FEDERAL COURT OF AUSTRALIA

Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 3) [2013] FCA 85

THE COURT ORDERS THAT:

1.    The application for leave to file and serve the draft rejoinder served on the solicitors for the cross-claimant on 9 October 2012 be and is hereby refused.

2.    The cross-respondent pay the cross-claimants’ costs of this application.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

INtroduction

1    On 2 November 2012, I heard an amended interlocutory application by the cross-respondent (“Spirits”) for leave to file and serve a rejoinder in the form served on the solicitors for the cross-claimants (“FKP”) on 9 October 2012 (“the draft rejoinder”).

2    This was the second occasion on which I dealt with such a matter. On 25 January 2012 I published my reasons for judgment in Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 2) [2012] FCA 23 (“FKP No 2”) in which, inter alia, I refused leave to file a rejoinder in the form of a draft served on FKP on 15 July 2011 (“the earlier draft rejoinder”).

3    The form of the draft rejoinder is different from the earlier draft rejoinder although, in substance, there is much commonality in the pleadings (see the side by side comparison at [6] to [8] below).

The Pleadings: Actual and Proposed

4    In response to the orders I made on 9 February 2012 in consequence of my reasons for judgment in FKP No 2, FKP filed a reply to Spirits’ defence to FKP’s second further amended cross-claim. Paragraph 7A(a) to (c) of the reply pleads the basis of a claim of issue estoppel in para 7A(i), and a further or alternative claim of an abuse of process in para 7B. Paragraph 7A(a) to (c) reads:

7A    In answer to paragraph 14, and in further answer to the whole of the defence to second further amended cross-claim, the cross-claimants say:

Findings of prior judgments

(a)    The Presidium Decision decided that:

(i)    VAO-SPI [now known as OAO Plodovaya Kompaniya] was formed as a new entity and not by transformation of Sojuzplodoimport;

(ii)    the provision in the charter of VAO-SPI to the effect that it was the legal successor to Sojuzplodoimport was invalid;

(iii)    VAO-SPI was not the legal successor to Sojuzplodoimport; and

(iv)    Sojuzplodoimport continued to exist as a separate legal entity following the formation of VAO-SPI

(the Succession Findings).

Particulars

(i)    The cross-claimants rely on the whole of the Presidium Decision and the Ruling of the Court of Arbitration of Moscow dated 21 December 2000 which was reinstated by the Presidium Decision (the Court of Arbitration Decision), including paragraphs 13-22, 29, 30-32 of the Presidium Decision and paragraphs 15-27 and 30-32 of the Court of Arbitration Decision.

(ii)    A translation of the Presidium Decision containing hand-numbered paragraphs is annexed to this Reply and marked A. A translation of the Court of Arbitration Decision containing hand-numbered paragraphs is annexed to this Reply and marked B.

(b)    the Presidium Decision further decided that the court’s decision in respect of the Succession Findings was not time barred by operation of Article 181 of the Russian Federation Civil Code or otherwise affected by any alleged delay by the Government of the Russian Federation in commencing the proceedings the subject of those judgments;

Particulars

The cross-claimants rely on the whole of the Presidium Decision and the Court of Arbitration Decision including paragraphs 20-28 of the Presidium Decision.

(c)    the Presidium Decision further decided that the court’s decision in respect of the Succession Propositions was not affected by any alleged representation by the Government of the Russian Federation;

Particulars

The cross-claimants rely on the whole of the Presidium Decision and the Court of Arbitration Decision, including paragraphs 29 and 30-32 of the Presidium Decision and paragraphs 28 and 30-32 of the Court of Arbitration Decision.

5    The draft rejoinder relevantly asserts that the Presidium Decision (as defined in the reply) was given in proceedings which involved a violation of the rules of natural justice under the common law of Australia (para 3); that the Presidium was biased and not impartial and further and in the alternative there was a reasonable cause for a fair minded lay observer to apprehend that the Presidium might not bring an impartial mind to the resolution of the questions arising in those proceedings (apprehended bias) (para 4); and that recognition of the Presidium Decision in Australia would be contrary to public policy in Australia (para 5). Paragraphs 3, 4 and 5 of the draft rejoinder read:

3    In further rejoinder to paragraphs 7A(a) to 7A(c) of the Reply, the Cross-respondent says that for the reasons pleaded in paragraph 4 below, the Presidium Decision does not have any force in, and ought not be recognised in, Australia because the Presidium Decision was given in proceedings which involved a violation of the rules of natural justice under the common law of Australia.

