ENFORCING FOREIGN COURT JUDGMENTS :

ENFORCING FOREIGN COURT JUDGMENTS: EXAMPLES/CASES

Principles of recognition - I • Article 241 Arbitrazh Procedural Code (APC) RF • Recognition and enforcement Of foreign court judgements on commercial matters • If it is envisaged by: • International Treaty of the RF; or • Federal Law

Principles of recognition -II • Article 243 (4) APC RF - under no circumstances may a foreign judgement be reviewed as to its substance • THE Court shall determine whether there is any reason for non-recognition or enforcement in accordance with Article 244 APC RF

Reasons for non-recognition - I • Article 244 APC RF - a judgement shall not be recognised: • (1) If it has not came into legal force; • (2) The defendant (the party against whom the judgement was entered) was not notified in due course; • (3) In accordance with THE international Treaty of the RF the dispute is in THE exclusive jurisdiction of a Russian court;

Reasons for non-recognition - II • (4) If there is an earlier judgement of a Russian court given in proceedings between the same parties involving the same cause; • (5) If proceedings between the same parties involving the same cause are pending before a Russian court and those proceedings ARE the first to be instituted; • (6) THE Limitation period for enforcement has lapsed; • (7) If such recognition is contrary to the public policy in the RF

Pan Am Pharmaceuticals Inc (USA) vs Russian Cardiology -I • Non -recognition on the basis of absence of AN international treaty on legal assistance between RF and a relevant foreign state • Pan Am Pharmaceuticals Inc (USA) vs Russian Cardiology Complex • FAS Moscow Region Ruling, 17.11.2004, No KG-A40/10556-04

Pan Am Pharmaceuticals Inc (USA) vs Russian Cardiology -II • Held: presence of AN international treaty is a mandatory condition of recognition and enforcement by the Russian court • There is no treaty between USA and RF on legal assistance

Pan Am Pharmaceuticals Inc (USA) vs Russian Cardiology-III • Russia has not concluded such treaties with all jurisdictions in Western and Central Europe or with the United States or Canada • Restrictive approach of Russian courts hindered the development of good business relations between Russian and Western companies, as the latter often fear that they may be unable to protect their interests by seeking the requisite legal remedies in Russia

Yukos Case - I • BNP Paribas SA and others v Yukos Oil Company, FAS Moscow Region Ruling of 02/03/2006 • The High Court of Justice Chancery Division (UK) judgement of 24/06/2005 • The sum claimed by the Banks was advanced pursuant to a Loan Agreement dated 23 September 2003 • Event of Default: included any event or circumstance which had or might reasonably be expected to have a material adverse effect

Yukos Case -II • October 2003, following an inquiry into Russian oil companies, the defendant’schief executive officer was arrested. • The Russian tax ministry fixed the defendant’stax liability for 2000 at $US 3.3bn. • 15 April 2004, THE defendant’s assets were frozen pursuant to a freezing order

Yukos Case - III • 29 June 2004, judgment was given against the defendant for the tax due in 2000; process of execution of that judgment followed • Summary judgement application (without full hearing) • Held: the defence had no prospect of success

Yukos Case -IV • UK court judgement was recognized and enforced in Russia in the absence of a treaty • On the basis of the 1994 Agreement on Partnership and Cooperation between Russia and the European Union, • Which was recognized as a treaty on reciprocal legal assistance for the purposes of Russian procedural legislation

Recognition on the basis of Federal Law • “Reciprocity and Comity” principle (comitas gentium) • It is not contained in the APC RF • But it is contained in the Federal Law “On Insolvency (bankruptcy)” • Reference to a Federal Law in article 241 APC allows courts to apply RP principle in bankruptcy proceedings

Generally recognised Principles of International Law • Reciprocity • Comity (mutual recognition by nations of the laws of other nations) • Contained in Section 15 (4) of the Constitution RF

Rentpool B.V. vs OOO “Podjemniye Technologii” 2009 -I • June 2009 the Moscow Regional Arbitrazh Court ruling • 7 December 2009 - supported by the Supreme Arbitrazh Court RF (No VAS-13688/09) • Judgement issued by a Dutch district court was recognized and enforced on the basis of reciprocity and comity, deciding to uphold these generally recognized principles of international law despite the fact that Russia has no treaty on reciprocal recognition of judgments with the Netherlands

Rentpool B.V. vs OOO “Podjemniye Technologii” 2009 -II • Held: formal refusal by a Russian court to recognize (enforce) a foreign court judgement because it found no grounds to do so in Russian procedural legislation • Would constitute a direct violation of the Constitution and of international conventions to which Russia is a party

