Hulley Enterprises Limited & Ors v The Russian Federation

Where enforcement proceedings are stayed pending a challenge to an arbitral award in the courts of the seat, the stay is a case-management measure. The court must assess the position at the time of the application and weigh comity, efficiency, the risk of inconsistent decisions, prejudice caused by delay, and the status of the foreign challenge.

A stay may be lifted in stages. Where the remaining foreign challenge concerns a different issue from a domestic jurisdictional challenge, the domestic proceedings may be resumed to determine that jurisdictional issue, while the stay continues for subsequent enforcement steps. Security should not ordinarily be ordered under general case-management powers where the statutory power to order security under the Arbitration Act 1996 has not arisen because state immunity remains unresolved.

The claimants sought recognition and enforcement in England of arbitral awards exceeding US$50 billion. The proceedings had been stayed by consent pending challenges to the awards in the courts of the Netherlands.

The Hague Court of Appeal reinstated the awards, but the Dutch Supreme Court later rejected the jurisdictional grounds of challenge while remitting an alleged arbitration fraud issue to the Amsterdam Court of Appeal. The claimants applied to lift the English stay, relying on the resolution of the jurisdictional issues and on changed circumstances following Russia’s invasion of Ukraine. They alternatively sought security.

The central issue was whether the stay should remain in place, and if lifted, to what extent.

1. The stay was lifted in part. It was lifted solely to the extent necessary to determine the defendant’s jurisdictional challenge based on state immunity. Any further lifting required a further application.
2. The court adopted the case-management analysis in the earlier judgment of Henshaw J, [2021] EWHC 894 (Comm). The relevant question was whether, in the circumstances now existing, the advantages of continuing the stay outweighed the prejudice and other factors favouring continuation of the English proceedings.
3. The Dutch Supreme Court had rejected all the jurisdictional grounds raised before it. The remaining Dutch proceedings concerned alleged fraud in the arbitration and did not overlap with the jurisdictional challenge under s. 9(1) of the State Immunity Act 1978. The risk that the English court would determine an issue on the basis of a foreign decision later reversed had therefore fallen away.
4. The possibility of a future reference to the CJEU concerning Article 45 of the Energy Charter Treaty was too speculative to affect the decision. The consequences of Russia’s invasion of Ukraine gave additional weight to the claimants’ prejudice from continued delay, although the extent of the resulting enforcement difficulties was difficult to quantify.
5. The continuing fraud challenge justified retaining a stay in relation to later enforcement steps, because allowing that process to conclude could avoid inconsistent decisions. It did not justify maintaining a complete stay while the distinct jurisdictional challenge remained unresolved.
6. Security would not have been ordered. The court accepted the earlier conclusion that the power under s. 103(5) of the Arbitration Act 1996 had not arisen while state immunity remained unresolved. In those circumstances, an order for security under CPR 3.1(3) as a condition of continuing the stay was inappropriate.

The judgment records the earlier procedural history, including the continuation of the stay by consent and Henshaw J’s refusal to lift it in [2021] EWHC 894 (Comm). This was a further first-instance application to vary the stay.