Public Joint Stock Company (“Rosgosstrakh”) v Starr Syndicate Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Moulder |
| Judgment Date | 17 June 2020 |
| Neutral Citation | [2020] EWHC 1557 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2018-000102 |
| Date | 17 June 2020 |
[2020] EWHC 1557 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
THE HONOURABLE Mrs Justice Moulder
Case No: CL-2018-000102
Mr Akhil Shah QC and Mr Richard Blakeley (instructed by Temple Bright LLP) for the Claimant
Mr Michael McParland QC and Mr Samar Abbas Kazmi (instructed by Clyde & Co LLP) for the Defendant
Hearing dates: 12 and 13 May 2020
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.
THE HONOURABLE Mrs Justice Moulder
This is the reserved judgment on the claimant's application for summary judgment on its claim for recognition and enforcement of three judgments obtained in its favour in the Russian courts in 2015 and 2016 (the “Summary Judgment Application”). The main judgment obtained relates to a policy of reinsurance (the “Reinsurance Policy”) which was written by the defendant reinsurers (with others, together the “reinsurers”) for JSC Kapital Insurance (“Kapital”) which had written a policy (the “Insurance Policy”) in favour of Sukhoi Civil Aircraft Company (“Sukhoi”). The two further judgments relate to interest and costs.
The claimant is PJSC Insurance Company “Rosgosstrakh” (“RGS”) which it is accepted, has succeeded to the benefit of the judgments of which recognition and enforcement are sought.
The hearing was held remotely in light of Covid-19 but the court had the benefit of lengthy written submissions as well as oral submissions from leading counsel on each side.
The application was supported by two witness statements of Mr Smirnov, the lawyer having conduct of the litigation for the claimant, dated 5 November 2019 and 3 April 2020 and two expert reports of Professor Roman Bevzenko dated 5 November 2019 and 3 April 2020.
In response the defendants have filed witness statements of Mr Ninkovic, Head of Claims, Specialty, at Brit Syndicates Limited dated 14 February 2020, and Mr Lawson dated 5 May 2020. The defendants also rely on expert reports from Mr Karabelnikov dated 13 February 2020 and from Dr Labin dated 14 February 2020.
Although it is an application for summary judgment, the Court notes that the bundle of evidence ran to some nine lever arch files with five further lever arch files of authorities.
Background
At the relevant time Kapital was a subsidiary of RGS. RGS was originally a state-owned insurance company and around 2005 – 2006 control of the RGS group of companies passed to Mr Denil Khachaturov (“Mr Khachaturov”) and his associates (paragraph 37 – 41 of the witness statement of Mr Ninkovic).
According to the defendants' evidence, in about December 2016 RGS was in severe financial difficulties and Mr Khachaturov was forced to transfer control and ownership of RGS to Otkritie FC Bank. In August 2017 the Central Bank of Russia took over the administration of Otkritie effectively nationalising RGS and the other companies in the RGS group including Kapital (paragraph 42 of the witness statement of Mr Ninkovic).
Sukhoi is an aircraft manufacturer and a division of PJSC United Aircraft Corporation, the aerospace and defence conglomerate that is majority owned by the Russian State (paragraphs 12 – 17 of the witness statement of Mr Ninkovic).
The Insurance Policy was entered into in respect of the period 1 January 2012 – 31 December 2012 and covered four specific aircraft part of the Superjet programme. It is the defendants' case that the development of the Sukhoi Superjet-100 was part of a development project which was being supported by the Russian Ministry of Industry and Trade. One of the aircraft crashed in 2012 killing all 45 people on board. This led to a claim under the Insurance Policy both in respect of the Hull “All Risks” section and the Third-Party Legal Liability cover.
Although Kapital initially resisted payment to Sukhoi it did make payment under the Insurance Policy and then sought an indemnity under the Reinsurance Policy.
