Significant case law of the Supreme Court of Lithuania on recognition and enforcement of foreign judgments related to sanctioned persons

The Supreme Court of Lithuania has ruled that European Union (EU) sanctions against persons from the Republic of Belarus may constitute grounds for non-recognition of a judgment of the Republic of Belarus.

With regard to the sanctions imposed by the EU on the entities of the Republic of Belarus and the Russian Federation, as well as the decisions taken by these states in relation to “unfriendly” states, the Supreme Court’s interpretations may be of significance in assessing the possibility of recognising and enforcing the judgments of the courts of the Republic of Belarus and the Russian Federation in the Republic of Lithuania. This case law may also be relevant in assessing the possibility of recognising and allowing the enforcement in the Republic of Lithuania of foreign arbitral awards rendered in respect of sanctioned persons or rendered in states where the arbitral awards of the Republic of Lithuania would be unrecognisable due to the provisions of the legislation of those states.

On 9 November 2022, the Supreme Court heard an application by the applicant Vitebskoblvodokanal, a municipal water supply and sewerage utility company of Vitebsk region, for recognition and enforcement in the Republic of Lithuania of a decision of the Economic Court of Vitebsk region of the Republic of Belarus of 5 May 2021.

The Supreme Court has ruled that there are two independent grounds for non-recognition of a decision of the Economic Court of the Vitebsk Region of the Republic of Belarus.

• The first ground is the compatibility of the recognition and enforcement of a foreign judgment with the public policy of the Republic of Lithuania.

In the present case, the Republic of Lithuania and the Republic of Belarus have concluded a treaty of 20 October 1992 on legal assistance and legal relations in civil, family and criminal matters.

Article 19 of the Bilateral Treaty provides that legal aid shall not be granted if its provision is likely to prejudice the sovereignty or security of the requested Contracting Party or the rights and legitimate interests of its nationals, or if it is contrary to the fundamental principles of its law. These grounds for refusal of legal aid shall be regarded as public policy of the Contracting Party.

The Supreme Court noted that the provision of Article 19 of the Bilateral Treaty must be interpreted as including the basic principles of the European Union legal acts, since the generally recognised principles of international law are an integral part of the legal system of the Republic of Lithuania.

Accordingly, the sanctions imposed on the Republic of Belarus at the level of the European Union fall within the scope of Article 19 of the Bilateral Treaty and, therefore, the sanctions imposed may constitute a ground for refusal of legal aid under that article of the Bilateral Treaty.

In this context, the Supreme Court analysed the amendments to Regulation No 765/2006, which introduced a more detailed interpretation of the meaning of the term “claim” into the Regulation, and stated that the legal regulation in force at the time of the cassation proceedings covers not only monetary claims, but also all claims relating to the contract or transaction affected by the measures imposed by the Regulation. Accordingly, applications for recognition and enforcement of judgments, which are dealt with in the context of sanctions under the Regulation, fall within the legal category of “claim”.

The Supreme Court also noted that Regulation No 765/2006 covers command and control situations, and the fact that a particular natural or legal person is not included in the sanctions lists does not mean that he or she will not be subject to the sanctions regime, but that a listed person may de facto stand behind him or her. Whether a sanctioned person owns/controls another entity must be determined on a case-by-case basis by examining the factual circumstances.

Consequently, if the Court finds that there are grounds for assessing the applicant as being subject to sanctions in accordance with the provisions of Regulation No 765/2006, legal aid should be refused in accordance with Article 19 of the Bilateral Agreement.

• The second ground is the compatibility of the recognition and enforcement of a foreign judgment with the principles of good faith and reciprocity recognised by international law.

The Supreme Court stated that the content of the Order of the President of the Republic of Belarus No 137 of 7 April 2022 “On Enforcement Documents” and the Resolution of the Council of Ministers of the Republic of Belarus No 209 of 6 April 2022 “On the List of Foreign Countries Performing Unfriendly Actions in Relation to Belarusian Legal Entities and/or Natural Persons”, according to which the obligations assumed by a bilateral international treaty on the recognition and execution of judgments of courts of the Republic of Lithuania were refused to be fulfilled, should be assessed. If it is established that these acts violate the principles of good faith and reciprocity recognised by international law, this could also constitute an independent ground for non-recognition of a judgment of the Republic of Belarus.

On the basis of the above-mentioned grounds, the Chamber of Judges decided to refer the case back to the Lithuanian Court of Appeal for a retrial.

(Ruling of the Supreme Court of Lithuania, Civil Cases Division, 9 November 2022 in civil case No. 3K-3-255-611/2022)