4    At the time at which the Presidium Decision was issued, and during the hearing of those proceedings before the Presidium, the Presidium was biased and not impartial, and further and in the alternative, there was reasonable cause for a fair minded lay observer to apprehend that the Presidium might not bring an impartial mind to the resolution of the questions arising in those proceedings.

Particulars

(i)    The Cross-respondent relies upon the matters set out in, and the documents referred to in, the expert report of Professor William Bowring, Exhibit WB-3 to the affidavit of Professor Bowring sworn on 2 April 2012 and filed in this proceeding.

(ii)    The Cross-respondent relies upon the matters set out in, and the documents referred to in, paragraphs 150 to 164 of the report of the expert opinion of Professor Michael Newcity filed in Case Number 214864, Civil Court of the Hague, which matters and documents will be the subject of further expert evidence in these proceedings.

(iii)    The Cross-respondent relies upon the matters set out in, and the documents referred to in, paragraphs 458 to 513 of the expert report of Professor Richard Sakwa, dated 19 October 2009 and filed in Government of the Russian Federation v Yuri V Shefler, City of Westminster Magistrates’ Court, which matters and documents will be the subject of further expert evidence in these proceedings.

5    In further rejoinder to paragraphs 7A(a) to 7A(c) of the Reply, the Cross-respondent says that the Presidium Decision does not have any force in, and ought not to be recognised in, Australia because recognition of the Presidium Decision in Australia would be contrary to public policy in Australia.

Particulars

(i)    The Presidium Decision was issued as the result of the procedure of procuratorial protest and supervision initiated by the Deputy Prosecutor General (also known as the Deputy Procurator General, but hereafter referred to as the Deputy Prosecutor General).

(ii)    The procedure of procuratorial protest and supervision is a proceeding available to the Deputy Prosecutor General, a party to the decision being protested against, but was unavailable to any private litigant such as [OAO Plodovaya Kompaniya].

(iii)    The procedure of procuratorial protest is an unfair procedure which enshrines an institutional inequality between the Deputy Prosecutor General (being a government official) as litigant and a private citizen as litigant.

(iv)     Australian public policy requires equality of procedural rights, including appellate rights, between a government official and a private citizen as litigants.

(v)     The procedure of procuratorial protest and supervision is a procedure which has been held by the European Court of Human Rights to violate the right to “a fair hearing by an independent and impartial tribunal established by law” in Article 6 of the European Convention on Human Rights in cases involving a civil right.

(vi)    The fundamental unfairness of the procedure of procuratorial protest and supervision as recognised in (v) above ought to inform the public policy of Australia in refusing to recognise the decision, whether or not the decision involves a civil right within the meaning of Article 6 of the European Convention on Human Rights.

The Draft Rejoinder and the Earlier Draft Rejoinder Side by Side

6    The assertion in para 3 of the draft rejoinder finds its equivalent in para 3(b) of the earlier draft rejoinder (see [3] of FKP No 2) and the reasons pleaded in reliance (para 4 of the draft rejoinder and paras 3(c) to (f) of the earlier draft rejoinder) cover common ground if references to paras 3(e) and (f) of the earlier draft rejoinder are ignored.

7    The assertion in para 4 of the draft rejoinder finds its equivalent in para 3(c) of the earlier draft rejoinder (see [3] of FKP No 2) although the reasons pleaded in reliance (particulars 4(i) to (iii) of the draft rejoinder and para 3(f) of the earlier draft rejoinder) are totally different.

8    The assertion in para 5 of the draft rejoinder finds its equivalent in para 3(g) of the earlier draft rejoinder (see [3] of FKP No 2) and the reasons pleaded in reliance (particulars 5(i) to (vi) of the draft rejoinder and any one or more of the matters pleaded in para 3(f) of the earlier drafts rejoinder) have substantial commonality. Particulars 5(i) and (ii) of the draft rejoinder are identical to those in para 3(f)(i) and (ii) of the earlier draft rejoinder; and particulars 5(iii) and (iv) of the draft rejoinder are, in substance, found in para 3(f)(iii) of the earlier draft rejoinder.

