Paris Court of Appeal, No. 16/09464 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 23 November 2016, n° 16/09464

Paris Tribunal of Grande Instance, Enforcement Judge, 15 April 2016, No. 15/82058

Paris Court of Appeal, 23 November 2016, 16/09459

Paris Court of Appeal, Pole 4, Eighth Chamber, 18 October 2018, No. 16/08807

Paris Court of Appeal, 18 October 2018

HULLEY ENTERPRISES LIMITED

Vs. CTRE INFOR AG PRESSE RUSSIE RIA NOVOSTI

ROSSIYA SEGODNYA

RUSSIAN FEDERATION

PUBLIC PROSECUTOR (voluntary intervener)

FACTS AND PROCEDURE

The Cypriot company Hulley Enterprises Limited (Hulley Company) was a shareholder of the Russian oil company Yukos between 1999 and 2007 date of its expropriation by the Federation of Russia.

On 18 July 2014, an arbitral tribunal located in The Hague rendered a final award, following an arbitration proceedings, noting the failure by the Russian Federation to fulfill its obligations under the Energy Charter Treaty and ordering the Federation to pay the Hulley Company Enterprises Limited compensation of 39,971,834,360 USD as well as 3,388,197 euros for the reimbursement of arbitration fees and USD 47,946,190 for legal fees incurred by the Hulley Enterprises Limited.

By enforcement order (in French Ordonnance d’exequatur) of 1 December 2014 the President of the Paris Tribunal of Grande Instance made the final award enforceable.

On 2 June 2015 Hulley Enterprises Limited executed a garnishment of claims by SA VTB Bank (France), making the latter’s bonds towards “the Russian Federation, including political, territorial, ministerial or administrative subdivisions, unavailable, irrespective of their previous or current name, including but not limited to the following: Russian Federation, Russian Empire, Union of Soviet Socialist Republics, USSR, Union of Soviet Socialist Republics, USSR, ReserveFund, Emergency Reserve Fund, Reserve Fund, RF, National Wealth Fund, NWF”.

On 23 June 2015 the Russian International Information Agency Rossiya Segodnya and the Center information Ria Novosti (the Rossiya Segodnya and Ria Novosti agencies), the balance of whose accounts opened at SA VTB Bank was made unavailable due to the seizure on 2 June 2015, summonded the Hulley company before the enforcement judge of Paris Tribunal of Grande Grande Instance to order the release of this seizure.

By adversarial judgment of 15 April 2016, this enforcement judge:

excluded from the debates the documents submitted during deliberation,
dismissed Hulley’s application to have the summons lapsed,
ordered the release of the seizures carried out to the detriment of the Russian International Information Agency and the Ria Novosti centre held by VTB Bank on 2 June 2015 “and on 31 August 2015”,
dismissed Hulley’s claim for damages,
said there is no need for the application of Article 700 of the Code of Civil Procedure,
ordered Hulley to pay the costs.

Hulley Enterprises Limited appealed this decision on April 15, 2016.

On 15 April 2016, Hulley Enterprises Limited summoned CTRE INFOR AG Presse Russie Ria Novosti and the Russian International Information Agency Rossiya Segodnya to appear before the First President of the Paris Court of Appeal by a bailiff’s act of 15 April 2016, on the basis of Articles R 121-22 of the Code of Civil Enforcement Procedure and 700 of the Code of Civil Procedure. This aims at suspending the enforcement of the measures taken by the enforcement judge and ordering the “CTRE INFOR AG Presse Russie Ria Novosti” to pay the costs and to pay him the sum of 15,000 euros in application of Article 700 of the Code of Civil Procedure.

By submissions filed and supported orally at the hearing, Hulley Enterprises Limited maintained its application for a stay of enforcement of the disputed judgment while seeking the dismissal of the counterclaims made by the opposing party and increasing the compensation under Article 700 of the Code of Civil Procedure to the sum of EUR 30,000.

