Yukos Capital Sarl v OJSC Rosneft Oil Company
| Jurisdiction | England & Wales |
| Judge | Rix,Longmore,Davis L JJ |
| Judgment Date | 27 June 2012 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 June 2012 |
Court of Appeal (Civil Division).
Rix, Longmore and Davis L JJ.
Lord Grabiner QC, Ciaran Keller and Conall Patton (instructed by Travers Smith LLP) for the appellant.
Gordon Pollock QC, Jonathan Nash QC and James Willan (instructed by Byrne and Partners LLP) for the respondent.
The following cases were referred to in the judgment:
Abidin Daver, The[1984] AC 398.
Abouloff v Oppenheimer & CoELR (1882) 10 QBD 295.
A-G v NissanELR [1970] AC 179.
AK Investment CJSC v Kyrgyz Mobil Tel LtdUNK [2011] UKPC 7; [2011] 1 CLC 205.
Al-Koronky v Time-Life Entertainment Group LtdUNK [2006] EWCA Civ 1123; [2007] 1 Costs LR 57.
A Ltd v B BankUNK [1997] ILPr 586 (CA).
AM Luther Co v James Sagor & CoELR [1921] 3 KB 532.
Arnold v National Westminster Bank plcELR [1991] 2 AC 93.
Banco Nacional de Cuba v Sabbatino (1964) 376 US 398.
Berezovsky v AbramovichUNK [2010] EWHC 647 (Comm); [2011] EWCA Civ 153; [2011] 1 CLC 359; [2011] 1 WLR 2290.
Blad v BamfieldENR (1674) 3 Swans 604; 36 ER 992.
Buck v A-GELR [1965] 1 Ch 745 (CA).
Buttes Gas and Oil Co v Hammer (No. 3)ELR [1982] AC 888.
Carl Zeiss Stiftung v Rayner & Keeler LtdELR [1967] 1 AC 853.
Cherney v Deripaska (No. 2)UNK [2008] EWHC 1530 (Comm); [2009] 1 All ER (Comm) 333; [2009] EWCA Civ 849; [2009] 2 CLC 408.
Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs, Government of PakistanUNK [2009] EWCA Civ 755; [2009] 2 CLC 84; [2010] UKSC 46; [2010] 2 CLC 793; [2011] 1 AC 763.
Duke of Brunswick v King of Hanover (1848) 2 HL Cas 1.
Empresa Exportadora De Azucar (CUBAZUCAR) v Industria Azucarera Nacional SA (IANSA) (The Playa Larga)UNK [1983] 2 Ll Rep 171 (CA).
Henderson v HendersonENR (1843) 3 Hare 100; 67 ER 313.
I Congreso del Partido, The[1983] 1 AC 244.
Jeyaretnam v MahmoodTLR (The Times, 21 May 1992).
Johnson v Gore Wood & CoELR [2002] 2 AC 1.
Kirkpatrick v Environmental Tectonics Corp International (1990) 493 US 400.
Korea National Insurance Corp v Allianz Global Corporate & Speciality AGUNK [2008] EWCA Civ 1355; [2008] 2 CLC 837.
Kuwait Airways Corp v Iraqi Airways Co (Nos. 4 and 5) [2001] CLC 262; [2003] 1 CLC 183; [2002] 2 AC 883.
Lucasfilm Ltd v Ainsworth [2011] UKSC 39; [2012] 1 All ER (Comm) 1011.
Mannington Mills Inc v Congoleum CorpECAS (1979) 595 F 2d 1287.
Mokbel v A-G for the Commonwealth of Australia [2007] FCA 1536; (2007) 244 ALR 517.
OAO Neftyanaya Kompaniya Yukos v Russia (Application No 14902/04) (2012 54 EHRR 19.
Oetjen v Central Leather Co (1918) 246 US 297.
Oppenheimer v CattermoleELR [1973] Ch 264 (CA); [1976] AC 249 (HL).
Oppenheimer v Louis Rosenthal & Co AGUNK [1937] 1 All ER 23 (CA).
Owens Bank Ltd v BraccoELR [1992] 2 AC 443.
Owens Bank Ltd v Etoile Commerciale SAWLR [1995] 1 WLR 44.
Pemberton v HughesELR [1899] 1 Ch 781.
Philippine National Bank v United States District Court (2005) 397 F 3d 768 (9th Cir).
Princess Paley Olga v WeiszELR [1929] 1 KB 718.
R v Bow Street Metropolitan Stipendiary Magistrate, ex parte Pinochet Ugarte (No. 3)ELR [2000] 1 AC 147.
R (on the application of Yukos Oil Co) v Financial Services AuthorityUNK [2006] EWHC 2044 (Admin).
Ricaud v American Metal Co Ltd (1918) 246 US 304.
Sennar, The (No. 2)[1985] 1 WLR 490.
Sharon v Time IncUNK (1984) 599 F Supp 538 (SDNY).
Skrine & Co v Euromoney Publications Ltd [2001] EMLR 16.
Underhill v Hernandez (1897) 168 US 250.
Voda v Cordis Corp (2007) 476 F 3d 887.
