Yukos Capital S.A.R.L (a Company Incorporated in Luxembourg) v Ojsc Rosneft Oil Company (a Company Incorporated in the Russian Federation)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rix |
| Judgment Date | 27 June 2012 |
| Neutral Citation | [2012] EWCA Civ 855 |
| Docket Number | Case No: A3/2011/1790 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 June 2012 |
[2012] EWCA Civ 855
Lord Justice Rix
Lord Justice Longmore
and
Lord Justice Davis
Case No: A3/2011/1790
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION COMMERCIAL COURT
MR JUSTICE HAMBLEN
2010. FOLIO 315 and 316
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Grabiner QC and Mr Ciaran Keller and Mr Conall Patton (instructed by Travers Smith LLP) for the Appellant
Mr Gordon Pollock QC and Mr Jonathan Nash QC and Mr James Willan (instructed by Byrne and Partners LLP) for the Respondent
Hearing dates: Tuesday 20 th March 2012
Wednesday 21 st March 2012
Thursday 22 nd March 2012
Introduction
This is the judgment of the court, to which each of its members has contributed.
We are concerned in this appeal with arbitration and litigation on an international scale, but also with allegations which go to the heart of questions of the rule of law in a friendly foreign state.
The problem is this. A claimant, incorporated in Luxembourg but originally part of a Russian group, obtains a Russian arbitration award under a Russian contract against a Russian company, part of a Russian resources group now within majority Russian state ownership and control. At the time when the contract between the original parties was entered into, both parties had been members of the same Russian group, then in private hands. By the time the award is issued, however, the defendant company, to which the liability has passed by a process of universal company succession, is within Russian state control, while the claimant company has survived in private hands outside the state takeover. It is now said by the defendant company (but had not been said at the arbitration) that the contract under which the award had been made was part of an unlawful tax scheme operated by the original parties to the contract when they were associated companies within a single group.
Following the making of the arbitration award, there are proceedings in the Russian courts which lead to the setting aside of the award. The claimant contends that those judicial proceedings are a travesty of justice but typical of the campaign of state interference which has been waged by the Russian state.
The claimant seeks to enforce the award, despite its having been set aside by the courts of the country where it was made, in another foreign nation, namely The Netherlands, pursuant to the New York Convention.
The Dutch court at first instance refuses enforcement, on the ground that the award has been set aside in Russia; but on appeal in the Amsterdam court of appeal the award is recognised for enforcement, while the Russian court's decision setting aside the award is refused recognition. The refusal of recognition is on the ground that it can be inferred, from the general nature of the subservience of the Russian courts to state influence in matters of state importance, that the decision of the Russian court in setting aside the award was "partial and dependent", in other words was dictated by bias or intimidation. As a result the Russian award is enforced in The Netherlands. However, there remains an outstanding claim for post-award interest, albeit the award itself does not provide for post-award interest.
Meanwhile the claimant proceeds to England, where it also seeks to enforce the award and post-award interest, both pursuant to the New York Convention and at common law. Enforcement proceedings are therefore commenced in the commercial court in London.
The defendant says: the award has gone, it has been set aside by the Russian courts; and the allegations of bias which the claimant makes, or at any rate a large part of the claimant's case which is concerned to allege a conspiracy on the part of the Russian state to steal the assets of the private group to which the claimant company originally belonged, and ultimately to purloin the group itself, by forcing it into bankruptcy by unlawful tax demands and/or by buying its assets in rigged auctions, raises issues about the executive or administrative acts of a foreign sovereign within its own territory upon which the courts of England cannot adjudicate. That is said in reliance on the act of state doctrine, and/or on the associated doctrine of judicial abstinence, the doctrine of non-justiciability. The defendant also says that the award should in any event not be enforced in England because it wrongly gives effect to an unlawful scheme of fraudulent tax evasion.
