Hulley Enterprises Ltd (a company incorporated in Cyprus) v The Russian Federation
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Cockerill |
| Judgment Date | 01 November 2023 |
| Neutral Citation | [2023] EWHC 2704 (Comm) |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2015-000396 |
[2023] EWHC 2704 (Comm)
Mrs Justice Cockerill
Case No: CL-2015-000396
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT
KING'S BENCH DIVISION
IN THE MATTER OF THE ARBITRATION ACT 1996
AND THE MATTER OF AN ARBITRATION CLAIM
7 Rolls Building
Fetter Lane
London,
EC4A 1NL
Jonathan Crow CVO KC and David Peters (instructed by Stephenson Harwood LLP) for the Claimants
Khawar Qureshi KC (instructed by Dmitry Andreev) for the Defendant
Hearing dates 4,5 October 2023
APPROVED JUDGMENT
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic. This judgment was handed down remotely by the judge and circulated to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Wednesday 1 November 2023 at 10:30am
Introduction
Over the course of two days I have heard the trial of two preliminary issues arising out of a longstanding and complex dispute between the Defendant (the Russian Federation: “RF”) and the Claimants, who are the former majority shareholders in OAO Yukos Oil Company (“Yukos”). The manifestation of that dispute which concerns this court is enforcement of arbitral awards of some US$50 billion plus compound interest accruing at some US$2.5 million dollars a day (“the Awards”).
These Awards resulted from determinations of a Tribunal of well known international arbitrators that (i) they had jurisdiction to hear a claim brought by the Claimants for breach of the RF's obligations under Article 13(1) of a treaty called the Energy Charter Treaty (“the ECT”); (b) the Claimants' allegations of breach (via unlawful expropriation via tax demands and bankruptcy proceedings) were well-founded; and (c) the RF was liable to pay the Claimants more than US$50 billion in damages.
Those preliminary issues were defined as:
i) Issue 1: Whether and to what extent the RF is, by reason of certain judgments of the Dutch courts, precluded from re-arguing the question of whether it has agreed in writing to submit to arbitration the disputes that are subject of the Awards;
ii) Issue 2: Whether, if the answer to Issue 1 is that the RF is so precluded from re-arguing the relevant question, the Jurisdiction Application ought to be dismissed forthwith.
Those issues arise against a procedural background which has already been summarised at length in two judgments of this court. The parties know the facts intimately. The interested reader is referred to:
i) [8 – 44] of the judgment of Henshaw J reported at [2021] 1 WLR 3429 (“the Henshaw Judgment”); and
ii) [2 – 23] and [27 – 38] of the judgment of Butcher J at [2022] EWHC 2690 (Comm) (“the Butcher Judgment”).
In essence:
i) On 10 November 2014, the RF commenced the Dutch Proceedings: a challenge to the Awards in the courts of the Netherlands (the arbitral seat) seeking to have the Awards set aside. In that litigation it advanced a range of challenges including ones which went to the Tribunal's jurisdiction, and also ones relating to the conduct of the arbitration;
ii) On 30 January 2015, the Claimants initiated these English Enforcement Proceedings seeking the recognition and enforcement of the Awards in this jurisdiction;
iii) On 25 September 2015, the RF filed its application contesting the jurisdiction of the English Court on the basis of the RF's state immunity pursuant inter alia to Section 1 of the State Immunity Act 1978. Its Summary of Evidence outlined the arguments (described in more detail in the Henshaw Judgment at [49]) that:
a) The agreement in Article 45 of the ECT did not on the true construction of that article apply to the Article 26 arbitration process (“the Article 45 argument”);
b) The Claimants were not entitled to invoke the provision because they were not “investors” (as defined) with an “investment” (as defined) (“the investor/investment argument”);
c) The claims brought lay outside the scope of the dispute resolution provisions because Article 21 of the ECT carved out taxation, and the claims were based on taxation measures (“the Article 21 argument”).
On 8 June 2016, the English Enforcement Proceedings were stayed by consent and by order of Leggatt J (“the Stay”).
Meanwhile on 20 April 2016, the Awards were set aside by the District Court of The Hague (“The Hague DC”), on the basis of the Article 45 argument.
The Hague Court of Appeal (the “Hague CoA”) allowed the Claimants' appeal on that issue and (in accordance with Dutch procedure) it also considered de novo all of the RF's other challenges to the Awards (including (i) Set Aside Ground 2: the Article 45 argument (ii) Set Aside Ground 3–4: the investor/investment argument (iii) Set Aside Ground 5: the Article 21 point and (iv) Set Aside Ground 1: a “fraud in the arbitration” allegation). The set aside grounds are listed more fully in the Henshaw Judgment at [44].
