A narrow escape


The Supreme Arbitrazhniy Court in Loral Space & Communications Holdings Corporation v. Globalstar Kosmocheskiye Kommunikatsii Ltd handed down the ruling that the notice of the arbitration proceedings must be seen in a wider sense and include all communications between the parties, the party and the tribunal and cannot be limited to a particular document.

In September 2000 Loral Space & Communications Holdings Corporation, USA and Globalstar Kosmocheskiye Kommunikatsii Ltd, Russia entered a loan agreement. The contract contained an arbitration clause with reference to the rules of the London Court of International Arbitration. On March 23, 2007 the tribunal made an award in favour of Loral Space for the amount of 995,360 US dollars plus expenses. The company applied to the Moscow Arbitrazhniy Court for an order to recognise and enforce the award.

The respondent resisted the enforcement under art. V.I.(b) of the New York Convention, arguing that it had not been properly notified of the exact time and location of the hearing.

The respondent was informed of the proceedings in fax messages of November 9, October 26, December 14, 2006 and January 3, 2007. The notices informed the company that the hearing would take place in London and suggested they come to an agreement on an exact time and place. Globalstar, however, did not respond and eventually the tribunal set the place and time. The letter with the exact time and address was received by the respondent on January 31, 2007, five days before the hearing. Globalstar claimed that it did not have sufficient time to obtain a British visa in such a short time and therefore was deprived of the opportunity to present its case.

The court of the first instance supported the respondent and refused enforcement of the award. The Appeal Court overruled the decision, but the Court of Cassation decided against the recognition.

The Supreme Court stated that the respondent was informed of the proceedings and the place of the hearing by the faxes, nearly three months in advance. The fact that these messages did not contain information of the exact time and address was irrelevant and could not prevent the respondent from applying for the British visa.

Although the Supreme Arbitrazhniy Court finally enforced the award the risk was clear. Desire to run through the proceedings as fast as possible can lead to the worst possible finale: an unenforceable award.



February 12, 2009.