Norsk Hydro ASA v The State Property Fund of Ukraine and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Gross |
| Judgment Date | 18 October 2002 |
| Neutral Citation | [2002] EWHC 2120 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2002/441 |
| Date | 18 October 2002 |
The Honourable Mr Justice Gross
Case No: 2002/441
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Paul Walker QC & Alan Maclean (instructed by Reed Smith Warner Cranston) for the Claimant
Guy Philipps QC (instructed by White & Case) for the Second Defendant
Hearing dates: 25 September 2002 & 11 October 2002
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Gross
Introduction
There is before the Court an application by The Republic of Ukraine ("Ukraine"), to set aside:
(1) The order made (without notice) by Morison, J. on the 29 th April, 2002 ("the Morison order") and the judgment entered pursuant thereto;
(2) The interim third party debt order made (without notice) by Andrew Smith, J., on the 13 th September, 2002 ("the Smith order").
For present purposes, the background can be shortly and neutrally summarised. Contracts were entered into for the development of the Hydro TIS Yuzhny Terminal, in the Ukraine ("the terminal"). The relationship between the various owners of the terminal was governed by the Owners' Agreement dated 19 th April, 1996 ("the OA"). Disputes arose and, it was said, in effect, by the Claimant ("NH"), that it had been wrongly expelled from the venture; in short, its interest in the terminal had been expropriated. Pursuant to cl. 20 of the OA (to which I shall come), NH commenced arbitration proceedings. The nature of NH's complaint appears from paragraph 1 of its Request for Arbitration ("the Request for arbitration"):
"On 19 April 1996 Hydro and the Respondents, as well as the European Bank for Reconstruction and Development, signed the Owner's Agreement (the "Agreement") regulating the relationship between the owners of Transinvestservice, a company with limited liability incorporated under the laws of Ukraine. …. The purpose of the Agreement is to regulate Hydro's role in Transinvestservice and the operation of Transinvestservice. For example, in Article 4 of the Agreement the owners of Transinvestservice recognise and acknowledge the leading role to be played by Hydro in Transinvestservice.Article 3 of the Agreement sets forth certain undertakings made by the owners of Transinvestservice with respect inter alia to licences, permits and approvals required for the operation of the Yuzhny II terminal near Odessa, Ukraine.
The Respondents have in various ways breached their obligations under the Agreement, inter alia by attempting to oust Hydro as an owner of Transinvestservice and has thereby caused damage to Hydro. In this arbitration, initiated pursuant to Article of 20 of the Agreement, Hydro will seek compensation for such damage."
The OA provided, so far as material, as follows:
"This Owners' Agreement … is made on 19 April 1996, between
1. Norsk Hydro a.s, a company with limited liability incorporated under the laws of Norway and having its principal offices in Oslo, Norway (hereinafter referred to as "Hydro");
2. The State Property Fund of Ukraine, being an agency of the Government of Ukraine and having its principal offices in Kiev, Ukraine (hereinafter referred to as the "State Property Fund");
3. Concern Primorsky, a concern organised and incorporated under the laws of Ukraine and having its principal office in Odessa, Ukraine (hereinafter referred to as "Primorsky"); and
4. Alpex, a joint venture company organized and incorporated under the laws of Ukraine and having its principal office in Odessa, Ukraine (hereinafter referred to as "Alpex");
5. Colorado Financial Incorporated, a company organised and existing under the laws of the State of Nevada, United States of America, with its principal offices in Odessa, Ukraine (hereinafter referred to as "Colorado");
6. European Bank for Reconstruction and Development (hereinafter referred to as "EBRD")
…
"Owners" shall mean Hydro, EBRD, the State Property Fund, Colorado, Primorsky and Alpex, individually or together, and any other party holding Shares in the Company, and "Owner" shall mean any one of them;
…
2. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Owner hereby represents, warrants and covenants to the other Owners that:
(i) it is a separate legal entity and has all requisite corporate and other power and authority to enter into this Agreement and to carry out the transactions contemplated by this Agreement, and that it is duly established, organised and validly existing under the laws of its jurisdiction of incorporation or, in the case of the EBRD, under international law;
(ii) All proceedings required to be taken by it to authorize the execution, delivery and performance of this Agreement by it have been properly taken, and this Agreement constitutes its valid and binding obligations, enforceable against it in accordance with it terms …..
….
