Arbitration Hurdles Facing Foreign Investors in Russia: Analysis of Present Issues and Implications

Russia has come a long way since the collapse of the Soviet Union in 1991, but there are still some structural reforms that need to take place in order to increase investor confidence. In 2007, one hundred billion dollars was invested in Russia from overseas, which represents a record for a developing market economy. However, direct foreign investment in Russia is still low compared to other European nations. Foreign investment is one of Russia\u27s main strategies for improving the long-term health of the economy. There is a lot of promise for future economic growth, but some recent actions by the Russian state and the legacy of the Soviet system continue to hamper the development of a truly healthy business climate. One of the biggest issues that foreign investors face in Russia is enforcement of contracts when deals fall apart or one side breaches the contract. Contract enforcement is a huge concern in the former Soviet region due to the fact that commercial courts, arbitration services, and bailiffs are not as effective, experienced, and autonomous as they are in the Western regions. In addition, the legacy of corruption that carried over from the Soviet era exacerbates the problem even further. Many foreign investors feel that Russia offers plenty of investment opportunities, but they quickly encounter that conducting business in Russia can be rather difficult. This article will look at the legal and regulatory environment, specifically focusing on arbitration in order to ascertain if arbitration is an effective and reliable dispute resolution method for foreign investors doing business in Russia. The article will examine various arbitration hurdles that foreign businesses and investors in Russia are likely to encounter and will offer advice on how to avoid or overcome these obstacles. The first section of this article describes the effectiveness of arbitration in international commercial disputes conducted in Russian arbitration tribunals. The second section analyzes the enforcement of foreign arbitration awards by Russian courts, closely examining some of the reasons employed by Russian courts in refusing to enforce foreign arbitration awards. Lastly, the third section of this article looks at the international arbitration claims filed against the Russian state and examines the issues that foreign investors are likely to face while arbitrating those claims