Analysis of draft REjoinder and FKP’s Submissions Thereon

Paragraphs 3 and 4 of Draft Rejoinder

9    The pleading in para 3 of the draft rejoinder does not stand on its own; it is “hinged” to the pleading in para 4. For that reason, it is convenient and appropriate that they be dealt with together. Paragraph 3 is effectively pleading that the Presidium Decision involved violation of the rules of natural justice under the common law of Australia because, both during the hearing and at the time of issue, the Presidium was biased (not impartial) or there was reasonable cause for a fair minded lay observer to apprehend the Presidium was biased. The bases for the bias or apprehended bias pleaded are particularised as being the matters set out, and the documents referred to, in three expert reports: Report of Professor William Bowring, Ex WB-3 to the affidavit of Professor Bowring sworn 2 April 2012 (Ex 1); Report of Professor Michael Newcity (paras 150 to 164) annexed to the affidavit of Katriona Ellana Nagy sworn 24 April 2012 (Ex 2); and Report of Professor Richard Sakwa (paras 458 to 513) also attached to Ex 2.

10    Unlike the earlier draft rejoinder, no facts are particularised. FKP submitted that a pleading of actual or apprehended bias requires more than a general reference to evidentiary material of the kind contained in the three reports, even assuming the relevance of the material can be made good. It further submitted that there is distinction between allegations of material facts and the evidence that is adduced to support them. A reference to evidence does not of itself identify the material facts. An allegation of judicial bias of the highest court of a foreign sovereign state is a serious matter which must be particularised with precision. That is particularly so as this Court has already found that an extensive list of factual allegations, contained in the earlier draft rejoinder, could not support the bias allegation (see FKP No 2 at [23]–[37]).

Report of Professor Bowring

11    In its written submissions, Spirits identified three relevant factual matters in the report of Professor Bowring upon which it relied in support of the bias allegation.

12    First, it referred to paras 63–80 of the report, in which “Professor Bowring details problems relating to the judiciary’s lack of independence during the relevant period, with specific regard to the Arbitrazh Courts”.

13     Even putting aside the question of admissibility of that evidence, FKP submitted that a generalised allegation or opinion relating to “problems” as to the independence of the judiciary is incapable of supporting an allegation of actual or apprehended bias in a particular case. It says nothing of the decision under scrutiny, but rather amounts to a general complaint. The following passage from FKP No 2 at [36] is apposite as a criticism of Spirits’ latest formulation:

Instead of setting out any matters relating to the Presidium proceedings at all, Spirits does nothing more than refer to three cases in which concerns were expressed by foreign courts about the prospect that individuals would not receive a fair trial in certain Russian courts. That provides no basis for a suggestion that the Presidium proceedings, in the events which happened in 2001, involved bias. Indeed, to the extent that concerns were expressed in those cases about the Russian Arbitrazh courts, it is salutary to recall that it was precisely the appellate board of the Moscow Arbitrazh court which found in OAO’s favour in the present proceedings. Spirits makes no allegation that that court was biased.

14    As the authorities referred to in FKP No 2 demonstrate, it is incumbent upon a party making a serious allegation of bias, in relation to the Court of highest instance of a foreign state, to identify the facts, matters and circumstances of the particular case which support an allegation of actual or apprehended bias.

15    Secondly, Spirits referred to Professor Bowring’s discussion of the case of Films by Jove v Joseph Beroz 341 F Supp 2d 199 (2004), and his conclusion about that case.

16    In Films by Jove, specific allegations of misconduct were made. These allegations were, no doubt, the subject of pleading and evidence in that proceeding. In particular, Professor Bowring refers to a finding of a New York judge as to “convincing evidence that executive officials improperly pressured the High Arbitrazh Court to intervene in the Soyutzmultfilm Studio litigation on behalf of FSUESMS” at [87].

17    By contrast, in the draft rejoinder, no specific acts of misconduct are identified. Instead, Spirits seemed to advance a “similar fact” submission: “Professor Bowring also notes that the order made by the Presidium in the litigation involving OAO Plodovaya Kompaniya was signed by Mr Yakovlev, being the judge who also signed the judgment in [the] Films by Jove case referred to above”. FKP submitted that if this was intended to make some form of tendency submission, it is not only impermissible (and inadmissible) but also devoid of any appropriate factual support.

18    In fact, Films by Jove is a different case, having different facts and different parties. A discussion of that case is entirely irrelevant to an allegation of actual or apprehended bias in the present case.

