Yukos Capital SARL v OJSC Rosneft Oil Company

A foreign arbitral award is not rendered unenforceable in England merely because it has been annulled by the courts of the seat. The English court must determine whether the annulment decision should be recognised under ordinary conflict of laws principles. Recognition may be refused for fraud, breach of natural justice or conflict with public policy.

As a matter of Russian law, interest on an arbitral award was recoverable only from the date an enforcement order became effective. The court was not entitled to anticipate a rational development of foreign law beyond its present state. An English court could, in principle, award interest under Senior Courts Act 1981, s 35A, on a debt represented by a foreign award, although the exercise of that discretion remained for later determination.

The claimant sought interest on four Russian-seated arbitral awards made in 2006. The awards had been annulled by the Moscow Arbitrazh Court, and those decisions had been upheld on appeal. The Dutch courts nevertheless permitted enforcement, and the principal sums were paid in 2010.

The English proceedings raised preliminary issues concerning whether the annulment decisions prevented enforcement at common law and whether post-award interest was recoverable under Article 395 of the Russian Civil Code or s 35A of the Senior Courts Act 1981. The central questions were whether the English court should recognise the Russian annulment decisions and whether Russian law required an exequatur before interest accrued.

1. Enforcement. The court rejected the defendant’s contention that the ex nihilo nil fit principle automatically prevented enforcement of an award annulled at the seat. The awards were prima facie enforceable at common law. The defendant’s case depended on recognition of the Russian annulment decisions.
2. Recognition of a foreign judgment setting aside an award was governed by ordinary English conflict of laws principles. The English court could refuse recognition where the judgment was impeachable for fraud, breach of natural justice or inconsistency with domestic public policy. If the claimant failed to establish its pleaded case, the Russian decisions would be recognised and the awards would not be given effect.
3. Russian law. Foreign law was a question of fact proved by expert evidence. The court had to determine how the foreign courts interpreted the relevant code, rather than construe the foreign code independently. It could consider source materials and foreign decisions, but was not bound by a foreign decision if the evidence showed that it did not accurately represent the law. The court declined to anticipate developments beyond the existing state of Russian law.
4. The Presidium of the Supreme Arbitrazh Court’s decision in OJSC Kurba v Slavneftstroy was directly applicable and universally binding on the Russian Arbitrazh courts. Resolution 10-P of the Constitutional Court did not alter that position. Russian law therefore required an effective writ of execution, or exequatur, before interest under Article 395 accrued. Since no Russian exequatur existed, the claim under Article 395 failed.
5. English interest. The arbitration agreements and the arbitrators’ decision not to award interest did not create an absolute bar to statutory interest. The English enforcement claim was a claim for a debt, and s 35A of the Senior Courts Act 1981 could apply in principle. Whether interest should be awarded was left to the court’s later discretion.

The Enforcement Preliminary Issue was answered in favour of the claimant in the stated circumstances. Interest was unavailable under Russian law before an effective exequatur, but was recoverable in principle under s 35A.

The judgment records earlier preliminary-issue decisions in the same litigation. Those decisions are excluded from the cited-case analysis because they formed part of the same procedural dispute.