The Yukos saga is a gift that keeps on giving.
Following the nationalisation of Yukos in 2007, former shareholders commenced a number of arbitral proceedings against Rosneft, which acquired Yukos’ assets, and Russia.
Many readers of the blog will know that the English courts have already dealt with an aspect of the Yukos saga. The arbitrations against Rosneft were seated in Russia. The arbitral tribunals decided in favour of the claimants. The awards were set aside in Russia. Nevertheless, the award creditors tried to enforce the awards in the Netherlands and England. The Dutch courts refused to recognise the Russian settings aside. In 2012, the Court of Appeal of England and Wales held that the foreign act of state doctrine did not apply to allegations of impropriety against foreign court decisions and that the Dutch judgment did not create an issue estoppel in England because the issues raised in the Dutch and the English proceedings were not the same (violations of Dutch and English public policy, respectively).
Cockerill J has now dealt with another aspect of the saga. The arbitration against Russia was commenced under the Energy Charter Treaty and was seated in the Netherlands. The arbitral tribunal (Yves Fortier as Chairman, Charles Poncet, and Stephen M Schwebel) ordered Russia to pay USD50bn to the claimants plus compound interest accruing at around USD2.5m a day. Russia tried to set aside the arbitral award, while the award creditors tried to enforce it in England. The Hague Court of Appeal rejected Russia’s challenges that the tribunal did not have jurisdiction and that there was fraud in the arbitration. The Dutch Supreme Court upheld the Court of Appeal’s ruling regarding the jurisdictional issue but held that the Court of Appeal had erred with respect to the fraud issue. The judgment was quashed and returned to the Court of Appeal for further consideration and decision. Did the Dutch judgments create an issue estoppel in England regarding the jurisdictional issue? Cockerill J answered the question positively in her judgment of 1 November 2023 in Hulley Enterprises Ltd v Russia.
There were four issues before the court: 1) can a foreign judgment against a state create an issue estoppel; 2) did the Dutch judgments satisfy the requirements for recognition from section 31 of the Civil Jurisdiction and Judgments Act 1982; 3) were the issues in the Dutch and English proceedings the same; and 4) were the Dutch judgments res judicata regarding the jurisdictional issue?
It may be surprising to hear that there was no clear authority on whether a foreign judgment against a state can create an issue estoppel. The court found that under common law there was ‘no reason why, if the relevant hurdles are cleared, there cannot be an issue estoppel arising out of a foreign judgment against a state, just as there can be against an ordinary company or individual’ ([48]).
Section 31(1)(b) of the Civil Jurisdiction and Judgments Act 1982 provides that a foreign judgment against a state can be recognised and enforced in England only if the court of origin would have had jurisdiction in the matter if it had applied rules corresponding to those applicable to such matters in the United Kingdom in accordance with the State Immunity Act 1978. ‘In other words: you can enforce/recognise a judgment here, but only if you could have got it here.’ ([42]) Section 2 of the 1978 Act provides that submission to jurisdiction is an exception to immunity. Russia submitted to the jurisdiction of the Dutch courts by challenging the award there.
The issues in the Dutch and English proceedings were the same, namely the validity of the arbitration agreement.
After hearing from experts on Dutch law, the court found that the Dutch judgments were res judicata regarding the jurisdictional issue, even if the Supreme Court had quashed the part of the Court of Appeal judgment dealing with the fraud issue and returned it to the Court of Appeal.
The outcome is that:
a particular legal battle has already been fought out fully between the parties. The RF chose to dispute jurisdiction, including the construction of Article 45 ECT, in the Netherlands. It has..had a determination, and cannot seek to have another one before a different court. ([55])
Consequently, the court dismissed the jurisdictional challenge to the enforcement of the arbitral award and, furthermore, stated that Russia was not immune as respects proceedings in the courts of the United Kingdom which relate to the arbitration pursuant to section 9 of the 1978 Act.
The Dutch and English courts are yet to deal with the fraud issue. The next chapter of the Yukos saga is eagerly awaited.
Fair enough, but you have to wonder why The Sennar (No 2) did not provide three quarters of the answer: the plea that ‘You chose to join issue on the validity of the dispute resolution agreement before the Dutch courts and now you are liable to be stuck with the result’ is hardly a novel one. The construction and application of s 31 was dead easy, and the outcome was inevitable so long as the judge could discern finality in the rather curious decisions and disposals by the Dutch court. With the benefit of expert evidence she had no real difficulty with that either. 123 paragraphs of judgment seems a bit on the long side, but there it is.
Thank you, Adrian. I agree with your comments. The issues raised were relatively easy, especially in comparison with those decided by the Court of Appeal in 2012. I have found the case interesting because it illustrates the interplay between the recognition of foreign judgments and the enforcement of arbitral awards quite well. And, of course, the amount of the award given against Russia is unbelievably high and will possibly (assuming the fraud defence is rejected) lead to more interesting judgments on state immunity.
Indeed. Where you see interplay, I think I may see something slightly different. For if the basis for recognition of foreign judgments is the obligation arising from the losing party’s agreement with the counterparty to accept the jurisdiction of the foreign court and abide by its adjudication, and if the basis for recognition of the award is the obligation arising from the agreement to resolve the dispute by arbitration and act in accordance with the award of the tribunal, there is so much in common that it would be surprising if the differences were other than incidental or marginal. The case of presence as a basis for the recognition of judgments requires only a small amount of analysis to accommodate it within this general pattern; but the result is that the conventional separate and distinct treatment, in our teaching, of judgments and awards obscures that which ought to be made clear.
That is a valid point from the perspective of English law. But arbitration is a very international phenomenon and the laws of many countries do not allow for such conflation of foreign judgments and arbitral awards. That is why I believe it is sensible to talk about the interplay between the two.