The Supreme Court of Uzbekistan ruled on the recognition and enforcement of a Russian arbitral award in the context of US sanctions.
EU and US sanctions against Russia are not an obstacle to the recognition and enforcement of arbitral awards issued by Russian courts – a case from Uzbekistan.
In Case No. 4-10-2225/540, JSC “Uzbekneftegaz” appealed against the decision of the Tashkent City Court (dated 13 January 2023) on the recognition and enforcement of an arbitral award issued by the Russian Arbitration Centre (hereinafter – “RAC”) in favour of the Russian JSC “Zagorsk Pipe Plant”.
According to the award, the Uzbek company is obliged to pay USD 13,142,317.80 as debt, USD 375,832.21 as interest for the use of funds and USD 71,733.48 as arbitration fee.
“Uzbekneftegaz” appealed to the Supreme Court of Uzbekistan on the grounds that Gazprombank, which was named as the debt collecting bank, was subject to US sanctions, and therefore enforcement of the award would be contrary to the public policy of the Republic of Uzbekistan.
The Court found no reason for refusing to recognise and enforce the RAC award against Uzbekneftegaz”, as the recognition and enforcement of this award does not contradict and/or threaten the public policy of the Republic of Uzbekistan.
In its ruling, the Court refers to Article 256 (1) of the Economic Procedural Code of the Republic of Uzbekistan (EPC):
“The Commercial Court of the Republic of Uzbekistan shall refuse to recognise and enforce a foreign arbitral award upon the application of the party against whom it is directed, if that party submits evidence that:
1) the parties to the arbitration agreement were incapable of acting to any extent under the law applicable to them, or the arbitration agreement is invalid under the law to which the parties have subjected the agreement or, in the absence of such an indication, under the law of the country where the award was made;
2) the party against whom the award has been made was not duly served with notice of the appointment of the arbitrator or of the arbitral proceedings, or was otherwise unable to present his defence; or
3) the award relates to a dispute which is not covered by or does not fall within the terms of the arbitration agreement or the arbitration clause in the contract, or contains decisions on matters which are not within the scope of the arbitration agreement or the arbitration clause in the contract, unless the decisions on matters which are covered by the arbitration agreement or the arbitration clause can be separated from those which are not covered by such agreement or clause; or
4) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, in the absence of such agreement, with the law of the country in which the arbitration took place; or
5) the award has not become final as to the parties or has been set aside or suspended by a competent authority of the State in which it was made or of the State whose law governs it; or
6) the dispute was decided by an incompetent foreign arbitrator.”
“Uzbekneftegaz” did not submit any evidence to support its arguments. As a result, the Tribunal did not find any ground for refusing to recognise and enforce the RAC Award against “Uzbekneftegaz”, since the recognition and enforcement of this Award does not contradict and/or threaten the public policy of the Republic of Uzbekistan.
Therefore, in accordance with Articles 118, 278 and 281 of the EPC, the Economic Disputes Chamber of the Supreme Court dismissed the appeal and left it without satisfaction. For this reason, the court ruling of 13 January 2023 remained unchanged.
It should be noted that the US sanctions against “Gazprombank” are not directly affecting the fulfilment of the contractual obligations between the parties. “Gazprombank” acts only as a payment instrument that can easily be replaced by another. The respondent invoked the alleged violation of sanctions and the violation of public policy in its claim only to avoid the payment obligation – its main contractual obligation.
Nevertheless, the case serves as a reminder that EU sanctions apply within the jurisdiction (territory) of the EU; to EU nationals or residents doing business in the EU. The same rules apply to the US. Thus, EU and US sanctions do not apply in third countries and decision that could not be enforced in the EU or US might be enforced in those third countries, which is a fact that especially companies with worldwide business activities should bear in mind.
Source – https://kdb.legal/en/russian-arbitral-awards-are-still-being-recognised-in-uzbekistan-despite-western-sanctions/