RUSSIA – The recognition of international arbitral awards and the public policy exception

The International commercial arbitration is a swift ADR method to settle international trade disputes through the arbitration services provided, for example, by the International Chamber of Commerce (ICC), London Court of International Arbitration (LCIA) or other institutions. Because of this, it is a common practice, nowadays, to include an arbitration clause in international trade contracts concluded with foreign commercial partners.

However, once an arbitral award has been issued, it may be necessary to obtain its recognition and enforcement before the domestic courts of the country in which the assets of the succumbing party are located. In accordance with the New York Convention of 1958, save for limited exceptions, recognition shall be automatically granted within all States parties to the Convention.

One of these exceptions is represented by the “public policy” of the requested State. According to the public policy exception, a domestic court might decide to deny recognition and enforcement of a foreign arbitral award within its own jurisdiction in case of incompatibility of the results of such recognition with the national legal order.

In the case of the Russian Federation, the public policy exception (in Russian: ogovorka publichnogo poryadka lit. “exception of public order”) is widely known to represent a notable obstacle to the recognition and enforcement procedures. In a practitioner’s experience, it is not uncommon for Russian commercial tribunals (in Russian: arbitrazhnye sudy) to deny recognition based on a wide interpretation of public policy and the formalistic approach of Russian judges.

Examples include imprecisions in the formulation of the arbitration clause or of the claim (including the liquidation of claimed damages), the violations of the most imperative principles of the Russian economic, political and legal systems, or the fact that the arbitral tribunal had not taken into consideration the nature of the contract from which the dispute arises under the scope of Russian law. In the past, however, Russian courts have sometimes denied the recognition of foreign awards which, if enforced, would have caused the bankruptcy of companies deemed to be strategic (as in judgment A56-60007/2008 of the Saint Petersburg Commercial Tribunal, later rebutted by the Presidium of the Higher Commercial Court of the Russian Federation).

In 2019, the Presidium of the Supreme Court of the Russian Federation has issued Resolution n. 53 addressing some of the uncertainties deriving from the extension, interpretation and application of the public order exception. Other aspects, however, remain yet unsolved.

In the light of the above, whenever entering into an agreement with a Russian commercial partner, it is extremely important to bear in mind the peculiarities of the Russian jurisdiction from the very moment of the drafting of the contract to the conduction of the arbitration proceedings.