Yukos Capital SARL v OJSC Rosneft Oil (2011)
A decision of the Amsterdam Court of Appeal gave rise to an issue estoppel preventing the defendant from denying that decisions of the Russian courts annulling arbitration awards were the result of a partial and dependent judicial process.
The court was required to determine two preliminary issues in a claim by the claimant (Y) to enforce four arbitration awards against the defendant (R). Y was a member of a Russian group of companies involved in oil production. The group was broken up and R, which was owned and controlled by the Russian government, acquired the majority of its assets. The awards were issued by a tribunal acting under the rules of the International Commercial Arbitration Court at the Chamber of Trade and Industry of the Russian Federation. The awards related to certain intra-group loans made by Y. The tribunal found that Y was entitled to repayment of the loans together with interest. The amount of the awards was about US$425 million. Y began enforcement proceedings in the Netherlands. The awards were then set aside by the Russian Arbitrazh Courts on R's application. The Dutch court refused leave to enforce the judgments. On appeal, the Dutch appeal court determined that the Russian decisions annulling the awards should not be recognised since they were the result of a partial and dependent judicial process. Accordingly, leave was given to enforce the awards. In the English proceedings Y claimed interest of over $160 million in respect of the period during which R had refused to satisfy the awards. The preliminary issues were whether the decision of the Dutch appeal court gave rise to an issue estoppel preventing R from denying that the Russian decisions annulling the awards were the result of a partial and dependent judicial process; and, if not, whether the principles of act of state or non-justiciability prevented Y from showing that the decisions were the result of a partial and dependent judicial process.
(1) The decision of the Dutch appeal court gave rise to an issue estoppel preventing R from denying that the annulment decisions of the Russian courts were the result of a partial and dependent judicial process, DSV Silo und Verwaltungsgesellschaft mbH v Owners of the Sennar (The Sennar) (No2) (1985) 1 WLR 490 HL followed. There had been a decision on the merits: the appeal court found as a fact that the annulment decisions were the result of partial and dependent judicial process. That was a necessary part of its decision to permit enforcement. That decision would be res judicata in the Netherlands. The decision was not a "surprising decision" for the purposes of Dutch law. It would not be unjust for R to be prevented from denying that the annulment decisions were the result of a partial and dependent judicial process. The factors relied on did not amount to special circumstances which would exceptionally lead to a finding that there was no issue estoppel. In particular all the material on which R wished to rely could have been put before the Dutch court, but R chose not to do so (see paras 42, 75-76, 86, 107 of judgment). (2) The act of state doctrine was not engaged if the validity of the act of the foreign state was not an issue,Berezovsky v Abramovich (2011) EWCA Civ 153, (2011) 108(10) LSG 23followed. The English court could examine whether a foreign court system was lacking in independence notwithstanding that that might involve an examination of acts of the state which resulted in that lack of independence, Cherney v Deripaska (2009) EWCA Civ 849, (2010) 2 All ER (Comm) 456 and AK Investment CJSC v Kyrgyz Mobil Tel Ltd (2011) UKPC 7considered. In the instant case the decision which had to be made was whether the annulment decisions offended against English principles of substantial justice. In order to determine that issue it was not necessary to declare that the annulment decisions, or any other acts relied on, were invalid or ineffective, Yukos Oil Co v Financial Services Authority (2006) EWHC 2044 (Admin) distinguished. Thus the act of state doctrine was not engaged. Nor did the case engage the principle of judicial abstention: it was not beyond the competence of the court to consider and determine whether the acts relied on by Y were part of a scheme controlled by the Russian government. Furthermore, it was open to Y to plead other alleged instances of unfair proceedings and perverse judicial decisions in proceedings relating to it and to allege bias in cases involving matters of importance to the Russian Federation (paras 113, 171, 179-188, 191-203).
Preliminary issues determined in favour of claimant
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