Yukos Universal Limited (Isle of Man) v.

The Russian Federation

(AN ARBITRATION IN ACCORDANCE WITH THE ENERGY CHARTER TREATY AND

THE 1976 UNCITRAL ARBITRATION RULES)

(Assignment towards the fulfillment of assessment in the subject of Energy Law)

SUBMITTED BY: SUBMITTED TO:

RISHABH 1466 (B) MS. ROSMY JOAN

B.A. LL.B. (SEMESTER VIII) FACULTY OF

LAW

NATIONAL LAW UNIVERSITY, JODHPUR

SEMESTER- VIII

(JANUARY-MAY 2020)
Contents
Introduction ................................................................................................................................ 3

Summary .................................................................................................................................... 4

Background Information ............................................................................................................ 4

Research Questions .................................................................................................................... 5

Method of Data Collection......................................................................................................... 5

Evaluation and Analysis of Data................................................................................................ 6

A. Indirect Expropriation – the Legal Threshold:................................................................ 6

B. The question of ‘legality’ of Indirect Expropriation: ...................................................... 8

C. The enforcement of the ‘Award’: ................................................................................... 9

The Aftermath .......................................................................................................................... 12

A. The ‘case-to-case’ approach in conjunction with the three elements to decide threshold
incorporated increasingly in investment treaties.................................................................. 12

B. Controversy regarding the enforcement issues of the Award. ...................................... 13

Conclusion ............................................................................................................................... 14

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 INTRODUCTION
Yukos was created as a joint stock company in 1993 and privatized in 1995, with operations
across the oil and gas sector; yuganskneftegaz (YNG) was its main production subsidiary. In
200, Yukos was Russia’s largest company in the sector and listed as one of the world’s top ten
oil and gas companies by market capitalization. The claimants complained that, starting in July
2003, Russia took a series of measures leading to yukos being declared bankrupt in August
2006. Yukos was eventually struck off the registry of companies in Nov. 2007 and its assets
nationalized. Russian state-owned co. in Nov. 2007 and its assets nationalized. Russian state-
owned companies Gezprom and Rosneft acquired Yukos remaining assets.

Among the measures alleged to have breached the ECT are the criminal prosecution of the co.
and its management Mikhail Khodorkovsky (CEO of Yukos and supporter of Russian opposion
parties), Platon Lebedev (Director of the claimants Hulley Enterprises and Yukos Universal)
and Vasily Shakohvsky (President of Yukos-Moscow) were charged and convicted of crimes
including embezzlement, fraud, forgery and tax evasion. To escape similar charges, other
executives fled Russia, such as Leonid Nevzlin (Deputy Chairman of the Yukos Board of
Directors).

During the arbitrations, Russia referred to Khodorkovsky, Lebedev, Nevzlin and others as the
“oligarchs” – the individual owners of the claimants and emphasized that they were involved
in seeral illegal activities. Russia characterized YUkos as “criminal enterprise” that perpetrated
embezzlement, tax evasion through the misuse of special low-tax zones within Russia, tax fraud
and schemes to avoid the enforcement of tax liens, as well as transfer pricing schemes to divert
the proceeds from the sale of oil to offshore shell companies owned by the “oligarchs”

According to the claimants, Russia also imposed tax reassessment, VAT charges, fines and
assets freezes against Yukos; threatened to revoke its licenses; annulled its merger with Russia
oil company Sibneft; and forced it to sell YNG, its most important production facility. They
argued that, along with the harassment of Yukos’ Executives, these measures by Russia
amounted to a breach of the fair and equitable treatment (FET) standard under the ECT Article
10(1) and to an indirect expropriation of the claimants’ investment in Yukos in violation of
ECT Article 13(1).

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In this paper, the landmark energy arbitration in the case of Yukos Universal Limited (Isle of
Man) v. The Russian Federation1 (hereinafter “Yukos case”) is visited by the author.

