24.03.2021 | Articles
Russian case law in 2020 on recognition and enforcement of foreign judgments under reciprocity rule

Recognition and enforcement of foreign judgments (‘R&E’) is a persistent problem of Russian case law. Different obstacles still arise even when judgments, filed for R&E in the Russian Federation, are made by courts of countries which are contracting parties to multilateral conventions (e.g., the Minsk Convention 1993, Kiev Convention 1992) or bilateral treaties on legal assistance and legal relations in civil, family and criminal matters. Currently, there are circa 30 such bilateral treaties entered into by Russia.

One of the major problems of Russian case law related to private international relations is enforceability of judgments from the countries which have no special treaties on reciprocal R&E of judgments with Russia. Surprisingly enough, those are the world leading economies of the Western Europe, the US, Canada and Japan.

This is when a principle of reciprocity appears on the scene. The principle derives from an even older custom of international comity (comitas gentium, comity) which requires states to treat foreign legal order with courtesy. However, some legal scholars claim that the reciprocity and comity are different conceptions. The principle of comity means non-binding customs that states voluntarily follow for reasons of etiquette, convenience, and the maintenance of good neighborly relations. Whereas the reciprocity allows recognition of rights acquired in a foreign state only if that state allows recognition of rights arising in the first state.

This article is devoted to how Russian courts applied these principles in 2020.

LEGAL REGULATION OF R&E PROCEEDINGS

Briefly, the algorithm of R&E in Russia is the following:

  1. Determine whether there are any relevant rules in a multilateral convention if both the Russian Federation and the country of judgment’s origin are contracting parties to the respective convention;
  2. Determine whether there are any relevant rules in a bilateral treaty between the Russian Federation and the country of judgment’s origin (if any);
  3. According to some Russian case law and legal scholars, an unwritten rule of reciprocity shall be applied as a ‘last resort’ in case if no international treaties are present. However, there are certain difficulties in its application which are described below.

It is interesting to note that sometimes Russian courts apply the New York Convention 1958 in cases connected with R&E of foreign judgments despite the fact that its scope does not cover enforceability of state courts’ decisions.[i]

The legal framework for R&E of judgments in Russia besides international treaties is established by special procedural rules. As a general rule,

  • Chapter 45 of the Civil Procedural Code of the Russian Federation (‘CivPC’) is applicable, and general jurisdiction courts have jurisdiction if at least one of the parties to a civil dispute is a natural person (not being an individual entrepreneur as well); and
  • Chapter 31 of the Commercial (Arbitrazh) Procedural Code of the Russian Federation (‘ComPC’) is applicable, and commercial (arbitrazh) courts have jurisdiction if parties to the dispute are legal entities.

Despite the rules of the two procedural codes are, for the most part, similar, there are some differences. According to art. 241(1) of the ComPC, the decisions of courts of foreign states shall be recognised and enforced in the Russian Federation by the commercial courts if the R&E of such decisions is envisaged in (1) an international treaty of the Russian Federation and (2) federal law. Meanwhile, art. 409(1) of the CivPC mentions only an international treaty as a ground for R&E.

Unfortunately, such deficiency of the CivPC has resulted in the previous practice of the Supreme Court of the Russian Federation (‘SC’), when the SC refused to recognise and enforce the German judgment on the grounds that no relevant international treaty existed between Russia and Germany.[ii] In addition, as will be shown below, the courts of general jurisdiction tend to construe the procedural rules discussed more strictly than the commercial courts.

RULE OF RECIPROCITY

Now, a reciprocity principle is established only in art. 1(6) of the Russian Law “On Insolvency (Bankruptcy)”. However, it does not mean that only decisions on insolvency (bankruptcy) cases may be recognised on the basis of reciprocity. In reality, decisions on numerous categories of cases were recognised and enforced in Russia based on this principle. It should be mentioned that decisions of higher instance courts are technically not mandatory for lower courts due to the lack of stare decisis principle in Russia. Nevertheless, they often provide useful guidelines for the lower courts on interpretation of statutes.

