So-Called "Russian" Institute of Modern Arbitration
and "Russian" Arbitration Center:
Examining Their Role in Russian Arbitration
the Hierarchies of State Power Affect
Arbitration in Russia
Compiler: Alexander Muranov
The So-Called “Russian” Institute of Modern Arbitration and “Russian” Arbitration Center : Examining Their Role in Russian Arbitration. GONGO-Structures? Declarations and Reality. How the Hierarchies of State Power Affect Arbitration in Russia / Compiler : Alexander Muranov. — Moscow, 2020. — 172 p. — (From the history of arbitration “reform” in Russia).
This work is a study of the status of the Russian Institute of Modern Arbitration and Russian Arbitration Center (these structures being among the few that have obtained the right to administer arbitration from the Ministry of Justice). The study also examines their activity in the field of Russian arbitration, as well as their relations with third parties.
The methodology of this study is very simple: the information was initially collected from publicly available sources, and then logically analyzed and generalized based on the compiler’s many years of experience in Russian arbitration and his knowledge of domestic reality (including the peculiarities of how public authorities operate in Russia).
The study concludes that the statements of RIMA and RAC with regards to their missions and goals do not correspond to existing facts. RAC is not what it claims to be, particularly to foreign entities. It maintains a policy of misleading others, Russian society and the foreign arbitration community in the form of suppressio veri. RAC is a state-created and state-controlled entity, a GONGO (Government-Organized (Operated) Non-Governmental Organization). In Russia the government is afraid of arbitration; as a result, it has turned RAC into a tool for the subjugation thereof.
Not all of the abbreviations used and persons featured in this study are indicated below.
GONGO (Government-Organized (Operated) Non-Governmental Organization) — a nominally non-governmental entity that is, however, created upon the initiative and with participation of the government, catering to its interests and willingly concealing any affiliations therewith.
at the RF CCI — International Commercial Arbitration Court at
the Chamber of Commerce and Industry of the Russian Federation.
RAC — Russian Arbitration Center.
RIMA — Russian Institute of Modern Arbitration.
Council — Council for Development of Arbitration under Ministry of Justice of the Russian Federation.
FCA — Federal Chamber of Attorneys of the Russian Federation.
RF — Russian Federation.
Anton V. Asoskov — member of the RAC Board, member of the Council
for Development of Arbitration.
Roman S. Bevzenko — previously member of the RAC Board, member of the Council for Development of Arbitration.
Elena A. Borisenko — chairperson of the Supervisory Board of the International and Comparative Law Research Center — one of the founders of RIMA, Deputy Chair of Gazprombank Management Board, former Deputy Minister of Justice, previously partner of Ivanyan & Partners, an active participant in arbitration “reform”.
Mikhail L. Galperin — Representative of the Russian Federation at the European Court of Human Rights, Deputy Director of the Department of International Law and Cooperation, Deputy Minister of Justice of the Russian Federation, one of the key Ministry of Justice officials engaged in the arbitration “reform”, previously Chair of the Council for Development of Arbitration.
Andrey A. Gorlenko (Jr.) — until recently (December 2019) General Director of RIMA, presently member of the RAC Board and a partner of Ivanyan & Partners.
Andrey A. Gorlenko (Sr.) — father of the above, for a long time occupied or still occupying senior positions in various structures under Vladimir Lisin’s control.
Khristophor V. Ivanyan — partner of Ivanyan & Partners (located at the same address as RIMA), member of the Supervisory Board of RIMA, previously member of the Supervisory Board of the International and Comparative Law Research Center — one of the founders of RIMA.
Ilya I. Kryzhanovsky — head of the Foundation for Legal Education and Research — one of the founders of RIMA, member of the Supervisory Board of the International and Comparative Law Research Center — one of the founders of RIMA.
Alyona N. Kucher — member of the Council for Development of Arbitration, previously member of the RAC Board.
Vladimir S. Lisin — Russian oligarch, one of the richest people in Russia, one of the initiators and financial sponsors of the arbitration “reform”, president of ANO Sports Arbitration Chamber, which has obtained permission from the Ministry of Justice to administer arbitration.
Olga B. Motenko — founder of LLC LF Academy — one of the founders of RIMA, general manager of LLC CC St. Petersburg International Legal Forum, member of the RIMA Supervisory Board, member of the Supervisory Board of the International and Comparative Law Research Center — one of the founders of RIMA.
Denis V. Novak — Deputy Minister of Justice of the Russian Federation, Chairman of the Council for Development of Arbitration.
Yury S. Pilipenko — President of the Federal Chamber of Attorneys of the Russian Federation — one of the founders of RIMA, member of RIMA Supervisory Board, member of RAC Board, RAC arbitrator.
Vasiliy S. Torkanovsky — partner of Ivanyan & Partners, previously Chair of the Supervisory Board of the International and Comparative Law Research Center — one of the founders of RIMA.
are you from, wonderful child?
According to Article 11(1) “Judicial Protection of Civil Rights” of the Civil Code of the Russian Federation, “1. Protection of violated or contested civil rights shall be performed by a court, arbitrazh (commercial) court or arbitral tribunal (hereinafter — the court) in accordance with its competence”.
Federal Law dated 29 December 2015 No. 382-FZ “On Arbitration (Arbitral Proceedings) in the Russian Federation” (Law on Arbitration) introduced in its Article 2 “Basic Notions Used in the Present Federal Law” a distinction between arbitration and the administration of arbitration:
“2) arbitration (arbitral proceedings) is the process of resolution of a dispute by an arbitral tribunal and issuance of the award by an arbitral tribunal (the arbitral award);
3) administration of arbitration is the performance by a permanent arbitration institution of the functions of organizational support of arbitration, including ensuring the selection, appointment or removal of arbitrators, record keeping, and organization of collection and distribution of arbitration fees, with the exception of the functions of the arbitral tribunal in resolving a dispute;”.
The Law on Arbitration also established that arbitration may be administered only by a non-profit organization that has been granted the right to exercise the functions of a permanent arbitration institution (PAI). This must be granted by the Ministry of Justice of the Russian Federation (Ministry of Justice) in the manner prescribed by this law (before March 2019 it was the Government of Russia that granted such a right).
The Ministry of Justice grants permission on condition that the Council for Development of Arbitration (created by the Ministry itself; see below, paras. 114 and 119) recommends that such permission be granted.
Entities that have not been granted the right to exercise the functions of a PAI by the Ministry of Justice are prohibited from exercising any functions in the administration of arbitration.
Only four Russian organizations and two foreign ones have been granted the right to exercise PAI functions since the Law on Arbitration entered into force on 1 September 2016 (see below, paras. 176 and 11).
The Autonomous Non-Profit Organization (ANO) Russian Institute of Modern Arbitration (RIMA) is one of them. RIMA was established on 17 August 2016.1
RIMA declares its mission to be as follows (Annex 1):
“...To become a free and open platform. It wishes to unite Russian and foreign specialists, businesspeople and scholars who are interested in promoting ADR in Russia and who are ready to create a high quality school of arbitration comparable to the best international examples”.2
“The Russian Institute of Modern Arbitration is aimed at promoting and popularizing arbitration in Russia. It has the goal of increasing the attractiveness of Russia as a place for business and dispute resolution”.3
The Russian Arbitration Center (RAC) is a PAI created under RIMA, meaning it is a “structural subdivision ”4 within the meaning of Article 44(1) of the Law on Arbitration.
RIMA states with regard thereto (Annex 2):
Russian Arbitration Center’s function is to administer
arbitration in a modern and efficient way.
The Russian Arbitration Center was created to assure that even the most complex disputes are resolved in a professional and impartial way in strict accordance with the applicable rules.
The structure of the Russian Arbitration Center and Arbitration Rules, as well as the professional approach of the Russian Arbitration Center are based on the experience of leading international arbitration institutions”.5
RIMA (RAC) has three territorial divisions:
4 See Article 1(6) of the Regulation of Russian Arbitration Center under ANO Russian Institute of Modern Arbitration (https://centerarbitr.ru/wp-content/uploads/2019/02/Положение-РАЦ-200219_final.pdf).
there is nothing hidden that will not be disclosed, and nothing
concealed that will not be known or brought out into the open.
The present work is a study of the specific features of the status of RIMA and RAC, their place and activity in Russian arbitration and their relationship to foreign entities.
The task of the present study is to check whether what RIMA and RAC say about their mission and purpose (see above Section “What is the Russian Arbitration Center?”) corresponds to reality and whether they really are what they claim to be.
The methodology of this study is very simple: the information was initially collected from publicly available sources, and then logically analyzed and generalized. This analysis was also aided by the compiler’s many years of experience in Russian arbitration and his knowledge of domestic reality; including the peculiarities of how public authorities operate in Russia.
The following information was collected while undertaking the specified task:
On the basis of the data analysis and generalization, conclusions of a prolegomenic nature were made on the specific status of RIMA (RAC) in Russian arbitration (set forth in two separate sections (see, for instance, Section XVI “Final Conclusions Regarding RAC. Reasons for Such a State of Affairs with RAC”) or scattered throughout the text of the study).
Certain methodological aspects of the present study are given below.
The purpose of this study is a purely epistemological one, including in the context of criticizing the way that RAC presents knowledge in relation to itself, and also taking into account the need to consider the relationship between illusion and reality, as well as the distinction between opinion and knowledge in relation to RAC.
As already pointed out, the present study is prepared from open sources in the public domain. Therefore, it contains many references to Internet resources.
Consequently, this study does not claim to contain new information. The facts specified herein are already familiar to many already engaged in Russian arbitration. Nor do the compiler’s conclusions contain anything new in comparison with what he has already said or written.
Moreover, it cannot be considered sensational. For those familiar with Russian reality what it describes will seem rather humdrum and banal. However, as they say, the more banal the words, the more truth they hold.
The idea of this study is, inter alia, to put together already known facts to create a fuller picture made up of the separate pieces of a mosaic.
The emphasis in this study is on factual matters. For the purposes of this study, facts shall mean information taken from open sources in the public domain. The compiler has not been able to check them all.
As to the conclusions, it should be stressed once again that they could be drawn by anyone familiar with the rules of logic, with many years’ experience of work in Russian arbitration and generally aware of domestic reality (including the peculiarities of how public authorities operate in Russia).
In the light of the foregoing, the compiler does not feel he can give himself the distinguished title of “author”. He has put together information that may easily be found, accompanied with short comments, the essence of which is plain for the attentive reader to see. This has not been such a difficult task.
No rumors were taken into consideration in the course of the research (for instance, those with regards to the family links between Elena Borisenko and Olga Motenko, see below).
This study was prepared over a short time period. It is mostly utilitarian and does not claim to be scientific. Nor does it claim to be exhaustive since it is limited to the propaedeutic.
This study was prepared by the compiler in a private capacity, on his own (though with assistance from Georgy Suvorov) and at his own expense, not by anyone’s order or at anyone else’s expense.
Reading the study should not give the impression that the compiler is excessively emotional about arbitration “reform”. It is not emotion, but methodology and the evidence found that set the tone of the conclusions drawn below.
This was prepared by the compiler, on the one hand as a purely private person, and on the other hand as a journalist according to the Law of the Russian Federation dated 27 December 1991 No. 2124-I “On Mass Media”.9 It is not associated with other organizations where he works, or of which he is a member,10 or collaborator.
the purposes of the journal International
Commercial Arbitration Review,
where the compiler is the editor-in-chief.
10 Outside the scope of the present study, the compiler is an attorney, partner of the Muranov, Chernyakov & Partners Law Firm, associate professor of MGIMO University, and acts as a party representative and arbitrator in various litigations.
The compiler of this study is of the opinion that for the correct assessment of the information shown below it has to be considered in a joined-up perspective. To return to the image of a mosaic already used, what the various elements mean when considered in isolation may remain unclear. However, when put together, their true meaning is unveiled.
Nothing in the present study may be interpreted as constituting assertions that specific persons are guilty of committing any offences.
This study is not intended to change anything or to call on anyone to take action.
Rather, it is intended for thoughtful interested parties in the Russian Federation, especially young lawyers.
It is also aimed at the future, when some may be interested in reading about the features of the current arbitration “reform” in the Russian Federation.
In addition, it might be relevant for foreign specialists interested in Russia and the peculiarities of our arbitration sector.
Finally, searching for truth is a value per se which already justifies the preparation of the present study. “Truth and liberty have this excellence, that all one does for and against them serves them equally well” (Victor Hugo).
The compiler stresses that he does not regularly conduct studies similar to this one on a professional basis, nor does he have the opportunities that others might have to do so, and therefore it may be imperfect.
The compiler also realizes that some people referred to in the study may state that it is not objective, particularly because the compiler is, allegedly, biased in his attitude toward arbitration “reform”.
The compiler would reply that he has set out his understanding of the situation and the said people may share their ideas based on the same or other facts (hopefully, not alternative ones).
At the same time the compiler, of course, does not hide his skepticism regarding arbitration “reform” in Russia. He recalls that in 2014-2016 to a degree he contributed to it and its implementation. In particular, being on the lists of arbitrators of the International Commercial Arbitration at the Chamber of Commerce and Industry of the Russian Federation (“ICAC at the RF CCI”) and the Maritime Arbitration Commission at the Chamber of Commerce and Industry of the Russian Federation (“MAC at the RF CCI”), as well as being a member of the ICAC Presidium and deputy chair of the MAC and having done a lot for the promotion of their image.
At the same time, he maintained a cooperative relationship with RAC, organized the “Russian Arbitration Day - 2018” jointly with it,11 and issued a collection of articles based on its results, being one of the learned editors thereof.12
However, when in 2017 he understood what RAC and arbitration “reform” really were, he refused to participate in the “Russian Arbitration Day” and informed RAC that further cooperation was impossible due to a difference in values (fairness, independence, impartiality and transparency with regard to significant relevant issues).
For the same reason, the compiler intentionally refused any posts offered at the RF CCI MAC and before that, had refused any positions in the ICAC. He further criticized the “reform” so actively that the RF CCI removed him from the lists of ICAC and MAC arbitrators.
The compiler’s refusal of these posts and prospective opportunities to pursue a career within the framework of arbitration “reform” (in particular in cooperation with RAC) was driven by his wish to be able to express his opinion freely and conduct independent research in the area of Russian arbitration.
In view of the above, the compiler does not hide that his goal could be seen to be a selfish one: the wish to enjoy freedom of speech and exercise his research interests in the area of Russian arbitration history and practice, including with respect to those arbitration values that the compiler considers most important.
Therefore, this is nothing but a value-oriented study and seeking out any ulterior motive such as bitterness or envy is pointless.
This study may also be seen as the compiler’s attempt to redeem himself of the harm which, unfortunately, was caused to Russian arbitration by his involvement in 2014-2016 in the implementation of arbitration “reform”.
In the present study for the sake of convenience the term “RAC” may be used instead of “RIMA” where the use of the latter would have been more accurate.
Internet resources referred to in this study are for the most part in Russian.
The 43 annexes (assorted evidence in Russian: documents, web-pages etc.) which accompany the Russian version of this study are enclosed with this English version in part only (if they are originally in English, not in Russian).
This study is the first from the series “On the history of arbitration ‘reform’ in Russia”: it will be followed by others.
On February 10, 2020 in connection with this study a press release was published on the official website of the RAC which stated that “the allegations made by A. Muranov in relation to the RAC and RIMA... as well as various individuals that are associated by A. Muranov with RIMA are false and unfounded”.13
To a suggestion that a public debate be held on which is false — this study or the said press release (because, as is known, tertium non datur) — the RAC made no response.
Ceterum censeo reformationem delendam esse.
Russia everything is a mystery, and nothing is a secret.
Anne de Stael
As has already been said, nothing stated below will come as a surprise to those familiar with Russian reality. This situation is quite normal for Russia.
But that does not mean that it is acceptable.
RAC has very close ties with the Ministry of Justice, the Government of the Russian Federation, JSC Gazprombank and the state corporation Rosatom.
An entity officially controlled by the state corporation Rosatom is the founder of RAC.
JSC Gazprombank most likely stands behind another founder of RAC: the Foundation for Legal Education and Research.
RAC’s statement that its structure is transparent14 does not match the facts.
RAC has very close ties with Ivanyan & Partners - “the king of public procurement” - which is appointed by the Ministry of Justice and the Ministry of Finance of the Russian Federation, inter alia, on an exceptional basis, without tenders or a transparent procedure for public procurement of services. They are appointed to provide services to the ministries for tens of millions of US dollars.
RAC received an “arbitration” license from the Government of the Russian Federation extremely quickly and easily, unlike almost all other applicants. A privileged regime for obtaining permission was established for RAC, while discrimination, double standards and violations of the principle of equality were shown by the Ministry of Justice towards other applicants.
RAC, without meeting any of the requirements (grounds) for it, was granted the right to use the word “Russian” in its name by the Ministry of Justice for reasons unrelated to the law.
This was done through former general director of RIMA and executive administrator of RAC Andrey Gorlenko. He is linked to the Russian oligarch Vladimir Lisin, one of the financial sponsors of arbitration “reform” in Russia, who has a particular interest in arbitration.
RAC painstakingly conceals data on the beneficiaries of its founder, the Foundation for Legal Education and Research. The entities behind the Foundation were registered at mysterious premises at an address for mass registration of legal entities while their managers are nominees.
The reason for this is that presumably JSC Gazprombank stands behind the Foundation.
RAC has close ties with a person who used to organize and conduct gambling without proper authorization.
A member of the Supervisory Board of RIMA, member of the Board of RAC and arbitrator of RAC, and President of the Federal Chamber of Attorneys of the Russian Federation Yury Pilipenko is implicated in a scandalous situation over a conflict of interest (his offshore company leases the premises to the Federal Chamber of Attorneys and the information about this is concealed). RAC is silent about this situation.
