Belgian Court Dismisses Russia’s Attempt to Block Yukos Awards Enforcement Proceedings
Despite the fact that I had initially told myself that I would not write about the Yukos (Yukos) case before 2017, my wish has evaporated after the Brussels Court of First Instance handed down its judgment on the matter earlier than expected (click here, for an analysis of the background of the case).
In short, in its judgment of 9 December 2016, the Brussels Court of First Instance found that Russia’s attempt to block the enforcement of Yukos Universal Ltd (YUL)’s award was inadmissible. Unfortunately (for the sake of the debate) the court therefore didn’t examine the merits of the case.
As I had reported earlier, the Belgian exequatur of the award rendered in YUL’s favour had initially been granted by the Brussels Court of First Instance on 24 June 2015. However, this had been done through an ex parte procedure which did not allow Russia to take part in the proceedings and to make itself heard. Subsequently, Russia filed a third-party opposition against this order for exequatur with the effect that the parties were brought back before the same court for a new hearing and new deliberations.
However, during this new hearing, YUL argued that Russia’s third party opposition was inadmissible. In order to substantiate its argument, YUL relied on the fact that the arbitral tribunal had been seated in the Netherlands and therefore a 1925 bilateral convention between Belgium and the Netherlands on (among other things) the recognition and enforcement of arbitral awards (the Belgium-Netherlands Convention) applied to the enforcement of the award in Belgium. According to YUL, this Belgium-Netherlands Convention explicitly provided that an order granting exequatur of an arbitral award was only subject to appeal and not to third-party proceedings like the one initiated by Russia.
Against this position, the Russian Federation put forward four arguments. All of those arguments, however, were dismissed by the Brussels Court of First Instance. Although those arguments have already been discussed before, I have briefly summarized them below and will give a short explanation of the Court of First Instance’s response.
Firstly, Russia had argued that YUL had explicitly opted to have the arbitral award enforced under Belgian law as it had – in its initial unilateral motion seeking exequatur – opted for an application of Article III of the New York Convention. Thereby, Russia argued that YUL had waived the possibility (under Article VII of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention)) to invoke the application of the Belgium-Netherland Convention.
The Court of First Instance dismissed this argument and found that the New York Convention did not provide for any exclusive application of either Article III or Article VII of the New York Convention. The Court found on the contrary that both provisions had to be read in relationship with one another. Furthermore, quite logically, the Court of First Instance found that the Belgium-Netherlands Convention preempted the application of Belgian law because of the supremacy of international law.
Secondly, Russia also argued that the Belgium-Netherlands Convention was not applicable to the case at hand because it only applied to cases of a civil and commercial nature while this case was first and foremost a tax and expropriation case.
The Court of First Instance dismissed the argument finding that the issue of admissibility in cases of recognition and enforcement of foreign arbitral awards was different from the issue regarding the merits of the case. While the discussion on the alleged tax and expropriation nature of the case could have been analysed if the merits of the case had been examined, this debate did not apply in the discussions on the admissibility of Russia’s third-party opposition.
Thirdly, Russia had argued that the Belgium-Netherlands Convention was only applicable to adversarial proceedings and did not apply to ex parte proceedings as initiated by YUL in 2015. There was, therefore, nothing to prevent Russia from filing a third-party opposition instead of an appeal against the order of 24 June 2015.
The Court of First Instance refused to follow the argument and found that the Belgium-Netherlands Convention only made adversarial proceedings mandatory in cases regarding the recognition of foreign judgments and not in cases regarding the recognition of arbitral awards.
Fourthly and finally, Russia argued that the Belgium-Netherlands Convention had fallen into disuse. Relying on the Vienna Convention on the Law of Treaties as well as case-law from Belgian jurisdictions (which still applied the Belgium-Netherlands Convention), the Court of First Instance ruled that this argument could not be followed as nothing suggested that Belgium had ever attempted to revoke the application of the Belgium-Netherlands Convention in Belgian law. Therefore the Belgium-Netherlands Convention was still fully in force and applicable.
All in all, this judgment is definitely a landmark episode in the enforcement of YUL’s award in Belgium. While it remains to be seen which steps will now be taken by Russia, it will be interesting to see the implications that this judgment will have on the other proceedings (pending before another Chamber of the Brussels Court of First Instance) in which Russia is challenging the legality of the seizures conducted by YUL. Stay posted…
In the meantime, let me wish you a Merry Christmas and a Happy New Year.
José Rafael Mata Dona
February 24, 2017 at 4:58 pmAccording to article 1122 of the Belgian Code of Civil Procedure, it is possible to file a third-party opposition against a judgement delivered by a civil court or a criminal court. The Belgian Constitutional Court has recently held the aforementioned provision as incompatible with articles 10 and 11 of the Belgian Constitution in that it pre-empts the opposition of affected third parties against the order of exequatur of an arbitral award (See its decision n° 21/2017 of Feb 16, 2017).
The Tribunal of First Instance of Brussels recently rejected Russia’s third-party opposition against the order of exequatur of the Yukos Ltd award granted in 2015. The TFI applied a bilateral convention between Belgium and the Netherlands which explicitly provides that an arbitral award is not subject to third-party proceedings. In this regard the TFI considered article VII of the New York Convention, which provides that the New York Convention “shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforcement of arbitral awards entered into by the Contracting States, nor deprive any interested party of any right”.
Would had at that time the admission of Russia’s third-party opposition been incompatible with the Belgian Constitution? To be the case, the bilateral convention between Belgium and the Netherlands should have provided for third-party opposition against the exequatur of arbitral awards. It did not. But had it done, it could have been considered as pre-empting the application of the Belgian law.
After the decision of the Constitutional Court, I ask myself the following question:
Could Russia have foreseen the enforcement of an unfavourable award in Belgium? If so, could Russia have been expected to know the bilateral convention between Belgium and the Netherlands?
For your considerations, I transcript below the rationale of the Constitutional Court in its decision.
“B.6.2 Le règlement judiciaire des conflits et la voie de l’arbitrage sont des modes de règlement des litiges distincts qui obéissent à des règles de procédure différentes. En choisissant l’arbitrage, les parties acceptent de soumettre leur litige à des règles de procédure propres, notamment en ce qui concerne les possibilités de recours contre la sentence arbitrale, en pleine connaissance des avantages et des inconvénients qui découlent de ce choix.
B.7.1. En revanche, les tiers à la convention d’arbitrage n’ont pas choisi ce mode de règlement du litige et ne peuvent donc être réputés en avoir accepté les conséquences sur leurs droits. Or, les possibilités pour les tiers au litige de s’opposer à la présomption de vérité attaché à la décision qui met fin à ce litige, présomption qui peut porter atteinte à leurs droits, varient en fonction du choix procédural posé par les parties et sur lequel les tiers n’ont aucune emprise.”
That being said, Russia filed the third opposition in Belgium against the order of exequatur of the Yukos Ltd award not because it was not a party to the arbitration, which it obviously was. But because the exequatur was granted to Yukos Ltd in Belgium as a result of a unilateral proceeding.
Quentin Decleve
February 24, 2017 at 5:32 pmThank you José.
Indeed, this judgment by the Belgian Constitutional Court will be the topic of a post that I will publish in the coming days.
However, as you rightly point out, I don’t think that this judgment applies to the Yukos case since Russia was not a third party to the arbitration proceedings. In that case, Russia was only a third party to the initial recognition and enforcement proceedings carried out in Belgium.