The Reinsurance Policy provided under the heading “Interest”:
“To indemnify the Reinsured in respect of a Policy or Policies issued by them to the Original Insured as follows:-
Section 1
1) Hull All Risks: covering against all risks of physical loss of or damage.
2) Aircraft legal liability.
arising from the test flights of Sukhoi Superjet 100 aircraft following production, as original.”
Under the heading “Original Conditions” it stated:
“Uses: Test and Certification flights”
It is the defendants' case that the Reinsurance Policy also expressly incorporated AVN1C which excludes liability where the aircraft is being used for any illegal purposes or for any purpose other than the purpose stated in the schedule to the Reinsurance Policy and AVN41A under which it is a condition precedent that no amendment to the terms and conditions of the original insurance policy is binding unless prior agreement has been obtained from the reinsurers. Under the Heading “Conditions” it stated:
“Reinsurance Underwriting and Claims Control Clause AVN41A (excluding rate and retention) and with notice of loss within seven days”
and under the heading “Original Conditions” the relevant paragraph stated:
“Original Policy Wording includes the following: –
Original Policy Number: 01-004- 000 or 04
Section 1
Original policy as per AVN1C”
Around December 2012 the reinsurers were presented with a Hull claim for approximately US$32 million. At that stage all but two of the reinsurers refused to accept the claim on the basis that the accident flight did not fall within the Reinsurance Policy. The reinsurers refused to pay out on the Reinsurance Policy on the basis that the flight in question was a demonstration flight which was outside the scope of the cover which the reinsurers said was limited to “test and certification flights” in accordance with the conditions of the Policy. The defendants took the view that Kapital's amendment of the original insurance policy to remove any limitation to test and/or certification flights was not binding on the reinsurers unless their prior agreement had been obtained.
The Reinsurance Policy contained the following choice of law and jurisdiction clause:
“This reinsurance shall be governed by and construed in accordance with the law of Russia and each party agrees to submit to the exclusive jurisdiction of the Courts of Russia.”
In May 2013 Kapital commenced proceedings in relation to the issue of liability in respect of the Hull “All Risks” section of the Reinsurance Policy in the courts of a town in Siberia where RGS had its registered office, that is the arbitrazh court of the Khanty-Mansi Autonomous region — Yugra (the “KM Court”).
On 9 September 2013 Mr Khachaturov sent a letter to the CEO of each of the non-paying insurers. It included the following:
“we would like to mention here that our group and our client have made the decision to initiate PR-campaign within the players of the Russian insurance/reinsurance market. The aim of that campaign is to inform other players about the named reinsurers breaking of contractual obligations. The campaign is going to take place in mass media as well as in the insurance and reinsurance pools and unions where our group is represented.
We are going to reconsider our cooperation with the nonpaying companies and groups which they represent as we cannot be sure they will be ready to support us on future claims. Our lawyers investigate the possibility of putting the arrest on the reinsurers' assets in Russia if any exist”
On 19 September 2013, one of the reinsurers, Allianz, decided to settle the claim under the Reinsurance Policy and on 4 November 2013, another reinsurer, AIG, also decided to settle the claim.
Moscow Actions
The defendants brought actions against Kapital in the Moscow Arbitrazh Court to recoup advances paid to Kapital under the legal liability section of the Reinsurance Policy. The first action (the “First Moscow Action”) brought by certain of the defendants was heard before Judge Larina and judgment was given in December 2014. Before Judge Larina Kapital did not dispute that the crash took place during a demonstration flight. Judge Larina found that the relevant reinsurers had the right to return of the funds since “the parties have defined that insured events under the contract can only be test flights” and also “taking into account” that the plane crash took place during a demonstration flight.
An appeal by Kapital to the Ninth Arbitrazh Appeal Court in Moscow was rejected in April 2015. A further appeal to the Moscow Regional Arbitrazh Court was rejected in July 2015.
The second action brought by the other defendants (the “Second Moscow Action” and together with the First Moscow Action, the “Moscow Actions”) was heard by Judge Ponomareva who found in...
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