Erroneous application of conventions by state court in recognition of arbitral award (Russian Commercial Court)

In Case: № А084781/2014, the Commercial Court of the Central District of Russia has upheld a ruling denying recognition and enforcement of an arbitral award.

Maxim Kulkov (Managing Partner), Elena Zaltser (Associate), KK&P

A dispute arose between a Ukrainian claimant and a Russian domiciled respondent and arbitration was commenced with the International Commercial Arbitration Court under the Ukrainian Chamber of Commerce (ICAC) with a Ukrainian seat. In the arbitration proceedings, the ICAC sent a notice of arbitration to the respondent by a DHL courier. However, the respondent did not attend the hearing and an arbitral award was issued in favour of the claimant.

The claimant applied to the Commercial Court of Belgorod Region (Russia) for recognition and enforcement of the award. The court held that the award could not be recognised as the respondent had not been duly notified of the arbitration. The Commercial Court of the Central District of Russia upheld this ruling. In their reasoning, instead of applying the New York Convention (www.practicallaw.com/62055196), the courts applied two conventions: namely, the 1992 Kiev Treaty on Settlement of Commercial Disputes and the 1993 Minsk Convention on Legal Aid and Legal Relations in Civil, Family and Criminal Cases (Conventions). The Conventions, which have been made between various CIS countries, including Russia and Ukraine, provide for service on a defendant to be made through the state court at the domicile of the defendant. Accordingly, in this case the Russian court rather than ICAC should have served the proceedings on the respondent. Therefore, the Russian courts found that the method of service used was inconsistent with the Conventions and declined the application for recognition.

This case goes against established practice whereby an arbitral institution may notify a respondent of arbitration proceedings directly. Where parties are from signatory countries to these Conventions, arbitral institutions should consider the notification procedure specified by the Conventions in case the defendant does not appear at hearings.

Case: № А084781/2014 (www.practicallaw.com/D0318741) (Commercial Court of the Central District of Russia).

This article has previously been published by Practical Law Arbitration on 22 April 2015.