34 MARKET COMMENTARY
INTERNATIONAL ARBITRATION 1/3LY
THE STORY SO FAR Arbitral tribunals operating under the auspices of the International Commercial Arbitration Court in Moscow (known by its English acronym, ICAC, or Russian acronym, MKAS) rendered four awards in favour of Yukos Capital in September 2006. Yukos was awarded 12.9 billion roubles (equivalent to approximately USD 483.5 million at that time) and almost USD 858,000 in principal – believed to be in respect of different liabilities. The awards made no provision in respect of interest. On 23 May 2007, the Moscow Arbitrazh Court set aside the awards in judgments which were upheld on appeal. Yukos nonetheless sought leave to enforce the awards in the Netherlands, having identified assets of Rosneft in that jurisdiction. Although the Dutch District Court refused leave to enforce the awards, in April 2009 the Amsterdam Appeal Court overturned that decision and granted Yukos leave. It did so on the basis that the decision to set-aside the awards was not consistent with principles of private international law and Dutch law. As the awards remained unpaid, in March 2010 Yukos sought to enforce them in England under the New York Convention and at common law. It also obtained a without notice freezing injunction against Rosneft, which was subsequently discharged by the provision of acceptable security. The Dutch proceedings continued and, in June 2010, the Dutch Supreme Court dismissed Rosneft’s appeal from the Amsterdam Appeal Court’s decision and the awards were paid. THE LATEST JUDGMENT The English proceedings continued in respect of Yukos’ claim for post-award interest, and the recent judgment concerned two preliminary issues in that claim – firstly whether the set-aside decisions had the effect that the awards could not be enforced at common law because they no longer existed in a legal sense; and secondly whether interest was recoverable as a matter of Russian law, and/or under section35A of the Senior Courts Act 1981. The court decided the first of these issues in favour of Yukos, holding that there was no principle in English law of ex nihilo nil fit (or “nothing comes of nothing”) as had been argued by the defendant. In reaching this decision, the judge considered the analysis in Dicey, Morris & Collins on The Conflict of Laws (at chapter 16—148) of the same point in the context of the New York Convention, and related case law. The answer to the question of whether the awards could be enforced was not to be found in theories of legal philosophy, but by a test: whether the court in considering whether to give effect to an award could (in particular and identifiable circumstances) treat it as having legal effect notwithstanding a later order of a court annulling the award. In applying this test the court was not bound to recognise a decision of a foreign court which offended against basic principles of honesty, natural justice and domestic concepts of public policy. Simon J held that, subject to Yukos proving that the set-aside decisions did offend against those basic principles (as pleaded by Yukos) the English Court would give effect to the awards.
The Court favoured Yukos’ argument, that no effect should be given to the set-aside decisions based on conventional English conflict of laws principles, and held that it was not necessary that the award remained enforceable under the governing law of the arbitration in order for it to be enforced at common law. The court also addressed two preliminary issues relating to whether the claim for interest could proceed, under both Russian law and under section 35A of the Senior Courts Act 1981, though it was not required to decide whether to make an award at this juncture. The judge, applying Russian law, held that no claim for interest could proceed as a matter of Russian law since such a claim only arose on the date that exequaturs were obtained as part of enforcement proceedings. There were no exequaturs in this case owing to the set-aside decisions so there could be no claim for interest as a matter of Russian law. Interest in respect of the late payment of a foreign award could in principle be claimed under section 35A of the Senior Courts Act 1981 as the English claim was in essence a claim to enforce a debt. However, the court would need to be persuaded that it should exercise its discretion to award interest, and the circumstances in which the arbitrators and the Amsterdam Appeal Court declined to grant an award of interest would be relevant to the exercise of that discretion. THE RELEVANCE The decision is clearly of relevance to parties that have agreed to the resolution of disputes by arbitration in a forum outside England and who can show that they have suffered from a supervisory court decision offending against basic principles of honesty, natural justice and domestic concepts of public policy. Of course, such cases are likely to be few and far between, but provided that the jurisdiction of the English courts can be established, assistance will be available in certain, narrow, circumstances. It remains to be seen how the Russian courts will react to this decision but given the current climate and the high profile of the underlying dispute we shall be watching this space with interest.
Yukos Capital S.à.R.L. -v- OJSC Oil Company Rosneft [2014] EWHC 2188 (Comm) A version of this article was first published in Global Arbitration Review, August 2014.
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