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Contents of issue 1/2006

Article by Karabelnikov B.R.

Public Policy Exception in the Modern Practice of Russian and Foreign Courts.

Article compares Russian and Western practice of application of the public policy exception in cases connected with enforcement and annulment of international arbitral awards. The author analyzes the most recent precedents of Russian state courts in this area and discusses positive and negative trends in approach of Russian judges.

Article by Asoskov A.V.

Practice of the Presidium of the High Arbitrage Court of the Russian Federation: An example of a reasoned use of the public policy exception.

In issue 3 of our journal for 2005 we commented on order No. 3351/04 of the Presidium of the High Arbitrage Court dated 26 October 2004. In this issue we provide examples of actions by the lower courts in connection with this order. The main conclusion of the Presidium of the High Arbitrage Court is that the use of sham evidence by the claimant during an arbitration process provided grounds for the use of the public policy exception. This conclusion is in line with the modern approach, which is recognised in court practice and doctrines of most developed countries in the world. The author also analyses the differences in material law and procedural approaches to public policy.

Article by Loboda A.E. and Loboda U.V.

The arbitrability of disputes and recognition of arbitration decisions in the field of international transportation of cargo by sea

An article by these Russian authors, which provides an analysis of western practice in the area of disputes concerning transportation of cargo by sea in respect of the possibility of resolving such disputes by arbitration.

Article by Richard H. Kreindler

Approaches to the application of transnational public policy by arbitrators

By reference to which body or bodies of law an arbitrator purport to consider public policy? What is the distinction between public policy respecting the enforceability of the contract, on one hand, and public policy respecting the enforceability of the arbitral award, on the other hand? To what extent the public policy under the law of country being closely connected with the contract, should be followed by the tribunal deciding the dispute under different substantive and procedural law? All these questions are addressed by this article, which provides a translation of an article published in The Journal of World Investment Vo. 4 No. 2 (April 2003).

Article by O.M. Malhotra

Public Policy in India

In this article the Indian author justifies the decision of the High Court of India taken in 2003 which creates a precedent where reference to public policy is justified on the grounds of obvious mistakes which were found on the surface of the arbitration award and which were allowed to be there. This article provides a translation of an article published in The Journal of the Chartered Institute of Arbitrators Volume 71 No. 1 (February 2005).

Article by Michael Hwang and Amy Lay

Do egregious errors amount to a breach of public policy?

The article by these Singapore lawyers analyses a substantial amount of material from a geographical as well as from a factual point of view. The position of the authors, who consider that references to public policy are nonetheless acceptable in situations where an arbitration tribunal makes a clear and unbearable mistake as far as a court is concerned, is illustrated by a large number of examples. Characteristically, the majority of examples are "pro-arbitration" i.e. more favourable to arbitration, as out of the numerous cases studied by them there are only six examples of successful challenges to an arbitration award based on the public policy exception granted by courts within jurisdictions party to the New York Convention and the UNCITRAL Model Law. Apart from the cases taken from the English courts and the courts of the British Commonwealth, which rely on the Arbitration Act 1950 and laws which flow from it, in all other cases analysed in the article (and there is a significant amount of them) the courts either leave the challenged arbitration awards without setting them aside or enforce them. This article has been extended by Mr Hwang from the version of the article published by him with Miss Lay in The Journal of the Chartered Institute of Arbitrators Volume 71 No. 1 (February 2005).

Article by Harry Arkin and Jonathan Franck

The emasculation of enforcement under the New York Convention in the USA?

Amongst international lawyers who are often and not without reason criticizing the Russian court system it has become somewhat of a rule to use the support provided to international arbitration by the courts in the USA as a positive example. Nevertheless, the US courts also have similar problems. Furthermore, in addition to the problems in respect of the use of the procedural doctrine of forum non conveniens already described by us in issue 2, 2004, during recent times there have been other examples of refusal of enforcement of foreign arbitration awards within the framework of the New York Convention, this time with reference to the constitutional principle of due process and reliance on the public policy exception. For the sake of fairness, we will point out that discussions in all of these cases were not about the protection by American courts of local companies but about the attempt of the overloaded American court systems to avoid considering cases which are clearly not related to business in the US. Nonetheless, the authors persuasively criticize amongst other things this "refusal" approach, which, however, is not practised by all American courts at present. The authors suggest specific wording for inclusion into contracts, which in their opinion would help to ensure enforcement of foreign arbitration awards, made following disputes arising from such contracts. This article is a translation of an article published in The Journal of the Chartered Institute of Arbitrators Volume 71 No. 1 (February 2005).

Article by Hans van Houtte

The Vienna Sales Convention in ICC arbitration practic.

The article summarises the decisions in respect of questions of applicability of the Vienna Convention on International Sale and Purchase of Goods made within a framework of the arbitration rules of the ICC. These decisions are not well known to the majority of Russian specialists since most of them never get translated into Russian. The conclusions reached by the ICC arbitrators in relation to the use of the Vienna Convention in most agree with the conclusions of the ICAC arbitrators, however, there are some rather interesting differences. There are also questions, arising out of the practice of the ICC, which have not yet been summarised in publications, dealing with the practice of Russian arbitrations. This article is a translation of an article published in the ICC International Court of Arbitration Bulletin Volume 11/No.2 Fall 2000.

