Commercial Court dismisses application under section 66 of the Arbitration Act

02/08/11

Nomihold Securities Inc v Mobile Telesystems Finance SA

On 1 August 2011, Mr Justice Burton dismissed an application by Mobile TeleSystems Finance SA ("MTSF") under section 66 of the Arbitration Act 1996 to set aside registration of an arbitration award as a judgment. MTSF is a wholly-owned subsidiary of Mobile TeleSystems OJSC, the leading telecommunications group in Russia, Eastern Europe and Central Asia.

In December 2010, the Respondent ("Nomihold") obtained an LCIA arbitration award (the "Award") against MTSF in a total amount of more than US$200 million. The arbitration concerned the sale by Nomihold to MTSF of a Seychelles company, which had previously owned Bitel LLC, a mobile phone services company in Kyrgyzstan.

At an ex parte hearing on 26 January 2011, Mrs Justice Gloster ordered the registration of the Award as a judgment under section 66 of the Arbitration Act 1996 and also granted a worldwide Freezing Order in respect of MTSF's assets.

MTSF did not bring any application to challenge the Award, but it subsequently applied to set aside the registration of the Award as a judgment on a number of grounds, including that (1) the enforcement of the Award in this jurisdiction served no legitimate purpose, (2) the enforcement of the Award was contrary to public policy since (i) it would result in the contravention of money-laundering legislation in the Seychelles, and (ii) the Award was obtained by Nomihold illegally and/or by fraud since one of its witnesses had allegedly lied to the arbitral Tribunal when giving evidence.

In his judgment, Mr Justice Burton rejected each of these grounds of challenge. The Judge held that since parallel proceedings are on foot in Luxembourg (where MTSF is incorporated) Nomihold had a legitimate interest in obtaining an English judgment in order to avoid the risk of the Luxembourg Courts delivering an inconsistent judgment. The Judge also held that MTSF had failed to establish that enforcement of the Award would constitute a money-laundering offence in the Seychelles. As regards fraud, the Judge held that MTSF's allegations were not made out by its evidence, that its evidence was not fresh within the meaning of Ladd v Marshall, and in any event the alleged perjury of Nomihold's witness, even if established, would not have contributed to the outcome of the arbitration.