Practical Law: Russian Supreme Court dismisses application to set aside an arbitral award against a state funded entity on public policy grounds (an update by Maxim Kulkov and Alexandra Chilikova)
A Russian employer, Zvesdny Hotel JSC, (the Employer) brought a claim before the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (the ICAC) against a Hungarian contractor, Polus TFC LLC, (Contractor) arising under an agreement for the construction of a hotel in Sochi for the Olympic games. After the tribunal dismissed the claim, the claimant filed a motion with a Russian state court to set aside the award.
The Employer argued that the award was contrary to public policy because the Employer is 99.5% funded by the Leningrad Region, which means that the “unjust” dismissal of the claim against the Contractor by the arbitral tribunal will lead to a gap in the Leningrad Region’s budget, including underfunding of the region’s social programmes. The Employer also referred to the fact that the construction of the hotel was part of the government’s Olympic construction project.