Earlier in its practice, the now dissolved Supreme Commercial Court of the Russian Federation (‘SCCpointed out that the principles of international comity and reciprocity are an integral part of the legal system of the Russian Federation.[iii] This position corresponds to the principle of the priority of international law over national law, as enshrined in art. 15(4) of the Constitution of the Russian Federation (‘Constitution’).

As it was stated above, litigants trying to refer to and apply the reciprocity rule in state courts of Russia often face different issues. Probably the greatest one of them is a problem of determining which of the two countries’ courts shall make the so-called ‘first step’. Thus, some of the Russian courts noted that it was necessary to check whether courts of the other country had reciprocally enforced Russian judgments previously. Meanwhile, there is still no certain criteria regarding checks on the reciprocity rule by Russian courts. Assessment is done on a case-by-case basis. In some of them, no evidence of reciprocal enforcement is required by the court while other courts refuse to enforce foreign judgments and mention that the applicant has not presented any evidence that Russian courts’ judgments were recognised in the other country.[iv] This may lead to an endless circle – if a foreign court’s judgment is not enforced in Russia due to the lack of enforced Russian courts’ judgments in the foreign country, then the next time foreign country’s court may refuse to enforce a Russian judgment because of the Russia’s previous refusal.

APPLICATION OF RECIPROCITY RULE IN RUSSIAN CASE LAW DURING 2020

Decisions applying reciprocity rule

  1. In our opinion, the Commercial Court of Moscow provided the exemplary reasoning for R&E of the judgment of the District Court of Amsterdam. The court pointed out that the grounds for recognition listed in art. 241 of the ComPC are not exceptional cases. Moreover, art. 244(1) of the ComPC containing the numerus clausus of the grounds for refusal of R&E does not provide such ground as absence of the international treaty and/or the federal law. The fact that the Dutch courts have previously recognised the decisions of Russian courts is confirmed by the previous practice of the SCC.[v]
  2. The Commercial Court of Moscow rendered an extremely noteworthy judgment (upheld by the Commercial Court of Moscow District). Although there is no international treaty between the UK and the Russian Federation, the Court determined Partnership and Cooperation Agreement 1994 between the EU and Russia as an applicable treaty. Moreover, the Court stated that Russia is a party to numerous international conventions and agreements which provide for the rights of persons to a fair and public hearing by an independent and impartial court. The purpose of R&E is the protection and defence of human and civil rights and freedoms. It implies mutual cooperation of states on the recognition of the rights and interests of individuals, and the rights of such individuals may be determined not only by foreign law but also by a decision of foreign court (which corresponds to art. 46(1) of the Constitution, guarantying everyone judicial protection of his/her rights and freedoms). Therefore, the Court concluded that the decision of the High Court of Justice is in any case subject to recognition on the basis of the subsidiarily applicable principle of reciprocity.[vi]
  3. Similarly, the Ninth Appellate Commercial Court recognised the decision of the U.S. court, as the applicant provided evidence of the R&E of judgment made by the Khamovnichesky District Court of Moscow and the judgment of the Commercial Court of Moscow by the United States District Court for the Southern District of New York.[vii]
  4. In the following decision, the Eighth Cassation Court of General Jurisdiction stated that the judges would be able to establish reciprocity in the practice of foreign courts independently of applicants. The Court stated that only the absence of a relevant international treaty could not be the ground for dismissal of the application for enforcement of the Austrian judgment if Austrian courts recognise the binding nature of Russian judgments on the basis of the principle of reciprocity. Moreover, the Court stated that even if the applicant failed to prove it, the first instance court should had requested him to provide evidence of the enforcement of judgments on the basis of reciprocity or to request the relevant information from the Russian Ministry of Foreign Affairs and the Austrian Ministry of Foreign Affairs.[viii]
  5. The Second Appellate Court of General Jurisdiction made an important clarification in its ruling, stating that for recognition of a foreign court decision on the basis of reciprocity it shall be established that the courts of the relevant state recognise Russian judgments on a similar category of lawsuits. However, neither the Court, which sought clarification from the Ministry of Foreign Affairs and Ministry of Justice of the Russian Federation, nor the applicant were able to establish reciprocity in the Finnish court practice regarding Russian judgments on civil disputes. By virtue of national law, Finland unilaterally enforces only Russian judicial acts in alimony cases. Therefore, the Court denied the application for R&E of Finnish judgment.[ix]
  6. It is notable that recognising the court’s decision from the Republic of South Ossetia, the Commercial Court of Moscow simply acknowledged the existence of the reciprocity principle, without establishing reciprocity in the case law of the respective republic on a similar category of civil cases.[x] Such an approach may be explained with the fact that Russia is one among few countries which recognise the existence of the Republic of South Ossetia as a political entity, and it would be inconsistent on the part of Russian courts to prevent economic cooperation between commercial organizations of the two states.