The order of Presidium of the High Arbitrage Court of the Russian Federation dated 11 May 2005 No. 207/04

In this decision the Presidium clearly points out that the non-participation in the arbitration proceedings by a respondent who had received proper notice about proceedings carries with it the loss of the respondent's right to challenge what he perceives to be an incorrect interpretation of the arbitration agreement by the tribunal. Accordingly, the Presidium set aside the decisions of the lower courts which avoided arbitration awards on the basis of procedural breaches. However, the part of the award where the tribunal awarded that the claimant's claims are to be satisfied by the realisation of the respondent's real property by way of public auction remained void. This was because the carrying out of public auctions is not a question which can be decided by an international arbitrator, the Presidium decided that the decision in this respect is outside the scope of an arbitration dispute and voided the arbitration award in this part with reference to Part II of Article 34 of the Law of the Russian Federation on International Commercial Arbitration.

Decision of the Appeal Court of Paris dated 31 May 2001 The Cassation Court of France decision number 539 dated 13 March 2004 in the matter of Unicode v Ural Caly commentary by D. Pellew.

This case is interesting for two reasons. First, it clearly illustrates the particularly positive approach of the French legal system to international arbitration. Second, it provides a rare example where an arbitration award is enforced by a Russian company against its western partner in a joint venture. Usually everything happens the other way around.

The decision of the Appeal Court of Western Sweden in the case T4366-02 dated 29 December 2003.

This decision of the Swedish court on a claim of invalidity of an arbitration award given in Sweden is related to the analysis of the use of the imperative norms of the EU laws by an arbitrator. After 1999, when the European Court of Justice on the application of the High Court of the Netherlands decided that the national courts of EU countries were obliged to set aside international arbitration awards, which were given without any reference to the fundamental norms of the laws of the EU on competition and activities on the goods markets on the basis of public policy and at the request of qualified persons, many specialists negatively reacted to the ability itself of an international arbitration tribunal to decide any disputes which theoretically could end up being connected with such laws. This arbitration award, which was not set aside in Sweden and was enforced in France shows that the sceptics were too quick with their decisions and that within the narrow interpretation of the term of public policy accepted in Europe the decision in the case of Eco Swiss v Benetton (Case - 126/97, [1999]) Eco Swiss ECR I-3055) cannot be considered as an implied threat for any arbitration decision concerning EU law. Published in the Stockholm Arbitration Report 2004:2

ICAC decision dated 15 March 2005 in matter number 197/2003

In this rather unusual case the subject matter in dispute was a claim for compensation against the purchaser equivalent to the amount of inflation of the consideration in Russia during the period of the works. Usually calculations in foreign economic deals are made in hard currency and the question of indexing inflation does not arise. However, in this case the calculations were made in roubles. The tribunal had to establish not only the applicable index of inflation but also to find out whether the obligations of the purchaser to compensate the inflation should be applied to the whole value of the works or only to part of it which was described in a separate additional agreement. The analysis carried out by the tribunal may well become a precedent for the resolution of similar disputes both in respect of the issues of interpretation of contracts and on the questions connected to compensation for losses due to inflation. The award also sets out the legal fees which were incurred on resolving the dispute. It is interesting that even though the claim was partially satisfied the cost of defending claim was paid to the defendant through his representatives.

ICAC decision dated 24 March 2005 Case No. 19/2004

In this case members of the tribunal came across a rather complicated set of circumstances. The claimant in the case was a company whose rights under a loan agreement were transferred to it by way of assignment. The respondent without challenging the receipt from the assignor of the amount in question, which he did not return, made numerous procedural claims challenging the rights of the claimant to apply to ICAC. At the same time the respondent also applied to the civil court in Russia with the aim of finding invalid the assignment of the rights and the main loan agreement. Finally, the assignor who concluded the initial loan agreement with the respondent became involved in a separate arbitration dispute with the claimant as a result of which the respondent tried to combine the two separate arbitrations.

In order to understand this complicated factual matrix and procedural claims ICAC carried out three oral hearings on the matter. In the end the members of the tribunal agreed that the attempts by the respondent to prolong the resolution of the dispute was a misuse of his rights and agreed to grant the payment of the full amount that was claimed by the claimant under the loan agreement.

Nevertheless, as it often happens in foreign arbitrations, after the conclusion of the last oral hearing the parties were asked to exchange schedules of the costs that they had incurred to date. The legal expenses of the claimant were found to be excessive and even though the award was completely in his favour the greater part of his legal expenses remained without repayment by the other side. The reasoning of the tribunal on this issue deserves particular attention by lawyers who carry out arbitrations in Russia.




Лучшие юридические департаменты России - 2008

Третейское разбирательство в Российской Федерации

Третейские суды и гражданский процесс