Russia's Constitutional Court supports arbitrability of consumer disputes

06.12.2012

Practical Law Company

On 4 October 2012, the Constitutional Court of the Russian Federation issued a ruling upon consideration of the inquiry questioning constitutionality of certain Russian legislative provisions which allow the arbitration of a wide range of civil disputes and could be interpreted as allowing arbitration of consumer disputes. The Constitutional Court found no violation of the Constitution in such provisions and confirmed arbitrability of consumer disputes in general.

Background

Article 17 of the Law on Protection of Consumers' Rights (Consumer Law) provides a consumer with the right to choose the court for protection of its violated rights (between courts at the location of respondent, the residence of a consumer or the place of inclusion or performance of a contract).

Article 16 of the Consumer Law provides that a contractual term which impairs the rights of consumers, as compared to those provided by law, shall be recognised as invalid.

Article 222 of the Civil Procedure Code stipulates that a dispute should be referred to arbitration if it falls under an arbitration clause.

Article 1(2) of the Law on Arbitration Institutions provides that any civil law dispute can be subject to resolution by arbitration, unless a federal law provides otherwise.

Facts

An individual filed a claim at the civil court of first instance, claiming termination of a preliminary purchase agreement for an apartment. Since the purchase agreement contained an arbitration clause, the respondent applied for the suit to be summarily dismissed on the basis of Article 222 of the Civil Procedure Code.

The claimant objected to the application for summary dismissal, arguing that a dispute involving a consumer can only be considered by the Russian state courts. In support of its argument, the claimant relied on Articles 16 and 17 of the Consumer Law.

The respondent did not agree with the claimant's interpretation of those articles and initiated an inquiry to the Constitutional Court. The claimant questioned the constitutionality of Article 222 of the Civil Procedure Code and Article 1(2) of the Law on Arbitration Institutions, which appear to permit a wide range of civil disputes to be arbitrated.

Decision

The Constitutional Court rejected the application. It considered that arbitration of consumer disputes is not, of itself, contrary to the Constitution. The referral of such disputes to arbitration is not a violation of consumer rights, but rather an alternative venue for their protection.

The Constitutional Court noted that the Consumer Law does not contain limitations on arbitrability of consumer disputes. Therefore, such disputes are arbitrable, in principle. Having said that, the Constitutional Court explained that it is the duty of every state court that is approached with an application for summary dismissal of a case due to the presence of the arbitration clause, to evaluate the validity of such a clause. The court should make sure that there is fairness in the formation of the tribunal and in the chosen procedure, and that the consumer's access to justice is not limited in any way by the wording of the arbitration clause.

The Constitutional Court also added that arbitration clause could not a priori violate consumers' rights, because the state courts supervise arbitral awards when a party challenges an awards and at the enforcement stage.

Comment

This ruling of the Constitutional Court brings more clarity to the issue of arbitrability of consumer disputes in Russia.

Case

Ruling N 1831-O (www.practicallaw.com/5-522-8967).

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