19    Thirdly, Spirits stated that:

...Professor Bowring then documents the significant importance of vodka to the Russian state and examines the conduct of the relevant litigation of the Arbitrazh courts involving representatives of the Russian State and OAO Plodovaya Kompaniya, and the events leading up to the commencement of the proceedings in Russia. Professor Bowring expresses the opinion at para 113 that the documents indicate that “the recovery from OAO Plodovaya Kompaniya of the right to the “Stolichnaya” and other trademarks were matters of the highest state importance, directed from the very top.

20    It may be accepted for present purposes that the recovery from OAO Plodovaya Kompaniya of the right to the Stolichnaya and other marks was a matter of the highest state importance, “directed from the very top”. That, however, says nothing about the Presidium, any actual or apprehended bias on the part of the Presidium, any interference by any member of the Russian government in the activities of the Presidium, or any communication at all with the Presidium.

21    Indeed, the high point of Professor Bowring’s opinion as to the importance of the Stolichnaya marks to the Russian state appears to be the directive dated 13 March 2000 issued by President Putin to the Prime Minister, the Prosecutor General and certain government ministers (not to the Presidium or any member of it). That directive was particularised in the early draft rejoinder. It may be assumed that, taken at its highest, the directive supports the proposition that the Stolichnaya marks were important to the Russian state, but is incapable of supporting an allegation of actual or apprehended bias on the part of the Presidium. This Court has already so found, FKP No 2 at [35]–[38].

Report of Professor Newcity

22    Spirits also referred to the report of Professor Newcity. That report was dated 9 February 2007 and was not prepared for the purposes of these proceedings. Spirits submitted that it “outlines various matters indicating the lack of impartiality within the Russian judiciary”. That evidence, which contains matters of generalised opinion about the Russian judiciary, is no different in character from the evidence of Professor Bowring at [63]–[80] of his report. For the reasons already identified, that evidence identifies no facts pertaining to the relevant proceedings before the Presidium and is incapable of supporting an allegation of actual or apprehended bias on the part of the Presidium in the present case.

Report of Professor Sakwa

23    Spirits referred in a generalised way to paragraphs of the report of Professor Sakwa. It does not identify any specific factual or other matters arising from those paragraphs.

24    That report was not prepared for the purposes of the present proceedings. The report itself does not identify any fact capable of supporting an allegation of actual or apprehended bias on the part of the Presidium in the relevant proceedings.

Reference to other cases relating to Russian courts

25    In its submissions, Spirits referred to decisions of various courts concerning Russian courts, namely, Deripaska v Cherney [2009] EWCA 849, The Government of the Russian Federation v Yuri V Shefler, City of Westminster Magistrates’ Court, 8 June 2010 (unreported) and Films by Jove. FKP submitted that none of those decisions would assist the Court in considering any question of actual or apprehended bias on the part of the Presidium in the relevant proceedings in 2001 in this case. Deripaska and Shefler involved prospective consideration of future proceedings in Russia. They did not involve a determination of the question of actual or apprehended bias in respect of any previously issued Russian court decision. According to FKP, this Court’s comments as to the relevance of such decisions in FKP No 2 at [36], set out at [13] above, remain applicable in this respect.

26    Spirits made extensive submissions about another English case concerning the Russian Courts, Yukos Capital S.a.r.L v OJSC Rosneft Oil Company: at first instance [2011)] EWHC 1461 (Comm), [2012] All ER (Comm) 479; on appeal [2012] EWCA Civ 855. Spirits’ reliance on Yukos appears to be twofold.

27    First, Spirits appeared to submit that as a legal matter, it is reasonably arguable that an allegation of bias is justiciable and does not offend the “act of State principle” or the principle of “judicial abstention”. FKP submitted that that submission misapprehends the dispute on this application. As submitted, it may be assumed in favour of Spirits for the purposes of the leave application, that, as a matter of law, an allegation of bias does not offend the “act of State principle” or the principle of “judicial abstention”. The relevant question on this application is whether the matters which Spirits has pleaded and particularised are adequate to advance a case of actual or apprehended bias on the part of the Presidium in respect of the Presidium Decision which has reasonable prospects of success.

28    Secondly, Spirits submitted that, if the Yukos pleading was permitted to go forward, Spirits’ pleading in the present case should also be permitted to proceed, as the “particulars now provided by Spirits extend significantly beyond those relied upon by the claimant in Yukos”.

