Russian Supreme Court rules on explicit consent to arbitration agreement and applicability of estoppel theory – update for Practical Law by Maxim Kulkov and Sergey Lysov

The Judicial Chamber of Economic Disputes of the Russian Supreme Court has ruled that a company is not bound by an arbitration agreement which was concluded on its behalf by a person acting on a general power of attorney and having no special authority to do so.

A state enterprise Izhvodokanal (claimant) requested the Commercial Court of Udmurtia Region to enforce an arbitral award issued against Expert Management Company (respondent). However, the respondent challenged the award claiming that the arbitration agreement had been signed by a person that was not authorised to conclude it.

In considering the respondent’s challenge, the Supreme Court underlined that consent to arbitration was the cornerstone principle on which the Russian arbitration system was based, and that consent should be explicit. Further, a person signing a contract containing an arbitration clause should be specifically authorised to enter into the arbitration agreement. Therefore, according to the Supreme Court, a power of attorney should contain a special power to sign an arbitration agreement.

Notably, the Supreme Court’s decision contradicts prior rulings of the highest courts in Russia. In Case N 12311/2010 of 12 April 2011, the Resolution of the Presidium of the Supreme Commercial Court stated that a general power of attorney, authorising the conclusion of an entire agreement, also covered the power to sign an arbitration agreement. The Supreme Court’s disregard of previous case law will likely cause confusion for Russian arbitration practitioners and academics. This approach could lead to a surge in challenges to existing arbitration agreements because specific authority to conclude them is rarely included in powers of attorney.

However, on a positive note, the Supreme Court clarified that, in accordance with the estoppel principle, the respondent may not contest the existence of an arbitration agreement if it has been actively involved in an arbitration and fails to raise the argument concerning the existence of the arbitration agreement until the enforcement stage. Such an approach would be deemed an abuse of right and the argument would be rejected.

Case: Izhvodokanal v Expert Management Company, Case No. A71-15240/2014 (Russian Supreme Court).

This article has been published by Practical Law Arbitration on 20 of April 2016.