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Anti-arbitration injunctions in Russia?

Russian commercial courts, among other things, are known for their reluctance to issue interim measures. For that reason alone, two recent rulings, where the courts at first instance actually granted anti-arbitration injunctions, were bound to attract more attention than they would otherwise deserve. These decisions were successfully overturned, demonstrating that the risks of Russian courts granting injunctive relief against parties to arbitration are rather low, though not zero. 

As a matter of Russian procedural law, there is nothing to prevent Russian courts from issuing anti-suit or anti-arbitration injunctions. One type of interim measure provided for expressly in the procedural legislation is the prohibition of a party or non-party to a proceeding taking certain actions. However, in reality, unless there is an absolutely clear-cut case where the judge is satisfied that the measures requested are the only means to prevent irreparable harm, such applications are granted rarely. Arguably, this is a very high burden to meet for a party requesting an anti-arbitration injunction.

However, against a background of some unsuccessful attempts to obtain anti-suit injunctions from the Russian courts, in two recent cases (case No. A53-23688/2015 and case No. А03-547/2016) the first instance courts granted such measures in an arbitration context, only for the decisions to be later overturned.

The facts of both cases seem to be pretty similar, even though they occurred in two different Russian regions (Rostov Region and Altai Krai, which are located some 4000 kilometres from one another). The borrowers entered into loan facility agreements with Sberbank, the largest Russian bank. The agreements provided for arbitration under the rules of the National Chamber of Arbitration (a domestic arbitral institution, which is often chosen by Sberbank). The borrowers failed to repay the loans and filed the claims with the Rostov state court, seeking declarations that the arbitration clauses in the loan facility agreements (but not the agreements themselves) were invalid. In the meantime, Sberbank commenced arbitrations against the borrowers. The borrowers applied to the state courts for interim measures seeking to prevent Sberbank and the arbitral institution from taking any actions aimed at commencing, continuing or administering arbitrations under the relevant agreements.

The courts granted the injunctions. They agreed with the borrowers’ contention that failure to grant the injunction may render the judgments in the relevant cases of no use for the borrowers, as the arbitral tribunals were likely to render their awards before the courts delivered their judgments on the invalidity of the arbitration clauses. Due to the parties’ agreement that the awards were final, they would not be subjected to setting aside proceedings. Therefore, the borrowers alleged that they would not have recourse against the awards. Furthermore, the courts showed sympathy to the borrowers’ allegations that allowing Sberbank to pursue claims in arbitration may lead to financial losses for the borrowers, as they may have been liable to pay arbitration fees.

The measures granted by the Rostov court (case no. A53-23688/2015) on 10 September 2015 were lifted by the same court on 6 October 2015 upon application by Sberbank. The ruling is pretty succinct and does not provide any insight into the court’s reasoning when it lifted the injunction.

The Altai court’s measure (case no. А03-547/2016) may be of more interest. Having been granted on 17 February 2016, it was quashed by the appellate court on 21 April 2016. The appellate court reasoned that, even though setting aside proceedings would not be available due to finality of the awards, this would not prevent the applicant from resisting enforcement of the awards on exactly the same grounds. Furthermore, the court agreed with Sberbank’s argument that pursuing arbitration would not cause financial harm to the borrower per se, as it would only become liable for arbitration fees if the tribunal so ordered in the award.

Most importantly, the court further reasoned that the anti-arbitration injunction granted by the lower court would have essentially contradicted the constitutional right to have recourse to the competent court (in this context, to the agreed arbitration) and would therefore violate the constitutional right of the other party (Sberbank). Essentially, this would have prevented the recovery of the outstanding debts from the borrowers. Moreover, the applicable legislation does not allow state courts to interfere with arbitration in such a manner.

The cases in question concerned domestic arbitrations, but I believe they are useful in the international arbitration context as well.

Theoretically, Russian courts would be in a position to grant similar injunctions against a Russian-based arbitral institution administering international arbitration. However, they would be unlikely to accept jurisdiction if the claimant in arbitration, and the arbitral institution were both foreign entities. In cross-border matters, Russian commercial courts follow the doctrine of effective jurisdiction. This means that the court has the jurisdiction to grant interim measures, which would have greater control over enforcement. From this perspective, Russian courts would generally not be in a position to grant interim measures against foreign entities with no presence within the jurisdiction. Therefore, it is very unlikely that the Russian courts would issue an anti-arbitration injunction in relation to a foreign-seated arbitration.

But even with respect to Russian-seated arbitrations, the chances of obtaining an anti-arbitration injunction is very low. Firstly, as noted by the appellate court, such injunctions are likely to be in excess of the scope of judicial interference with arbitrations prescribed by the applicable legislation. Furthermore, the burden of convincing the court that there is a serious risk of unenforceability of future judgments is rather difficult to meet, as the court would always be mindful of other remedies available to parties to resist enforcement of the award in situations where the arbitration clause is found to be invalid.

This means, however, that anti-arbitration injunctions would not be available even where there is a genuine need for them, for example, in cases where the arbitration was commenced in the absence of any agreement whatsoever. The party would, therefore, have to rely only on the remedies against the resulting award, and may not be able to prevent the proceedings as such.

Norton Rose Fulbright Andrey Panov

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