Merchant International Company Ltd v Natsionalna Aktsionerna Kompaniia Naftogaz Ukrainy
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE DAVID STEEL |
| Judgment Date | 14 July 2011 |
| Neutral Citation | [2011] EWHC 1820 (Comm) |
| Docket Number | Case No: 2010 FOLIO 445 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 14 July 2011 |
[2011] EWHC 1820 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice David Steel
Case No: 2010 FOLIO 445
The HON MICHAEL BELOFF QC, MR MICHAEL LAZARUS & MR ROBERT PALMER (instructed by HOGAN LOVELLS INTERNATIONAL LLP) for the Claimant
MR ALEXANDER LAYTON QC & MR MICHAEL FEALY (instructed by SIMMONS & SIMMONS) for the Defendant
Hearing dates: 10th & 24th June 2011
Introduction
The claimant (MIC) asserts that it is the assignee under an assignment agreement dated 28 December 1998 of a substantial debt originally owed by the defendant's (NAK) legal predecessor to Gazprom. The present proceedings are the latest round in MIC's lengthy attempts to recover payment of monies under that assignment which have been outstanding since August 1999.
The agreement contains no law or jurisdiction clause. There has, however, been extensive litigation in the Ukraine. The proceedings commenced in 2002. At the third attempt MIC obtained a judgment in its favour in 2006 for a sum in excess of US24 million inclusive of interest. Attempts by MIC to enforce this judgment in the Ukraine were unsuccessful because in 2005 the Ukraine had enacted a law which imposed a suspension of enforcement notices to protect fuel and energy companies against the execution of judgments.
In April 2010 MIC commenced these proceedings in the Commercial Court with a view to enforcing its Ukrainian judgment in England by obtaining an English judgment against NAK at common law. At the same time MIC was granted a without notice domestic freezing order limited to US25 million. This order bit on a substantial shareholding held by NAK in a UK listed company JKX Oil and Gas Plc.
Service of these proceedings was effected pursuant to the Hague Convention in the Ukraine in September 2010. NAK sought to set aside that service on the ground that the exercise by the English court of jurisdiction over the claim would circumvent the domestic law suspending enforcement in the Ukraine. This application was heard and dismissed on 28 January 2011.
NAK again acknowledged service of the claim and stated an intention to defend. In the event no defence was served and accordingly MIC entered judgment in default on 28 February 2011. NAK now seeks to set aside that judgment and to have the claim struck out. The basis of this application is that in the meantime NAK had applied to the Supreme Commercial Court of the Ukraine for an order setting aside MIC's Ukrainian judgment from 2006 because of alleged newly discovered circumstances.
The new circumstances identified were said to be:
a) that on 11 February 2011 NAK had become aware that MIC had no legal standing or capacity to make the assignment in December 1998; and
b) that on 17 February 2011 NAK became aware that the underlying agreement with Gazprom was not signed by its purported signatory, Mr Klyuk, the Chairman.
On 7 April 2011 the Supreme Commercial Court granted NAK's application to cancel the Ukrainian judgment by reference to the first of these allegations, namely that MIC apparently lacked standing or capacity to enter into the assignment. The claim was remitted to the lower court for a retrial.
On 26 April 2011 MIC submitted its own application to the Supreme Court seeking leave to apply to the Supreme Court of the Ukraine by way of review by that court of the Supreme Commercial Court's decision. That application was dismissed on 31 May on the basis that, since the matter had not been ultimately resolved (given the new trial), the court had no jurisdiction. The next day, on 1 June 2011, MIC submitted an application to the Supreme Commercial Court itself seeking a review of the decision of 7 April also on the ground of newly discovered circumstances to the effect that on 5 May 2011 MIC had become aware that the document that NAK had submitted to the Supreme Commercial Court as being an excerpt from the Delaware Corporation Registry was incomplete and misleading. Further, material furnished by MIC was said to undermine the proposition that MIC lacked standing to make the assignment. This application has yet to be ruled upon.