Members of the Board of RAC, who are simultaneously members of the Council for Development of Arbitration (the Ministry of Justice issues arbitration “licenses” according to its recommendations), vote at council sessions in violation of the rules on conflict of interest. They vote predominantly and consistently against granting permission to other applicants (with the exception of five cases when the Ministry of Justice suggested voting otherwise, including in the case of RAC itself).
RAC makes every effort to promote control by the Ministry of Justice over the Council for Development of Arbitration, as well as ensuring that no one can obtain a recommendation without the Ministry’s say so.
Information on the sources of RAC finance (over EUR 1 million per year) is carefully concealed. This goes against proper standards, especially given that RAC asserts that it does not provide administration services in the area of arbitration, but is instead engaged in public activity similar to the administration of justice by state courts.
The reasons for concealment of this information are: 1) an unwillingness to reveal connections with persons affiliated with the state; and 2) an intention to create the deceitful impression that RAC is independent.
At the same time, taking Russian reality into consideration, it appears that the sums listed in the organization’s official financial reports constitute only part of the finances for RAC and persons related thereto.
It cannot be ruled out that Vladimir Lisin’s companies may secretly be providing financial support to RAC in exchange for various services.
Specific arrangements may take place between RAC and Rosatom providing a privileged regime to the state corporation for the consideration of disputes involving entities under its control.
The possibility that state corporation Rosatom finances RAC in a non-transparent manner and that RAC may exercise the functions of a “puppet” arbitration center for Rosatom cannot be excluded.
RAC and the aforementioned Ivanyan & Partners may collaborate not just on information and legal matters but also over finances (it is entirely possible that the law firm may be secretly financing RAC through rent payments).
The fact that this law firm is the sole supplier of services for Ministry of Justice and the Ministry of Finance needs for huge sums of money may be evidence that the Russian Federation, through the law firm, is paying for the services of foreign lawyers while not wishing to disclose such information.
RAC claims that it does not provide arbitration administration services but in fact conducts public activities similar to the administration of justice by state courts.
RAC is an ardent opponent of competition in the arbitration services market, it fears competition because of a desire to preserve its unjustified privileges.
RAC is involved the oligopolistic division of arbitration in Russia along with the RF CCI and the RUIE (Russian Union of Industrialists and Entrepreneurs).
RAC is one of the tools for the elimination of independent regional arbitration centers in Russia.
The Russian authorities launched the arbitration “reform” to subject arbitration in Russia to state control.
State control and lack of competition in arbitration is a continuation and reflection of the policy of subordinating the state courts to the executive branch. This deprives the courts of real independence. Now the executive branch (the Ministry of Justice) has even extended its powers to Russian arbitration.
In fact, RAC is a GONGO (Government-Organized (Operated) Non-Governmental Organization). This is a non-governmental public structure which, although created by a government initiative and with involvement of public authorities and operating in the interests of the government, at the same time deliberately conceals its connections with the government.
RAC was not only created to make a false impression on the Russian public that there are independent arbitration institutions in the Russian Federation.
RAC is also a tool aimed at foreign onlookers, to mislead them for the following purposes:
The events held by RAC are, inter alia, a platform to disguise the genuine essence of RAC as a GONGO.
At the same time, it is worth noting that with the creation of RAC there was also another goal: a number of Russian officials gaining control over a share in the arbitration services market with regard to international disputes through weakening the position of ICAC at CCI RF.
Summarizing the above information, it can be concluded that the RAC is not a truly independent arbitration institution and that it benefits from significant privileges that are not available to other entities in the Russian Federation.
The facts show that the Ministry of Justice maintains, in respect of RAC, a policy of favoritism (in the form of cronyism15) in violation of the principles of equality and prohibition of discrimination against entities.
The statements by RIMA and RAC on their missions and goals do not match the available facts.
RAC is not what it claims to be. It operates a policy to mislead others, Russian society and the foreign arbitration community in the form of suppressio veri.
This is a case of history repeating itself: Soviet propaganda claimed that the Chamber of Commerce and Industry and the Foreign Trade Arbitration Commission of the USSR within it were independent public institutions. In fact, in secret documents the government recognized the fact that the Chamber of Commerce was answerable to them.
The printed version of the “Guide to Regional Arbitration” (vol. 7 (2019)), prepared by Global Arbitration Review (GAR), reported with regards to RAC (Annex 61):
is a controversial organization in Russian arbitration circles,
where some believe it is secretly backed by the government. Such
fears are fueled by a lack of clarity on its ownership structure and
source of funding.
While doubts persist, it is best approached with caution”.
At the same time, the electronic version of the same “Guide to Regional Arbitration” indicates (Annex 62):
funding is an occasional topic of conversation in Russian
arbitration circles, with the central question being who really
funds it. This talk is ‘very Russian’ and focusses on
the presence of shell companies in the ownership chains of some of
its five founders (the name for shareholders of non-profit
organizations in Russia) combined with the fact no founder is
obviously wealthy. Nor does revenue from current caseload appear to
cover RIMA’s current operating budget ($1.1 million or so).
RIMA says that the fact the founders in question are ‘foundations’ insulates them entirely under Russian corporate law from any external control — and by extension also RIMA.
Still, some regard it as important to flag this debate”.16
Law360.com (a Lexis Nexis Company) notes (Annex 7):
“The Vienna and Hong Kong centers now join three institutions in Russia that are able to administer Russian corporate disputes, providing options to international businesses that may be wary of local arbitral institutions with ties to Moscow amid lingering concerns of undue influence and possible corruption”.17
RAC heads the list of these local arbitral institutions.
The reasons that led to this state of affairs are listed in more detail below in Section XVI.
Nobody denies the right of RAC to present its own views on the facts and statements given in this study.
is a practice of attributing powers of authority to sidekicks or
confidants, a sort of favoritism. It is particularly notable among
politicians, and organizations acting in their support. It includes
appointing “pals” to senior positions, providing them
with workplaces and other benefits regardless of their expertise.
Cronyism emerges when the benefit-giver (the appointing one) and the
beneficiary (the appointed one) are in social and business ties with
each other. The appointer’s need for support of his own
proposals, in the line of duty in particular, is commonplace. For
that purpose, a loyal assistant (the appointed one) becomes engaged,
and the latter will endorse all of the proposals, never voting “nay”
or expressing an opinion contrary to that of the patron.
16 https://globalarbitrationreview.com/insight/guide-to-regional-arbitration-volume-7-2019/1178466/wh- itelist-institutions-worth-a-closer-look-
RIMA was among the first to be granted the right to exercise the functions of a PAI18 as early as 27 April 2017,19 just eight months after its incorporation. Despite its short history, the Ministry of Justice and the Government of the Russian Federation decided that it met, inter alia, the “reputation” criterion enshrined in Article 44(8)(4) of the Law on Arbitration.20
With regard to RAC being granted PAI status the Government of the Russian Federation stated on its website:
“The Autonomous Non-Profit Organization ‘Institute of Modern Arbitration’ has a renowned reputation in arbitration in connection with its practical, learned and educational activity aimed at the development of arbitration in Russia ...” 21
In one of the documents submitted by RIMA as part of its application to obtain the right to exercise PAI functions it emphasized that it had a “renowned reputation” in the said sphere (see the Note on Autonomous Non-Profit Organization Institute of Modern Arbitration).
At the same time and in the same document the “renowned reputation” of RIMA actually came down to the following, as of the moment of submission of the application:
Some of the events in which RIMA listed its participation were organized by RIMA’s founders, and the 8th IBA Annual Conference “M&A in Russia and CIS” put on the same list, was, in fact, organized by the Association of Participants in Assisting in the Development of Arbitration Proceedings (hereinafter also referred to as the Arbitration Association, RAA). This last has, so far, tried three times without success to obtain similar permission from the Ministry of Justice.
right to exercise the functions of permanent arbitration institution
(PAI) is granted to non-profit organizations by the Ministry of
Justice (previously - by the Government of the Russian Federation)
following the recommendation of the Council for Development of
Arbitration in the manner prescribed by Article 44 of the Law on
19 See the Russian Government Order dated 27 April 2017 No. 799-r (http://static.government.ru/media/files/nSWrnBJ0IBQFq6NdTTbu1IyUCKAk6XTO.pdf).
20 “8. The right to the exercise functions of a permanent arbitration institution may be granted or refused to a non-profit organization under which a permanent arbitration institution is created pursuant to the analysis of its compliance with the following requirements:
4) the reputation of a non-profit organization under which a permanent arbitration institution is created, the scale and nature of its activities, taking into account the composition of its founders (participants) allowing for a high degree of organization for the activities of the permanent arbitration institution, including in terms of financial support for the creation and the activities of the relevant department, and the exercise by the specified organization of activity aimed at development of arbitration in Russia”.
Unlike RIMA, attempts by all the other applicants to obtain the right to exercise the PAI functions were unsuccessful (apart from two Russian and two foreign ones, see below, paras. 9 and 11).
In view of the above, it is worth paying attention to the figures which clearly illustrate how many applications were filed with the Ministry of Justice and how many entities were actually granted the right in question by the Ministry of Justice (previously - the Government of the Russian Federation).22
Total applications submitted (number of non-profit organizations and foreign arbitration institutions)
Number of applications sent for consideration to the Council
Number of applications in respect of which a positive decision was taken
From the establishment of the council until 3 March 2017
(13 Russian organizations, 1 foreign arbitration institution)
(2 Russian organizations, 1 foreign arbitration institution)
(2 applications sent for consideration to the Council were considered by the Council in the following reporting period)
From March to December 2017
(approximately 50 non-profit organizations located in Russia, some of them applied more than once)
(6 Russian organizations)
(2 Russian organizations)
From 21 December 2017 to 29 March 2019
(28 Russian organizations, some of them applied more than once)
(13 Russian organizations and 1 foreign)
From 29 March 2019 until the present
The precise number of submitted applications is unknown.
It is presumed that the official data will be published in the Council report for 2019.
(4 Russian organizations and 2 foreign)
(1 Russian organization and 2 foreign)
As can be seen from the table, for the total period of the Council activity, out of approximately 150 applications that were submitted, only 29 were forwarded to the council, and only five of them were approved.
It is important to note that the composition of the Council for Development of the Arbitration25 (“Council”), which gives recommendations to the Ministry of Justice (previously - the Government of the Russian Federation) and on the basis of which the Ministry of Justice (previously - the Government of the Russian Federation) grants non-profit organizations the right to exercise PAI functions (as prescribed by Article 44 of the Law on Arbitration) presently includes three members of RAC Board: Yury Pilipenko, Elena Uksusova and Anton Asoskov26 (Annex 8). Previously other members of the Council, Roman Bevzenko and Alyona Kucher, were also members of the RAC Board, but now they have left the Board.
All of them voted predominantly and consistently against granting authorization to other applicants (other than RAC and the four organizations specified below).
It is obvious that they acted in violation of the rule on conflict of interest, as established by Russian legal regulations,27 since they are interested blocking competitors for RAC.
reports on the Council’s activity for 2016
and 2018 (https://minjust.ru/sites/default/files/publichnyy_otchet_2018_g_.docx).
23 Here it means the reporting period in accordance with each of the three council reports. At the same time, the reports for 2017 and 2018 contain the data on the number of submitted applications only for the relevant reporting period and do not include the figures for the period(s) from previous report(s).
This is confirmed by the fact that according to the 2017 report 88 applications were submitted while according to the 2018 report — 39 applications. That is, the 2018 report does not include and cannot include the data from the 2017 report.
24 For the period starting from 29 March 2019, two sessions of the Council were held (4 April 2019 (https://minjust.ru/ru/novosti/o-zasedanii-soveta-po-sovershenstvovaniyu-treteyskogo-razbiratelstva) and 18 June 2019 (https://minjust.ru/ru/novosti/sostoyalos-zasedanie-soveta-po-sovershenstvovaniyu-treteyskogo-razbiratelstva-0)) where six applications from non-profit organizations were considered, with positive decisions being taken in respect of three organizations.
25 See Order of the Ministry of Justice dated 6 September 2016 No. 201 “On Approval of the Composition of the Council for Development of Arbitration” (as of 14 June 2017, No. 104; as of 21 December 2017, No. 268; as of 5 February 2018, No. 19; as of 27 April 2018, No. 79) (https://minjust.ru/sites/default/files/prikaz_minyusta_ot_06.09.2016_201_v_red.27.04.2018.rtf).
27 In accordance with the Regulation on the establishment and activity of the Council for Development of Arbitration, approved by the Order of the Ministry of Justice dated 20 March 2019 No. 45 (“Regulation on Council”):
“23. Members of the Council shall:
3) not permit any conflict of interest in the course of their activity as members of the Council, notify the Secretary in advance in writing of presence or possibility of their personal interest that leads or may lead to conflict of interest while considering questions on the agenda of the Council”.
Herewith, the notion of “conflict of interest” is not defined in the Regulation, which creates room for abuse.
Apart from RIMA, an “arbitration license” was issued to the Arbitration Center at RUIE.28 This comes as no surprise bearing in mind the status of RUIE and the fact that the Arbitration Center at RUIE is a long established arbitration center: “The Arbitration Centre is the successor of the Arbitration court at RSPP (established in 2006), the Arbitration commission at PJSC Moscow Stock Exchange (established in 1994) and the Arbitration court of the National Association of Securities Market Participants (NAUFOR) (established in 1997)” 29 (Annex 9).
At the same time, it is well known that RUIE played an active role in the development of arbitration “reform” and is on good terms with the government.
Additionally, authorization by the Ministry of Justice was also granted to the Autonomous Non-Profit Organization Sports Arbitration Chamber.30
It could not be otherwise, because this Chamber was intended to become the arbitral center which, as stated in the Federal Law dated 4 December 2007 No. 329-FZ “On Physical Culture and Sport in the Russian Federation”, is necessary to resolve disputes arising in professional and elite sports, including individual labor disputes.
It is also well known that this organization is supported by Vladimir Lisin (for more details about him and his role in the “reform” see below, Section IX).
Permission was also given by the Ministry of Justice to two foreign arbitration institutions31: the Hong Kong International Arbitration Center32 and the Vienna International Arbitration Center.33 These permits to perform PAI functions, granted to foreign arbitration institutions, were to be expected, as RAC had lobbied for the interests of these institutions (see below, para. 171).
Permission was also sought from the Ministry of Justice by two institutions from Kazakhstan (National Chamber of Entrepreneurs Atamaken and international arbitral center IUS, but they were both refused).
Apart from that, the ICAC at the RF CCI and MAC at the RF CCI were granted PAI status by virtue of express provisions in the Law on Arbitration.
The question remains: what merits helped RIMA to obtain PAI status?
The supposed reasons and conditions for this will be set out in the following sections of the present study (see also Section XVI “Final Conclusions Regarding RAC. Reasons for Such State of Affairs with RAC”).
It should also be noted that, unlike RIMA and the three above-mentioned organizations, other famous arbitration organizations failed to obtain the relevant authorization.
They include, Autonomous Non-Profit Organization Independent Arbitration Chamber (ANO NAP),34 affiliated with Sberbank.
It is known that ANO NAP attempted to obtain permission to perform PAI functions by sending documents to the Council on 18 August 2017 (back before 1 November 2017, i.e., before the end of the transition period within the meaning of the Law on Arbitration)35 stating that it was successor to a previously acting arbitral institution. However, the meeting of the Council was only scheduled on 10 November 2017 and notice of the meeting was received by the NPO on 2 November 2017, that is after the end of the important transition period. All of this led to the fact that ANO NAP was refused permission with reference to the fact that after 1 November 2017 the succession of arbitral institutions was impossible. The position of the Ministry of Justice could be summarized as follows: "with the end of the transition period, arbitration clauses become unenforceable in terms of referring the dispute to an arbitral institution” which, at that time, had not received the status of PAI, and therefore documents on the legal succession of PAI were contrary to the law.36 The NPO believed that the documents should have been returned to them for correction. However, the application was considered despite the NPO’s request to postpone the meeting.
The above account of the refusal to ANO NAP caused an outcry from practicing lawyers, who commented on the Ministry of Justice’s deliberate evasion of granting the right to exercise PAI functions to that organization.37
Having been refused PAI status, ANO NAP applied to the Government of Russia (to Igor Shuvalov, then First Deputy Prime Minister) with a complaint about the Council violating the procedure for consideration of NPO applications. ANO NAP’s complaint was then sent by the Government of Russia to the Ministry of Justice itself, which replied with a standard run-around letter.38
Another vivid example is the story of three applications and three refusals (with only the last one finally reaching the Council) for the Association for Development of Arbitration.
This association was established as early as April 2013 in Moscow and operates on the basis of equal membership of Russian and foreign law firms, practicing lawyers and representatives of the scientific community. Due to its varied membership the association expresses the views of a wide range of participants in fields related to alternative resolution of commercial disputes. The association is known for its numerous achievements in the development of arbitration, including at an international level39 (Annex 10).
35 Within the meaning of Article 52(13) of the Law on Arbitration and clause 2 of the Decree of Government of the Russian Federation No. 577 dated 25 June 2016 “On the Approval of the Rules for Granting the Right to Exercise the Functions of Permanent Arbitration Institution and the Regulation for the Depositing of Rules of PAI”.
37 See, for example: https://www.kommersant.ru/doc/3480488; https://www.kommersant.ru/doc/3628037.
The first two refusals of the association by the Ministry of Justice were related to extremely formulaic nitpicking about insignificant technical issues. The arbitrator’s area of expertise was incorrectly indicated in the first application. In the second application the arbitrator’s patronymic was given incorrectly, and in the opinion of the Ministry of Justice details about the place of work and position of several of the arbitrators was inconsistent with the information indicated “on the official websites of educational and other organizations”.
The third time RAA was rejected by the Council due to the following grounds:
“...since the reputation of the non-profit organization under which the permanent arbitration institution is created, the scale and nature of its activities, taking into account the composition of its founders (participants), does not allow for a high level of organization of the activities of a permanent arbitration institution, including in terms of financial support for the creation and activities of the relevant institution”.
