Possible rejection for the Enforcement for CEE Awards has always been one of investors’ biggest concerns seeking to invest in the region. Russia, the major country in the region, has been long considered somewhat to arbitration awards enforcement. Many cases on refusals to enforce clear-cut awards have given the state the hostility tag on enforcement of international arbitration awards.
Seeking Arbitral awards in Russia is believed to be a mountainous task. However, a 2018 study by Russia Arbitration Association suggests that such may not be the case. The study considered 472 cases that south enforcement in the country recorded 80% success and only 20% rejection. This meant that over 380 cases that required Russia Courts to rant enforcement were acknowledged and enforced. While less than 100 were rejected.
While this data may not cover the whole picture of Russian Arbitration, the country’s Courts have made it clear the grounds on which arbitration awards in Russia will be rejected. This article will consider these factors to educate investors and experts on why Recognition and enforcement of an award may not be granted in the country.
Grounds for the rejection of Recognition and Enforcement awards in Russia
Russia is a member state of the New York Convention, the Geneva Convention, also known as the European Convention, the CIS multi-international treaties, and so many other bilateral agreements and treaties that make the country obligated to enforce international arbitration awards when issued.
However, there are reasons grounds with which Russia can reject an award, and they include:
The award is considered non-arbitrable according to Russian state law
There are certain cases where issued awards may be considered non-arbitrable by Russia Courts. A common case is when the award issued is against a local Russian company under insolvency. The state ensures that companies going through bankruptcy are not subject to compensation payments to foreign investors. But should instead liquidate its assets to pay off local shareholders and other stakeholders.
This is not the only case where an award may not be recognized. However, there are no written rues onto why an award may be rejected, so Investors cannot exactly prepare to counter rejection of issued awards by the courts. This leads to a very tricky situation for investors, given the country’s reputation with award enforcement.
Public Policy issues
Russia may not enforce an award on the round that the award requirement violates the country’s public policies. The problem many investors find with this condition is that these violated policies are not explicitly stated. Hence an award could be rejected without any real basis. Many awards rejected in Russia have been stated to have violated the country’s public policy, and recognizing them would lead to the undermining f state values.
Award does not compliment Russia Federation Laws
Before an award can be considered recognizable and enforceable in Russia, it must first be in line with Russian laws. The state, just like other regions, takes this factor very seriously and will not enforce an award that seems to or against its sovereign laws. This factor is also responsible for the rejection of many awards.
If standard Arbitration Rules are not Followed
Russia is one of the states that critically examine awards nature, especially those awarded to a local company, to see if any process in the hearing has been violated. Russia Courts will not hesitate to set aside an award that has provable issues with the arbitrator’s disclosure commitment, unclear terms, and ross misinterpretation by the arbitrator.
Russia Courts are known to turn these types of awards due to unclear conditions and terms.
An award will not be enforced if the party required to offer compensations for damages was not properly notified about the day the court will hear the case for enforcement. The courts may temporarily set aside and ensure that the party is represented in court.
Russia has and will continue to be a state that attracts investors. Despite being known for its reputation of critically examining awards, the country will, in most cases, grant enforcement if all rules are followed. Russia arbitration plays a major role in how the CEE states are considered, and over the years, the country’s reputation in awards enforcement has improved.
This article duly considered all that investors and contractors need to know for the rejection of Arbitral awards in Russia. As can be seen, the requirements are common with all CEE Awards, which at first view are easy to see through. However, what cannot be ignored is the fact that certain reasons for the rejection of awards enforcement are subjective, with no written law to reference as a basis.
With this being the case, it is only good judgment for investors to seek quality arbitrators or expert institutions to help them with their drafting process to do any loophole that the country can exploit.
Rättsakuten is a major arbitration institution that investors can contact to ensure their interests are fully protected in an arbitration clause before entering into a contract with The Russian Federation or any of its local companies.
Rättsakuten is a leading law firm focused on Commercial Arbitration and Dispute Resolution. Based in Sweden, Rättsakuten handles dispute resolution and Arbitration matters before the SCC (Swedish Chamber of Commerce), ICC, HKIAC, and several other Arbitration tribunals.