One interesting and noteworthy bilateral agreement is the Trade and Payments Agreement concluded between the USSR and Sweden in Moscow on 7 September 1940 (the “Agreement”). Although this agreement was entered into during the Soviet time, it still continues to operate in Russia, particularly with regard to Article 14 of the Agreement with the Annex “Agreement on Arbitration Courts” and Article 15 dealing with arbitral awards’ enforcement. (The articles are quite lengthy; therefore, their texts were omitted from the note).

This Agreement was signed 70 years ago during the Soviet era, yet after the collapse of the USSR, Sweden and new Russia decided to retain it. On 29 September 1993, a Protocol was signed in Stockholm on the termination of application with regard to the relations between the two countries concerning certain previous agreements. However, according to Article 3 of the Protocol, that termination did not affect the legal force of Articles 14 and Article 15 of the 1940 Agreement. The Protocol was ratified in Russia by Federal Law № 18-FZ on 17 February 1995 and became effective on 1 May 1995.

I would like to note five reasons why, in my opinion, the provisions of the 1940 Agreement require particular consideration.

Firstly, Stockholm is probably the city where the majority of arbitration cases to which Russia is a party to are considered, and the awards are subsequently enforced in Russia. This situation is inherited from the Soviet period.

Secondly, the provisions concerning recognition and/or enforcement of arbitral awards contained in the 1940 Agreement differ from the New York Convention’s provisions as they are less generous to the prevailing party. Accordingly, it should make quite a difference for such a party, as well as for debtors under such awards, whether the provisions regarding arbitration and enforcement of arbitral awards in the 1940 Agreement are applicable or not. This issue is also very important for Russian courts, especially for the High Arbitrazh Court which is responsible for shaping a uniform judicial practice.

Thirdly, the Agreement concerns provisions which have prevailing force over domestic Russian regulations. Their correct application by Russian courts do not merely constitute controversial issues which are imperative and sensitive for society, economy and state but also form a sphere which has not been completely mastered in Russia so far, and which involves a multitude of issues and problems.

Fourthly, the provisions of the Agreement are unique: there are no other ones of a like nature in any other international agreement to which Russia is a party to.

Finally, the analysis of such provisions results in rather curious and even somewhat unexpected legal conclusions.

There are two important points in the effective provisions of the 1940 Agreement: (1) the special procedure of constituting the arbitral tribunal according to the provisions of the Annex and; (2) the two grounds for refusal to recognize and enforce an arbitral award which differ from the grounds provided for in the New York Convention and the Russian Law “On International Commercial Arbitration”. The first ground for refusal to enforce an arbitral award under the Agreement is when an application to set aside an arbitral award is being considered at the seat of arbitration. This is sufficient ground to refuse recognition and enforcement of the award in Russia under Article 15 of the Agreement. A similar ground for refusal can be the fact that the time for challenging the arbitral award in its seat has not yet expired.

The second ground for refusal is “the award being contrary to the state legal principles of the country where arbitral award enforcement is requested”. The concept of “state-legal principles” is used in Article 15 along with the concept of “public order”, and not as a synonym to the latter. The concept of “state-legal principles” is distinct from the traditional public policy exception. The concept of “state legal principles of Russia” is similar to the “constitutional legal principles of Russia”, which is broader than the concept of “public order of Russia”, and would aggravate problems of enforcement of arbitral awards.

In 1940 nobody in the USSR thought there was a difference between the concepts of “public order” and “state legal principles”, except perhaps that the former was considered more acceptable for foreign states and the latter as more suitable for the USSR. From the viewpoint of modern Russian domestic law, the recognition of the two concepts as “separate” was confirmed in 1993. It is obvious that the possibility of using the concept as is in legal practice creates the risk that fewer awards will be enforced in Russia.

Despite highlighting the relevant provisions of the Agreement and their legal force as confirmed by the 1993 Protocol, it is high time for such provisions to be abolished. It is an outdated Agreement that most lawyers in Russia and Sweden are not aware of, and if they were aware of it, it would almost certainly lead to a movement to abolish the articles in effect.

Firstly, the international conference “Commercial Arbitration in Russia, Sweden and the UK: New Business Opportunities”, was held on 9-10 June at the Congress Center of the Russian Chamber of Commerce and Industry. The conference was jointly organized by the Center of Arbitration and Mediation at the Russian Chamber of Commerce and Industry in cooperation with the Stockholm Chamber of Commerce, CIA and BE Capital. More than 100 lawyers from Russia and abroad attended the conference with a wide range of interesting topics. In conjunction with this event, a meeting of the newly elected SCC Secretary General Annette Magnusson and Kaj Hobér with members of the Russian Young Arbitration Lawyers Group, MAF40 was held to discuss arbitration in Sweden in general, and activities of the SCC in particular (http://www.sccinstitute.com/?id=23696&newsid=34412).

Secondly, on June 23, 2010, the Russian Chamber of Commerce and Industry took some initiatives with regard to the International Commercial Arbitration Court (ICAC), which is acting under the auspices of that Chamber. To this, a new list of arbitrators of the ICAC was approved by the Russian Chamber of Commerce and Industry. The list currently includes 179 Russian and foreign practitioners. The previous list that was approved in 2005 with later amendments included 176 Russian and foreign arbitrators. The current list, taken into account the number of deceased arbitrators and those who were not included in the list, there are 30 newly listed arbitrators, among them 10 are foreigners.

