Yukos Capital S.A.R.L -v- OAO Tomskneft VNK,  IEHC 115 (2014)
|Parts:||Yukos Capital S.A.R.L, OAO Tomskneft VNK|
|Reporting Judge:||Kelly J.|
|Docket Number:||2013 34 MCA|
THE HIGH COURT
COMMERCIAL[2013 No. 34 MCA]
IN THE MATTER OF THE ARBITRATION ACTS 1954 – 1998
AND IN THE MATTER OF SECTION 41 OF THE ARBITRATION ACT 1954 AND IN THE MATTER OF SECTION 7 OF THE ARBITRATION ACT 1980 AND IN THE MATTER OF SECTION 41 OF THE ARBITRATION ACT 1998 AND IN THE MATTER OF ORDERS 56 AND 56A OF THE RULES OF THE SUPERIOR COURTS
YUKOS CAPITAL S.A.R.L. APPLICANTAND
OAO TOMSKNEFT VNK (OTKYTOYE AKTSIONERNOYE OBSHCHESTVO
VOSTOCHNAYA NEFTYANAYA KOMPANIA) RESPONDENT
JUDGMENT of Mr. Justice Kelly delivered on the 13
day of March, 2014
This is the respondent’s application to set aside an order of Peart J. of 8th February, 2013, granting the applicant leave to serve these proceedings outside the jurisdiction. The order is sought pursuant to O. 12, r. 26 of the Rules of the Superior Courts.
The respondent also seeks an order pursuant to the same rule or the inherent jurisdiction of the court setting aside the order of Peart J. which dispensed with the requirement for personal service of the proceedings and which granted leave to effect substituted service on the respondent.
These proceedings seek (pursuant to s. 7 of the Arbitration Act 1980 and s. 41 of the Arbitration Act 1954) the enforcement in this State of an arbitral award made by the International Court of Arbitration of the International Chamber of Commerce in New York City on 12th February, 2007.
Alternatively, an order is sought pursuant to s. 14 of the Arbitration (International Commercial) Act 1998 and Article 35 of the UNCITRAL Model Law (to which effect is given in Ireland by s. 4 of the Arbitration (International Commercial) Act 1998) enforcing the award in the State in the same manner as if it were a judgment of this Court. Judgment is sought in respect of the amounts dealt with in the award which are:-
(a) 3,838,794,521 RUR;
(b) 2,067,164,932 RUR;
(c) 1,348,727,671 RUR;
(e) USD$121,603.28; and
The applicant is a Luxembourg company which was incorporated on 31st January, 2003. The respondent is a Russian open joint stock company. It is located at Burovikov Street, Tomsk Region, Strezhevoi in Russia. It is wholly owned jointly by OAO Rosneft through Rosneft’s subsidiaries and 50% by OAO Gazprom through Gazprom subsidiaries. Rosneft is one of the biggest international oil companies in the world with its majority shareholding owned by the Russian Federation. Gazprom is a large global energy company employing over 400,000 people and accounting for 15% of global gas output.
The award was made in respect of three loans made by the applicant to the respondent.
The first loan is the subject of an agreement made on 20th July, 2004, with an addendum to that agreement of 22nd November, 2005. The agreement was for a total amount not exceeding 2.3 billion RUR.
The second agreement was dated 27th July, 2004, together with an addendum of 22nd November, 2005 and was for a total amount not exceeding 1.24 billion RUR.
The third agreement was for a sum not exceeding 810 million RUR and was made on 4th August, 2004, with an addendum of 22nd November, 2005.
The applicant advanced the principal sums provided for in those agreements to the respondent. The total sum paid was 4,350,000,000 RUR.
The applicant contends that the respondent defaulted on the repayment of the loan, resulting in a demand being made in December 2005 for repayment of the total principal sums.
In the absence of payment of those monies, the applicant filed a request for arbitration in respect of the loans with the International Secretariat of the ICC International Court of Arbitration (the ICC). The applicant’s entitlement to make such a request derived from clause 5.1 of each of the loans as amended by the addendum agreements of 22nd November, 2005.
Under the addendum agreements, the original Article 5.1 was amended and restated so as to provide for any dispute to be finally resolved by arbitration in accordance with the then current Rules of Arbitration of the ICC. The addenda also provided that judgment on the award might be entered in any court having jurisdiction in respect thereof. They went on to provide that the seat of the arbitration would be New York City and that the language of the arbitration would be English. The matters in dispute were to be decided in accordance with the substantive law of the State of New York. The addenda provided that the dispute would be heard and determined by an Arbitral Tribunal consisting of three arbitrators, each of whom was to be independent and impartial.