DECISIONS DENYING APPLICATION OF RECIPROCITY RULE

Reasoning of all the following judicial acts is based on strict interpretation of the provisions of art. 409(1) of the CivPC. Moreover, such an approach denying recognition on the ground of lack of an international treaty frequently leads to violation of the applicant’s rights. For example, first instance courts of general jurisdiction tend to reject an application at the stage of acceptance without proceeding on the merits. While the existence of reciprocity is a legally significant circumstance which is subject to substation only directly in the course of proceedings on the merits. Thus, the applicant gets the right to present his/her position in full only at the stage of appeal against such a refusal in a higher court.

  1. The City Court of Moscow refused to enforce the foreign judgment on the ground of lack of the according bilateral treaty between Russia and the British Virgin Islands. The Court mentioned as well that the reciprocity rule was not prescribed by the provisions of CivPC.[xi]
  2. The Court used the same reasoning in another case, emphasizing that the applicant had not proved reciprocity in the Dutch case law.[xii] In our opinion, this refusal to recognise the decision of the District Court of Amsterdam seems extremely unfair and unlawful. Had the Court itself, as indicated in the Case No. 4 above, engaged in determining of the reciprocity, it would have established it as in the Case No. 1. Thus, the refusal violated the applicant’s right to a fair trial and to judicial protection.
  3. A similar situation occurred in the case resolved by the Fourth Appellate Court of General Jurisdiction that refused to recognise the U.S. court’s decision in the absence of the according treaty between the two countries. However, if the Court had recognised the existence of reciprocity, as the court of another circuit held in the Case No. 4 above, it would have been possible to establish the reciprocity in U.S. judgments as in the Case No. 3. All these mistakes led to another unfair judgment.[xiii]
  4. Again, we face the analogous arguments with regard to the decision of the District Court of North Holland recognition of which was denied by the Ninth Cassation Court of General Jurisdiction. The applicant’s pleadings on the necessity of applying the European Convention on Human Rights 1950 and the Partnership and Cooperation Agreement in this case were dismissed, unlike in the Case No. 2 above where the Moscow Commercial Court successfully applied them.[xiv]
  5. In the last case, the First Appellate Court of General Jurisdiction (on the grounds described above) refused to recognise the judgment of the High Court of Justice to dissolve the marriage. Thus, the right to a fair trial of the former spouse, who filed the according application with the Court to divide the jointly acquired property in the Russian territory, was violated. This contradicts the logic expressed in the Case No. 2 and infringes the former spouse’s pecuniary interest.[xv]

