Banwell International Limited v. OOO Rosshelf

At a glance

Parties

Banwell International Limited (applicant, claimant in the arbitration) v. OOO Rosshelf (interested party, respondent in the arbitration); third parties: Federal Tax Service Inspectorate No. 3 for Moscow and Rosfinmonitoring

Case no.

No. А40-117331/18 (Moscow Arbitrazh Court No. А40-117331/18-141-835)

Court

Moscow Arbitrazh Court (first instance); Arbitrazh Court for the Moscow District (cassation)

Underlying award(s)

London Court of International Arbitration award of 5 April 2018, case No. 173595 (tribunal presided over by George Burn, with Olga Baglay and Claire Blanchard)

Treaty

New York Convention 1958 (Articles III and V); Russian Arbitrazh Procedure Code, Articles 241–246

Sector

Shipbuilding; share pledge enforcement

Outcome

The Moscow Arbitrazh Court recognised and enforced the award on 17 July 2018. On 4 October 2018 the cassation court set that ruling aside and sent the case back for a new hearing on public policy.

Amount

Under the award: Banwell may enforce its pledge over the Lotos shares, and Rosshelf must pay GBP 38,339.39 in arbitration costs. The first-instance court also awarded RUB 3,000 state duty against Rosshelf.

The dispute

Banwell International Limited applied to the Moscow Arbitrazh Court to recognise and enforce an LCIA award of 5 April 2018 (case No. 173595) against OOO Rosshelf. The award held that Banwell may enforce its security over shares of the Lotos shipyard (AO "Sudostroitelny zavod 'Lotos'") under a Share Pledge Agreement of 24 April 2008. The enforcement may be by open auction or by other means a national court prescribes, and Banwell must pay Rosshelf any balance left after the sums due to it under the Share Purchase Agreement of 24 April 2008 and its enforcement costs (clause 6.8). The award also ordered Rosshelf to pay GBP 38,339.39 in arbitration costs. Rosshelf did not appear at first instance. On cassation it argued that enforcement would breach Russian public policy: the Russian Federation is the ultimate beneficiary of both Rosshelf and Lotos, both belong to the state corporation United Shipbuilding Corporation (AO "OSK"), and OSK is on the list of strategic enterprises under Presidential Decree No. 1009 of 4 August 2004.

Key holdings

1. Rosshelf was duly notified. The court notice had been returned to the sender, and the ruling accepting the application had been posted on kad.arbitr.ru on 29 June 2018, so Rosshelf bore the risk of not receiving notices and of not filing a response. The court heard the application in its absence. Moscow Arbitrazh Court, pp. 1–2
2. The court found no grounds to refuse recognition under Article V of the New York Convention or Article 244 of the Arbitrazh Procedure Code. It recognised and enforced the LCIA award of 5 April 2018 and ordered Rosshelf to pay RUB 3,000 in state duty. Moscow Arbitrazh Court, p. 4
3. The cassation court relied on Information Letter No. 156 of the Presidium of the Supreme Arbitrazh Court (26 February 2013). Under it, public policy means fundamental legal principles of the highest mandatory force. These include the ban on acts prohibited by overriding mandatory rules where such acts harm the sovereignty or security of the State. A court may refuse enforcement on public policy grounds of its own motion, whatever objections the parties raise. Cassation ruling, p. 8
4. The first-instance court did not check the award against public policy. In particular, it did not consider the arguments that the Russian Federation is the ultimate beneficiary and that OSK is on the list of strategic enterprises under Presidential Decree No. 1009 of 4 August 2004. Cassation ruling, p. 8
5. Because the evidence still had to be examined and assessed, the cassation court could not decide the case itself under Article 287 of the Code. It set aside the ruling of 17 July 2018 and sent the case back to the Moscow Arbitrazh Court to review the award's compatibility with public policy. Cassation ruling, p. 9

Procedural history

1. 24 April 2008Banwell and Rosshelf conclude the Share Purchase Agreement and the Share Pledge Agreement over the Lotos shares.
2. 5 April 2018LCIA award in case No. 173595: Banwell may enforce its pledge over the Lotos shares and recover GBP 38,339.39 in arbitration costs.
3. 28 June 2018The Moscow Arbitrazh Court accepts Banwell's application for recognition and enforcement and schedules a preliminary hearing.
4. 17 July 2018The Moscow Arbitrazh Court recognises and enforces the award (operative part announced on 16 July 2018).
5. 4 October 2018The Arbitrazh Court for the Moscow District grants Rosshelf's cassation appeal, sets aside the enforcement ruling and remands the case for a new hearing (operative part announced on 1 October 2018). The published documents do not show the outcome of the new hearing.

Tribunal, counsel and experts

Decided by

• A.G. Avagimyan Judge, Moscow Arbitrazh Court
• N.Yu. Dunaeva Judge, Arbitrazh Court for the Moscow District (presiding judge)
• S.V. Nechaev Judge, Arbitrazh Court for the Moscow District
• E.A. Petrova Judge, Arbitrazh Court for the Moscow District

For the claimant

M.A. Tugelbaev

For other participants

Federal Tax Service Inspectorate No. 3 for Moscow

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Keywords

• recognition and enforcement
• New York Convention
• Article V(2)(b)
• public policy
• LCIA
• share pledge
• Lotos shipyard
• United Shipbuilding Corporation
• strategic enterprises
• state-owned enterprise
• shipbuilding
• cassation
• remand
• Article 244 Arbitrazh Procedure Code
• Rosshelf
• Russia

Summary generated with AI from the published documents — refer to the award for the authoritative text.