This study is not intended to provide an analysis of the rejection of RAA. However, at the very least it can be said that that at the time of the application to the Council RAA’s achievements far exceeded those of RIMA, taking into account the number of events held/ organized, journals issued, books published, etc.40
As a further illustration, one may take the Autonomous Non-Profit Organization Center of Arbitration Proceedings (ANO CenAP) which applied seven (!) times to the Ministry of Justice to obtain the right to exercise the PAI functions. The Ministry of Justice refused to send the documents to the Council six times on pure formalities. Only on the seventh application were the documents finally delivered for consideration by the Council.
As was proven by subsequent events, this was to formally reinforce the pre-existing and repeatedly expressed position of the Ministry of Justice in relation to ANO CenAP and to give the appearance of abiding by the decision-making procedure. Ultimately, at the Council meeting on 4 April 2019, it was decided to refuse to grant ANO CenAP the right to fulfill PAI functions41 (voting result: nine votes in favor, 35 against42). On 25 April 2019, the Ministry of Justice adopted Decree No. 518-r refusing to grant ANO CenAP the right to exercise the PAI functions, indicating that two requirements provided for by the Law on Arbitration were allegedly not met by ANO CenAP. This was adopted in violation of the law as the details of the discrepancy were not cited.
ANO CenAP unsuccessfully tried to challenge the last refusal under case No. A40-157872/201943 (the arbitrazh (commercial) court dismissed the case on the grounds of lack of jurisdiction, which decision was upheld by the courts of appeal and cassation). An attempt by ANO CenAP to resolve the dispute in the courts of general jurisdiction under case No. 02a-0835/201944 (in the first instance) was also unsuccessful at the time of writing. Zamoskvoretsky District Court dismissed the lawsuit45 without a proper rationale for the decision, thus violating the law.
So RAC received an “arbitration” license as quickly and easily as possible and without experiencing any of the difficulties encountered by almost all the other applicants. It could be argued that there was a privileged regime to secure this permission created for RAC, whilst in relation to the others the Ministry of Justice was discriminatory and applied double standards.
more details of the Council’s session where the application of
RAA was considered, and the reasons for refusal see: https://journal.arbitration.ru/upload/iblock/cc2/Arbitration.ru_N7_11_August2019_upd.pdf.
45 https://www.mos-gorsud.ru/rs/zamoskvoreckij/cases/docs/content/c91a32d9-8669-4b91-bf26- c2768aab2498
By Order dated 13 March 2018 No. 288-r the Ministry of Justice permitted RIMA and RAC to include the word “Russian” in their names.46 This was done quite quickly while other entities spend many years on vain attempts to obtain this right.
There are only 28 organizations on the register (kept by the Ministry of Justice) of permits issued for the inclusion of “Russian Federation”, “Russia” or derivatives thereof in the name of non-profit organizations.47
Andrey Gorlenko (recently the general director of RIMA and currently a member of RAC Board - see about him below, Section 5.1) noted in this regard:
“The authorization to include in an organization’s name the word ‘Russian’ is granted only to those organizations the activities of which are unique and beneficial to the public”.48
Yury Pilipenko (President of the Federal Chamber of Attorneys of the Russian Federation - one of the founders of RIMA - see about him below, Section 5.6) also pointed out:
“This event can hardly be overestimated... It is both a new stage in the development of our Arbitration Center, and at the same time a higher degree of responsibility for the fate of arbitration in our country as a whole. I hope that our efforts will be a success”.49
In the light of the above it is important to refer to the provisions of the regulatory instrument governing the grounds and procedure for issuing the corresponding permit: Decree of the Government of the Russian Federation dated 24 September 2010 No. 753 “On Approval of the Rules for Issuing Permission to Include in the Name of a Non-Profit Organization the Official Name ‘Russian Federation’ or ‘Russia’, As Well As Derivatives Thereof” (“Decree No. 753”).
In accordance with paragraph 5 of the Decree No. 753:
The Ministry of Justice of the Russian Federation shall decide to
grant (deny) authorization to a non-profit organization if it meets
(fails to meet) one of the following requirements:
c) the non-profit organization has provided_for at least three years unique services being beneficial to the public (or sells relevant products):
If a non-profit organization meets one of the requirements provided for by subparagraphs ‘a’ — ‘c’ of this paragraph, but has been operating for less than three years, the decision to issue a permit to this non-profit organization is made by the Ministry of Justice of the Russian Federation on the basis of an instruction _ from the Prime Minister of the Russian Federation ”.
At the time of obtaining the authorization of the Government of the Russian Federation (27 April 2017) RIMA (IMA) had been conducting its allegedly “unique and publicly helpful activity” for less than three years (since 17 August 2016). The question then arises: what was so unique and beneficial to the public in RIMA (IMA), that authorization was given to it by the order of the Prime Minister of the Russian Federation?
And yet, as follows from an analysis of court precedent, it is not easy to confirm the “unique” nature of the activity performed which led to permission being granted.
For example, the Ninth Arbitrazh (Commercial) Court of Appeal in its ruling dated 29 January 2013 No. 09AP-38996/2012-AK regarding case No. A40-82016/12-130-779 notes with regard to court forensic examination:
“In its explanatory note ANO CSE lists a number of examinations carried out by the said organization. At the same time there was no information or evidence confirming the unique nature of these examinations in the explanatory note and files. The legal basis, the principles of organization and the main directions of state forensic science in the Russian Federation in civil, administrative and criminal proceedings are defined in the Federal Law dated 31 May 2001 No. 73-FZ ‘On State Forensic Activity in the Russian Federation’, which also applies to the activities of persons who are not state forensic experts. According to the aforementioned Federal Law, _forensic examination is a procedural action ”.50
This example demonstrates that the fact that a specific activity envisaged by law is carried out (whether a forensic examination or the administration of arbitration in accordance with the Law on Arbitration) is not per se sufficient evidence in support of the fact that a non-profit organization carries out a unique and publicly beneficial activity.
The above implies that RIMA (RAC), without meeting any actual conditions, obtained from the Ministry of Justice the right to use the word “Russian” in its name due to reasons unconnected with the law.
The objectives of obtaining such a right include among other things misleading Russian and foreign persons, as well as gaining an unreasonable competitive advantage to weaken the positions of the ICAC at the RF CCI in the Russian arbitration market (see below, para. 179).
Taking this into account, the word “Russian” or the letter “R” in the names and “RAC”, respectively, should be used in quotation marks.
As one of the main goals of its work RIMA points to, inter alia, “provision of services in the field of contribution to alternative resolution of civil law disputes by way of arbitral proceedings (arbitration) and mediation ”.51
At the same time, at present RAC publicly and unequivocally denies that it provides arbitration administration services.
In 2018 Andrey Gorlenko (general director of RIMA and executive administrator of RAC) stated: “If [others] deem this to be a services market, let them think so, but what we do is promote and develop arbitration”.52
RAC’s viewpoint that arbitration administration does not constitute a service may clearly be seen in a case in the Arbitrazh (Commercial) Court of Moscow city, No. A40-217302/2018-33-2400.53
That case was initiated by the Autonomous Non-Profit Organization Center of Arbitration Proceeding (Novosibirsk), Association Altay Arbitration Center (Barnaul), and the Association of Independent Arbitration (Perm) (jointly the Applicants) which, like many other organizations, applied to the Ministry of Justice more than once in an effort to obtain the right to exercise the PAI functions, but only received formulaic and unlawful denials.
The Applicants therefore decided to apply to the Federal Antimonopoly Service of the Russian Federation (FAS), on the basis that the Ministry of Justice was unlawfully and systematically rejecting almost all organizations, coordinating its actions with RAC and the RF CCI. This was evidenced, inter alia, by the fact that the Ministry of Justice actually approved a structure for the Council for Development of Arbitration that allows it, in coordination with RAC and the RF CCI, to limit access to the arbitration services market for other entities and to ensure division of the market between RAC and the RF CCI.
The Applicants’ submission to FAS contained a detailed description of the factual circumstances, evidencing violations of the antimonopoly legislation by the aforementioned entities and references to the applicable law, as well as a list of specific measures that the applicants requested FAS to undertake in order to stop violations of the antimonopoly legislation by the Ministry of Justice, RAC and CCI of the Russian Federation.
However, FAS denied the Applicants’ request to initiate a case over the violation of antimonopoly legislation, giving no rationale whatsoever.
Section 3 of the RIMA Charter
See also: https://centerarbitr.ru/2017/10/18/siac-mou/
53 https://kad.arbitr.ru/Card/5de8288f-2be0-4036-87e6-75f59dd69da9; see also written explanations of
RIMA of 24 October 2018 (Section 2), 29 October 2018 (Section 1).
This FAS rejection was appealed by the Applicants in the Arbitrazh (Commercial) Court of Moscow city (with the Ministry of Justice, RF CCI and RIMA acting as third parties (the above-said case No. A40-217302/2018-33-2400)).
It is important to note that FAS did not deny that it was competent to consider the Applicants’ submission, thereby recognizing that arbitration administration falls within the scope of the services market, which is governed by legislation on protection of competition.
A similar position by FAS may also be traced in its reply No. 201221137(5) dated 11 January 2013:
“According to the FAS, services provided by a non-profit organization to organize and conduct arbitration proceedings can be considered as goods for the purpose of applying the Law on Protection of Competition. A non-profit organization that provides the aforementioned services on a fee basis in the framework of the organization of arbitration proceedings, can be classified as a business entity within the meaning of the Law on Protection of Competition”.
At the same time, in the Arbitrazh (Commercial) Court of Moscow city, RAC denied that it provided arbitration administration services. Specifically, in its written explanations dated 24 October 2018, RAC included a separate Section 2 “The administration of arbitration is of a specific legal nature and is aimed at ensuring the implementation of the constitutional right to judicial protection by participants in civil turnover”, where, inter alia, it was stated:
“Therefore, arbitration administration is a specific activity of PAIfor the exercise, jointly and inseparably with the arbitrators, of quasi-public functions and may not be deemed as provision of services. Moreover, PAI activity would be impossible in principle[,] and from this fact another fundamental misunderstanding or deliberate distortion of the nature of arbitration by the Applicants follows”.
Moreover, in its written explanations dated 29 October 2018, RIMA (RAC) in Section 1 “The Applicants’ reference to the fact that the activity of arbitration administration falls within the services sector due to the use of this term by the institute and the RF CCI, is unfounded” stated:
“Based on the foregoing, contrary to the Applicants’ opinion, the mere use of the term ‘services’ does not automatically entail a change in the quasi-public legal content of arbitration administration activities carried out by the PAI”.
In other words, RAC claims that it does not provide services for the administration of arbitration, but in fact conducts public activities similar to the administration of justice by state courts.
The reasons thereof are not a matter of chance and will be explained below in para. 177.
In the Arbitrazh (Commercial) Court of Moscow city, RAC also disagreed that arbitration administration services are covered by the Federal Law dated 26 July 2006 No. 135-FZ “On Protection of Competition”. In its written explanations dated 24 October 2018, RAC noted:
this it follows that within the framework of arbitration, it is the
arbitrators, not the PAI, that carry out activities aimed at making
a profit and being of a civil law nature (in contrast to the
activities of the PAI). With some reservations, one can talk not
about the arbitration administration market, but about the
arbitration market instead.
In addition, being, as will be described in detail below, an alternative way to resolve disputes[,] arbitration in principle cannot be governed by the Federal Law ‘On Protection of Competition’, and all the arguments of the Applicants in this part indicate a complete misunderstanding or intentional distortion of the nature of arbitration. In this regard, on the basis of the totality of the above circumstances, the FAS reasonably and lawfully refused to initiate proceedings”.
To put it differently, the services are provided by the arbitrators, and it is they who gain profit, while PAIs administer justice and do not gain any income (it sounds absurd, but this is exactly what RAC’s suppositions are).
As can be seen, RAC rejects the importance of competition in the field of administration of arbitration.
The main outcome of the case hearing in the Arbitrazh (Commercial) Court of Moscow city was the emergence of part 1.1 in Article 44 of the Law on Arbitration (introduced by the Federal Law dated 27 December 2018 No. 531-FZ “On Amendments to the Federal Law ‘On Arbitration (Arbitral Proceedings) in the Russian Federation’ and the Federal Law ‘On Advertising’”).
In accordance with this rule, the activity of PAIs in relation to arbitration administration does not fall within the scope of the antimonopoly legislation of the Russian Federation.
This legislative withdrawal of arbitration administration from the scope of antimonopoly regulation was nothing other than an attempt to impede further progress in this case as well as to ensure the privileged position of RAC in arbitration.
An indication that such legislative removal was a direct consequence of the involving RAC was confirmed, inter alia, by Vadim Chubarov (vice-president of the RF ICC who, unfortunately, put the ICAC of the RF CCI under his personal control and interests):
“The occurrence and consideration of the case resulted in the direct enshrinement in the law that relations connected with the activities of permanent arbitration institutions administering arbitration are not subject to the regulation of antitrust laws (part 1.1 of Article 44 of the Law on Arbitration). This is a rare case when a lawsuit has grown into a provision of the law in the shortest time possible. I believe that the deputies, who supported the arbitration community and made the corresponding amendment, helped arbitration proceedings to take a huge step forward — it is impossible to extend the laws of commerce to the activities of arbitration institutions”.54
In other words, RAC and CCI are ardent opponents of competition between arbitration centers, with their fears resulting from their keenness to preserve their unjustified privileges.
The reasons for this are no accident and will be explained below in para. 177.
To have a better idea of what RIMA (RAC) is, one must not neglect the issue of its founders and some of the other persons affiliated to it.
The Board of the RAC includes, inter alia, Anton Asoskov, known for his loyalty to the Russian Ministry of Justice (for which he was admitted to the Council for Development of Arbitration (see above, para. 8)), as well as his development of the theoretical grounds for the special prohibition on referring domestic Russian disputes to foreign courts and arbitration centers by request of the Ministry of Justice (but with authorization to consider any non-Russian disputes in the Russian Federation).57
The information on the founders of RIMA is also published on its
official website: http://modernarbitration.ru/en/institute/founders/
57 Asoskov A.V. Is it Acceptable to Refer Purely Domestic Disputes without a Foreign Element for Resolution by a Foreign Arbitration? // Zakon. 2017. No. 8. P. 115-123.
The general director of RIMA, as well as the executive administrator of RAC since December 2019 is Yulia Mullina.58
From the time of the foundation of RIMA (RAC) and until December 2019 the head was Andrey Gorlenko.
At various times Andrey Gorlenko held the following positions59:
Assistant attorney, attorney, partner of the law office Reznik, Gagarin & Partners.
Member of the task force for elaborating new legislation on arbitration (arbitral proceedings).60
Senior associate of the international law firm Debevoise & Plimpton.
Executive administrator, RAC at RIMA.
2019 - until present
Partner of Ivanyan & Partners61 (Annex 14), member of RAC Board62 (Annex 8).
not on the lists of
Chair of the Committee for (budget and) tax policy of the Russian
Union of Industrialists and Entrepreneurs (RUIE).64
59 https://lfacademy.ru/speaker/14691; https://www.kommersant.ru/doc/3134897
60 https://roscongress.org/speakers/andrey-gorlenko/biography/; https://komitetgi.ru/news/events/1534/; https://pravo.ru/review/view/118483/
64 https://lfacademy.ru/course/22951/22975; https://www.lawtek.ru/person/3393/gorlenko_andrey
Andrey Gorlenko’s career trajectory is well known: he came to the field of arbitration due to the case of the ICAC at the RF CCI under the claim by Nikolay Maximov against JSC Novolipetsk Steel Company67 (see below, para. 120). This case was dealt with by the law firm Reznik, Gagarin & Partners, which has long protected the interests of JSC Novolipetsk Steel Company and its beneficiary Vladimir Lisin (see below, Section IX). This was thanks to his father, who worked under the guidance of Vladimir Lisin (see below, para. 124).
When Vladimir Lisin decided to deal with the arbitration “reform” (see below, Section IX), his companies instructed, inter alia, Andrey Gorlenko and hired Debevoise & Plimpton, thus providing financial sponsorship for the “reform” (see below, para. 123). The Ministry of Justice was, of course, unable to elaborate on the draft bill itself.
After that, as a sign of gratitude, Andrey Gorlenko was listed as an employee of the firm for the sake of getting a wage. After that, he was sent to RAC.
Since the end of 2019 he has been a partner at Ivanyan & Partners, which is no coincidence (see below, Section XIII). His move to this firm is reminiscent of that of Elena Borisenko, who was actively involved in arbitration “reform”, from the Ministry of Justice to JSC Gazprombank (see below, Section XI).
Below is given the structure of RIMA (RAC) and its founders, which clearly shows how they are interlinked, and also that RAC, acting via its founders, is closely connected with the Ministry of Justice, the Government of the Russian Federation, JSC Gazprombank (Gazprombank), and the state corporation Rosatom.
Please see more details on each founder of RIMA as well as the proof of the connections between these entities, in Sections 5.2, 5.3, 5.4, 5.6, X, XI below.
The Foundation for Legal Education and Research (the Foundation) implements and supports projects aimed at researching and developing international law.68
According to the Uniform State Register of Legal Entities, it has the same address (location) as RAC: 119017, Moscow, Kadashevskaya embankment, 14, bldg. 3 (evidently in different rooms).
Apart from being a founder of RAC, the Foundation is also the founder of ANO International and Comparative Law Research Center. The latter is also a founder of RIMA (see above, para. 51). It also has the same address: 119017, Moscow, Kadashevskaya embankment, 14, bldg. 3.
Ivanyan & Partners is located at the same address (see below, Section XIII).
68 The information is given on the website in the section concerning the founders (http://modernarbitration.ru/en/institute/founders/ (Annex 12)). It is noteworthy that, if one clicks the active link “Foundation for Legal Education and Research” in the section “Founders”, one will be directed not to the website of the Foundation, but to the website of the International and Comparative Law Research Center (http://iclrc.ru/ru) instead.
