Eurasia Business News | 17 January 2025
Russia appeals for state immunity in $50 billion Yukos case
By Swann Collins
Russia is currently appealing to block the enforcement of a nearly $60 billion arbitration award related to the Yukos Oil Company case. This appeal follows a significant ruling from the English High Court, which determined that Russia could not invoke state immunity to resist enforcement of the arbitral awards issued in favor of Yukos shareholders.
Court Ruling: In November 2023, the English High Court ruled that issue estoppel applies against a foreign state, Russia, allowing former Yukos shareholders to move forward with their claims. The court found that Russia was barred from re-arguing whether it had agreed to arbitration, as this had already been conclusively determined by Dutch courts.
The arbitral awards were issued in 2014 in favour of the former majority shareholders (“Shareholders“) of OAO Yukos Oil Company (“Yukos“).
Russia’s Arguments: Russia contends that the arbitration award issued in 2014 was obtained through fraud and asserts its sovereign immunity under the State Immunity Act 1978. The Russian government argues that its relationship with Yukos shareholders was public rather than commercial, which should exempt it from such legal scrutiny.
Legal Precedents: The case marks a significant legal precedent regarding the interplay between state immunity and issue estoppel. The court concluded that if a state submits to jurisdiction by participating in legal proceedings, it may waive its immunity.
Further Proceedings: As the legal battle continues, Russia’s appeal will be closely watched, particularly regarding how it navigates the complexities of international law and sovereign immunity. The next steps will likely involve detailed legal arguments about jurisdiction and the validity of the arbitration agreement.
This ongoing Yukos saga highlights the challenges faced by states and foreign investors in international arbitration contexts and raises broader questions about sovereign immunity in global legal frameworks.
Background
In 2005, three former Yukos majority shareholders (the Shareholders, and Claimants) initiated arbitration proceedings in the Permanent Court of Arbitration in The Hague (the Tribunal) under the Energy Charter Treaty 1994 (ECT), alleging that Russia had unlawfully expropriated Yukos’ assets. In 2014, the Tribunal found in favour of the Shareholders, awarding them total damages of over $50bn (the Awards). However, in April 2016, the Hague District Court set aside the Awards, and the Shareholders filed an appeal to the Hague Court of Appeal.
On 18 February 2020, the Hague Court of Appeal quashed the Hague District Court’s decision and reinstated the Awards. On 15 May 2020, Russia initiated a cassation appeal before the Dutch Supreme Court (the Cassation Appeal).
On 5 November 2021, the Dutch Supreme Court handed down its judgment in the Cassation Appeal, rejecting all grounds for appeal except for ground 1 – the fraud ground, which was referred to the Amsterdam Court of Appeal for a decision on the merits.
In parallel, in 2015, the Shareholders had initiated enforcement proceedings in England, which were stayed due to the ongoing Dutch court proceedings. The stay was only lifted in October 2022 by Butcher J (the Butcher judgment) (Henshaw J had previously refused to lift the stay in April 2021 while the decision from the Dutch Supreme Court was pending).
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Against this background, in November 2023, Mrs Justice Cockerill delivered her decision on the preliminary issues of a jurisdictional challenge, including on immunity grounds, raised by Russia in the English enforcement proceedings.