Commercial contracts between Russian and Western parties often contain

clauses that provide for arbitration as the parties’ choice for resolving disputes.

Generally, these clauses provide that the seat of the arbitration will be in a third

(or neutral) country, i.e., a country that is neither Russia nor the home jurisdiction

of the Western party. If the Western party is awarded damages in the arbitration

and seeks to have that award recognized and enforced by a Russian court against

assets of the Russian party in Russia, the Russian party, or the Russian court on its

own motion, may seek to block such recognition and enforcement on public

policy grounds. Denial of recognition and enforcement will have the effect of

depriving the Western party of any recourse to recover its damages in Russia.

Thus, the scope of the public policy exception to the recognition and enforcement

of foreign arbitral awards in Russia is an important issue that Western companies

seeking to engage in commercial transactions with Russian companies should

consider in advance of entering into those transactions. The purpose of this article

is to examine the scope of the public policy exception in Russia today, how it has

evolved in recent years and whether it differs in any significant respect from how

the public policy exception is applied in certain other countries.

 

The starting point for this analysis is the New York Convention (the 1958

United Nations Convention on the Recognition and Enforcement of Foreign

Arbitral Awards). The USSR ratified the Convention in 1960, and in 1991, after

the collapse of the USSR, Russia assumed full responsibility for all the rights and

obligations of the USSR under the Charter of the United Nations and its

multilateral treaties, including the New York Convention. Approximately 145

other countries, including all the major Western countries, are parties to the

Convention, making it a widely adopted treaty. The Convention is thus the basis

upon which almost all foreign arbitral awards are presented for recognition and

enforcement in Russia.

 

The Convention requires a signatory state to recognize and enforce an arbitral

award made in another signatory state unless one of the grounds specified in

Article V of the Convention exists. The grounds in Article V(1) are essentially
procedural in nature and must be proven by the respondent.1 The grounds in