Nikolay Viktorovich Maximov v Open Joint Stock Company "Novolipetsky Metallurgichesky Kombinat"
| Jurisdiction | England & Wales |
| Judge | Sir Michael Burton,JUDGE |
| Judgment Date | 27 July 2017 |
| Neutral Citation | [2017] EWHC 1911 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2014-337 CL-2014-658 |
| Date | 27 July 2017 |
[2017] EWHC 1911 (Comm)
Sir Michael Burton
(sitting as a Judge of the High Court)
Case No: CL-2014-337 CL-2014-658
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Paula Hodges QC and Dominic Kennelly (instructed by Herbert Smith Freehills LLP) for the Claimant
Michael Brindle QC, Ciaran KellerandThomas Munby (instructed by Debevoise & Plimpton LLP) for the Defendant
Hearing dates: 19–22 and 26–27 June, and 3–4 July 2017
This has been an application to enforce an award of the International Commercial Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation ('ICAC') made by three distinguished Russian arbitrators, IS Zykin as Chairman, VS Belykh and KI Devyatkin (by a majority, but the dissent was in a minor, and in the event immaterial, respect only as to approximately 1% of the quantum) in the sum of RUB 8,928,001,875.70 plus interest. The Award was set aside by an order by Judge N.V. Shumilina of the Moscow Arbitrazh (i.e. Commercial) Court on 21 June 2011, which was upheld on appeal by the Federal Arbitrazh Court of Moscow District ('FAC') on 10 October 2011, and permission to appeal was refused on paper by the Supreme Arbitrazh Court of the Russian Federation ('SAC') on 30 January 2012. The Claimant seeks its enforcement, notwithstanding, by this Court, pursuant to the New York Convention, and at common law.
The Claimant, represented by Paula Hodges QC and Dominic Kennelly, submits that this Court should not recognise the Russian court judgments setting aside the Award. The Defendant, represented by Michael Brindle QC, Ciaran Keller and Thomas Munby, has raised the doctrine of ex nihilo nihil fit, whereby if the award has been set aside then there is nothing to enforce. Although Mr Brindle has set out his stall in respect of the latter doctrine, which has some academic, but no material, if any, UK judicial, support, the submissions and the evidence have revolved around the central question of recognition of the Moscow court judgments, with which this Judgment will be primarily concerned. There has not been a great deal of dispute between the parties as to the proper test for me to apply, on any basis a high hurdle for the Claimant to surmount, before refusing to recognise the judgment (upheld on appeal) which set aside the award. There was no evidence in the case of actual bias, but I am asked to infer bias from the perverse nature of the Russian court's conclusions (and in certain respects the manner in which they were arrived at). Effectively the test is whether the Russian courts' decisions were so extreme and incorrect as not to be open to a Russian court acting in good faith.
The Award arose out of a Share Purchase Agreement dated 22 November 2007 ('the SPA') whereby the Defendant agreed to acquire 50% plus one share of the Claimant's holding in OJSC Maxi-Group ('Maxi-Group') on the basis of a purchase price calculated in accordance with clauses 3 (the parties had elected for Transaction B of two possible routes) and 4 of the SPA. Maxi-Group was a Russian company founded by the Claimant, which carried on a substantial metallurgical business in Russia. There was dispute as to the calculation of the purchase price, which was resolved by the Arbitrators: the Defendant had put in a counterclaim alleging fraud and breach of contract very late in the course of the arbitration, indeed after the conclusion of three oral hearings, but the Arbitrators, giving full reasons for their decision ruled that out:-
" No less important is the fact that during this long period the Company, being the controlling shareholder of the Issuer, had sufficient opportunity to discover all the circumstances affecting the Purchase Price for the Shares and to provide such circumstances in due course during these arbitration proceedings.
If any violations of the Company's rights as a buyer took place due to any actions or omissions on the part of the Individual as seller, the buyer is still entitled to file the corresponding claims according to the law and the agreement and seek legal recourse to protect its civil rights (article 12 of the RF CC). This however, does not exempt the buyer from an obligation to pay the purchase price if such an obligation was not duly performed. Thus, the seller is entitled to demand timely performance of said obligation.
The Company had the opportunity to make a counter-claim to defend its rights during this arbitration proceedings, however it did not use it. Moreover, the Company still has the procedural ability to file a claim on these grounds within separate proceedings.
