Appellate Court Confirms the Validity of Asymmetric Dispute Resolution Clauses

March 25, 2015

Dechert lawyers representing a major international bank in court proceedings in a number of regions in southern Russia with respect to claims to recover a total of about US$300 million in loan funds from the guarantors of a Russian and Ukrainian agricultural holding company, prevailed on procedural grounds when the Fifteenth State Arbitrazh (Commercial) Appellate Court (Rostov-on-Don) ruled in their favor. On 4 March 2015, the Court of Appeals overturned a ruling previously issued by the first instance State Arbitrazh (Commercial) Court of the Rostov Region declining to hear the bank’s claims based on the lack of validity of an asymmetrical dispute resolution clause, and duly returned the case for retrial to the court of first instance. The appellate court held that the dispute resolution clause incorporated in the deeds of guarantee is valid from the point of view of English law. 

Dispute Background 

The deeds of guarantee forming the subject matter of the dispute are governed by English law and contain identical asymmetrical dispute resolution clauses providing for proceedings at: (1) the London Court of International Arbitration; (2) the courts of England; or (3) courts of any other jurisdiction. The arbitration clause (1) is applicable to the guarantor and the bank by default, while options (2) and (3) are for the benefit of the bank only. The bank decided to use option (3) and filed a claim at the location of the Russian companies incorporated in the Rostov region. 

The court of first instance, applying Russian law, held that options (1) and (2) were valid, while option (3) is invalid. With respect to the latter, the court maintained that the provisions of the deeds enabling the bank to file a claim with a court of any jurisdiction (option 3) “are informational in character and do not cancel the agreement reached between the parties concerning the disputes being subject to the jurisdiction of the courts of England”. The court ruled that “an agreement on dispute resolution may not grant only one of the parties (in the given case, the Credit Agent) the rights to refer to a competent state court and deprive the other party (the Guarantor) of the same right”. The court also disregarded the opinion of a lawyer from the English Queen’s Counsel (QC) who had confirmed the validity of the one-sided dispute resolution clause. 

As a result, the court declined to hear the bank’s claim on the basis that there were “both arbitration and jurisdiction agreements available”

Arguments of the appeal 

The arguments of the bank – omitting the aspects that are irrelevant for this publication – were essentially that the dispute resolution clause was valid both as a matter of English and Russian law. In asserting the position under English law, the bank referred to the legal opinion of the English QC already on the case file, and provided supporting authorities from the English courts confirming the validity of asymmetric clauses. In articulating the position under Russian law, the bank referred to Resolution No. 1831/12 of the Presidium of the Supreme State Arbitrazh (Commercial) Court of the Russian Federation of 19 June 2012, noting that while an asymmetric settlement “is invalid for undermining the balance of the rights of the parties”, it is invalid only insofar as it undermines the balance of the parties’ rights. The bank argued that under Russian law, an asymmetrical clause should have been re-categorized by the court as a symmetrical one. Therefore, under Russian law, the court should have recognized the right of each of the parties (both the bank and the guarantor) to make use of any contractual forum, including the Russian courts. If such recognition had occurred, the court would not have dismissed the action. 

Resolution of the appellate court 

The appellate court concluded that “deeds of guarantee do not preclude the possibility of initiating proceedings before an arbitration court, a competent court in England, or in any other court of competent jurisdiction. Case records contain no evidence that the above provisions of the deeds of guarantee (as far as alternatives for choosing a jurisdiction for the resolution of a particular dispute is concerned) are contrary to English or Russian law, were challenged or invalidated. Therefore, they are binding on the parties.” 

The Court expressly referred to the legal opinion of the QC, who confirmed that since the clause gives the bank the option to select the forum and jurisdiction, this clause is deemed valid under English law. On the basis of this legal opinion and in the absence of information to the contrary, the court asserted that it may proceed from the premise that “the content of foreign law had been established”. 

Having recognized the position under English law as sufficient, the appellate court did not analyze the arguments on the bank’s claims from the viewpoint of Russian law, but instead referred to the practice of Russian state arbitrazh courts dating back to 2009-2011, where similar dispute resolution clauses had been recognized as valid. 


The ruling is of interest primarily because it is one of the few acts recently adopted by the Russian courts (following the adoption of Resolution No. 1831/12) confirming the validity of an asymmetrical dispute resolution clause, albeit from an English law perspective. While application of foreign law by the Russian courts has long ceased to be an unusual practice, the ruling is yet another step in the right direction as it recognizes the validity of asymmetrical dispute resolution clauses that are commonly utilized in international financial contracts.

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