Before 2016, there were concerns about the effectiveness of arbitration in Russia. Russian companies could sue in any arbitration court abroad and, as a rule, all corporate disputes could be resolved by foreign arbitral tribunals. This situation was not without pitfalls, however, as the resulting decision then had to be approved by a Russian court.
On 1 September 2016, the Russian reform (the “Reform”), including an Arbitration and Associated Law, came into force. The Arbitration Law regulates not only domestic arbitration but also, to a certain extent, international arbitration in Russia. It covers disputes with a foreign element – most often involving at least one non-Russian party, a Russian company with foreign participation or cross-border trade. The Associated Law amended the Arbitration Procedural Code of the Russian Federation (“APC”), the International Commercial Arbitration Act (“ICAL”) and several others. The new amendment to the ICAL may slightly broaden its scope to include “investment disputes” and other new elements. The new Arbitration Act and the amendments to ICAL state that the former applies to international arbitration proceedings within the limits specifically provided for.
With the advent of the Reform, all corporate disputes, such as those that arise after mergers and acquisitions and from share purchase agreements or shareholders agreements in Russian companies, must be settled only in those arbitral tribunals which have been granted by the Ministry of Justice of the Russian Federation the status of a “Permanent Arbitral Institution” (“PAI”). However, the fate of this Reform was initially unpredictable. Up until 2019, PAI status was only held by Russian arbitral institutions.
The prominent arbitration specialist, Gary Born, explained in his lecture “The Winter is Coming” concerns by stating that the Russian Reform of 2016 might be seen as part of a rising worldwide fight against international arbitration. There was considerable criticism regarding the Reform, but the arbitration law was designed to combat negative aspects by introducing PAI status. However, the chief concern in Russia was about whether renowned arbitration institutions would actually apply for a license and whether they would be able to obtain it from the Russian Government and from the Ministry of Justice. Despite criticism and opposition, the Reform was implemented in 2019.
On 25 May 2019, the Hong Kong International Arbitration Centre (HKIAC) was the first foreign arbitration centre to apply for such status and it was approved for listing by the Ministry of Justice. The same year, the HKIAC was followed by the Vienna International Arbitration Centre (VIAC). On 18 May 2021, the Russian Ministry of Justice then granted PAI status to the ICC International Court of Arbitration (ICC) and the Singapore International Arbitration Centre (SIAC).
It is without doubt an opportunity for users of international arbitration in Russia to have access to three of the “five most preferred arbitral institutions” in the world, according to the Queen Mary University of London and White & Case Survey. Obtaining this status allows these arbitral institutions to administer international arbitrations with a place of arbitration in Russia and arising out of certain corporate disputes. Among the most notable and potentially far-reaching changes with implications for international arbitration are the status of foreign institutions conducting proceedings in Russia and the related issue of the status of ad hoc arbitrations; this is in addition to issues of the arbitrability of corporate disputes, which previously remained unresolved and caused a number of problems in practice.
The question remains open, however, as to whether these institutions can oversee disputes arising from shareholders’ agreements in relation to Russian joint ventures, which constitute another large cross-section of disputes after mergers and acquisitions disputes. Confusion is caused by inconsistencies between the provisions of the APC and the Federal Law No. 382-FZ “On Arbitration (Arbitration Proceedings) in the Russian Federation“.
The APC provides that in order for an institution to administer disputes arising from shareholders’ agreements, this institution must adopt special corporate dispute arbitration rules and the arbitration clause in the shareholders’ agreement must be signed by all shareholders, including the Russian joint venture itself.
Even after the 2018 amendments to the Russian Arbitration Act, the conflict between the two laws and the uncertainty as to which law should prevail remained unresolved. In theory, this conflict should not be a problem. Under the rules Lex posterior derogat legi priori and Lex specialis derogat generali when applying the general rules of interpretation of Russian law, the provisions of the Russian Law on Arbitration as a later and more specific law should prevail over the rules of the APC. However, risks could arise if Russian courts eventually resolve this conflict in favour of the APC. If APC requirements prevail for existing arbitrations administered by any PIA (which have not adopted their own special corporate dispute arbitration rules), it could make enforcement of awards in such arbitrations in Russia difficult.
To date, Russian courts have not yet taken a position on this issue. In one case, the court dismissed a claim for alleged lack of jurisdiction because the arbitration clause was neither signed nor extended to the shareholders of a Russian company. However, the decision did not refer to the Russian Arbitration Act, which overrides the requirement of the APC.
In response to a joint request by the VIAC and the HKIAC, the Ministry of Justice of the Russian Federation published clarifications on the application of Russian arbitration law on 10 February 2020. The Ministry of Justice confirmed that the provisions of the Russian arbitration law took precedence over the earlier rules of the APC. The ICC, VIAC, SIAC and HKIAC should thus generally be entitled to consider corporate disputes arising out of shareholders’ agreements, despite the absence of special rules and even if the arbitration clause in the shareholders agreement is only signed by the parties to the shareholders agreement and not by a related Russian company.
Also, a significant portion of disputes arising from mergers and acquisitions and other transactions with Russian parties can now be submitted to the ICC, VIAC, SIAC or HKIAC directly, without the use of so-called waterfall arbitration clauses. If a contract includes a waterfall arbitration clause and mentions these arbitral institutions, they may automatically be entitled to hear disputes arising from the contract.
At the same time, however, the Ministry of Justice of the Russian Federation has indicated that all corporate disputes relating to liability, termination, appointment, election and suspension of a Russian company’s management can only be resolved by a PAI which has adopted its own special corporate rules.
 Russian Federal Law No.409-FZ “On Amendments to Certain Legal Acts of the Russian Federation and on Repeal of Article 6, part 1, item 3 of the Federal Law “On Self-Regulatory Organizations”” in Connection with Adoption of the Federal Law “On Arbitration (Arbitral Proceedings) in the Russian Federation” (2015); Russian Federal Law No.382-FZ “On Arbitration (Arbitral Proceedings) in the Russian Federation” (2015)
 The Maritime Arbitration Commission at the Chamber of Commerce and Industry of the Russian Federation; The Arbitration Centre at the Russian Union of Industrialists and Entrepreneurs; The Russian Arbitration Center at Russian Institute of Modern Arbitration
 International Arbitration Survey: Adapting arbitration to a changing world, Queen Mary University of London, White & Case, School of International Arbitration (2021)
 Russian Federal Law No. 531-FZ “On the amendments to the Federal Law on arbitration (arbitration proceedings) in the Russian Federation and the Federal Law on advertising” – rules for creation of arbitration courts (2018)
 Court of Murmansk Region, Case No. А42-574/2020, 5 November 2020