On 18 June 2019, the Council for the Development of the Arbitration Process of the Ministry of Justice of the Russian Federation recommended granting VIAC the status of a PAI (“permanent arbitration institution”) under Russia’s Federal Law on Arbitration dated 29 December 2015. As of 11 July 2019, VIAC is now officially included in the list of foreign arbitral institutions recognized as a PAI (as per order No. 845-r issued on 4 July 2019). We are the first European arbitral institution to have received a government permit. This registration is crucial in order to ensure enforcement of VIAC awards also in the future in the Russian Federation.
Only HKIAC has yet obtained a permit as foreign arbitral institution in April this year. The Russian Arbitration Law requires all arbitral institutions to obtain a Russian government permit. Without such permit, domestic institutions are banned. So far, only four Russian institutions are eligible to administer commercial arbitrations: International Commercial Arbitration Court (ICAC) and the Maritime Arbitration Commission at the Chamber of Commerce and Industry are exempt from the permit requirement as they are long-standing Russian institutions. In addition, the Arbitration Centre at the Russian Union of Industrialists and Entrepreneurs and the Russian Arbitration Centre at the Russian Institute of Modern Arbitration have both obtained permits. No other permit applications have been successful to date. For foreign arbitration institutions, the situation is different: the law does not explicitly require them to obtain a Russian permit, nor does it declare foreign arbitral awards non-enforceable in Russia in the absence of a permit. Decisions made by arbitral tribunals in the Russian Federation when administered by foreign arbitration institutions that are not authorized to function as a permanent arbitration institution are considered as made by ad hoc arbitration thus leading to a much more difficult enforcement regime, especially in case of corporate disputes (see below). Foreign arbitration institutions applying for a license need to define whether they also seek to administer Russian “domestic disputes” (essentially disputes without cross-border elements, unrelated to international economic activity and foreign investment). If so, they need to form a local Russian branch. VIAC chose not to open a local branch and, therefore, is not eligible as of now to administer Russian domestic disputes, whether corporate or not. In addition, VIAC has not yet adopted specialized “corporate arbitration rules” compliant with the stringent requirements of the Arbitration Law and is thus not eligible to administer corporate disputes. These are defined broadly to include, among other things, M&A disputes arising from the acquisition and pledge of Russian companies’ shares and claims under shareholder agreements. Under Russian law, arbitration of corporate disputes is only allowed if administered by an institution holding a permit. E contrario, ad hoc arbitration of these disputes is prohibited altogether. As a PAI VIAC can, however, administer some forms of “corporate disputes” (such as disputes from SPAs and pledge agreements) without adopting specialized “corporate arbitration rules”. The risk of conducting corporate arbitration disputes before a foreign arbitral institutions without a permit is that it might render the award unenforceable in Russia.
Lord Goldsmith QC comments in a debrief of Debevoise on 26 June 2019:
“Russian and Russian-based disputes are an important part of the diet of international arbitration. Parties involved in international transactions need to have confidence entrusting the adjudication of these disputes. It is good therefore that the recognition of the VIAC as a permanent arbitration institution will provide another choice for businesses when it comes to choosing a method to resolve their disputes and that arbitral awards resulting from disputes resolved in this way will be enforced in Russia.”