It argues at the outset that the Paris Court of Appeal ruling on enforcement proceedings has no jurisdiction and/or power to hear applications from the Russian Federation, which seek to challenge the enforceable title on the basis of which it – Hulley Enterprises Limited - is entitled to take measures of forced enforcement against it.

It further maintains that it has a serious ground of annulment and / or reform of the contested decision in that:

the execution judge of the Paris tribunal de grande instance has not been validly seized, the assignment of the Ria Novosti / Rossiya Segodnya agencies having lapsed,
the sums of money seized on June 2, 2015, coming from bank accounts opened with the VTB Bank on behalf of the Ria Novosti and Rossiya Segodnya branches, are the exclusive property of its debtor the Russian Federation.

The Russian international news agency Rossiya Segodnya and the Agency information center Press Russia Ria Novosti, in writings filed and supported orally at the hearing, solicit on the basis of articles R.121-22 of the code of civil enforcement procedures and 700 of the code of civil procedure, the dismissal of the request for a stay of execution of the decision of the execution judge of 15 April 2016, the maintenance of the provisional execution of this decision, and the condemnation of the Hulley Enterprises Limited to pay the costs and pay them 15,000 euros under Article 700 of the Code of Civil Procedure.

It claims the absence of a serious grounds of annulment or reversal of the challenged decision, especially that:

the enforcement judge of the Paris Tribunal of Grande Instance was not validly referred to, the summons of the Ria Novosti/RossiyaSegodnya agencies being lapsed,
the sums of money seized on 2 June 2015 from the bank accounts opened at VTB Bank in the name of the Ria Novosti and RossiyaSegodnya branches are the exclusive property of the Russian Federation.

The Russian international news agency Rossiya Segodnya and the information centre Agence Presse Russie Ria Novosti, by written submissions filed and supported orally at the hearing, request the court on the basis of articles R.121-22 of the Code of Civil Enforcement Procedure and 700 of the Code of Civil Procedure, to dismiss the application for a stay of execution of the enforcement judge’s decision of 15 April 2016, to maintain the provisional enforcement of that decision, and to order Hulley Enterprises Limited to pay the costs and to pay them 15,000 euros pursuant to Article 700 of the Code of Civil Procedure.

They argue that there are no serious grounds for setting aside or reversing the contested decision on the grounds that :

Article R. 211-11 of the Code of Civil Enforcement Procedures does not require the delivery of the third party’s information letter to the clerk’s office under penalty of the summons lapsing and that they validly placed the summons issued against Hulley prior to the hearing,
they have, as a unitary company, by virtue of their articles of association and by law, their own assets and a substantive law enabling them to manage their property with all the prerogatives linked to the right of ownership.

By submissions in “incidental voluntary action” filed and supported at the hearing, the Russian Federation requested the Court, on the basis of Articles 328, 330, 1504, 1514, 1516 and 1520 of the Code of Civil Procedure, Article L. 111-2 et seq. of the Code of Civil enforcement proceedings, to accept its accessory voluntary action and to “find admissible and well-founded all the claims of Ctre Infor AG PresseRussie Ria Novosti and the Russian International Information Agency Rossiya Segodnya arising from the irregularity of the seizures made by the company Hulley Enterprises Limited”.

It submits that the title on which Hulley Enterprises Limited relied to operate its garnishment lapsed due to the annulment of the arbitration award.

The Attorney General spoke last.

