The Standard ICC Arbitration Clause - Invalid in Russia?
On 26 September 2018 the Russian Supreme Court1 upheld the decisions of two lower instances2 rejecting the recognition and enforcement of an ICC arbitral award in the Dredging and Maritime Management SA v. InjTransStroy AO dispute. All three instances upheld the argument of the respondent (InjTransStroy AO) that the arbitration clause does not reference the ICC International Court of Arbitration and therefore the ICC lacks competence.
Case
An ICC arbitral award was rendered in favour of Dredging and Maritime Management. It applied to the Russian state court for the recognition and enforcement of the award. The respondent challenged the arbitration clause arguing that it is too uncertain to determine the arbitration institution to hear the dispute.
According to the court decisions, the arbitration clause only referred to (i) the settlement of disputes in international arbitration and (ii) the ICC Rules of Arbitration governing the procedure of arbitration. On this basis, the court held that the lack of an explicit reference to the ICC International Court of Arbitration means that the ICC does not have competence. The court also noted that that the parties could have meant any other international arbitration institution when referring to international arbitration in general.
The Russian business media3 reports that Alexis Moure, the president of the ICC, has sent a request to the president judge of the Russian Supreme Court raising the issue and voicing major concerns about the precedent. The text of the request is not available and it is not clear whether the Russian Supreme Court will respond.
Comment
Importantly, the precise wording of the arbitration clause in question is not available. It seems that the arbitration clause used in the contract was the ICC standard arbitration clause. However it is not clear (i) whether it was in English or Russian and (ii) how much it stuck to the official wording of the ICC standard clause. The standard ICC arbitration clause in English indeed does not refer to the ICC International Court of Arbitration.4
Russian state courts have previously upheld the ICC standard arbitration clause on numerous occasions. The court decisions in the Dredging and Maritime Management SA v. InjTransStroy AO dispute do not set a binding precedent under Russian law, but may be taken into account by Russian courts in considering arbitration clauses.
Conclusion
Based on the above, it would be prudent to include an explicit reference to the ICC International Court of Arbitration in arbitration clauses with Russian parties (or if recognition and enforcement may take place in Russia). This is applicable both to new contracts and existing ones.
In this respect the ICC has recently amended its page on recommendations on standard arbitration clauses. It now directly added Russia to those jurisdictions where an explicit reference to a particular arbitration institution is advisable5 and suggests the following wording for this purpose: "All disputes arising out of or in connection with the present contract shall be submitted to the International Court of Arbitration of the International Chamber of Commerce and shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules."
1 Case number 305-ЭС18-11934
2 Case numbers А40-176466/2017, Ф05-4897/2018
3 https://www.kommersant.ru/doc/3798973, https://pravo.ru/news/206812/
4 https://iccwbo.org/publication/standard-icc-arbitration-clauses-english-version/
5 https://iccwbo.org/dispute-resolution-services/arbitration/arbitration-clause/
