Supreme Commercial Court of Russia on consent award after termination of arbitration proceedings
Practical Law Company
In June 2012, the Supreme Commercial Court of Russia issued a ruling (the full text of which only became available in August 2012) dealing with the competence of arbitrators to issue a consent award after the termination of arbitral proceedings. A party to a purchase agreement commenced arbitration proceedings at a Russian domestic arbitration institution, seeking confirmation of its title to immovable property. The arbitral tribunal issued an award satisfying the claim (Final Award). Subsequently, the parties reached a settlement whereby the title to the property remained with the respondent, who was to pay a certain amount of money to the claimant). The parties requested that the arbitrators record the agreement in the form of a consent award, which was consequently issued. When the respondent failed to pay the sum under the consent award, the claimant applied to the court for an enforcement writ.
The commercial court of first instance dismissed the claim, stating that the arbitral tribunal lacked competence to issue the consent award after issuing the Final Award. The court held that, after the final award is rendered, arbitration proceedings are considered terminated and, therefore, the settlement should have been recorded during the enforcement proceedings in the state court, not by the arbitrators. The court of second appeal (cassation) supported these conclusions.
The Supreme Commercial Court of Russia did not agree with the lower courts' approach. It overturned the judgments and sent the case to the first instance court for reconsideration. In doing so, it stated that Russian arbitration legislation does not prohibit the arbitral tribunal from recording a settlement after the termination of arbitration proceedings. In the opinion of the Supreme Commercial Court judges, if one adopted the approach that arbitrators cannot issue consent awards after the termination of the proceedings, it would mean that parties who reach settlement after the termination of the arbitration proceedings will be forced to initiate unnecessary execution (enforcement) proceedings in the court in order to record their settlement. According to the Supreme Court, such an approach contradicts the principles of procedural economy and efficiency, party autonomy and the amicable settlement of disputes by the parties.
To summarise, the ruling of the Supreme Commercial Court confirmed the competence of the arbitrators to issue a consent award even after the termination of the arbitration proceedings by the final award. However, the court did not dwell on the possible consequence of such a confirmation. Thus, arbitrators are considered to have the power to annul their own final awards and substitute them with consent awards.
It should be noted that one of the Supreme Commercial court judges did not agree with the majority and issued a dissenting opinion, arguing that the applicable legislation should be interpreted to read that the mandate of the arbitrators is terminated after the final award. Thereafter, that arbitrator's authority could be "revived" only in certain specific cases identified in the legislation, among which the need to confirm the settlement is not listed. Thus, in the dissenting judge's opinion, arbitrators do not have authority to issue consent awards, thereby reconsidering their own final awards.
Although this ruling of the Supreme Court was not unanimous, and its reasoning may not be very persuasive, it does bring some certainty to court practice on this point, at least regarding domestic arbitration, which was not consistent previously.
If you would like to receive our legal alerts and updates highlighting current legal issues relevant to your areas of interest and providing expert commentary by our lawyers, please click on "Sign Up" and fill out the form.