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2020-02-doc5 Yukos arbitration cont’d

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In a judgment of 18 July 2014, an Arbitration Tribunal had sentenced the Russian Federation (RF) to pay a total of approximately US $ 50 billion to the three shareholders as damages. The facts have been widely covered in business media. The Tribunal was of the opinion that it was not really the Russian Federation’s duty to collect taxes from Yukos, but to eliminate Mr. Khodorkovsky as a potential rival to President Putin and to appropriate/expropriate Yukos’ property. The Arbitral Tribunal based its jurisdiction with regard to the claim of the shareholders on Article 26 of the Energy Charter Treaty (ECT), which states that a dispute between a contracting state and a foreign investor can be settled by arbitration. The Russian Federation has signed this treaty, but it never ratified it. The ECT did, however, provisionally apply to the RF for a number of years. The RF then demanded from a Dutch court of first instance (District Court The Hague) that the ruling in this Yukos arbitration be set aside.

Under Dutch law the annulment of an arbitral award can only be made on a limited number of grounds. One of those grounds is, rather evidently, that the Arbitral Tribunal had no power to decide in this case. In its judgment of 20 April 2016, the District court The Hague court indeed set aside the decision of the Arbitral Tribunal because it considered that the Arbitral Tribunal was not competent to judge the case. In the opinion of the court, the ECT offered no basis for its authority to judge. On 18 February 2020, the Court of Appeal The Hague disagrees with the court’s decision. According to the Court of Appeal, the jurisdiction of the Arbitral Tribunal does indeed rest on the ECT. When the RF signed the ECT, it undertook to apply that treaty provisionally unless it would violate Russian law. In the opinion of the court, there is no question of conflict with Russian law. The RF had also put forward a number of other arguments as to why the arbitral award should be set aside, but the court also rejected these. The result is that the arbitral award of six years ago is back in force having judicial effect. The RF can appeal the Supreme Court of the Netherlands against the decision of the Court of Appeal. So back in a few years on this one!

See Court of Appeal The Hague (in Dutch; haven’t seen an English translation yet) https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:GHDHA:2020:234