UPON WHICH:

1- On the merits of the application for a stay of execution

Whereas Article R 121-22 of the Code of Civil Enforcement Proceedings provides that : “In the event of an appeal, a stay of execution of the decisions taken by the enforcement judge may be requested from the first president of the court of appeal. The request is made by summons in summary proceedings issued to the opposing party and denounced, if necessary, to the third party in whose hands the seizure was made. Until the day of the pronouncement of the order by the first president, the application for stay of execution suspends the proceedings if the contested decision has not called into question their continuation; it prolongs the effects attached to the attachment and to the provisional measures if the contested decision has ordered the release of the measure. The stay of enforcement is granted only if there are serious grounds for annulling or reversing the decision referred to the court. An applicant for a manifestly abusive stay of execution may be ordered by the First President to pay a civil fine of up to EUR 3 000, without prejudice to any damages that may be claimed”;

On the lapse of the summons

Whereas, in support of its application for a stay of enforcement, Hulley EnterprisesLimited claimed that the judgment of 15 April 2016 should be set aside in that it was delivered in breach of Article R. 211-11 paragraph 2 of the Code of Civil Enforcement Proceedings because the agencies Rossiya Segodnya and Ria Novosti did not submit a copy of the information letter to third parties to the clerk’s office of the enforcement judge by the day of the hearing at the latest;

Whereas, pursuant to Article R. 211-11 paragraph 2 of the Code of Civil Enforcement Proceedings, the author of the challenge informs the third party by simple letter and gives a copy of it to the clerk’s office of the enforcement judge at the latest on the day of the hearing, failing which the summons lapses;

That it follows from the above-mentioned provisions that the obligation to inform the third party is not accompanied by any sanction and that the lapsing of the summons is a sanction for failure to submit the dispute to the clerk’s office of the enforcement judge at the latest on the day of the hearing and not for failure to submit the letter of denunciation to the third party;

That the existence of divergent case law between the courts of appeal on the element sanctioned by the lapse of the writ of summons is not such as to characterise, in itself, a serious ground for annulling the disputed decision;

That in the present case the delivery to the registry of the summons by the agencies Rossiya Segodnya and Ria Novostiau later on the day of the hearing is not contested by Hulley;

Consequently, the ground alleging a violation by the judge of the provisions of Article R. 211-11 paragraph 2 of the Code of Civil Enforcement Proceedings is devoid of the serious nature required by Article R. 121-22 of the Code of Civil Enforcement Proceedings and must be dismissed;

On the validity of the seizure

Whereas pursuant to Article L. 111-1 of the Code of Civil Enforcement Proceedings, any creditor may, under the conditions laid down by law, compel his/her defaulting debtor to perform his/her obligations towards him/her;

Moreover, Article L 211-1 of the same code stipulates that any creditor in possession of a writ of execution showing a debt due for immediate payment may, in order to obtain payment, seize in the hands of a third party the debts of his debtor relating to a sum of money, subject to the special provisions on the seizure of remuneration provided for by the Labour Code;

Whereas in the disputed decision of 15 April 2016 the enforcement judge ordered, on the basis of Articles L. 211-1 and L. 231-1 of the Code of Civil Enforcement Procedures, the withdrawal of the seizures carried out, on the grounds that the Rossiya-Segodnya and Ria Novosti agencies have all the attributes of legal personality since they hold their own assets consisting of property rights and debts even though their rights would be limited on the assets handed over in “economic management” by the Russian State. Only the Rossiya Segodnya and Ria Novosti agencies have a claim on the VTB company. The seized bank is not a debtor of the Russian Federation in respect of accounts opened in the name of unitary enterprises in execution of a contract. The Russian Federation - the debtor referred to in the writ of execution - does not have a claim on the seized third party and that, consequently, the challenged seizures cannot persist;

Whereas the enforceable title is constituted in this case by the arbitration award of 18 July 2014 of arbitral tribunal in the Hague, coated with the enforcement order by order of 1 st December 2014 the court de grande instance de Paris, ordering the Russian Federation to pay the Hulley company various are ;

Whereas the writ of execution in this case is the arbitral award of 18 July 2014 of the Arbitral Tribunal of The Hague, which was declared enforceable by order of 1 December 2014 of the Paris Tribunal of Grande Instance, ordering the Russian Federation to pay Hulley various sums;

