JSC Alfa Bank v. V. K.

At a glance

Parties

JSC Alfa Bank (applicant; claimant in the arbitration) v. V. K. (interested person; respondent in the arbitration)

Case no.

Court of Appeal of Lithuania, civil case No. e2T-72-381/2018

Court

Lietuvos apeliacinis teismas (Court of Appeal of Lithuania), Civil Division: Artūras Driukas (presiding judge and rapporteur), Dalia Kačinskienė, Gintaras Pečiulis

Underlying award(s)

LCIA partial award of 7 February 2018, arbitration No. 163435 (sole arbitrator A. L.); LCIA partial award on jurisdiction of 30 March 2017

Forum and rules

Recognition and enforcement under the 1958 New York Convention; underlying arbitration under the LCIA Rules (2014)

Treaty

New York Convention, Article V(1)(a), (b), (d) and V(2)(a), (b); Guarantee Deed of 27 November 2015, clause 20 (arbitration clause)

Sector

Banking; loan guarantee

Outcome

Recognition and enforcement in Lithuania granted (29 November 2018). Every ground for refusal was rejected.

Amount

Award recognised: RUB 858,044,628.47 and EUR 8,822,622.64, plus daily interest of RUB 765,187.68 and EUR 5,739.47 from 1 October 2017 until payment

The dispute

JSC Alfa Bank made several loans in 2012–2014 to ARVI NPK, a Russian limited liability company that V. K. held indirectly through the Lithuanian holding company UAB Vyrja and the ARVI group. ARVI NPK fell behind on its payments. On 27 November 2015 V. K. signed a Guarantee Deed governed by English law. In it he guaranteed ARVI NPK's obligations under credit agreements Nos. 2–5, and clause 20 sent disputes to LCIA arbitration. ARVI NPK did not repay, so the bank demanded payment from V. K. and started LCIA arbitration on 20 September 2016. In a partial award of 7 February 2018 the sole arbitrator ordered V. K. to pay the sums claimed, and the bank asked the Lithuanian Court of Appeal to recognise and enforce that award. V. K. opposed recognition on four main grounds: (1) the Guarantee Deed and its arbitration clause were procured by fraud and economic pressure, and the bank had waived arbitration by suing in Russia; (2) asset freezes left him unable to present his case; (3) the arbitrator committed procedural irregularities; and (4) the default interest awarded was punitive and contrary to public policy.

Key holdings

1. A recognition court checks only the exhaustive grounds in Article V of the New York Convention. It may not review the merits, reassess the facts or evidence, or re-examine how the arbitrator applied the law. It may consider new facts only so far as needed to assess a public policy breach that the arbitrator did not examine. ¶¶ 10–11, 19
2. No ground under Article V(1)(a) or V(2)(b) arising from the arbitration agreement. V. K.'s fraud and duress allegations repeated arguments the arbitrator had already considered and rejected. The minutes of the 3 November 2015 meeting, which V. K. signed, recorded his agreement to give a guarantee under English law. The draft deed had been sent to the ARVI group by 24 November 2015, and V. K.'s lawyer countersigned the deed. V. K. never properly challenged the arbitration clause, and the arbitrator upheld jurisdiction in the partial award of 30 March 2017. ¶¶ 24–27, 29
3. No waiver of arbitration. The Russian court case was based on a different suretyship agreement, dated 7 December 2012, so it did not show that the parties had abandoned the 2015 arbitration clause. ¶ 28
4. No denial of the opportunity to present his case under Article V(1)(b). The asset freeze was imposed because of a real risk that V. K. would evade enforcement, as he had given away property to family members. He also took an active part in the arbitration and was represented from 20 December 2016. The LCIA's refusal to give legal advice on how to challenge the jurisdiction award was not a ground for refusal. ¶¶ 31–33
5. No procedural irregularity under Article V(1)(d). The Court rejected each complaint. The arbitrator gave V. K.'s evidence less weight, but this caused no substantial injustice. The counterclaim had not been validly filed, and the arbitration fee for it was never paid. The refusal to release the hearing audio recording was justified because it contained privileged conversations. The allegation of ex parte contact was unsupported. V. K.'s correction requests were challenges to findings of fact, not requests to correct typographical errors. Minor procedural defects are not enough for this ground. ¶¶ 34–42
6. The default interest is not contrary to public policy. The rates of 0.1% per day (foreign currency) and 0.2% per day (roubles) under clause 3.5 were agreed between what were in substance business parties, and such agreements must be respected. The arbitrator's finding that the interest accrued automatically could not be reviewed. ¶¶ 43–47
7. The partial award of 7 February 2018 is recognised and may be enforced in Lithuania. The ruling took effect on the day it was adopted and could be appealed in cassation to the Supreme Court of Lithuania within 30 days. ¶ 48; operative part

Procedural history

1. 27 November 2015V. K. signs the Guarantee Deed with JSC Alfa Bank; clause 20 provides for LCIA arbitration.
2. 6 September 2016The Meshchansky District Court of Moscow decides the bank's claim against V. K. and ARVI NPK under a separate suretyship agreement of 7 December 2012.
3. 20 September 2016The bank starts LCIA arbitration (No. 163435). On 23 September 2016 the Vilnius Regional Court freezes V. K.'s assets up to RUB 534,804,437.85 and EUR 6,583,334.63.
4. 9 February 2017The Court of Appeal of Lithuania upholds the asset freeze.
5. 30 March 2017The sole arbitrator issues a partial award on jurisdiction, upholding jurisdiction.
6. 7 February 2018LCIA partial award orders V. K. to pay RUB 858,044,628.47 and EUR 8,822,622.64 plus interest.
7. 29 May 2018The Court of Appeal accepts the recognition request and raises the interim measures to the amounts of the award.
8. 29 November 2018The Court of Appeal recognises the partial award and grants leave to enforce it.

Tribunal, counsel and experts

Decided by

• Artūras Driukas Judge, Court of Appeal of Lithuania (presiding judge and rapporteur)
• Dalia Kačinskienė Judge, Court of Appeal of Lithuania
• Gintaras Pečiulis Judge, Court of Appeal of Lithuania

For the respondent

Ellex Valiunas ir partneriai

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Keywords

• New York Convention
• recognition and enforcement
• Lithuania
• LCIA
• personal guarantee
• ARVI
• public policy
• fraud and economic duress
• validity of arbitration agreement
• waiver of arbitration
• right to be heard
• procedural irregularity
• default interest
• penalty clause
• competence-competence
• separability
• asset freeze
• prohibition of merits review

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