29    In fact, according to FKP, that submission is not correct. Rather, the opposite is true.

30    In Yukos, an arbitral tribunal acting under the rules of the International Commercial Court made, in September 2006, an award in favour of the claimant (Yukos). The award was subsequently overturned by decisions of the Russian Arbitrazh Courts between May and December 2007. In proceedings to enforce the award in the Netherlands, the Amsterdam Court of Appeal allowed enforcement of the award, and refused recognition of the Russian court’s decision setting aside the award on the basis that the decision was “partial and dependent”. Enforcement proceedings were also commenced in England. Yukos asserted that the respondent (Rosneft) was estopped, on the basis of the Dutch decision, from asserting that the Russian decisions were not “partial and dependent”. In the alternative it sought to argue positively that those decisions were not partial and dependent. In support of its positive case, Yukos made allegations which in particular included the following:

(a)    “[E]ntirely unsubstantiated tax demands were made, after Yukos had previously been given a clean audit by the tax authorities; and those demands were pursued in such a manner as was intended to [impede] their discharge by Yukos. Thereafter the tax demands were upheld by the Russian courts in proceedings which were grossly unfair and involved a manifestly improper application of Russian tax law; and any judge who found in favour of Yukos was summarily removed. Enforcement of those tax demands was then carried out in a manner intended not to maximise recovery, but to ensure that Yukos’ assets were transferred at the lowest possible price to Rosneft. This process included enforcing against Yukos’ critical production facilities first; the admission by the Courts of manifestly unsubstantiated claims by Rosneft; and rigged auctions by the bankruptcy manager. All challenges by Yukos to these manifestly inappropriate acts were dismissed by the Courts.

(b)    More generally, the Russian Arbitrazh Courts have, when adjudicating proceedings involving Yukos or companies associated with it, acted in a manner which demonstrates that the cases have not been decided in accordance with the relevant law and/or in a fair manner, but involved bias and/or deliberate misapplication of the law. …Yukos Capital shall rely on the examples set out in Annex 1.

31    As the allegations summarised above demonstrate, Yukos’ case incorporated allegations of specific factual matters pertaining to the judicial process it sought to impugn, including matters such as the dismissal of judges or specified examples of unfair procedure. The present case involves no such matters.

32    In any event, the Court in Yukos was not concerned with the question before the Court in the present case, namely, whether the matters pleaded and particularised are adequate to support a case of actual or apprehended bias of the Presidium in respect of the Presidium Decision, having reasonable prospects of success. Rather, it was concerned with the different question of justiciability. Rosneft objected to Yukos’ pleadings on the basis that they offended the “act of State principle” or offended the “judicial abstention” principle and were non justiciable. Hamblen J at first instance and the Court of Appeal found that those principles had not been contravened.

33    Further, in the present case, the allegation of actual or apprehended bias is raised as a defence to issue estoppel in relation to the Presidium Decision; in Yukos the question of impartiality was raised as a basis on which the Court would as a question of substantial justice refuse to recognise a series of decisions of Russian courts.

34    A further point of distinction which may be observed is that, in Yukos, the claimant relied upon a favourable decision in a Dutch appellate court. In the present case, by contrast, in cognate proceedings in the Netherlands, the Court of Appeal of the Hague has recently determined the question of succession in favour of FKP and against Spirits: Spirits International BV v FKP Sojuzplodoimport, Case No. 105.005.107/02, ruling of 24 July 2012.

35    According to FKP, it follows that Yukos does not assist Spirits in establishing that its pleading and particularisation of its case of actual or apprehended bias has reasonable prospects of success.

Conclusion

36    FKP submitted that the amendments represented by paras 3 and 4 of the draft rejoinder do not improve upon the pleaded case set out in the earlier draft rejoinder, in respect of which leave was refused in FKP No 2. The pleading fails to specify any material facts, and the expert reports to which it refers identify no factual matters pertaining to the conduct or determination of the proceedings by the Presidium in the Russian proceedings.

37    In this respect, Spirits’ repeated reliance on the proposition that allegations involving matters of disputed fact should be permitted to go to trial is, according to FKP, misplaced. To the extent that relevant factual matters can be identified, they may be taken at their highest. Even with that allowance, those matters are not capable of supporting a case of actual or apprehended bias.

Paragraph 5 of the Draft Rejoinder

38    In rejecting the cognate pleading in the earlier draft rejoinder (paras 3(f)(i)–(iii)) the Court in FKP No 2 found at [23], [24]:

These grounds relate to the prosecutor’s right of protest. There is no pleading as to any concrete matter relating to the prosecutor’s right of protest which gives rise to any actual or apparent bias, or any denial of an opportunity to be heard.

