CASES
OF INTEREST
Monegasque
De Reassurances S.A.M.
(Monde Re) v. Nak Naftogaz of Ukraine and Ukraine
The dispute
began
with a contract entered into in 1998 between AO Gazprom of Russia and
AO
Ukragazprom, a Ukrainian company and NAK Naftogaz’s predecessor, for
the transportation
of natural gas by pipeline across Ukraine to various destinations in
Europe.
According to Gazprom, unauthorized amounts of gas were withdrawn by the
Ukrainian company, giving rise to breach of contract. Naftogaz
vehemently
denied the illegal withdrawal of gas from the pipeline but Gazprom's
Russian
insurance provider, Sogaz Insurance Company, nevertheless reimbursed
Gazprom
for the gas. Sogaz in turn was
reimbursed by Monde Re of Monaco, pursuant to a reinsurance agreement.
Thereafter,
Monde Re filed suit against Naftogaz in the Moscow Arbitration Court
which
quickly entered a judgment against the Ukrainian company.
Naftogaz appealed the initial decision for
payment of the $88 million US to Monde Re to the Russian Supreme Court,
but the
ruling was predictably upheld.
Monde
Re then attempted to enforce the Russian court’s arbitration award in
the
United States District Court for the Southern District of New York not
only
against Naftogaz but also against the State of Ukraine claiming that
Naftogaz
was a controlled commercial entity of the Ukrainian government.
Counsel for Naftogaz and Ukraine, in
addition to denying any factual basis for all of the Russian claims,
strenuously argued that the United States courts were without subject
matter or
personal jurisdiction over the Defendants.
In a reported decision, the trial court dismissed the Mondo Re’s case
on
the grounds that the US court system was not an appropriate
jurisdiction to
hear the case (forum non
conveniens).
On November 15, 2002, a three judge panel of the United States Court of
Appeals
for the Second Circuit in New York unanimously announced it’s ruling in
favor
of Nak Naftogaz of Ukraine and the State of Ukraine. Of great
significance is
that the US Appeals Court judges specifically rejected the argument
that
corruption in the judicial system of Ukraine was so pervasive that a
fair
hearing was impossible to obtain in that country and concluded that
contrary to
the assertions of Mono Re’s experts, the courts of Ukraine would be a
most appropriate
forum for the matter.
NAK
Naftogaz was represented by Myroslaw Smorodsky, Martin Mendelsohn
of
Schnader Harris, Washington, DC, and Danylo Kurdelchuk of Kyiv, Ukraine
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