Ontario Court Sets First Date for Enforcement of Stans US$118 Million International Arbitration Award

Toronto, Ontario (FSCwire) - Stans Energy Corp. (TSX-V: HRE, OTCQX: HREEF), (“Stans” or the “Company”) is pleased to report that the Ontario Superior Court of Justice (the “Court”) has scheduled the application hearing for June 29, 2015 in the Company’s case against the Kyrgyz Republic (“the Republic”) and Kyrgyzaltyn JSC (“KJSC”). The Company’s attorneys, Bennett Jones LLP, have served and filed the Company’s required documents in support of its application for an order of the  Court  recognizing and enforcing the US$ 118,000,000 award of Moscow Chamber of Commerce and Industry (“the MCCI”) dated June 30, 2014 (the “Award”), pursuant to the International Commercial Arbitration Act.

Stans’ application before the Court seeks an order recognizing and enforcing the Award against the respondents; the Republic and KJSC. 

Ontario Court Justices Penny, Newbould (twice), Strathy and Wilton-Siegel, in granting or extending Mareva injunctions against the Republic and KJSC in this and other proceedings, have concluded that KJSC, at the behest of its sole shareholder, the Republic, will dissipate its substantial assets in Ontario (and the only exigable asset known to Stans that the Republic holds outside of that country) to avoid enforcement of arbitration awards. KJSC's interest appeal in seeking to set aside the Mareva injunction will be heard by the Divisional Court on May 15, 2015.

The Republic and KJSC have resisted scheduling Stans' application to the Court (effectively seeking a stay) asserting that ongoing legal proceedings in Russia will lead to the arbitral Award being set aside, and that they should be entitled to move to set aside the Award before Stans applies to enforce its Award.  Motions in Moscow Arbitrazh Court are now scheduled to continue to be heard on March 10, 2015.  Definitive timetables for trial have yet to be set in this matter. The Republic’s original application to set aside the arbitral Award has already been dismissed once. The current hearings have resulted from the Republic’s appeal of the original ruling.

We recognize a risk that the Russian court will grant the Republic an order setting aside the Award.  If the Award is set aside Stans current intention is to appeal such decision while continuing with its enforcement proceedings in Ontario,  If it was finally determined that the Award is set aside, it is also within the Company’s right to initiate arbitration proceedings in another proper forum for the unlawful expropriation Stans have suffered.

Even if the Award is set aside by the Russian Court the Canadian Court can refuse to give effect to the Russian judgment on the grounds that the Russian judgement does not deserve to be recognized.

Furthermore, on February 25, 2015, the Republic sought and was denied a worldwide anti-enforcement injunction against Stans to prevent Stans from enforcing the arbitral award by the same Russian Court that the Republic and KJSC insist will set aside the arbitral award. The Russian court has therefore declined to order a stay of the Ontario proceedings pending a determination by it of the Republic’s application to set aside the arbitral award.  There was no basis for this Russian court to stay enforcement by an Ontario court of the arbitral Award.

The effect on an Ontario Court of an order setting aside the Award is not certain. There is precedent in Ontario courts affirming it is "within the discretion of the Ontario court, that is, the enforcing court, to recognize and enforce the arbitral award even where it has not become binding or has been set aside by a court in the jurisdiction of the award.”

KJSC’s own lawyer, Brian Casey, has previously published a supporting corollary:

“A court may still enforce a foreign arbitral award, notwithstanding that it has been set aside or otherwise challenged in the jurisdiction in which the award was made.  The New York Convention, which is mirrored in the Model Law, was an attempt to set out internationally recognized grounds for enforcement and challenge of an arbitral award.

Even if the reason for setting aside the award at the place of arbitration appears to fall within generally accepted grounds for challenge, the enforcing court may determine not to give effect to the foreign judgement that the foreign judgment does not deserve to be recognized.[ii]”

Furthermore in Yukos Capital v Rosneft[iii], The Dutch Court held that the Moscow Arbitrazh Court (the same court being relied on here by the Republic and KJSC) is “not independent or impartial” and refused to recognize its decision setting aside an arbitral award.  The courts in the United States of America[iv] and France[v] have refused to recognize judgements setting aside otherwise enforceable arbitral awards.

See also notes below.



Contact Details

Stans Energy Corp.
Rodney Irwin, Interim President & CEO
rodney@stansenergy.com
647-426-1865 

Stan Energy Corp
David Vinokurov, VP Corporate Development
david@stansenergy.com
647-426-1865



[i]NOTES: If the Kyrgyz Republic is successful in the hearing on the merits of its application to set aside the award of MCCI, it is possible the Ontario courts could also conclude that there is no enforceable arbitral award to recognize, despite the positions we have stated herein. In that case, Stans could be subject to cost consequences in the Ontario court, and which could be significant.  If Stans were forced to seek a new arbitral award in a different forum, there would be significant cost and delay to Stans. It is also possible that the Ontario courts could vacate the Mareva injunction, if the Ontario courts are not convinced other grounds to maintain the Mareva injunction exist, in which event, there is serious risk that the Kyrgyz Republic could dispose of its Canadian exigible assets before Stans could have a chance to obtain a new arbitral award against the Kyrgyz Republic, and Stans could be exposed to significant costs indemnity consequences.

[i] [1992] OJ n 257 at 29 (Sup Ct.)