#5159 - Yukos Capital V. Rosneft - Conflict of Laws BCL

Yukos Capital v. Rosneft

Facts

A claimant, incorporated in Luxembourg but originally part of a Russian group, obtains a Russian arbitration award under a Russian contract against a Russian company, part of a Russian resources group now within majority Russian state ownership and control. At the time when the contract between the original parties was entered into, both parties had been members of the same Russian group, then in private hands. By the time the award is issued, however, the defendant company, to which the liability has passed by a process of universal company succession, is within Russian state control, while the claimant company has survived in private hands outside the state takeover. It is now said by the defendant company (but had not been said at the arbitration) that the contract under which the award had been made was part of an unlawful tax scheme operated by the original parties to the contract when they were associated companies within a single group.

Following the making of the arbitration award, there are proceedings in the Russian courts which lead to the setting aside of the award. The claimant contends that those judicial proceedings are a travesty of justice but typical of the campaign of state interference which has been waged by the Russian state.

The claimant seeks to enforce the award, despite its having been set aside by the courts of the country where it was made, in another foreign nation, namely The Netherlands, pursuant to the New York Convention. The Dutch court at first instance refuses enforcement, on the ground that the award has been set aside in Russia; but on appeal in the Amsterdam court of appeal the award is recognised for enforcement, while the Russian court's decision setting aside the award is refused recognition. The refusal of recognition is on the ground that it can be inferred, from the general nature of the subservience of the Russian courts to state influence in matters of state importance, that the decision of the Russian court in setting aside the award was “partial and dependent”, in other words was dictated by bias or intimidation.

Meanwhile the claimant proceeds to England, where it also seeks to enforce the award and post-award interest, both pursuant to the New York Convention and at common law. Enforcement proceedings are therefore commenced in the commercial court in London.

Question

Whether the Defendant is issue estopped by the judgment of the Amsterdam Court of Appeal dated 28th April 2009 from denying that the judgments of the Russian civil courts annulling the arbitral awards which are the subject of these claims were the result, or likely to be the result, of a partial and dependent judicial process.

Holding

The issue in the Dutch proceedings was whether the annulment decisions setting aside the arbitral awards were “partial and dependent”; if they were, then they were not to be recognised by the Dutch courts. Mr Pollock for Yukos Capital submitted that the issue in the English proceedings is exactly the same since, if the decisions were “partial and dependent”, the English courts will not recognise them.

The difficulty with Mr Pollock's submission is that “public order” or “public policy” is inevitably different in each country. The standards by which any particular country resolves the question whether the courts of another country are “partial and dependent” may vary considerably and it is also a matter of high policy to determine the circumstances in which this country should recognise the judgments of a state where the interests of that very state are at stake. Normally such recognition will be given and, if it is to be refused, cogent evidence of partiality and dependency will be required. Our own law is (or may be) that considerations of comity necessitate specific examples of partiality and dependency before any decision is made not to...