The Entities behind the Foundation
The founder of the Foundation is LLC Fininvestcom registered in Uglich in a small building (where Pyaterochka69 store is situated) with 42 other legal entities (Yaroslavskaya street, 50).
The Casebook data service is silent on the characteristic feature of the address where Fininvestcom is registered70 (a matter of whether there are signs of it being a mass registration address). However, previously this service did directly indicate that LLC Fininvestcom was registered at a mass registration address.
Here it is appropriate to recall the widespread practice in the Russian Federation, approved by the authorities, of concealing beneficiaries associated with them, including by using commercial organizations registered at dubious addresses.71
In turn, LLC Fininvestcom has two founders: LLC Finansovy Alliance and LLC Inter Garant. The founder of each of them is LLC Fininvestcom itself. At the same time LLC Inter Garant is also the founder of LLC Finansovy Alliance. LLC Inter Garant has only one founder: LLC Fininvestcom.
well-known Russian low-priced chain store.
71 https://neftegaz.ru/news/gosreg/240700-taynye-vladeltsy-baykalflnansgrupp-kotoryy-kupil-yugansk- neftegaz-v-2004-g-stali-yavnymi-no-eto-niche/
In other words, judging by all the signs, the real “beneficiary” of the Foundation is concealed, while the nominal founder of the Foundation is seemingly a “shell” company, LLC Fininvestcom.
It is obvious that a special loop control structure has been employed here, in order to conceal the true beneficiary.
The Foundation possesses assets of over RUB 75 million (though the profit of the Foundation is 0).72
It is noteworthy that the Foundation’s main activity is “88.99. The provision of other social services without accommodation not included in other groups” (previously the main activity of the Foundation was designated as “The provision of social services for the elderly and disabled without accommodation”. The head of the Foundation is Ilya Kryzhanovsky. There is no publicly available information about Ilya Kryzhanovsky as an authoritative lawyer. On the internet there is only some information about a candidate of chemical sciences Ilya Kryzhanovsky (Kryzhanovsky, Ilya Structural and chemical ordering in films of arsenic sulfides deposited by ion-beam spraying: diss. ... candidate of chemical sciences: 02.00.01; St. Petersburg, 1994).73
At the same time, one of the members of the Supervisory Board of the Foundation is Famil Sadygov (see Report on Activity of the Non-Profit Organization and Personal Composition of its Management Bodies for 2018). He is also a member of the Board of Directors and Deputy Chair of the Management Board of Gazprombank.74
From the Report, it also follows that the chair of the Supervisory Board of the Foundation is Igor Rusanov, who is Deputy Chair of the Management Board of Gazprombank.75
Hence, we may draw the conclusion that Gazprombank stands behind the said LLC (LLC Finansovy Alliance and LLC Inter Garant) (see also below, Section XII).
Besides, in the above-mentioned Report Denis Norenko is mentioned amongst others as a member of the Supervisory Board. According to available information76 he is an entrepreneur and founder of three commercial entities: LLC W S Capital (currently being liquidated), LLC W S Capital Management and LLC Hustle Beach. LLC W S Capital Management (with authorized capital of RUB 35.2 million) offers consulting on business and management issues. Furthermore, Denis Norenko is also known to be a member of the Board of Directors of the Cyprus company WS Financial and Investment Services Ltd.77 Amongst other things it owns the fund WSFIS Global Opportunities Fund which has been a co-owner of Citymobil company since 2018.78
information can be found at:
https://zachestnyibiznes.ru/company/ul/1137799023493_7703480804_FOND-PRAVOVYH-ISSLEDOVANIY/balance, for instance, or in any other sources.
73 https://search.rsl.ru/ru/record/01000307922; http://fizmathim.com/strukturno-himicheskoe-uporyadochenie-v-plenkah-sulfidov-myshyaka-nanesennyh-ionno-luchevym-raspyleniem
78 Former Managers of Gennady Timchenko Became Co-owners of Citymobil (22 November 2018) (https://www.vedomosti.ru/technology/news/2018/11/22/787153-sitimobil-menedzheri-gennadiya-timchenko).
As reported in the mass media, Denis Norenko is affiliated with the Seaport Gelendzhik, being a former employee of companies connected with the well-known entrepreneur Gennady Timchenko79 who is, in turn, deemed to be a person closely related to the government authorities.80 As regards the Seaport Gelendzhik, its facilities were constructed by JSC Stroytransgaz (the only company carrying out works under this public procurement contract) being part of Volga Group of the above-mentioned Gennady Timchenko.81
The following information regarding the Foundation is available on the Internet:
“The founder there [is] LLC Fininvestcom (TIN 7609017130). At the end of November 2015 Gazprombank was present in that organization via the controlled LLC Adamant (TIN 7703504318) and LLC Finproekt (TIN 7727526624). The question is: did Gazprombank leave this project? Adamant was replaced by LLC Finalliance (TIN 7717159397) in which a direct founder [is] LLC Inter Garant (TIN 7717156477) which is owned by the above-said LLC Fininvestcom (TIN 7609017130)”.82
It is also noteworthy that the aforementioned LLC Fininvestcom (TIN 7609017130) and associated LLC Adamant (TIN 7703504318) (as asserted above) and LLC Finproekt (TIN 7727526624) and Gazprombank itself (TIN 7744001497) are indicated as affiliated entities in relation to LLC Gazenergoset Povolzhye83 (which is part of the Gazprom Gazenergoset Group84).
The fact that LLC Adamant was connected with LLC Fininvestcom is also confirmed by other internet sources. For example, one source states that LLC Adamant “is or was the founder...” of LLC Fininvestcom with a stake of 0.03 % for the amount of RUB 5,000 as of 3 March 2016.85
Now that LLC Adamant does not figure in the authorized capital of LLC Fininvestcom, there are no traces of Gazprombank’s direct participation.
It may be indirectly concluded that LLC Fininvestcom may still be connected with Gazprombank from the fact that Gazprombank affiliates, LLC New Financial Technologies (PSRN 1027601305050, TIN 7612021722) and LLC Trade Investments (PSRN 1037602004978, TIN 7612031880) are also registered in Uglich at the same address as LLC Fininvestcom (with the only difference being the rooms occupied86).
As can be seen, any information as to the persons standing behind the Foundation for Legal Education and Research is thoroughly concealed (but, most likely, this is Gazprombank).
Managers of Gennady Timchenko Became Co-owners of Citymobil (22
November 2018) (https://www.vedomosti.ru/technology/news/2018/11/22/787153-sitimobil-menedzheri-gennadiya-timchenko).
80 Maikova I., Terentyev I. That Very Timchenko: The First Interview of the Richest Friend of Putin (26 October 2012) (https://www.forbes.ru/sobytiya/lyudi/181713-tot-samyi-timchenko-pervoe-intervyu-bogateishego-iz-druzei-putina); https://en.wikipedia.org/wiki/Gennady_Timchenko.
81 Vavina Е. Stroytransgaz Will Build a Port in Gelendzhik without Tender (21 August 2018) (https://vedomosti.ru/realty/articles/2018/08/22/778715-stroitransgaz-port-gelendzhike).
86 List of entities affiliated with Gazprombank as of 30 November 2019 (https://www.gazprombank.ru/upload/files/iblock/0a3/affil_30062019.pdf)
(Gazprombank is one of the largest commercial banks of Russia): New Financial Technologies LLC: 152610, Russian Federation, Yaroslavl Region, Uglich, ul. Yaroslavskaya, bldg. 50, room 208;
Trade Investments LLC: 152610, Yaroslavl Region, Uglich, ul. Yaroslavskaya, bldg. 50, room 234, floor 2.
The founder of LLC LF Academy is Olga Motenko, who is at the same time the founder of LLC Conference Center St. Petersburg International Legal Forum.
The organizer of the St. Petersburg International Legal Forum is the Ministry of Justice87 along with, seemingly, the Russian Government and other related entities (see below, Section XII).
of LLC Conference Center St. Petersburg International Legal Forum
is owned by Olga Motenko. This businesswoman started out in 2007 as
the general director of the Oberon insurance company (in 2009,
after her dismissal, the company was re-registered in Izhevsk where
it was quietly wound up, while its parent company Regional
Insurance Alliance is presently going bankrupt). In 2011 [she]
founded LLC Conference Center St. Petersburg International Legal
Forum, at the same time in St. Petersburg she founded the company
Molot with her partners which, according to data from the
All-Russia Classificatory of Economic Activity Types, specialized
in gambling and betting activities.
Judging by information from arbitrazh (commercial) cases involving Molot, more than once it was checked by the Department for Combating Economic Crimes, which discovered that this company ‘under the guise of operating the Student Ticket, Farmer, and Motherland Shield Russian non-state instant lotteries arranged and held gambling events using electromechanical equipment without proper authorization’”.88
For other data regarding this forum, Olga Motenko and ties with the Ministry of Justice and Gazprombank, see below, Section XII.
ANO International and Comparative Law Research Center, according to its website89 (Annex 16), conducts “research on various issues of international and comparative law that are strategically important for the Russian Federation and Russian business”.
The founder of the International and Comparative Law Research Center, as noted in para. 60, is the Foundation for Legal Education and Research.
The partners of the International and Comparative Law Research Center are, inter alia: Gazprombank (see below, Section XI), Ivanyan & Partners (see below, Section XIII), St. Petersburg International Legal Forum (see below, Section XII), and LLC LF Academy90 (Annex 17) (see below, Section 5.3).
The chair of the Supervisory Board of the International and Comparative Law Research Center is Elena Borisenko91 (Annex 18) (see below, para. 135). Previously this position was held by Vasily Torkanovsky who is a partner of Ivanyan & Partners.92
At present, the members of the Supervisory Board of the International and Comparative Law Research Center are (Annex 18): the above-mentioned Olga Motenko (see above, paras. 76 and 77), Ilya Kryzhanovsky (see above, para. 68) and Igor Rusanov (see above, para. 69).93 Previously these positions were held by Khristophor Ivanyan (see below, para. 162), Ilya Kryzhanovsky and Igor Rusanov.94
Previously the general director of the International and Comparative Law Research Center was Ekaterina Sorokovaya,95 who is currently working in the Ministry of Economic Development of Russia, and who used to work in the Administration of the President of Russia, and the Deposit Insurance Agency.96
After Еkaterina Sorokovaya, the general director of this Center was Еkaterina Papchenkova, who in 2018—2019 was an advisor of the Minister for Economic Development of the Russian Federation.97
In 2018, the International and Comparative Law Research Center became involved in procurement No. 31806843973 of legal services from a sole supplier, where the client was the state corporation VEB.RF.98 And yet, for some reason, there is no information on the Center’s involvement in procurement No. 31806843973 on the official website of the Uniform Information System in the Procurement Sphere,99 or on the website of the state corporation VEB.RF.100
The private institution Center for Arbitration and Legal Expertise formally became a co-founder of RIMA on 26 January 2018.
The founder of this center is the state corporation Rosatom. The latter was founded by the Russian Federation.
It is not difficult to trace the previous connection of this Center with RAC. For example, from November 2017 the Arbitral Center for Resolution of Economic Disputes established at this Center (the latter was founded by the state corporation Rosatom), actually became a part of RAC, which created, based on it, a specialized division for the resolution of disputes in the nuclear industry101 (Annex 8).
The connection between RAC and Rosatom state corporation is also clear for other reasons (for more details see below, Section X).
The Federal Chamber of Attorneys of the Russian Federation (FCA) and its president Yury Pilipenko (member of the Supervisory Board of RIMA, member of the Board of RAC102 (Annex 8), arbitrator of RAC103 (Annex 19)) are well known for their ties with and subordination to the state, though the FCA is called upon to be an independent non-profit organization principally protecting the interests of attorneys.
Yury Pilipenko is also considered by many attorneys in Russia as a conductor of state interests rather than those of FCA.
In particular, Yury Pilipenko is the partner of YUST law firm, which is also known for its ties with the state.
Specifically, one of the founders and a senior partner of the company104 (Annex 20) is Vladimir Pligin, a Deputy of the State Duma of the fourth, fifth and sixth convocations from the United Russia party, chair of the State Duma Committee on Constitutional Legislation and State Building of the State Duma of IV-VI convocations.105 Vladimir Pligin is also known for his connections with Dmitry Kozak106 (Annex 21) since his student days. Dmitry Kozak is one of those who stood by the sources of the YUST law firm in St. Petersburg.107 Dmitry Kozak’s wife, Natalia Kvacheva, currently works in the YUST law firm.108
There are varying views of Yury Pilipenko’s activity as President of the Federal Chamber of Attorneys in the attorneys’ community.
Take, for example, the situation with the re-election of Yury Pilipenko for a second term. Here, in contravention of the Regulations of the Council of the Federal Chamber of Attorneys the President of the Udmurt Attorneys’ Chamber Dmitry Talantov was expelled from the session of the Council of the Federal Chamber of Attorneys, after which a unanimous decision to re-elect Yury Pilipenko was declared. The legitimacy of this decision is questionable.109
The term “Pilipenko Clash” (“the Pilipenko Case”) and hashtag “#юргдеденьги” [#yurywhereisthemoney] became quite widespread in the Russian attorneys’ community.110
106 Deputy Head of Administration of the President of the Russian Federation since 24 January 2020, Deputy Chair of the Government of the Russian Federation (14 October 2008 - 15 January 2020), Minister of Regional Development of the Russian Federation (2007-2008), Authorized representative of the President of the Russian Federation in the Southern Federal Circuit (2004-2007) (https://en.wikipedia.org/wiki/Dmitry_Kozak).
109 https://www.facebook.com/groups/727763147251862/permalink/2518001361561356/; https://vk.com/courtlawyers?w=wall-761802_4346
The case being that, as can be seen from the Internet,111 Yury Pilipenko is the beneficiary of the company which owns the premises (address: Moscow, Sivtcev Vrazhek, 43) which were leased for a long time by the Federal Chamber of Attorneys itself.
You could conclude that the funds paid by the FCA as rent actually go to the President of the RF FCA. The RF FCA itself receives funds from the attorneys’ chambers for the constituent entities of Russia which, in turn, gather contributions from attorneys. In other words, the funds of attorneys from all over Russia ultimately go to Yury Pilipenko himself.
Data in the Uniform State Register of Real Estate No. 99/2019/281304040 dated 31 August 2019 on the land plot, as well as No. 99/2019/281304105 dated 31 August 2019 on the building at the address listed make no mention of the titleholder. The Uniform State Register of Real Estate No. 99/2019/281303892 dated 31 August 2019 regarding non-residential premises “Cellar No. 0, Basement floor No. 0, Floor No. 1” at the same address contain in the “titleholder” field the company WIGMORE HOLDING LIMITED (ВИГМОР ХОЛДИНГ ЛИМИТЕД), TIN: 9909091234. It has not been possible to find a company with this name and TIN in available sources. There are other companies with almost identical names registered in Cyprus112 (Annex 22), Great Britain113 (Annex 23), and other jurisdictions114 (Annex 24).
The “Pilipenko Clash” caused a storm in the attorneys’ community and, in particular, engendered a number of statements from the Inter-Regional Public Organization of Attorneys and Lawyers Initiative - 2018 and Dmitry Talantov addressed to Yury Pilipenko115 with requests to disclose the relevant information, as well to as the Ministry of Justice asking for assistance in getting answers from the Federal Chamber of Attorneys to the inquiries.116 There was no articulate reaction from the Ministry of Justice.117 Notably, at the All-Russian Civil Forum in response to a question from one forum participant aimed at ensuring that the attorneys’ chambers financial documents be made available in the public domain, Denis Novak (Deputy Minister of Justice of Russia) asked that the Ministry of Justice not be drawn in to internal conflicts of the Bar.118
It is extraordinary that even after Yury Pilipenko acknowledged that he had a conflict of interest,119 the situation did not change.
All of the above testifies that, at least, the Federal Chamber of Attorneys is not just a chamber of attorneys, its president is not just a president and his participation in the activity of RAC is also no accident. RAC keeps quiet about this whole situation.
115 https://www.facebook.com/groups/i2018/permalink/2133719246911461/; http://i-2018.ru/applications
It is noteworthy that Gazprombank is listed among other “historical” beneficiaries of RIMA.
Contour.Focus is a service designed to help you check a
counterparty. The data from this service is also used on the
websites www.kommersant.ru, https://www.forbes.ru,
121 This data was obtained for a separate fee when using the “One-off” tariff (https://focus.kontur.ru/site/price).
The precise and specific sources of RAC financing are unknown. RAC tries, by any means it can, to avoid disclosing such information. In response to a proposal to do this made during a meeting between RAC and a private individual this a proposal was declined.
The RIMA website contains a section on “Internal Documents and Reports”122 (Annex 25). But it does not contain any financial statements.
The question about RAC’s real sponsors is also raised at an international level:
is an occasional topic of conversation in Russian arbitration
circles, with the central question being who really funds it. This
talk is ‘very Russian’ and focusses on the presence of
shell companies in the ownership chains of some of its five founders
(the name for shareholders of non-profit organizations in Russia)
combined with the fact no founder is obviously wealthy. Nor does
revenue from current caseload appear to cover RIMA’s current
operating budget (USD 1.1 million or so).
RIMA says that the fact the founders in question are ‘foundations’ insulates them entirely under Russian corporate law from any external control — and by extension also RIMA.
Still, some regard it as important to flag this debate”123 (Annex 62).
RAC asserts, in particular, that finance is provided by the Foundation for Legal Education and Research (see above, Section 5.2). However, as has been stated above, the structure of this foundation is quite strange, its founders are limited liability companies and the origin of their assets is also unknown (see above, paras. 62-66). Any information about the Foundation’s beneficiaries is thoroughly concealed.
