3 Power Wind Energy Ltd v. A.A. Muraviev

At a glance

Parties

3 Power Wind Energy Ltd (creditor) v. Andrei Aleksandrovich Muraviev (debtor in personal bankruptcy); appeal by Groner Bridge Legal Services LLC

Case no.

No. А40-127342/17; appeal No. 09АП-25629/2018

Court

Ninth Arbitrazh Court of Appeal (Moscow), Russia

Underlying award(s)

Award of the International Commercial Arbitration Court of the Republic of Cyprus of 29 June 2017, case No. 1CAC ш 01/05-19/2017

Forum and rules

Russian bankruptcy proceedings; the underlying arbitration was under the UNCITRAL Arbitration Rules (1976) and Cyprus Law No. 101 of 29 May 1987

Treaty

New York Convention 1958, Article III

Court panel

I.M. Kleandrov (presiding), S.A. Nazarova, A.N. Grigoriev

Sector

Loan finance (Eurobond loan)

Outcome

Appeal dismissed. The first-instance ruling that entered the award-based claim in the third rank of the creditors' register was upheld.

Amount

RUB 497,249,479.44 entered in the register: RUB 470,525,300 loan principal, RUB 26,623,352.59 interest and RUB 100,826.85 arbitration fee. These are converted from EUR 7,000,000, EUR 396,075.34 and EUR 1,500 at RUB 67.2179 per euro on 31 October 2017.

The dispute

On 28 April 2015, 3 Power Wind Energy Ltd lent Andrei Muraviev 70 Eurobonds worth EUR 100,000 each (EUR 7,000,000) under loan agreement No. 39L-02/15, for 24 months at 2.75% a year. The agreement provided for repayment in money. Its clause 4 referred disputes to the International Commercial Arbitration Court of the International Committee for the Protection of Property of the Republic of Cyprus, under the UNCITRAL Rules. On 29 June 2017 that court ordered Muraviev to repay the principal with interest and costs. Muraviev was declared bankrupt on 7 November 2017, and the lender asked for its award-based claim to be entered in the register of creditors. Another creditor, Groner Bridge Legal Services LLC, objected. It argued that the loan was void under Articles 10 and 168 of the Russian Civil Code as an abuse of rights designed to inflate the debtor's liabilities, that entering the claim breached Russian public policy and Article 1 of Protocol 1 to the ECHR, and that the court had failed to apply the grounds for refusal in Article 244(1)(2) and (7) of the Arbitrazh Procedure Code (APC).

Key holdings

1. In bankruptcy proceedings, a claim confirmed by an arbitral award can be entered in the creditors' register without a separate order granting enforcement. The only objections available are the grounds for refusing enforcement; if one is proved, the claim is examined under the general rules. p. 4
2. There was no breach of proper notice. The parties were notified on 19 May 2017 of the hearing set for 22 June. Only one hearing took place, and the debtor asked for the case to be heard in his absence. p. 4
3. Under Article III of the New York Convention and Article 34 of the UNCITRAL Rules, the Cyprus award is final and binding and must be recognised. The claim was well founded and was properly entered in the register, since there was no evidence the debt had been paid. p. 5
4. The court rejected the arguments of abuse of rights, public policy and ECHR Protocol 1. Under freedom of contract and Article 807 of the Civil Code, a loan may be made in securities with repayment in money, and the agreement did provide for repayment in money. pp. 5–6
5. The foreign-currency debt was converted into roubles at the Central Bank rate on the date the asset-realisation procedure was introduced (31 October 2017), as Article 4 of the Bankruptcy Law requires. p. 3

Procedural history

1. 28 April 2015Loan agreement No. 39L-02/15 concluded.
2. 29 June 2017The Cyprus International Commercial Arbitration Court issued an award against Muraviev for EUR 7,000,000 principal, EUR 396,075.34 interest and EUR 1,500 costs.
3. 7 November 2017The Moscow Arbitrazh Court declared Muraviev bankrupt, ordered the realisation of his assets and appointed Elena Vladimirovna Gorelenko as financial manager.
4. 28 December 20173 Power Wind Energy filed its claim for entry in the creditors' register.
5. 12 April 2018The Moscow Arbitrazh Court (Judge V.A. Chernukhin) entered the claim of RUB 497,249,479.44 in the third rank of the register.
6. 29 June 2018The Ninth Arbitrazh Court of Appeal dismissed Groner Bridge Legal Services' appeal (operative part announced 26 June 2018).

Tribunal, counsel and experts

Decided by

• I.M. Kleandrov Judge, Ninth Arbitrazh Court of Appeal (presiding judge)
• S.A. Nazarova Judge, Ninth Arbitrazh Court of Appeal
• A.N. Grigoriev Judge, Ninth Arbitrazh Court of Appeal

For the claimant

P.G. Pavlov

For other participants

Groner Bridge Legal Services LLC · T.V. Aksenova

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Keywords

• New York Convention Article III
• recognition of foreign arbitral award
• personal bankruptcy
• register of creditors' claims
• Cyprus
• Eurobonds
• loan agreement
• abuse of rights
• public policy
• Article 244 APC
• notice of arbitral proceedings
• UNCITRAL Rules 1976
• Russia
• Muraviev
• currency conversion

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