Merchant International Company Ltd v Natsionalna Aktsionerna Kompaniia Naftogaz

25 Oct 2012

The Supreme Court has refused permission to appeal against the decision of the Court of Appeal to dismiss the appeal by Naftogaz, the Ukrainian state owned energy company against a decision of the Commercial Court which will allow Merchant International Company (MIC) to enforce a Ukrainian judgment for US$24m against Naftogaz in England and Wales, even though the Ukrainian judgment had since been set aside by the Ukrainian courts.  MIC had originally obtained default judgment against Naftogaz on the basis of the Ukrainian judgment. When that Ukrainian judgment was set aside, Naftogaz applied to have the default judgment set aside in turn. MIC successfully resisted that application, in both the Commercial Court and on appeal to the Court of Appeal, on the basis that the Ukrainian courts’ decision to set aside the judgment in MIC’s favour had breached Article 6 ECHR.  In deciding the appeal, the Court of Appeal considered three central questions: first, whether the English courts could properly consider breaches of the ECHR by other Convention Member States; second, whether the Ukrainian proceedings had violated the Article 6 right; and third, whether, in the unusual circumstances of the case, even if entitled to conclude there was such a violation, the Court should nonetheless set aside the default judgment on the basis that the foreign res judicata in respect of which it had been obtained had lost its status as a final judgment in its court of origin.