Search for justice

In 2005, after it became clear that the Russian Federation intended to expropriate Yukos, GML commenced independent arbitration proceedings, pursuant to the Energy Charter Treaty.

Signed by Russia in 1994, the Energy Charter Treaty protects investors by ensuring fair treatment, non-discrimination and due process. It provides explicitly for international arbitration. GML's arbitration was administered by the Permanent Court of Arbitration in The Hague.

From 2005 to 2014, three renowned arbitrators headed the tribunal. One was selected by the Russian Federation, one by GML, and one by the Permanent Court of Arbitration since it administered the proceedings.

The arbitrators examined more than 4,000 pages of evidence. They presided over ten days of hearings on jurisdiction and admissibility, and 23 days of hearings on the merits. They heard more than 20 witnesses give evidence. Although the Russian Federation participated fully in the ten-year arbitration, it put forward not a single factual witness, despite the tribunal suggesting this would be helpful.

In its Final Award of July 2014, the tribunal concluded that:

The Peace Palace in The Hague, home of the Permanent Court of Arbitration

The Peace Palace in The Hague, home of the Permanent Court of Arbitration

The Tribunal awarded compensation of more than $50 billion to GML's wholly-owned subsidiaries, Yukos Universal Limited and Hulley Enterprises Limited, and to Veteran Petroleum Limited, a pension fund for the benefit of former Yukos employees.

In light of the Russian Federation's refusal to pay the awards, GML launched enforcement proceedings in Belgium, France, Germany, India, the United Kingdom and the United States. Immediately, the Russian Federation threatened the governments of Belgium, France and the United States that any decision of their courts to recognise or enforce the awards would have severe repercussions. Belgium and France promptly adopted so-called ‘Yukos laws’ that would make it more difficult for any person to attach the assets of any foreign state.

Meanwhile, the Russian Federation applied to the Dutch courts to have the Arbitral Awards set aside. National courts in The Netherlands have jurisdiction over the set-aside process since The Hague was the seat of the arbitration. In 2016, the District Court of The Hague decided to set aside the Arbitral Awards. It ruled that the Arbitral Tribunal did not have jurisdiction to hear the claims since the Russian Federation had signed but not ratified the Energy Charter Treaty (ECT), the legal basis for the arbitral proceedings.

In February 2020, in a detailed 134-page judgment, the Court of Appeal of The Hague quashed the decision of the District Court and reinstated the Arbitral Awards. The Court of Appeal found that the Arbitral Tribunal did have jurisdiction to hear the claims brought by the former shareholders on the basis that the Russian Federation, whilst it had signed but not ratified the ECT, had provisionally applied the ECT, including its provisions regarding dispute resolution. The Court of Appeal further found that provisional application of the ECT and its dispute resolution mechanism were not inconsistent with the constitution, laws or regulations of the Russian Federation.

On 15 May 2020, the Russian Federation filed a cassation appeal against the judgment of the Court of Appeal with the Supreme Court of the Netherlands. On 17 July 2020, the former Yukos majority shareholders filed their statement of defence.

In December 2020, the Supreme Court dismissed Russia’s application to suspend enforcement of the Arbitral Awards, deciding that the former Yukos majority shareholders may continue to enforce them. Following a preliminary review of Russia’s appeal, the Supreme Court ruled that the likelihood of Russia’s arguments succeeding was not such as to warrant any suspension of enforcement.

On 5 February 2021, the Supreme Court of The Netherlands heard oral submissions from the Russian Federation and the former Yukos majority shareholders; the parties exchanged written pleadings on the same day. Later in 2021, the Advocate-General will submit his opinion to the Supreme Court, which in turn will deliver its judgment some months thereafter.

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