute and violation by the award’s enforcement of the Russian public policy. Having more clarity on the subject will undoubtedly be beneficial to the court practice.
The claimants also argued that the dispute was of corporate nature and thus not arbitrable. The court admitted that the claim was filed by a corporation participant for invalidation of the corporation’s transactions and certain corporate law rules were alleged to have been violated. However, the court examined the essence of the parties’ relations and ruled that the claims did not concern the legal entity’s internal corporate relations and were largely based on general civil law rules. Given the purpose of the dispute resolution clause, its invalidity can only concern the possibility to submit a dispute to a foreign forum and not any issue of the legal entity’s management or shareholding. As to non-arbitrability of corporate disputes, the court noted that non-arbitrable are only certain types of corporate disputes that need stricter state control over the issues of management or ownership of shareholdings. The court’s findings demonstrate that courts tend to closely examine the disputed relationship rather than be confined with the formal approach. This is a welcome development since indirect claims by shareholders for invalidation of underlying agreements have often been used to prevent enforcement of awards issued in disputes arising out of such agreements and a thorough analysis of the relations will contribute to the predictability of the court practice.
During the second round of review, the claimants argued that the clause was unenforceable due to sanctions imposed against Uraltransmash and its shareholder, Uralvagonzavod. While the court of appeal dismissed these arguments as not falling under the disputed issue of the arbitral clause’s invalidity, the cassation court in partly reversing the decision directed the trial court to examine the impact of sanctions. Claimants argued that because of sanctions they were unable to pay the SCC expenses as the payments got blocked by banks, could not retain a qualified legal representative and thus have inequal rights to present their case in arbitration. During the retrial, the court of first instance examined in detail all the arguments and dismissed them. The court concluded that the claimants failed to provide evidence of circumstances preventing them from resolving the case at the SCC as per the agreed clause. In the course of appeal proceedings, the claimants moved for withdrawal of their claims and it was accepted by the court.
B.2 Injunction to terminate SCC arbitration due to exclusive jurisdiction of Russian courts in a sanctions-related dispute denied as the claimant failed to prove that sanctions created obstacles to its access to justice and that the arbitration agreement was unenforceable
This case arose out of the same contract as the case for invalidation of an arbitration clause discussed under B.1 above, and was initiated after the cassation sent that case to re-trial with directions to analyze the impact of sanctions. Here Uraltransmash and Uralvagonzavod requested the court to issue an injunction against the pending SCC arbitration initiated by PESA and to award approximately USD 66 million if PESA failed to comply with the issued injunction within 14 days of it becoming effective. Like in the previous case, the claimants argued that sanctions created obstacles for their access to justice and therefore the arbitration clause was unenforceable, the case was subject to the exclusive jurisdiction of Russian commercial courts under article 248.1 of the CAP and claimants are entitled to request the issue of an injunction against the pending foreign proceedings. The court ruled that imposition of sanctions was not enough to render the clause unenforceable and to subject the case to the exclusive jurisdiction of Russian state commercial courts. Rather, the claimants were to provide proof of circumstances obstructing their access to justice in the foreign forum. The claimants failed to discharge the burden of proof. The court found that sanctions did not prevent claimants from retaining foreign qualified lawyers and did not require claimants to obtain any authorizations from Swedish authorities, including for making payments to the Arbitration Institute. The court also dismissed the claimants’ arguments that the award would likely be unfavorable to them due to sanctions and the resulting attitude to sanctioned Russian entities. The decision was upheld by the cassation court.
B.3 Enforcement of the ICAC award refused as arbitration was used to confirm a fictitious debt
The case concerns enforcement of an arbitral award issued by ICAC (Russia)’s Irkutsk regional office under the ICAC Domestic Arbitration Rules by a sole arbitrator upon a claim by an individual entrepreneur against an LLC, arising from a loan agreement. The respondent filed a motion to consider the case without it present and admitted the claims filed against it. The court joined the Prosecutor’s office and the Financial Monitoring Service to ensure there was no money laundering involved as per the recent Supreme Court guidance. The authorities found indications of judicial proceedings being used to obtain writs of execution to conduct transactions aiming at legalizing funds whose legality has not been confirmed and ordered the parties to submit evidence to confirm the legality of the transactions made, the source of funds, how the money was spent. The claimant alleged that it had borrowed the money for the loan from another individual and provided loan agreements with the alleged creditor. The court requested from the tax authority documents on the respondent (accounting balance sheet, information on taxes paid for 2019-2020; claimant’s income for 2016-2019 and the alleged creditor of the claimant). Based on the tax authority documents, the court found that the respondent company was not filing any tax reports and was no conducting any activities. The income of both the claimant and its alleged creditor did not allow them to obtain the funds allegedly lent to the respondent. Therefore, the court came to the conclusion that the loan transaction was not real and the parties wanted to give an appearance of a civil law dispute to create a fictitious debt and the arbitration was used to confirm this artificial debt to make it appear lawful. The court ruled that in this case arbitration was used to bypass the law and refused enforcement based on the violation of public policy. The case is noteworthy i.a. because it proves that despite the fact that the arbitral institution (a regional office of the ICAC (Russia)) was exempted by law from obtaining the license to administer arbitrations in Russia (having been granted it due to its historical authority), the abuse of arbitration proceedings still takes place. This confirms that an effective way to fight the abuse is not by restricting access of arbitral institutions to the market but via state courts’ control exercised in the course of enforcement proceedings.
