?Russian Supreme Court upholds lower courts’ decisions vacating arbitral award due to lack of arbitration agreement with Kyrgyz Republic

In Case No. А4064831/14, a judge of the Russian Supreme Court considered whether to allow an appeal of the decisions of the Cassation Court and Moscow Commercial Court setting aside an arbitral award rendered in favour of Stans Energy against Kyrgystan.

Dmitry Vlasov (Associate), KK&P

Speedread
A judge of the Russian Supreme Court has recently refused another attempt by Stans Energy Corporation (a Canadian company) to
reinstate an arbitral award against Kyrgyzstan issued in its favour by a tribunal acting under the auspices of the Moscow Chamber of
Commerce and Industry (MCCI). Stan’s appeal was denied the possibility of being referred to the Supreme Court for review. As such,
this likely marks the end of the appeal process in respect of the decisions of the Moscow Commercial Court and Cassation Court setting
aside the MCCI award (Case No. А4064831/14).

Facts
In May 2015, the Moscow Commercial Court set aside the MCCI award rendered in the proceedings between Stans and Kutisay Mining LLC (Stans’ subsidiary in Kyrgyzstan) (investors) and the Kyrgyz Republic. The Moscow Commercial Court found that the tribunal lacked jurisdiction over the dispute as there was no valid arbitration agreement (see Legal update, Moscow Commercial Court sets aside arbitral award and provides interpretation of Article 11 of Moscow Convention (www.practicallaw.com/76164529).

On appeal, the Cassation Court (Commercial Court of the Moscow region) agreed with the reasoning of the lower court finding no violation of any provisions of substantive or procedural law (see Legal update, Stans Energy and Kutisay unsuccessfully challenge Commercial Court of Moscow decision (www.practicallaw.com/16180909).

The Cassation Court held that the lower court was right to conclude that neither Article 11 of the 1997 Moscow Convention nor the 2003 Kyrgyz Law “On Investments in the Kyrgyz Republic” provide a legal basis for the MCCI tribunal’s jurisdiction, as there was no arbitration agreement between the parties. The Cassation Court also referred to the principle of sovereign immunity of the state when analysing whether Kyrgyzstan waived its immunity to allow for a dispute to be resolved by arbitration under the auspices of the MCCI and found that it did not.

Decision
Stans applied to the Supreme Court to appeal the above decisions. The Supreme Court Judge N. Pavlova who reviewed Stans’ application did not find any grounds that would allow for the appeal to be heard by the Chamber for Economic Disputes of the Supreme Court. The Supreme Court Judge held that the lower courts were right to conclude that the MCCI tribunal lacked jurisdiction to resolve the dispute on the basis that there was no arbitration agreement providing for disputes between the parties to be resolved under the MCCI Rules. Judge N. Pavlova noted that as the Republic did not give its consent to resolve the dispute by an MCCI arbitration, the lower courts were right to find that the award was rendered in breach of the sovereign immunity principle, which is a fundamental principle of Russian law. Further, the courts were correct in holding that international law requires that a state expressly waive its immunity and expressly consent to a dispute being resolved in a state court or by means of alternative dispute resolution. Any consent must be expressed clearly, precisely and unambiguously. On this basis, the Supreme Court Judge found no material violations of substantive or procedural law by the lower courts and therefore refused to refer Stans’ appeal to the Supreme Court for review.

Comment
With this decision, the Supreme Court has brought to an end this particular dispute under the MCCI Rules between Stans and the Kyrgyz
Republic. However, it is understood that in May 2015 Stans Energy brought fresh arbitral proceedings against Kyrgystan under the
UNCITRAL Rules and is continuing with the recognition and enforcement proceedings before the Ontario Court of Justice, so this may
not represent complete defeat for Stans.

Case: No. А4064831/14 (Russian Supreme Court).

This article has previously been published by Practical Law Arbitration on 27 Jan 2016.