Substantive Public Policy Concept in Enforcement of Foreign Arbitral Awards in Russia Author

88 Pages·2017·1.27 MB·English

by  Shtromberg, Alexandra

Substantive Public Policy Concept in Enforcement of Foreign Arbitral Awards in Russia

Author: Shtromberg, Alexandra
014593781
Supervisor: Ville Pönkä
Degree: International Master’s Degree Programme in International Business Law
Date: 18.04.2017
Tiedekunta/Osasto - Fakultet/Sektion – Faculty Laitos - Institution – Department

Faculty of Law
Tekijä - Författare – Author

Alexandra Shtromberg
Työn nimi - Arbetets titel – Title

Substantive Public Policy Concept in Enforcement of Foreign Arbitral Awards in Russia
Oppiaine - Läroämne – Subject

International arbitration
Työn laji - Arbetets art – Level Aika - Datum – Month and year Sivumäärä - Sidoantal – Number of pages
Master‘s 18.04.2017 70
Tiivistelmä - Referat – Abstract
Predictability in the enforcement of foreign arbitral awards is crucially important both for the parties to a certain dispute and the state
where enforcement is sought. Being arbitration-friendly means increasing of investment attractiveness. For parties, it means that
their contractual will regarding arbitration is respected and party autonomy is in no way breached.
In practice, the Russian Federation is still an unknown playing field for those parties who aim to enforce foreign arbitral awards and
file respective claims with the Russian commercial courts. The Russian Federation is the party to the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards, meaning that enforcement courts rely on the narrow scope of grounds to refuse
recognition and enforcement of foreign arbitral awards. In practice, Russian commercial courts tend to interpret provisions of the
Convention incoherently. One of such examples is the wide interpretation of public policy exception that allows to refuse recognition
and enforcement of foreign arbitral awards in cases when such would be contrary to the public policy of that country.
The thesis explores the risks that parties face when the interested party or the court itself brings public policy to the light. It analyses
the modern concept of public policy under Russian law and court practice and examines the enforcement trends regarding public
policy exception.
Avainsanat – Nyckelord – Keywords

Public policy, international public policy, international commercial arbitration, recognition, enforcement, Russian law, New York
Convention
Säilytyspaikka – Förvaringställe – Where deposited

University of Helsinki, Faculty of Law
Muita tietoja – Övriga uppgifter – Additional information
TABLE OF CONTENTS

SOURCES ................................................................................................................................ iii
International materials ............................................................................................................... iii
Constitutions, legal codes & legislation .................................................................................... iii
Cases cited ................................................................................................................................. iv
Scholarly material ....................................................................................................................... v
ABBREVIATIONS ................................................................................................................ xvi
1. INTRODUCTION ............................................................................................................... 1
1.1.Role of recognition and enforcement of foreign arbitral awards and current situation in the
Russian Federation ................................................................................................................ 1
1.2.Research subject and research questions .............................................................................. 3
1.3.Structure of the research ........................................................................................................ 4
2. PUBLIC POLICY IN INTERNATIONAL COMMERCIAL ARBITRATION ........... 4
2.1.General principles of recognising and enforcing foreign arbitral awards in the international
landscape ............................................................................................................................... 4
2.2.Definition of public policy .................................................................................................... 6
2.3.International regulatory framework of public policy ............................................................ 9
2.4.Applying public policy under the New York Convention .................................................. 11
2.5.Role and impact of public policy ........................................................................................ 14
2.5.1.Impact on legal systems ............................................................................................. 14
2.5.2.Stakeholder analysis .................................................................................................. 15
2.5.3.Impact on courts ......................................................................................................... 15
2.5.4.Impact on parties ........................................................................................................ 16
2.5.5.Impact on arbitral tribunals ....................................................................................... 17
2.6.Classifications of public policy ........................................................................................... 17
2.7.Public policy versus other grounds ..................................................................................... 22
2.8.Conclusions: roadmap to analyse national public policy .................................................... 24
3. PUBLIC POLICY IN RUSSIA ......................................................................................... 25
3.1.Introduction ......................................................................................................................... 25
3.2.Emergence of public policy in Russian legal theory ........................................................... 25
3.3.Mentality of stakeholders in enforcement of foreign arbitral awards ................................. 27
3.3.1.Mentality of the enforcement courts .......................................................................... 28
3.3.2.Mentality of the parties to the dispute ....................................................................... 29
3.4.Current framework of public policy in Russia .................................................................... 30
3.4.1.Legislation ................................................................................................................. 30
3.4.2.Role of the Supreme Commercial Court (2002-2014) in forming concept of
substantive public policy .................................................................................................... 32
i
4. SUBSTANTIVE PUBLIC POLICY IN PRACTICE ..................................................... 34
4.1.Introduction ......................................................................................................................... 34
4.2.Procedure of recognition and enforcement of foreign arbitral awards under Russian law . 35
4.3.Applicable principles of Russian law ................................................................................. 39
4.4.Case studies: introductory notes ......................................................................................... 44
4.5.Illegality of underlying transactions ................................................................................... 46
4.6.Proportionality of liability .................................................................................................. 53
4.7.Violation of branch legislation and public policy as a result of enforcement .................... 59
4.7.1.Currency control ........................................................................................................ 59
4.7.2.Bankruptcy law .......................................................................................................... 60
4.7.3.Principles of procedural law ...................................................................................... 61
4.7.4. Property law .............................................................................................................. 61
4.8.Scope and capacity of parties involved ............................................................................... 62
4.9.Mala fide of parties referring to violation of substantive public policy ............................. 66
4.10.Conclusions ....................................................................................................................... 68
5. CONCLUSIONS ................................................................................................................ 68

ii
SOURCES

International materials
International Conventions & Treaties

United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards,
June 10, 1958 (the New York Convention)
European Convention on International Commercial Arbitration (1961 European Convention)
1965 Convention on the Settlement of Investment Disputes between States and Nationals of
Other States (1965 Washington Convention)
1972 Convention on the settlement by arbitration of civil law disputes resulting from relations
of economic and scientific-technical cooperation (1972 Moscow Convention)
1975 Inter-American Convention on International Commercial Arbitration (Panama
Convention)
1987 Arab Convention on Commercial Arbitration (1987 Amman Convention)