SUMMARY
The claims of the dispute arise out of a series of actions undertaken by the respondent against
Yukos Oil Company, including arrests, large tax assessments and aliens, and the auction of the
main Yukos facilities, among others which allegedly led to the bankruptcy of the company and
eliminated all value of claimant’s share in Yukos.

BACKGROUND INFORMATION
The claimants in the three parallel arbitrations were Hulley Enterprises Limited (Cyprus),
Yukos Universal Limited (Isle of Man) and Veteran Petroleum Limited (Cyprus); jointly, they
held 70.5 percent of the shares in Yukos. The arbitrations were initiated under the Energy
Charter Treaty (ECT) in 2005, and the claimants’ original ask was for no less than US$114
billion. In addressing the two jurisdictional issues, it had postponed in the 2009 interim award,
the tribunal upheld its jurisdiction, finding that the claims were not barred because of the
claimants’ illegal conduct or because of the taxation measures carve-out of ECT Article 21.

The arrests, tax reassessments, fines and the forced sale of the Yuganskneftegaz production
facility, among other measures imposed on the claimants, amounted to an indirect
expropriation of Yukos, in breach of Russia’s obligations under the ECT during the country’s
provisional application of the treaty. The tribunal did not see a need to consider whether Russia
also breached the treaty’s fair and equitable treatment standard. Along the lines of the award
in Occidental v. Ecuador, issued by a tribunal also chaired by Yves Fortier, a 25% reduction
in the amount of damages was determined, due to the claimants’ contributory fault in their
abuse of the low-tax regions within Russia and their misuse of the Cyprus-Russia tax treaty.

The claimants were awarded three heads of damages: the value of their shares in Yukos, the
value of lost dividends, and interest on both. The tribunal valuated the damages based on a
comparable companies method advanced by the claimants’ and corrected by Russia. The
valuation date chosen was the award date, as the resulting amount of damages was higher. The
tribunal granted simple pre-award interest and annually compounded post-award interest.
Russia was given a 180-day grace period to pay the US$50 billion in total damages, to

1
UNCITRAL, P.C.A. Case No. AA 227 (hereinafter, “Yukos Awards”).

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reimburse the claimants for the €4 million they had deposited with the PCA for costs, and to
repay them about 75 per cent (US$60 million) of their legal fees.

RESEARCH QUESTIONS
The questions for analysis in the case throughout its legal history in the courts and tribunals are
as follows:

1. Whether there has been an “Indirect Expropriation” by the Russian Government?

2. Was the expropriation non-discriminatory?
3. Was the expropriation accompanied by the payment of prompt, adequate and effective
compensation?
4. Was the expropriation for a public interest purpose?
5. Was the expropriation carried out under the due process of law?
6. Did the actions of the Federal Government of Russia constitute an illegitimate
expropriation?
7. Is the Award enforceable considering the Russian Federation’s non-ratification of the
ECT?

METHOD OF DATA COLLECTION

The method of research for this paper was data collection from primary as well as Secondary
Sources. For the purpose of this article, the author has referred to scholarly articles, the copy
of the Arbitration Award, the enforcement issues in the courts and Newspaper Articles covering
the arbitration proceedings and the subsequent reactions to the award. Some of the sources are:

Primary & Secondary

- The Energy Charter Treaty

- The Hague District Court and the Court of Appeal judgments

- The Yukos Arbitral Award (all the three referred ones)

- Online Articles - Yukos arbitration decision in a nutshell (by: Yarik Kryvoi)

- Published Articles – A case of winning the battle and losing the war: Yukos v. Russian
Federation (By: Amy Billing)

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 EVALUATION AND ANALYSIS OF DATA
Nations are not prohibited under International Investment Law from making an expropriation
but the same has to necessarily be of a lawful nature. To qualify as a ‘lawful’ expropriation,
the taking of the investment must be for a public purpose, non-discriminatory in character,
done with the observance of due process, and accompanied by adequate compensation2. The
core guarantee of International Investment Law is that of protection against expropriation3
Protection against expropriation is a core guaranty of international investment
law. The ECT realizes this guarantee through Article 13(1)4, which reflects a standard for
expropriation found in numerous investment treaties. Yukos case involves the application of
Article 13(1) to find that the Russian Federation had indirectly expropriated Yukos. The
primary issues that arose in the cases and their resolution has been as follows in the case.

