An award creditor, Dredging and Maritime Management SA (“DMM”) sought to recognize and enforce an ICC award issued on 15 September 2014 in a Geneva-seated arbitration.[1] In addition to arguments on violation of public policy due to enabling a material breach of the rights of other creditors[2] the Moscow Arbitrazh Court accepted the respondent’s argument that the ICC arbitration court lacked competence to resolve the dispute. The arbitration clause was as follows:

Any dispute that failed to be settled amicably was to be finally resolved in international arbitration. Unless otherwise agreed by the parties, the dispute is to be finally resolved in accordance with the Rules of Arbitration of the International Chamber of Commerce …

According to the court, an arbitration clause is capable of being performed once it clearly specifies the name of the arbitral institution entrusted to resolve the dispute, with sufficient detail to identify the particular institution. In this case, the parties failed to clearly state that the disputes are to be referred to the International Arbitration Court at the ICC thus the wording of the clause is ambiguous.[3] The court held:

the reference to international arbitration or to the rules of arbitration of the International Chamber of Commerce per se does not represent an agreement of the parties to refer a dispute to a particular arbitration court.

The Cassation court upheld the ruling[4] and the Supreme Court refused to consider the appeal on the merits in the course of second tier cassation review.[5] The appeal to the Chairman of the Supreme Court’s cassation panel for considerations on the merits was not accepted.[6]

In what represents a rare development, on 12 November 2018 the president of the ICC Court Alexis Mourre sent a letter to the Chairman of the Russian Supreme Court Vyacheslav Lebedev expressing “serious concern” over the ruling and asking for clarification.

The findings in the case are not to be taken as demonstrating that Russian courts are not arbitration-friendly in interpreting arbitration agreements in general. Rather, the conclusions were based on particular circumstances of the case, that is, the bankruptcy of the award debtor and the resulting main argument that the enforcement would violate the rights of the debtor’s creditors. In particular, the enforcement would lead to DMM’s claims being preferred above the claims of other creditors who were parties to an amicable settlement agreement.

Moreover,  it should be noted that in earlier cases, the courts found arbitration clauses referring to the rules of arbitration of the ICC to be enforceable,[7] as the rules stipulate in detail the way the tribunal is formed, as well as the dispute resolution procedure at a particular arbitral institution.

While not resolving the issue of enforceability of a standard arbitration clause in the course of cassation review, subsequently the Supreme Court dealt with the issue in the Review of court practice on arbitration-related matters  which was issued by Russia’s Supreme Court on 26 December 2018 (Item 5 of the  Review), upholding the enforceability of arbitration agreements recommended by arbitral institutions.  The case underlying the relevant item of the Review was the 2013 Bosch Termotechnik v. AVTOSPED Internationale Speditions GmbH case where an ICC standard arbitration clause was upheld.

Though not binding, the Review expresses the position of the Supreme Court on applying relevant legal rules to disputes related to arbitration and effectively corrects the findings in the Dredging and Maritime Management SA v. Inzhtransstroy JSC case.

This case note originally appeared in the Baker McKenzie International Arbitration Yearbook. The Yearbook comprises reports on arbitration in key jurisdictions around the globe. You can access the Yearbook here. The country chapter “Russia” can be found here.

 

[1] Dredging and Maritime Management SA v. Inzhtransstroy JSC, А40-176466/2017, case file at: http://kad.arbitr.ru/Card/e14833d5-67ca-48a9-adff-78c46640dabe.

[2] Award debtor was in bankruptcy proceedings, and an application for enforcement was considered in separate proceedings after the conclusion of an amicable settlement with other creditors.

[3] Ruling of Moscow Arbitrazh Court dated 08 February 2018 in case А40- 176466/2017.

[4] Decision of Arbitrazh Court of Moscow Circuit dated 25 April 2018 in case А40- 176466/2017.

[5] Supreme Court Ruling dated 26 September 2018 in case А40-176466/2017.

[6] Letter of the Supreme Court dated22 November 2018 305-ES18-11934.

[7] Bosch Termotechnik v. AVTOSPED Internationale Speditions GmbH case in, “The Baker McKenzie International Arbitration Yearbook,” 2013-2014 edition: Resolution of the Supreme Arbitrazh Court’s Presidium dated 16 July 2013 № 2572/13 in the case provides the following reasoning: In such circumstances the reference to the rules of arbitration of the International Chamber of Commerce clearly testifies to the agreement of the parties to have their dispute resolved by international commercial arbitration in accordance with Arbitration Rules of the International Chamber of Commerce with seat in Russia or in Germany(depending on who was the respondent). Resolution of the Arbitrazh Court of West-Siberian Circuit dated 19 January 2018 in case No. А81-4101/2016: In accordance with Clause 18.3 of the contract any dispute that has not been finally settled as per Clause 18.2 of the contract is to be finally resolved in accordance with Arbitration Rules of the International Chamber of Commerce (ICC) by three arbitrators appointed in accordance with these rules. The seat of arbitration is Vienna, and the language of arbitral proceedings is English. … … courts of the first and appeal instances were right in finding that the parties have agreed to refer all disputes arising out of agreement to be resolved by International Chamber of Commerce, with seat in Vienna and the language of arbitral proceedings.