Proskauer Rose International Practice Guide Proskauer Rose LLP |
      Proskauer on International Litigation and Arbitration:
       Managing, Resolving, and Avoiding Cross-Border Business or Regulatory Disputes
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C. Zealously Protecting US Court Jurisdiction Against Gamesmanship in non-US Tribunals

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  1. In Telenor Mobile Comm. AS v. Storm LLC, 2008 WL 4950970, (S.D.N.Y. 2008), the Southern District of New York held that a Ukrainian court's order invalidating an arbitration provision did not make it "impossible"for the company to comply with a US arbitration award under the same agreement and held the company in contempt for failing to comply with the US arbitration award.

(a) In Telenor, a Norwegian corporate shareholder of the Ukrainian mobile telecommunications company, Kyivstar, initiated arbitration proceedings in the US, pursuant to an arbitration clause in the shareholders' agreement, to redress various violations of the shareholders' agreement by Storm, a Ukrainian company and Kyivstar's other shareholder.  Storm, however, attempted to prevent the arbitration proceedings by obtaining a ruling from a Ukrainian court that declared the shareholders' agreement ? specifically the arbitration clause - to be invalid.

(b) Despite the Ukrainian court's holding, the arbitration panel heard the case and determined that it had jurisdiction to hear the dispute.  Specifically, the panel refused to give conclusive effect to the Ukrainian decision because of "the collusive nature of the Ukrainian litigation and because Telenor was not named as a party to [the Ukrainian] litigation or notified of it until [later.]" In 2007, the Southern District of New York confirmed the arbitration award ("2007 Order").

(c) In the 2008 case, Strom argued that, given the Ukrainian order, it was impossible to comply with the 2007 Order.  The Southern District of New York disagreed and held that a non-US court order prohibiting compliance with a US court order does not constitute an "impossibility"against compliance.  Accordingly, finding Storm's noncompliance with the 2007 Order to be willful and ongoing, the district court imposed, inter alia, substantial sanctions and fines that would double every 30 days until the contempt was cured.

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