OOO HOCHTIEF Development Russland v. OOO Investitsionnaya Kompaniya “Pulkovskaya”

At a glance

Parties

OOO HOCHTIEF Development Russland (applicant, award creditor) v. OOO Investitsionnaya Kompaniya "Pulkovskaya" (award debtor)

Case no.

Arbitrazh Court of Saint-Petersburg and Leningrad Oblast, No. А56-23769/2013

Court

Arbitrazh Court of Saint-Petersburg and Leningrad Oblast (Judge M.A. Rakcheeva, 2013; Judge S.M. Krotov, 2018); Federal Arbitrazh Court for the North-Western District (O.Yu. Nefedova presiding, M.G. Vlasova, R.V. Kazantseva)

Underlying award(s)

SCC Arbitration Institute award of 4 April 2013, case No. V(071/2012) (also cited as SCCV(071/2012)), seat Stockholm; arbitrators Christer Söderlund, Christer Danielsson and William E. Butler (who issued a separate opinion)

Treaty

New York Convention 1958, Article V(2)(b)

Sector

Construction project management; real estate development

Outcome

Recognition and enforcement granted in 2013 and upheld on cassation; in 2018 the court set aside its 2013 ruling on newly discovered circumstances and refused recognition, because a criminal judgment found the award was obtained with forged evidence.

Amount

Award: EUR 3,988,400 (incl. VAT) plus interest under Article 395 of the Russian Civil Code from 9 April 2012; EUR 374,013 in fees and legal costs plus interest under section 6 of the Swedish Interest Act; arbitration costs of EUR 193,966, SEK 53,065 and USD 7,602. Court duty of RUB 2,000 awarded in 2013. RUB 316,063,960.72 was transferred from the court deposit account for the creditor in 2016–2017.

The dispute

On 29 December 2010 Pulkovskaya (the customer) and HOCHTIEF Development Russland (the project manager) signed a contract for project management at the preliminary and design stages. It covered a complex in Saint Petersburg with office buildings, an apart-hotel, parking, a car wash, and Mercedes-Benz and Porsche dealer centres. The contract price was EUR 3,988,400, earned on obtaining the construction permits. Pulkovskaya refused to pay. HOCHTIEF then won an SCC award in Stockholm on 4 April 2013 and applied to the Russian courts for recognition and enforcement under the New York Convention. Pulkovskaya argued that enforcement would breach Russian public policy. In its account, HOCHTIEF had acted in bad faith: it hid the final design documentation, broke its guarantees to correct the design, and forged the signature of S.V. Iliodorova on a covering letter delivering the acceptance act. Later, a Russian criminal judgment convicted HOCHTIEF's former managers of attempted fraud. Pulkovskaya then sought review of the 2013 enforcement ruling on newly discovered circumstances.

