If the parties failed to agree on governing law then there's article 1211 of Civil Code, which contains conflict of law rules in the case when parties failed to agree on applicable law.

On what reason parties may refrain from reaching an agreement on governing law? The reasons could be different. First, they just forgot to do so. But it's a rare situation. The main reason why they refrain from identification of governing law is as follows. Both parties recognise that they need this contract and all substantial terms and conditions were already agreed. The only issue left which they failed to agree is just a governing law, because each party insists to apply its domestic law. And they decide to left the contract without an identification of governing law at all (in order not to ruin friendly relations between them). The competent court will independently and fairly apply conflict of law rules and no party will affect the choice of law (and noone's interest will be harmed).

These conflict of law rules will be binding for a competent court in the case when parties failed to agree on applicable law. The question arises: what conflict of law rules are applicable for the arbitral tribunal?

Section 1 of Art.1186 of Civil Code: law applicable to civil law relations with a foreign element should be established by a treaty of a law. Example of a treaty is Minsk Convention where the principle is lex loci contractus. This rule (principle) will prevail (according to section 4 of art.15 of our Constitution) over Civil Code.

Para.2 of section 1 of art.1186 reads: features of establishment of law applicable by international commercial arbitration shall be determined by a law on international commercial arbitration.

Our Law on ICA (which is a translation of UNCITRAL Model Law) in its art.28 provides as follows: the arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by parties as applicable to the substance of the dispute. It is a section 1. Section 2: failing any designation by the parties the arbitral tribunal shall apply the law determined by the conflict of law rules which it considers applicable.

As we've already established if the case is a subject of consideration by the state court the conflict of law rules are contained in Civil Code (art.1211, for instance). If the case is a subject of consideration by the arbitral tribunal it applies the conflict of law rules which it considers applicable.

May the tribunal (on its own initiative) resolve the dispute basing on lex mercatoria if there's no an agreement of application of lex mercatoria of the parties? It's possible. Tribunal has much more powers in the scope of determination applicable law. State court and tribunal are bound by the agreement on law, but if there's no such an agreement, the rules on conflict of law would not be binding for the tribunal while be binding for state court.

Award.

There's an issue. Unless the case should be resolved by the single arbitrator, when there're three arbitrators the award shall be taken by majority of votes.

By the way, the same approach is contained both in Civil Procedure Code (GPK) and Arbitration Procedure Code (APK).

The question arises: if for some reason or other one of arbitrators or one of state court judges is unable to sign the final award or judgement - what will be the concequences? For instance, what if one of arbitrators signed an essential part of the award and then died and didn't sign the left parts of the award?

Law on internal arbitration - there's a mandatory provision according to which voluntary arbitration is entitled to announce only an essential part of the award. So internal voluntary arbitration cannot escape announcement of essential part of award.

As for ICA there's no such a rule. In practical terms ICA very often does announce essential part of the award, but not always. It's not prohibited not to announce the award.

But as for procedure of taking a decision both in courts and in arbitration it should be resolved unanimously or by majority of votes. If one of judges is unable to sign judgment, the latter will be set aside. With respect to award the situation is different. Rules of ICAC of CCI of Russia provide that an award shall be taken by majority of votes of panel. If any of the arbitrators cannot sign arbitral award for any reason then the chairman of ICAC shall verify this circumstance with indication of the reasons of the absense of arbitrator's signature.

So as we can see the situation in voluntary arbitration is much more flexible than in state court.

The case-law of Presidium of SCA exists on this issue. There was a dispute referred to resolution to ICAC of CCI of Russia. The arbitral panel consists of three persons. After completion of oral hearing the chairing person announced that proceedings are over. There was a discussion (deliberation) among arbitrators. Actually they did agree upon the resolution of the dispute on the merits, but one of arbitrators suddenly died. And he didn't sign complete text of the award.

In accordance with section 3 of para.38 of ICAC Rules the majority of votes of arbitrators is required in order to render an award. The chairman of ICAC stated that this provision was complied with. It was challenged in Presidium of SCA. Presidium took the following view. In case when there was no signature of state court judge on the full judgment judgment would be set aside. In terms of arbitral award - as Presidium stated - it is unknown whether dead arbitrators took part in deliberation at all (because arbitral tribunal is not oblige to announce at least essential part of the award). In such situation the award de facto was taken by 2 arbitrators, not 3. For that reason the award was annulled.

