Commercial Arbitration in Russia (Historical)

Arbitration resolution of disputes was known in Old Russia. Actually, it had much in common with similar institute under Roman Law. References to resolution of business disputes by way of arbitration were contained in such legal documents of those times as treaties between princes in the 11th and 12th centuries and the 1649 Code.

Arbitration courts as institutions set up to settle disputes between trade counterparts were not as widespread in Russia as they were in European countries in the Middle Ages. They did exist, though, in Russia’s major territorial trading centers such as Arkhangelsk, Nizhny Novgorod, Moscow, closer to our time, and in trading centers on the Volga River.

In the 18th and 19th centuries, Russian lawyers (such as Volkov and Vitsin, in the first place) turned a close attention to the scientific aspects of arbitration in Russia. Among the documents they drew up was the 1831 Arbitration Court Statute.

A draft General Statute of Chambers of Commerce and Industry in Russia was ready for lawmakers to enact in 1911. According to paragraph 12 of its section “Terms of Reference of a Chamber,” “the chambers shall, acting in the capacity of arbitration courts, resolve disputes arising out of commercial and industrial issues, provided, however, there is an agreement to this effect between the parties, subject to all applicable provisions of the law.” The Statute was not, however, passed at the time.

In Soviet times, the rights of arbitration courts were exercised by arbitration commissions operating at commodity and stock exchanges established in 1922. Arbitration ideas were most consistently implemented in the Foreign Trade Arbitration Commission (FTAC) created legislatively in 1932 and placed under the National Chamber of Commerce. A directive was issued by the USSR Central Executive Committee and Council of People’s Commissars on June 17, 1932.

Prior to the institution of the Foreign Trade Arbitration Commission, arbitration of foreign trade disputes by permanent nongovernmental arbitration institutions was not governed by laws at the national level or at the level of constituent republics.

The nongovernmental status of the FTAC was reflected in the appointment of its members. Initially, the FTAC consisted of 15 members who were appointed by the governing board of the National Chamber of Commerce from representatives of commercial, industrial, transport, and other business organizations and persons possessing specialized knowledge and skills in foreign trade and foreign trade legislation.

The parties to a dispute elected arbitrators from among FTAC members, and, in their turn, the arbitrators elected an umpire from among the same Commission members.

Commission members were appointed for a term of one year. Once appointed, their powers were, as a rule, renewed automatically.

New members were appointed to the FTAC to fill vacancies left by withdrawing members. This practice helped maintain stability of Commission membership and had a positive effect on the performance of the Commission’s tasks.

At their annual meetings, Commission members elected an FTAC Chairman and two deputy chairs.

Under the FTAC Statute and in accordance with established practice, the Commission chair exercised executive powers, including making decisions on such issues as acceptance of statements of claim and formation of tribunals to arbitrate specific cases.

The FTAC gave its first award on November 15, 1933.

The role of the FTAC at that early stage of its history was recognized by references made in several bilateral international trade agreements entered into by the Soviet Union in pre-World War II years as to the possibility of disputes arising out of foreign trade contracts being resolved by a permanent arbitration institution in the USSR.

The Commission dealt with about a hundred disputes in the period between 1932 and mid-1941, when this country entered World War II. Overall, in the first twenty years of its existence, the Commission issued rulings in cases involving organizations, institutions and firms from scores of countries in Europe, Asia, and America.

Legal issues arising in disputes that required arbitrators to display high standards of professionalism included such traditional and at the same time complex procedural matters as definition of a tribunal’s own jurisdiction and applicable law. In fact, the Commission’s tribunals did not apply Soviet law alone, for some cases could only be resolved by invoking foreign laws.

While in the period immediately following the end of World War II to the late 1950s, disputes between Soviet foreign trade organizations and their counterparts in East European countries did not occupy a significant place in the Commission’s work, in the next two decades the FTAC mostly focused on disputes arising in the context of economic, scientific and technological cooperation among COMECON member countries. Disputes involving organizations, firms and enterprises of other countries claimed an insignificant share during that period.

Vigorous economic ties among socialist countries led, naturally enough, to a significant increase in the number of cases examined by the FTAC every year – by the late 1980s, the Commission was dealing with three hundred cases a year. Arbitration was essentially based on application of standard COMECON documents governing the main types of economic transactions among socialist countries. A key role in expanding the scope of foreign trade arbitration and reinforcing its function of an important infrastructural element of international economic relations was played by a Convention on Arbitration of Civil Law Disputes Arising Out of Relations of Economic, Scientific, and Technological Cooperation (Moscow Convention) signed by COMECON countries in 1972.

Even though the number of disputes involving firms from non-socialist countries was insignificant, they were often very complex in terms of legal issues to be dealt with by the FTAC. Awards rendered by the FTAC in cases in this class are without a doubt interesting in legal terms, testifying as they did to the high proficiency standards Soviet arbitrators showed in the field of economic relations between countries with different socioeconomic and legal systems.

Arbitrators who dealt with disputes for the FTAC included leading Soviet experts in international business law, both of theory and practice. Those were top-class professionals in foreign trade and people of high educational and cultural standards, who, as a rule, were fluent in several foreign languages.

The FTAC was, for a considerable period of time, headed up by famous lawyers commanding high respect in and beyond this country. They included such outstanding law scholars as D.F. Ramzaitsev, D.M. Genkin, S.N. Bratus, and V.S. Pozdniakov, who made a significant contribution to national jurisprudence. They certainly played a key role in promoting foreign trade arbitration in this country as a whole and in enhancing the prestige of the permanent foreign trade arbitration institution they headed up.

The modern stage in the life of the permanent foreign trade arbitration institution, which was renamed as Arbitration Court at the Chamber of Commerce and Industry of the USSR in 1987, began practically with the start of a new age in the life of the nation as a whole and radical reforms in its socioeconomic structure and legal system.

Officially, this stage opened with the enactment of the Law “On International Commercial Arbitration” in 1993, which also introduced new Statute of the International Commercial Arbitration Court (ICAC) at the Chamber of Commerce and Industry of the Russian Federation. According to the decree adopted by the Supreme Soviet of the Russian Federation on July 7, 1993, the ICAC is the successor to the Arbitration Court at the Chamber of Commerce and Industry of the USSR.

The ICAC is now well known for its many years experience, highly qualified arbitrators, procedures fully consistent with international standards, stable and predictable practices.

The ICAC was the first arbitration court in Russia to become a laureate of the “Femida” award in 1999 for contribution to the establishment of democratic society and development of the rule-of-law state institutions.

The ICAC’s membership in the International Federation of Commercial Arbitration Institutions (IFCAI) may be regarded as another proof of its world recognition.