Commercial Court of Central District of Russia denies recognition of award that had been voluntarily executed

In Case: № А624805/2014, the Commercial Court of the Central District of Russia considered an appeal against a decision denying recognition and enforcement of an arbitral award.

Maxim Kulkov (Managing Partner) and Elena Zaltser (Associate), KK&P

The Commercial Court of the Central District of Russia has recently upheld a ruling of the Commercial Court of Smolensk Region in which it denied recognition and enforcement of an arbitral award.

The claimant, a Ukrainian company, sought to enforce an award granted by the International Commercial Arbitration Court under the Ukrainian Chamber of Commerce (ICAC) with a Ukrainian seat in the Commercial Court of Smolensk Region (Russia).

By the award, the respondent, a Russian company, was ordered to pay for goods received under a delivery contract. The respondent paid RUB8,320,000 and provided documents evidencing the payment. It subsequently stated that part of the sum was to cover future delivery contracts, while the rest was in voluntary satisfaction of the award.

The claimant argued that, as the respondent had not mentioned what the payment comprised, when it made payment, it was up to the claimant to decide what the payment represented. The claimant contended that the payment covered obligations under the new contracts between the parties, rather than being made in voluntary execution of the award.

The Smolensk court denied recognition and enforcement of the award, finding that the award had been voluntarily executed. The court held that, if the purpose of a particular payment was not indicated, then the payment had to be put towards the obligations that had already been incurred and which had been confirmed by an arbitral award. Accordingly, the respondent’s payments were deemed as the execution of the award even if the respondent failed to indicate the purpose of the payment.

The claimant appealed to the Commercial Court of the Central District of Russia, which upheld the ruling of the Smolensk Court.

Case: № А624805/2014 (Commercial Court of the Central District of Russia).

This article has previously been published by Practical Law Arbitration on 06 May 2015.