In a judgment dated April 20, 2016, the District Court of The Hague, in the Netherlands, set aside awards that had ordered Russia to pay US$50 billion to the shareholders of Yukos, a bankrupt oil company. An English translation of the judgment is available online, and a summary of the awards, issued in July 2014 by a tribunal at the Permanent Court of Arbitration (PCA), is available at the ITN website.
The Dutch court found that the PCA tribunal lacked jurisdiction under the Energy Charter Treaty (ECT) to arbitrate the cases against Russia. In particular, it noted that Russia had signed but never ratified the ECT, and that the Russian parliament had rejected its ratification. According to the court, “based only on the signature of the ECT, the Russian Federation was not bound by the provisional application of the arbitration regulations of Article 26 ECT.”
The court also found that Russian law prohibits bringing disputes of a public law nature to international arbitration without legislative approval. As the court understood that the Yukos case centred on a challenge to tax measures imposed by Russia, and as the ECT was not ratified, the court concluded that the dispute could not have been brought to arbitration.
The decision could make it more difficult to enforce the awards in many countries. However, counsel for the Yukos shareholders, Yas Banifatemi of Shearman & Sterling, stressed that “enforcement courts will be at liberty to assess the award for themselves, irrespective of what the Dutch courts have to say on the matter.” There are pending enforcement proceedings in Belgium, France, Germany, the United Kingdom, and the United States.