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London Arbitrators Must Tackle Red Square Hotel Dispute

Commercial arbitrators are often called upon to address thorny jurisdictional issues where all the parties to a dispute, and its subject matter, have nothing at all to do with the UK. That was certainly so in one case involving a lucrative project to redevelop a hotel near Moscow’s Red Square.

A businessman of Russian origin claimed that he had been frozen out of involvement in the project by a finance company controlled by the City of Moscow. He claimed to have been the victim of a corporate raid in which shares in an overseas company had been redistributed by a combination of legal and illegal means. The two contracts which underpinned the project were subject to English law; however, arbitrators in London declined jurisdiction to consider the matter.

In upholding the businessman’s challenge to that decision, the court found that his claims fell within the terms of the contracts’ arbitration clauses. Although the City of Moscow was not a signatory to either agreement, he was entitled to join it in the arbitration by virtue of a provision of the Russian Civil Code. Pursuant to Section 67 of the Arbitration Act 1996, the dispute was sent back to the arbitrators for resolution.