The proceedings in the Ukraine
In a little further detail the sequence in the Ukrainian proceedings is as follows:—
a) NAK filed its petition for review of the judgment on the basis of newly discovered circumstances on 11 th February 2011. This was said to be based upon a memorandum received that very day from the Ukrainian lawyers that a review of the files of the case had led to the receipt of advice from a US law firm, together with an excerpt from the Delaware Corporation Registry. Such was said to reveal that MIC was "granted the status of good standing by upgrading from its lack of standing as late as 30 January 2002". Thus it was submitted there was reason to believe that MIC lacked sufficient legal capacity to make the assignment. The court was accordingly invited to cancel the judgment.
b) The petition was accompanied by a copy of a memorandum from the Ukrainian lawyers together with the extract from the Registry. This application was supplemented by a further petition dated 22 February. The application for review was accepted on 23 February and a date fixed for consideration of the application pending which the enforcement of the original judgment would be suspended.
c) MIC filed responsive submissions on 23 March 2011. This in effect made two points, albeit at some length. First, the material adduced did not satisfy the requirements of Article 112 of the Commercial Procedural Code of the Ukraine, and in particular that the threshold requirement that the material was not and "could not be known to the petitioner at the time of the hearing of the case". Secondly, evidence was adduced to support the contention that the lack of good standing of MIC only arose on 1 March 2001, and accordingly well after the assignment was executed.
Despite that vigorous opposition the Supreme Commercial Court on 7 April 2011 handed down its judgment. The court explained that by virtue of Art. 112 of the Ukrainian Code of Commercial Procedure a review of judgment could be legitimate where the new material adduced was available at the time of the trial so long as it contradicts the decision and both the petitioner and the court were unaware of it and could not have been aware of it.
It was accepted that NAK was not aware at the time of the trial of the new material that it had produced relating to the standing of MIC. As regards the submission of MIC that any review of the register would have revealed that the lack of good standing only arose after the assignment was executed, it appears to have been common ground that the Supreme Commercial Court as a cassation court was "not entitled to establish or deem established the facts". On this basis it was asserted that the court could only review a court decision based on newly discovered circumstances "when such review does not entail investigation of the factual information".
In the event the Supreme Commercial Court ruled that the first instance decision should be set aside and the case forwarded for a new trial. As already recorded, an application to appeal that order to the Supreme Court failed on 31 May 2011, it would appear, for want of jurisdiction. The further application to the Supreme Commercial Court filed next day which accuses NAK of having misled the Supreme Commercial Court and also praying in aid the European Convention on Human Rights (to which the Ukraine is a party) is still outstanding.
The question that now arises is whether in those circumstances the fact that the Ukrainian judgment has been set aside should be ignored by this court. It is of course NAK's submission that since the Ukrainian judgment has been set aside and a new trial has been ordered, there is no foreign judgment, let alone one which is final and conclusive, which can be recognised or enforced in England and that accordingly the proceedings should be set aside.
In response, it is MIC's position that this court should not recognise the decision of the Supreme Commercial Court of 7 April 2011. No other course, it is contended, would be consistent with public policy and/or with the duty upon this court under Section 6 (1) of the Human Rights Act 1998 not to act in a way which is incompatible with MIC's Convention rights. Furthermore it is submitted that the judgment in default is a "possession" of which MIC cannot unjustifiably be deprived under Article 1 of Protocol 1. In the alternative, even if the court were minded to have regard to the judgment, it should refuse to set aside the default judgment in its discretion under CPR Part 13.3.
Present application
The proceedings in this court took a somewhat unusual course. The hearing was set down for a half day (inclusive of submissions relating to an associated application for a fresh freezing order). In the event the argument on "public policy" as conducted by junior counsel for the parties occupied almost all the available time and the matter was adjourned (accompanied by a request by the court for a copy of the judgment of the Amsterdam Court of Appeal in ...
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