Smagin v. Kalken Holdings Limited and Yegiazaryan

At a glance

Parties

Smagin (Russian Federation) v. Kalken Holdings Limited (Nicosia, Cyprus) and Yegiazaryan (Russian Federation, resident in the USA)

Case no.

General Application No. 601/2017, District Court of Nicosia

Court

District Court of Nicosia (Επαρχιακό Δικαστήριο Λευκωσίας), Cyprus

Forum and rules

Recognition and enforcement under the New York Convention (Ratification Law 84/1979), Law 121(I)/2000 and the International Commercial Arbitration Law 101/1987

Underlying award(s)

LCIA Case No. 101721, award of 11 November 2014 (tribunal members named in the notarial certificate as Lee, Per Runeland and Hober)

Court composition

Λ. Δημητριάδου-Ανδρέου (L. Dimitriadou-Andreou), President of the District Court

Sector

Commercial real estate (Europark shopping centre, Moscow)

Outcome

Application granted (5 May 2020). The LCIA award was recognised, registered and declared enforceable in Cyprus, with costs against the respondents.

Amount

Award enforced: USD 72,243,000 in damages; pre-award interest at 7% a year from 1 July 2013 (USD 6,899,701.32); post-award interest at 8% a year compounded quarterly; legal costs of GBP 2,658,151.93, USD 672,354.08 and RUB 2,958,750.00; arbitration costs of GBP 118,321.75. The respondents were ordered to pay the costs of the Cyprus application, to be assessed by the Registrar.

The dispute

Smagin asked the Nicosia District Court to recognise, register and enforce an LCIA award of 11 November 2014. The award ordered Kalken Holdings Limited, a Cypriot company, and Yegiazaryan to pay him, jointly and/or severally, damages for the loss of his interest in the Europark shopping centre in Moscow. The tribunal's jurisdiction rested on LCIA arbitration clauses in three agreements: a Shareholders' Agreement of 26 December 2006, an Escrow Agreement of 13 November 2007 with Deutsche Bank, and a 2008 partnership agreement. Both respondents objected. First, they argued that duly certified copies of the arbitration agreements had not been produced under Article IV of the New York Convention; Yegiazaryan also challenged the certification of the award itself. Second, they argued that the application was an abuse of process, and so contrary to public policy, because Smagin was running a parallel action (No. …/2011) in Nicosia for the same relief. Yegiazaryan further argued that the award's 8% compound interest was usurious under Cypriot law and contrary to public policy.

Key holdings

1. Law 121(I)/2000 governs only the procedure for registering foreign judgments and awards. Under Article 169 of the Constitution, the New York Convention as ratified by Law 84/1979 prevails over Law 101/1987. Review under Articles IV and V is supervisory and does not reach the merits. The applicant must produce the Article IV documents; the burden then shifts to the respondent to prove an Article V ground. pp. 6–8
2. Article IV(1)(a) and (2) were satisfied. The original award carried a London notary's certificate, and that certificate was authenticated by an Apostille under the Hague Convention of 5 October 1961. The Greek translation was made by the Press and Information Office of the Republic of Cyprus, a government department, so it counted as an official translation. p. 9
3. Article IV(1)(b) was satisfied even though the original agreements were not produced; the originals were held by the Russian police. Copies were certified as true by the applicant's own declaration, an LCIA email and a letter from the Russian police. Following Rainstorm Pictures v. Lombard-Knight and Nimegran v. Wigram, the Convention does not require independent certification of a copy. pp. 9–11
4. No abuse of process. The registration proceeding and Action …/2011 have different subject matter and different parties: the action sought damages, an account and transfer of the Europark share. The action had in any event been discontinued. p. 11
5. The public policy exception in Article V(2)(b) applies only in exceptional cases, where enforcement would breach a fundamental principle of the Cypriot legal order. An interest rate higher than the rate applied in Cyprus does not breach such a principle. The court relied on, among others, a 2005 decision of the Austrian Supreme Court. pp. 12–13
6. The court ordered the award recognised, registered and enforced. Costs followed the event and were awarded against the respondents. p. 13

Procedural history

1. 26 October 2010Smagin filed the LCIA arbitration (Case No. 101721) against the respondents.
2. 11 November 2014The LCIA tribunal issued its award in Smagin's favour.
3. 9 December 2014Yegiazaryan challenged the award in the English High Court under section 67(1)(a) of the Arbitration Act 1996. On 12 December 2014 he obtained an ex parte order restraining enforcement; on 22 December 2014 it was varied to allow steps in other jurisdictions, including Cyprus, to preserve assets. Kalken filed its own challenge on 6 February 2015.
4. 9 July 2015The High Court (Commercial Court) dismissed both challenges. It ordered Kalken to pay GBP 72,500 in costs and refused Kalken leave to appeal; Yegiazaryan was granted leave.
5. 19 December 2016Yegiazaryan's appeal was dismissed.
6. 2017Smagin filed General Application No. 601/2017 in the District Court of Nicosia.
7. 5 May 2020The District Court of Nicosia granted recognition, registration and enforcement of the award, with costs.

Tribunal, counsel and experts

Decided by

• Λ. Δημητριάδου-Ανδρέου (L. Dimitriadou-Andreou) Judge, District Court of Nicosia

For the claimant

Michael Kyprianou & Co. LLC · Baker & McKenzie

For the respondent

Στέλιος Αμερικάνος & Σία ΔΕΠΕ (for Kalken Holdings Limited) · Χαβιαράς και Φιλίππου ΔΕΠΕ (for Yegiazaryan) · Gibson, Dunn & Crutcher LLP

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Keywords

• New York Convention
• recognition and enforcement
• Article IV
• Article V(2)(b)
• public policy
• duly certified copy
• Apostille
• certified translation
• arbitration agreement
• abuse of process
• parallel proceedings
• interest rate
• usury
• LCIA
• Europark
• Cyprus
• Law 84/1979
• Law 121(I)/2000

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