Russia's main commercial court rules that corporate disputes are not eligible for arbitration
In a significant move that could reshape the arbitration landscape, the Supreme Commercial Court of Russia has upheld decisions in the case Novolipetsk Steel v Maximov (case No. A40-35844/2011-69-311), effectively restricting the arbitrability of corporate disputes, particularly those involving international arbitration.
Key developments arising from this landmark case include:
- The Russian Supreme Court (RSC) has overridden arbitration agreements that designate foreign arbitration forums, asserting jurisdiction in disputes involving Russian entities despite arbitration clauses. This move creates legal uncertainty and risks diminishing the efficiency and neutrality expected in international arbitration.
- The doctrine of kompetenz-kompetenz—whereby arbitral tribunals decide on their own jurisdiction—has been weakened by RSC rulings, allowing Russian courts to disregard arbitration agreements and retain jurisdiction over corporate disputes.
- Amendments to Russian procedural laws, notably Article 248 of the Arbitrazh (Commercial) Procedure Code introduced in 2020, empower Russian courts to issue anti-arbitration and anti-suit injunctions with significant fines, effectively disincentivizing parties from pursuing foreign arbitration or enforcement of arbitral awards abroad.
These measures, coinciding with Russia’s broader legal retreat from international arbitration, are causing divergence from international arbitration norms and raising serious concerns among foreign investors and contracting parties.
The Novolipetsk Steel case may have strong precedential value or may have been intended as a message to corrupt arbitral panels to clean up their act. Prior to this case, specific corporate jurisdiction was not understood to be exclusive to the commercial courts; both commercial courts and arbitrators heard corporate disputes.
Meanwhile, the article does not discuss the specific outcome of the case involving Amazon Flex drivers. However, the case may have implications for how companies monitor and regulate employee communications on social media platforms, with popular platforms like Facebook, Messenger, Twitter, Pinterest, LinkedIn, Whatsapp, and Email potentially being affected.
It's important to note that binding arbitration clauses are common in contracts and agreements between various parties, including companies, employers/employees, consumers, and businesses. In the absence of cooperation from the other party, enforcing one's right to arbitration can present challenges. The article does not provide specific details on how to enforce a right to arbitration when the other party does not cooperate.
Additionally, some courts in the U.S. now require a form of "compulsory" mediation (settlement conference) before allowing a case to proceed. Alternative Dispute Resolution (ADR) is a method to settle disputes instead of or before going to court, and it can be used to avoid having a case go to court.
The current legal environment in Russia, with its significant restrictions on the arbitrability of corporate disputes, favors Russian court jurisdiction and national sovereignty over previously respected arbitration agreements. This environment creates considerable unpredictability for foreign and domestic parties relying on arbitration to resolve corporate disputes in Russia. No recent developments suggest a reversal of this trend; rather, Russia appears to be reinforcing these restrictions as part of a broader move away from international arbitration frameworks.
[1] Source: Russian Legal Information Agency (RAPSI) [3] Source: Chambers and Partners Global Practice Guide, Russia: Arbitration 2021
In light of the Supreme Commercial Court of Russia's decision on the Novolipetsk Steel v Maximov case, there might be a growing need for finance-focused businesses to resort to dispute resolution methods that are more aligned with the Russian legal system, rather than relying on international arbitration, due to the increased jurisdiction of Russian courts. The recent amendments to Russian procedural laws, such as Article 248 of the Arbitrazh (Commercial) Procedure Code, additionally introduce penalties for parties that pursue foreign arbitration or the enforcement of arbitral awards abroad, potentially leading to an increase in Alternative Dispute Resolution (ADR) methods within the Russian business landscape.
