Building Trust Step By Step – Enforcement of a Russian Commercial Court Decision in Germany

One of the pervasive issues in Russian-German business relationships is whether court decisions rendered in one of the two countries will be recognised and enforced in the other country. While the answer to this question appeared to be a rather clear “no” in the recent past, it is now a “yes, in some cases” and a “maybe in other cases as well”.

Arguably the most recent step in the on-going development is a decision handed down by the Landgericht [Regional Court] Augsburg on 9 July 2013. The German court granted the enforcement of a Moscow Oblast Commercial Court decision of 9 June 2012.

The Proceedings in Russia

Russian Eko-Dush LLC filed a claim against German IF Logistik GmbH in the Moscow Oblast Commercial Court, requesting an order for the payment of EUR 64,990.88. The claim was based on a contract dated 1 March 2007 under which Logistik had promised to transport certain goods. On 27 April 2011, Eko-Dush made a request for the transport of goods from Italy to the Moscow Oblast. For whatever reason, the goods never reached their destination. Eko-Dush claimed the value of the goods.

The Moscow Oblast Commercial Court initially declared that it did not have territorial jurisdiction. The Tenth Commercial Appellate Court annulled this decision and remanded the case. The appellate court invoked Article 31(1)(b) of the 1956 Geneva Convention on the Contract for the International Carriage of Goods by Road (“CMR Convention”) which the parties had also agreed to be applicable to their contract. That provision reads:

1. In legal proceedings arising out of carriage under this Convention, the plaintiff may bring an action <…> in the courts or tribunals of a country within whose territory:

<…>

(b) The place where the goods were taken over by the carrier or the place designated for delivery is situated.

Thus, the appellate court established that the Moscow Oblast Commercial Court had territorial jurisdiction. In the ensuing proceedings, that court handed down a default judgment in favour of Eko-Dush.

The Enforcement in Germany

Eko-Dush then filed a request in the Landgericht Augsburg for the enforcement of the Russian decision and in the alternative claimed damages. The Landgericht Augsburg granted enforcement on 9 July 2013.

The court held that under Section 723(2)(1) of the German Civil Procedure Code, a judgment granting the enforcement of a foreign court decision (“Vollstreckungsurteil”) shall not be made if it is not possible to recognise the foreign court decision in Germany. Section 328 of the German Civil Procedure Code, in turn, sets forth five grounds for refusal to recognise a foreign court decision. In short, these grounds concern the jurisdiction of the courts of the foreign state (No. 1), the proper notice of the proceedings in the foreign court (No. 2), res iudicata and lis pendens (No. 3), public policy (No. 4) and reciprocity (No. 5). The Landgericht Augsburg’s examination of two of these grounds is of particular importance.

With respect to the proper notice, the court concluded that a package served on the German company’s director via TNT constituted sufficient notice. It found that the director could read Russian and therefore, the service of documents in Russian was possible. Apparently, the German court did not consider whether posting the time and place of the hearings on the Russian court’s website (which the Russian court relied on) constituted sufficient notice.

Turning to the question whether there was a general guarantee of reciprocity regarding the recognition of decisions between Russia and Germany, the court stated that it did not have to decide this issue. Literature and court practice – both of which were scarce, according to the court – left room for both a positive and a negative decision. Instead, the court relied on Article 31(3) CMR Convention which reads:

When a judgement entered by a court or tribunal of a contracting country in any such action as is referred to in paragraph 1 of this article has become enforceable in that country, it shall also become enforceable in each of the other contracting States, as soon as the formalities required in the country concerned have been complied with. These formalities shall not permit the merits of the case to be re-opened.

The Landgericht Augsburg held that under this convention, decisions from the other contracting States falling within its ambit should be recognised without “…the merits of the case to be re-opened”. Thus, the CMR Convention guaranteed reciprocity between Russia and Germany regarding the recognition of decisions in disputes arising out of carriage of goods by road.