In the event, The Hague CoA Judgment in February 2020 rejected all of the RF's challenges (including ruling that the RF was not entitled, in the context of a set aside application under Article 1065 of the Dutch Code of Civil Procedure, to run the fraud in the arbitration argument) and reinstated the Awards.
The RF then brought a cassation appeal in the Dutch Supreme Court (“DSC”) against some (but not all) of the conclusions in The Hague CoA Judgment. The points which were “in play” on the appeal were: (i) entitlement to run the fraud argument (ii) the Article 45 argument, (iii) investment/investor argument (iv) aspects of the Article 21 argument.
On 6 July 2020, the Claimants applied to lift the Stay following a judgment of the Hague CoA. At this point the RF's cassation appeal to the Dutch Supreme Court (“DSC”) was pending. That application was rejected by Henshaw J by his judgment dated 14 April 2021 which continued the Stay.
On 5 November 2021, the DSC gave judgment (“the DSC Judgment”), finding that the Hague CoA's rulings on Set Aside Grounds 2 to 7 did not result in cassation (i.e. upholding the Hague CoA), but that the Hague CoA had erred in its ruling on Set Aside Ground 1 (fraud). Accordingly, the DSC Judgment quashed the Hague CoA Interim and Final Judgments and referred the case to the Amsterdam Court of Appeal for further consideration and decision.
The net result was that apart from the procedural question as to whether or not the argument on fraud in the arbitration should have been excluded from the set-aside proceedings, all the grounds on which the Defendant sought to rely in relation to the jurisdiction of the Tribunal failed either in the Hague CoA and were not appealed (the Article 21 argument) or failed in both the Hague CoA and the DSC (investor/investment and Article 45).
Following the handing down of the DSC Judgment, the Claimants re-applied to lift the Stay. In October 2022, Butcher J acceded to that application in part, lifting the Stay “ solely for the purpose and to the extent necessary for the resolution of the Defendant's Jurisdiction Application”, and giving directions for the determination of the Preliminary Issues.
The Butcher Order granted each of the Claimants and the Defendant permission to file evidence from a single Dutch law expert on the following issue: “whether and to what extent the determinations in the Dutch Judgments are final and/or conclusive as a matter of Dutch law as between the Claimants and the Defendant”. Pursuant to the Butcher Order, the Claimants filed evidence in the form of three expert reports of Prof. Dr. Jan Willem August Biemans dated 20 December 2022, 29 August 2023 and 25 September 2023. The Defendant filed its evidence in the form of an expert report of Mr. Jacob Cornegoor dated 2 June 2023 and a rebuttal expert report dated 8 September 2023.
The Parties' Arguments
The Claimants (in summary) urge me to answer both preliminary issues in the affirmative. They say that:
i) The issue which arises on the Jurisdiction Application is whether the RF has agreed to submit to arbitration the disputes that are the subject of the Awards (“the Arbitral Jurisdiction Issues”). If it has, then (a) the exception to State immunity identified in s. 9 of the State Immunity Act 1978 (“the SIA 1978”) applies; and (b) the Defendant's assertion of State immunity in relation to the enforcement proceedings, (and hence the Jurisdiction Application) must be rejected;
ii) A final and conclusive answer to the Arbitral Jurisdiction Issue has already been given by the curial courts pursuant to the Hague CoA Judgment and the DSC Judgment. By these judgments (collectively “the Dutch Judgments”) the Dutch courts have concluded that the Defendant did agree to arbitrate the disputes which are the subject of the Awards;
iii) Under English law, the Dutch Judgments give rise to an issue estoppel which precludes the Defendant from re-running its failed case on the Arbitral Jurisdiction Issue;
iv) The Defendant is therefore not permitted to re-argue the Arbitral Jurisdiction Issue before this court;
v) Since the Jurisdiction Application depends entirely on the Defendant being able to (a) re-argue the Arbitral Jurisdiction Issue and (b) to persuade this court to reach a different conclusion from the Dutch courts, it follows that the Jurisdiction Application must be dismissed.
The RF says the opposite. It contends that:
i) The Preliminary Issues require the Court to accept and conclude that the Dutch Judgments give rise to issue estoppel/ res judicata, such that the English Court should...
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