B.4 Consequences of Administering Russia-Seated Arbitrations by Unlicensed Foreign Arbitral Institutions
A party filed a claim for enforcement of an ad hoc arbitral award issued in February 2019 by an arbitrator of Helsinki International Commercial Arbitration Court (HICA) for the recovery of a debt under a supply contract. The courts of two levels enforced the award, finding that arbitration was administered by a foreign arbitral institution, and enforcement of such awards is covered by the provisions of article 44(3) of the Domestic Arbitration Law. Said provisions stipulate that such awards issued in Russia are deemed for the purposes of the Domestic Arbitration Law to be issued in ad hoc proceedings. The courts also noted that the respondent failed to object to the jurisdiction of the tribunal in the course of arbitration proceedings, and thus could not argue that the tribunal lacked competence and/or any provision of the arbitration agreement was not complied with. The Supreme Court reversed the decisions of lower courts and refused enforcement. The Supreme Court disagreed with lower courts and ruled that licensing requirements were also applicable to foreign arbitral institutions and an exemption existed for cases where the award was issued by a non-licensed foreign arbitral institution based on an arbitration agreement providing for ad hoc arbitration. In this case, the Supreme Court found there was no evidence that the proceedings were administered by a foreign arbitral institution. On the contrary, the court found that the functions of administering arbitration (filing the claim, issuing the decision) were performed in Russia. Therefore, the court agreed that HICA was a sham foreign arbitral institution, established to bypass the requirements of the Russian arbitration law. Based on Article 10 of the Russian Civil Code (abuse of rights) the Supreme Court dismissed the claims for enforcement. The Court refused to apply the estoppel provisions of the Domestic Arbitration Law (respondent’s failure to challenge jurisdiction and timely rely on a violation of the Domestic Arbitration Law provisions) as prevention of acts to bypass the rule of law have priority in terms of protecting the public policy of the Russian Federation.
This case is an example of a failed attempt to bypass the requirements imposed on arbitration in Russia in the course of the 2016-2019 arbitration reform by using the complexities and inconsistencies of the new regulation. Special provisions regarding the enforcement of awards issued by unlicensed foreign arbitral institutions were envisaged having in mind such reputable foreign arbitral institutions, such as the ICC, LCIA, SCC, etc., and not the likes of the HICA. At the same time, the court has mechanisms to prevent the abuse of arbitration proceedings at the enforcement stage.
In a more recent case dealing with the enforcement of an SCC award issued in Russia, the court granted enforcement despite the fact that SCC was not licensed to administer arbitrations in Russia. The court found that in a case where unlicensed foreign arbitral institutions issue awards in Russia-seated arbitration proceedings such awards are considered on the territory of Russia as awards issued in ad hoc arbitration proceedings. Thus, according to the court, special regulation applies rather than the general prohibition for unlicensed arbitration courts to perform any functions in administering Russia-seated arbitration proceedings that were relied upon by the other party. The cassation court upheld the ruling, cassation appeal against this ruling to the Supreme Court is pending.
 Law N 5338-1 dd. 07.07.1993 (as amended on 25 December 2018).
 Federal Law No382-FZ on Arbitration (Arbitration Proceedings) in the Russian Federation dd. 29 December 2015.
 Article 248.2 of the CAP.
 Article 248.1(4) of the CAP.
 Article 248.1(5) of the CAP.
 See Chapter XIII.2 of the Federal Constitutional Law “On Constitutional Court of the Russian Federation” (hereinafter “Constitutional Court Law“), introduced by Federal Constitutional Law dd. 09.11.2020 N 5-FKZ.
 The underlying document (the document a foreign decision is based on) could constitute international treaties, or trade usage, or national laws of the third countries).
 In order to administer arbitrations in Russia, since November 2017 an arbitral institution is to obtain a special authorisation (“license”). The license is issued by the Ministry of Justice upon a recommendation of a Council for Improvement of Arbitration provided the statutory criteria (Article 44 of the Domestic Arbitration Law) are met.