That the garnishment carried out into the hands of VTB Bank SA on 2 June 2015 concerns “the Russian Federation, including its political, territorial, ministerial or administrative subdivisions, whatever their former or current names, including in particular: Russian Federation, Russian Empire, Union of Soviet Socialist Republics, USSR, Reserve Fund, Emergency Reserve Fund, Reserve Fund, RF, National Wealth Fund, NWF”;

That by a letter dated 3 June 2015 addressed to the bailiff, VTB Bank indicated that it was debtor of various sums “likely to enter in the field of seizure” on 2 June 2015, on behalf of the Ria Novosti and Rossiya Segodnya branches;

Whereas it is common knowledge that the debtor - in this case the agencies Rossiya Segodnya and Ria Novosti - are not the debtors designated by the arbitral award of 18 July 2014; Whereas a garnishment is valid only if it originates from the creditor of the debtor, a claim that must personally bind the creditor and the debtor, the creditor must have a writ of execution against the person who must execute;

In support of the validity of the seizures made - without however legally naming this situation with regard to the seizure-attribution - the Hulley company invokes the status of a unitary company of these agencies, which would only manage the assets of the Russian Federation allocated to them by virtue of the law of economic management, and notes that in the absence of their own assets, the proceeds of this management would in fact be the property of the Russian Federation, just like the seized debts;

That in support of its allegations it states:

In support of its allegations, it reports:

Statements by the Russian ambassador in France to the Registrar of Mortgages concerning a property of the unitary company Itar-Tasssur the status of the Russian Federation’s owner of the property managed by the Itar-Tass agency,
A legal opinion of 15 December 2010 of the State Institute of the Ministry of Foreign Affairs of the Russian Federation stating that the property of the State Unitary Enterprise is the exclusive property of the State and that the Unitary Enterprise is an organisation without any ownership rights over the property lent to it by the owner,
The position of the Rossiya Segodnya agency on the occasion of an enforcement measure carried out in Belgium on assets of the Russian Federation where it claimed that as a unitary enterprise under Russian law it had an economic management right over assets belonging to Russia,
Federal Law No. 215-FZ of 13 July 2015 on the State Space Activity Corporation Roscosmos defining the legal regime applicable to the property relations between the Russian Federation and this state corporation,
Decree No. 221 of 12 May 2016 of the President of the Russian Federation approving the list of State unitary enterprises to be transformed into joint stock companies whose shares are to be transferred to the State Space Activity Corporation Roscosmos as a contribution of assets of the Russian Federation,
A consultation by Professor Maggs, an expert in Russian law on unitary enterprises, concluding that unitary enterprises have no assets of their own and that they do not have the status of owners of the assets they manage on behalf of the Russian Federation, in application of a specific legal regime entitled “the law of commercial management”,
The statements made on 1 March 2016 by Professor Yevgeny Sukhanov, Deputy Chairman of the Council for the Codification and Improvement of Civil Legislation to the President of the Russian Federation, who would reconsider his position on the existence of a unitary company’s own assets;

Whereas according to the statutes of the Russian international news agency Rossiya Segodnya, unitary state enterprise coming to the rights of the Ria Novosti agency subject to liquidation, determine the applicable rules, the Agency:

Whereas according to the Articles of Association of the Russian International Information Agency Rossiya Segodnya, a unitary state enterprise coming under the rights of the AgencyRia Novosti, which is being wound up, which determine the applicable rules, the Agency:

is a legal person, it has its financial balance sheet, a current bank account and other accounts in banks (…) (Article 1.5),
shall be liable for its obligations in respect of all property held by it; the Agency shall not be liable for the obligations of the Russian Federation, and the Russian Federation shall not be liable for the obligations of the Agency, except as expressly provided by the legislation of the Russian Federation (Article 1.6),
in its own name, acquires property rights, as well as non-economical personal rights, enters into obligations, acts both as claimant and defendant (article 1.7),