According to the RAC Annual Report for 2019,130 its total revenue for the said period was RUB 127,911,776.58, of which RUB 102,706,000 was the founders’ contributions: RUB 78,800,000 was received from the Foundation for Legal Education and Research (see above, Section 5.2) and RUB 23,906,000 was received from the private institution Center for Arbitration and Legal Expertise founded by Rosatom State Corporation (see above, Section 5.5). In the light of this it is important to underline that according to RAC cases statistics in 2019,131 out of 262 claims submitted to RAC in 2019, 194 claims (i.e., nearly three fourths) were considered in conformity with the Rules for Resolution of Disputes in the Nuclear Industry (see also Section X).
It appears that the funds were received by the aforementioned Foundation from Gazprombank (see below, Section XI) or structures affiliated with it.
All these facts serve as an additional proof that RAC is dependent upon Rosatom State Corporation and Gazprombank.
At the same time, according to the RAC Annual Report for 2019,132 its total expenses for the said period amounted to RUB 128,698,058.56, of which:
123 https://globalarbitrationreview.com/insight/guide-to-regional-arbitration-volume-7-2019/1178466/wh- itelist-institutions-worth-a-closer-look--eastern-europe
124 https://casebook.ru/card/company/finances/1167700062804; https://zachestnyibiznes.ru/company/ul/1167700062804_7707371500_RISA-ROSSIYSKIY-INSTITUT-SOVREMENNOGO-ARBITRAGhA/balance
125 Calculation in accordance with the official rate of exchange of the Central Bank of the Russian Federation as of 31 December 2016.
126 https://casebook.ru/card/company/finances/1167700062804; https://zachestnyibiznes.ru/company/ul/1167700062804_7707371500_RISA-ROSSIYSKIY-INSTITUT-SOVREMENNOGO-ARBITRAGhA/balance
127 Calculation in accordance with the official rate of exchange of the Central Bank of the Russian Federation as of 31 December 2017.
128 https://casebook.ru/card/company/finances/1167700062804; https://zachestnyibiznes.ru/company/ul/1167700062804_7707371500_RISA-R0SSIYSKIY-INSTITUTS0VREMENN0G0-ARBITRAGhA/balance
129 Calculation in accordance with the official rate of exchange of the Central Bank of the Russian Federation as of 31 December 2018.
130 RAC Annual Report for 2019 (https://centerarbitr.ru/wp-content/uploads/2020/03/РАЦ-годовой_отчет-2019.pdf), p. 6.
131 RAC in Figures. The Information about the Cases Heard in 2019 (https://centerarbitr.ru/wp-content/uploads/2020/03/РАЦ-в-цифрах-2020.pdf).
132 RAC Annual Report for 2019 (https://centerarbitr.ru/wp-content/uploads/2020/03/РАЦ-годовой_отчет-2019.pdf), p. 7.
However, apart from RUB 102,706,000 (the founders’ contributions, see above), RAC revenue for 2019 included only:
So it follows from these figures which show the revenue-to-expense ratio, RAC is deeply unprofitable and operates only with the help of Rosatom State Corporation and Gazprombank.133
The unusual dynamic of “donations” to benefit RIMA is also of interest: according to the data for 2017 they amounted to approximately RUB 42 million, in 2018 there was a sharp increase to RUB 86 million and in 2019 an increase to nearly RUB 103 million (see above). These figures speak for themselves.
At the same time RIMA’s expenses for principal activities (i.e., the targeted events - conferences, seminars, social activity) amounted, specifically, in 2018 to RUB 5,795,000 while the expenses for maintaining the administrative personnel were RUB 75,380,000.
If we take, for instance, the Federal Chamber of Attorneys, this margin is much less (specifically, in 2018 it was RUB 70,301,000 for the targeted events, and RUB 104,878,000 for maintaining the organization itself).
There is no specific data about the financing of RAC’s founders (naming the “donors”). Judging by information from the Contour.Focus service, all of the Foundation for Legal Education and Research earnings are from “voluntary property contributions and donations”; regarding the Center for Arbitration and Legal Expertise, virtually all the income is in the form of targeted contributions; however, according to data from Contour.Focus, at the end of 2014 almost all the revenue was formed from “other inputs”. Among the sources of income for the ANO International and Comparative Law Research Center, inter alia, funds received for performing public procurement contracts can be listed (specifically, as the sole supplier (5 April 2019) for the amount of RUB 1.8 million) - providing services for the study of foreign legislation on subsoil use, preparing proposals for the development of Russian legislation (see also above, para. 85). But the main source is also voluntary contributions and donations.
Any information about the exact entities making the said contributions and donations is concealed.
The reports on the activity of the non-profit organization and personal composition of its management bodies for 2016,134 2017,135 2018,136 provided by RIMA to the Ministry of Justice, specify that the sources of its asset formation are “special-purpose contributions from Russian commercial organizations” and “special-purpose contributions from Russian non-profit organizations”.137
also about it very interesting comments of Roman Zykov in Facebook
group of Treteysky
137 All reports since 2016 see: http://unro.minjust.ru/NKOReports.aspx.
“Special-purpose contributions from commercial organizations” may also seem to imply arbitration fees in specific cases.
The purpose of qualifying them as such is to reduce taxation and, more importantly, to conceal information despite the public interest in obtaining it.
However, the total amount of such fees is unlikely to reach the amounts referred to above in para. 103.
According to reports on spending and the use of other property by the non-profit organization, including that received from foreign states, their public authorities, international and foreign citizens, stateless persons or their representatives and/or from Russian legal entities receiving monies and other property from the said sources for 2016,138 2017,139 2018,140 RIMA actually spent, respectively, RUB 10,943,000, RUB 45,733,000, and RUB 81,829,000.
Does non-disclosure of information about the sources of RAC finance for 2016-2018 meet the proper standards?
Especially when RAC states that it does not provide services related to arbitration administration but, in essence, exercises public activity similar to the administration of justice by state courts (see above, para. 44)?
At the same time, there is nothing bad about third-party financing of an arbitration institution, as long as the information about it and its sources is transparent, the sources themselves are lawful and the sponsors do not attempt to influence the arbitration institution or, of course, the arbitrators.
What are the reasons for concealing the information?
Firstly, an unwillingness to show connections with persons affiliated with the state. Secondly, an intention to create the deceptive impression that RAC is independent.
At the same time, in the light of Russian reality, it seems that the amounts indicated in the said reports are just part of the finance for RAC and related entities.
One of the key officials in the Ministry of Justice dealing with arbitration “reform” is Mikhail Galperin (who, inter alia, was from June 2011 until September 2012 the Deputy Director of the Department of International Law and Cooperation, and from May 2017 - the Authorized representative of the Russian Federation at the European Court of Human Rights and Deputy Minister of Justice141).
Before his work in the Ministry of Justice he, inter alia, was in charge of “legal support for the international activity of OJSC Ilim Group created on the basis of assets belonging to CJSC Ilim Pulp Enterprises, with one of the top managers there in the 1990s being Dmitry Medvedev”.142 The arbitration “reform” is known to have been carried out with the participation and approval of Dmitry Medvedev143 (the then chair of the Russian Government).
As director of the Department of Economic Legislation of the Ministry of Justice from 2015, Mikhail Galperin played an active role in the arbitration “reform”. He was also chair of the Council for Development of Arbitration of the Ministry of Justice from 2016 until the appointment of Denis Novak, the Deputy Minister of Justice in 2019,144 to that position. Presently he is a member of that Council.145
144 https://minjust.ru/ru/organizacionnaya-struktura/sostav-soveta-po-sovershenstvovaniyu-treteyskogo-razbiratelstva; https://www.kommersant.ru/doc/3303854
In the Ministry of Justice Mikhail Galperin was also actively collaborating with Elena Borisenko, who was in charge of arbitration “reform”146 (see below, para. 135).
On 6 September 2017 Mikhail Galperin, with his presence, provided support to RAC during the signing of the memorandum with the Japan Association of Arbitrators (JAA).147
In view of the above, there are no doubts about the close ties between RAC and the Ministry of Justice.
Sources in the Ministry of Justice and the arbitration community confirm that the Ministry of Justice, represented, inter alia, by Mikhail Galperin, created a completely privileged regime for RAC and a completely discriminatory one against all other parties that applied to the Ministry of Justice for permission (see above, paras. 15-24).
147 Report on RAC’s activities as of 2017 and 2018 (https://centerarbitr.ru/wp-content/uploads/2018/08/Отчет-РАЦ-2017-2018web.pdf), p. 4. The Institute of Modern Arbitration Signs Memorandum of Understanding with Singapore International Arbitration Centre (SIAC) (https://centerarbitr.ru/en/2017/10/18/mou- with-siac/ (Annex 11)).
The Ministry of Justice grants the authorization to obtain permanent arbitration institution (PAI) status, provided that the Council for Development of Arbitration recommends issuing such an authorization to an applicant as a result of analyzing information on the latter.148
The Council was created by the Ministry of Justice itself. Its composition is also determined by the Ministry of Justice.149 At present, the Council consists of 50 people.150
At least 50 % of them have neither participated as arbitrators nor even as interested parties’ representatives nor have they in any way seriously come across arbitration issues in their professional activities.
At the same time, the decision to recommend authorizing an applicant is taken by the Council by a majority of not less than two-thirds of votes of the total number of Council members entitled to vote.151 Therefore, in order to be granted the right to exercise PAI functions, an applicant needs 34 Council members to vote “in favor”. Sixteen votes “against” will suffice for the Ministry to refuse to grant this right.
According to paragraph 12 of the Regulations on the Council: “Members of the Council shall be persons occupying public positions, and civil servants whose number may not exceed one-third of the total composition of the Council”.
As can be seen, the Ministry of Justice is entitled to appoint to the Council sixteen officials who will follow its directions, and this is enough for each decision taken to conform with the Ministry of Justice’s wishes (for more about its arbitration policy see below, Section XVI).
Let’s take a look at the current state of affairs with Council members.
The Ministry of Justice has appointed to the Council:
civil servants and two people working in organizations under direct
government control (Denis Novak (see above, para. 111), Alexandra
Zalutskaya, Mikhail Galperin, Maria Guseva, Evgeny Pisarevsky,
Ekaterina Sorokovaya (see above, para. 84), Alexey Terentyev,
Svetlana Uglova, Vadim Vinogradov, Dmitry Tolokonnikov);
Three employees of the Federal Chamber of Attorneys of the Russian Federation, widely known for its ties with the government and its subordination thereto (see above, para. 89). These representatives of the Federal Chamber of Attorneys (Yury Pilipenko (see above, Section 5.6), Andrey Suchkov and Alexander Yanin) vote in line with the Ministry of Justice;
Two employees of the CCI RF, under which the ICAC and the MAC already operate with PAI status, by virtue of the express provision in the Law on Arbitration. These representatives of the RF ICAC (Vadim Chubarov (see above, para. 48), vice-president of the RF CCI, and Dmitry Podshibyakin, deputy director of the Center of Arbitration and Mediation of the RF CCI) vote in line with the Ministry of Justice.
44(4) of the Law on Arbitration: “The
right to exercise the functions of a permanent arbitration
institution in accordance with this Federal Law is granted to a
non-profit organization by an act of the authorized federal executive
body, adopted in the manner established by it, on the basis of a
recommendation by the Council for Development of Arbitration to
grant the right to exercise the functions of a permanent arbitration
149 In accordance with the Regulation on the procedure for the establishment and activities of the Council for Development of Arbitration, approved by Order of the Ministry of Justice of Russia dated 20 March 2019 No. 45 (“Regulation on the Council”).
151 According to paragraph 29 the Regulations on the Council.
These votes are enough to ensure that no one gets a recommendation without the approval of the Ministry of Justice.
However, the Ministry of Justice has also appointed to the Council at least six other people known for their loyalty and willingness to vote as requested of them (Alexandra Nesterenko, Olesya Petrol (see below, para. 174), Alexey Zhiltsov, Anton Asoskov (see above, para. 52), Roman Bevzenko and Alyona Kucher (see above, para. 123)).
In addition, Council members include two former members of RAC Board (Roman Bevzenko, Alyona Kucher) as well as three acting members of RAC Board (Yury Pilipenko, Elena Uksusova and Anton Asoskov).
Council member Ekaterina Sorokovaya used to be the general director of the International and Comparative Law Research Center - a founder of RAC (see above, para. 51).
All the above people have voted predominantly and consistently against authorizing various applicants (with the exception RAC and the four organizations referred to in para. 176).
It is obvious that they have acted in violation of the conflict of interest rules set out by Russian regulations152 since they have an interest in RAC not facing any competition.
accordance with paragraph 23 the Regulations on the Council:
“Members of the Council are obliged:
not to allow conflicts of interest in their activity as the Council
member, to notify in good time in written form the Council Secretary
of the presence or potential presence of their personal interest
which leads or may lead to a conflict of interest during
consideration of the issues put to vote of the Council session”.
At the same time, the “conflict of interest” notion is not defined in the Regulations on the Council, which cannot but pave the way for potential abuse of rights.
However, the Council was created and is controlled by the Ministry of Justice so effectively it is impossible to get a recommendation without an instruction from the Ministry of Justice.
In addition, the Ministry of Justice makes every effort not to pass on applications for consideration by the Council: it simply sends them back to the applicants on unlawful grounds (see above, paras. 15-24, 38).
Furthermore, before each Council session, the Ministry of Justice sends out to the Council members what are in essence instructions with various derogatory information on the applicants which the ministry does not intend to authorize.153
Certain Council members have informed me that Ministry of Justice officials speak to them before voting, explaining how and in whose favor they should vote.
Therefore, the Council is a screen used by the Ministry of Justice to conceal its preferences, and a structure that is under the latter’s control.
RAC does its best to facilitate Ministry of Justice control and make it impossible for anyone to get a recommendation without direction from the Ministry of Justice (for more about the policy of the Ministry of Justice in arbitration see below, Section XVI).
RAC representatives vote at the Council sessions in violation of conflict of interest rules.
Member of RAC Board, former director of RAC, Andrey Gorlenko, has intentionally misled the public by saying the following:
lawyers see a conflict of interest between the Ministry of Justice
and your center, considering the ministry’s attitude toward
you as biased, given that one of the founders of your autonomous
non-profit organization Institute of Modern Arbitration is LLC LF
Academy, owned and headed by the person owning the organization
which is operator of the St. Petersburg International Legal Forum.
And one of the forum organizers is in the Ministry of Justice. Can
you answer these claims?
— I think the answer is quite simple — we were given a recommendation by the Council. Some people say that the Council is controlled by RUIE and CCI, but it consists of 37 persons, very experienced and respected professionals of different ages, with different backgrounds and from different areas. Just take a look at the list of names and you will see that these are people with a matchless reputation who value it very much”.154
the compiler’s materials: A Cunning Wording — and No
Authorization from the Government. How
the Ministry of Justice is Programming the Voting in the Council for
“Arbitration Proceeding Development” (21 January 2019)
How the Ministry of Justice is Programming the Voting in the
“Council for Arbitration Proceeding Development” —
2. Report of the Ministry of Justice for 2018. Three Brief Comments
on Yesterday’s Meeting of that “Council” (5 April
Well-known Russian billionaire Vladimir Lisin155 was one of the initiators and financial sponsors of the arbitration “reform”.
He had a particular interest in arbitration after Nikolay Maximov’s claim against JSC Novolipetsk Steel Company for recovery of RUB 9.5 billion was granted in 2011 by the ICAC at the RF CCI.
reform was triggered by plans to create an International Financial
Center (IFC), which requires a well-functioning system of commercial
arbitration, and a number of high-profile scandals, which prompted
the RUIE and a number of major entrepreneurs, including the head of
Alfa Group Mikhail Fridman and the owner of the Novolipetsk
Metallurgical Plant (NLMK) Vladimir Lisin to draw attention to the
problem. One of the most high-profile conflicts that led to
discussions about reform was the unfinished lawsuit between NLMK
Vladimir Lisin and the owner of Maxi Group OJSC Nikolay Maximov
regarding the sale of NLMK Maxi Group assets. Mr. Lisin’s
dissatisfaction with the existing arbitration institutions was
formed after the International Commercial Arbitration Court (ICAC)
in 2011 granted the claim by a Yekaterinburg businessman to recover
RUB 9.5 billion from NLMK. NLMK challenged this award in the
Arbitrazh (Commercial) Court of Moscow city (and now Mr. Lisin’s
companies are seeking to recover RUB 12.5 billion from his
opponent), and criminal cases have been opened against Nikolay
Maximov. Thus, the government of the Russian Federation has been
concerned with the problem of arbitration institutions for at least
two years, despite the fact that the topic only appeared in the
public domain a year ago ”.156
“Lisin, according to his acquaintances, was defending not only the metallurgists’ interests. It was he who achieved the adoption in 2011 of a law that exempts ship owners from five types of taxes. Together with the Minister of Finance Anton Siluanov, he discussed the law on de-offshorization, and with the Chairman of the Supreme Court Vyacheslav Lebedev, the reform of arbitration institutions, says Shokhin. All of these questions directly relate to Lisin: shipping companies are included in his transport holding, he owns NLMK through a Cyprus offshore, and due to the award of the arbitration court, NLMK almost lost RUB 9.5 billion”.157
The award of the ICAC at the RF CCI against JSC Novolipetsk Steel Company was set aside by the Arbitrazh (Commercial) Court of Moscow city on fabricated grounds (case No. A40-35844/2011158). Basically, the setting aside of this became one of the most scandalous in the history of Russian justice and arbitration. The reason is that the grounds for the annulment were very far-fetched from a legal standpoint. In particular, there was a reference to the corporate nature of this dispute (a matter relating to the transfer of the right of ownership of shares) and its non-arbitrability with a reference to Articles 33(1)(2) and 225.1(2) of the Arbitrazh (Commercial) Procedure Code of the Russian Federation (in the version current at the time of the case) on submission to jurisdiction of arbitrazh (commercial) courts. For example, the courts stated that this rule on “specific submission to jurisdiction of corporate disputes not only demonstrates the limit of the courts’ of general jurisdiction and arbitrazh (commercial) courts’ competence, it also means that the said disputes may not be referred to arbitral tribunals, due to the nature and specific features of the legal relations giving rise to such disputes...” (see Ruling of the Federal Arbitrazh (Commercial) Court of the Moscow Circuit dated 10 October 2011 regarding case No. A40-35844/11-69-311159). Therefore, Russian courts found the presence of some sort of public element in the dispute over the sale of shares, which allowed them to set aside the award of the ICAC due to the non-arbitrability of the dispute and violation of public policy.
