On 18 June 2019, the Council for the Development of the Arbitration Process of the Ministry of Justice of the Russian Federation—the body promoting the creation of favorable conditions for development of arbitration in Russia—recommended granting the Vienna International Arbitration Centre at the Austrian Federal Economic Chamber (the “VIAC”) the status of a permanent arbitration institution (“PAI”). The Institution is expected to start operating in Russia on or before 8 July 2019, once it has been included in the list of foreign arbitral institutions recognized as a PAI.

VIAC therefore will become the second foreign arbitration institution with the right to administer a number of arbitrations in Russia, following the Hong Kong International Arbitration Centre (the “HKIAC”). The HKIAC was included in the register in April this year and, accordingly, received PAI status.

As discussed in our previous client update, following the 2016 arbitration reform, institutional arbitrations in Russia can be administered only by arbitral institutions with PAI status. At present, only six arbitral institutions have that status: five Russian based and one foreign—the HKIAC. The addition of another reputable arbitral institution such as the VIAC to the list of institutions recognized as PAIs is positive news for participants in the Russian market and the Russian arbitration community at large. In addition to expanding the menu of dispute resolution options available to businesses today, it represents a significant step towards creating a more developed platform for resolution of international disputes in Russia.

Once included in the list, the VIAC, like the HKIAC, will have the right to administer a wide range of commercial matters, including international disputes with the seat of arbitration in Russia and certain corporate disputes, such as disputes arising out of the ownership of shares in a Russian legal entity or the management of a legal entity (e.g., under a shareholder agreement) and the activities of share registrars.

However, because the VIAC does not have a separate subdivision in Russia, it will not be able to administer a number of categories of domestic disputes. Further, the VIAC will not yet be able to administer certain arbitrable corporate disputes for which a PAI is required to have specialized corporate arbitration rules. This means that disputes arising out of a company’s incorporation, reorganization and liquidation and disputes brought by shareholders to recover damages caused to a legal entity and to invalidate transactions made by a legal entity will be beyond the VIAC’s remit in Russia—for the time being.

Lord Goldsmith KC comments:

“Russian and Russian-based disputes are an important part of the diet of international arbitration. Parties involved in international transactions need to have confidence entrusting the adjudication of these disputes. It is good therefore that the recognition of the VIAC as a permanent arbitration institution will provide another choice for businesses when it comes to choosing a method to resolve their disputes and that arbitral awards resulting from disputes resolved in this way will be enforced in Russia.”