Key holdings

1. Recognition and enforcement granted (2013). There was no evidence of any ground under Article V(1)(a)–(e). The bad-faith allegations did not show a breach of public policy: the SCC tribunal had already examined the delivery of the acceptance act and whether the design complied with the contract, and a Russian court may not review the award on the merits (Article 243(4) of the Arbitrazh Procedure Code). First-instance ruling of 15 August 2013, pp. 4–6
2. Arbitrator William E. Butler's separate opinion did not support a finding of bad faith. It only set out his view on whether the contractor could be replaced at the design stage. Ruling of 15 August 2013, p. 6
3. Cassation appeal dismissed. Pulkovskaya's arguments amounted to a review of the award on the merits. The public policy exception applies only where enforcement would produce a result unacceptable to the Russian sense of justice, and enforcing payment of a contract debt, interest and costs does not do so. The stay of enforcement ordered on 29 August 2013 was lifted. Cassation ruling of 6 November 2013, pp. 5–6
4. Review admissible. The court rejected HOCHTIEF's request to terminate the review proceedings. The application sought review of a Russian enforcement ruling, not annulment of the Swedish award, so the review was limited to whether the award could be enforced in Russia. Ruling of 31 October 2018, p. 2
5. The criminal judgment binds the court. The Oktyabrsky District Court of Saint Petersburg (judgment of 16 June 2017, case No. 1-3/2017, in force from 13 June 2018) convicted HOCHTIEF's former general director and employees of attempted fraud under Article 159.4(3) of the Criminal Code. It found that the design documentation did not comply with the contract, that the addendum to the design brief of 25 October 2011 was forged, that covering letter No. 71 was forged together with Iliodorova's signature, and that the SCC tribunal was misled. Under Article 69(4) of the Arbitrazh Procedure Code, these findings bind the court. Ruling of 31 October 2018, pp. 5–8
6. Recognition refused on public policy grounds (Article V(2)(b) of the Convention; Article 244(1)(7) of the Arbitrazh Procedure Code). An award based on forged documents breaches fundamental principles of Russian law. The court set aside the ruling of 15 August 2013 on newly discovered circumstances and refused recognition and enforcement of the award. Ruling of 31 October 2018, pp. 9–10

Procedural history

1. 29 December 2010Project management contract concluded. Clause 8.4.2 provides for SCC arbitration in Stockholm before three arbitrators, in English.
2. 11–19 April 2012HOCHTIEF's payment claim of 11 April 2012 is rejected by Pulkovskaya on 19 April 2012.
3. 4 April 2013SCC award in case No. V(071/2012) upholds HOCHTIEF's claim; William E. Butler issues a separate opinion.
4. 15 August 2013The Arbitrazh Court of Saint-Petersburg and Leningrad Oblast recognises and enforces the award (operative part announced 8 August 2013). Writs of execution are issued on 22 August 2013.
5. 6 November 2013The Federal Arbitrazh Court for the North-Western District dismisses Pulkovskaya's cassation appeal and lifts the stay of 29 August 2013.
6. 28 December 2016The court orders RUB 316,063,960.72 to be transferred from its deposit account to the bailiffs' account for HOCHTIEF. The funds arrive on 14 February 2017.
7. 16 June 2017The Oktyabrsky District Court of Saint Petersburg convicts HOCHTIEF's former managers of attempted fraud against Pulkovskaya (in force 13 June 2018).
8. 10 July 2018The Thirteenth Arbitrazh Appellate Court declares HOCHTIEF bankrupt (case No. А56-116888/2017) and appoints Ivan Vladimirovich Babenko as bankruptcy manager.
9. 31 October 2018On review for newly discovered circumstances, the court sets aside the 2013 ruling and refuses recognition and enforcement (operative part announced 25 September 2018).

Tribunal, counsel and experts

Decided by

• M.A. Rakcheeva Judge, Arbitrazh Court of Saint-Petersburg and Leningrad Oblast
• O.Yu. Nefedova Judge, Federal Arbitrazh Court for the North-Western District (presiding judge)
• M.G. Vlasova Judge, Federal Arbitrazh Court for the North-Western District
• R.V. Kazantseva Judge, Federal Arbitrazh Court for the North-Western District
• S.M. Krotov Judge, Arbitrazh Court of Saint-Petersburg and Leningrad Oblast

For the claimant

Bankruptcy manager · A.V. Zhuk

For the respondent

A.T. Ibragimov · S.I. Metzger · E.V. Safonova · A.V. Khodyrev · A.V. Kuznetsov · I.I. Dubrovskaya · D.S. Petrova

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Keywords

• HOCHTIEF
• Pulkovskaya
• New York Convention
• Article V(2)(b)
• public policy
• recognition and enforcement
• SCC award
• Stockholm
• newly discovered circumstances
• fraud
• forged evidence
• criminal judgment
• res judicata of criminal findings
• bad faith
• no review on the merits
• project management contract
• Mercedes-Benz and Porsche dealer centres
• Russia

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