Arbitral tribunals may consider disputes on real estate
Pepeliaev Group advises that the Russian Constitutional Court (the “Constitutional Court”) has adopted a ResolutionResolution No. 46-P of the Russian Constitutional Court dated 3 October 2023.
(the “Resolution”) aimed at eliminating contradictions between arbitral tribunals and state courts regarding the arbitrability of disputes in the area of real estate.
In the case being considered, the claimant was unable to obtain a writ of execution to enforce an award of an arbitral tribunal that a land plot be split and the title to a part of the land plot be recognised, because the dispute was connected with real estate and the state court questioned whether the arbitral tribunal had jurisdiction to resolve it.
The Russian Constitutional Court has issued a reminder that disputes concerning rights to real estate may be examined using the arbitral procedure and a writ of execution may be issued for such cases.
Disputes regarding jurisdiction
In 2022, an arbitral tribunal resolved a dispute concerning the split of a land plot and the acknowledgement of title to a part of the land plot, following which the claimant requested a state court to issue a writ of execution.
However, the district court denied the writ of execution to enforce this decision alleging that the examination of matters connected with title to real estate falls under the exclusive jurisdiction of state courts and the dispute being resolved by an arbitral tribunal contradicts fundamental principles of Russian law.
The claimant appealed the decision of the district court. However, the cassation court of general jurisdiction upheld the decision of the first instance court. When the appeal was sent for examination in a court hearing of the Judicial Panel for Civil Law Cases of the Russian Supreme Court (the “Supreme Court”), it was dismissed by both the judge and the Deputy Chief Justice of the Supreme Court.
Position of the Constitutional Court
The Resolution significantly increases legal certainty in matters connected with the delineation of jurisdiction. In particular, the Constitutional Court has clarified that:
Article 14(2)(5.1) of Federal Law No. 218-FZ “On the state registration of real estate” dated 13 July 2015 provides directly that awards of arbitral tribunals under which writs of execution have been issued according to decisions which have come into effect of courts of general jurisdiction or of state commercial courts, can, together with such writs of execution, be grounds for the registration of title to real estate;
Disputes may not be considered using the arbitral procedure when they are connected with real estate, but at the same time relate to categories which fall outside the jurisdiction of arbitral tribunals under article 22.1(2) of the Russian Civil Procedure Code or other federal laws (for example, if the real estate item is the subject matter of an inheritance dispute, privatisation dispute or a dispute concerning contract work for state or municipal needs).
- State courts have a right to deny a writ of execution to enforce an award of an arbitral tribunal entailing registration of title in cases when:
- the development of the disputed obligation depends on how a public law function is performed (for example, if the public authority changes the permitted use of the land plot);
- the parties manifestly act in bad faith and attempt to create the appearance of a private law dispute.
In the grounds for its Resolution, the Constitutional Court points out that state registration does not affect the nature of a dispute concerning real estate because it is not an element of this legal relationship. The public law aspect will arise only after state courts acknowledge the results of this dispute and the state certifies the result of the transaction. Based on the text of the Resolution, this position also applies to disputes considered using the state commercial (‘arbitration’) procedure.
What to think about and what to do
The Constitutional Court insists that disputes concerning real estate may be resolved by arbitral tribunals. It emphasises that the latter are one of the forms for protecting civil rights and are directly provided for by Russian legislation. In addition, in view of the risk that the award of an arbitral tribunal could be dismissed or a writ of execution of such award could be denied, we recommend taking into account the nature of the possible civil law dispute before making provision for it to be considered using the arbitral procedure.
Help from your adviser
Pepeliaev Group’s experts provide comprehensive legal support to parties to transactions with real estate.
Pepeliaev Group’s range of services includes advising on sale and purchase issues and closing other transactions with real estate, analysing risks associated with a particular item of real estate, representing the interests of companies in their interactions with state authorities and conducting legal due diligence of real estate.