Yukos Capital S.A.R.L. v OAO Tomskneft VNK

• Jurisdiction: Ireland
• Judge: Mr. Justice Kelly
• Judgment Date: 13 March 2014
• Neutral Citation: [2014] IEHC 115
• Court: High Court
• Date: 13 March 2014

Yukos Capital Sarl v Oao Tomskneft VNK

COMMERCIAL

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

BETWEEN

YUKOS CAPITAL S.A.R.L.

APPLICANT

AND

OAO TOMSKNEFT VNK (OTKYTOYE AKTSIONERNOYE OBSHCHESTVO "TOMSKNEFT" VOSTOCHNAYA NEFTYANAYA KOMPANIA)

RESPONDENT

[2014] IEHC 115

[No. 34 MCA/2013]

THE HIGH COURT

Litigation - Arbitration - Enforcement of arbitral award - Application to set aside an order of the High Court - Discretion - Appropriateness - Class of action - Resident outside jurisdiction - Assets - Cost, convenience and propriety - Arbitration Act 1980 - Rules of the Superior Courts

Facts: This matter concerned an application brought by the respondent to set aside orders dated the 8 ^th February 2013 granting the applicant leave to serve civil proceedings outside the jurisdiction and leave to effect substituted service on the respondent. The proceedings that were brought by the applicant sought the enforcement of an arbitral award made by the International Court of Arbitration of the International Chamber of Commerce in New York City on the 12th February 2007 or an order enforcing the award in the same manner as if it were a judgment of the High Court.

It was clear that the applicant had attempted to have the award recognised and enforced in Russia and France but was unsuccessful in both countries. A similar application had also been in Singapore and was pending at the time this judgment was delivered.

Held by Kelly J. that the Arbitration Act 1980 provides the basis for an award made pursuant to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards being enforced in the Irish state. Nevertheless, it was said that in the case of a defendant resident outside the jurisdiction, the Court must satisfy itself that it should assume jurisdiction by reference to the prescriptions of O. 11 of the Rules of the Superior Courts before considering the substantive case. The applicant had originally been granted leave to serve the civil proceedings outside the jurisdiction on the basis of O. 11 r. 1(s), but it was found that this class of action was clearly inappropriate because it referred to proceedings brought to enforce an interim measure issued by an arbitral tribunal based outside the jurisdiction. It was said, however, that this was possibly a mistake on the part of the High Court judge because the applicant had brought the motion on the basis O. r. 1(q), which referred to proceedings that were brought to enforce a foreign judgment. This sub-rule was said to be potentially applicable.

It was further held that even if an applicant was able to show that the substantive proceedings fell within a class of action under O. 11 r. 1, the Court must still be satisfied that it is proper to assume jurisdiction. In this regard, the relevant case law indicated that the Court should have regard to the comparative cost, convenience and propriety, which inevitably involved a consideration of the interests of both parties to the litigation. It was noted that the respondent company was based in Russia, that the respondent had no assets within Ireland and that there was no evidence to suggest that there was any realistic prospect of that changing. These factors were not a precondition to the exercise of the discretion to permit service out of the jurisdiction, but it was held that it would be inappropriate to do so because the cumulative effect of these factors meant that the Court could not see any practical benefit that would ensue if the arbitral award was enforced. It was also noted that this was the fourth attempt of the applicant to have the award enforced. For that reason, it was held that it would be unjust to require the respondent to yet again defend its position.

For these reasons, it was held that it would be inappropriate for the Irish High Court to assume jurisdiction of the proceedings. The orders of the High Court dated the 8th February 2013 were, therefore, set aside.