Rentpool B.V. vs OOO “Podjemniye Technologii” 2009 - III • The recognition and enforcement of Russian court judgements in the Netherlands Constitutes unconditional grounds for recognizing and enforcing Dutch court judgements in Russia On the basis of reciprocity and comity in international law

Rentpool B.V. vs OOO “Podjemniye Technologii” 2009 - IV • This is the first time that recognition and enforcement have been successfully sought on these grounds for a judgement from a non-treaty country • It is still unclear what would have happened if the Counsel for the applicant had not provided evidence on enforceability of Russian courts judgements in the Netherlands

Rentpool B.V. vs OOO “Podjemniye Technologii” - conclusion • The absence of a treaty between Russia and a foreign country no longer constitutes unconditional grounds for a court to refuse to recognize and enforce such decisions in Russia • Still important to persuade a court that there is a practice of recognition and enforcement of Russian courts’ judgements in a relevant country

“Public policy” (PP) reason for non-recognition -I • Universal reason to set aside orders for the enforcement of judgements • No legal definition • PP is open-textured and encompasses a broad spectrum of different acts

“Public policy” (PP) reason for non-recognition - II • Supreme Court of RF definition • Ruling of 27 May 2003 Case No 5G03-39

“Public policy” (PP) reason for non-recognition - III • “Public policy” is defined as fundamental provisions regarding public, economic and social foundations of a society established by the state; AND • Fundamental principles of the legal system

Moscow National Bank Ltd. (London) vs. GU “Eye microsurgery“ - I • October 2002 the arbitrazh court ruling recognising the UK court decision • This ruling was revoked twice by the Federal Arbitration Court of the Moscow Region and finally was adjourned until a decision was reached on the Russian court case on the validity of the guarantees given by GU “Eye microsurgery“ to Moscow National Bank

Moscow National Bank Ltd. (London) vs. GU “Eye microsurgery“ - II • August 2003 - the Russian court decided the case on the validity of the guarantees given by GU “Eye microsurgery“ to Moscow National Bank and held guarantees void • Guarantees did not satisfy the mandatory provisions of the Russian law

Moscow National Bank Ltd. (London) vs. GU “Eye microsurgery“ - III • The third ruling on enforcement of the UK court decision • In this ruling the court refused to recognise and enforce the UK court decision in Russia as based on a void contract (guarantees issued by GU “Eye microsurgery“ and held void by the Russian court)

Moscow National Bank Ltd. (London) vs. GU “Eye microsurgery“ - IV • The arbitrazh court held that enforcement of the decision of the UK court based on void documents would therefore constitute a breach of Russian constitutional and legal order and would be against public policy

“Improper notice” reason for non-recognition - I • The defendant (the party against whom the judgement was entered) was not served with a document which instituted the proceedings in due course so as to prevent him from preparing a defence • the ground for non-recognition most frequently used by a party against whom a foreign judgment is entered

“Improper notice” reason for non-recognition - II • In some cases Russian courts take evidence of service of documents issued by a foreign court as acceptable evidence of notice • In other cases Russian courts refuse to consider such service of documents as acceptable evidence (for instance, the case OOO “Jun Shen” vs. OOO PK “Forest resources”) • Reliance on “improper notice” ground may be successful

“Improper notice” reason for non-recognition - III • Service made by way of publication in the media is not proper notice • There are a number of cases that support this position

Presidium of the Supreme Arbitration Court RF, Information letter No. 96 of 22.12.2005 - I • A Polish entrepreneur applied to the Russian court for enforcement of a Polish court decision to recover debt from a Russian company • The Russian court established that the documents were served by post at the last known address of the company in Russia

Presidium of the Supreme Arbitration Court RF, Information letter No. 96 of 22.12.2005 - II • Held: • The documents were not served personally on the Russian party • As a result of such [improper] notice the Russian party could not attend proceedings by a foreign court and arrange for its defence • Posting a notice to a party at its last known [place of business] address is improper notice

Lapse of limitation period for enforcement • Article 246 of the Arbitrazh Procedural Code (APC) RF • Application for a foreign court judgment enforcement shall be filed within 3 years from the date it becomes effective • Justifiable reasons can be given for a failure to apply in time • This period can be extended by a court

Thank you! MGAP Attorneys at law Moscow - London 2010 by Tatiana Menshenina, Natalia Kalinina, Alexander Yurchik

ENFORCING FOREIGN COURT JUDGMENTS :