Zokirjon Abdusattarov, LL.M.

Student, Institute for Law and Finance

Enforcement of Foreign and International Arbitral Awards in Russia

Introduction

Since laws and regulations differ from country to country, investors and businessmen,
who are entering into a contract with a foreign counterparty, above all, want to make sure
that the contract they are signing is legally valid and binding, and in cases when a dispute
arises as to the performance or termination of the contract, they want to make sure that
there is legal certainty and recourse to certain type of legal remedies is available. Smooth
and flexible dispute settlement mechanisms and choice of governing law, within the frame of
which parties feel comfortable to carry out their activities, are of great importance to any
investor, who is risk averse to legal matters.

Russia’s economy is in “catch up” process and is growing at a steady pace attracting
increasing number of investors. Russian authorities understand well that in order to keep the
current economic growth level and to raise the investment ranking of the country, they need
to furnish with necessary legal tools to create legally friendly business environment. There
are quite promising signs of legislative and judicial practice developments in this respect.
However, to expect dramatic changes in the Russian legal system would be too optimistic at
this point. A certain level of conservatism still lingers on the modern legislators’ mind.

Russia has two types of courts1 that have jurisdiction over matters regarding
arbitration: Courts of General Jurisdiction and Courts of Arbitration. The former deals with
civil and criminal matters mostly between private persons themselves or in relation to the
state, and Courts of Arbitration consider legal disputes involving legal entities and private
entrepreneurs. The name of the court is somewhat misleading for foreigners because this
court is not arbitration in the common understanding of the terminology but a state
established regular court, which has several instances to appeal and whereas appointment of
judges and procedure of court hearings are strictly set out by law. Russians use “treteyskiy
sud” to denote “arbitration court” in internationally accepted meaning of the word and
“arbitrazhniy sud” to denote “Economic Court”, which is a state court. Thereafter I will use
denoted meanings of the Russian terminologies, i.e., Arbitration Court and Economic Court,
so that not to lead to any confusion.

Arbitration courts in Russia have a special status and they can be set up on an ad hoc
basis for resolving controversies arising out of certain contractual obligations or on a
permanent basis under some companies or associations. In principle, decisions of arbitration
courts are considered as final and not subject to appeal or reconsideration. However there
are exceptions to this statement and there are additional procedural requirements as a result
of which enforcement of arbitral awards might become cumbersome or if not possible at all.
This paper will cover the issues of enforcement of foreign and international arbitral awards in
Russia in light of development in legislation.

1
There are other types of courts as well, such as the Constitutional Court of the Russian Federation, military
courts and other types of specialized courts. But they are irrelevant for the purposes of this paper.

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 Zokirjon Abdusattarov, LL.M. Student, Institute for Law and Finance

Legislative Framework

Rules as to establishment, requirements for procedural rules and enforcement of

awards of arbitration courts are governed both by the national laws and international treaties
that Russia has ratified.
The Constitution of Russia regards international law as a part of the legal system and
in cases of conflict with national law, the former stands on a higher hierarchy and
supersedes national law. There are several international treaties on arbitration to which
Russia has become a party and established rules thereof are legally binding on its whole
territory. The most important ones go in the following order:
- New York Convention of 1958 on the Recognition and Enforcement of Foreign
Arbitral Awards;
- European Convention on International Commercial Arbitration of 1961;
- European Convention providing a Uniform Law on Arbitration of 1966.

These international agreements aim to achieve greater uniformity in the laws of its
member states in the matters of arbitration, and thereby circumvent capacity of member
states to regulate the given areas through establishing certain foundational principles which
cannot be breached and leave certain areas of regulation at the disposal of member states
as well. Moreover they serve to facilitate international economic relations through
recognizing and enforcing arbitral awards even when the latter are made in a foreign
member state.
It’s worth mentioning that most provisions of the said international treaties do not have
the nature of direct effect but they give guidance to legislators to take certain legislative
actions and implement this guidance. International rules and norms contained therein are
incorporated into national laws of the Russian Federation. At present there exist two special
laws which regulate matters related to arbitration courts, namely, the Law on International
Commercial Arbitration of 1993 and the Law on Arbitration Courts of the Russian Federation
of 2002. The latter is beyond the scope of this paper and will not be discussed.
The Law on International Commercial Arbitration with slight modifications virtually
incorporates all the artciles of the UNCITRAL Model Law on International Commercial
Arbitration of 1985. The scope of application of the said Russian Law encompasses the
situations where the place of arbitration is in the territory of Russia or/and in certain cases2
when effects of the arbitration take place in the territory of Russia.
Within the purview of the Law, disputes between parties to an agreement where at least
one of the parties is a commercial company located abroad or when it is a company
established in Russia with a foreign investment can be brought before international
commercial arbitration.
The present Law regulates the following arbitration matters:
• Arbitration agreement
• Composition of arbitral tribunal
• Jurisdiction of arbitral tribunal
• Conduct of arbitral proceedings
• Making of award and termination of proceedings

2
They are provided in Articles 8, 9, 35 and 36 of the Law on International Commercial Arbitration of Russia.

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 Zokirjon Abdusattarov, LL.M. Student, Institute for Law and Finance