RSC O.12 r26

ARBITRATION ACT 1980 S7

ARBITRATION ACT 1954 S41

ARBITRATION (INTERNATIONAL COMMERCIAL) ACT 1998 S14

UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION ART 35

ARBITRATION (INTERNATIONAL COMMERCIAL) ACT 1998 S4

ARBITRATION ACT 1954 S4(1)

ARBITRATION ACT 1954 S4(2)

ARBITRATION ACT 1980 PART III

NEW YORK CONVENTION ON THE RECOGNITION & ENFORCEMENT OF FOREIGN ARBITRAL AWARDS ART III

NEW YORK CONVENTION ON THE RECOGNITION & ENFORCEMENT OF FOREIGN ARBITRAL AWARDS ART V

ARBITRATION ACT 1980 S9

ARBITRATION ACT 1980 S9(2)

ARBITRATION ACT 1980 S9(3)

KASTRUP TRAE-ALUVINDUET A/S v ALUWOOD CONCEPTS LTD UNREP MACMENAMIN 13.11.2009 2009/29/7254 2009 IEHC 577

JURISDICTION OF COURTS & ENFORCEMENT OF JUDGMENTS ACT 1998 S5

RSC O.11

GLENCORE GRAIN ROTTERDAM RBV v SHIVNATH RAE HARNARAIN CO 28 F 3D 114 (US)

FIRST INVESTMENT CORPORATION OF MARSHALL ISLANDS v FUJIAN MAWEI SHIPBUILDING LTD 703 F 3D 742 (US)

BORN INTERNATIONAL COMMERCIAL ARBITRATION VOL 2 2399

BORN INTERNATIONAL COMMERCIAL ARBITRATION VOL 2 2400

GATER ASSETS LTD v NAK NAFTOGAZ UKRAINY 2008 1 AER (COMM) 209

RSC O.11 r1(Q)

RSC O.11 r1(S)

RULES OF THE SUPERIOR COURTS SI 15/1986

RULES OF THE SUPERIOR COURTS (ARBITRATION) SI 361/2010

RSC O.11 r1(K)

RSC O.11 r1(L)

INTERNATIONAL COMMERCIAL BANK PLC v INSURANCE CORPORATION OF IRELAND 1989 IR 453

ANALOG DEVICES BV v ZURICH INSURANCE COMPANY 2002 1 IR 272

MCCREA v KNIGHT 1896 2 IR 619

INTERMETAL GROUP LTD v WORSALE TRADING LTD 1998 2 IR 1

SPILIADA MARITIME CORPORATE v CANSULEX LTD 1987 AC 460

HARRODS (BUENOS AIRES) LTD, IN RE 1992 CH 72

RSCO.11 r2(5)

TASARRUF MEVDUATI SIGORTA FONU v DEMIREL & ANOR 2007 4 AER 1014

THE HAGEN 1908 P 189

REDFERN & HUNTER ON INTERNATIONAL ARBITRATION PARA 11.14

TRIDON AUSTRALIA PTY LTD v ACD TRIDON INC 2004 NSWCA 146

WEST TANKERS INC v ALLIANZ SPA & ANOR 2011 AER 51

INTERNATIONAL ALLTEX CORP v LAWLER CREATIONS LTD 1965 IR 264

1 JUDGMENT of Mr. Justice Kelly delivered on the 13th day of March, 2014

Introduction

2 1. This is the respondent's application to set aside an order of Peart J. of 8 ^th 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.

3 2. 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.

Background

4 3. 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 12 ^th February, 2007.

5 4. 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:-

6 (a) 3,838,794,521 RUR;

7 (b) 2,067,164,932 RUR;

8 (c) 1,348,727,671 RUR;

9 (d) USD$153,622;

10 (e) USD$121,603.28; and

11 (f) GBP£52,964.84.

The Parties

12 5. The applicant is a Luxembourg company which was incorporated on 31 ^st 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 Loans

13 6. The award was made in respect of three loans made by the applicant to the respondent.

14 7. The first loan is the subject of an agreement made on 20 ^th July, 2004, with an addendum to that agreement of 22 ^nd November, 2005. The agreement was for a total amount not exceeding 2.3 billion RUR.

15 8. The second agreement was dated 27 ^th July, 2004, together with an addendum of 22 ^nd November, 2005 and was for a total amount not exceeding 1.24 billion RUR.

16 9. The third agreement was for a sum not exceeding 810 million RUR and was made on 4 ^th August, 2004, with an addendum of 22 ^nd November, 2005.

17 10. The applicant advanced the principal sums provided for in those agreements to the respondent. The total sum paid was 4,350,000,000 RUR.

18 11. 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.

19 12. 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 22" November, 2005.

20 13. 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...