Spirits’ submissions do not provide any further explanation. Rather there is an inchoate suggestion that, because the Deputy Prosecutor-General had a right of protest, there was an “inequality before the court”: SS [40(d)]. But there is no suggestion, and certainly no pleading, that this meant that the Presidium was not impartial, or that OAO was not given an opportunity to be heard: in fact it is clear even from the proposed Rejoinder itself that it was given that opportunity: Rejoinder para 3(f)(v).

39    FKP submitted that substantially the same criticism is apposite in the present circumstances.

40    First, there is no allegation in the draft rejoinder that the prosecutor’s protest to the Presidium was made other than in accordance with Russian law.

41    Secondly, in the draft rejoinder, Spirits makes no allegation that the procuratorial protest contravenes the requirements of natural justice under Australian law. The allegation of contravention of natural justice is confined to paras 3 and 4; and Spirits submission makes clear that this allegation is intended to be separate from its allegations of contravention of natural justice.

42    Thirdly, in fact OAO Plodovaya Kompaniya sought to impugn the process of procuratorial protest in its appeal to the European Court of Human Rights. This appeal failed at first instance and appellate level: Case of OAO Plodovaya Kompaniya v Russia, Application No 1641/02, Judgment of 7 June 2007; rendered final on 12 November 2007 by refusal of request for referral to the Grand Chamber; see O’Shanassy 21.2.2008, Ex POS-2, tab 4.

43    In the circumstances of the case where, on the pleading, there is no contravention of Russian law, no contravention of natural justice under Australian law, and no contravention of European law, FKP submitted that there is no apparent basis for contravention of Australian public policy.

44    Spirits appears to rely on Stern v National Australia Bank Limited [1999] FCA 1421 in support of this pleading. However, as Stern makes clear (at [143]), the extent to which the enforcement of a foreign judgment is contrary to public policy must be of a high order to establish a defence.

45    Further, Spirits appears to suggest, in reliance on Adams v Cape Industries plc [1990] Ch 433 at 568–571 that the Court should undertake for the purposes of the question of public policy an inchoate inquiry as to “fairness of procedure” travelling beyond the requirements of natural justice. Adams stands for no such proposition. As Spirits identifies, Adams was a case in which the foreign court determined damages summarily without judicial assessment. The defendants had not been notified of this (indeed the judgment itself wrongly represented that damages had been judicially assessed). The Court of Appeal did not undertake an inquiry travelling beyond the requirements of natural justice. To the contrary, the Court concluded that this was a “departure from the basic principles of natural justice” (at 569). It further held that the summary procedure was also contrary to the law of the foreign jurisdiction (South Africa) (at 571). The Judge had proceeded on a summary basis in error.

46    According to FKP, these authorities further emphasise the inadequacies of para 5 of the draft rejoinder; the matters advanced in para 5 have no reasonable prospects of success.

Analysis of Spirits’ Submissions in Reply

Paragraphs 3 and 4 of the Draft Rejoinder

47    In support of para 3 of the draft rejoinder, Spirits submitted that there is clear authority for the proposition that an Australian Court may refuse to recognise a foreign judgment if a breach of natural justice occurred in the foreign jurisdiction: Boele v Norsemeter Holding A/S [2002] NSWCA 363 at [24]; Davies, Bell and Brereton JJ: Martin D, Nygh’s Conflict of Laws in Australia (8th ed, Butterworths 2010) at [40.79]; Barnett PR, Res Judicata, Estoppel and Foreign Judgments (Oxford University Press, 2001), at paras 2.08–2.09 especially at 2.09 (iii); Adams v Cape Industries plc [1990] Ch 433 at 566–567; Pemberton v Hughes [1899] 1 Ch 781 at 790. So much may be accepted and indeed was conceded by FKP.

48    In support of para 4 of the draft rejoinder, Spirits observed that the alleged circumstances giving rise to the breach of natural justice, namely, actual bias, or in the alternative apprehended bias, are pleaded in para 4 of the draft rejoinder. That is indisputable; the draft rejoinder speaks for itself.

