Russian Client Recovers Over 16,5 Mln From US Defendants

The attorneys of Jus Privatum, in association with our U.S. colleague, Robert Jeffries, represented our Russian client, a limited liability company headquartered in the city of Belgorod, Russia, in the US district court in Virginia in the matter related to our client’s petition for confirmation and enforcement of three arbitral awards from the International Commercial Arbitration Court at The Chamber Of Commerce and Industry of the Russian Federation (ICAC) in favor of our Russian client against two defendants, both being Virginia limited liability companies.

Confirmation of the arbitral awards was requested in accordance with the provisions of the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards (1958).

Two of the awards equal to $15,596,815.42 and are against the first respondent and one of the awards against the second respondent is for $1,084,471.80.

The relationship between the parties arose from several loan agreements and their addendums signed by the parties between 2007 and 2009, where under the petitioner lent a total of USD 15 Mln to the first respondent and a total of USD 1,8 Mln to the second respondent. Both respondents then defaulted on each of these loans.

Following the ICAC legal procedures that took place in Russia back in 2014, ICAC rendered three arbitral awards in favor of our client against the two US respondents.

Both respondents did not participate in the ICAC arbitration proceedings in any way, despite the notice of proceedings was timely delivered to the respondents via DHL pursuant to the ICAC Rules.

In August 2015 our Russian business litigation attorneys timely filed the petition for confirmation of the arbitral awards and entry of judgment to enforce the three ICAC awards to the district court in Virginia.

Respondents in their turn filed their opposition arguing that the enforcement should be refused because (1) they were not able to present their case at the Russian arbitration and (2) enforcement of the three arbitral awards would be contrary to the public policy of the United States.

The district court has considered the case and has held a decision after an oral argument between the parties in December 2015 and further briefing from the parties that took place in January 2016.

After careful consideration of the case the district court decided that the respondents have failed to demonstrate that they were unable to present their case at arbitration proceedings in Russia since the respondents had proper notice of the ICAC arbitrations, so they had “the opportunity, either directly or through a representative, to file evidence or argument with the ICAC either in person or remotely”.

The court has also resolved that due to respondents’ failure to participate in the arbitration, “respondents are precluded from raising defenses that could have been presented at the ICAC arbitrations”. Since the respondents did not raise such arguments during the Russian arbitration, they are therefore waived their right to argue on public policy grounds in the US district court. These were the matters to be resolved by the ICAC arbitrators in Russian proceedings.

The district court in Virginia has ruled that respondents failed to demonstrate that the enforcement of the three ICAC arbitral awards would violate “explicit public policy” of the US. The court has pointed that public policy “is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interests”. Respondents have not identified any law or legal precedent that supports their assertion that that enforcement of arbitral award would “violate the US most basic notions of morality and justice”. Instead respondents seek and improper substantive review of the three ICAC arbitration awards which contradicts “the United States’ strong public policy favoring arbitration”, has ruled the court.

As a result the district court decided that the respondents failed to demonstrate that the court should refuse to confirm and enforce the three arbitral awards rendered by ICAC against them. Therefore the court has granted the client’s petition for confirmation and entry into judgment.

The total amount of money recovered from the US defendants exceeds USD 16,5 Mln.

USD 16,5 Mln