Russia: Arbitration and Dispute Resolution I

The Courts

The financial crisis of 1998 led to a significant increase in the number and complexity of disputes being referred to the commercial courts in Russia, particularly the Moscow Arbitrazhniy (commercial) Court. This was something of a baptism of fire for many of the judges who found themselves being asked to consider complex issues of fact and law, often under close scrutiny both from at home and abroad. Although many Russian lawyers will claim that Russia is a civil law system and, therefore, individual court decisions do not create precedents which are binding on other judges and courts, in practice the significance of case law has increased greatly in the last few years. As in other civil law jurisdictions, Russian judges and lawyers are realising the value of case reports that can give guidance on how previous cases were decided. A judge may not be required to follow precedents but he may be persuaded by them.

This chapter describes the court structure and the basic elements of litigation in Russia. Note that the court system is organised on a federal level and will necessary apply to every region in the country.

Calls for the reform of the Russian legal system can often be heard but perhaps the most pressing need is to improve the quality and number of judges and the court facilities in which they are required to work. An average judge in the Moscow Arbitrazhniy Court is reportedly required to handle around 450 cases each year – an intolerable workload.

Structure

The jurisdiction of the Russian courts is principally divided between the courts of common jurisdiction and the state arbitrazhniy courts, which between them deal with civil, criminal and commercial matters. There is also a separate constitutional court. It should be noted here that the arbitrazhniy courts are often referred to as arbitration courts. This can be confusing since the arbitrazhniy courts are state-run like their counterparts in the West. They should not be confused with commercial arbitration bodies that administer private arbitrations by agreement between the parties. These arbitration bodies operate independently from the state.

The Russian court system also includes federal military courts and so-called 'specialised' courts. In addition, a system of 'single judges' (mirovye sudyi) is being created to hear minor disputes that are currently referred to the first instance courts of common jurisdiction.

The structure, jurisdiction and procedure of the courts of common jurisdiction are set out in the Federal Law On the Court System of the Russian Federation and the Civil Procedural Code of 1964. The courts of common jurisdiction are organised on the basis of first instance district or municipal trial courts; second instance regional appellate courts with geographically discrete jurisdictions; and a single national Supreme Court (based in Moscow), which hears appeals from the regional appellate courts.

Under the Federal Law On Arbitrazhniy Courts in the Russian Federation a new arbitrazhniy court system was set up to deal with commercial disputes. These separate state arbitrazhniy courts have their own structure, jurisdiction and procedure as defined by the Arbitrazhniy Procedural Code.

Courts of Common Jurisdiction

Supreme Court

^

Regional Appellate

Court

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District or Municipal

Court

Arbitrazhnye or Commercial Courts

Supreme Arbitrazhniy

Court

^

Federal District Court

(cassation)

^

Regional Arbitrazhniy

Court

There are three levels of state arbitrazhniy court. At the regional level, there are the Arbitrazhniy Courts of the Constituent Subjects of the Russian Federation. These are courts of both first instance and of appeals. Next there are the Federal District Arbitrazhniy Courts, of which there are roughly ten throughout Russia. These district courts hear cassation applications (which are described below) from the regional courts. The Russian Supreme Arbitrazhniy Court occupies the highest level and exercises a supervisory role over the regional and district arbitrazhniy courts.

Although jurisdictionally separate, the Supreme Court and the Supreme Arbitrazhniy Court occasionally publish joint resolutions summarising their practice in relation to particular issues and giving an authoritative interpretation of current law.

Courts of Common Jurisdiction: First Instance Jurisdiction

In effect, any matter not assigned to be dealt with elsewhere is dealt with by the courts of common jurisdiction.

Cases are normally commenced in the first instance district or municipal courts. In very limited circumstances – for example, in cases involving state secrets – a second instance regional appellate court may act as a tribunal of first instance. The Supreme Court acts as the first instance court for disputes arising in connection with the presidential and parliamentary elections and some other administrative matters.

A defendant should usually be sued in the first instance court for the area in which he resides, or, if the defendant is a firm, in the first instance court for the area in which it has its registered office. If the defendant's whereabouts are unknown or if the defendant is resident abroad, then the claimant may be able to issue proceedings in the court of the region in which the defendant's property is located.

The quorum of a first instance district or municipal court is usually one professional judge, but in some circumstances it is a judge and two lay citizen representatives.

Courts of Common Jurisdiction: Appellate Jurisdiction

The final judgment of a first instance court becomes enforceable after ten days. During this period each party has a right of appeal on fact and/or law to a regional appellate court. The appeal must be filed with the court whose judgment is being appealed.

No new evidence may be adduced on appeal unless it was not possible to present that evidence to the lower court. Respondents may reply to the points raised in the appeal by submitting a written response.

The quorum of an appellate court will usually be three professional judges.

Decisions taken by a regional appellate court can be further appealed to the supervisory appeal instance, the Presidium of the regional appellate courts, and then to the Supreme Court. The Supreme Court acts the final court of appeal. It has the authority to reverse decisions of all first instance courts and rulings by appellate courts. Appellate proceedings before the supervisory appeal instances, including the Supreme Court, can only be brought by high-level judges and officials from the Prosecutor-General Office listed in Articles 320 and 321 of the Civil Procedural Code.

State Arbitrazhniy Courts: First Instance Jurisdiction

The jurisdiction of the state arbitrazhniy courts is confined to cases of a commercial or business nature. Any other type of dispute requiring a hearing in a public forum must be tried by the court of common jurisdiction.

As a general rule, an action should be started in the regional court for the area in which the defendant resides. If the defendant is a firm, then the action should be begun in the first instance court for the area in which it has its registered office.

If there are two or more defendants and they are located in different constituent subject territories of the Russian Federation, the claimant can start the action in the relevant court for any of the relevant constituent subject territories.

If the defendant's whereabouts are unknown or if the defendant is resident abroad, then the claimant may be able to issue proceedings in the court for the region in which the defendant's property is located. In addition, if it is a contractual claim, legal action can be started in the first instance court for the region in which the agreement is meant to be performed. Whatever the location of the first instance court, it is sometimes possible to transfer a case to an alternative arbitrazhniy court of the same level of competence.

The quorum in a first instance state arbitrazhniy court is usually one professional judge.

State Arbitrazhniy Courts: Appellate Jurisdiction

Decisions of first instance arbitrazhniy courts become enforceable after one month and during this time a party has the right of appeal on fact and/or law to the appeals instance of the regional court that first heard the case. The appellant cannot put forward new claims or adduce new evidence, unless it was not possible to present that new evidence at the first instance trial.

The appellant must serve a copy of the appeal documents filed with the court on all the other parties at the first instance trial. They then have a chance to enter a written response to the points raised in the appeal. The response must be filed with the appellate court before the date of the appeal hearing.

Under the Arbitrazhniy Procedural Code of 1995 there is a distinct appeal procedure called causation, under which a Federal District Arbitrazhniy Court has the power to cancel a decision or ruling of a regional arbitrazhniy courts or against appeal rulings by such courts.

The final court of appeal is the Russian Supreme Arbitrazhniy Court, which has a supervisory appellate function empowering it to revise the decision of any state arbitrazhniy court that is illegal or lacking in legal substance. Appellate proceedings before the Supreme Arbitrazhniy Court can only be brought by the chairman of the Supreme Arbitrazhniy Court or by the prosecutor-general of the Russian Federation.

The quorum of an appellate state arbitrazhniy court is always an uneven number of judges. A minimum of three is required, irrespective of the level at which the appeal is heard.

For further information please contact Sergei Yuriev at:

[email protected]