Disputes settlement in the CIS: any signs of pro-arbitration approach?

1. Disputes settlement in the CIS: any signs of pro-arbitration approach? Markian Malskyy Partner, Attorney-at-law Moscow, 2012

2. Content 1. Importance of the issue of arbitrability 2. Subjective and objective arbitrability 3. Status quo 4. Conclusions and recommendations

3. Importance of the issue of arbitrability • Arbitrability is the foundation of a pro-arbitration attitude • Arbitration is often regarded as much better than litigation for resolution of international commercial disputes • Pro-arbitration approach of the arbitral tribunals, but more strict and formalistic approach of the judges at the setting aside and enforcement stages • Clear prescription by law of certain category of disputes as non-arbitrable justly estop the parties to a dispute from the right to choose dispute resolution method • Uncertainty in arbitrability of some disputes is the hardest situation, it give rise to the risks of (i) arbitral tribunal’s conclusion of its non-competence to decide the dispute, (ii) setting aside or (iii) denial in enforcement of the award by competent court

4. Importance of the issue of arbitrability Arbitrability in CIS – it is all about uncertainty! How can we speak about hostile to arbitration approach, when the door for arbitration is only shut softly, but not closed completely?! Almost any commercial dispute in the CIS may be settled by arbitration! Why it is not pro-arbitration jurisdiction?

5. Subjective and objective arbitrability “subjective arbitrability” – whether certain individuals or entities are considered unable to submit their disputes to arbitration because of their status or function; “objective arbitrability” – whether the subject-matter of the dispute submitted to arbitration is not one which can be resolved by arbitration (Emmanuel Gaillard and John Savage (eds), Fouchard Gaillard Goldman on International Commercial Arbitration, (Kluwer Law International 1999) pp. 312-313)

6. Status quo – subjective arbitrability The following cases may be referred to international commercial arbitration: • disputes resulting from contractual and other civil legal relations arising in course of foreign trade and other forms of international economic relations, provided that the place of business of at least one of the parties is situated abroad; • disputes arising between enterprises with foreign investment and international associations and organizations established in the territory of Ukraine/Russia, among themselves, disputes between their members, as well as their disputes with other legal entities in Ukraine/Russia. Disputes involving state and state-owned entities may be settled by international commercial arbitration and rendered awards are enforceable.

7. Status quo – objective arbitrability • The category of non-arbitrable disputes is not clearly defied by the law • Real estate disputes Ukraine: pros – right understanding of Article 77 of the Private International Law Act; cons – wrong understanding of this provision Russia: pros – Constitutional Court Ruling dated 26.05.2011; cons – negative court practice prior that decision • Corporate disputes Ukraine: pros – unclear wording of para. 2 of Article 12 of the Commercial Procedural Code of Ukraine; cons – court practice Russia: pros – possibility of pro-arbitration interpretation still exists; cons –Maksimov case

8. Conclusions and recommendations • So far as the list of disputes, which cannot be settled by international commercial arbitration, is not clearly defied, there are signs of pro-arbitration approach in the CIS • The door for arbitration is not closed and may open at any time for any concrete case • Reasons of such uncertainty as to arbitrability: • low awareness of the judges with key principles of international commercial arbitration; • bad reputation of domestic arbitration; • judges desire to monopolize the right to consider the most interesting cases (corporate, real estate etc.) • Arbitration remains the best choice in such uncertainty, however, the final choice of appropriate dispute resolution scheme shall be made on case by case basis

9. Markian Malskyy, Partner, Head of West Ukrainian Branch Specialization: Real Estate & Construction, Dispute Resolution, Corporate Law / M&A, Commercial Law, International Arbitration. Experience: Markian Malskyy, attorney-at-law, LL.M., specializes in representing clients’ interests before judicial authorities of Ukraine and dispute settlement under the procedures of commercial and investment arbitration. He has extensive experience in corporate dispute settlement in the energy sector, contractual disputes, trade and real estate disputes. He represented one of the major oil producing company of the Russian Federation in a dispute on collection of more than 200 million USD of losses caused by improper execution of the shareholders agreement. He handled cases under the Arbitration Rules of ICSID, ICC, SCC, UNCITRAL, LCIA and ICAC. Prior to joining Arzinger attorney-at-law Malskyy worked as a lawyer in the international arbitration team in the firm Freshfields Bruckhaus Deringer in Paris. Markian Malskyy is the author of two books on commercial dispute settlement, published more than 50 legal articles. He is a recommended arbitrator of two arbitration courts of Ukraine, a member of the Board and the Head of the Law Committee of the West Ukrainian Branch of EBA. In June 2009 Markian Malskyy was elected for a two-year term as a Representative of one the International Bar Associations’ committees in Ukraine. Member of the Lviv Oblast Bar Association, Ukrainian Bar Association, International Bar Association Languages: Ukrainian, Russian, English, German, French and Polish Contacts: Phone: +38 032 242 96 96 E-mail: Markian.Malskyy@arzinger.ua

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