A. Indirect Expropriation – the Legal Threshold:

This was the substantive issue as decided by the Arbitration Tribunal looking at the issue from
the lens of ECT. A claim of indirect expropriation is at the heart of the Yukos investment
arbitration cases brought by three former shareholders of OAO Yukos Oil Company (Yukos)
against the Russian Federation. On 18 July 2014, the Tribunal issued its unanimous final
awards in these combined cases, determining that the Russian Federation had breached its
obligations under Article 13 (Expropriation) of the Energy Charter Treaty (ECT).

The Tribunal held that while the Russian Federation ‘has not explicitly expropriated Yukos or
the holdings of its shareholders’, nonetheless, the measures it had taken ‘have had an effect
‘‘equivalent to nationalization or expropriation’’.5 The Tribunal’s ruling was thus squarely
founded on a finding of indirect expropriation. In this respect, the Tribunal concluded that ‘the
primary objective of the Russian Federation was... to bankrupt Yukos and appropriate its
valuable assets’.

Most of the investment treaties, including the ECT, do not provide detailed criteria for
assessing whether or not an indirect expropriation has occurred. It is recognized in international
law that measures taken by a State can interfere with property rights to such an extent that these

2
United Nations Conference on Trade and Development (UNCTAD), Taking of Property (2000) 12.
3
Esme Shirlow, DEFERENCE AND INDIRECT EXPROPRIATION ANALYSIS IN INTERNATIONAL INVESTMENT LAW:
OBSERVATIONS ON CURRENT APPROACHES AND FRAMEWORKS FOR FUTURE ANALYSIS, (2014) 29(3) ICSID
Rev—FILJ 595, 597 (2014).
4
Article 13 (1), The Energy Charter Treaty, 1998.
5
Yukos Awards, supra, n.1, ¶ 1580.

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rights are rendered so useless that they must be deemed to have been expropriated, even though
the State does not purport to have expropriated them and the legal title to the property formally
remains with the original owner6. Tribunals should take a ‘fact-based, case-by-case’ approach
in assessing whether or not the government measures in question constitute an indirect
expropriation7.

The Tribunal followed the same approach in its combined award despite Article 13 of ECT
providing no specific guidelines in this direction. The three elements to be considered in cases
of an alleged indirect expropriation along with the case to case approach are as follows: (i)
Degree/intensity of harm to the investment: the economic impact of the government measures;
(ii) Investor’s legitimate expectations: the interference of the government measures with
reasonable and legitimate investor expectations; and (iii) Character: the character of the
government measures8.

1. In this case, there was little controversy about the extreme economic impact of the
Russian Federation’s measures on Yukos and its investors. By the end of its demise,
Yukos had been liquidated and struck off the Russian register of companies, with its
assets acquired by the State-owned oil company, Rosneft, for little or no compensation.
The Yukos Tribunal, in this respect held that the primary objective of the Russian
Federation was not to collect taxes but rather to bankrupt Yukos and appropriate its
valuable assets9. Unlike a number of other investment arbitrations the tribunal did not
face difficulty in determining whether the level of economic impact or deprivation to
the investor constituted an expropriation in Yukos Case10.
2. The Yukos Tribunal’s consideration of legitimate expectations on the part of the
Claimants as investors, and Yukos as a taxpayer in the Russian Federation, was at the
core of the Tribunal’s Decision. It was contested very strongly by Russia that that
without a specific commitment from the host State, an investor has no right or legitimate
expectation to expect non enforcement or exemption from taxes and associated

