Practical Law publishes KK&P’s commentary by Maxim Kulkov and Sergey Lysov to The Russian Supreme Court’s approach on repeated consideration by tribunal of dispute arising from same contract

Repeated consideration by tribunal of dispute arising from same contract contradicts Russian public policy

Maxim Kulkov (Managing Partner) and Sergey Lysov (Associate), KK&P

The Russian Supreme Court has ruled that recognition and enforcement of an award rendered in a dispute arising from a contract that was previously subject to arbitration proceedings between the same parties constituted a violation of Russian public policy.

The dispute between the Russian company AO Ryazan Plant of Metal-Ceramic Equipment (RPMCE) and German company Lugana Handelsgesellschaft mbH (Lugana) arose from a Distribution Agreement concluded in 2001 (Agreement). The Agreement contained an arbitration clause providing for arbitration under the rules of the German Institution of Arbitration (DIS).

Due to a violation of the Agreement by RPMCE, Lugana initiated arbitration proceedings in 2013 seeking compensation for its losses. After the tribunal satisfied the claim in 2015, Lugana applied to a Russian state court to recognise and enforce the award. However, during the enforcement procedure it transpired that a dispute arising from the same Agreement between the same parties had already been resolved by the DIS in an award in 2005, which was later recognised and enforced by the Russian courts.

RPMCE argued that a repeated consideration of the same dispute violated the principle of finality of the award (res judicata) and contradicted public policy. RPMCE had raised the same arguments during the arbitration proceedings. However, the tribunal specifically stated in its award that although the dispute arose from the same Agreement, it now considered different claims to those raised in 2005.

The first instance court satisfied Lugano’s application on recognition and enforcement. On appeal, the Russian Supreme Court disagreed with the lower courts’ approach and set aside the enforcement order and recognition of the award.
While the decision is silent on the differences between the 2005 and 2015 claims, it appears that several claims brought in 2005 were not considered by the tribunal at that time and therefore Lugana brought those claims again in a second arbitration. The Supreme Court found this to be a violation of the principle of finality of the award (res judicata) which, in the opinion of the Supreme Court, is an integral part of Russian public policy.

Case: № А54-3603/2016 (310-ЭС17-5655) (Russian Supreme Court).

You may find the link to the original text here.

Reproduced from Practical Law with the permission of the publishers.

Authors’ profiles: Maxim Kulkov, Sergey Lysov