GA Telesis LLC v. OAO AK “Transaero”

At a glance

Parties

GA Telesis LLC (USA, Florida) v. OAO Aviation Company "Transaero" (in bankruptcy, represented by its receiver A.V. Belokopyt)

Case no.

No. А56-27823/2018

Court

Arbitrazh Court of Saint-Petersburg and Leningrad Oblast (first instance); Arbitrazh Court for the North-Western District (cassation)

Underlying award(s)

Final ICC award of 12 April 2017, Case No. 21479/MHM (arbitration in New York)

Treaty

New York Convention 1958 (Articles III and V)

Court

First instance: Judge S.M. Krotov. Cassation: A.E. Filippov (presiding), M.G. Vlasova, V.K. Serova

Sector

Aircraft engine leasing; aviation

Outcome

The award was recognised and enforced (16 May 2018). The cassation court upheld that ruling and dismissed Transaero's appeal (21 September 2018).

Amount

Award enforced: USD 2,893,927.83 rent arrears, USD 151,377.80 contractual interest (penalty) plus further interest until payment, and USD 318,885 damages, payable in roubles at the Central Bank of Russia rate on the date of enforcement. Costs: RUB 3,000 state duty to GA Telesis; a further RUB 3,000 state duty on the cassation appeal to the federal budget.

The dispute

Transaero, a Russian airline, leased two Rolls-Royce Trent 884-17 aircraft engines (serial numbers 51325 and 51343) from Aero Turbine, Inc. The leases were two engine lease agreements of 5 October 2012, made under a general terms agreement on engine leasing of 2009. In December 2012 Aero Turbine sold the engines to GA Telesis and assigned the leases to it. Transaero failed to pay rent and returned the engines in May 2016. GA Telesis brought an ICC arbitration in New York under clause 22.1 of the general terms agreement. The final award of 12 April 2017 ordered Transaero to pay rent arrears, contractual interest and damages. Insolvency proceedings against Transaero had been opened in October 2015 on Sberbank's petition. GA Telesis then sought recognition and enforcement of the award in Russia. Transaero did not appear at first instance. On cassation it argued that the debts were pre-bankruptcy claims that could only be pursued inside the insolvency case, and that the statutory moratorium on penalties during supervision barred the interest.

Key holdings

1. Recognition is governed by Article 241 of the Russian Arbitrazh Procedure Code (APC) and Article III of the New York Convention, since Russia and the United States are both parties. Transaero raised no documented objections, and the court found no ground to refuse under Article V of the Convention or Article 244 APC. The court may not review the award on the merits. First-instance ruling, pp. 3–4
2. The court recognised and enforced the award for USD 2,893,927.83 principal, USD 151,377.80 interest plus further interest until payment, and USD 318,885 damages, payable in roubles at the Central Bank of Russia rate on the date of enforcement. It also ordered Transaero to pay RUB 3,000 state duty. First-instance ruling, operative part
3. The enforced sums are current payments under the bankruptcy law, not claims that must be lodged in the insolvency case. The bankruptcy case was opened on 19 October 2015. The award covered rent for 20 October 2015 to 31 May 2016, interest on that rent, and costs from the return of the engines in May 2016, so all of these obligations arose after the petition was accepted (Article 5(1) of Law No. 127-FZ; Resolution No. 63 of the Supreme Arbitrazh Court, ¶¶ 2 and 11). Cassation ruling, pp. 4–5
4. The ban on accruing penalties after supervision is introduced (Article 63(1) of Law No. 127-FZ) excludes current payments. It therefore does not apply to interest on late current payments, and enforcing that interest is not contrary to Russian public policy under Article V(2) of the Convention or Article 244(1)(7) APC. Cassation ruling, p. 5
5. Transaero did not prove any ground for refusal. The cassation court upheld the first-instance ruling, dismissed the appeal, and ordered Transaero to pay RUB 3,000 state duty to the federal budget; payment of this duty had been deferred by order of 27 July 2018. Cassation ruling, pp. 5–6

Procedural history

1. 5 October 2012Two engine lease agreements concluded between Transaero and Aero Turbine, Inc. On 27 December 2012 they were assigned to GA Telesis.
2. November 2015GA Telesis started ICC arbitration in New York.
3. 19 October 2015The St Petersburg court accepted Sberbank's petition and opened bankruptcy case No. А56-75891/2015 against Transaero.
4. 12 April 2017Final ICC award in Case No. 21479/MHM in favour of GA Telesis.
5. September 2017Transaero declared bankrupt and receivership opened, with A.V. Belokopyt appointed receiver. The first-instance ruling dates this decision 13 September 2017; the cassation ruling dates it 20 September 2017.
6. 16 May 2018Arbitrazh Court of Saint-Petersburg and Leningrad Oblast recognised and enforced the award (operative part announced 10 May 2018).
7. 21 September 2018Arbitrazh Court for the North-Western District dismissed Transaero's cassation appeal (operative part announced 20 September 2018).

Tribunal, counsel and experts

Decided by

• S.M. Krotov Judge, Arbitrazh Court of Saint-Petersburg and Leningrad Oblast
• A.E. Filippov Judge, Arbitrazh Court for the North-Western District (presiding judge)
• M.G. Vlasova Judge, Arbitrazh Court for the North-Western District
• V.K. Serova Judge, Arbitrazh Court for the North-Western District

For the claimant

M.A. Mikheenkova

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Keywords

• Transaero
• recognition and enforcement
• New York Convention
• Article V(2)
• public policy
• ICC
• aircraft engine lease
• Rolls-Royce Trent
• bankruptcy
• current payments
• insolvency moratorium
• penalty interest
• Russia
• Article 244 APC
• cassation
• Sberbank

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