Under the given circumstances the arbitrators find no grounds to satisfy the motion to suspend the proceedings.
Given the above …….the arbitrators rule as follows:
1. To not allow the Company to amend its counter-claim and its statements in relation to the initial claim, given the delay;
2. To dismiss the Company's motion to suspend arbitration hearings in the present case;
3. Taking into account the stage of the proceedings and conclusions of the arbitrators regarding submissions made by the Parties upon conclusion of the oral hearings, to dismiss any additional submissions of the Parties on the issues reviewed in this ruling."
The Award was issued, after the three oral hearings in June, September and October 2010 (all prior to the belated counterclaim in February 2011), on 31 March 2011. Meanwhile:
(1) The Defendant had issued a claim in the Moscow Arbitrazh Court on 16 March 2011 that the SPA was null and void on the basis that it was procured by fraud: this was challenged by the Claimant on the basis of the arbitration clause in the SPA, which was upheld at first instance by the Arbitrazh Court ('the jurisdiction challenge').
(2) The Defendant applied to ICAC that the Arbitrators should be recused on grounds of their delay, which was first rebutted by the Arbitrators and then refused by the ICAC Presidium on 30 March 2011, the day before rendition of the Award.
The Defendants appealed such decision on 6 April to the President of the Chamber of Commerce and Industry of the Russian Federation ('CCI') (refused on 8 June 2011, because the Award had been rendered and they regarded themselves as functus) and on 7 April applied to the Arbitrazh Court to set aside the Award, based, by way of addition to the fraud case, on the ground that two of the Arbitrators had failed to disclose links to the expert witnesses whose written reports were submitted in the arbitration by the Claimant (the 'Non-Disclosure Ground').
The hearing of the set aside application in the Arbitrazh Court before Judge Shumilina (after a preliminary hearing and the lodging by the parties of substantial written submissions) was heard on 21 June 2011. Judge Shumilina had had other hearings on that day starting at 10.45. The hearing of the Defendant's application, and there were 12 cross motions, began at 5pm and lasted 5 hours. Judge Shumilina delivered, as she was obliged at Russian law to do, an immediate decision orally; she set aside the Award, and her written reasons for doing so were delivered on 28 June.
Judge Shumilina gave in her written reasons three grounds for setting aside the Award, only one of which, the Non-Disclosure Ground, had been raised or relied upon by the Defendant. The other two grounds, which had not been raised by her during the hearing and had consequently not been the subject of any argument, were the 'Public Policy Ground' and the 'Non-Arbitrability Ground'. She rejected the second ground which had been relied upon by the Defendant, based upon alleged fraud by the Claimant.
Judge Shumilina's judgment was upheld by the FAC (and the cross-appeal by the Defendant dismissed) on 26 September 2011, written reasons being delivered on 10 October. The Claimant appealed to the SAC, which refused permission on paper by a judgment dated 30 January 2012.
Meanwhile the Defendant's appeal against the earlier upholding by the Arbitrazh Court of the Claimant's jurisdiction challenge, based upon the arbitrability of the Defendant's fraud case, was allowed on 4 July 2011, following Judge Shumilina's recent judgment, and there were unsuccessful appeals by the Claimant and eventually on 7 April 2014 a decision by the Arbitrazh Court setting aside the SPA, itself unsuccessfully appealed by the Claimant. If the Claimant cannot therefore enforce the Award in his favour, he has no route to seek to recover the unpaid purchase price by any other means, the Russian courts having set aside the SPA itself. The Defendant did seek to raise allegations of fraud against the Claimant in this application, but they were withdrawn.
There have been other legal actions between the parties, among others reciprocal criminal complaints, including a criminal complaint by the Defendant sought to be revived against the Claimant only very recently, two applications by the Claimant to the Constitutional Courts of the Russian Federation (the effect to which is very much in dispute between the parties, and I am unable to resolve that dispute so as to derive any assistance from them for the purpose of this hearing), and applications to the European Court of Human Rights by the Claimant, but none of these in the event are now material to my decision. In addition, the Claimant applied successfully to the Tribunal de Grand Instance of Paris to enforce the award, which decision was unsuccessfully appealed by the Defendant to the Paris Court of Appeal; and the Claimant also applied to the Amsterdam District Court for enforcement in the Netherlands, which refused enforcement: the Claimant's appeal to the Amsterdam...
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