Another ground was the alleged presence of a conflict of interest between the arbitrators and lawyers who prepared the learned (legal) opinions in the course of the dispute resolution. However, the courts failed to take into account that JSC Novolipetsk Steel Company representatives did not refer to this conflict in the course of the arbitral proceedings itself, but simply stated it when they challenged the arbitral tribunal award.
The JSC Novolipetsk Steel Company representatives who helped to “convince” the Russian courts of the correctness of its position were lawyers from the law firm Gagarin, Reznik & Partners, including Andrey Gorlenko.
In addition, it has to be said that in the course of the proceedings in the ICAC at the RF CCI a huge information campaign was organized by JSC Novolipetsk Steel Company aimed at discrediting the ICAC, in which Andrey Gorlenko160 took part (see about him above, Section 5.1).
Moreover, one of the arbitrators in the above mentioned ICAC case, who was appointed by JSC Novolipetsk Steel Company, issued a dissenting opinion in favor of the said company. According to everyone who knows him it could not have been he who prepared a dissenting opinion with such views.161 Those in the know believe that Andrey Gorlenko must be in the know about this strange incident (but he keeps his own counsel on the matter).
Vladimir Lisin took an active part in discussions on the “reform” together with Andrey Gorlenko162 (see above, Section IX), Elena Borisenko (see above, para. 135), and Vadim Chubarov (vice-president of the RF CCI, who after 2011 brought the ICAC under his personal control for his personal benefit).
Vladimir Lisin’s great interest in the field of arbitration is also confirmed by the Ministry of Justice issuing in 2019 permission to exercise the functions of PAI for ANO Sports Arbitration Chamber. He is president163 of this concern and, according to various sources, financially supports it (just as he intends to spend USD 10 million to support the International Shooting Federation,164 of which he was elected president in 2018 (Annex 26)).
To develop the arbitration “reform” Vladimir Lisin is known to have engaged, inter alia, Andrey Gorlenko, as well as Debevoise & Plimpton (see above, para. 56).
It would be no exaggeration to say that the mechanism for subordinating arbitration to the state in Russia was developed, inter alia, by Debevoise & Plimpton paid for by Vladimir Lisin’s companies. It is obvious that the Ministry of Justice could not have developed the draft laws itself.
The choice of Debevoise & Plimpton was no coincidence: the firm is known, inter alia, for their work in Russia’s interests in Yukos cases165 (Annex 27).
principal assets are JSC Novolipetsk Steel Company and
transport-logistics holding Universal Cargo Logistics Holding.
According to Forbes rating and Bloomberg agency, in 2018 he was recognized as the richest Russian with assets worth USD 19.1 billion. In 2019, according to Forbes journal, his wealth grew by USD 2.2 billion reaching USD 21.3 billion. Therefore, in 2019 he took second spot in the rating of “20 richest Russian businessmen” published by Forbes magazine.
160 “According to official statistics, presently around 1,500 arbitral tribunals operate in Russia. By expert estimations, the quantity of such tribunals is larger — approximately 2,000 but many of them are established for ‘a specific case’ and upon completion of the dispute they are liquidated with all documents (on the internet the services for establishment of an arbitral tribunal on a ‘turn-key’ basis costs RUB 50,000). ‘The arbitrazh (commercial) courts (including the Supreme Arbitrazh (Commercial) Court) are overloaded with applications for setting aside awards from arbitral tribunals issued in violation of Russian legislation, as well as fundamental principles (of court independence and impartiality) formulated by the European Court of Human Rights on the basis of Article 6 of the European Convention on Human Rights’, — says partner of Reznik, Gagarin & Partners Law Office Andrey Gorlenko. One example may be the award issued by ICAC at the CCI in the dispute between Nikolay Maximov and NLMK in 2011 which has already been set aside due to violation of the said principles, the lawyer adds. ‘At present a new claim by Maximov against NLMK has been submitted to ICAC at CCI, and the Presidium of ICAC may not settle the issue of appointing the presiding arbitrator for over a month. The criteria for his choice have not been determined, which raises questions about the independence and impartiality of the arbitrator’, — he says” (https://www.rbc.ru/newspaper/2013/02/28/56c1bb869a7947ac7f7abee1).
161 See in more detail: Muranov A. A Curious Arbitration Artifact from the Past (descending opinion on the award in the ICAC case No. 244/2009 (Maximov v. NLMK)) — a Possible Connector-Symbol for Arbitration “Reform”, Its Inspirers and Beneficiaries (29 November 2019) (https://zakon.ru/blog/2019/11/29/lyubopytnyj_tretejskij_artefakt_iz_proshlogo_osoboe_mnenie_k_resheniyu_po_delu_mkas__2442009_maksimo)
164 https://www.insidethegames.biz/articles/1073130/lisin-sets-up-potentially-game-changing-10-million- development-fund-for-shooting-sport
One of the firm’s lawyers, Alyona Kucher, took part in developing the arbitration “reform” along with Andrey Gorlenko166: “Participation in the working group of the Ministry of Justice of Russia on the reform of arbitration legislation in Russia, including drafting new arbitration law”167 (Annex 28).
Subsequently, as a reward she was included in the Board of RAC and the Council for Development of Arbitration.
The connection between Andrey Gorlenko and Vladimir Lisin is also confirmed by the fact that Andrey Gorlenko’s father, Andrey Gorlenko (Sr.), has for a long time occupied and/or occupies various positions in a number of structures controlled by Vladimir Lisin.
for development, Transport Asset Management
Cargo Logistic Holding (UCL Holding)
- an international transport group, whose businesses transport
goods by rail and by sea, transfer them at Russian ports and
provide logistics and shipbuilding services. This group includes,
OJSC Ship-owning company Volga Shipping and PJSC North-Western
Member of the Board of Directors, OJSC Ship-owning company Volga Shipping.
OJSC Ship-owning company Volga Shipping is controlled by Vladimir Lisin.172
2015,173 present moment174
Member of the Board of Directors, OJSC North-Western Shipping.
OJSC North-Western Shipping is controlled by Vladimir Lisin.175
At the present176
Director for development, Member of the Board of Directors, JSC Tuapse Commercial Seaport.177
JSC Tuapse Commercial Seaport is controlled by ULCH which is owned by Vladimir Lisin.178
Member of the Board of Directors, JSC Saint-Petersburg Seaport.
JSC Saint-Petersburg Seaport is controlled by Vladimir Lisin.180
Deputy General Director of LLC Independent Transport Company.
LLC Independent Transport Company was controlled by Vladimir Lisin.182
A number of indirect signs reported by people involved in the arbitration sector may indicate that it is not impossible that Vladimir Lisin’s companies may secretly provide financial support to RAC in exchange for services of various types.
168 https://www.uclholding.ru/ucl-holding/ta/team. The official website of the company (https://www.uclholding.ru.), including a reference to the above-mentioned section of the website, is presently under construction. The information is also confirmed by other sources (at least, as of 2018):
169 See, e.g., http://mb.nkso.ru/news_6587.html.
173 https://www.nwship.com/sites/default/files/filefield_paths/gosa-2015-final.pdf; https://www.moex.com/ru/listing/emidoc-data-facts.aspx?id=606043; https://www.finam.ru/services/depocompanyitem01F7E/
177 http://www.tmtp.ru/press-center/releases/itogi-godovogo-sobraniya-akcionerov-oao-tuapsinskiy- morskoy-torgovyy-port-0
179 https://www.uclholding.ru/sites/default/files/magazine/volgo-nevskiy-prospekt/2013/12/vnpn12.pdf. The official website of the company, including the reference to the above-mentioned section of the website, is presently under construction.
The State Corporation for nuclear power Rosatom is a Russian state holding created by the Russian Federation under the special Federal Law dated 1 December 2007 No. 317-FZ and encompassing over 360 nuclear industry enterprises. Rosatom includes all civil nuclear enterprises of Russia, the nuclear military complex and scientific research organizations as well as the nuclear icebreaker fleet183 (Annex 29).
Previously “Rosatom’s system had its own arbitration — the Arbitral Center for Resolution of Economic Disputes at the Private Institution Center for Arbitration and Legal Expertise” .184 The Center for Arbitration and Legal Expertise was created by Rosatom. In the light of the “reform” this center closed the Arbitral Center and became one of the founders of RIMA (see above, para. 51).
That said, a special division for the resolution of disputes in the nuclear industry had previously been established in RAC185 (Annex 8) (see above, para. 87).
According to information provided by the former director of RAC Andrey Gorlenko in an email dated 23 November 2017, the Center for Arbitration Regulation and Legal Expertise “expressed its readiness to actively participate in supporting and financing the activities of the Institute of Modern Arbitration, as well as joint activities aimed at developing and popularizing arbitration in Russia”.
Alexander Plakhin, head of the said division of RAC for the resolution of disputes in the nuclear industry, had previously occupied the position of director of the Center for Arbitration and Legal Expertise at Rosatom.186
Another person associated with a Rosatom company187 (JSC TVEL from Rosatom’s fuel division188) is Vladimir Molchanov, legal counsel and chief expert of the division189 (Annex 8).
According information from various people, Rosatom initially proposed the organization of a specialized branch within a specific PAI to deal with disputes in the nuclear industry instead of setting up its own PAI. At the same time, Rosatom took the principled position that the arbitration fee for disputes in this branch should not be higher than in state courts (RUB 200,000). Rosatom also proceeded from the need to consider “paying extra to arbitrators” considering these type of disputes, taking into account the low level of fees for such cases.
188 http://www.rosatom.ru/journalist/news/toplivnaya-kompaniya-rosatoma-tvel-ispolnila-kontrakt-na- postavku-toplivnykh-tabletok-dlya-aes-tarap/
It is likely that these conditions for working together were satisfactory to RAC. A good illustration in this regard is the way the arbitration fee to resolve a dispute in the nuclear industry by a specialized division of RAC is calculated190:
Examples of amount of claim
Arbitration fee = Administrative expenses + Arbitrators’ fee
Disputes in nuclear industry
RUB 7 000 = RUB 1,400 + RUB 5,600
RUB 60.000 = RUB 17.500 + RUB 42,500
RUB 78. 000 = RUB 15,600 + RUB 62,400
RUB 265.400 = RUB 65 000 + RUB 200,400
to Article 12 of the Rules of RAC Division for Resolution of
Disputes in the Nuclear Industry (as amended on 21 January 2019)
- “With a claim value of up to RUB 10,000,000 (ten million rubles) for the purposes of arbitration of domestic disputes or USD 200,000 (two hundred thousand US dollars) for the purposes of international commercial arbitration, a dispute shall be heard by a sole arbitrator” (paragraph 2);
- “With a claim value equal to RUB 10,000,000 (ten million rubles) or more for the purposes of arbitration of domestic disputes or USD 200,000 (two hundred thousand) or more for the purposes of international commercial arbitration, and in the event of filing applications for transforming legal relations or other demands which may not be estimated in terms of monies, a dispute shall be heard by three arbitrators” (paragraph 4).
The calculations were carried out using calculators on the official website of RAC (https://centerarbitr.ru/nuclear-division/calculator/; https://centerarbitr.ru/about/calculator/).
191 According to Article 25:
“1. An expedited arbitration procedure is carried out without an oral hearing, on the basis of documents alone.
2. An expedited arbitration procedure shall apply if the Parties to the arbitration have indicated in the Arbitration Agreement that an expedited arbitration procedure should be applied to disputes between them and that the Parties to the arbitration expressly agree that oral hearings are not to be held within the framework of the expedited arbitration procedure. A direct agreement between the Parties to the arbitration to waive the oral hearing for the application of the expedited procedure in the framework of international commercial arbitration is not required.
3. The provisions of this article may not be amended by agreement between the Parties to the arbitration, unless otherwise provided for by the provisions of this article.
4. The expedited arbitration procedure may be applied for claims with a value of not more than RUB 10,000,000 (ten million rubles) for the purpose of arbitration of internal disputes or USD 200,000 (two hundred thousand US dollars) for the purposes of international commercial arbitration.
Examples of amount of claim
Arbitration fee = Administrative expenses + Arbitrators’ fee
Disputes in nuclear industry
RUB 69463.62 = RUB 13892.72 + RUB 55570.90
USD 15200 (RUB 941662.80) = USD 4350 + USD 10850
RUB 100 439.37 = RUB 20 087.87 + RUB 80 351.50
USD 23 070 (RUB 1 429 221.105) = USD 5 850 + USD 17 220
Examples of amount of claim
Arbitration fee = Administrative expenses + Arbitrators’ fee
Disputes in nuclear industry
Procedure (standard)193 RUB 200,000
RUB 7.000 = RUB 1,400 + RUB 5,600
RUB 50.000 = RUB 12,500 + RUB 37,500
RUB 11,000,000 Procedure (standard)
RUB 78.000 = RUB 15,600 + RUB 62,400
RUB 180.250 = RUB 47,750 + RUB 132,500
As can be seen, the amount of the arbitration fee payable to resolve disputes in the nuclear industry is significantly (several times!) lower than the amount of the fee payable for resolving disputes in the framework of domestic or international commercial arbitration, or for disputes in the agricultural industry.
However, it is clear that disputes in the nuclear industry cannot, by definition, be considered simpler than other disputes.
At the same time, according to RAC cases statistics in 2019,194 out of 262 claims submitted to RAC in 2019, 194 claims (i.e., nearly three fourths) were considered in conformity with the Rules for Resolution of Disputes in the Nuclear Industry.
The above shows that specific arrangements could have taken place between RAC and Rosatom during the creation of a special division for the resolution of disputes in the nuclear industry. These arrangements could have ensured a privileged regime for Rosatom during the consideration of disputes of entities under its control.
It cannot be ruled out that Rosatom finances RAC in a non-transparent manner and RAC may exercise the functions of a “puppet” arbitration center for Rosatom.
This can only cast a shadow on the reputation and independence of RAC.
Further evidence of this is the fact that in the standard contract forms used by Rosatom companies, a clause in favor of (specifically) RAC is stipulated for contractual relations between its organizations, while for contractual relations between any Rosatom organization and external counterparties - a clause in favor of other permanent arbitration institutions is also stipulated.195
a rate of exchange of RUB 61.9515 per USD 1 (as of 24 January 2020).
193 There is a similar mechanism in relation to the RAC Rules for the resolution of disputes in the agricultural sector (https://centerarbitr.ru/wp-content/uploads/2019/02/Правила_арбитража_сх_споров_РАЦ_итог.pdf), which also provide for a standard and expedited procedure for the settlement of disputes (Article 18):
“1. An expedited arbitration procedure is carried out without an oral hearing, on the basis of documents alone.
2. An expedited arbitration procedure shall apply if the Parties to the arbitration have indicated in the Arbitration Agreement that an expedited arbitration procedure should be applied to disputes between them and that the parties to the arbitration expressly agree that oral hearings are not to be held within the framework of the expedited arbitration procedure. A direct agreement between the parties to the arbitration to waive the oral hearing for the application of the expedited procedure in the framework of international commercial arbitration is not required.
3. The provisions of this article may not be amended by agreement between the Parties to the arbitration, unless otherwise provided for by the provisions of this article.
4. The expedited arbitration procedure may be applied when the price of the claim is not more than RUB 30,000,000 (thirty million rubles) for the purpose of arbitration of internal disputes or USD 500,000 (five hundred thousand US dollars) for the purposes of international commercial arbitration.
194 RAC in Figures. The Information about the Cases Heard in 2019 (https://centerarbitr.ru/wp-content/uploads/2020/03/РАЦ-в-цифрах-2020.pdf).
195 http://innov-rosatom.ru/desktop_app/login/Проект Договора.doc
Gazprombank is one of the largest commercial banks of Russia196 with significant state participation, including via JSC Gazprombank and Vneshekonombank.197
The deputy chair of the management board of Gazprombank is Elena Borisenko.198
During arbitration “reform” Elena Borisenko held the post of Deputy Justice Minister of Russia199 and said her goal was the creation of regulatory mechanisms “that will make the arbitral institutions effective and competitive” and noting that “there will not be many of them [arbitral institutions] after that”.200 This indicates that a plan for “destroying arbitration by napalm bomb” (an expression Mikhail Galperin used off the record) already existed in 2013.
Various sources in the arbitration field and in RAC itself confirm that Elena Borisenko collaborates closely with RAC, particularly taking part in events organized by RAC.201
People affiliated with Gazprombank were or are members of the supervisory boards of two of RIMA’s founders as of 2018 (see above, para 69).
Regarding the connections between Gazprombank and RIMA founders, see above, Section 5.2.
(Annex 30); https://ru.wikipedia.org/wiki/Газпромбанк
199 https://pravo.ru/court_report/view/118159/. She occupied this position from 2012 until 2015 working in the structure of the Ministry of Justice in various positions from 2009.
201 https://www.advgazeta.ru/novosti/kak-budet-rabotat-arbitrazh/; https://centerarbitr.ru/2016/11/14/время-арбитража-пришло-заметки-о-конф/
As reported on the RAC website202 (Annex 31), it functions with the support of the Saint-Petersburg International Legal Forum (SPILF).
The forum was established in 2011 and is conducted with the support of the President of Russia and the Ministry of Justice. Among the organizers of SPILF are the Ministry of Justice and SPILF Fund203 (Annex 15).
Gazprombank is a general partner of SPILF204 (Annex 32).
