When two judgments are not better than one: BVI Court refuses to enforce Russian judgments at common law
On 26 October 2022, the BVI Commercial Court handed down its decision in Nokian Shina LLC v (1) Andrei Valerevich Smyshliaev and (2) Olga Borisovna Smyshliaeva, refusing to enforce two Russian judgments at common law.
The underlying dispute concerned a sale and purchase agreement entered into by the Claimant on the one hand and a Russian company called RusshinaTyumen LLC. The Claimant alleged that another company within the group (Track LLC) had provided a guarantee although the defendants’ position was that the guarantee was forged. Track was subsequently declared bankrupt.
The Claimant’s claim in the BVI was a claim to enforce two Russian judgments against the defendants. The interesting thing about these judgments, however, is that they were not simple judgments for a money sum but were two judgments obtained in Russian bankruptcy proceedings and as a result of the Russian concept of “subsidiary liability”. This principle enables creditors, in certain circumstances, to pursue those alleged to have been in control of insolvent companies prior to insolvency if the companies have insufficient assets to satisfy creditors’ claims.
The relevant judgments in this case which the Claimant was trying to enforce were essentially (1) a judgment finding that the defendants were subject to subsidiary liability in Track’s insolvency and (2) a judgment which then assigned the bankruptcy trustee’s right to seek to recover assets for the insolvent estate to creditors (again a procedure only available in Russian bankruptcy proceedings).
The issue before the BVI court was whether the judgments of the Russian insolvency court were amenable to enforcement in the BVI at common law through the mechanism of a common law debt claim.
The Claimant argued that taken together the judgments clearly amounted to a judgment for a definite sum in its favour against the Defendants. The Second Defendant (the First Defendant did not defend the claim) argued that the judgments must, however, be construed separately and in doing so, it is apparent that the judgments are unenforceable as the March judgment is not a judgment made in favour of the Claimant and the June judgment is not a judgment for a definite sum. The Second Defendant further argued that judgments made in the context of insolvency proceedings in other countries should not generally be enforceable as a matter of public policy.
The Court applied the well-known Dicey Rule for common law enforcement of foreign judgments: (i) is the judgment for a definite sum of money (ii) is the judgment final and conclusive and (iii) are there any public policy or other reasons why the judgment should not be enforced.
The Court held that the June 2019 judgment was not a judgment for a definite sum of money and was thus not enforceable. As a result, the Claimant could not enforce it in the BVI. The court noted that without the June 2019 judgment, the Claimant could not demonstrate that the March judgment was made in its favour. The March 2019 judgment was made in favour of Track, through its insolvency or bankruptcy receiver and not in favour of the Claimant. The Court held that it was not enough for the June judgment to specify sums of money, it needed to order that the Second Defendant pay such sums to the Claimant.
While the Court accepted that the claim satisfied the second and third prongs of Dicey Rule 52, the Court held that the failure of the first prong, that the judgment is for a definite sum of money, was determinative of the Claimant’s claim.
Harneys acted for the successful defendant.
This judgment serves as a good reminder of the principles that underpin the Court’s jurisdiction to enforce foreign judgments at common law.