6
Starrett Housing Corp v Government of the Islamic Republic of Iran (1983) 4 Iran–USCTR 122, 154.
7
Christopher Gibson, A LOOK AT THE COMPULSORY LICENSE IN INVESTMENT ARBITRATION: THE CASE OF
INDIRECT EXPROPRIATION, (2010) 25 Am U Intl L Rev 357.
8
Supra, note, 6.
9
Yukos Awards, n.1, ¶ 1579.
10
Sempra Energy International v Argentine Republic, ICSID Case No ARB/02/16, Award (28 September 2007)
¶¶ 283–6.

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 penalties11. The Russian Federation contended that a distinction must be made between
expropriatory measures that breach a host State’s obligations under the ECT and the
legitimate exercise of State regulatory power, including the imposition and enforcement
of taxes12. The Tribunal found that it was unable to accept that the expectations of
Yukos should have included the extremity of the actions which in the event were
imposed upon it.
3. The Yukos Tribunal found that the relevant measures imposed by the Russian
Federation were taken only under the guise of taxation, but in reality
were aimed at achieving an entirely unrelated purpose The Tribunal further found that
‘President Putin and his administration used Yukos’ tax problems as a pretextual
justification for setting in motion a plan to bankrupt Yukos, as opposed to just collecting
the taxes that might have been legitimately assessed. The Russian Federation’s
measures did not qualify for an exemption from the expropriation standards of the ECT
under' the taxation carve-out provision in Article 21(1)13 of the ECT.

B. The question of ‘legality’ of Indirect Expropriation:

Expropriation is permissible and lawful under the Article 13(1) if four conditions are met. The
expropriation must be (i) for a purpose which is in the public interest; (ii) non-discriminatory;
(iii) carried out under the due process of law; (iv) accompanied by the payment of ‘prompt,
adequate and effective compensation14.

1. The Tribunal questioned the fact as to whether the destruction of Russia's largest oil
company served any public interest purpose. The Tribunal indicated that it was, instead,
in the interest of the largest State-owned oil company, Rosneft, which took over the
principal assets of Yukos virtually cost-free. However, this was not the same as being
in the public interest of the economy, polity and population of the Russian Federation.
2. Claimants contended that the expropriation was not accompanied by compensation, let
alone prompt, adequate and effective compensation. The Tribunal found that the
Russian Federation’s failure to meet this prescription was incontestable, because the
effective expropriation of Yukos was not accompanied by the payment of prompt,

11
Surpa, Note No. 16, ¶ 1544.
12
Ibid, ¶ 1545.
13
Article 21(1), Energy Charter Treaty, 1998.
14
Supra, note No. 6.

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 adequate and effective compensation, or, in point of fact, any compensation
whatsoever.
3. The Tribunal found that ‘Yukos was subjected to processes of law’, but it did not accept
that the expropriation of Yukos was ‘carried out under due process of law’ for the
multiple reasons discussed in the award. The harsh treatment accorded to Messrs
Khodorkovsky and Lebedev remotely jailed and caged in court, the mistreatment of
counsel for Yukos and the difficulties counsel encountered in reading the record and
conferring with Messrs Khodorkovsky and Lebedev, and the pace of the legal
proceedings, did not comport with the due process of law15. Rather, the Tribunal found
that the Russian court proceedings, and most egregiously, the second trial and second
sentencing of Messrs Khodorkovsky and Lebedev16, indicated that the Russian courts
‘bent to the will of Russian executive authorities to bankrupt Yukos, assign its assets to
a State controlled company, and incarcerate a man who gave signs of becoming a
political competitor17'.
4. On the question of whether the treatment of Yukos and the appropriation of its assets
were discriminatory, the Tribunal observed that this question had been inconclusively
argued between the parties. The Tribunal ruled that this question need not be and has
not been decided by this Tribunal.

