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Back Pocket Arbitration Courts

18.12.2013 15:34 / Vedomosti

Vedomosti has received a copy of third party arbitration courts reform draft by the Ministry of Justice. The draft has been submitted to the Government and is now being reviewed by the President, according to a Ministry of Justice source.

Third party arbitration courts can settle any debate, if the law permits. The key advantage of third party arbitration is the speed of proceedings and trust from both parties, says Deputy Chairman of the Russian Union of Industrialists and Entrepreneurs Arbitration Court Alexander Zamaziy, and judgment is passed by an expert.

The Ministry of Justice, however, warns of abuse. Third party arbitration courts may be set up by any company, sometimes even for the purpose of settling a particular dispute, says Zamaziy, by simply filing a notice with a state court. Rostech, Sberbank, Lukoil, Morton Construction Group all have their own third party arbitration courts. Frequently arbitration courts have the final say on a contract, the counterparty is under duress, says Aide to CEO at Gradient Alpha Vadim Tkachenko.

The Ministry of Justice proposes to introduce a ban on third party arbitration courts reviewing cases that involve their ‘parent companies’, to allow courts be incorporated as not-for-profit organizations only, with prior approval from a special Ministry of Justice committee. Courts will adopt and publish procedures, set up an internal committee to appoint judges. This will prevent abuse, say officials. Chamber of Commerce third party arbitration courts will not have to re-register, on condition that they adjust their procedures and internal structure.

The Ministry for Economic Development generally supports the Ministry of Justice standpoint, said a representative: it is “a must” due to mounting abuse.

One-off arbitration courts are unlikely to be re-registered with the Ministry of Justice, says Tkachenko, and those in need of back pocket arbitration courts will easily cover up affiliation ties.

Sergey Titov

Corporate and contract lawProject Group №2