The claimant says: the award has not gone, for the Russian courts' setting aside of the award was partial and dependent, as the Dutch court has correctly found in proceedings which in any event bind and estop the defendant under the doctrine of issue estoppel. As for the doctrines of act of state and of non-justiciability, they do not apply. The act of state doctrine does not apply because there is no attempt here to challenge the validity of any act of state. The doctrine of non-justiciability does not apply because the case is concerned with judicial standards, which are justiciable. As for the new allegation of unlawful tax evasion, that allegation is itself said to be part of the Russian state's unlawful campaign, with the assistance of the tax and judicial authorities, to strip and acquire control of the assets of the private group to which the claimant originally belonged.
In the commercial court, Hamblen J agreed with the claimant on two preliminary issues which are concerned with issue estoppel and the act of state doctrines. He held that the defendant is estopped by the decision of the Amsterdam court of appeal from saying that the Russian court's decision setting aside the arbitration award is not partial and dependent. The claimant therefore sees its way open to argue in England that there is no impediment so far as that Russian court decision is concerned to enforcing the award in England. He also held that there is no room in this case for the application of the doctrines of act of state or non-justiciability. Hamblen J's judgment is reported at [2011] EWHC 1461 (Comm), [2012] All ER (Comm) 479. The judge treated the two issues entirely separately, and determined the estoppel issue first.
On this appeal the parties have renewed their submissions below. Those submissions raise complex and intriguing issues. Thus what is the rationale of the act of state doctrine? Is it a narrow doctrine which requires the validity (as distinct from the lawfulness, morality or motives) of the foreign sovereign's acts to be impugned, or else requires some positive remedy to be sought from the English court which is predicated on an attack on those sovereign acts? Or is it a broader doctrine which prevents the English court "sitting in judgment" on those acts? Does the doctrine apply to judicial acts at all? How is it that the English court does appear regularly to consider the quality of justice in foreign states in cases concerned with the English long-arm statute and issues of forum non conveniens, or in cases concerned with extradition? How is it that the English court does regularly consider the persecutory acts of foreign sovereigns, both in the past and potentially in the future, in the context of cases concerned with claims to asylum? How do the act of state doctrines fit with the doctrine of estoppel, where there may be a conflict between rules of public policy? When, on a claim to enforce a foreign arbitration award, there is competing reliance on decisions of the state where the award was made and of another state where the award is taken for enforcement, and when issues of public policy may be said to be involved, should the English court be deciding any issue of public policy for itself, or should it be content to abide by the foreign courts' decisions, and if so, which one?
The awards
There are in fact four awards, made between Yukos Capital S.a.r.L ("Yukos Capital") as claimant and OJSC Yuganskneftegaz ("YNG") as respondent. They were issued by a tribunal acting under the rules of the International Commercial Court at the Chamber of Commerce of Trade and Industry of the Russian Federation. The defendant in these proceedings, in this court the appellant, OJSC Rosneft Oil Company ("Rosneft"), is the universal successor to the rights and liabilities of YNG, pursuant to an amalgamation that took place on 1 October 2006. The awards were made a little earlier, on 19 September 2006. The amount awarded by the four awards was about US$ 425 million, which has now been paid pursuant to Yukos Capital's enforcement proceedings in The Netherlands. However, Yukos Capital now seeks, in these further enforcement proceedings in England, to recover post-award interest, in the further sum of more than $160 million.
Yukos Capital was at one time a member of the Yukos Group, a well-known Russian group of companies involved in oil production and trading. I will refer to "Yukos" as the group, and to Yukos Capital as the claimant in the awards, the Dutch proceedings and these proceedings respectively.
After the forced break-up of Yukos in Russia, Rosneft acquired the majority of Yukos's assets. At that time Rosneft was wholly owned and controlled by the Russian state. It remains so owned and controlled, not wholly but by a majority. The break-up of Yukos and the acquisition of its assets by Rosneft has been referred to as the "re-nationalisation" of Yukos or its assets. However, Yukos Capital...
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