LONDON: Russian disputes in the UK – for how much longer?
Global Arbitration Review
An event organised by the Russian and CIS Arbitration Network (RCAN) examined recently proposed legal reforms in Russia and their potential impact on Russian disputes being resolved in London. Paul Martenstyn, deputy senior clerk at Fountain Court Chambers and a member of the RCAN organising committee, reports
Over 130 delegates attended the event on 27 November, which was hosted by Stephenson Harwood and chaired by the firm's CIS group head, Tatiana Minaeva. A panel of UK and Russian speakers debated why so many Russian parties choose to fight their disputes in London and whether proposed reforms to Russian law and procedure will challenge London's pre-eminence as an arbitration venue for Russian parties.
Minaeva explained how Russia's corporate laws do not easily accommodate joint venture investment schemes or international arbitration of corporate disputes arising from direct investments into Russian companies. This has driven foreign investors in Russia to rely on shareholders' agreements governed by English law and to use offshore companies in order to arbitrate their disputes abroad. As a result, in the past decade a significant number of Russian disputes have landed before English courts and arbitral tribunals seated in England, many of them at the LCIA.
Roman Khodykin of Berwin Leighton Paisner in London provided an overview of the proposed legal reforms in Russia. He said that Russians want to submit their disputes to international fora, where they expect to receive a fair hearing. By contrast, he argued, the Russian state wants to take more control over substantial disputes by compelling state-related companies to use Russian law and courts; making Russian law more attractive and user-friendly; compelling a trial in the Russian courts irrespective of clauses that mandate foreign arbitration or litigation; and amending rules on jurisdiction so that certain disputes can only be resolved by Russian courts.
The speakers went on to discuss whether these reforms in Russia will have a material impact on Russian business and will attract "domestic" disputes back to Russian courts. There were strong opposing views. On the one hand, Vladimir Khvalei of Baker McKenzie in Moscow said there are alternative options to the Russian courts in Russia, for example, the new Russian Arbitration Association. Khvalei, who is the association's founding chairman, said it will provide a good platform for fair arbitral proceedings before an experienced tribunal, as the arbitrator fees will be much higher than those at Russia's best-known arbitral institution, the International Commercial Arbitration Court at the Russian Chamber of Commerce and Industry. On the other hand, Nick Marsh of DLA Piper in London took a strong view that even if CIS parties do not have the perception that arbitration in Russia is unreliable or subject to political risk, Western parties who do business with CIS parties certainly do. So the many transactions between CIS and Western parties (such as joint ventures) are unlikely to be affected by the changes in the short to medium term. Charles Bear QC of Fountain Court Chambers in London agreed that, as long as there is no trust in the Russian judiciary, Russians will continue favouring England as a venue for their disputes. He did not think that situation would change soon.
LCIA deputy registrar Keisha Williams shared some statistics of Russian disputes being dealt with by LCIA arbitration and pointed out the risks facing parties seeking to resolve their disputes at LCIA against a Russian counterparty. Svetlana London of MGAP Attorneys-at-Law in London added that parties need to be aware that certain provisions of English law might be unenforceable in Russia. On the other hand, Kirill Saskov of Kachkin and Partners in St Petersburg said that Russian lawyers are very busy with Russian arbitrations in Russia, although he agreed that the current reform of the judicial system does not add stability.
There was general agreement among the panellists that the Russian legal system is still viewed by many as too uncertain, and that accordingly London lawyers can breathe a sigh of relief – for the moment at least.
The event was organised by RCAN, a network that brings together arbitration practitioners, scholars and business people with an interest in Russian and CIS arbitration. It aims to facilitate the exchange of knowledge, share experiences and encourage further development of international arbitration in relation to the CIS region.
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