Hence, The Tribunal concluded that in order for the Russian Federation to be found in breach
of its obligations under Article 13 of the ECT, the foregoing violations of the conditions of
Article 13 more than suffice. Accordingly Respondent’s liability under international law for
breach of treaty was established.

C. The enforcement of the ‘Award’:

In a highly anticipated judgment which was handed down on 20 April 2016, The Hague District
Court (the “Court”) set aside the $50 billion Yukos awards rendered against the Russian
Federation in arbitration proceedings administered by the Permanent Court of Arbitration in

15
Daniel Friedrich Behn, AN ARBITRAL TRIBUNAL AWARDS YUKOS SHAREHOLDERS 50 BILLION USD IN
DAMAGES AGAINST THE RUSSIAN FEDERATION, PluriCourts Blog, July 29, 2014,
https://www.jus.uio.no/pluricourts/english/blog/daniel-friedrich-behn/an-arbitral-tribunal-awards-yukos-
shareholders-50-billion-usd-in-damages-against-the-russian.html.
16
YUKOS SHAREHOLDERS OBTAIN HISTORIC VICTORIES BEFORE ECHR AND HAGUE COURT OF ARBITRATION,
available at
https://www.khodorkovsky.com/resources/yukos-shareholders-obtain-historic-victories-before-echr-and-hague-
court-of-arbitration/.
17
Press Release, Russia ordered to pay US$50 billion over Yukos, The National, July 28, 2014,
https://www.thenational.ae/world/russia-ordered-to-pay-us-50-billion-over-yukos-1.266611.

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The Hague. Further, by its ruling dated 25 September 2018, the Court of Appeal in The Hague
(“CoA”) has dismissed a number of procedural objections raised by the former Yukos
shareholders, Hulley Enterprises Ltd., Veteran Petroleum Ltd. and Yukos Universal Ltd.
(“HVY”) against the scope of the Russian Federation’s Defence on Appeal.

The Court, which was competent to hear Russia’s claim in the setting aside proceedings on the
basis that The Hague was the place of arbitration, reached its decision on the grounds that the
arbitral tribunal that had rendered the awards lacked jurisdiction. Accordingly, the Court
annulled the three interim awards of 30 November 2009, as well as the three final awards of
18 July 2014.

In assessing the competence of the Tribunal, the Court examined in turn whether (i) the Energy
Charter Treaty (the “ECT”) was provisionally applicable pursuant to Article 45 ECT and (ii)
whether or not the arbitration clause of Article 26 ECT was consistent with Russian law.

The Court first examined the effect of what has been labelled as the “limitation clause” of
Article 45(1) ECT, which provides that each ECT signatory State agrees to apply the ECT
provisionally pending its entry into force “to the extent that such provisional application is not
inconsistent with its constitution, laws or regulations”.

The Russian Federation submitted that the clause requires a “piecemeal” approach, which
involves analysing whether each provision of the ECT is consistent with the Constitution, laws
and regulations of the Russian Federation. In contrast, the former Yukos shareholders argued
that the inquiry is an “all-or-nothing” exercise which requires an analysis and determination of
whether the principle of provisional application per se is inconsistent with the Constitution,
laws or regulations of the Russian Federation.

Whilst the Tribunal had followed the former Yukos shareholders’ “all-or-nothing” approach,
the Court accepted the Russian Federation’s interpretation of Article 45(1) ECT, finding that
its wording necessitated an examination of each separate article of the ECT to determine
whether the provisions contained therein were contrary to the constitution or other legislation
or regulation of the State concerned. The Court held that the Russian Federation, which never
ratified the ECT, was only bound by those provisions of the ECT reconcilable with Russian
law, including the 1993 Russian Constitution.

In reaching its conclusion, the Court looked to the Vienna Convention on the Law of Treaties
to interpret the “limitation clause”, finding that the ordinary meaning of the words contained

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in Article 45(1) ECT supported the interpretation advocated by the Russian Federation. The
Court also considered that for the purposes of interpreting the “limitation clause”, significance
should not be attached to the fact that the Tribunal’s opinion was supported by the opinion of
another tribunal – incidentally chaired by the same person – in another ECT-based arbitration,
namely the Kardassopoulos v. Georgia case.