The chair of the Supervisory Board of the SPILF Fund since 2015 has been Elena Borisenko205 who is also referred to as one of the founders of SPILF.206
The operator of SPILF is LLC Conference Center Saint-Petersburg International Legal Forum (LLC CC SPILF)207 (Annex 33).
As previously said in para. 76, the general director and the only founder of LLC CC SPILF is Olga Motenko (see above, paras. 76 and 77) who is also the general director and the only founder of LLC LF Academy, i.e., one of RIMA’s founders (see above, para. 51).
Olga Motenko appointed her relative I. Motenko as development director of SPILF.
The SPILF Fund is located at the same address as LLC LF Academy: 191002, city of Saint-Petersburg, Fontanka river embankment, 50, E.
has already been said, “100%
in LLC Conference center St. Petersburg International Legal Forum
is owned by Olga Motenko. This businesswoman started out in 2007 as
the general director of the Oberon insurance company (in 2009,
after her dismissal, the company was re-registered in Izhevsk where
it was quietly wound up, while its parent company Regional
Insurance Alliance is presently going bankrupt). In 2011 [she]
founded LLC Conference Center St. Petersburg International Legal
Forum, at the same time in St. Petersburg she founded the company
Molot with her partners which, according to data from the
All-Russia Classificatory of Economic Activity Types, specialized
in gambling and betting activities.
Judging by information from arbitrazh (commercial) cases involving Molot, more than once it was checked by the Department for Combating Economic Crimes, which discovered that this company ‘under the guise of operating the Student Ticket, Farmer, and Motherland Shield Russian non-state instant lotteries arranged and held gambling events using electromechanical equipment without proper authorization’”.208
And yet former RAC director Andrey Gorlenko repeatedly denies209 that these connections are a sign of favoritism (in the form of cronyism) by the Ministry of Justice towards RAC.
Even more significant is that the founder of SPILF Fund is LLC Dar Fund Management Company. Alexander Sokolov is director of the latter, a man who is referred to as a “multiple CEO” of a number of legal entities.210
It is interesting to emphasize that in the extract from the Unified State Register of Legal Entities about the SPILF Fund, in the section “Information on the founders (participants) of the legal entity”, TIN 7706664648 is stated as allocated to LLC Dar Fund Management Company. However, this TIN is actually owned by LLC Orion (TIN 7706664648), the founder of which, in turn, is the Dar Fund of Regional NonCommercial Projects (TIN 7705517400).
This DAR fund is notorious for the film “He is Not Dimon to You”211 that tells of the alleged property of the former Chair of the Government of the Russian Federation Dmitry Medvedev. The film claims that the latter heads up a multi-level corruption scheme: “through charitable foundations and organizations legally registered with his trustees (including relatives and classmates), he owns expensive real estate purchased with oligarch money and Gazprombank loans”.212
The head of the Supervisory Board of the DAR Fund of Regional Non-Commercial Projects is (or was) Ilya Eliseev213 (mentioned at least in official sources as of 2016 and 2017) who - among his other dubious ties214 - is also the Deputy Chair of the Management Board and member of the Board of Directors of Gazprombank.215
At the same time Elena Borisenko (see above, para. 135) and Yury Pilipenko (FCA, see above, Section 5.6) were members of the panel for that award ceremony.217 Such award ceremonies certainly look pretty odd.
The above shows that RAC is closely connected (including, via SPILF) with the Ministry of Justice, Gazprombank and various top officials of the Russian Federation.
RIMA218 (RAC219) and one of its founders (Autonomous Non-Profit Organization International and Comparative Law Research Center220) are located at the same address (119017, Russia, Moscow, Kadashevskaya embankment, 14, bldg. 3) as Ivanyan & Partners221 (Law Firm). This building is owned by unrelated third parties.
As reported by various people, Elena Borisenko (see above, para. 135) used to work in the Law Firm (now this information is buried). The Law Firm provides legal services to, amongst others, Gazprombank (see above, para. 134).
Apart from this, in recent years the Law Firm has been providing legal services to the Russian Federation, inter alia, representing the Russian Federation in the European Court of Human Rights,222 as well as working so actively in the public procurement field that the media has called it one of the “kings of government procurement”.223
According to Khristophor Ivanyan, it is "... not a very visible law firm. On the legal market it is known, first and foremost, for a strong international practice through which it represents the interests of the Russian Federation in multinational disputes”.224
The Law Firm also won the tender, for example, during procurement process No. 31401294718230 with an initial price of RUB 184,090,400 for JSC Oboronservis (the subject of the procurement was legal assistance necessary on issues of Russian, Federal Republic of Germany and Swiss Confederation legislation, as well as involvement in arbitration proceedings under the rules of the International Arbitration Court of the International Chamber of Commerce. This was due to the refusal, because of sanctions, by the Rheinmetall concern to execute a contract worth EUR 120 million for the construction of a combat training center for troops in Nizhny Novgorod Region).231
JSC Oboronservis (now called JSC Garnizon) is a commercial organization controlled by the Ministry of Defense of Russia, established in 2008 by Presidential Decree and resolutions by the Russian Government to release the military from economic functions not intrinsic to an army.232
In 2013-2014 senior lawyer Sergey Kabanov and partner Sergey Chuprygin from the Law Firm represented the interests of the Ministry of Defense of Russia (as a third party) in arbitrazh (commercial) courts of appellate and cassation instances in the case of a claim for cancellation of an investment contract and a counterclaim to enforce the performance of the contractual obligation and amendment of the contractual terms (case No. A40-102296/11).233
There are other parties with state involvement among the clients of the Law Firm’s lawyers. For example, in 2014, the partner of the Law Firm Alexey Koziakov and senior lawyer Tatiana Bravicheva represented Nevskaya Pipeline Company LLC (an oil transshipment terminal operator in the seaport of Ust-Luga controlled by, inter alia, Gazprombank and Transneft234) in arbitrazh (commercial) courts of appeal and cassation instances in a lawsuit against CJSC GT Morstroy for recovery of losses incurred as a result of elimination of defects (deficiencies) in the performance of a contract with a value of RUB 21,941,414.4 (case No. A56-75450/2012).235
218 http://modernarbitration.ru/en/contacts/ (Annex 35).
219 https://centerarbitr.ru/en/contacts-2/ (Annex 36).
220 http://www.iclrc.ru/en/about/contacts (Annex 37).
221 https://ivanyan.partners/en/ (Annex 38).
229 http://zakupki.gov.ru/223/contract/public/contract/view/general-information.html?id=2005916&view-Mode=FULL; http://zakupki.gov.ru/223/contract/public/contract/view/suppliers.html?id=2005916&view-Mode=FULL
233 http://kad.arbitr.ru/Card/5e8ef28f-a16e-4424-a434-908524eaa3f4. See, for instance, Resolution of the Ninth Arbitrazh (Commercial) Appellate Court dated 15 October 2013, Resolution of the Federal Arbitrazh (Commercial) Court for the Moscow Circuit dated 6 February 2014.
235 http://kad.arbitr.ru/Card/0adcdcba-b340-4e5d-a4d7-f586c82023ff. See, for instance, Resolution of the Thirteenth Arbitrazh (Commercial) Appellate Court dated 12 May 2014, Resolution of the Arbitrazh (Commercial) Court for the North Western Circuit dated 22 August 2014.
In 2018 the Law Firm’s lawyers (partner Sergey Chuprygin and senior lawyer Natalia Rodina) represented in arbitrazh (commercial) courts of the first and cassation instances the interests of JSC BTK Group (the sole supplier of military equipment (uniforms) for the Russian army236) in a case for the recognition and enforcement of an award from the German Arbitration Institute in favor of Mangold Consulting GmbH (case No. A56-20885/2018237).
As said above in paras. 82 and 83, the lawyers of the Law Firm Khristophor Ivanyan and Vasily Torkanovsky were previously members of the Supervisory Board of the International and Comparative Law Research Center, one of the founders of RIMA.
Maria Miroshnikova (partner of the Law Firm) and Ekaterina Smirnova (adviser of the Law Firm) listed as RAC arbitrators242 (Annex 19). Also, as said above in the table to para. 54, since December 2019 the former director of RAC Andrey Gorlenko has been a partner in the Law Firm.
It appears that RAC and the Law Firm may collaborate not only over information and legal matters but also financially (it cannot be ruled out that the Law Firm may have secretly financed the RAC through rent payments).
The fact that the Law Firm is the sole supplier of services for the needs of the Ministry of Justice and the Ministry of Finance and receives such huge sums also shows that the Russian Federation uses this method of payment via the Law Firm for services from foreign lawyers while not wishing to disclose this information.
At the same time and without any direct connection with the Law Firm, we may note that in order to better understand the problems arising in the modern public procurement system in Russia, one should remember that:
this system is not transparent and is inefficient. One of the main problems in this area is the extremely low level of competition. According to the Audit Office, in 2018 14.2 % of all funds spent by the state on procurement (in absolute terms this amounts to about RUB 7 trillion) went to a single supplier. More than a third of such purchases were carried out in performance of a decision by the Russian Government or the President243;
in the period of 2017—2018 the number of violations within the field grew fivefold244;
it is characterized by a high degree of corruption, including the spread of so-called “rollbacks”; one corrupt technique connected with “rollbacks” is overpricing by the suppliers;
finally, very often those that win a tender in this system are close to the tender organizers.
RAC is actively trying to establish ties with foreign arbitration centers.
In doing so, RAC specifically emphasizes that it is supported by the public authorities of Russia, who are allegedly conducting a pro-arbitration policy. The public authorities provide assistance to that end: they always represent themselves in a different manner abroad compared to their behavior within the state itself.
At the same time, RAC conceals its true links with the government from foreign entities.
On 6 September 2017 Mikhail Galperin (Deputy Minister of Justice, see above, para. 110) supported RAC with his presence during the signing of a Memorandum on Cooperation with the Japan Association of Arbitrators (JAA).245
On 17 October 2017 employees of the Ministry of Justice and Igor Shuvalov, First Deputy Prime Minister of the Russian Federation, supported RAC with their presence during the signing of a Memorandum of Understanding with the Singapore International Arbitration Center (SIAC).246
on RAC’s activities as of 2017 and 2018
246 Ibidem; The Institute of Modern Arbitration Signs Memorandum of Understanding with Singapore International Arbitration Centre (SIAC) (https://centerarbitr.ru/en/2017/10/18/mou-with-siac/ (Annex 11)).
The Russian arbitration community is aware that RAC assisted the Hong Kong International Arbitration Centre (HKIAC) and Vienna International Arbitral Centre (VIAC) in obtaining authorization from the Ministry of Justice (see above, para. 11) without hiding the fact that the issue of recommendations by the Council for Development of Arbitration had already been resolved. A notable point reported by someone involved in these events: RAC had even planned to celebrate VIAC’s success in a restaurant in advance.
In August 2019 RAC was granted the status of observer at the II Arbitration and Mediation Procedure/Dispute Resolution UNCITRAL248 (Annex 41) working group with assistance from the Russian public authorities, while at the same time not disclosing its true links with the state.
on RAC’s activities as of 2017 and 2018
(https://centerarbitr.ru/wp-content/uploads/2018/08/Отчет-РАЦ-2017-2018web.pdf), p. 5;
HKIAC and the Institute of Modern Arbitration Sign Agreement of
Since 2018 RAC, seeking to improve its image abroad, has been organizing and financing an annual conference, Russian Arbitration Day (RAD),249 inviting foreign speakers to take part. The RAD organizers are Alexey Zhiltsov and Anton Asoskov, members of the Council for Development of Arbitration and loyal to the Ministry of Justice (see above, Section VIII). Anton Asoskov is also a member of the RAC Board (see above, para. 52). Roman Khodykin is another organizer, from Bryan Cave Leighton Paisner (Russia) LLP. All of them manifestly and actively support the “reform” aimed at destroying independent arbitration in Russia.
Seeking to improve its image abroad RAC supports the Moscow pre-moot of the international arbitration competition Willem C. Vis International Commercial Arbitration Moot250 (Annex 42). Among others, Olesya Petrol (member of the Council for Development of Arbitration appointed to the Council with the support of RAC) is in charge of it.251
In the light of what has been said in previous sections, it seems that RAC is a GONGO (Government-Organized (Operated) Non-Governmental Organization), a nominally non-governmental public structure. Although it was created by an initiative from and with the participation of public authorities and operates in the interests of the government, it is deliberately concealing its connections to them.
Among other things, RAC was established not only to give the deceitful impression that there are independent arbitration institutions in Russia, but also as a tool aimed at foreign audiences, misleading them to the following ends:
the illusion abroad that there are independent arbitration
institutions in Russia;
lobbying for Russian government interests abroad, allegedly as a strong representative of the arbitration community in Russia but in fact, inter alia, under instruction from the Government of the Russian Federation.
Events held by RAC are, inter alia, platforms to conceal the true nature of RAC as a GONGO.
At the same time, it is important to note that the creation of RAC pursued another goal as well: a number of Russian officials gaining control over a share in the arbitration services market with regard to international disputes through weakening the position of ICAC at CCI RF (see below, para. 179).
Only four Russian organizations have been granted arbitration “licenses” (see above, paras. 9, 10 and 12).
In essence, the arbitration field in Russia has been divided between three organizations: RAC, RF CCI and RUIE. The autonomous non-profit organization Sports Arbitration Chamber (see above, para. 10) may be disregarded: it focuses on the very specific issues of sports arbitration.
The current situation in the arbitration field could be succinctly described as an arbitration oligopoly.
The above explains why RAC:
is an ardent opponent of competition between arbitration centers (see above, para. 49);
states that it does not provide arbitration administration services but simply conducts public activity analogous to the exercise of justice by state courts (see above, para. 45);
in conjunction with the Ministry of Justice impedes the issue of arbitration “licenses” to other entities;
in general, fears transparency.
RAC feats competition because that would threaten its status. RAC fears regulation to protect competition. RAC feats bearing material liability before the parties to disputes in situations where it has made a mistake during arbitration administration and therefore it denies that it provides services (provision of services is covered by the Civil Code of the Russian Federation).
The fact that the arbitration field in Russia is divided between three organizations: RAC, RF CCI and RUIE (see above para. 176) is by no means accidental: it is an accurate reflection of the distribution of political forces in Russia. There are only three serious political players in Russia: representative of the security agencies, the civil bureaucracy and oligarchs.
RUIE reflects oligarchs’ interests, the RF CCI has always been on close terms with the security authorities, while RAC was created by the Ministry of Justice, i.e., civil bureaucracy.
At the same time, one of RAC’s important purposes is to weaken the position of the ICAC at the RF CCI as its competitor. This is why RAC supported HKIAC and VIAC in obtaining authorizations from the Ministry of Justice (see above, para. 11).
It should be noted that the Ministry of Justice dismissed the applications of each and every regional applicant.
Instead, RAC, RF CCI252 and RUIE253 promptly started establishing their own divisions in the regions, by agreement with the Ministry of Justice.
The result of this was the elimination of independent regional arbitration centers in Russia.
In view of the above, RAC is also a tool for the disruption of federalist ideas in the field of Russian arbitration.
Here this is not so much an arbitration oligopoly as arbitration monopolization of everything in favor of Moscow. It is in full conformity with the Russian authorities’ policy aimed at suppressing federalism.
So one can only agree with RAC’s statement that it does not really provide arbitration administration services: inter alia, it solves other important specific matters for the government in the area of arbitration.
Presently, the ICAC at the RF CCI has divisions in Voronezh,
Irkutsk, Kazan, Krasnodar, Moscow region, Nizhny Novgorod, Saratov,
Stavropol, Rostov-on-Don, St. Petersburg, Tyumen, Ufa, Chelyabinsk,
Vladivostok and Ulyanovsk.
253 https://arbitration-rspp.ru/branches/info/. Presently RUIE has: Far Eastern division, Southern division, Moscow regional division, divisions in Ekaterinburg, Krasnodar, Novosibirsk, Republic of Tatarstan, St. Petersburg, Saratov and Chelyabinsk.
All of the conclusions made above in the Section “Some Conclusions Based on the Study Results” are worth repeating.
RAC is a structure created and controlled by the state, a GONGO (Government-Organized (Operated) Non-Governmental Organization).
Governmental control over RAC is necessary to exclude arbitration awards being delivered against the government and entities connected to it (see also below for the reasons for such a policy).
The RAC is most probably financed by sponsors (including Gazprombank and Dar fund, or through Ivanyan & Partners) who obviously follow instructions from the government, while at the same time meticulously concealing the amounts and the financing itself.
The fact that finance is provided secretly including through various funds, and that accurate information about the sources and volume of financing is concealed, gives reason to presume that the amounts of money allocated and actually spent on specific purposes do not match up.
In clear violation of the law, RAC administers disputes that involve Rosatom (not only is Rosatom a founder of RAC but it almost certainly finances it, too). Specific arrangements may take place between RAC and Rosatom ensuring that this state corporation benefits from a special privileged regime during the consideration of disputes involving the entities under its control.
It is clear that everything related to RAC is at the same time closely connected with the problem of improper concealment of information:
see above, para. 67 on the concealed beneficiaries of the Foundation for Legal Education and Research as the founder of RAC;
see above, Section VI on the concealed information about finance sources for RAC;
see above, para. 94 on activity regarding the secret leasing of property.
At the same time, RAC may also use as a “screen” references to arbitration confidentiality, which, no doubt, do not truly match the essence of this institution.
Such concealment of information is particularly remarkable in the context of RAC’s statements that it does not provide arbitration administration services but simply conducts public activity analogous to the exercise of justice by state courts.
Also one cannot but notice that the issue of conflict of interests may constantly come up in the context of references to RAC (and in fact even corruption issues are not excluded):
see above, para. 120 regarding the strange case with the dissenting opinion of the arbitrator;
see above, para. 116 on voting by members of the Board of the RAC against authorizing other applicants in violation of the rules on conflict of interests;
see above, para. 94 on the lease of property in violation of conflict of interest rules;
see above, para. 166 on public procurement.
