MOSCOW, April 5 - RAPSI. A Canadian court dismissed an appeal filed by Khan Resources Inc. challenging a lower court’s dismissal of its motion to validate, substitute or dispense with service of the statement of claim in a lawsuit against the Russian Atomredmetzoloto (ARMZ) uranium producer.

Khan sought, among other things, to restore a prior order of the Superior Court of Justice that validated service of the statement of claim on ARMZ, a subsidiary of the Russian State Atomic Energy Corporation ROSATOM.

The appeal hung on Rule 17.05(3) of the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the Convention), which states in relevant part: “An originating process or other document to be served outside Ontario in a contracting state shall be served… (a) through the central authority in the contracting state.”

In August 2010, Khan Resources filed a lawsuit in Ontario, seeking $300 million in damages from AMRZ for breaching fiduciary duties, unlawfully interfering in its economic relations, breaching good faith and damaging its rights, reputation and property.

Under international law, Khan Resources attempted to notify the defendant about the statement of claim through the Russian Justice Ministry. However, the ministry declined to serve the statement of claim on the defendant.

Rather than appealing in Russia, which it was entitled to do, Khan then filed a motion in Ontario to validate the notification. In October 2011, the court granted the motion, stating: “The purpose of the Convention, similar to that of Rule 16, is to facilitate the service of legal documents outside their jurisdiction of origin, not to enable foreign states to immunize their own subsidiary corporations by arbitrarily refusing to effect such service.”

ARMZ, however, successfully challenged the decision in March 2012. The court stated that Khan had failed to exhaust all possible options to notify the defendant in Russia since it could have appealed the Justice Ministry's denial in the Moscow Commercial Court or bring its complaint to the superior authorities.

The Court of Appeal for Ontario agreed, explaining: “For the reasons that follow, in my view the Superior Court judge was correct to hold that rule 17.05(3) is a complete code for service on foreign defendants in states that are parties to the Convention.”

Khan issued a statement shortly thereafter voicing its disappointment with the decision. The statement concluded that Khan is presently reviewing its legal options.
ARMZ had not provided a comment by the time of publication.