In 2010, the domestic arbitral institution (known as Law Centre "Arbitrator") considered a claim brought by a state unitary enterprise, Mineralovodsky Water Utility (the Enterprise), against an individual. In the course of the proceedings, the claimant failed to submit proof of payment of the arbitration fees. Nevertheless, the arbitrators proceeded with the case and issued a final award satisfying the claimant's claims and ordering the claimant to pay its arbitration fees and additional costs (extra fees) which were incurred by reason of the claimant's failure to pay the arbitrators' fees on time.

The Enterprise did not comply with the award and the arbitral institution filed an application to enforce of the award in the commercial court of first instance, which granted the application and issued an execution writ. However, the appellate court disagreed and refused to enforce the award, considering the extra fees to be a penalty and questioning the arbitrators' power to penalise the parties for failure to comply with arbitrators' orders.

The Supreme Commercial Court went even further. It overturned the decisions of the lower courts and terminated the proceedings altogether, finding that the arbitral institution had no standing in the proceedings because it was not a "party to arbitration proceedings" and that under the Russian Code of Commercial Procedure the right to enforce the arbitral award is limited to the "party to arbitration proceedings". Therefore, the arbitral institution could not enforce the award in its favour but should protect its rights through other means. Further, the Supreme Commercial Court found that the arbitrators had no right to charge the extra arbitration fees as a penalty measure due to the voluntary character of arbitration.

This case is rather unusual. The arbitral institution did not follow the practice of other institutions which work on an advance payment basis. This case illustrates that such an advance payment system works best for arbitration institutions, especially in Russia, where the courts are not willing to assist the institutions in collecting fees. Remarkably, the Supreme Commercial Court expressly mentioned that the arbitral institution should have secured its rights by taking advance payment of the fees.

In essence, the position of the Supreme Commercial Court in this case was fair to some extent: had the award been enforced, the claimant would have paid double the original amount of arbitration fees due to the extra penalty charges (it not being totally clear whether the institution had any right under its arbitration rules to fine the parties in the first place). However, the legal reasoning of the Court is flawed in some respects and the decision has left arbitral institution with practically no venue for the collection of fees from the parties: it is questionable, under Russian law, whether a claim filed directly against a party for the collection of the fees would have standing in court. The obligation of the party to pay arbitration fees arises from the arbitral award, not in contract or tort, and so the process of collecting those fees should be more in the nature of enforcement proceedings, not ordinary adversarial proceedings.

Nevertheless, it is likely that this approach will be followed by other courts if such a case arises again.