Yukos Capital S.a.r.L (a company incorporated in the Luxembourg) v OJSC Rosneft Oil Company (a company incorporated in the Russian Federation)

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMr Justice Hamblen
Judgment Date14 June 2011
Neutral Citation[2011] EWHC 1461 (Comm)
Docket NumberCase No: 2010 Folio 315 and 316
Date14 June 2011

[2011] EWHC 1461 (Comm)




Royal Courts of Justice

Strand, London, WC2A 2LL


Mr Justice Hamblen

Case No: 2010 Folio 315 and 316

Yukos Capital S.a.r.L (a company incorporated in the Luxembourg)
OJSC Rosneft Oil Company (a company incorporated in the Russian Federation)

Mr Gordon Pollock QC Mr Jonathan Nash QC and Mr James Willan (instructed by Byrne and Partners) for the Claimant

Mr Anthony Trace QC Mr Benjamin John and Mr Ciaran Keller (instructed by Travers Smith) for the Respondent


Hearing dates: 16,17,18,19 May 2011

Mr Justice Hamblen



1. The present proceedings concern the determination of two preliminary issues ordered to be tried by David Steel J in relation to the claims made by the Claimant (“Yukos Capital”) to enforce four arbitration awards issued on 19 September 2006 (the “Awards”).


2. The Awards were issued by a tribunal acting under the rules of the International Commercial Arbitration Court at the Chamber of Trade and Industry of the Russian Federation. The Defendant (“Rosneft”) is the universal successor to the rights and liabilities of the respondent to the Awards, OJSC Yuganskneftegaz, pursuant to an amalgamation that took place on 1 October 2006. The Awards were subsequently set aside by the Russian Arbitrazh Courts, in a series of decisions (the “Annulment Decisions”) which Yukos Capital contends were biased and pre-determined.


3. The amount of the Awards was about US$425 million, which was paid in August 2010 following enforcement proceedings in the Netherlands (the “Dutch enforcement proceedings”) in which the Amsterdam Court of Appeal determined in a judgment dated 28 April 2009 that the Annulment Decisions should not be recognised as they were the result of a partial and dependent judicial process. Yukos Capital now seeks to recover interest in respect of Rosneft's refusal to satisfy the Awards between 2006 and 2010. The interest claimed (at Russian Central Bank rate) amounts to over US$160 million.


4. The preliminary issues are:

(1) Whether Rosneft is issue estopped by the judgment of the Amsterdam Court of Appeal dated 28 April 2009 (the “Appeal Decision”) from denying that the judgments of the Russian civil courts annulling the arbitral awards were the result, or likely to be the result, of a partial and dependent judicial process; and

(2) The issues relating to Act of State/non-justiciability pleaded in Rosneft's Rejoinder (on the assumption that the facts pleaded in the Claimant's Reply are true) and whether paragraph 7(1) of Yukos Capital's Re-Amended Reply should be struck out.


General Background


5. Yukos Capital was a member of the Yukos Group, a well-known Russian group of companies involved in oil production and trading.


6. After the forced break-up of the Yukos Group in Russia, Rosneft acquired the majority of the latter's assets. At that time, Rosneft was wholly owned and controlled by the Russian government; it remains majority owned and effectively controlled by the Russian state.


7. The Awards relate to certain intra-group loans made between Yukos Capital and a (former) production subsidiary of Yukos (OJSC Yuganskneftegaz or “YNG”). By the time that the Awards were made, and the Russian Arbitrazh Courts came to consider them, YNG had been acquired by Rosneft as part of the re-nationalisation of Yukos' assets. The Arbitrazh Courts were therefore considering Awards which required Rosneft (then wholly state owned) to pay Yukos Capital (still controlled by Yukos and its shareholders) a sum in excess of US$400 million.


8. The Awards were claims in respect of loan agreements which YNG (under Rosneft's control) had accepted, before the arbitrators, were valid. The claims were that YNG had not repaid the loans and Yukos Capital sought repayment of the full capital amount and interest. The Tribunal found in favour of Yukos Capital.


9. The Awards were subsequently set aside by the Russian Arbitrazh Courts on Rosneft's application. The challenge was entertained notwithstanding the expiry of the 3 month period in which a challenge could be brought. The Awards were set aside on what Yukos Capital contends were the flimsiest of grounds including, for instance, that Yukos Capital had been permitted to amend its claim and that one of the arbitrators had spoken at a major conference of which Yukos' lawyers were co-sponsors. The decision to set aside the Awards was upheld on appeal, and permission to appeal to the Highest Arbitrazh Court was refused.


