The arbitrazh court, within its jurisdiction, has the right to consider a dispute involving a foreign party when there is an agreement of the parties to the dispute on submitting their controversies to arbitration if: the claim is filed in the appropriate arbitrazh court of a "subject" of the Russian Federation; respondent does not move to transfer the dispute to arbitration before his first submission on the merits of the dispute or before the arbitrazh court renders its first decision.
       A Russian foreign trade association brought a suit in the arbitrazh court against an English trade company.
       The dispute rose out of the international trade contract which was to be performed mainly in the territory of the Russian Federation.
       The international trade contract signed by the parties contained an arbitration clause providing for submission of a dispute to arbitration.
       However, the suit was brought in the arbitrazh court in the Russian Federation. The respondent (the English firm) submitted its objections to the claim, evidence supporting the objections, and participated in the court proceedings during the hearings on the merits in the first and the appellate instance.
       Only using its right of cassational appeal, the respondent stated that the suit was filed in violation of the agreement to submit disputes arising out of the contract to arbitration, and that the arbitrazh court had no jurisdiction to decide the dispute arising out of the contract.
       In another case, a Russian joint-stock company sued, in the arbitrazh court, a German firm which had a representative office and property in the territory of the Russian Federation, for damages caused by improper performance of its obligations.
       The joint venture contract of these two firms had a clause referring disputes to an arbitration court in the territory of Russia.
       However, the suit was brought in the arbitrazh court under the rules of the Code of Arbitrazh Procedure. The respondent (the German firm) was sent copies of the complaint and the attached documents.
       The above named documents, as well as the notice of the time and place of the arbitrazh proceeding, were served on the defendant according to the requirements of the international treaties on serving of judicial documents. A representative of the respondent firm appeared at the hearing in the arbitrazh court, presented a duly executed power of attorney; however, he did not make any declarations during the trial.
       Only after the arbitrazh court had rendered a judgement, the respondent appealed it, citing the arbitrazh court's lack of jurisdiction because the agreement of the parties provided for arbitration.
       Actions of the foreign firms in these cases were improper for the following reasons.
       In the above cases, the suits were brought in the arbitrazh court of the Russian Federation according to the requirements of Art. 22 of the Code of Arbitrazh Procedure (jurisdiction over disputes involving a foreign organization).
       The arbitrazh court has the right to consider cases involving foreign parties "if the claim arises from the contract by which the performance should take place or has taken place in the territory of the Russian Federation" (Art. 212 (2)(2) of the Code of Arbitrazh Procedure of the Russian Federation) or "if an affiliate or a representative office of a foreign party is located in the territory of the Russian Federation" (Art. 212 (2)(1) of the Code of Arbitrazh Procedure).
       A foreign firm (the respondent) which entered into an agreement referring the disputes to arbitration, had the right, in its first submission on the merits of the dispute, to reject consideration of the dispute by the arbitrazh court of the Russian Federation.
       Such an order is established by Art. 87 of the Code of Arbitrazh Procedure which provides that the arbitrazh court leaves the claim without consideration "if there is an agreement of the parties to submit the dispute to arbitration…. and the possibility of submitting to arbitration is not lost; and if the respondent who objects to the consideration of the case by the arbitrazh court, makes a motion to transfer the dispute to arbitration no later than the submission of his first application on the essence of the dispute.
       Therefore, taking into account the provisions of Art. 87 of the Code of Arbitrazh Procedure, actions of the plaintiff who brought a suit in the Arbitrazh court, and of the defendant who did not make a motion, according to the arbitration clause, to refer the dispute to arbitration, and participated in trial in the arbitrazh court; demonstrated the intent of the parties to defend their rights and interests in the arbitrazh court of the Russian Federation.
       In such a situation, the arbitrazh court had no reasons to leave the claim without consideration.
       In the other case, the defendant (the German firm), while attending the trial, did not submit an answer to the complaint, did not make a statement of its objection to consideration of the dispute by the arbitrazh court, and did not file a motion to transfer the dispute to arbitration pursuant to Art. 87 (1)(2) of the Code of Arbitrazh Procedure of the Russian Federation.
       Meanwhile, Art. 87 (1)(2) of the Code of Arbitrazh Procedure provides that if there is an arbitration agreement, the possibility of the parties to submit their dispute to arbitration should not be lost.
       Losing a possibility to refer to the arbitration agreement may take place as a result of rendering a judgement by the arbitrazh court.
       The analogous rule is formulated in Art. 23 of the Code of Arbitrazh Procedure of the Russian Federation: a dispute within jurisdiction of the arbitrazh court can be transferred to arbitration before the rendering of a judgement by the arbitrazh court. The arbitrazh court of the first instance renders the judgement in the order specified in Section II of the Code of Arbitrazh Procedure.
       These provisions of Russian legislation conform to the order established by the international treaties to which the Russian Federation is a participant: Art. VI (1) of the 1961 European Convention on International Commercial Arbitration, and Art. 11 (3) of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
       The German firm (the respondent) did not use its right of the first submission to refer the dispute to arbitration before the arbitrazh court had decided on the merits of the dispute.
       In such circumstances, the arbitrazh court, within its jurisdiction, had the right to consider the dispute involving a foreign party, as provided by law: the Code of Arbitrazh Procedure of the Russian Federation.
       Thus, if there is an agreement of the parties to refer the dispute to arbitration, the arbitrazh court in the Russian Federation leaves the claim without consideration only when the respondent moves to transfer the dispute to arbitration before the arbitrazh court renders its first decision.