Risks of "Pocket Arbitration" Ad Hoc : Intermediate Results of the Arbitration Reform in Russia

Abstract

The article deals with the arbitration court formed to resolve a specific dispute. One-party court, or the so-called "pocket arbitration", is a situation where arbitrators cannot comply with the principle of impartiality due to the fact that the arbitral tribunal is a structural unit of one of the parties or part of the same holding company. As a result of the reform of arbitration proceedings in Russia, the niche of "pocket" permanent arbitration courts has been filled with situational arbitration, where the party with a stronger negotiating position determine the arbitrator and the rules. This phenomenon is becoming popular in disputes between microfinance organizations and borrowers, which, given the particular sensitivity of this area, requires public law intervention. The freedom of the parties to the contract is limited in order to prevent infringement of the rights and legitimate interests of the economically weaker party. Arbitration model is liberal as it is based on the autonomy of will. Arbitration ad hoc has its advantages in unique disputes where the parties are ready to determine the figure of the arbitrator and the rules for considering the dispute. However, this institution demonstrates signs of distortion, which means it needs restrictions. The existing regulatory restrictions and clarifications were defined by the Plenum of the Supreme Court of the Russian Federation, but they proved ineffective in practice. The author proposes to ban situational arbitration in case of loan agreements with microfinance organizations.