Monegasque De Reassurances
S.A.M. (Monde Re) v. Nak Naftogaz of Ukraine and Ukraine
The dispute began with a contract entered into in 1998 between AO
Gazprom of Russia and AO Ukragazprom, a Ukrainian company and NAK Naftogaz’s
predecessor, for the transportation of natural gas by pipeline across Ukraine
to various destinations in Europe. According to Gazprom, unauthorized amounts
of gas were withdrawn by the Ukrainian company, giving rise to breach of contract.
Naftogaz vehemently denied the illegal withdrawal of gas from the pipeline
but Gazprom's Russian insurance provider, Sogaz Insurance Company, nevertheless
reimbursed Gazprom for the gas. Sogaz in turn was reimbursed by Monde
Re of Monaco, pursuant to a reinsurance agreement.
Thereafter, Monde Re filed suit against Naftogaz in the Moscow Arbitration
Court which quickly entered a judgment against the Ukrainian company.
Naftogaz appealed the initial decision for payment of the $88 million US
to Monde Re to the Russian Supreme Court, but the ruling was predictably upheld.
Monde Re then attempted to enforce the Russian court’s arbitration award
in the United States District Court for the Southern District of New York
not only against Naftogaz but also against the State of Ukraine claiming that
Naftogaz was a controlled commercial entity of the Ukrainian government.
Counsel for Naftogaz and Ukraine, in addition to denying any factual basis
for all of the Russian claims, strenuously argued that the United States courts
were without subject matter or personal jurisdiction over the Defendants.
In a reported decision, the trial court dismissed the Mondo Re’s case on
the grounds that the US court system was not an appropriate jurisdiction
to hear the case (forum non conveniens). On November 15, 2002, a three judge
panel of the United States Court of Appeals for the Second Circuit in New
York unanimously announced it’s ruling in favor of Nak Naftogaz of Ukraine
and the State of Ukraine. Of great significance is that the US Appeals Court
judges specifically rejected the argument that corruption in the judicial
system of Ukraine was so pervasive that a fair hearing was impossible to obtain
in that country and concluded that contrary to the assertions of Mono Re’s
experts, the courts of Ukraine would be a most appropriate forum for the
NAK Naftogaz was represented by Myroslaw Smorodsky, Martin Mendelsohn
of Schnader Harris, Washington, DC, and Danylo Kurdelchuk of Kyiv, Ukraine