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20 July 2017
New rules on international and domestic disputes
Multi-party and multi-contract disputes
Joinder of additional party
Case management tools
Other noteworthy procedural aspects
Following the reform of the Arbitration Law, most existing arbitral institutions must re-register and obtain a permit from the government to administer disputes in Russia before November 1 2017. In addition, they need to align their arbitration rules with the new legislation's standards and requirements. The International Commercial Arbitration Court (ICAC) and the Maritime Arbitration Commission (MAC) at the Russian Chamber of Commerce and Industry are the only Russian institutions which are exempt from the permit requirement. However, they still need to update their arbitration rules.
The ICAC has used this opportunity to enhance significantly its previous arbitration rules, which had been in force since 2005. The new rules entered into force on January 27 2017 (even though they were published a few days later) and apply to disputes commenced after that date. The rules were originally available only in Russian, but the international commercial arbitration rules can now also be accessed in English.(1) At present, the domestic arbitration rules are available only in Russian, but translations should be forthcoming.
The updated legislation draws a new line between domestic and international disputes. Previously, disputes involving two Russian companies were considered to be 'international' disputes under Article 1(2) of the old Law on International Commercial Arbitration if at least one of the Russian entities had foreign companies among its shareholders. The old law was adopted in 1993, when no legal framework or tradition of domestic arbitration existed in Russia. The idea behind this provision was to allow Russian subsidiaries of foreign companies or companies with foreign investments to refer their disputes to arbitration. The only arbitral institutions which existed at that time were the ICAC and the MAC, which operated within the framework of the previous law and resolved only international disputes.
Since then, domestic arbitration has developed (at least to some extent) and been further enhanced and the legal framework for domestic arbitration has been closely aligned with that of international arbitration. It was apparently for this reason that the drafters of the updated Law on International Commercial Arbitration decided that companies with foreign investments in their capital are entitled to resort to domestic arbitration only if the dispute has no other foreign element.
The ICAC can now simultaneously deal with domestic and international disputes. Accordingly, disputes involving the subsidiaries of foreign companies can still refer their disputes to the ICAC. However, the ICAC has adopted different rules for domestic and international disputes. This update focuses primarily on the new features of the rules for international disputes, but notes where certain procedural features are unavailable under the rules for domestic disputes. The most important changes relate to multi-party and multi-contract disputes, as well as to the rules on joinders and consolidations.
The previous rules contained limited and rather outdated provisions on multi-contract arbitration. In particular, the rules allowed claims under several contracts to be considered in one set of proceedings only if all of the disputes were covered by one arbitration agreement. Thus, if there was an umbrella arbitration clause relating to all of the contracts in question, the claims arising under such contracts could have been brought together. However, if the contracts contained only identical arbitration clauses, the claims under each contract had to be brought separately.
The new Rules on International Arbitration(2) allow claims under several contracts to be brought together even if they are covered by different arbitration clauses which provide for arbitration under the ICAC rules and are compatible with regard to their content. However, for this to apply, the claims must be substantively interrelated. The Rules on Domestic Disputes contain no such similar provisions.
The new rules also contain provisions on the consolidation of arbitral proceedings,(3) which was not previously available. Consolidation is available only if all of the parties have agreed thereto, but agreement to ICAC arbitration is also deemed to be an agreement to the consolidation of the proceedings.(4)
Consolidation is available where the claims are covered by one arbitration agreement, or different compatible arbitration agreements which provide for ICAC arbitration, if the claims are substantively interrelated.
Each party can apply for consolidation and the ICAC Presidium must take the decision on such an application. When deciding on the application, the presidium considers, among other things:
There is also a presumption that the consolidation is impossible if the formation of the arbitral tribunals was completed in the subsequent proceedings.
Unless the parties have agreed otherwise, the matters should be consolidated into the proceedings which were commenced first.
Consolidation is unavailable under the domestic arbitration rules.
The new rules also introduce provisions on the joinder of additional parties, which in many respects are analogous to the provisions of the International Chamber of Commerce rules.
