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Russia

Entering into an arbitration agreement, the parties sometimes provide for various alternatives. This happens quite often for example in loan contracts between Russian borrowers and UK based international financial institutions. In an attempt to bargain a favorable position in jurisdictional terms, the lender may want to reserve its right to go to a court of law. This is usually attained by supplementing the arbitration agreement with such opportunity, that is, by specifying that besides the option of having their dispute arbitrated the parties may initiate legal proceedings in, say, a UK court. Pursuing this bargaining path, the lender may also seek that a borrower unilaterally waive its right to challenge the jurisdiction chosen by the lender in case of a dispute. However, a lender should carefully exploit its bargaining power, since not all options will necessarily be viable.

Both the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards and Russian legislation fail to clearly require that an arbitration agreement stipulate an exclusive dispute resolution forum. This may be interpreted as allowing for an alternative to arbitration, for example, a court of law. Based on some secondary sources, it seems that Russian case law also supports such an interpretation. And such an alternative arbitration agreement should be enforceable. It should be noted, however, that in this case the arbitration should take priority over the court.

It is less clear whether an arbitration agreement, in allowing for arbitration at the discretion of one party, may bar the other party from initiation of the same arbitration. This procedural inequality raises the question of enforceability of such arbitration clauses. They could be viewed as inconsistent with the Convention and Russian law. Even if arbitrators assert jurisdiction under this arbitration clause, a potential arbitral award may be refused enforcement in Russia on the basis of inconsistency. It is also possible that an arbitration clause might be rendered invalid only in the part limiting the other party's right. Still, in the absence of any case law that could shed light on the matter, it is at present difficult to predict to what extent, if any, this arbitration clause is enforceable.

For clarification on this and other matters Russian case law should be constantly monitored.

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