49    Spirits relied on what was stated by the Privy Council in AK Investments CJSC v Kyrgyz Mobitel Ltd & Ors [2011] UKPC 7 at [96] to [102]. After discussing cases including Voth v Manildra Flour Mills (1990) 171 CLR 538 (at [97]) and Mokbel v Attorney-General (Cth) (2007) 162 FCR 278 (at [98]), both of which were relied on by FKP, the Privy Council said (at 101) :

The true position is that there is no rule that the English court (or Manx court) will not examine the question whether the foreign court or the foreign court system is corrupt or lacking in independence. The rule is that considerations of international comity will militate against any such finding in the absence of cogent evidence. That, and not the act of state doctrine or the principle of judicial restraint in Buttes Gas & Oil Co v Hammer, is the basis of Lord Diplock’s dictum in The Abidin Daver and the decisions which follow it. Otherwise the paradoxical result would follow that, the worse the system of justice in the foreign country, the less it would be permissible to make adverse findings on it.

50    Spirits submitted that the above statement also represents the law in Australia. The principle is one of evidence, not one of pleading. Whilst it is not appropriate to test evidence at this stage of the proceedings for the purposes of determining whether to allow a pleading to go forward, there is in any event “cogent evidence” already supplied in the present case by Professor Bowring’s report.

51    While accepting FKP’s submission that allegations of bias should be pleaded with appropriate particularity, Spirits submitted in response that whatever standard of pleading and particularisation is required, it has met and indeed exceeded it. Spirits has particularised its case by reference to the form of the expert evidence which it expects to be able to adduce at trial, as providing the best particulars of the allegations of actual or apprehended bias. Those particulars include the expert report of Professor William Bowring. The particulars also include references to extracts from reports of Mr Newcity and Professor Sakwa provided for related foreign proceedings to which Spirits and FKP are also parties. Those reports have not been prepared in final form for the purposes of these proceedings, but the reference to them in the pleading may be taken as an indication that expert evidence to this effect will be adduced in the present proceedings.

52    In light of the content of those reports, FKP’s protestations that there is insufficient pleading or particularisation in support of the allegations in paras 3 and 4 of the draft rejoinder cannot be sustained. FKP is plainly on sufficient notice of the case it must meet at trial.

53    According to Spirits, the Court must assume, on this application, that the opinions and facts set out in those reports will be proved in the proceedings. Thus, FKP must demonstrate to the Court that even if the opinions and facts as set out in those experts’ reports were accepted, those opinions and facts would be incapable of sustaining the pleading of actual or apprehended bias. FKP cannot discharge that burden. Rather, if the facts and opinions set out in those expert reports are established, it would be well open to the Court to make the findings of fact to the effect that the decision of the Presidium is attended by actual or apparent bias.

54    Spirits submitted that questions of admissibility cannot govern what is essentially a question as to whether FKP has been put on sufficient notice of the case put against it on bias.

55    Further, FKP’s submissions about the Films by Jove case entirely ignore the fact that the findings in Films by Jove themselves give rise to a reasonable apprehension of bias in other cases involving Mr Yakolev, decided at or around the same time as Films by Jove which involve a government interest (a description which fits the Presidium decision in the present case). Any reasonable observer, knowing of the findings in Films by Jove and of the involvement of Mr Yakolev in that case and the present case, their proximity in time, and the similar government interest in the outcome in each of them, would have a reasonable apprehension that a Court of which Mr Yakolev is a chairman might not bring an impartial mind to bear on the Presidium Decision which FKP seeks to have this Court recognise.

Paragraph 5 of the Draft Rejoinder

56    Spirits accepted that its pleading at para 5 is novel, and in respect of which there is no exact precedent in Australian law. However, according to Spirits, that is not the end of the matter.

57    The circumstance that Spirits was deprived of the benefit of a judgment by reason of a unilateral right of appeal possessed only by the Deputy Prosecutor General, acting in the interests of the State, raises an important issue of a lack of equality of a State and its citizens before the courts. Spirits accepts that the issue as presented in the present case does not fit squarely within the traditional common law conception of natural justice (i.e. the hearing rule and the bias rule). But, according to Spirits, it is plainly arguable that it offends Australian public policy for a situation to arise in which a government effectively gets “a second bite at the cherry” to seek to overturn a judgment against the State, in circumstances where that same judgment would not have been further appellable had it been decided against the citizen, OAO Plodavaya Kompaniya. That falls broadly within the ambit of “fairness of procedure” discussed in Stern as a recognised head of public policy, if “procedure” is viewed broadly enough to include appeal rights.