Prof. Musin notes that this approach might be too strict since the present legislation does not give a ground to apply such an approach.

We've already mentioned that just like in state courts in voluntary arbitral tribunal the award should be taken by majority of votes. May be it's not practicable, but theoretically there's a possibility will have their own opinions and will fail to reach a majority required by law. The chairman of FAS SZO told that in terms of state courts judges MUST reach a majority during deliberation.

If an award cannot be taken by majority of votes it should be taken by the presiding arbitrator - ICAC Rules state it.

Whether the voluntary arbitration may apply lex mercatoria rather than national law? We told that it is possible. But whether arbitrators are entitled to base their award on the principle of justice and good faith (ex bono et aequo) rather than national law?

Let's put this question with respect to state court. Is state court able to resolve the case ex bono et aequo? Nope, it is not.

Now the same question with regard to voluntary arbitration. Para.39 of ICAC Rules specifically indicates that the award should inter alia contain motives on which the award is based.

Art.29 of Model law - arbitral tribunal shall decide ex aequo et bono only if the parties had expressly authorised it to do so. Arbitral tribunal has no discretion on its own to decide the case ex aequo et bono.

This artice of Model law is one the very few ones which is not literally traslated in our national law. This section is omitted in our national law on ICA.

On the other hand omission does not mean a prohibition to resolve the dispute ex aequo et bono. So if the parties did expressly authorise the arbitrators to issue ex aequo et bono award the award will be OK.

Of course, usually the award contains a very detailed description of the motive, facts, applicable rules of law etc. So the problem is just theoretical.

When award is made, it is put into written form, it is signed by whole panel, it is sent to all litigants, the question arises: whether and for what reasons the award may be set aside or at least declared unenforceable?

We have a substantial difference between awards and judgement here. As for judgement there are some reason for rejection of it. The list of these reasons is exhaustive.

If we look in art.288 of APK we'll see that such reasons include misapplication of rules of substantive or procedural law, bench was illegal, absence of some persons participating in the case who was not properly notified about the time and place of proceedings, inconsistency with rules on the language of the proceedings, judgement relates to rights of persons not participated in the case, judgement is not signed by judge(s) and so on.

As for voluntary arbitration here we should bear in mind (1) relevant rules of inter'l law such as those contained in New York Convention 1958 and European convention on ICA 1961 (Geneve Convention) and (2) relevant rules of our GPK and APK (rules on recognition and enforcement of foreign arbitral award).

Generally speaking the situation is as follows. A possibility to set award aside or to refuse its enforcement is only available (permissible) both by inter'l and domestic law in very limited situations. Why so? Because both inter'l and our domestic law are of a standpoint according to which inter'l arbitration should be granted special trust. That's why its award may be set aside or declared unenforceable in very limited situations.

Misapplication of law when rendering award does not make the award unenforceable.

Let's consider the grounds of setting award aside contained in New York Convention (art.5). There're 2 groups of grounds. The first group includes circumstances which losing litigant should prove. The second group consists of two reasons existence or absence of which a state court when being apply for enforcement should check upon its own initiative.

Art.5: recognition and enforcement may be refused by the request of the party if it proves: (1) where under the applicable law the party is incapable (nedeesposobny). But incapacity is attributable only to natural persons. But vast majority of foreign trade transactions are related to legal entities. What incapacity means? Is it possible for a legal entity to be under some incapacity? Real life is much more reach than any imagination. Yes, it's possible.

If arbitral award is invalid upon the law which governs this agreement, or, if there's no such indication, upon the law of the country where the award is rendered. It's second ground.

Thirdly, party against whom award was issued was not properly notified about circumstance that consequently led to inability to submit the party's submission.

Fourthly, the tribunal had no jurisdiction (the dispute is not covered by arbitration clause etc.)

In terms of public policy. It is the first ground which shall be checked by the court in its own initiative. The second ground is the check whether the dispute resolved is in principle may be resolved by arbitration.

Public policy includes fundamental principle of legal system. SCA noted that violation of russian law is not in itself a violation of public policy. Violation of russian law should relate to some fundamental, essential things.