Commencement of arbitration interrupts the limitation period even if tribunal later declines jurisdiction.

03.11.2010

PRACTICAL LAW COMPANY.

A recent ruling of the Federal Arbitrazh Court of the Ural circuit held that the commencement of arbitration proceedings interrupts the limitation period even if the tribunal later declines jurisdiction.

The claimant, Feyline - Comercio International E Servicos Lda (a Portuguese company), brought before the Arbitration Court of Bashkortostan (first instance court) a monetary claim against the respondent, Novo-Ufimsky Petroleum Refinery (a Russian company).

Although the claim was filed after the expiration of the three-year limitation period, the claimant argued that it had not missed the deadline for filing because it had previously filed its claim before the International Commercial Arbitration Court under the Russian Federation Chamber of Commerce within the provided limitation period. However, the tribunal later declined its jurisdiction to hear the case, so the claimant had to apply to a state court.

The first instance court stated that because the arbitral tribunal declined its jurisdiction, the period of limitation was not interrupted and therefore the claim to the state court was filed after the expiration of the limitation period.

However, the Federal Court took another point of view, overturning the decision of the first instance court, and ruling that if the initial request for arbitration was filed within the limitation period, this is sufficient to interrupt the limitation period even if the tribunal later terminated the case due to lack of jurisdiction.

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