ECtHR Decision in NAK Naftogaz Ukrainy v. United Kingdom

21 June, 2017

The European Court of Human Rights (ECtHR) handed down its Judgment on 15 June 2017 in the case that was brought by Ukraine’s national oil and gas company, Naftogaz, against the United Kingdom.

The case arose from litigation between Merchant International Company Limited (“MIC”) and Naftogaz. MIC successfully sued Naftogaz in the Ukrainian courts and obtained a judgment in 2006 worth approximately US$25m (“2006 Judgment”). MIC sought to enforce this judgment debt against Naftogaz’s assets in England by obtaining (i) a freezing order against Naftogaz in relation to its shares in a UK oil company; (ii) a default judgment against Naftogaz in the sum of such debt (“English Default Judgment”); and (iii) a third party debt order requiring share dividends due to Naftogaz to be paid instead to MIC and also a charging order in favour of MIC in respect of such shares.

In April 2011, a court in Ukraine quashed the 2006 Judgment (“2011 Judgment”). Naftogaz subsequently applied to the English Commercial Court to set aside the English Default Judgment. In July 2011 the English Court refused to set aside the English Default Judgment and held that it would not recognise and enforce the 2011 Judgment because it did not meet the requirements of Article 6 of the European Convention on Human Rights. This was upheld on appeal to the Court of Appeal. The Supreme Court refused permission to appeal.

Naftogaz subsequently sought to challenge before the ECtHR the refusal by the English courts to recognise the 2011 Judgment and set aside the English Default Judgment. Naftogaz claimed that these decisions constituted a breach of its right to property provided by Article 1 of Protocol 1 to the European Convention on Human Rights.

The ECtHR found in favour of the UK and dismissed Naftogaz’s claim.

Professor Dan Sarooshi acted on behalf of the UK in the case. He was instructed by the UK Foreign and Commonwealth Office and the UK Ministry of Justice.