 See the list at the Ministry of Justice website at: https://minjust.gov.ru/ru/pages/deponirovannye-pravila-arbitrazha/
 See Joint Request For Certain Clarifications To The Russian Ministry Of Justice And The Council For Development Of Arbitration At The Russian Ministry Of Justice From The Hong Kong International Arbitration Centre And The Vienna International Arbitral Centre of February 10, 2020, available at: https://www.hkiac.org/sites/default/files/ck_filebrowser/20200210%20HKIAC-VIAC%20Joint%20Request%20for%20Clarifications.pdf
 See Position of the Working Group No. 2 on Foreign Arbitral Institutions on the Matters Referred to in the Joint Request for Certain Clarifications from the Hong Kong International Arbitration Centre (HKIAC) and the Vienna International Arbitral Centre (VIAC), available in Russian at: https://www.hkiac.org/sites/default and in English translation at: https://www.hkiac.org/sites/default/files
 (a) disputes relating to the ownership of shares or participation interests in the charter (contributed) capital of business entities and partnerships, equity of cooperatives’ members, to the establishment of encumbrances and the exercise of the rights conferred by them, including disputes arising out of sale and purchase agreements of shares or participation interests in the charter (contributed) capital of business entities and partnerships, disputes relating to the enforced recovery against shares or participation interests in the charter (contributed) capital of business entities and partnerships, with the exception of disputes arising out of the activities of the depositories relating to the recording of title to shares and other securities, disputes arising in connection with division of the estate or division of the joint marital property, including shares or participation interests in the charter (contributed) capital of business entities and partnerships, equity of cooperatives’ members (Article 225.1(1)(2) of the APC).
 (b) disputes arising out of the activities of the registrars of securities’ owners, relating to the recording of title to shares and other securities, exercise by the registrar of securities’ owners of other rights and obligations, as provided by the federal law in connection with the offering of issuance and/or circulation of the securities (Article 225.1(1)(6) of the APC).
 (c) disputes arising out of agreements between the participants of a legal entity regarding the management of that legal entity, including disputes arising out of corporate agreements (Article 45(7.1) of the Law on Arbitration).
 Russian Arbitration Center: https://centerarbitr.ru/corporate-disputes/information-about-claims/ ; RSPP: https://arbitration-rspp.ru/about/structure/boards/corporative-disputes/; ICAC (Russia): https://mkas.tpprf.ru/ru/Stat/page.php; https://mkas.tpprf.ru/ru/news/zasedanie-prezidiuma-mkas-pri-tpp-rf-i400529/
 JSC “UralTransmash” after the replacement); JSC NPC Uralvagonzavod and JSC Ural Transport Machine Building Engineering Bureau (as procedural claimants) (hereinafter collectively “Claimants“) v. Pojazdy Szynowe PESA Bydgoszcz SA, case file at: https://kad.arbitr.ru/Card/58340e4f-48a9-4feb-a4b5-ba0a810acb78
 Replaced by JSC Uraltranshmash at the beginning of the trial.
 Federal No 223-FZ dd. 18.07.2011 “On procurement of goods, works and services by certain types of legal entities”.
 99.23 of Uraltransmash shares is owned by Uralvagonzavod, which in turn is 100%-owned by Rostech Corporation.
 Federal Law No57 -FZ.
 Arbitrazh Court of Uralsky Circuit dd. 06 July 2020.
 Supreme Court Ruling dd. 11 July 2018 .
 See Baker McKenzie Yearbook for 2018-2019, case B1: Mosteplostroy JSC v. Mosinzhprojekt JSC, А40-165680/2016, case file at: http://kad.arbitr.ru/Card/692507fe-d800-4152-b90f-77af1b4a9444
 Resolution of the Seventeenth Court of Appeal dd. 24 March 2020 in case А60-62910/2018.
 The argument was first addressed in the Resolution of the 17th Court of Appeal dd. 24 March 2020 in case А60-62910/2018.
 Resolution of the Arbitrazh Court of Uralsky Circuit dd. 06 July 2020 in case А60-62910/2018.
 Judgment of Arbitrazh Court of Sverdlovsk region dd. 05 October 2020 in case А60-62910/2018. Thus, the court disagreed that sectoral sanctions applied to the disputed contract, as well as that the claimants were prevented by means of EU Resolution No 833/2014 of 31 July 2014 from resorting to legal remedies in respect of the disputed contract. The court also noted that the claimants were not prevented from effecting payments to the SCC due to sanctions as alleged, and in fact engaged the services of qualified legal counsel.
 Resolution of the 17th Court of Appeal dd. 17 March 2020 in case А60-62910/2018.
