Russian vs International Arbitration

For a contract with a Russian counterparty, the parties can send disputes to a Russian arbitration institution or to a foreign one such as the ICC, LCIA, SIAC or HKIAC. Russian institutions are cheaper and their awards are enforced inside Russia with fewer obstacles. Foreign institutions offer familiar rules and neutral venues, but since 2020 Russian courts may refuse to let a sanctioned party be bound by them. The right choice depends on where the assets are and whether sanctions touch either side.

Attorney Elena Petrova advises on arbitration clauses and on enforcing or resisting awards in Russian courts.

Russian and Foreign Institutions

Russia reformed its arbitration law in 2016. Since then a permanent arbitration institution needs government permission to administer disputes. The best known domestic bodies are the International Commercial Arbitration Court at the Chamber of Commerce and Industry and the Russian Arbitration Center.

Foreign institutions can also obtain this status, and a few have done so. Ad hoc arbitration still exists, but Russian law limits the disputes it may hear, and corporate disputes need an administering institution.

Comparing the Main Parameters

Cost Drivers Beyond the Filing Fee

Institutional fees are only part of the bill. In London, Paris or Singapore the parties also pay arbitrators at hourly rates, hearing rooms, translation of Russian documents and travel. Foreign counsel rates are usually far above Russian ones.

A domestic case uses documents in their original language and Russian procedural habits. Evidence production is narrower, which also reduces the budget.

Enforcing the Award

Russia is party to the 1958 New York Convention. A foreign award is recognised through the arbitrazh court at the debtor's location or the place of its assets. Grounds for refusal are narrow on paper, but public policy is interpreted broadly in practice.

A Russian award against a debtor with assets only in Russia is the most straightforward case. If assets sit abroad, a Russian award must itself be recognised in that country, and some courts there now hesitate.

Sanctions and the Current Climate

In 2020 the Arbitrazh Procedure Code gained rules giving Russian courts exclusive jurisdiction over disputes involving sanctioned persons. Such a party may start a case in Russia despite a foreign arbitration clause. The court may also issue an anti-suit injunction and award a penalty against a party that continues abroad.

Western banks, arbitrators and experts also face their own compliance limits. Payment of fees and of the award itself can become blocked.

Wording of the Arbitration Clause

A vague clause creates a dispute about the forum before the real dispute begins. The clause should name the institution exactly, the seat, the language and the number of arbitrators. Model clauses published by the institutions are a safe starting point.

Russian courts also check that the institution named has permission to administer cases in Russia. A clause pointing to a body without that status may be declared unenforceable.

Choosing the Forum for a New Contract

Petrova looks at four questions before drafting a clause: where each party holds assets; whether either party or its owners are under sanctions; which law governs the contract; and how large the likely claims are.

For a small contract with a purely Russian asset base, a domestic institution is usually sensible. For a large cross-border deal with assets in several countries, a split or a neutral seat in Asia or the Middle East may work better. Existing clauses should be reviewed now, not when a dispute has already started.

The main channel of communication with the attorney is email: attorneypetrova1@gmail.com.