A joinder is also available if the claims of additional parties are covered by the same arbitral agreement as the principal claim, or another compatible arbitration agreement providing for ICAC arbitration, if the additional party's claim substantively relates to the principal claim.
The additional party can join the proceedings:
Joinder will generally be available before the formation of a tribunal is completed. In such cases, the additional party will usually be considered to be a co-claimant or co-respondent for the purposes of the tribunal's formation. However, if this is impossible under the circumstances, the ICAC nominations committee will appoint the entire tribunal for the parties. Joinder of an additional party after the tribunal's formation is possible only if the additional party agrees to accept the proceedings in the state in which they are at the time of joinder.
The joinder of additional parties is unavailable under the domestic arbitration rules.
As was previously the case, the rules allow for the intervention of third parties which make no claims in their own name.(5) A third party can intervene in the existing proceedings if the request for such an intervention is filed by a party to the existing proceedings or the third party itself, usually within the deadline allowed for the filing of the statement of defence (ie, 30 days from the respondent's receipt of the statement of claim).(6) The intervention would be allowed if there was an arbitration agreement covering all parties to the proceedings and a third party. Alternatively, all parties and the third party could consent to the third party's participation in arbitration within 15 days from the receipt of the relevant request. The Rules on Domestic Arbitration also allow third-party participation if all parties to the dispute consent thereto.(7)
One of the main issues with the previous version of the ICAC rules was that they did not allow active case management by an arbitral tribunal. The new Rules on International Arbitration make a small step towards better case management.
Article 27 of the Rules on International Arbitration provides that the president of the tribunal is responsible for ensuring proper preparation of the case. To have the case prepared for the hearing, the president may – with the other tribunal members' consent – establish a timetable regarding:
The rules also allow the tribunal to conduct a case management conference with the parties and their representatives (including by telephone and videoconferencing), if necessary, although there is no requirement to do so. The rules also state that the parties' views as to the above measures may be requested, but that the tribunal is not obliged to seek such views.
As these provisions are rather novel for ICAC arbitration, it remains to be seen to what extent the arbitral tribunals will use them to enhance the efficiency of complex cases and the flexibility of ICAC arbitration in general. Unfortunately, the Rules on Domestic Disputes do not provide similar case management tools.(8)
The new rules embrace modern technology – for example, most documents can be exchanged in electronic form, except:
The rules also allow for hearings to be conducted by videoconferencing, if possible.(10)
In the context of international arbitration, the updated rules contain provisions similar to Articles 18.3 to 18.5 of the London Court of International Arbitration Rules. Thus, by authorising a legal representative to act on its behalf, a party is deemed to have confirmed the consent of its legal representative to comply with the present rules and other ICAC regulations and rules. If the legal representative fails to behave properly, the arbitral tribunal may consider this when determining the costs allocation, but can also send a warning to the relevant party or suggest that it replace its legal representative.(11) It remains to be seen to what extent these powers will be used in practice.
The rules further provide that, following the tribunal's formation, a party wishing to change its legal representative must notify the secretariat and the arbitral tribunal in advance and may change the legal representative only if such a change would not create grounds for challenging any arbitrator or setting aside or denying the recognition and enforcement of an arbitral award.(12)
Under the Rules on International Arbitration, as well as the Rules on Domestic Disputes, the place of arbitration is always Moscow.(13) Parties cannot change this, although they can agree to hold hearings in a different location.
Further, in the context of international arbitrations, the language of arbitration is presumed to be Russian unless the parties have agreed otherwise.(14)
Overall, the new ICAC Rules on International Arbitration are much closer to the prevailing international arbitration practice. However, it is unclear to what extent the new features and tools will be used in practice. At the same time, the ICAC Rules on Domestic Arbitration do not seem to have been improved much.
For further information on this topic please contact Andrey Panov at Norton Rose Fulbright (Central Europe) LLP by telephone (+7 499 924 5101) or email (firstname.lastname@example.org). The Norton Rose Fulbright website can be accessed at www.nortonrosefulbright.com.
(1) Available here.
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