The list is not mandatory for the parties to choose from in disputes to be considered by the ICAC; however, the Chairman of the arbitral tribunal (in case there are three arbitrators) shall be appointed by the Presidium of the ICAC only from that list. Should the Presidium of the ICAC decide that the dispute should not be resolved by a panel, a sole arbitrator shall also be appointed by the Presidium of the ICAC only from that list.

In addition, the Russian Chamber of Commerce and Industry has also introduced several important amendments to the ICAC Rules (the “Rules”).

The position of the First Deputy- Chairman of the ICAC has been created. The person in that position is intended to replace the Chairman of the ICAC in case of a need. Subject to the ICAC previous Rules, there were two Deputy- Chairmen with the same legal status.

Furthermore, the amendments increased the number of the members of the Presidium of the ICAC, who are elected during the general meeting of the ICAC arbitrators every 5 years, from fine to seven. Furthermore, the Rules of the quorum of the Presidium of the ICAC (important body in everyday activities of the ICAC) were also amended.

In addition, a new provision was added in relation to the number of copies of all documents that need to be submitted to the ICAC (one extra copy is to be provided); the additional copy is to be provided to the Rapporteur in an ICAC case. The involvement of a Rapporteur is a special procedural feature of every ICAC case: a Rapporteur is a knowledgeable person appointed by the secretary of the ICAC (subject to the proposal of the Chairman of the arbitral tribunal of the sole arbitrator) to help the arbitral tribunal or the sole arbitrator with the file. In the ICAC, there is a list of rapporteurs. A Rapporteur whose name is not included in the list of Rapporteurs can still be appointed subject to the prior approval of the ICAC Chairman.

Moreover, two major amendments were introduced to the Rules in order to promote transparency and efficiency. Firstly, the Rules provides that party in a dispute can request to submit its oral arguments via a video conference. This request is considered by the arbitral tribunal or the sole arbitrator subject to the circumstances of the case, opinion of the other party(s) and technical availabilities. Secondly, the Rules state that a person can hold a position of an ICAC Chairman for two terms only (not more than 10 years).

On June 28, 2010, the General Meeting of Arbitrators of the ICAC was held. Professor Alexey A. Kostin was elected as the Chairman of the ICAC, while Professor Ivan S. Zykin was elected as the First Deputy-Chairman of the ICAC, and Professor Evgeniy A. Sukhanov was elected as the Deputy-Chairman of the ICAC.

Professor Alexey A. Kostin, supported by 80 % votes of the ICAC arbitrators replaced Professor Aleksandr S. Komarov, who held that position for 17 years (since 1993). The following persons were elected members of the Presidium of ICAC for a five-year term: professor Nina G. Vilkova, professor Alexey N. Zhiltsov, professor Aleksandr S. Komarov, professor Sergei N. Lebedev, professor Aleksandr L. Makovskiy, professor Mikhail G. Rozenberg, professor Oleg N. Sadikov.

I believe that all amendments are positive with real intention to make the ICAC more transparent and more competitive.

Just to mention one last thing that I found is interesting, thus worth noting. A few mass-media in Russia broadcasted a rumors on the potential relation between the new elections and the cases heard by ICAC arbitrators almost four years ago (http://www.kommersant.ru/doc.aspx?fromsearch=32838547-ebbf-4c10-bab5-a749b20307c6&docsid=1405322). among the cases were Yukos Capital s.a.r.l. (Luxembourg) v. OJSC Yuganskneftegaz (former subsidiary of Yukos Oil Company, which was held insolvent by Russian courts due to huge tax liabilities because of its involvement in tax scams. OJSC Yuganskneftegaz was finally acquired by the Russian state oil company Rosneft). The claimant sought to enforce four loan agreements. In the four similar cases, the ICAC Arbitral Tribunal found in favor of the claimant. Later on, the debtor successfully challenged the awards before the Russian Commercial (Arbitrazh) Court, which set the awards aside for a number of procedural violations. Then Yukos Capital s.a.r.l. applied to Dutch courts to enforce the awards. The Court of the First Instance rejected enforcement while the Appellate Court found in favor of Yukos Capital s.a.r.l.

On June 25, 2010, three days before the ICAC Meeting, the Dutch Supreme Court denied Rosneft the right to appeal in that case on enforcement. That decision of the Dutch Supreme Court provided a good ground for rumors. It was rumored that the ICAC Chairman was replaced for political reasons, i.e. perhaps due to his influence on the outcome of the said arbitral cases in 2006 or for failing to prevent granting the awards by the ICAC Tribunals in favor of Yukos Capital s.a.r.l. In my opinion, such rumors are mere gossip by people who are not aware of the ICAC procedures taken to resolve the cases and the amount of preparation needed, or that they have an intent to distort the ICAC procedures. You may believe everything you read in the newspapers or hear in the media unless you were a witness to an event. I was.

Alexander Muranov