YUKOSCASE: INVESTMENT ARBITRATION HAS TOO BROADLY INTERPRETED ITS JURISDICTION A REVIEW OF THE HAGUE DISTRICT COURT DECISION
On 20 April 2016, The Hague District Court set aside the $50 billion Yukos awards rendered against the Russian Federation in arbitration proceedings administered by the Permanent Court of Arbitration in The Hague. The Court reached its decision on the grounds that the arbitral tribunal lacked jurisdiction. In assessing the competence of the arbitral tribunal, the Court held that the relevant provisions of Energy Charter Treaty could not be provisionally applicable pursuant to Article 45 of the Treaty because they were contrary to Russian laws (Constitution of 1993, Laws on foreign investments, principle of the separation of powers) which did not offer independent legal basis for the settlement of investor-state disputes in international arbitral proceedings. According to the Ruling of the Court the Permanent Court of Arbitration failed to make the correct evaluation of the fact that Russia never ratified the Treaty; the scope of the signing was expressly restricted by the Limitation Clause in Article 45 aimed to provide for the solution of conflicts between states' national laws and their international obligations. Consequently, Russia was only bound by the Treaty provisions reconcilable with the Russian law and never made unconditional offer for investment arbitration. In its judgment the Court supported arguments of the Russian Federation that it never consented to arbitrate public-law disputes under the Treaty and that arbitrators were wrong in declaring themselves competent to hear the case. The defeated party (the shareholders) is going to lodge an appeal with The Hague Court of Appeal, which will involve a complete new hearing.