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Israel’s Supreme Court has long articulated a liberal interpretation of Israel’s Enforcement of Foreign Judgments Law (1958). See Encyclopedia of International Commercial Litigation (Israel Chapter) § B11.1. In the recent case of JSC VTB Bank v. Margolis (Civil Appeal 1948/15, March 6, 2017), the Supreme Court extended that liberal approach. The JSC decision is noteworthy in at least two respects – (a) it is the second time in less than three years that the Supreme Court has dealt with the issue of enforcement of judgments from Russia, and (b) it contains a detailed discussion as to the availability of the statutory defense that the respondent (defendant before the foreign court) did not receive a “reasonable opportunity” before the foreign court to present his defense.
This blog post deals primarily with the Russia-related issues from the JSC case, and in a subsequent blog post, we will discuss the Supreme Court’s analysis of the availability of the “lack of reasonable opportunity” defense.
Enforcement (again) From Russia:
The first case in which Israel’s Supreme Court dealt with the enforceability of a judgment from a Russian court was in 2014, in Double K Oil Products Ltd. v. Gazprom Transgaz Ltd. The Double K decision received a great deal of attention (and some criticism), primarily for two reasons – (a) its “benefit of the doubt” approach concerning the integrity of the Russian judicial system, and (b) its flexible (or “open to reexamination”) approach to the issue of reciprocity concerning Russian courts.
On the issue of the Russian judicial system’s integrity, the Court in Double K took note of the fact that courts in the United States and in the UK have enforced Russian judgments notwithstanding contentions by some that the Russian judicial system is corrupt. Without closing the door to the possibility that a future litigant could successfully oppose the enforcement of a Russian judgment by proving corruption, the Supreme Court relied heavily upon the fact that the respondent in Double K had executed a contract that included a forum selection clause that expressly authorized the Russian courts to exercise jurisdiction. Essentially the Supreme Court told the respondent: “Once you consent to the jurisdiction of the Russian courts, don’t come crying to us about that court system’s integrity.”
On the issue of reciprocity, the Supreme Court in Double K held (in a nutshell) that, until proven otherwise, the Israeli judiciary should assume that Russian courts would recognize Israeli judgments.
JSC and Consent to Jurisdiction:
As was the case in Double K, the applicant in the JSC case was able to point to the signature of the respondent on a contract (actually multiple contracts) containing a forum selection clause conferring jurisdiction upon the Russian courts. To a large extent, the existence of the forum selection clauses was a showstopper – the Supreme Court in JSC cited to its longstanding rule that consent to foreign jurisdiction estops a defendant from denying the jurisdiction of the designated court. (Pp. 20-21, para. 22)
Reciprocity — Silence is Golden:
As indicated above, in Double K, the Supreme Court left open the possibility that, if it were to turn out that Israeli judgments are not enforced “as a matter of principle” in Russia, there might be a change with respect to the enforceability in Israel of Russian judgments.
Citing to the above observation in Double K, the respondent in JSC asserted that, subsequent to the decision in Double K, no Israeli judgment had been enforced in Russia, and the respondent argued that, therefore, the reciprocity requirement in its case was not met.
The Supreme Court made short shrift of that argument. The Court observed that the argument was made with little or no proof. (P. 20, para. 21)
Of course, the Court could have been even more critical of the respondent on this issue – because the question is not whether any Israeli judgment has been enforced in Russia. Rather, the issue is whether enforcement of an Israeli judgment has been denied by any Russian court. Apparently the respondent was not able to call to the court’s attention any such case. It is, of course, possible that many judgments have been rendered by Israeli courts in recent years against debtors located in Russia but that there was no need in those cases to seek enforcement in Russia.
As indicated above, a subsequent blog post will address the Supreme Court’s analysis of the availability of the “lack of reasonable opportunity” defense.