Supreme Commercial Court of the Russian Federation Publishes Precedent-Setting Ruling of Its Presidium That Affects Validity of an Asymmetric Arbitration Clause

03.09.2012

On September 1, 2012 the Supreme Commercial Court of the Russian Federation published full text of the Ruling of Its Presidium dated June 19, 2012, case No. 1831/12, where ZAO RTK was represented by the partner of the Firm Ilya Ischuk and senior associate of the Firm’s litigation practice Mikhail Samoylov.

This case has drawn particular attention as it dealt with the question of validity of a prorogation agreement, i.e. an agreement whereunder one of the parties to the transaction in order to defend its rights could approach either a state government court or an arbitration tribunal while the other party was entitled to defend its interests only in an arbitration tribunal.

There are members of the legal community who believe that such agreement should be treated as valid as it is based on the civil law principle of freedom to contract.

However lawyers of the Firm were able to prove the opposite during the session of the Presidium of the Supreme Commercial Court.  The view of the Firm has been largely based on the precedents of the European Court of Human Rights, which had introduced the principle of procedural equality of the parties that was subsequently implemented in the acts of the Constitutional Court of the Russian Federation.

Presidium of the Supreme Commercial Court accepted the view of the lawyers of the Firm and incorporated into this country’s commercial arbitration process precedents set by the European Court of Human Rights on a similar matter, having arrived at the following conclusion: a dispute resolution agreement cannot grant the right to approach a state government court of competent jurisdiction to only one party under the contract and yet deprive the other party of a similar right.  Should such agreement be entered into it will be invalid as violating the balance of the rights of the parties.  Accordingly, the party which right was violated by such agreement on dispute resolution is also entitled to approach the state government court of competent jurisdiction exercising its guaranteed right to judicial protection on the terms equal to those that exist for its counterparty.

We need to mention that the legal position of the Supreme Commercial Court of the Russian Federation outlined for this case creates grounds for review of judicial acts adopted by commercial arbitration courts on the cases with similar actual circumstances yet based on the norm of law in its interpretation different from the interpretation presented in the ruling.

Full original text of the ruling of the Presidium of the Supreme Commercial Court case No. 1831/12 in the Russian language is available on the following link.

This case has drawn attention of our colleagues whether based in Russia or countries of Europe, the U.K. and the United States, which is evident from comments/articles on official websites of many law firms, even the blog of Financial Times.

To help any interested parties/companies to obtain the information from the source on the decision made, to research why the Supreme Commercial Court of the Russian Federation adopted the decision or to analyze legal position of the high judicial instance, KIAP has prepared
translation of the Resolution of Presidium of the Supreme Commercial Court of the Russian Federation dated June 19, 2012, case 1831/12, into the English language.


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