Информационный обзор практики Международного арбитража (Декабрь, 2013)

The Supreme Arbitrazh Court of the Russian Federation deals another blow to the affiliated arbitrages.

This time, the Chamber of Judges of the Supreme Arbitrazh Court (SAC) accepted and passed to the Presidium the case reversing the decision of the arbitration court of the JSC Gazprom (case no. A40-147862/2012).

The case involves a contract dispute between JSC Yamalgazinvest (100% owned by Gazprom) and the Neftegazproekt Institute. The contract contained an arbitration clause whereby all disputes, controversies, and claims were to be resolved by the Arbitration Court of JSC Gazprom. Yamalgazinvest filed a claim in the Arbitration Court of the Gazprom with a demand for 2.1 million rubles in penalty charges. According to the Arbitration Court judgment, the Institute was charged 1.6 million rubles.

Challenging the decision of the Arbitration Court, the Institute filed an application to the Arbitrazh Court of Moscow. The court cancelled the arbitration decision, reasoning that the arbitration court was established and funded by an entity affiliated with one of the parties to the dispute, and, therefore, the guarantee of arbitration impartiality could not be assured.

The Federal Arbitrazh Court of the Moscow Region reversed the decision of the Arbitrazh Court of Moscow citing several clauses of the Rules of the Arbitration Court of JSC Gazprom guaranteeing to the parties of disputes, who are not subsidiaries of JSC Gazprom, the rights to participate in the selection of arbitrators. According to the Federal Arbitrazh Court, this decision guarantees impartiality and objectivity in the election of arbitrators. However, the Institute filed an appeal (nadzor) with the SAC, and after consideration of the complaint, it was assigned to the Presidium of the SAC. In the procedural decision, by passing the case to the Presidium of the SAC, the judges relied on the principle of impartiality, which the Supreme Arbitration Court had already declared in the Judgment of the Presidium of 28 July 2011 no. 1308/11. Citing the lack of guaranteed impartiality, the Chamber of Judges pointed out that the Arbitration Court of JCS Gazprom is not independent in organizational and financial terms.

The case was considered by the Presidium on 29 October 2013. This resulted in the cancellation of the decision of the Federal Arbitrazh Court of the Moscow Region and reinstatement of the first instance court decision.

The case is now before the Presidium of the Supreme Arbitrazh Court.

The Intellectual Property and Copyright Court clarifies the rules for interim measures during domain disputes.

On 15 October 2013 the Intellectual Property and Copyright Court published on its official website the judgment of the Presidium of no. SP-23/3.

The judgment resolves a number of important practical issues. First, it contains the definition of a domain dispute. Second, the judgment covers issues related to the choice of interim measures during domain disputes. The courts are free to select the type of interim measures they desire, without making reference to the interim measure requested by the applicant.

Comparing the requirements of the Arbitrazh Procedural Code of the Russian Federation, the new procedure of proving the need for interim measures is more efficient. To justify the adoption of interim measures, the applicant must provide only sufficient proof of his or her rights to the subject intellectual property. Providing proof that the failure of the interim measures would result in negative consequences is not required.

Korean investor chooses Russian arbitration to resolve US$ 23 million lease dispute with Kyrgyzstan.

Arbitration in the Moscow Chamber of Commerce and Industry (MCCI) considered its first investment dispute involving a state. On 29 May 2013, Korean investor J.B. Lee filed a lawsuit against MCCI, demanding from the management of the free economic zone, Bishkek, represented by the Government of Kyrgyzstan, US$ 23 million in compensation for the illegal expropriation of property. According to four contracts signed in 1997 (later, these contracts were restructured into Agreement No. 101-A), between the FEZ Bishkek and J.B. Lee Company and the CAC, the CAC leased land of more than 23 hectares. According to the lease, the term was for 93 years. Since 2002, payments from the FEZ have been received irregularly; thus, the FEZ’s debt to the Korean investor increased. At the end of 2002, the CAC and FEZ agreed that the lease payments to the company were to be modified by reducing the remaining debt of the FEZ Bishkek.

The investor claims that in 2005, the state commenced expropriating its investments. By 2012, six hectares of previously leased land was seized without any reason being given. On 10 December 2012, the FEZ Bishkek violated the agreements and the requirements of the Kyrgyz legislation unilaterally, terminating lease contract no. 101-A.

CAC’s lawsuit was brought under the Convention on the Protection of Investors (concluded in Moscow in 1997, which Kyrgyzstan ratified in 2000) and the provisions of the Civil Code of the Kyrgyz Republic. After examining the facts, the MCCI came to the conclusion that the dispute should be resolved under the Convention for the Protection of Investors' Rights of 1997. The arbitrator found that the termination of the contract was illegal and approved the investor's right to compensation. The government of Kyrgyzstan was obliged to pay the Korean investor US$ 22,481,437 as compensation for expropriation, arbitration costs, and legal fees. The decision was issued on 13 November 2013.

The Federal Arbitrazh Court of the Northwest District rejects public policy argument against enforcement of Swedish arbitration decision.

The dispute between LLC Investment Company Pulkovo (an official dealer of Mercedes-Benz, Porsche, and Hyundai in Russia, and a part of the IFG Olimp-Group) and Hochtief Development Russland (the Russian division of the German architectural bureau, Hochtief) concerned a construction project regarding the Mercedes and Porsche dealer centers, office buildings, and an apartment building and hotel located on the Pulkovo Highway. In 2010, the parties signed a management contract covering preliminary preparation and design (the customer was Pulkovo). The contract price was EUR 4 million. The contract contained an arbitration clause stating that disputes should be resolved by the Arbitration Institute of the Stockholm Chamber of Commerce.

After the commencement of the project, Pulkovo refused to pay Hochtief for the performed work, citing violations of the contract’s technical specifications. The German company filed a claim with the Stockholm Arbitration Institute. The claim was granted. Pulkovo refused to comply with the arbitral decision and, therefore, Hochtief filed an application for recognition and enforcement of foreign arbitral decisions with the Arbitrazh Court of St. Petersburg and the Leningrad region. The Arbitrazh Court granted the application, confirming the decision of the Arbitration Institute of the Stockholm Chamber of Commerce.

Pulkovo appealed the case before the Federal Arbitrazh Court of the North-West District. Pulkovo contended that enforcement of the arbitral decision would be contrary to the public policy of the Russian Federation, and would specifically violate the principle of good faith, which is a fundamental principle of the Russian legislation. The cassation instance court pointed out that the public policy argument is only applicable in those individual cases where the enforcement of a foreign judgment could result in a violation of Russian justice. In this case, such a risk was not evident.

Changes in Turkish legislation affect the rights of foreign investors.

The New Turkish Commercial Code reduces opportunities for investment. In recent years, mergers and acquisitions in Turkey were often accomplished by one party buying a controlling interest in another entity with borrowed funds. This scheme appeared to be authorized in accord with Article 380 of the new Code. This scheme is now illegal. Currently, the legal community is discussing options to remedy this situation. It may be that such a scheme would only be available when dealing with public companies.