Arbitration clause valid despite imprecise wording, claimant’s lack of funds and claims of bias regarding arbitral institution (Ninth Appellate Commercial Court, Moscow)

Maxim Kulkov (Managing Partner) and Olga Kokoz (Associate), KK&P

The Ninth Appellate Commercial Court in Moscow has upheld a lower court’s decision to terminate court proceedings due to the existence of a valid and enforceable arbitration clause (without prejudice to the claimant’s right to go back to court on the merits of its decision to terminate). The clause referred parties to arbitration in accordance with the ICC Arbitration Rules by an “Arbitration board consisting of 3 members”.

The appellate court rejected the claimant’s arguments that the clause lacked an agreement on the arbitration authority to administer the dispute due to the wording “Arbitration board”. The court held that “Arbitration board” was synonymous to “arbitral tribunal” and did not represent any obstacle to the validity and enforceability of the arbitration clause. The court highlighted that Russian law on International Commercial Arbitration provides for specific construction rules favouring arbitration clauses and that such rules prevail over general construction rules.

The appellate court equally dismissed the claimant’s position regarding the unenforceability of the arbitration clause due to the claimant’s lack of funds, which have resulted in supervision and insolvency proceedings. The court held that this did not suffice as proof of objective impossibility to finance arbitration proceedings, nor is the claimant deprived of a right to assign its claim to a solvent company for value. This position corresponds to the Supreme Court Ruling dated 12 July 2017 (see No. 307-ЭС17-640).

Finally, the court declined the claimant’s allegation that the ICC International Court of Arbitration is a biased institution because the respondent’s representative is its vice-president, as well as a president of ICC National Committee in Russia and ICC Commission on Arbitration. The court declined this argument stating that the impartiality requirement is only applicable to a particular arbitrator, considering their personal position regarding the case, as well as their connections to a party. Therefore, the claimant only has a right to challenge a potentially biased arbitrator.

This conclusion represents a positive trend in Russian caselaw, as opposed to the Supreme Court’s 2017 decision in Case No. 2-3969/2016, where an arbitration award was set aside because the party’s representative was a recommended arbitrator of an arbitral institution (see Legal update, Russian Supreme Court confirms lack of impartiality and independence where counsel on institutional list of arbitrators).

Case: Case No. A40-228417/18 (12 April 2019).

You can find the link to the full text of the article here (reproduced from Practical Law with the permission of the publishers)