Author: William R. Spiegelberger*
Published: July 2020
Description:
I. OVERVIEW OF 2018
In 2018, the rate of enforcement of all foreign arbitral awards in Russia plummeted to about 50% after having slipped steadily lower for the past five years. A major contributing factor to this decline was the fact that only three of seventeen awards from Ukraine were enforced in 2018 thanks to various incarnations of the public-policy objection, a defense that proved more effective than usual in 2018 also against non-Ukrainian awards.
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II. CASES OF DENIED ENFORCEMENT OF UKRAINIAN AWARDS
In 2018, the public-policy defense thwarted enforcement of thirteen of the fourteen UCCI awards that were denied enforcement (93%), confirming what now appears to be a trend that began in 2017 toward increasingly successful deployment of that defense. In an additional case described below, Agroproservis v. Sodruzhestvo-Soya, the public-policy defense resulted in denied enforcement of an award issued in favor of a Ukrainian company under the Rules of Arbitration and Appeal of the Federation of Oils, Seeds and Fats Associations Ltd. (“FOSFA”).
The predominance of this defense in the denial of specifically Ukrainian awards raises the question whether Russian courts are subjecting them to special treatment, perhaps as a result of the deterioration of Ukrainian-Russian relations that followed Russia’s occupation of Crimea and incursion into the Luhansk and Donetsk regions of eastern Ukraine in early 2014. Corroborating this suspicion is the fact that the enforcement rate of Ukrainian awards in Russia before 2014 was consistently higher than that of non-Ukrainian awards, hovering near 100%, only to slip ever lower since 2014 and then collapse in 2018. Although correlation does not entail causation, the 2014 inflection point does raise questions, especially where, as here, an otherwise exceptional defense has become the rule. An “unruly horse,” public policy has been playing an ever greater role in the Russian enforcing courts, assuming new forms in surprising places, all despite an express admonition from the Supreme Commercial Court (“SCC”) that it should be used restrictively and avoided when another enumerated defense to enforcement applies. The Russian courts’ recent treatment of Ukrainian awards therefore merits special attention.
*Member of the Bar of the State of New York and private practitioner in Vienna, Austria. From 2007 to 2017 William R. Spiegelberger was Director of the International Practice Department of Rusal Global Management B.V. in Moscow, and before that co-head of the Moscow Disputes Group of White & Case LLC. He is also a member of the National Advisory Council of the Harriman Institute at Columbia University.