HKIAC BECOMES FIRST FOREIGN INSTITUTION ACCREDITED TO HEAR RUSSIAN CORPORATE DISPUTES

On 4 April 2019, the Hong Kong International Arbitration Centre (HKIAC) received approval to be recognised as a "permanent arbitration institution" in Russia. The HKIAC is the first foreign institution to receive such approval, which marks an unprecedented change in the Russian arbitration landscape. Obtaining the "permanent" status means that the HKIAC will be able to administer arbitrations which relate to certain Russian corporate disputes.

The HKIAC applied for "permanent arbitration institution" status in the Summer of 2018. After an initial period, the Council for Development of Arbitral Proceedings at the Russian Ministry of Justice (the "Council"), which is responsible for approving such applications, voted overwhelmingly in favour of the application on 4^th April 2019.

The requirement for the Council's approval in order to obtain the status of a "permanent arbitration institution", i.e. an institution which administers arbitrations on a permanent basis, as opposed to ad hoc administration, was introduced by the Russian Federal Law on Arbitration (Arbitration Proceedings) (the "Law") in September 2016. One of the named reasons for the reform was an effort to eliminate so-called "pocket" arbitration institutions in Russia (i.e. those created by large corporations or banks to hear their disputes with counterparties). Although the regime was slightly modified following the changes that entered into force at the end of March 2019, it still provides that a foreign arbitration institution can administer tribunals hearing corporate disputes with respect to Russian companies only if it has a "permanent" status. Russian corporate disputes are those related to the management of, or participation in, Russian legal entities.

In order to obtain "permanent" accreditation, a foreign arbitration institution is required to meet only one criterion – it should be internationally recognised. The HKIAC was founded in 1985 and is an independent and not-for-profit organisation that heard a total of 265 arbitrations in 2018, 71.7% of which were international in nature. Notably, the HKIAC is not the first foreign institution to apply for "permanent" accreditation: a Kazakh institution, the International Arbitration Court of the Juridical Centre (IUS) has also applied but was unsuccessful.

The accreditation reflects the HKIAC's efforts aimed at meeting the growing demand of Russian businesses to have disputes administered by Asian arbitral institutions, as well as more traditional form.

It remains to be seen if other foreign arbitration institutions will follow the HKIAC's lead in order to gain accreditation under Russian law to hear Russian corporate disputes.

Update

Following the Council's vote, on 25 April 2019 the Russian Ministry of Justice signed a decree including HKIAC into the list of  foreign arbitration institutions with "permanent" accreditation, which is available on its website.

For more information, please contact Nicholas Peacock, Partner (London), Alexei Panich, Partner (Moscow), Alexander Khretinin, Senior Associate (Moscow), Olga Dementyeva, Associate (London), or your usual Herbert Smith Freehills contact.