The Scope of the Public Policy Exception to the Recognition and Enforcement of Foreign Arbitral Awards in Russia – Vol. 25 No .1

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Author: Peter J. Pettibone*

Published: August 2014

Description: Commercial contracts between Russian and Western parties often contain clauses that provide for arbitration as the parties’ choice for resolving disputes. Generally, these clauses provide that the seat of the arbitration will be in a third (or neutral) country, i.e., a country that is neither Russia nor the home jurisdiction of the Western party. If the Western party is awarded damages in the arbitration and seeks to have that award recognized and enforced by a Russian court against assets of the Russian party in Russia, the Russian party, or the Russian court on its own motion, may seek to block such recognition and enforcement on public policy grounds. Denial of recognition and enforcement will have the effect of depriving the Western party of any recourse to recover its damages in Russia. Thus, the scope of the public policy exception to the recognition and enforcement of foreign arbitral awards in Russia is an important issue that Western companies seeking to engage in commercial transactions with Russian companies should consider in advance of entering into those transactions. The purpose of this article is to examine the scope of the public policy exception in Russia today, how it has evolved in recent years and whether it differs in any significant respect from how the public policy exception is applied in certain other countries.

The starting point for this analysis is the New York Convention (the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards). The USSR ratified the Convention in 1960, and in 1991, after the collapse of the USSR, Russia assumed full responsibility for all the rights and obligations of the USSR under the Charter of the United Nations and its multilateral treaties, including the New York Convention. Approximately 145 other countries, including all the major Western countries, are parties to the Convention, making it a widely adopted treaty. The Convention is thus the basis upon which almost all foreign arbitral awards are presented for recognition and enforcement in Russia.

The Convention requires a signatory state to recognize and enforce an arbitral award made in another signatory state unless one of the grounds specified in Article V of the Convention exists. The grounds in Article V(1) are essentially procedural in nature and must be proven by the respondent. The grounds in …

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*Independent Arbitrator and Mediator. Retired Partner, Hogan Lovells, New York. Formerly, Managing Partner of the Moscow office of Hogan & Hartson LLP, 2000-2010. The author acknowledges, with appreciation, the contribution of Denis Almakaev, an associate in the Moscow office of Hogan Lovells, in the preparation of this article.