Moral: don’t arbitrate in Russia if you can help it

Decided eight weeks ago but just up on Bailii, the arbitration decision in Maximov v Open Joint Stock Company “Novolipetsky Metallurgichesky Kombinat” [2017] EWHC 1911 (Comm) is worth a brief note. Having sold a company to a buyer and faced a dispute as to the price, Nikolai Maximov got an arbitral award from a Russian tribunal for some 8 billion roubles (then about $250 million). A Russian court then proceeded at the buyer’s request to annul the award on very doubtful grounds, including those not raised by the parties. Two appeals failed. The seller sued in England under the New York Convention and at common law to enforce the award: to the buyer’s plea that the award had been set aside, the seller asked the court not to enforce that judgment on the basis that it must have been biased. Despite very grave suspicions about the propriety, let alone the correctness, of the Russian judgment, and despite evidence that the Russian judicial system left a great deal to be desired, especially when (as here) the Russian government had a strong interest in reducing or eliminating the award, the judge, Sir Michael Burton, was clear that this was not enough. Perverse and very suspicious it might be, but even here his Lordship was unable to draw the inference that the only explanation was bias.

Two further points for future reference. At [16] the judge expressed the view that a judgment given on one point out of evident bias would probably not be upheld even if there was another ground for the judgment that was not successfully challenged on that ground. And at [64] he strongly doubted a subsidiary argument by the defendant that once a court with jurisdiction had annulled an award that was an end of the matter however biased the court, since there would simply be nothing to enforce. And rightly so, we suggest: apart from anything else, the moral hazard that such a rule would engender is fairly obvious.

As we said at the beginning, arbitrate in Russia very much at your own risk.

 

One thought on “Moral: don’t arbitrate in Russia if you can help it

  1. Pingback: Moral: don’t arbitrate in Russia if you can help it – Inno TankBulk

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