 See B2 case in the 2020 Baker McKenzie Arbitration Yearbook: Instar Logistics v. Nabors Drilling International Limited, case file at: http://kad.arbitr.ru/Card/bb686748-753b-4c9f-b6f6-cb2fae36008b
 In that case the respondent failed to pay for the goods, did not respond to the claimant’s letters of claim and refused any contact with the claimant as a sanctioned entity. The courts agreed with the claimant that it was placed in an inferior position and could not enforce its contractual rights outside Russia. The arbitration clause was found incapable of being performed. Thus, as a rule the courts review all relevant facts and invalidate/ amend an arbitration clause only where sanctions hinder the claimant from exercising its rights in the agreed forum.
 JSC “UralTransmash” (Ural Transport Machinery Construction Company JSC), JSC NPC Uralvagonzavod v. Pojazdy Szynowe PESA Bydgoszcz SA (“PESA”), case file at: https://kad.arbitr.ru/Card/99ce7aa2-7f06-4615-baa5-94473b980771 (“Injunction Case”)
 Resolution of Arbitrazh Court of Uralsky Circuit dd. 06 July 2020 in case А60-62910/2018.
 Arbitration SCC V2018/114 between Pojazdy Szynowe PESA Bydgoszcz Spylka Akcyjna and Uraltransmash (Ural Transport Machinery Construction Company JSC).
 Ruling of Arbitrazh Court of Sverdlovsk region dd. 24 November 2020 in case А60-36897/2020.
 Resolution of Arbitrazh Court of Uralsky Circuit dd. 17 March 2021 in case А60-36897/2020.
 Piloyan A.V. v. Factor LLC, available at: https://kad.arbitr.ru/Card/aea3fe17-bf8c-49d0-a3e9-1576ada32549
 Award dd. 23 September 2020 in case № IRK-V-7/2020.
 International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation, http://mkas.tpprf.ru/en/; the list of ICAC (Russia) regional offices is available here: http://mkas.tpprf.ru/ru/otdeleniya/
 “Overview on separate issues of court practice in connection with measures by courts to fight illegal financial operations ” approved by the Supreme Court Presidium on 08 July 2020 enables courts to join state authorities in cases giving grounds for concerns of legalization of concerns.
 Among the circumstances to be investigated by the court are the following: how the transfer of funds from the claimant to the respondent had occurred; whether claimant’s financial state allowed it to provide the funds to the respondent, that is, the claimant’s income i.a. as specified in the tax declaration for the period preceding the transaction in question; confirmation of withdrawal of funds from its account as well as other evidence of having funds to loan. Further, how the loan was spent by the borrower, the way it was entered in tax and accounting documents of the respondent.
 “Olymp Group” vs. VostokEnergochermet LLC, case file at: https://kad.arbitr.ru/Card/b4f4c2c8-a38c-49d2-a6fc-dcce05ea10af
 The arbitration court at the “Helsinki international arbitrators” organization.
 Decision of Arbitrazh Court of Kemerovo region dd.25 April 2019; Resolution of Arbitrazh Court of West-Siberian Circuit dd. 11 July 2019.
 The rule that due to the lack of timely objections that any dispositive provision of the Domestic Arbitration Law as well as any provision of the arbitration agreement was not complied with, the party forfeits the right to argue this non-compliance is set out in article 4 of the Domestic Arbitration Law, applicable only to domestic arbitrations (however, the issue of whether a non-licensed foreign arbitral insititution is able to administer domestic arbitrations seated in Russia was not discussed in the case).
 Thus, the Supreme Court said that there should
 Case number А06-2352/2020; case file at: https://kad.arbitr.ru/Card/09927ff8-67b3-48f2-87d9-7e5921d9c8bc
 Ruling of Arbitrazh Court of Astrakhan region dd. 03 December 2020.
 See Article 44(3) of the Domestic Arbitration Law. At that, the court dismissed the respondent’s objections that for the special provisions to apply the parties should have entered into an ad hoc arbitration agreement.
 See Article 44(20) of the Domestic Arbitration Law stipulates that “Unlicensed arbitration courts are prohibited from discharging functions of administering arbitration, including appointment of arbitrators, ruling on challenges and termination of arbitrators’ mandate as well as from performing other actions in relation to conducting arbitration by an ad hoc arbitral tribunal (processing arbitration costs and fees, providing premises for hearings etc)…In case of breach of the above prohibition the arbitral award, including that by an ad hoc tribunal is considered to have been issued in breach of the arbitration procedure stipulated by this Federal Law.”
 Resolution of Arbitrazh Court of Povolzhsky Circuit dd. 11 March 2021.