In accordance with its interpretation of Article 45(1) ECT, the Court went on to consider
whether the arbitration clause contained in Article 26 ECT (from which the Tribunal derived
its competence) was “not inconsistent” with the Russian Constitution, laws or other regulations.
The Court rejected the former Yukos shareholders’ view that a provision of the ECT (such as
Article 26) can only be incompatible with Russian law if the Treaty provision concerned is
expressly prohibited as a matter of national law. The Court found that this limited interpretation
was neither supported by a textual interpretation of Article 45 ECT nor self-evident. Rather,
the Court held that the provisional application of a provision of the ECT would also be contrary
to a signatory State’s national law if it was not in line with its legal system, or if it was
irreconcilable with the principles laid down or derived from the State’s national legislation.

Based on the analyses contained in the experts’ reports relied on by the Russian Federation, the
Court found that the arbitration clause of Article 26 ECT did not have a legal basis in Russian
law and was incompatible with the principles laid down therein. Specifically, the Court was
satisfied that Russian law confines the option of arbitration to civil law disputes, and does not
provide a basis for the arbitration of disputes arising from legal relations between foreign
investors and the Russian Federation of a predominantly public law nature.

Finally, on the basis of Article 45(1) ECT, the Court held that the Russian Federation was not
bound by the provisional application of (the arbitration clause of) Article 26 ECT based on its
signature of the ECT alone. The Court found that the Russian Federation therefore had never
made an unconditional offer to arbitrate disputes, within the meaning of Article 26 ECT. As a
result, the former Yukos shareholders’ notice of arbitration served on the Russian Federation
did not constitute a valid arbitration agreement, and the Tribunal was not competent to hear the
case.

In view of the above findings, the Court deemed it unnecessary to consider the other grounds
for setting aside the awards that had been invoked by the Russian Federation in the proceedings.
The former Yukos shareholders were ordered to pay the costs incurred by the Russian
Federation in the setting aside proceedings, which were provisionally estimated, up to this

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judgment, at €16,801.80 each. Representatives of the former Yukos shareholders have already
announced that they will appeal the judgment of the Court. They have three months to lodge
such an appeal with The Hague Court of Appeal. The appeal will involve a full de novo hearing.
In the meantime, it remains to be seen if and to what extent the judgment of the Court will
impact pending recognition and enforcement proceedings brought by the former Yukos
shareholders in a number of jurisdictions around the world.

THE AFTERMATH
A. The ‘case-to-case’ approach in conjunction with the three elements to
decide threshold incorporated increasingly in investment treaties.
The decision and analysis of the tribunal in the present case fits well into the legal framework
for assessing indirect expropriation. The three criteria test laid down by the Tribunal along with
the case - to - case approach as laid down in the present case to judge whether the threshold for
an indirect expropriation has been met, and whether the expropriation is lawful lay down an
important position of law with respect to the same. The decision has had important effect on
future agreements of similar nature as well as the position of law with respect to external
expropriation as mentioned above in the aftermath section. The series of measures taken up by
the Russian Federation against Yukos were complex in their multiplicity and noteworthy in
their dimension.

However, the decision of the Panel has hardly deterred nations from framing policies like the
one devised by Russia in the present case. Aside from the sheer size and scale of this
expropriation, perhaps the most remarkable aspect of the Yukos case is that no one might have
expected, in a modern and globalized world in which the Russian Federation had taken steps
to become more open and integrated in the world economy, that a company such as Yukos—
Russia’s leading oil company and largest taxpayer would be subjected to these measures by its
own government. The case is a classic instance of the fall of a market giant not on account of
economic lows but due to sheer political rivalry.

