Russia / 13 September 2011 / Russia, Presidium of the Highest Arbitrazh Court of the Russian Federation / Stena RoRo AB (Sweden) v OAO Baltiysky Zavod (Russia) / A56-60007/2008
Country | Russia |
Court | Russia, Presidium of the Highest Arbitrazh Court of the Russian Federation |
Date | 13 September 2011 |
Parties | Stena RoRo AB (Sweden) v OAO Baltiysky Zavod (Russia) |
Case number | A56-60007/2008 |
Applicable NYC Provisions | V | V(1)(a) | V(2)(b) |
Source | http://kad.arbitr.ru (register of decisions of the RF arbitrazh courts) |
Languages | English |
Summary | On 24 September 2008, an arbitral tribunal at the Stockholm Chamber of Commerce (SCC) seated in Stockholm (Sweden) rendered an award ordering the Russian company Baltiysky Zavod to pay the Swedish company Stena RoRo EUR 20,000,000 in damages for non-performance of four ship-building contracts, as well as arbitration costs and expenses, with accrued interest. The first instance court (Arbitrazh Court of Saint-Petersburg and the Leningrad Region) refused to recognize and enforce the award on the following grounds: (1) the enforcement of the award against Baltiysky Zavod, which is a strategic company managed by the State, could lead to the company’s bankruptcy and be detrimental to the sovereignty and security of the State, and would therefore be contrary to the public policy of the Russian Federation; and (2) the dispute settled in the arbitration was not contemplated by the arbitration clause as the latter was contained in the contracts that did not enter into force because the decision of the board of directors of the Swedish company approving the ship-building contracts was not vested in the form required under Russian law. According to the first instance court, the failure to provide its Russian counterparty with the minutes of the meeting of Stena RoRo’s board of directors constituted a violation of the principle of equality of parties in civil law relationships, which is one of the fundamental principles of Russian law. Hence, the enforcement of the award would be contrary to the public policy of the Russian Federation. The court of cassation (the Federal Arbitrazh Court for the North-Western District) upheld the first instance ruling, but refused to consider that the enforcement of the award would be contrary to the public policy of the Russian Federation because of the alleged risk of Baltiysky Zavod’s bankruptcy. The Presidium of the RF Highest Arbitrazh Court cancelled the decisions of the lower courts and ordered to issue to Stena RoRo an enforcement writ for coercive enforcement of the SCC award of 24 September 2008. Re-examining the decisions of the lower courts in the supervisory proceedings, the Presidium referred to Article V(1) NYC in order to assess the validity of the arbitration agreement. In this respect, the Presidium concluded that the issue of whether the board of directors of Stena RoRo complied with the procedure for approval of contracts was resolved by the arbitral tribunal on the basis of the substantive and procedural provisions of Swedish law, to which the parties to the contracts subjected their legal relationships. Therefore, the lower courts had no legal grounds to re-examine on the basis of Russian law the factual circumstances already established by the arbitral tribunal. Likewise, by reference to Article V(2) NYC, the Presidium refused to accept the arguments of the lower courts that the Swedish company’s failure to comply with the Russian law procedure for corporate approval of contracts amounted to a breach of the public policy of the Russian Federation. Furthermore, it was discussed before the Presidium whether the fact that the arbitral tribunal ordered compensation by way of liquidated damages was contrary to the public policy of the Russian Federation. Referring to Article V(2) NYC, the Presidium considered that such damages also existed in the provisions of the Russian Civil Code concerning contractual liability in the form of penalties/damages and, hence, fell within the legal system of the Russian Federation. For that reason, the measures of liability ordered by the arbitral tribunal cannot in themselves be contrary to the public policy of the Russian Federation. Therefore, the lower courts did not have grounds to consider that the recognition and enforcement of the arbitral award would be contrary to the public policy of the Russian Federation. |
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