10. Yukos Capital contends that the Annulment Decisions should not be recognised by the English court because they were the product of a judicial process that was partial and dependent and therefore offend against English principles of substantial justice.


11. As Lord Lindley held in Pemberton v Hughes [1899] 1 Ch 781 at 790:

“If a judgment is pronounced by a foreign court over persons within its jurisdiction and in a matter with which it is competent to deal, English courts never investigate the propriety of the proceedings in the foreign court, unless they offend against English views of substantial justice”.


See also Dicey, Morris and Collins on Conflicts of Laws (14 th edition) Rule 45; Adams v Cape Industries Plc [1990] 1 Ch 433.


12. In the Dutch enforcement proceedings it has been determined that the Annulment Decisions were the result of a partial and dependent legal process. If, which is the subject of the first preliminary issue, Rosneft is issue estopped from contending otherwise then Yukos Capital contends that it will have essentially established that the Annulment Decisions should not be recognised.


13. If, however, there is no issue estoppel then Yukos Capital wishes to make good its case that the Annulment Decisions were the result of a partial and dependent legal process by reference to evidence to which objection is taken by Rosneft on the grounds of Act of State/non-justiciability. This is the subject matter of the second preliminary issue.


14. In outline, Yukos Capital relies, in part, on the alleged perverse application of Russian law within the Annulment Decisions themselves (Reply, paras. 7(2) to 7(5)), supported by the evidence of its Russian expert witness. But Yukos Capital also seeks to rely on various circumstances surrounding the Annulment Decisions. In particular it alleges:

(1) That there was, from December 2003, a concerted campaign against Yukos with the twin aims of destroying a political adversary (Mr Khodorkovsky) and re-nationalising strategic oil assets (i.e. the assets of Yukos), which involved unfair and partial judicial proceedings in which the courts were led by the executive in numerous respects (Reply, para. 7(6));

(2) That, in any event, there are numerous clear examples of the Russian Arbitrazh Courts treating Yukos Oil and companies associated with it unfairly, and manifestly misapplying Russian law. From that, it can be inferred that Yukos Capital did not receive a fair hearing in the proceedings leading to the Annulment Decisions (proposed amendment to the Reply, para. 6A and Annex 1);

(3) That Yukos is a matter of significant state interest and, in such cases, the judges of Russian Courts are susceptible to improper influences and pressure with the result that such cases are decided in the interests of the state rather than in accordance with the merits of the case (Reply, para. 7(1)).


15. Rosneft contends that each of the allegations in 14(1) to 14(3) above cannot be made because of the Act of State and/or non-justiciability principles (Rejoinder, paras. 6(1).ii and 6(3).i) and, also, that the allegation in 14(3) should be struck out as being too vague to be tried (Rejoinder, para. 6(1).i). It is those contentions which are the subject of the second preliminary issue.


(1) Issue Estoppel


The English proceedings


16. In the English proceedings Rosneft disputes the claims for interest on the grounds that the Awards have been set aside by the Annulment Decisions. In its Reply Yukos Capital contends as follows:

“5A. By a final and binding decision of the Amsterdam Court of Appeal dated 28 April 2009 between Yukos Capital and Rosneft, that Court held (as a necessary part of its decision) that the decisions of the Moscow Arbitrazh Court referred to in paragraphs 11 and 12, and the dismissal of the Claimants' appeals from those decisions referred to in paragraphs 13 and 14 were (alternatively, were likely to be) the result of a partial and dependant judicial process. Rosneft had submitted to the jurisdiction of the Dutch Courts by participating in the proceedings. That decision is to be recognised by this Court and gives rise to an issue estoppel binding upon Rosneft to that effect.

5B. Accordingly, those decisions were tainted by bias (actual or apparent); and/or were procured in circumstances contrary to natural justice and/or substantial justice; and/or were procured in circumstances which deprived the Claimant of a fair trial contrary to Article 6 of the European Convention on Human Rights.”


The Dutch enforcement proceedings


Proceedings at First Instance


17. Yukos Capital began the Dutch enforcement proceedings on 9 March 2007 by an application for “exequatur” (i.e. leave to enforce) under Articles 1075 (together with the New York Convention) and/or 1076 of the Dutch Civil Code of Procedure (“DCCP”). At that time, the Awards had not been set aside.


18. The proceedings were brought before the District Court of Amsterdam. On 24 May 2007 the District Court listed a hearing for 11 December 2007. Following the pronouncement of the Russian Annulment Decisions on 18 and 23 May 2007, Yukos Capital submitted a supplement to its application on 4 December 2007. On 7 December 2007, Rosneft submitted...

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