Key takeaways
New York Convention awards
The Court will recognise and enforce this save in very limited circumstances.
Fraud in the arbitration
This must be conduct dishonestly intended to mislead.
Allegations of fraud
This should be put to the Tribunal or to the supervisory court if they are known at the relevant time.
Hulley Enterprises Ltd & others -v- The Russian Federation [2026] EWHC 456 (Comm)
In an earlier article, we discussed the unsuccessful attempts by the Russian Federation (Russia) to argue that it had state immunity in respect of proceedings to enforce Energy Charter Treaty (ECT) arbitration awards against it: Issue Estoppel and State Immunity: Arbitration | Hill Dickinson.
In these latest proceedings, Russia unsuccessfully sought to challenge enforcement of those ECT arbitration awards on the grounds that enforcement would be contrary to English public policy. The Court ordered that the ECT arbitration awards be recognised and enforced as though they were judgments of the English Court, save the part of the awards dealing with costs and interest on costs.
This is reported to be the largest judgment granted to date by the English Commercial Court, around US$66 billion (inclusive of compound interest on the award of damages), and reflects the English Court’s policy of recognising and enforcing New York Convention (NYC) awards.
The judgment in this case is extremely long and contains a huge amount of factual and other evidence. This article is focused on highlighting some key legal issues arising that will be of relevance in the international arbitration context.
The background facts
The three claimants, Hulley Enterprises Ltd (Hulley), Yukos Universal Ltd (Yukos) and Veteran Petroleum Ltd (Veteran) were referred to collectively as HVY by the Court. HVY sought recognition and enforcement of three ECT arbitration awards (Final Awards), pursuant to ss. 101 and 103 of the Arbitration Act 1996 (1996 Act). The defendant is the Russian Federation (Russia).
HVY are three companies incorporated in the Isle of Man, whose beneficial owners have included various prominent Russian individuals (Russian Individuals). HVY were formerly the majority shareholders in OAO Yukos Oil Company (Yukos).
The underlying dispute related to Yukos, its oil assets in Russia and HVY’s case that Russia unlawfully expropriated those assets in breach of its obligations to them under the ECT. HVY brought claims in arbitration for damages under the ECT, which arbitrations were seated in the Hague, Netherlands. The arbitrations ultimately led to the three Final Awards being made by the Tribunal in favour of HVY, the total value of which was over US$50 billion, plus interest and costs.
After its challenge based on state immunity failed, Russia took a number of other points in its Defence. In essence, these were allegations centred on:
tax fraud by Yukos/the Russian individuals (including bribery and corruption). These allegations overlapped with arguments raised in the ECT arbitration proceedings and
fraud in the ECT arbitration proceedings. These allegations did not overlap with any arguments in the arbitration proceedings, but they did overlap with arguments made in related Dutch court proceedings, being the court with supervisory jurisdiction over the ECT arbitrations and the courts in which Russia had unsuccessfully sought to have the Final Awards annulled.
The Court ordered a trial of preliminary issues.
The law on the public policy objection
Pursuant to ss. 103(1) and (3) of the 1996 Act, recognition or enforcement of an NYC arbitral award may only be refused in very limited circumstances, including on public policy grounds.
The purpose of the NYC is to facilitate the enforcement of arbitration awards, and English law and public policy favour enforcing NYC awards. The threshold for a public policy objection is high. The grounds for refusing enforcement are narrow, and the burden is on the party resisting enforcement to establish that one of the exceptions applies.
Therefore, Russia had to establish that enforcing the Final Awards would be contrary to English public policy. If it did not do so, the Court had no discretion and had to enforce the Final Awards. If Russia did establish the public policy exception, the Court nonetheless had a discretion as to whether to enforce or to refuse enforcement of the Final Awards.
Allegations previously made before the Tribunal
In the context of s.103(3) of the 1996 Act, the Court is bound by the findings of fact and law that were made by the Tribunal. Accordingly, where a defendant asserts that enforcing an award would be contrary to public policy because of a particular fact, or a particular proposition of law, but the Tribunal has already held that the facts were not as alleged or has rejected that proposition of law, the Court will (in the absence of fraud or other vitiating factors) take the Tribunal’s decision as final and binding, and consider whether enforcement would be contrary to public policy on that basis.
If the Tribunal has not ruled on the allegations because the defendant did not raise them before it, but the defendant could and should have raised the allegations before the Tribunal (or at least before the supervisory Court), this may well preclude the defendant from raising the allegations in the context of enforcement proceedings. The Court would have to conclude that the relevant point could and should have been raised at the relevant earlier stage, and that there were no special circumstances which made the application of the principle inappropriate.
If the allegations were raised before the Tribunal and accepted by it, but the Tribunal nevertheless made an award in favour of the party said to be involved in the illegal or immoral conduct, the Tribunal’s findings in respect of the illegality/immorality can be relied on.
Allegations founded on fraud in the arbitration
Where it is alleged that an award has been obtained by fraud or other means contrary to public policy, the conduct in question must be conduct that the Court can describe as conduct dishonestly intended to mislead. This can include dishonest omissions, including the dishonest concealment of documents that should have been disclosed.
If the objection is accepted, the Tribunal’s findings cannot be relied on. The Court should, however, consider whether the objection could and should have been raised before the Tribunal and/or the supervisory court.
Furthermore,
(i) the conduct in question must be that of a party to the arbitration or its privies;
(ii) the conduct must be distinctly pleaded and proved, to the heightened standard of proof that applies to fraud, on the basis of cogent evidence, and
(iii) the standard of proof is not greater than the balance of probabilities but merely reflects human experience that an event is usually more readily explained by error than dishonesty.
In addition, the fraud must be material in that it has a sufficiently close degree of connection with the award, and the alleged misconduct should have caused substantial injustice to the innocent party.
The Commercial Court decision
The Court found that Russia had not established any of its allegations of fraud and misconduct to the requisite standard, such that the enforcement of the Final Awards would be contrary to English public policy. The only part of the Final Awards that the Court did think should be set aside was that in respect of costs and interest on costs. However, the Court could order recognition and enforcement of part of an award. The parties had agreed that in principle. Therefore, the remainder of the Final Awards should be recognised, pursuant to s.103(1) of the 1996 Act, and enforced as though they were judgments, pursuant to s.103(3) of the 1996 Act.
The Court concluded by highlighting that its decision did not mean that there were no “moral failings” in this case. However, the moral failings that Russia had alleged against the Russian individuals and HVY, whether or not they could be made out at trial, were incapable of affording any defence to the recognition and enforcement of the Final Awards, given the inherently pro-enforcement regime enshrined in the NYC, as implemented in ss.101 to 103 of the 1996 Act. This was particularly so where the jurisdiction of the Tribunal was no longer open to challenge.
Comment
In the words of the Court:
“…litigation of this kind is not a moral beauty contest. Despite the references above to public policy and universal morality, it has not been the function of this judgment to grade either HVY or the Russian Federation for morality; nor for beauty. In investor-state disputes, these qualities are not always present in abundance.”
The Court emphasised that the NYC and the implementing provisions in ss.101 to 103 of the 1996 Act are inherently pro-enforcement and they “can be relied on by sinners, no less than by saints.”