RAC is a participant in the oligopolic division of the arbitration services market in the Russian Federation in conjunction with the RF CCI and the RUIE.
RAC is a tool aimed at foreign onlookers (ably assisted by the term “Russian”, which RAC obtained the right to use without proper reason), inter alia, to mislead them for the following purposes:
creating abroad the illusion that there are independent arbitration institutions in the Russian Federation;
lobbying for the interests of the Russian authorities abroad - allegedly as a strong representative of the arbitration community in the Russian Federation, but in reality under instruction from the Government of the Russian Federation.
Events held by RAC are, inter alia, platforms to disguise RAC’s genuine nature as a GONGO.
At the same time, it should be emphasized that the creation of the RAC also pursued a different goal: a number of Russian officials gaining control over a share in the arbitration services market in international disputes by weakening the ICAC at the RF CCI.
Applications by HKIAC and VIAC for authorization from the Ministry of Justice through cooperation with RAC shows, unfortunately, that they either did not conduct proper due diligence, or that they consider loyalty to the Russian Government more important than the values on which arbitration is based.
RAC is not a genuinely independent arbitration institution, but benefits from significant privileges, offered to it by the government, which are offered to no other entity in the Russian Federation.
The facts show that the Justice Ministry operates a policy of favoritism (cronyism) with regard to FAC in breach of the principles of equality and prohibition of discrimination against entities.
The statements by RIMA and RAC on their missions and goals do not match the available facts.
RAC is not what it claims to be, particularly before foreign observers. It operates a policy to mislead others, Russian society and the foreign arbitration community in the form of suppressio veri.
But what are the reasons for such state of affairs?
The answer to this question is that in fact no arbitration “reform” took place in Russia.
The “reform” itself, if you look closely at it, is not reform at all, but a grandiose special operation to gain control over arbitration, to neutralize it as a rival that endangers the state, and an undercover operation, accompanied by a false propaganda campaign which is carried on with participation of the RAC.
The state control of and lack of competition in the field of arbitration is a continuation and reflection of the policy of subordinating the state courts to the executive branch. This deprives these courts of real independence. Now the executive branch (the Ministry of Justice) has improperly extended its powers to Russian arbitration.
It is known that in Russia the state, represented by state courts (especially the RF Supreme Arbitrazh (Commercial) Court since 2002), has been suspicious of and even partially hostile to arbitration. But earlier, on the whole, it was indifferent to it, since arbitration in essence did not harm the interests of the executive branch. But once the latter felt the danger that the very nature of arbitration posed to it, consisting of freedom, it immediately decided to introduce restrictions.
The first “blow” to the executive branch from arbitration was given in the YUKOS case. The only disputes won by YUKOS in Russia are four cases in the ICAC at the CCI (then not controlled by Vadim Chubarov, vice-president of the RF CCI).
“1) In 2006, the International Commercial Arbitration Court at the RF CCI and OJSC Yuganskneftegaz (the predecessor of OJSC Rosneft Oil Company) made awards in favor of Yukos Capital S.a.r.l. for debt collection under four loan agreements: a loan amount of RUB 11,233.0 million; accrued interest of RUB 1,702.9 million; and arbitration fees and legal costs of USD 0.9 million ...” 254
The awards were quickly set aside by the Arbitrazh (Commercial) Court of Moscow city but are known to have been enforced abroad255 (Annex 43). It was a strong blow against state ambition.
The authorities felt the second “blow” again thanks to the ICAC at the CCI, though this time through companies belonging to oligarch Vladimir Lisin, who was close to the state, when almost RUB 9 billion was recovered from OJSC NLMK in favor of Nikolay Maximov (ICAC Award of 31 March 2011 in case No. 244/2009). And this award was quickly quashed by the Arbitrazh (Commercial) Court of Moscow city (case No. A40-35844/11-69-311256) (see also above, para. 120). Since that very moment Vladimir Lisin’s companies decided to finance the arbitration “reform”.
quarterly report of Rosneft Oil Company OJSC for the third quarter
of 2010 (https://www.rosneft.ru/upload/site1/old_files/XcFJQdreVb.pdf), p. 29.
The third, and most dangerous indicator for public authorities, were the awards dated 18 July 2014 in the arbitration held in The Hague on the basis of UNCITRAL Rules (1976) and in accordance with the Energy Charter Treaty for recovery from the Russian Federation of over USD 50 billion (Hulley Enterprises Limited (Cyprus) v. The Russian Federation (PCA Case No. AA 226)257); Yukos Universal Limited (Isle of Man) v. The Russian Federation (PCA Case No. AA 227)258); Veteran Petroleum Limited (Cyprus) v. The Russian Federation (PCA Case No. AA 228)259).
These cases fixed the fate of arbitration in Russia. The state finally realized what a powerful tool arbitration could be and made up its mind to promptly neutralize it.
It does not seem to regret it at all, including in the light of the latest story with the arbitral award in Stockholm regarding the dispute between Gazprom and Naftogaz:
December 29 . /TASS/. Arrangements for the transit of Russian
gas through Ukraine to Europe, including the payment by Gazprom of
USD 2.9 billion to Naftogaz according to the verdict of the
Arbitration Institute of the Stockholm Chamber of Commerce, were a
difficult decision for the Russian side, but this meant it avoided
the worst-case scenario. This was announced by Russian Deputy Prime
Minister Dmitry Kozak in an interview with the Vesti Nedeliprogram
on the Russia-1 television channel on Sunday.
‘There was a choice: between bad and very bad. USD 2.9 billion for Gazprom, for our country is a hard decision’, he said. ‘But together we could have lost significantly more, incomparable amounts’.
On December 20 Moscow and Kiev announced the approval of a new gas transit contract (the current one expires on 31 December 2019) for a period of five years, as well as the settlement of mutual claims between Gazprom and Naftogaz. The parties agreed to waive new mutual claims, withdraw mutual claims, Gazprom to pay about USD 2.9 billion under the award by the Arbitration Institute of the Stockholm Chamber of Commerce and a settlement agreement on antitrust proceedings against Gazprom in Ukraine. On Friday, Gazprom announced payment of this amount to Naftogaz”.260
Arbitration “reform” is a tool for the subordination of arbitration to the state in Russia. The state, fearing arbitration, wants to control it (that is why the compiler has used the term in quotation marks throughout).
Solving the task set before it, the Ministry of Justice effectively banned the activities of independent arbitration institutions in the Russian Federation, except for those controlled by the state (see above, paras. 9, 10, 12, 176).
is why the Ministry of Justice has basically prohibited the activity
of independent arbitration institutions in Russia.
RAC is one of the tools of the state to achieve this goal.
All of the above also explains why everything related to RAC is at the same time closely connected with the problem of inappropriately concealing information, as well as why the issues of conflict of interests and even corruption constantly come up in connection with RAC: this is an inevitable consequence of false “reform”, arbitration oligopoly and deception.
It is well known that in Russia the state is afraid of civil society and suppresses it.
For this reason, the refusals, for instance, of the Ministry of Justice to register political parties and its refusals to issue authorization to administer arbitration are similar in nature.
In Russia, the government is particularly afraid of foreign arbitration centers and foreign arbitration awards. This is why it demands that foreign arbitration centers obtain authorization from the Ministry of Justice.
The essence of arbitration “reform” in Russia is:
This is inherently a denial of arbitration and the creation of conditions for corruption.
And responsibility for all this is borne, inter alia, by the RAC, including former and current members of its Board (Annex 8), as well as all those who actively contribute to the RAC, including:
Anton Asoskov (professor at the Department of Civil Law of the Law Faculty at Lomonosov Moscow State University (MSU));
Andrey Gorlenko (partner at Ivanyan & Partners Law Firm);
Anna Grishchenkova (partner at KIAP Law Firm, MCIArb);
Mikhail Ivanov (partner at Dentons);
Andrey Panov (counsel at the Moscow office of Allen & Overy);
Yury Pilipenko (President of the Federal Chamber of Attorneys of the Russian Federation);
Dmitry Stepanov (partner at Egorov Puginsky Afanasiev & Partners);
Elena Uksusova (professor of the Department of Civil and Administrative Procedure at Kutafin Moscow State Law University (MSAL));
Prof. Dr. Klaus Peter Berger, LL.M. (chairholder professor at University of Cologne);
The Right Honourable Dame Elizabeth Gloster, DBE, PC (international commercial arbitrator at One Essex Court (Temple, London));
Neil Trevor Kaplan, QC, JP, CBE, SBS (independent international arbitrator);
David W. Rivkin (partner at Debevoise & Plimpton LLP (New York, USA));
Francis Xavier, SC, PBM (partner at Rajah & Tann (Singapore));
Roman Bevzenko (previously member of the RAC Board, member of the “Council” for Development of Arbitration).
Everything rises in price in Russia, except for information about the increasing spread of corruption (NN).
The compiler understands that the present study will not change anything (except, perhaps, the compiler himself), not least because the Russian authorities do not care about their image at this historical stage in the development of Russia.
The same can be said about the attitude of most people associated with RAC to their reputation (the compiler is sure that they have much more specific information about the RAC than he does). At the same time, some of them did not have much of a reputation initially, while others cannot be prohibited from destroying theirs if they wish.
This section was prepared after the electronic version of this study had already been published on 6 February 2020 (in Russian and in English) on social networks: it is specifically for the printed version of the latter, particularly in light of events which took place after that date.
On 6 February 2020 I published on the website www.zakon.ru a blog post: “The So-Called ‘Russian’ Institute of Modern Arbitration and ‘Russian’ Arbitration Center: Examining Their Role in Russian Arbitration. GONGO-Structures? Declarations and Reality”.261
It was accompanied by the present study.
Simultaneously I posted information about it in the Treteysky Sud (“Arbitral Tribunal”) journal group on Facebook.
After that I created a website dedicated to this study: http://centerarbitrgongo.ru.
On 6 February 2020 Andrey Gorlenko (see above, Section 5.1) published the article “The Russian Arbitration Week Will Be Proactive, Action-Packed and Full of Stars”262 as his reply.
In this publication he allowed himself to state the following:
the reform its critics were trying to export what was to large
extent expected of them abroad: seminars with pancakes and
balalaikas as well as negative stories about Russian arbitration and
the Russian courts. In this context the situation with arbitration
and the courts’ attitude to arbitration was to their
They were doing it rather skillfully, earning their personal reputation as experienced guides in the ‘dark kingdom’, getting appointed as arbitrators and gaining new clients as representatives. No tangible positive effect was observed for arbitration and Russian specialists from these events aimed at foreign users”.
No doubt, the person he meant was Vladimir Khvaley.
Vladimir Khvaley replied to him on 7 February 2020 in the Treteysky Sud journal group on Facebook:
“As it turns out, the problem is not that the Russian courts refuse to enforce foreign arbitral awards due to such outrageous grounds as, for example, a standard ICC arbitration clause being invalid, but that this is being discussed. And the problem is not that RAC is a corrupt entity (if A. Gorlenko is ready to refute this statement, I offer him a public debate) but that this is being discussed. It reminds me of the good old song [“Don’t Stash Your Cash in Pots and Quiet Spots!”] https://www.youtube.com/watch?v=_YLSJ9pgTDY[.] So come on, you silly foreigners, come to us and you can be sure we will give you a warm welcome, don’t worry. This logic has one fundamental problem. Long ago the information monopoly, like the one in North Korea, was eliminated. And there are no more stupid woodentops who only watch the first channel of state television. And Mr. Muranov alone, through his web posts, in an instant can demolish the picture which has been carefully built up by such persons as А.А. Gorlenko over several years. So, Andrey Andreevich, a patriot is not he who calls a Soviet Lada car the best automobile in the world, but he who is trying to make it better, to ensure that it is manufactured in line with global standards, however difficult it may be. And a true patriot is not he who is yelling ‘Go, Russia, go!’ but he who is making efforts to improve it, to make it a civilized European country free of corruption. For this reason come to the public debates if you are not afraid, I’m throwing down the gauntlet to you. Gleb [Sevastyanov, the editor-in-chief of the Treteysky Sud journal], please deliver this to the right address, let the journal be an impartial platform”.
On 10 February 2020 Gleb Sevastyanov, the editor-in-chief of the Treteysky Sud journal, sent Andrey Gorlenko a challenge to a public debate with Vladimir Khvaley. There was no reply.
On 10 February 2020, RAC published a press release263 where, amongst other things, it stated: “Allegations made by A. Muranov in relation to the RAC and RIMA... are false and unfounded”.
RAC made no reply to my repeated proposals to hold a debate264 so that everybody could see who was lying - me or RAC in its press release.
In the light of this it was decided to set a time for the debate where the representatives of RAC could turn up: 17 March 2020, 19-00 Moscow time, Metropol hotel, Chekhov hall.265
Letters with explanations and invitations were sent to all members of the RAC Board. No replies followed.
261 Muranov А. The
So-Called “Russian” Institute of Modern Arbitration and
“Russian” Arbitration Center: Examining Their Role in
Russian Arbitration Today. GONGO-Structures? Declarations and
Reality (6 February 2020)
In any event, it was necessary for the purposes of transparency and to ensure RAC’s right to present its position.
Bearing in mind all difficulties arising out of the coronavirus problem, it was decided to arrange for a video broadcast for those who could not move around Moscow:
Additionally, RAC and all the members of its Board were invited to hold the debate by video conference. No reply followed.
On 17 March 2020, I attended the proposed debate. Not a single person from RAC was present.
The video broadcast successfully took place, and its recording can be watched by clicking the links above. In the course of the broadcasting I was asked questions online to which I gave answers.
Various people regretted the fact that RAC failed to appear for the debate.
On 18 March 2020 Roman Zykov published very interesting post in the Treteysky Sud journal group on Facebook analyzing the RAC annual report for 2019.
On 19 March 2020 I sent another letter addressed to the members of RAC Board which was left unanswered.
On 19 March 2020 I placed in the Treteysky Sud journal group on Facebook the post “The Debate Which RAC Feared and the Study about RAC: Certain Intermediate Results” which stated as follows:
could have been easily predicted, on 17 March 2020 RAC did not turn
up for the debate.
The video recording can be watched here: https://www.youtube.com/watch?v=5BPKlR6eT-c&feature=youtu.be
More could probably be said about the default award against RAC, as well its statements that the study are false.
RAC has the following options available:
1) to be as silent as the grave because they have nothing to say in reply;
2) to present an ‘alternative truth’ and ‘alternative facts’, including by employing an auditor to help with the ‘laundering’ [;]
3) to initiate a civil or criminal case against me. I have no doubts about their chances of success: the Ministry of Justice will help them.
We can summarize intermediate results of this small research experiment. Here are some of them:
It has become even clearer that RAC is afraid of the truth: and that they are unable to object to it.
Ultimately they declare that they are being bullied, that it is trolling and a smear campaign. An infantile explanation.
And Anna Grishchenkova (a member of the RAC Board) pretending to be unaware of what is going on has offered to serve as a guide for Vladimir Khvaley to take him on a tour around RAC.
There is another excuse made up by Andrey Panov: ‘We are busy with serious matters unlike you, you are wasting your time’. Without a doubt, they are busy with serious matters. Of 262 claims submitted to RAC in 2019, 194 cases are connected with the nuclear industry. How can they not be occupied with serious matters if they have first stolen arbitration from a company and then are benefiting from it? Others have stolen nothing and, obviously, they cannot have the 194 nuclear power industry cases.
Another variation on this theme from Andrey Panov and Апdrey Gorlenko: ‘We will not let you make any hype at our expense. This is your sacred war and not ours’. But there is no war. There is also no guerilla movement because everything is done in public. Nor is there any other type of war as no war may be waged against a robber and a rapist. Nobody is going to call for the overthrow of power and military struggle: I’m not a Bolshevik or a political terrorist unlike the Ministry of Justice and RAC. These are merely observations, studies, a collection of materials for further work and for the future (but with public coverage of this process);
RAC shows disrespect for the public because it simply issues amusing press releases and publishes funny posts from its Board members. At the same time, the previous policy of RAC was also quite obviously ‘the plebs will lap it up’;
RAC is trying to influence some foreigners to prevent them from disseminating the study about the RAC;
In their posts in this group some members of the RAC Board have made it clear that they would wish to distance themselves in some degree from RAC. No doubt RAC feels a bit offended by that;
RAC’s competitors, first and foremost the Chamber of Commerce and Industry of Russia, were glad to see the study about the RAC. They are like crabs in an arbitration barrel;
We have fixed certain features of the present-day situation for future generations which is quite important: they have a right to know what our reality was like;
Besides, a certain educational success about the present stage in history can in any case be seen, among foreigners as well;
The www.centerarbitrgongo.ru website was launched which, I hope, will develop;
As a result of the study, books have been prepared in Russian and English which will be published shortly and will be available in electronic format everywhere[;]
It also became clear that RAC and its Board members do not have the skills to conduct a tough discussion. A strange fact given that they include famous attorneys, lawyers and even the chairman of the Federal Chamber of Attorneys[;]
It is not expected that anything will change: as we have already mentioned, the purpose of this study is different. They will keep gnawing at arbitration like they have always done, sometimes throwing a few bones to others. They will lie. They will hold conferences etc., which, no doubt, will be attended by people. How could it be otherwise?
But they will be unable to repeat success of the Soviet FTAK (Foreign Trade Arbitration Commission) which managed to become recognized in the West 40-50 years after its existence (a conventional success, it should be noted). But these times are different.
History repeats itself: first as tragedy, then as farce. The elimination of arbitration in the USSR in the 1920s and the creation in the USSR of the Maritime Arbitration Commission and the Foreign Trade Arbitration Commission was a tragedy (inter alia, because around 50 % of arbitrators became victims of deathly repressions, and control over these institutions was exercised by the security agencies), while today it is already farce, a clowns’ parade”.
The silence of RAC proves that RAC has nothing to say in reply.
least there should be a default