HKIAC First Foreign Arbitral Institution Permitted to Administer Disputes in Russia
The Hong Kong International Arbitration Centre ("HKIAC") is pleased to announce that on 4 April 2019 the Russian Council for the Development of Arbitration ("Council") recommended that HKIAC be granted permission to function as a permanent arbitral institution ("PAI") under Article 44(3) of the Federal Law No. 382-FZ dated 29 December 2015 on Arbitration in the Russian Federation, as amended by, among others, the Federal Law No. 531-FZ dated 27 December 2018 ("Federal Law").
As a result, the Ministry of Justice of the Russian Federation will grant the permission to HKIAC by 25 April 2019.
Following the Russian arbitration reform introduced in September 2016, institutional arbitrations seated in Russia and arbitrations concerning certain types of corporate disputes in respect of Russian companies can only be submitted to a PAI as defined in the Federal Law.
The requirement for a foreign arbitral institution to acquire the status of a PAI is that the institution must possess a "widely recognized international reputation" which is assessed based on a set of criteria adopted by the Ministry of Justice.
As a PAI, HKIAC will become the first international arbitral institution authorised to administer (i) international disputes seated in Russia; (ii) disputes between parties from any special administrative region as defined under Russian law or disputes arising from agreements to carry out activities in any such region; and (iii) the following types of corporate disputes in respect of a legal entity in Russia (Article 45(7) and (7.1) of the Federal Law and Article 225.1 of the Russian Arbitral Procedure Code):
- "disputes concerning the ownership of stocks, shares in the charter capital of business companies and partnerships, share contributions by the members of production cooperatives, their encumbrance and the exercise of rights, arising from them", such as disputes arising out of share purchase agreements;
- "disputes arising from agreements between the participants of a legal entity concerning the management of that legal entity including disputes arising from corporate agreements", such as disputes arising out of shareholders' agreements; and
- "disputes arising from the activities of registrars of placement owners, regarding the registration of rights to stocks and other securities, the exercise of their rights and discharge of other obligations, provided by federal law in connection with the distribution and (or) circulation of securities, by the registrar of placement owners".
Under the Federal Law, certain other corporate disputes such as derivative claims may only be administered by institutions with PAI status and special rules for corporate disputes. HKIAC does not currently have special rules for corporate disputes. Nor does HKIAC have a separate division in Russia which, in addition to PAI status, is a requirement for a foreign arbitral institution to administer domestic arbitrations.
Matthew Gearing QC, Chairperson of HKIAC, says that "by obtaining the status of a PAI under Russia's amended arbitration law, HKIAC has taken the steps necessary to offer parties in certain Russian-related cases access to the services of an internationally recognised foreign arbitral institution. From HKIAC's perspective, we believe that parties will benefit from more options to resolve their disputes."
Elena Borisenko, Deputy Chairperson of the Board of Management of Gazprombank, comments that "this is another acknowledgment of the great efforts that HKIAC undertakes in promoting arbitration and taking meaningful initiatives for disputing parties. HKIAC is now an excellent option for Russian-related disputes."
Alexander Smirnov, Managing Director, Legal and Compliance, at Moscow Exchange Group, says "the community of Russian general counsels and in-house lawyers welcomes HKIAC – the first international arbitration institution to have received permission to facilitate disputes in Russia. No doubt that such permission has been granted due to the reputation and high level of expertise at HKIAC. I do believe that this is a significant step in the development of arbitration in Russia."
Sidnev Valery, General Counsel of EuroChem, says "both my company and myself are required from time to time to participate in international arbitration cases and we therefore welcome healthy competition between arbitration institutions as well as their efforts to enter the Russian market. I believe that it is a historic moment as HKIAC has received permission to act in Russia which is beneficial for both Russian companies and practicing lawyers."
With growing economic activity between Russian and Asian parties, HKIAC is emerging as a preferred institution for disputes involving Russian parties. The HKIAC Administered Arbitration Rules are available in the Russian language and 35 Russian-speaking arbitrators are listed on HKIAC's various panels of arbitrators. HKIAC operates primarily from a jurisdiction that has not imposed sanctions against Russian entities and Hong Kong does not require visas for Russian visitors. With its status as a PAI under Russian law, HKIAC is committed to providing its dispute resolution services to a broad range of Russia-related disputes in accordance with the Federal Law.