MacDonald, Dettwiler and Associates GmbH v. FGUP NIIR

At a glance

Parties

MacDonald, Dettwiler and Associates GmbH (applicant) v. FGUP NIIR, the Federal State Unitary Enterprise "Order of the Red Banner of Labour Radio Research Institute" (debtor); Rosfinmonitoring took part as a third party

Case no.

Moscow Arbitrazh Court Case No. А40-148306/18-141-1156

Court

Arbitrazh Court of the City of Moscow (Judge A.G. Avagimyan)

Underlying award(s)

ICC International Court of Arbitration award of 20 November 2017, Case No. 21922/MHM, made by John Kadelburger (name as transliterated from the Russian judgment)

Forum and rules

Recognition and enforcement under the New York Convention 1958 and Chapter 31 of the Russian Arbitrazh Procedure Code; underlying arbitration under the ICC Rules

Outcome

The court recognised the ICC award and declared it enforceable in the Russian Federation.

Amount

The award granted USD 7,700,000 for four milestone payments; late-payment interest under the Swedish Interest Act 2013 on four sums (USD 2,290,000, USD 2,290,000, USD 1,200,000 and USD 1,920,000); USD 325,881.77 interest on invoice No. 20150421-3; USD 291,864.74 and CAD 54,129.47 in legal fees; and USD 66,000 in arbitration costs, with interest. The court ordered the debtor to pay RUB 3,000 in state fees.

The dispute

MacDonald, Dettwiler and Associates GmbH applied to the Moscow Arbitrazh Court to recognise and enforce in Russia an ICC award of 20 November 2017 (Case No. 21922/MHM). The award had been made against FGUP NIIR, a Russian federal state unitary enterprise. It ordered NIIR to pay USD 7,700,000 for four milestone payments under the parties' contracts, plus interest, legal fees and arbitration costs. NIIR had not paid. NIIR opposed enforcement on five grounds: (1) the dispute fell within the exclusive jurisdiction of the Russian courts, so it could not be arbitrated; (2) it concerned federal property; (3) as a strategic enterprise under Presidential Decree No. 1009 of 4 August 2004, NIIR's disputes could not go to arbitration; (4) enforcement would breach Russian public policy and leave it unable to meet its obligations to third parties; and (5) the arbitrator's findings were wrong.

Key holdings

1. The dispute was arbitrable. Under the Law on International Commercial Arbitration, a dispute is non-arbitrable only where a federal law expressly says so, as Article 33 of the Arbitrazh Procedure Code and Article 33 of the Insolvency Law do. The exclusive jurisdiction rule in Article 248 of the Code does not apply when assessing arbitrability under Article V(2)(a) of the New York Convention. p. 3
2. The federal-property objection failed. The award rests on the parties' contractual obligations, and neither the contracts nor the obligations under them gave the applicant ownership of any Russian state property. pp. 3–4
3. Presidential Decree No. 1009 on strategic enterprises does not prohibit arbitration of disputes involving such entities. Under Article 90 of the Constitution it is a subordinate act, not a federal law, so it cannot restrict arbitrability. Neither the Privatisation Law No. 178-FZ nor Law No. 57-FZ on foreign investment in strategic companies restricts arbitrability either. p. 4
4. No breach of public policy under Article V(2)(b). Relying on Information Letter No. 156 of the Presidium of the Supreme Arbitrazh Court, the court found no inflated prices, no punitive damages and no lack of impartiality or independence in the arbitration. The claimed inability to meet obligations to third parties was not shown to be caused solely by the applicant's conduct. pp. 4–5
5. The challenges to the arbitrator's findings concerned the merits. Under Article 243(4) of the Arbitrazh Procedure Code, the enforcing court cannot review the award on the merits or re-establish the facts. Finding no ground for refusal under Article 244, the court recognised and enforced the award and ordered the debtor to pay RUB 3,000 in state fees. p. 5

Procedural history

1. 20 November 2017ICC award in Case No. 21922/MHM orders FGUP NIIR to pay USD 7,700,000 plus interest, legal fees and costs.
2. 10 September 2018The Moscow Arbitrazh Court announces the operative part of its ruling.
3. 11 September 2018Reasoned ruling issued: the award is recognised and enforced in Russia. The ruling could be appealed to the Arbitrazh Court of the Moscow District within one month; the published documents do not show whether an appeal was filed.

Tribunal, counsel and experts

Decided by

• A.G. Avagimyan Judge, Arbitrazh Court of the City of Moscow

For the claimant

K.I. Aleksa · O.V. Kolotilov

For the respondent

S.V. Kuznetsov · V.V. Butenko

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Keywords

• New York Convention
• recognition and enforcement
• Russia
• ICC
• arbitrability
• exclusive jurisdiction
• Article 248 Arbitrazh Procedure Code
• public policy
• strategic enterprise
• Presidential Decree No. 1009
• state unitary enterprise
• federal property
• no review on the merits
• Swedish Interest Act
• Rosfinmonitoring
• NIIR

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