58    Spirits submitted that, in any event, the categories of public policy are not closed. The Court certainly should not proceed, on the present application, as if those categories unquestionably were closed. Given the paucity of cases in which it has been argued that a court should refuse to recognise a foreign judgment for reasons of public policy, and given the even greater paucity of Australian cases on the topic, it can hardly be said that the authorities in the area are “settled and clear”, and it cannot be said that the pleading is “foreclosed by authority”: see Hicks v Ruddock (2007) 156 FCR 574 at [77], [93]. Indeed, the fact that an action shows little promise of success may not of itself be enough to justify dismissal, particularly where that dismissal turns upon a proposition of law which, while strong, may yet be open to some debate: Bond v Barry (2007) 73 IPR 490.

59    In cases before the European Court of Human Rights where there was a “civil right” at issue in the proceedings, it has been positively held that unilateral rights of protest do contravene the right to a fair hearing: see Ryabykh 52854/99 [2003] ECHR 396; Volkova v Russia 48758199 [2005] ECHR 214; Sovtransavto Holding v Ukraine 4855/99 [2002] ECHR 626; Brumarescu v Romania 28342/95 [1999] ECHR 105. Spirits accepted that in the appeal to the ECHR in the present case, the ECHR held that there was no “civil right” at issue, and hence Article 6 was not engaged. However, according to Spirits, that does not affect the basal unfairness which the above decisions recognise; nor does it affect the issue of Australian public policy, particularly in the light of s 64 of the Judiciary Act (1901) (Cth) and Article 14 of Covenant of Civil and Political Rights, to which Australia is signatory. Each of those embody the principle of Australian public policy to the effect that a State and its citizens should be equal before the courts.

60    According to Spirits, the pleading in para 5 should be allowed to go forward to trial. It should not be knocked out on the basis of a peremptory assessment of its prospects of success which erroneously equates novelty with a lack of prospects of success.

Consideration

61    Unlike the present application, there was no formal application before the Court seeking leave to file the earlier draft rejoinder. Spirits had claimed that it did not require leave, but I expressed considerable doubt as to the foundation of its claim (see [2(2)] and [18] of FKP No 2). In any event, the parties sensibly approached the matter on the basis that the Court had power to control its own processes including power not to permit a pleading which had no reasonable prospect of success to go forward, whether by way of refusal of leave to file or by way of strike-out or summary dismissal; a fortiori with the present application.

Paragraphs 3 and 4 of the Draft Rejoinder

62    As noted in [9] above, para 3 of the draft rejoinder does not stand on its own; it is “hinged” to the pleading in para 4. Apart from the bare pleading of bias on the part of the Presidium or, in the alternative, apprehension of bias on the part of the Presidium by a fair minded lay observer, no fact or circumstance going to the conduct of the Presidium, either during the hearing or in the process of reasoning it embraced in the course of reaching its decision, is relied on in support of the bare pleading. The bare pleading relies solely on evidentiary material of doubtful relevance and admissibility, namely, the three expert reports, none of which have anything to say about the instant case. The fact that the order made by the Presidium in the litigation involving OAO Plodovaya Kompaniya was signed by Mr Yakovlev, being the judge who also signed the judgment in Films by Jove (see [17] above), does nothing to support or advance Spirits’ case.

63    In consequence, the pleadings in paras 3 and 4 have to be evaluated and assessed as bare pleadings without any relevant particularisation; as such they would be liable to be struck out on one, or both, of two bases: they have no reasonable prospects of success; additionally, they do not convey to FKP the case it has to meet at trial.

64    The need for the Court to efficiently and vigilantly case manage the proceeding going forward, particularly in consequence of the orders made on 26 November 2010 in Federal Treasury Enterprise (FKP Sojuzplodoimport v Spirits International BV [2010] FCA 1293, upheld on appeal [2011] FCAFC 69, and having regard to the number of years the cross-claim has already been on foot, impels the conclusion that leave for Spirits to rely on paras 3 and 4 of the draft rejoinder should be refused.

Paragraph 5 of the Draft Rejoinder

65    Leave to rely on this pleading was effectively refused in FKP No 2, albeit on different grounds. It should again be refused. It not only has no reasonable prospect of success; in my view, it has no prospect of success. The fact that the Presidium Decision emanated from an appeal brought by or on behalf of the State in circumstances where the other party in similar circumstances, would have had no right of appeal, while it may be viewed as unfair, has nothing to do with inconsistency with public policy in Australia.

66    Leave to rely on para 5 of the draft rejoinder must be refused.

67    The application must be dismissed with costs.

Associate:

Dated:    15 February 2013