Perhaps the primary impact can be felt in the manner the State regulatory measures have
triggered a number of expropriation claims by investors under investment treaties, and have
resulted in divergent findings as tribunals find it difficult to set criteria for distinguishing
actions constituting compensable expropriation, as compared to valid government regulatory

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activity that do not justify compensation18. Modern investment treaties, such as the investment
chapter of CETA19, attempt to provide new guidance concerning government regulatory action
that should not be considered expropriatory20.

Moreover, an emerging consensus exists on three elements that can be considered by tribunals
in combination—in conjunction with a fact-based caseby-case approach—in determining
whether the legal threshold for an indirect expropriation has been met. Rather than rely
separately on the competing ‘sole effects’, ‘regulatory purpose’ or ‘State appropriation’
doctrines for determining indirect expropriation, these three elements can be applied
collectively to analyse the relevant factual circumstances21. The three criteria are increasingly
incorporated into the modern form of investment treaties, such as the investment chapter of
CETA and the United States and Canadian model BITs.

B. Controversy regarding the enforcement issues of the Award.

Yukos commenced its enforcement efforts by attempting to seize Russia’s assets abroad and
freezing Russian bank accounts, including the accounts of Russian space agency Roscosmos,
several national courts opposed the seizures in their respective jurisdictions. For instance, a
Paris court invalidated the seizures related to Paris enforcement proceedings in June 2016, on
the grounds that Roscosmos was a separate legal entity which could not be held accountable
for debts owed by Russia.

In June 2017, a Belgian court similarly unfroze Russian assets and lifted all attachments on
Russian-owned real estate and bank accounts in Brussels, on the basis that Yukos lacked a valid
enforceable title for the attachments. A 2015 amendment to the Belgian Judicial Code made it
more difficult for creditors to attach the assets of sovereign states, including by imposing
stricter conditions for the attachment; France passed a similar law in 2016.

The Paris Court of Appeal confirmed in June 2017 the release of the seizures of Roscosmos’
assets and accounts. It rejected Yukos’ appeal and affirmed the lower court’s ruling that
Roscosmos was not an emanation of the Russian state, but instead a separate legal entity not
liable for Russia’s debt in the USD 50 billion award. All in all, the Paris Court of Appeal held

18
Expropriation Regime under the Energy Charger Treaty, Energy Charter Secretariat (2012).
19
The Comprehensive Economic and Trade Agreement, 2017.
20
Annex X.11, The Comprehensive Economic and Trade Agreement, 2017.
21
Tarcisio Gazzini, Drawing the Line between Non-compensable Regulatory Powers and Indirect Expropriation
of
Foreign Investment—An Economic Analysis of Law Perspective, (2010) 7(3) Manchester J Intl Econ L 36, 37
(2010)

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that the seized funds did not belong to Russia and, as such, lifted attachments on funds held by
French satellite launch company Arianespace. Andrea Pinna, counsel to Russia in the Paris
enforcement proceedings, noted that “this is the ninth legal decision along these lines. Not
once have the oligarchs succeeded with their arguments brought before French courts for the
seizure of assets of Russian public corporations”.

CONCLUSION
The Yukos case started more than a decade ago and has further to go in terms of the Hague
Court proceedings and enforcement proceedings in multiple jurisdictions. What lies ahead is
hard to predict especially given wider political issues involving Russia. However, Yukos is
turning into a case for the arbitral community to test its limits and set new precedents.

With Yukos facing continuous hurdles in attempting to collect on the award costs, and targeting
Russian and French commercial interests in connection with the European space cooperation
proving to be a difficult task, and Yukos may have to look at other avenues for enforcement. It
could also appeal the latest decisions before the Cour de Cassation and seek to renew the
attachments.

The energy sector has clearly emerged as a trendy sector in which to use international
arbitration as a tool for resolving disputes. The importance and complexity of the issues at
stake, the prominence of the parties involved, and the size of the claims, all partake of the
popularity of energy arbitration.

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