Model Legislation & Guidelines

IBA REPORT Subcommittee on recognition and enforcement of arbitral awards,
Report on the Public Policy Exception in the New York Convention
(International Bar Association, 2015)
ILA REPORT, International law association, comm. on int’l commercial arb.,
ILA Final report on public policy as a bar to enforcement of
RECOMMENDATIONS international arbitral awards (2002).
UNCITRAL Model Law United Nations Commission on International Trade Law Model
Law on International Commercial Arbitration, G.A. Res. 40/72, 40
U.N. G.A.O.R. Supp. (No. 17), U.N. Doc. A/40/17 (June 21,
1985), revised in 2006, G.A. Res. 61/33, U.N. Doc. A/61/33 (Dec.
4, 2006).

Constitutions, legal codes & legislation
Civil Code of the Russian Federation (Гражданский кодекс Российской Федерации)
Civil procedure code of the Russian Federation (Гражданский процессуальный кодекс
Российской Федерации)
Commercial procedural code of the Russian Federation (Арбитражный процессуальный
кодекс Российской Федерации)
Constitution of the Russian Federation (Конституция Российской Федерации)
Federal law of the Russian Federation No. 102-FZ dated 24 July 2002 “On the arbitration courts
in the Russian Federation” (Федеральный закон Российской Федерации от 24.07.2012 №102-
ФЗ «О третейских судах Российской Федерации»)
Federal law of the Russian Federation No. 14-FZ dated 8 February 1998 “On the limited liability
companies” (Федеральный закон Российской Федерации от 08.02.1998 №14-ФЗ «Об
обществах с ограниченной ответственностью»)
iii
Federal Law of the Russian Federation No. 208-FZ dated 26 December 1995 “On the joint-stock
companies” (Федеральный закон Российской Федерации от 26.12.1995 №208-ФЗ «Об
акционерных обществах»)
Federal law of the Russian Federation No. 382-FZ dated 29 December 2015 “On arbitration
(arbitral proceedings) in the Russian Federation” (Федеральный закон Российской Федерации
от 29.12.2015 №382-ФЗ «Об арбитраже (третейском разбирательстве) в Российской
Федерации»)
Federal Law of the Russian Federation No.127-FZ dated 26 October 2002 “On insolvency
(bankruptcy)” (Федеральный закон от 26.10.2002 №127-ФЗ «О несостоятельности
(банкротстве)»)
Law of the Russian Federation No. 5338-1 dated 7 July 1993 “On international commercial
arbitration” (Закон Российской Федерации от 07.07.1993 №5338-1 «О международном
коммерческом арбитраже»)
Supreme Soviet Decree No. 9131-XI of the USSR dated 21 June 1988 “On Recognition and
Enforcement in the USSR of the Judgments of Foreign Courts and Arbitrations” (Указа
Президиума Верховного Совета РСФСР от 21.06.1988 № 9131-XI «О признании и
исполнении в СССР решений иностранных судов и арбитражей»)

Cases cited
Russian cases

Adecco AG v OOO Orglot
Apaucuck Point Environmental Limited v OAO Rosgazifikatsiya
Baltiysky Zavod v Stena RoRo
Ciments Francais v OJSC Holding Company Sibirsky Tsement
Connyland AG v OOO Mir-disain
Consulting, Management & Contracting Co. v Sylovye Mashiny
Energo-Management Anstalt vs Proizvodtsvennoye obyedineniye Teplovodokanal
Euro-Asian Investment Corporation v OAO Primorkhlebproduct (PMK)
Falkland Investments Ltd. v VBTRF OAO
Federalevel Holdings Ltd. v Ishchuk
Fringilla Co. Ltd. v OOO Rybprominvest
Gartic Limited v OOO Obyedinennaya sudostroitelnaya kompaniya
Hipp GmbH & Co. Export KG v OOO Sivma Detskoe Pitanie
ING Bank N.V., London Branch v OJSC Holding Company Sibirsky Tsement
International Finance B.V. v OAO AB Inkombank
Joy-Lud Distributors International Inc. v JSC Moscow Oi Refinery
Kruken GmbH v Avtodor-Agro
Lugana Handelsgesellschaft GmbH v OAO Ryazansky zavod metallokeramicheskikh priborov
NANA offshore v ZAO Trast-oil
OAO Bank VTB v OAO Finansovaya lizingovaya kompaniya
Odfjell SE v OJSC Sevmash
Oil & Natural Gas Corporation v OJSC Amur
Omegatech Electronic GmbH v state factory Izmeritel
OOO Remontno-proizodstvennoye obyedineniye v OAO RZD
United World v Krasny Yakor
Sokofl Star Shipping Co. Inc. v Technopromexport
Stena RoRo v Baltiysky Zavod
Traviata Environmental Ltd. v OAO Rosgazifikatsiya
Ukrainian Confectionery Factory A.V.K. v AVK-“Yug”
Yukos Capital S.A.R.L. v OAO Tomskneft
iv
ООО Cable and Wireless SNG Svyaz v ZAO Zebra Telekom

Foreign cases

DST v Rakoil
Mitsubishi Motors Corp. v. Sole Chrysler-Plymouth

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