⚖️ At the will of the Russian party, arbitration shall proceed – Russian Court held that a dispute between a Cypriot and a Russian company must be resolved under LMAA Rules

LLC "D.N.K." (the Claimant, shipowner) and LLC "Nizhegorodskaya Logisticheskaya Kompaniya" (the Respondent, charterer) entered into 15 standard bareboat charter agreements.

The agreements contained arbitration clauses in favor of arbitration under the rules of the London Maritime Arbitrators Association (LMAA).

Notwithstanding the arbitration clauses provided for in the agreements, the Claimant filed a claim with the Commercial Court of the Nizhny Novgorod Region against the Respondent for recovery of arrears in the amount of RUB 409 million under the charter agreements.

Subsequently, the Claimant assigned its rights under the charter agreements to a Cypriot company – AAS Amur Assets Shipping Company Limited, on the basis of which the court effected a procedural substitution of the Claimant.

The Respondent filed a motion to dismiss the claim without consideration, citing the parties' agreement to refer disputes to arbitration under the rules of the London Maritime Arbitrators Association (LMAA).

In response, the Claimant argued that the arbitration clauses had not been concluded. In support thereof, the Claimant referred to the fact that the parties had used the BARECON‑2001 form for bareboat charters but had not specified in Box 35 (dispute resolution) which option they had chosen. Box 35 provides for the following options:

🔘 Option (a) – dispute resolution in accordance with the rules of the London Maritime Arbitrators Association (LMAA);

🔘 Option (b) – dispute resolution in accordance with the rules of the Society of Maritime Arbitrators (SMA);

🔘 Option (c) – dispute resolution in arbitration at a place agreed by the parties and in accordance with the procedures applicable at that place.

In addition, in the Claimant's view, the dispute could not be referred to arbitration due to the imposition of restrictive measures against Russia, which, as the Claimant alleged, restrict its access to justice in proceedings under LMAA rules in London.

The court rejected the Claimant's objections, relying on the following circumstances:

👀 In violation of the principle of interpretation in favor of the validity of arbitration agreements (ad favorem validitatis), the Claimant failed to provide evidence that any interpretation of the arbitration clause would render it invalid and/or unenforceable (para. 26 of the Plenum of the Supreme Court of the Russian Federation Resolution No. 53 of 10 December 2019);

👀 The parties waived options (b) and (c) in Box 35 of the BARECON‑2001 form on dispute resolution, since in the text of the agreements themselves they elected option (a) at the time of signing, i.e., they agreed to arbitration under LMAA rules. Moreover, the parties did not specify in the agreements any "other arbitration institutions or courts" other than LMAA, so their choice is unambiguous;

👀 The Claimant is registered in Cyprus. At the same time, it did not provide evidence that the restrictive measures impede its access to justice or the consideration of the dispute in the arbitration agreed upon by the parties under LMAA rules. Nor is there evidence that restrictive measures have been imposed on the parties to the dispute.

Thus, the court dismissed the Cypriot company's claim against the Russian Respondent without consideration, based on the Respondent's reliance on the arbitration clauses in the agreements.

📎 The ruling can be found here.

According to the case file, today the ruling was upheld by the court of appeal. At the time of publication of this post, the decision had not yet been published.

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Original see here