Alexander Bezborodov, LL.M.
Associate
Beiten Burkhardt
When concluding import transactions, foreign investors are always faced with the choice of which court to select for resolving potential disputes with a contractual partner. What are the important aspects that need to be taken into consideration when selecting the best court?
Russian Federation State Court
Choosing a state court in Russia, such as the Moscow City Arbitration Court, makes it possible to successfully defend the interests of foreign investors and suppliers in disputes with Russian companies. At the same time, it should be noted that the arbitration courts traditionally examine disputes in a rather formal manner and are wary of any evidence that is not written. This applies particularly to electronic evidence such as e-mails. In the event that the foreign investor’s flow of documents is handled electronically, it would probably not be entirely warranted to choose a Russian Federation state court. In this case, it may be advisable to choose a foreign state court.
Foreign State Court
What needs considered when choosing a foreign state court? Judgments passed by foreign state courts are recognized in the Russian Federation only when an agreement on the recognition of court judgments has been concluded with the foreign country. This includes European countries such as Italy.
The second possibility for the recognition of court judgments is to apply the principle of reciprocity. State court judgments are recognized based on the principle of reciprocity, for example, with countries such as Britain and the Netherlands. Therefore, when choosing a foreign state court, it is necessary to check whether its judgments will be recognized in the Russian Federation.
Furthermore, it should be noted that any foreign court judgment has to go through the obligatory recognition and enforcement procedure in the Russian Federation, which naturally will draw out the timescale for conducting the case against a debtor and the term for enforcing the judgment.
Arbitral Tribunals
The choice of an arbitral tribunal as the competent court for import transactions is often advisable, given that the Russian Federation is a party to international conventions on the recognition of arbitral awards, which makes it possible to secure adequate protection in case of a potential dispute with a contractual partner. At the same time, the conclusion of an arbitration agreement will not completely rule out the possibility that certain disputes will nevertheless be examined by the state courts.
First of all, these will be cases of exclusive jurisdiction — for example, disputes involving foreign parties over state-owned property of the Russian Federation, disputes related to registering or issuing patents, or registering and issuing trademark certificates may not be referred for consideration by a commercial arbitral tribunal. This also applies to certain other cases that are specifically mentioned in the Arbitral Procedural Code and in the Civil Procedural Code.
Secondly, it should not be forgotten that an arbitration clause applies only to the parties to the arbitration agreement. Third parties, such as company participants, may challenge the validity of a contract by filing a claim with a state court, regardless of whether an arbitration clause is present.
Just like foreign state court judgments, arbitral awards will have to go through the obligatory recognition and enforcement procedure within the Russian Federation. The recognition procedure does not entail a verification of the case on the merits of the dispute, but only a check for compliance for procedural requirements: whether the arbitral tribunal had jurisdiction over the case, whether the dispute is under the exclusive jurisdiction of Russian Federation state courts, or whether the award violates fundamental principles of justice in the Russian Federation.
Thus, when concluding foreign economic transactions, the parties have a variety of options for selecting the competent court, each of which has its advantages and disadvantages. When making a choice, it is absolutely necessary for the parties to check whether the court judgment would be recognized in the defendant’s country, how long the recognition procedure will take, and what economic benefits would result from the choice of this or that court.