Shakhtersk Sea Coal Port (UMPSh LLC), represented by KIAP, Attorneys at Law, had insured a marine tugboat under a CASCO policy that had operated for years at Shakhtersk port. In December 2023, severe weather conditions caused the vessel to run aground, resulting in its subsequent recognition as a constructive total loss. Following a two-year claims adjustment process and receipt of a pre-trial demand, the insurer denied coverage citing standard defenses: gross negligence, unseaworthiness, and alleged technical unsuitability of a “tropical-class vessel” for operations in active ice formation conditions.
The Maritime Arbitration Commission (MAC) at the Russian Chamber of Commerce and Industry – the dispute resolution forum agreed upon in the insurance contract – rejected the insurer’s arguments. Arbitrators ruled the grounding constituted an insured event since: 1) no ice navigation restrictions were in effect when the voyage commenced, and 2) the vessel’s classification permitted unrestricted independent navigation. KIAP lawyers, representing the insured in arbitration, submitted comprehensive evidence including official investigation reports, expert assessments, video recordings, and ice-strengthening recommendations from classification societies. The tribunal granted the claim in full.
Despite the binding nature of the arbitration court decision, the insurance company failed to comply with it. Parallel proceedings then commenced in the Moscow Arbitrazh Court – for enforcement of the MAC award and the insurer’s application to set it aside.
Both the first-instance and cassation courts vacated the MAC decision, alleging violations of Russian legal principles and public policy. Their terse rulings revealed the state courts had effectively re-examined the evidentiary record (contrary to Articles 232 and 238 of the Russian Commercial Procedure Code), substituting their own factual findings for the arbitrators’ conclusions without identifying material legal errors.
The courts’ clear violation of the prohibition on reviewing arbitral award prompted UMPSh to appeal to Russia’s Supreme Court, where KIAP continued its representation. The Supreme Court held that lower courts had unlawfully reweighed evidence properly evaluated by arbitrators, emphasizing that: 1) arbitrators enjoy discretion in evidentiary assessment, and 2) public policy exceptions cannot justify substantive review of arbitral awards.
Rejecting the insurer’s objections, the Court reinstated the MAC decision without remand, ordering issuance of an enforcement writ.
KIAP's Maritime Law practice team handling this complex matter included: Junior Associate Karolina Tsmyg, Senior Associate Alexander Kartashov and Partner Maria Krasnova.