Originally from Between East and West: Essays in Honour of Ulf Franke

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I. INTRODUCTION

Transition to a market economy in the Russian Federation made it necessary to introduce substantial changes to the legal order created in the previous historical period. One of the main goals of law reform was to adjust existing regulation to the new business environment.

One of the immediate results of abandoning a centralized economic system was the rapid growth of the number of private enterprises involved in business activity including cross-border transactions. The old legal infrastructure turned out in practice to be inadequate for effective dealing with problems arising from business relationships in a free market system. Private business organizations and new commercial practices that became an important factor of everyday life had not been known to a centralized economy where the State played a dominant role.

Arbitration as a means of dispute settlement had been an important aspect of legal regulation of foreign trade activities in the Soviet Union in previous decades. A long-standing tradition of extensive use of and a positive attitude towards international commercial arbitration that had developed in the Soviet period was followed with little hesitation and suspicion by the new Russian business community, which was represented to a great extent by the private sector. International arbitration continued to be used as almost the only alternative in dealing with international commercial disputes considered to be the most adequate dispute settlement mechanism in the field of international trade, commerce, and investment. Today, development of arbitration and other means of ADR forms part of general economic and legal policy in modern Russia. Arbitration, with its flexibility and dynamism, is considered to have a significant potential in overcoming difficulties associated with the process of creating a sound business environment which is necessary for stable economic development.