The case of the day is Yukos Capital S.A.R.L. v. Oio Samaraneftegaz (2d Cir. 2014). In 2004, Yukos loaned Samaraneftegaz almost 2.5 billion rubles. The loan agreement had an arbitration agreement providing for arbitration before the ICC. Samaraneftegaz defaulted, and Yukos demanded arbitration. Samaraneftegaz failed to participate, and eventually Yukos won a judgment for the full principal amount of the loan, plus more than 664 million rubles in interest and approximately $700,000 in fees and the costs of arbitration. The Russian courts refused recognition of the award, but the District Court in New York confirmed the award, entering a dollar-denominated judgment that used the exchange rate of the date of the award. Samaraneftegaz appealed.
Samaraneftegaz argued that the court should have dismissed the case under the doctrine of forum non conveniens in favor of a Russian forum. The claim was that Samaranaftegaz was unable to obtain the testimony of a witness, Victor Grekhov, in the United States. But Samaranaftegaz made no offer of proof of what Grekhov would have said, and thus it failed to show prejudice, as required to challenge a denial of a forum non conveniens motion after a case has been decided on the merits.
Samaraneftegaz also challenged the court’s personal jurisdiction on the grounds that the agreement to arbitrate in New York was invalid. It argued that the power of attorney that had been used to authorized a representative to enter into the agreement to arbitrate was invalid because it was backdated. The judge rejected this argument because Samaraneftegaz had not shown that it was correct under Russian law. The court rejected for similar reasons the argument that the agreement to arbitrate in New York was improper under The Russian “abuse of right” doctrine. I wonder whether the arbitrators were asked to decide these issues, and if so, whether the questions really were for them rather than for the court.
Samaraneftegaz also argued that the award should not be enforced under Article V(1)(b) and (2)(b) of the New York Convention, as the Russian courts had held. The arbitration was held in the United States, and therefore, challenges under Article V(1)(b) were to be decided under US due process standards. Thus the Russian court’s conclusion that the arbitration violated Russian standards of due process was neither here nor there; and the factual findings that underlay the Russian decision, even if accepted, did not show a violation of US standards of due process.
Similarly, since the United States was the forum, the question under Article V(2)(b) is whether the award is contrary to US public policy. So the Russian courts’ decision that the award was contrary to Russian public policy was not relevant. But more to the point, Samaraneftegaz failed to raise the argument with the arbitrators, and therefore it had forfeited the argument.
While there is no rule strictly requiring courts to enter damages awards in dollars, that’s the traditional practice, noted in § 823 of the Restatement (Third) of Foreign Relations Law. So there was no error in converting the award from rubles to dollars. The date to be used for determining the exchange date is the date of accrual of the cause of action. Since the action here was for recognition and enforcement of the award, the action accrued on the date of the award.
Thus the court affirmed the judgment in all respects.