MAIN CONCLUSIONS

  1. As our study has shown, in 2020 courts of general jurisdiction continue to construe strictly the provisions of CivPC which do not expressly provide for the recognition of judgments on the basis of principle of reciprocity. However, commercial courts manage to apply the latter principle more often despite the fact that the ComPC does not contain such a rule either. It appears that the commercial courts prefer the approach that this principle is derived not from the procedural codes but rather from the Constitution and international conventions to which the Russian Federation is a party. Rules guaranteeing the right to a fair trial and judicial protection shall be interpreted as applicable to such R&E proceedings.
  2. It seems that the current situation when some Russian state courts expect of the other state’s courts to act first does not improve cooperation between authorities of different countries. Neither it promotes assurance of parties from different countries that in case of success in litigation in one state, the state courts of the other will enforce the respective judgment. All this leads to increase in transactional costs of the parties who are forced to enter into an arbitration or choice of court agreement in favour of a third country’s court to ensure that the prospective judgment will be enforced.
  3. Practical recommendations for applicants seeking recognition of foreign judgments from Russian courts are that in most cases they should be prepared to prove that the courts of the country of origin of the decision had previously recognised decisions of Russian courts. At the same time, the case law shows that it is advisable to demonstrate that the reciprocity has been developed in cases of a similar category. It is noteworthy that in some cases the courts are also engaged in establishing the reciprocity by applying to the relevant public authorities. However, this should not be treated as a general rule.

It seems that the current difference in the application of reciprocity principle by the courts of general jurisdiction and commercial courts could best be resolved by adopting an abstract clarification like a resolution of the Plenum of the SC which is the highest instance for both branches of the courts. Such clarifications should interpret the provisions of procedural laws broadly, facilitating the goal of recognising a foreign decision even in the absence of an international treaty. This seems to be the most plausible way to eliminate the current contradictions in case law because the adoption of the Unified Civil Procedural Code of the Russian Federation, the concept of which directly enshrines the principle of reciprocity as a basis for R&E, has been postponed indefinitely, and there have been no news on the according draft law in the past few years. In 2019, Russia signed the Final Act to the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters. However, at the moment this Convention has been ratified by and has entered into force only for two countries, Uruguay and Ukraine.[xvi] The Convention has the potential to establish a universal regime for the R&E but it is still unclear how soon, if at all, Russia and other major countries will join it. All this leads to the conclusion that no changes in the Russian courts’ approach to the R&E based on the principle of reciprocity can be expected.


 


[i] Decisions of the Commercial Court of the North Caucasus District as of 17.11.2015, case No. A53-9581/2015.

[ii] Ruling of the SC as of 01.12.2009 No. 4-G09-27.

[iii] Ruling of the SCC as of 26.07.2012 No. VAS-6580/12, case No. А40-119397/11-63-950.

[iv] Ruling of the SCC as of 19.05.2008 No. 5105/08, case No. А40-73830/06-25-349.

[v] Ruling of the Commercial Court of Moscow as of 18.12.2020, case No. A40-270774/2018

[vi] Ruling of the Commercial Court of Moscow as of 17.07.2020, case No. A40-29989/2020.

[vii] Decision of the Ninth Appellate Commercial Court as of 24.09.2020 No. 09AP-45250/2020, case No. А40-308642/2018.

[viii] Decision of the Eighth Cassation Court of General Jurisdiction as of 23.04.2020 No. 88-4957/2020.

[ix] Appellate Ruling of the Second Appellate Court of General Jurisdiction as of 23.12.2020 No. 66-1303/2020.

[x] Ruling of the Commercial Court of Moscow as of 31.07.2020, case No. A40-297362/2019.

[xi] Ruling of the City Court of Moscow as of 03.07.2020, case No. 3М-0568/2020.

[xii] Ruling of the City Court of Moscow as of 11.08.2020, case No. 3М-0036/2020.

[xiii] Appellate Ruling of the Fourth Appellate Court of General Jurisdiction as of 22.12.2020, case No. 66-2498/2020.

[xiv] Ruling of the Ninth Cassation Court of General Jurisdiction as of 31.03.2020 No. 88-2141/2020.

[xv] Appellate Ruling of the First Appellate Court of General Jurisdiction as of 08.07.2020, case No. 66-2905/2020.

[xvi] https://www.hcch.net/en/instruments/conventions/status-table/?cid=137