May 14 2009
The Amsterdam Court of Appeal recently enforced four Russian arbitral awards(1) under Article 5.1e of the New York Convention even though the Russian courts had set aside those awards.
On September 19 2006 four arbitral awards were rendered under the Rules of Arbitration of the International Commercial Arbitration Court of Moscow in a dispute between the claimant, Yukos Capital, and the defendant, Rosneft. The arbitral tribunal ordered Rosneft (then called Yuganskneftegaz) to pay Yukos Rb13 billion (about € 300 million). The Moscow Arbitrazh Court (ie, commercial court) decided to set aside the awards in its judgments of March 18 2007 and March 23 2007. Those decisions were confirmed on August 13 2007 by the Moscow Court of Appeal and on December 10 2007 by the Russian Supreme Court.
Yukos arrested certain assets of Rosneft in 2006 in the Netherlands on a provisional basis and then applied to the Amsterdam District Court for recognition and enforcement of the awards in the Netherlands. On the basis of the New York Convention 1958, the district court ruled that, in principle, it had to recognize the decision of the Russian state court with respect to the setting aside of the arbitral awards in the absence of exceptional circumstances, such as the violation of general accepted principles of due process. Since Yukos had not sufficiently proved such circumstances, the court recognized the Russian state court decisions and rejected the request for recognition and enforcement of the arbitral awards.
Yukos appealed this decision to the Amsterdam Court of Appeal and submitted further facts challenging the independence of the Russian courts in cases related to the takeover of control of the Yukos Group by the Russian state. In particular, it submitted that the Russian state used its judiciary to dismantle the Yukos Group.
In its as yet unpublished decision the Amsterdam Court of Appeal emphasized that the New York Convention provides only for the recognition and enforcement of arbitral awards, not for the international recognition of decisions of state courts setting aside or annulling such awards. Nothing in the convention or any other treaty obliges the Dutch courts to recognize Russian state court decisions. Such recognition is therefore subject to the common rules of Dutch international private law.
The appeal court further ruled that, in principle, a foreign court decision can be recognized in the Netherlands irrespective of its nature and significance, provided that a number of minimum requirements are met. The principle of due process is one of those requirements. Due process does not exist if the foreign decision has been rendered by a judicial tribunal which is not impartial and independent.
The appeal court held that the Russian state courts did not meet the minimum requirements regarding due process, independence and impartiality. It quoted various sources and reports, including:
The appeal court also referred to decisions of the UK, Swiss and Lithuanian courts which refused judicial cooperation with the Russian judiciary on the same grounds, and an October 31 2007 judgment of the Amsterdam District Court, which refused to recognize an August 1 2006 Russian judgment declaring the bankruptcy of Yukos Oil Company. The court considered that Rosneft did not submit actual facts or documents which could have shed light on the influence of the Russian state on the Russian judiciary in this case.
The appeal court held that Yukos successfully demonstrated that the Russian state exercised influence on the judiciary in matters concerning Yukos. It held that it did not require direct evidence demonstrating the lack of independence of the individual judges. For those reasons, it ignored the Russian state court decisions setting aside the awards and ordered the recognition and enforcement of the arbitral awards in the Netherlands.
The decision illustrates that in the Netherlands, foreign state court decisions setting aside arbitral awards are not automatically recognized. Recognition of such decisions does not follow the rules of the New York Convention, but rather the rules of Dutch international private law. Recognition of such decisions will normally take place, provided that, among other things, the fundamental principles of due process have been complied with or have been deemed to have been complied with.
However, the decision also illustrates that Dutch law attaches major significance to the judicial status of the arbitral award(2) in the jurisdiction in which it was rendered and, in particular, whether it was set aside in that jurisdiction.
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