The Possible Impact of the German Decision

To understand the broader impact of the decision, one has to look at the rules and practice of recognition and enforcement of foreign court decisions in Germany and Russia.

In short, German courts apply the following test to determine whether there is “reciprocity”: in case a German court would have rendered the very same decision, would a court in the State where it was in fact rendered recognise it? In answering this question, a German court would ideally look at a combination of various sources which have a certain hierarchy:  (1) the court practice in the foreign State on the recognition of German decisions, (2) the court practice in the foreign State on the recognition of decisions of other States, (3) the law on the recognition of foreign decisions in the foreign State.

The Hanseatisches Oberlandesgericht [Hanseatic Higher Regional Court] Hamburg concluded, in an often-quoted decision of 28 October 2004 (p. 48 et seq.), that none of these sources would allow the conclusion that reciprocity is guaranteed regarding Russia.

This decision may be outdated.  True, when looking at the third source in a commercial case, a German court ought to consider Article 241(1) of the Russian Commercial Procedure Code which establishes that foreign court decisions shall be recognised and enforced in Russia if this is provided for “by an international agreement of the Russian Federation and by federal law”. There is no such bilateral agreement between Russia and Germany, and the prevailing opinion in Germany appears to be that there is also no relevant multilateral agreement.

Equally true, a German court would most likely still come to the conclusion that there is no relevant Russian decision recognising and enforcing a German decision. Proceedings before the Krasnodar Region Commercial Court regarding the recognition and enforcement of a decision handed down by the Regional Court of Hamburg appear to be the only example. However, the court terminated them because the applicant, a German company, apparently lost interest. It also appears from the case file that the Russian court had attempted to contact the President of the German Federal Supreme Court, likely in order to receive an official statement whether Russian decisions were generally recognisable in Germany, but there is no trace of a response.

However, the Russian Supreme Commercial Court has recognised and enforced decisions from the Netherlands and England in recent years. In proceedings concerning the recognition and enforcement of a Dutch decision in Russia, the Supreme Commercial Court endorsed enforcement of foreign court decisions on the basis of a whole host of legal provisions. They ranged from Article 241 Russian Arbitrazh Procedure Code, Article 15(4) of the Russian Constitution and the principles of international comity and reciprocity to the Partnership and Cooperation Agreement between the European Communities and their Member States, of the one part, and the Russian Federation, of the other part and Article 6 of the ECHR. According to some German authors, these decisions are a strong indicator that German decisions stand a fighting chance of being capable of recognition in Russia (e.g. Axel Boës, DRJV-Mitteilungen 56/2013, p. 43, 48 with further references).

The decision of the Landgericht Augsburg is certainly not a bad sign. However, it remains unclear if Russian courts would attach any weight to it when deciding on the recognition or enforcement of a German decision in an ordinary commercial case, given that the decision is limited to CMR Convention cases. In the above-cited Dutch case, the Supreme Commercial Court also relied on the actual practice of enforcement of Russian decisions in the Netherlands. The reviewed decision will have only limited impact if the Russian courts will require evidence of actual recognition in ordinary commercial cases. The same significance ought to be attached to a decision of the Federal Commercial Court for the North-Western District on the recognition and enforcement of a German decision which opened insolvency proceedings. The court in that case relied on the fact that both Russian and German law explicitly allow for the recognition of such decisions. One may note that Meyer-Laucke (IPRax 2013, 94, 95) considers the decision of the Russian first instance court in the same case to have a more significant effect on the enforcement of Russian judgments in Germany.

Not least because of the uncertainty regarding mutual recognition and enforcement of court judgments, several European countries recently changed their approach. In Ukraine (2010), foreign court decisions may now be recognised and enforced not only based on international agreements, but also based on the principle of (presumed) reciprocity. Albania (1996), Bulgaria (2005), and Macedonia (2007) do not require reciprocity at all. Based on these developments, one may ponder whether maintaining the requirement of reciprocity is still appropriate.

Michael Wietzorek