In the event, a single arbitrator, the late Dr. Robert Briner, was appointed. In his award, he records that the request for arbitration was sent by the ICC to the respondent on 20th January, 2006, and that on 21st February, 2006, the respondent replied directly to the applicant, acknowledging receipt of the “legal claim”. The respondent claimed in that letter that the parties had not validly agreed to ICC arbitration.
On 13th February, 2006, the applicant proposed that the arbitration should be decided by a sole arbitrator, notwithstanding the provision for a tribunal consisting of three arbitrators. In his award, Dr. Briner stated that the respondent confirmed that it had no objection to the appointment of a sole arbitrator. This was done by letter of 20th March, 2006, signed on behalf of the respondent by a management company.
On 2nd June, 2006, Dr. Briner was appointed by the ICC Court of Arbitration as sole arbitrator.
As is recited in Dr. Briner’s award, on 8th June, 2006, by letter sent by DHL (a courier firm) to the respondent, he invited it (if it so wished) to give further reasons regarding its contention that the ICC Court was not competent to decide on disputes arising under the three loan agreements. No communication was received from the respondent.
Dr. Briner also records that on 27th June, 2006, he sent draft terms of reference to the parties with a deadline of 7th July, 2006, for comments. That deadline was extended at the applicant’s request to 17th July of that year, and the applicant confirmed that it had no comment. He did not receive any communication from the respondent. A statement of claim was delivered by the applicant on 11th October, 2006. The award recites that the respondent was obliged to file a reply by 8th November, 2006, but that none was received from it.
The award records that the parties were invited to attend a hearing on 14th December, 2006. The respondent was not represented at that hearing, nor did it send any communication to the arbitrator.
On 14th December, 2006, the applicant’s case was presented. At the conclusion of that hearing, the arbitrator declared the proceedings closed but that the respondent would still be authorised to submit its comments on the applicant’s documents which were presented at that hearing. A transcript and all documents produced at the hearing were sent to the respondent and a time was fixed for the receipt of its comments. No communication was received from the respondent. The arbitrator twice noted in his award that all communications were sent to the respondent via DHL and that according to receipts from that entity, all such communications were received by the respondent.
The arbitrator published his award on 12th February, 2007.
The arbitrator first stated his conclusions on the question of jurisdiction. He concluded that the addenda on 22nd November, 2005 had been validly entered into and bound the parties. Therefore he, as sole arbitrator, had jurisdiction to decide the dispute under the ICC Rules and to apply the substantive law of the State of New York, USA.
He held that having agreed that the dispute should be decided by a sole arbitrator, and after having declared in its correspondence that the addenda were not valid and binding and that the dispute, therefore, should not be heard under the ICC Rules, the respondent chose to no longer participate in the arbitration. Despite that failure to participate, he went on to say that in international commercial arbitration, default by a party does not constitute an admission of liability and does not automatically validate the arguments of a claimant. He held that an arbitral tribunal has to examine the merits of the claimant’s legal and factual arguments without going so far as acting as advocate for the defaulting party. Having adopted that approach, he came to the conclusion that the applicant was entitled to repayment of the principal advanced under the loans and to simple interest to the date of the award to be calculated in accordance with the terms of the loans. He also held that the applicant was entitled to demand the immediate repayment of the principal amount on the loans on 1st December, 2005, and was also entitled to penalties to be calculated in accordance with clause 3.2 of the loans from 1st December, 2005. The award also dealt with the payment of fees, expenses, costs and post-award interest.
It is common case that the respondent has not paid the award. The applicant now seeks the recognition and enforcement of the award in this jurisdiction.
The applicant contends that having regard to the provisions of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, s. 7 of the Arbitration Act 1980, and s. 41 of the Arbitration Act 1954, or, in the alternative, s. 14 of the Arbitration (International Commercial) Act 1998, this Court is obliged to recognise and enforce the award unless the respondent can establish the existence of one or more of the grounds upon which the Court is entitled to refuse recognition and enforcement.
The respondent contends that before one ever gets to consider the substantive relief sought in the proceedings, the question of this Court assuming jurisdiction to hear the matter must first be decided.
Before dealing with that, I ought to sketch out briefly the rather unsuccessful...
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