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Guide to Regional Arbitration (volume 5 - 2017)

White List: Eastern Europe

02 November 2016

For such a big area, eastern and central Europe is sparser on tried and tested local arbitration providers than some. But there are reasons for this.

The concept of arbitration was alien to the Soviet Union (except, to a slight degree, at the interstate level). When the Berlin Wall came down in 1989, some states took a while to legalise it (taking missteps along the way).

Others - chiefly Russia - legalised it, but with such a bang that the ensuing free-for-all may have done more harm to the concept than good.

Anyone could start an arbitral institution - and many did, leading to sub-standard arbitrations that were often overturned by courts. Arbitration also didn't have the advantage of gridlocked local courts (which helped to create busy centres in the Middle East and Latin America). Quite the reverse: eastern European courts are fast and cheap.

Therefore, there isn't the same busy arbitration scene that there is in other regions. Nevertheless a few provider organisations do stand out.

INTERNATIONAL COMMERCIAL ARBITRATION COURT AT THE RUSSIAN FEDERATION'S CHAMBER OF COMMERCE AND INDUSTRY (ICAC (MKAS))

So why is the ICAC worth putting on the white list?

ICAC has its detractors, but as one source had it, the ICAC is the best game in town, if you really want a provider in Russia. Russians themselves have a preference for sending anything major or complicated abroad, to institutions such as the LCIA, the SCC and the ICC.

And from a socio-legal perspective, ICAC is a good example of a certain style of centre prevalent in the region.

What's less than great about it?

The grumbles are those one hears more broadly in the region about arbitration: namely, that it's a very quick and brutal version. Cases are decided largely on the basis of documents. There's a hearing, but it's always abbreviated, and parties only get one real chance to make their case - at the outset - in the statement of the claim or its reply.

But if there's a hearing, isn't there an opportunity to elaborate more?

You'd think so. But the reality is hearings are booked around the availability of the ICAC's hearing rooms and the arbitrators. So sometimes even the parties can't make the date. If they can't, there's no chance to reschedule because the hearing rooms are booked solid. That's why longer hearings are out of the question too.

Why do they do it this way?

It's an adaptation of local court procedure. Arbitration didn't exist in the days of the Soviet Union, except at an interstate level, but a quasi-commercial form of court did: the arbitrazh system. When the first arbitral chambers came along (and in Russia that happened in a completely unregulated way, leading to hundreds more) they only had the arbitrazh courts' procedure to draw on when writing their rules. The results at times could be quite wacky (rules allowing arbitrators to compel the participation of third parties, or to amend awards if new circumstances come to light). The ICAC didn't go that far, but the courts explain much of its character.

Which parts of its character?

Why it's so fast and why it strives to be so cheap. It has to be, because the courts are. An average Russian court completes each case in under three months. The appeal only takes another two. And they cost next to nothing to use.

Unfortunately for the ICAC and others, keeping up with the arbitrazh system makes upping its game difficult.

Why's that?

Mainly it's about the arbitrators and how much the institution pays. Russian lawyers view accepting an appointment at the ICAC as tantamount to pro bono work, so they don't really want appointments. International names feel much the same.

Who gets appointed?

Academics who are very happy to eke out their university income. Or sometimes members of the ICAC's staff.

Why do people continue using it?

It's not all that busy. Russians seem quite happy going to their local courts (the arbitrazh system turns around 800,000 matters a year). In comparison ICAC got 241 cases in 2012, the last year for which clear figures are available. For the right case, it's actually quite good.

What kind of case?

Something uncomplicated and with a pretty finite value - e.g, the sale of goods. Around 64 per cent of ICAC cases are in fact in that bracket, concerning sums of less than US$1 million.

Are there any issues that should be raised?

One or two. Lawyers appearing there will need to present a notarised power of attorney (if the original power of attorney was issued abroad). And this should specify power to engage in all of the most likely amendments to the claim (adjusting the amount; withdrawing it; settling it). This requirement isn't in the rules but it is common practice. Be aware, too that, in international matters, ICAC has no neutral nation rule for the chair; rather the chair has to be appointed from the ICAC's list. Finally, the language of the arbitration is presumed to be Russian unless the agreement says otherwise.

Is that it?

Pretty much. If you want a dinner-party fact, prime Minister Dmitry Medvedev is on the approved list of arbitrators. However, he is "temporarily unavailable to take part in proceedings". The list still describes him as Russia's president, which he hasn't been since 2012 - so it may not be very well-tended.

COURT OF ARBITRATION AT THE POLISH CONFEDERATION OF PRIVATE EMPLOYERS LEWIATAN (LEWIATAN)

Why's it white-listed?

Because it's a good example of a new style of arbitral institution that is starting to be seen around this region.

Why's that?

It (and others) were founded out of dissatisfaction with existing offerings (see above and below).

What's different about these newer providers?

They, and the Lewiatan in particular, are a bit more modern all-round. Lewiatan was launched in 2005 but its rules were updated in 2012, and were amended in 2015. They're pretty reflective of international best practice. They refer to the IBA's guidelines on conflicts, and the rules on the taking of evidence. It's also ahead of the curve on use of approved lists.

Ahead how?

It doesn't use them. Parties have a completely free hand when appointing. If the centre has to make an appointment, then it's done by the nominating committee, which comprises a number of recognised private lawyers.

Is it popular?

Reasonably. So far it's handled about 120 cases. But there's an increase in case figures nearly every year. At the moment it gets around 33 matters a year, and has seven full-time staff in its secretariat. Recently it was voted second most popular arbitration institute in Poland in a survey conducted by local law firm Kocur & Partners, behind the PCC (see below) and two universities.

How come it's doing so well?

It's regarded as a decent case administrator. But its popularity also reflects dissatisfaction with other providers, and in particular how they've tried to control the appointment process. The employers' federation is more open to appointment on merit.

Who oversees it?

The courts are managed by an arbitration committee, comprising a president of the court of arbitration - Beata Gessel-Kalinowska vel Kalisz of the law firm Gessel - three vice presidents and three committee members.

There's also an appointing committee, chaired by Bartosz Kruzewski of Clifford Chance.

Appointing committee? But don't the parties have a free hand?

They do. It only steps in in a situation of default or inertia.

COURT OF ARBITRATION AT THE POLISH CHAMBER OF COMMERCE (POLISH CHAMBER OF COMMERCE)

Why's it on the white list?

It's Poland's oldest - and in some ways biggest - arbitral provider.

How old is it?

It's 66. It grew out of the Polish Chamber of Foreign Trade, established on 1 January 1950. It deals with about 400-500 cases a year, believed to be the largest caseload in eastern or central Europe.

How much of that work is international?

About 20 per cent.

What's its reputation?

It certainly has its fans: a survey by Kocur & Partners (see above) named it Polish arbitration users' favourite local institution. It's also the most familiar - in the same survey 91 per cent of respondents said they had used it.

Is it old school or new school?

It certainly tries to keep up with international best practice, and let parties control the process fully. New rules came into effect in 2015 (replacing the 2007 rules) along with a new president, Maciej Laszczuk, who now leads its 15-strong council in taking responsibility for arbitrator appointments and challenges, the criteria for inclusion in the institution's list of recommended arbitrators, and decisions relating to the publication of awards.

Any pitfalls?

In the past there were some concerns about the process of appointing arbitrators.

What were they?

It used to have an approved list system (it still does for chairs and sole arbitrators). There were concerns that the wider Chamber of Commerce exerted too much influence over who was on it (by controlling the committees that manage the list).

And now?

You be the judge. The list is certainly larger than ever, but it still attracts complaints. Some think it's still missing some of the more obvious people to include.