18. WAIVER OF IMMUNITY
To the extent that any Owner other than the EBRD enjoys sovereign and/or diplomatic immunity, such Owner hereby irrevocably and unconditionally waives all such immunity, including, but not limited to, immunity from the jurisdiction of any court of law in respect of any injunction, arrest or attachment of any property, whether before or after the rendering of any award, and with respect to the execution of any award."
Interposing here, the EBRD did not waive immunity, as was further made clear by cl. 19 of the OA.
"20. APPLICABLE LAW AND DISPUTES
This Agreement shall be governed by and construed in accordance with the substantive laws of Sweden.
Any dispute, controversy or claim arising out of or in connection with this Agreement or the breach, termination or invalidity thereof which cannot be amicably resolved, shall be finally settled by arbitration in accordance with the UNCITRAL Arbitration Rules, with the Stockholm Chamber of Commerce as appointing authority. The arbitral tribunal shall be composed of three arbitrators, it being agreed that all three arbitrators shall be appointed by the Stockholm Chamber of Commerce. The place of arbitration shall be Stockholm, Sweden."
I have already referred to paragraph 1 of the Request for Arbitration. In the Request, the Respondents were described as follows:
" Respondents:
1. The Republic of Ukraine, represented through the State Property Fund of Ukraine (the "Republic")
18/9 Kutuzov St. 252001, Kiev, Ukraine
2. Concern Primorsky ("Primorsky")
49 Suvorova Str., 270026 Odessa, Ukraine
3. Alpex joint venture company ("Alpex")
9 Kateryninska Str., 270026 Odessa, Ukraine
4. Colorado Financial Incorporated ("Colorado")
25 Risheljevskaja Str., 270026 Odessa, Ukraine"
Paragraphs 2 and 3 were in the following terms:
"2.Preliminary Statement of Relief claimed by Hydro
Hydro will ask the arbitral tribunal—to be appointed—to confirm that Respondents have breached their obligations under the Agreement and will ask the tribunal to order the Respondents to pay compensation for damages caused by Respondents. Hydro's prayers for relief will be set forth in detail in the Statement of Claim to be submitted pursuant to Article 18 of the UNCITRAL Arbitration Rules.
3.Appointment of arbitrators
Pursuant to Article 20 of the Agreement all three arbitrators are to be appointed by the Stockholm Chamber of Commerce. Hydro has today requested the Stockholm Chamber of Commerce to make such appointments …"
I come next to the Arbitral Award, dated Stockholm, 20 th March, 2000 ("the award"). The award recites the parties as follows:
" Claimant:
Norsk Hydro ASA ….
Respondents:
1. The Republic of Ukraine, through the State Property Fund of Ukraine, 18/9 Kutuzov Street, 252001 KIEV, Ukraine
2. Concern Primorsky, 49 Suvorova Street, 270026 ODESSA, Ukraine
3. Alpex Joint Venture Company
4 Colorado Financial Incorporated"
The proceedings were characterised by participation on the part of NH but non—-participation by the Respondents. So far as concerns the first Respondent to the arbitration, "The Republic of Ukraine, through the State Property Fund of Ukraine", all communications were addressed to the address of the State Property Fund ("the SPF"). The SPF did not participate in the arbitration, save to contest jurisdiction on the ground of a signature point (which does not require elaboration on this occasion). No other jurisdictional issue was raised. Save insofar as these communications to the SPF and this participation on the part of the SPF count as communication to and participation of Ukraine, it was not involved at all in the arbitration. The tribunal recorded the position of the parties as follows:
"1. Claims
Hydro requested the Arbitral Tribunal
(a) to confirm that the Respondents are in breach of the Owners' Agreement, through the breach of their contractual duty of good faith under that Agreement;
(b) to confirm that the Respondents are in breach of Section 4 of the Owners' Agreement;
(c) if the Tribunal were to find that the Owners' Agreement had been improperly executed by the Respondents, to confirm that the Respondents are in breach of Sections 2(i) and 2(ii) of the Owners' Agreement;
(d) to order the Respondents to pay, jointly and severally, USD 21,260,000 plus interest pursuant to the provisions of the Swedish Interest Act (rantelagen) from the date of the Award; and
(e) to order the Respondents to pay, jointly and severally, Hydro's costs incurred in connection with these proceedings, including legal fees and compensation to the arbitrators, plus interest on such amount.
At the main hearing, Hydro reduced its claim under (d) above, from USD 21,260,000 to USD 20,000,000 plus interest.
The Respondents did not participate in the...
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