The matter in brief
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Background. The client’s counterparty stopped performing a major contract and then moved part of its assets out of the jurisdiction where an award would have been easiest to enforce.
How the case ran. After pre-trial settlement failed, international arbitration proceedings were started. Once the award was issued, separate proceedings were needed to have it recognised and enforced abroad.
The outcome. Two years after the dispute began, the client received the full amount, RUB 1.2 billion. It shows that even when a debtor deliberately complicates recovery, a result is achievable through consistent work.
The legal framework for recovery when a debtor moves assets away
The right to go to international arbitration rather than a state court is generally determined by the arbitration clause in the contract itself. Its wording decides which institution will hear the dispute and under which rules.
If there are grounds to believe the debtor is preparing to move assets, interim measures can be sought before or during the proceedings, such as freezing accounts or prohibiting the disposal of property. This can be done through a state court in support of the arbitration or through an emergency arbitrator under the rules of most leading arbitral institutions.
Recognition and enforcement of an arbitral award abroad most often takes place under the 1958 New York Convention. In contracting states the award is recognised through a simplified procedure, without a review of the merits, and recognition can be refused only on an exhaustive list of grounds.
If the assets have already been moved, a separate ground for recovery may be to challenge the transfers themselves as sham or feigned transactions, or as ones made in abuse of rights to the detriment of the creditor.
Recovery abroad: time limits to bear in mind
General guidelines on time limits. How far they apply to a particular dispute depends on the governing law and the debtor’s jurisdiction.
How recovery usually proceeds when a debtor evades payment
The general sequence of steps. The specific timeframes and the measures involved depend on the contract, the governing law and where the debtor’s assets are found.
Claim letter and contract analysis
We check the arbitration clause and the governing law, send a pre-trial claim letter and, in parallel, analyse what is known about the debtor’s assets and structure.
Interim measures
Where there are signs of asset stripping, we apply for an order freezing accounts or prohibiting the disposal of property, before the debtor has time to dispose of its assets.
The arbitration proceedings
We build the evidence, take part in the written phase and the hearings, and work towards an award on the merits of the claim.
Recognition and enforcement abroad
We start recognition proceedings in the jurisdiction where the debtor’s assets are located and support enforcement until the client actually receives the money.
Why a debtor manages to move its assets
More often than not, assets are moved not when the dispute begins but before it. The creditor reacts to non-payment with a claim letter and a referral to arbitration, but does not check in advance what is happening to the counterparty’s property.
An application for interim measures is often filed too late, only once it is clear that the debtor does not intend to perform voluntarily, although it is more effective to make it at the earliest stage of the dispute.
A contract without additional security, such as a bank guarantee, a pledge or a surety, leaves the creditor with no independent source of recovery if the debtor itself has no assets by the time the award is enforced.
Another common misconception is that the money arrives automatically once the arbitral award is issued. In practice, a separate recognition and enforcement procedure is required in the country where the assets are located, with its own time limits and grounds on which the debtor may object.
How we handle recovery from evasive counterparties
While preparing the position on the merits, we assess where the debtor’s assets are actually located. An award won but impossible to enforce does not solve the client’s problem.
We treat interim measures not as a formality but as a separate stage of the strategy: the earlier the application is made, the less time the debtor has to dispose of its property.
For recognition and enforcement of the award abroad, we engage local lawyers in the jurisdiction where the debtor’s assets are located. The client deals with one point of contact and does not have to get to grips with the foreign procedure alone.
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Frequently asked questions
Why did the international arbitration take two years?+
The debtor deliberately complicated the process, including by later moving its assets, and separate proceedings were needed to have the award recognised and enforced abroad.
Can enforcement of an arbitral award abroad be speeded up?+
In part. The choice of jurisdiction for recognition and the quality of the document preparation have a significant effect on the timeframe, but procedural time limits cannot be removed altogether.
Would you like to assess the prospects of your case?+
Send a request and a litigation partner will contact you within one working day.