Collectability
A Russian Judgment is Fully Collectable Outside of Russia
Despite common misconceptions, Russian judgments are fully enforceable in most jurisdictions around the world where BNY Mellon has assets, including the United States. The Uniform Foreign Country Money Judgments Recognition Act, which has been adopted in the majority of states including New York, provides for the enforcement of foreign judgments in the United States. In accordance with this statute, a New York court is prohibited from recognizing a foreign money judgment only if it concludes that the judgment “was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law” or the “foreign court did not have personal jurisdiction over the defendant.”
Russian judgments have consistently been found to be enforceable in the U.S. and precedent has been established up to the appellate level confirming U.S. court enforcement of Russian judgments. A recent example is the case of Technostroyexport v. International Development and Trade Services where an appellate court affirmed the United States District Court’s previous confirmation of a major Russian money judgment. To date, it appears that not a single U.S. court has concluded that the Russian legal system is an inadequate forum and denied enforceability of a Russian judgment.
In the related RICO money laundering case of Pavlov v. The Bank of New York, BoNY obtained a dismissal from a New York Court in part because it argued that the case should be litigated in Russia instead of the U.S.. Further complicating matters for BoNY in the Pavlov case, BoNY successfully argued that Russia was an adequate alternative forum. Under current U.S. law, when a party claims there is an adequate alternative forum and seeks to transfer a case to that forum, that party must also agree that any judgment issued by that forum would be enforceable in the U.S.. Based on their arguments in this previous RICO case, it is unimaginable that a U.S. court would allow BoNY to now claim that Russia suddenly does not offer an adequate forum or that a judgment issued by a Russian court would be unenforceable.
Russia is Suing for Money Laundering not Lost Tax Revenue
Based on recent statement in the press, BoNY appears to be positioning itself to contest the enforceability of the judgment in the U.S. by arguing that, in affect, it is a judgment for the collection of taxes. Such an argument would be based on a legal principle recognized by some courts in the United States that prevents the courts of one sovereign from enforcing or adjudicating tax claims of another sovereign. This so-called revenue rule generally bars U.S. courts from enforcing foreign tax laws or judgments for the collection of foreign taxes.
The problem with this argument is that BoNY never owed any taxes or customs duties to begin with and the Russian government is not suing for the collection of back taxes or duties. According to the complaint, Russia is seeking a statutory remedy for money laundering under the RICO statute. Moreover, the Federation maintains that this doctrine has not been applied in the context of enforcing a foreign judgment and that it would be inapplicable here since it is not seeking to adjudicate or enforce a tax claim, but is instead suing BoNY for the criminal money laundering itself.
In addition to collection in the U.S., Russia will also be able to enforce a judgment in many other countries where BoNY has billions in assets and where the revenue rule does not exist. There is a well-established practice of enforcement of Russian judgments with many countries throughout the world, including in the EU.
BoNY is Dismissive of the Lawsuit, but the Risks are Real
BoNY has consistently claimed that the Russian lawsuit is 'frivolous and without merit'. Many leading international legal experts strongly disagree with these assertions. The simple fact is that only two conditions need to be met for this lawsuit to financially devastate BNY Mellon. The first is that a Russian verdict is handed down ordering the bank to pay $22.5 billion in damages (or any significant multi-billion dollar figure). More and more this seems a likely outcome. The second, and more important, condition is if a Russian judgment can be collected in any of 90 countries where The Bank of New York has significant assets. It appears by expert accounts that it can.
US Supreme Court favors enforcement of SCC and Russian arbitration awards
"The supreme law of the United States, as enunciated by the U.S. Supreme
Court, certainly favors enforcement of SCC and Russian arbitration awards.
In addressing the New York Convention, the Supreme Court has stated
that the goal and principal purpose of the Convention was to encourage the
recognition and enforcement of commercial arbitration agreements in
international contracts, and to unify the standards by which such
agreements are observed and enforced."3
- Vesselinovitch, Alexander. "Enforcement of SCC and Russian Arbitration Awards in the United States Courts: An Overview," Stockholm Arbitration - Download PDF Document
