MOSCOW, June 17 (RAPSI, Vladimir Yaduta) – Batbrothers, a company registered in Mongolia, seeks the recognition and enforcement of an award granted by the Moscow Commercial Court in favor of Gazprombank in the Supreme Court of the State of New York.

According to the case materials RAPSI has at its disposal, the Mongolian company alleges that in February 2006 Gazprombank entered into a facility agreement with Zolotoy Vostok-Mongolia (Golden East Mongolia, GEM), a gold mining company. The agreement provided for a total disbursement limit of $30 million in three tranches and stipulated an annual interest rate of 12.5%. The loan was secured by a personal guarantee by Sergey Paushok, the GEM Executive Director, the company’s equipment worth $6.2 million, and subsoil and exploration licenses worth about $33.7 million. Another guarantor of payments under the agreement was Zolotoy Vostok-Sibir (Golden East Siberia, GES).

In case the borrower failed to repay the loans, the lender could impose a penalty of 0.1% of the amount due for each day of delay. Since November 2008, the interest rate was adjusted from 12.5% to 18%.  

Later, due to the fact that the borrower failed to comply with the loan agreement, Gazprombank lodged a claim with the Moscow Commercial Court seeking to recover the arrears in the amount of $25 million (for the outstanding principal and interest) and about $22 million in default interest and penalties for failure to repay the outstanding amounts. In 2012, the Moscow Commercial Court rendered a judgment in favor of Gazprombank having fully granted the demands of the plaintiff and imposing on each defendant the payment of court fees in the amount of 200,000 rubles ($3,000).  

Allegedly, Gazpormbank has later transferred the rights relating to the enforcement of this award to Batbrothers company, which lodged the respective claim with a US court in April 2015. The defendants should have been properly summoned under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the Convention). However, according to the plaintiff, the proper service of the process could not be accomplished because Mongolia, where the plaintiff believed GEM was located, was not a signatory to the Convention, whereas Russia had refused to service summons from the USA since 2003.  

Therefore, Batbrothers made a motion with a US court seeking permission to use alternative methods of service the defendants located outside of the USA. Last week, the court denied this motion having noted that the company had not exhausted the means to provide adequate evidence demonstrating valid addresses of the both defendants, that the both defendants were still viable entities, and documentation of the assignment agreement between the plaintiff and Gazprombank.