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May 2013: Three Quinn Emanuel Victories for Ukrainian Businessman

May 2013

Quinn Emanuel recently won a complex, international commercial arbitration and related proceedings in Russian courts for Group DF, an entity controlled by Ukrainian businessman Dmitry Firtash.

The conflict arose from an illegal sale of EMFESZ, a leading gas trader with annual revenues of over $1 billion, and a subsidiary of Group DF. In 2009, 100% of the trader-owned by Mabofi Holdings Limited (which belongs to Group DF) was sold by Istvan Goszi for $1 to a Swiss company, RosGaz, under a power of attorney issued in 2004 in a different transaction. The sales contract contained an arbitration clause in favor of the International Commercial Arbitration Court at the RF Chamber of Commerce and Industry (ICAC).

Mabofi challenged the transaction in the Hungarian courts. The Hungarian courts held that the contract and the arbitration clause were unenforceable due to Goszi’s lack of authority to enter into the contract. RosGaz responded by filing a claim with ICAC seeking a declaration of validity of the contract. Mabofi challenged jurisdiction of the Tribunal, but the Tribunal ruled it had competence to resolve the dispute. Mabofi retained Quinn Emanuel to challenge the jurisdictional award and to lead Mabofi’s defense at the ICAC hearings on the merits.

Our position was as follows:

     The judgment recognizing the contract and the arbitration clause as a nullity is an award of non-property character that is subject to recognition in Russia on the basis of the Treaty on Mutual Legal Assistance between the USSR and Hungary without any special procedure;

     Recognition of such judgments without any special procedure is envisaged in Art. 10 of the Decree of the Presidium of the Supreme Soviet of the USSR No. 9131 of June 21, 1988;

     No other approach would be consistent with generally recognized principles of international comity and reciprocity; and

     Recognition of foreign judgments in Russia without any special procedure implies that such judgments are of the same legal force as judgments of arbitrazh (state commercial) courts in Russia and are of obligatory character.

The Moscow Arbitrazh Court dismissed the application to set aside the jurisdictional award, but the Federal Arbitrazh Court of the Moscow District upheld Mabofi’s arguments and sent the case back for retrial. Following remand, the Tribunal dismissed RosGaz’s lawsuit. In view of this victory in the main ICAC proceedings, Mabofi dropped, as moot, its challenge to the jurisdictional award.

RosGaz sought to set aside the final award in the Moscow Arbitrazh Court. The courts of first and cassation instance, however, upheld the decision for Mabofi and dismissed the challenge.

This case confirms that Russian courts increasingly take into account the existence and contents of foreign judgments when trying cases. Furthermore, the judgments of Hungarian courts had significant impact on the ICAC arbitration too. Having decided on its competence to consider the case, the Tribunal rejected the claim and resolved the dispute on the merits in the same manner as the Hungarian courts.