Voth v Manildra Flour Mills Pty LtdUNK (1992) 171 CLR 538.
Williams and Humbert Ltd v W&H Trade Marks (Jersey) LtdELR [1986] 1 AC 368.
Arbitration — Enforcement — Conflict of laws — Act of state — Estoppel — Preliminary issues — Russian arbitration awards against Russian company under loan agreements — Russian company passed into state ownership — Enforcement of arbitration awards in Netherlands and England — Awards set aside by Russian Arbitrazh courts — Loan agreements said to be part of illegal tax evasion scheme — Dutch court nevertheless enforced awards holding that Russian court decisions result of partial and dependent judicial process — Proceedings in England to enforce award and post-award interest — Act of state doctrine did not prevent investigation of or adjudication upon conduct of judiciary of foreign state — Act of state doctrine did not bar any part of claim — Dutch decision that Russian decisions partial and dependent not creating issue estoppel — Public policy different in each country — Defendant not estopped from denying that Russian court decisions partial and dependent.
This was an appeal by the defendant (Rosneft) from a judgment of Hamblen J ([2011] 2 CLC 129) deciding preliminary issues in favour of the claimant (Yukos).
Yukos was a member of a Russian group involved in oil production and trading. After the forced break up of the group in Russia, Rosneft, a state-owned company, had acquired the majority of its assets. Yukos obtained Russian arbitration awards under loan agreements with a former Yukos subsidiary which had been acquired by Rosneft.
Rosneft brought proceedings in the Russian Arbitrazh courts which led to the setting aside of the awards. Yukos contended that those judicial proceedings were a travesty of justice and the result of state interference.
Yukos sought to enforce the awards in the Netherlands, pursuant to the New York Convention, despite the fact that they had been set aside in Russia. The Dutch court at first instance refused enforcement, but the Amsterdam court of appeal recognised the awards and refused to recognise the Russian court decisions setting them aside, on the ground that the process had been “partial and dependent”.
Yukos also brought enforcement proceedings in England to recover post-award interest. Rosneft contended that the allegations against the Russian state were not justiciable and that enforcement would be contrary to public policy since the underlying intragroup loan agreements had been part of a scheme of fraudulent tax evasion. Yukos argued that the doctrines of act of state and of non-justiciability did not apply and that the decision of the Amsterdam court of appeal gave rise to an issue estoppel.
Hamblen J agreed with the claimant on two preliminary issues, holding that Rosneft was estopped by the decision of the Amsterdam court of appeal from saying that the Russian court's decision setting aside the awards was not partial and dependent; and that the doctrines of act of state and non-justiciability did not apply. Rosneft appealed.
Held, allowing the appeal on the estoppel issue:
1. The act of state doctrine did not prevent an investigation of or adjudication upon the conduct of the judiciary of a foreign state. Comity only cautioned that the judicial acts of a foreign state acting within its territory should not be challenged without cogent evidence. The act of state doctrine did not apply to allegations of impropriety against foreign court decisions, whether in the case of particular decisions or in the case of a systemic dependency on the dictates or interference of the domestic government. The courts were familiar with the standards by which to judge bias and other breaches of due process in the operation of courts and other tribunals. Judicial acts were not acts of state for the purposes of the act of state doctrine and there was no rule against passing judgment on the judiciary of a foreign country. (The Abidin DaverELR[1984] AC 398andAK Investment CJSC v Kyrgyz Mobil Tel LtdUNK[2011] UKPC 7; [2011] 1 CLC 205applied. Jeyaretnam v MahmoodTLR(The Times, 21 May 1992)andSkrine & Co v Euromoney Publications Ltd[2001] EMLR 16 disapproved.)
2. The act of state doctrine was not involved where the only issue was whether certain acts had occurred, not whether they were invalid or wrongful. In the present case, however, Yukos did not merely seek to show that certain events occurred (and did so in Russia and as a matter of state policy), but that such events were invalid, ineffective, wrongful, arbitrary, and directed by the hostile motive of a campaign of expropriation and wrongful imprisonment. (Kirkpatrick v Environmental Tectonics Corp International(1990) 493 US 400, A Ltd v B BankUNK[1997] ILPr 586 (CA)andBerezovsky v AbramovichUNK[2011] EWCA Civ 153; [2011] 1 CLC 359 considered.)
3. The act of state doctrine did not bar any part of Yukos's case. The essential issue was whether the annulment decisions should be recognised. That was a judicial question raised in respect of judicial acts. Yukos was entitled to seek to show that the annulment decisions were not worthy of recognition by the English court.
4. The issue decided in Holland was that the Russian judgments should not be recognised as a matter of Dutch public order and that was not the same issue as had to be decided in England. It made a great deal of difference whether the issue was being determined by reference to Dutch public order or English public order which was (or might well be) different. Thus Rosneft was not issue estopped from contradicting in England Yukos's assertion that the Russian courts' decisions, setting aside the awards in their favour, were partial and dependent. That was an issue which would have to be tried. (The Sennar (No. 2) [1985] 1 WLR 490 and AK Investment applied.)
1. This is the judgment of the court, to which each of its members has contributed.
2. 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.
3. 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...
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