• Recourse against award

• Recognition and enforcement of awards.
Last two matters, i.e., recourse against award and recognition and enforcement of awards,
are particularly relevant for our purposes.
In principle, arbitral awards are expected to be enforced voluntarily without
interference of the state. However for different reasons they are not enforced or executed on
the free will of the parties. The reasons might be the failure of one of the parties to perform
their obligations arising from an arbitral award, or filing a claim with court as to invalidity of
an arbitral award by one of the parties, by the state or by interested third parties.
Procedure for considering the questions of enforcement and invalidity of arbitral
awards is further mirrored and complemented in the Civil Procedural Code of the Russian
Federation (CPC), which sets out procedural rules for courts of general jurisdiction3, and
Economic Procedural Code of the Russian Federation (CPC), which sets out rules for
economic courts. An application to set aside an award can be made within a period of three
months from the date on which the award was notified. The grounds initially set out in the
European Convention providing a Uniform Law on Arbitration for setting aside awards do not
fully match with the grounds laid down in Russian national law. The author assumes Russian
legislator used its right to permitted reservations in Annex II for certain provisions of the said
Convention. On the following grounds awards of international arbitral tribunals set up in
Russia might be set aside or recognition and enforcement of foreign arbitral awards might be
refused:
- the party against which the award is to be enforced was not duly given a notice on
the election (appointment) of the arbitrator, the arbitration proceedings, or for other
reasons, was unable to present its case;
- one of the parties did not have capacity to enter into the agreement or this
agreement is invalid by virtue of law which parties have chosen to govern their
contract, and in the absence of such evidence, in accordance with the law of the
country where the decision was reached (stipulated only in the CPC);
- there is a court decision or on going dispute in court involving the same parties, on
the same subject matter and on the same grounds (stipulated only in the APC);
- the arbitral tribunal has exceeded its jurisdiction or its powers set in the agreement.
In this case, only the parts of the award which are made beyond the competence of
the arbitral tribunal can be found invalid provided that they can be separated from
the other part of the award;
- the composition of arbitral tribunal or the procedure for arbitral proceedings
contradicts the agreement of the parties or the law of the country where the
arbitration took place;
- the award has not yet become legally binding on the parties or has been set aside, or
its enforcement has been suspended by a foreign court where the arbitration took
place or pursuant to the foreign law concerned;
- the dispute cannot be the subject matter of arbitral proceedings pursuant to law or
the recognition and enforcement of foreign arbitral award contradict public order of
the Russian Federation;
3
Procedural matters in courts of general jurisdiction are governed by the Criminal Procedural Code as well when
such courts are hearing criminal cases.

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 Zokirjon Abdusattarov, LL.M. Student, Institute for Law and Finance

- the award of international commercial arbitral is subject to being set aside by virtue
of international agreement of Russia or the Law of International Commercial
Arbitration (stipulated in the APC and only applicable to international commercial
arbitration located in Russia).
- Enforcement of award may impair the sovereignty of the Russian Federation or
threatens the security of the Russian Federation (stipulated only in the CPC).

When a claim to set aside or suspend enforcement of foreign arbitral award is filed with
the court where recognition and enforcement of the same award is sought, the court may
suspend reaching decision on this matter if it considers it will be reasonable to do so.
Furthermore, law assigns certain subject matters to the exclusive jurisdiction of
courts. These subject matters can not be contested in arbitral tribunals. Though the
spectrum of most of the subject matters is predictable, there are some subject matters,
which do not cross your mind immediately, such as immovable property (if this property is
located in Russia) and properties which belong to the state. The latter is vaguely formulated
in APC and it is not clear which type of properties it may cover, i.e., whether it covers when
the state owns only the part of the property.
In the absence of the above grounds, courts may issue writ of execution to enforce
arbitral awards. The enforcement of arbitral awards is carried out according to the Law on
Execution Procedure.
As we have already discovered an application to enforce or set aside an arbitral
award can be filed with both economic courts and courts of general jurisdiction. In which
cases economic courts can hear claims regarding arbitral awards and in which cases courts
of general jurisdiction have the competence over these claims are surprisingly not addressed
by law. Suits concerning enforcement of arbitral awards can potentially be initiated in both
types of courts. It would not be a matter of concern if there didn’t exist some legal hitch.
The grounds for setting aside arbitral awards stipulated in the CPC differ from the
grounds in the APC. Bearing this in mind, there is a theoretical possibility that a court of
general jurisdiction might find an arbitral award invalid based on some ground contained in
the CPC while an economic court might find this arbitral award enforceable due to non-
existence of the ground that the court of general jurisdiction based its judgment. Each party
to an arbitration agreement might seek defense of their legal interest based on their
preference in different types of courts, i.e., one party in court of general jurisdiction and the
other in economic court. And since these two types of courts cannot repel or consider each
other’s cases, decisions of both courts might become equally legally binding and at the same
time contradicting at some aspects. The two types of courts cannot serve to each other as
an appellate court. Therefore, it is highly advisable to clarify which court will have jurisdiction
in cases of conflict arising out of enforcement of arbitral awards.