The KK&P team convinced the ICAC to apply the lis pendens principle and suspend proceedings until a parallel dispute is considered in Chinese arbitration

Russian and Chinese companies concluded a supply and distribution agreement that contained an arbitration clause in favour of the arbitration court at the chamber of commerce and industry or its equivalent at the location of the claimant.

The Russian company committed a number of significant violations of the contract, and our client, a Chinese company, terminated the contract and appealed to an arbitration court in China with a claim for recognition of the termination as lawful, and debt collection for the delivered goods and penalties.

In response, the Russian company appealed to the ICAC at the Chamber of Commerce and Industry of the Russian Federation with a claim against the client to declare the termination of the contract illegal, and to recover damages for allegedly substandard goods, overpaid funds, penalties, etc.

The primary task of the team, which included Managing Partner Maxim Kulkov, Senior Associate Nikita Chernyshenko, Associate Nikita Sattarov, and paralegals Ekaterina Belashova and Valeriya Lozovaya, was to prevent the dispute from being considered on its merits in the ICAC until the end of the proceedings in the Chinese arbitration.

To achieve this goal, the team had to convince the ICAC arbitrators of the need to apply the lis pendens principle, aimed at preventing parallel proceedings by different courts.

This task was complicated by the following factors:

1) Although they overlapped, the subjects of the claims in both cases did not completely coincide;

2) We found no examples in public ICAC caselaw of the ICAC applying the lis pendens principle;

3) The opponents referred to the fact that the lis pendens principle is not fixed in either Russian law or ICAC rules.

Despite this, the team convinced the tribunal to apply the lis pendens principle and suspend the ICAC process until the end of the arbitration in China.

Moreover, by suspending the proceedings, the ICAC de facto acknowledged that it would focus on the arbitration award issued in China, which would resolve key relationship issues between the parties.

Therefore, the main goal of the client, i.e., to prevent the resolution of the most important issues of the ICAC dispute, has been successfully achieved.