That these Articles of Association also provide that :

the assets of the Agency are the federal property, they are not assignable, and cannot be shared according to the contributions (shares, quota), including among the Agency’s employees; the assets are held by the Agency under the economic management regime, and are shown in its balance sheet (…); assets of another form of ownership cannot form part of the Agency’s assets (Article 3.1),
the proceeds and income from the use of the assets allocated to the Agency, as well as the assets acquired by it from the profits made, are the federal property and enter into the commercial management of the Company (Article 3.2),
the sources of the Agency’s assets are as follows (Article 3.5) :
- contributions to the Agency’s statutory fund,
- the assets of the liquidated company: Federal State Unitary Enterprise Russian International Information Agency Ria Novosti (Moscow),
- the assets of the liquidated establishment: Federal Budgetary Federal State Establishment Russian National Broadcasting Company Voice of Russia (Moscow), (…),
- assets transferred to the Agency by the decision of the federal body of the executive power exercising the functions of management of federal assets,
- the Agency’s profits from its activity,
- dividends (income) received from commercial companies where the Agency has holdings in the statutory funds of these companies, (…),
- economic or other rights,
- other sources not contrary to the legislation of the Russian Federation,
the Agency shall dispose of movable and immovable property in accordance with the legislation in force in the Russian Federation (Article 3.7),
the Agency shall dispose independently of the results of its productive activity, its revenues (with the exceptions established by the legislative acts of the Russian Federation), its net profit realised, remaining at the disposal of the Agency after payment of taxes and other obligatory payments, established by the legislation of the Russian Federation, and the payment to the federal budget of a part of the profit resulting from the use of the Agency’s property in accordance with the operational plan of the Agency; part of the net profit, remaining at the disposal of the Agency, may be used to increase the Agency’s statutory fund (Article 3. 10),
to achieve its statutory objectives, the Agency has the right to (Article 4.1) :
- To set up subsidiaries and representative offices and other autonomous units and finance their activities,
- To conclude with legal or natural persons all types of contracts which are not contrary to the legislation of the Russian Federation, nor to the aims and objects of the Agency,
- To acquire or lease fixed or current assets using available financial resources, credits, loans and other sources of financing,
- To pledge goods, lease or contribute property to the share capital of commercial companies(…) ;

In application of these provisions, the Agency therefore has legal personality separate from the Russian Federation, enjoys organic and decision-making independence and has its own assets which it manages autonomously, including property transferred to it by decision of the federal body; furthermore, while it is liable for its obligations through all the property it holds, it is not liable for the obligations of the Russian Federation;

That in the light of these elements which do not corroborate Hulley’s allegations as to the ownership of the property seized from VTBBank NV and in the absence of evidence of the existence of a claim personally binding the seizing and the debtor, it has not been established that the enforcement judge made a manifest error of assessment of the legal position of the parties by pointing out that the information agencies Rossiya-Segodnya and Ria Novosti are the sole holders of a claim on the bank and that, on the contrary, the Russian Federation, the debtor referred to in the enforcement order, is not;

That the application for a stay of proceedings should therefore be dismissed;

That there is no need to “maintain the provisional execution of the enforcement judge’s decision” as requested by the Rossiya Segodnya and RiaNovosti agencies. This consequence results, in fact, from the rejection of the application for a stay of proceedings;

2- On the other requests

Whereas, in view of the circumstances of the case, there is no need to apply the provisions of Article 700 of the Code of Civil Procedure;

That Hulley must be ordered to pay the costs of these proceedings.

FOR THESE REASONS

Accepts the Russian Federation in its voluntary action,

Dismiss the applications of Hulley Enterprises Limited,

States that Article 700 of the Code of Civil Procedure does not apply,

Orders Hulley Enterprises Limited to pay the costs.

ORDER issued by being made available at the Registry of the Court, the parties having been given prior notice thereof in accordance with the conditions set out in the second paragraph of article 450 of the Code of Civil Procedure.