National Joint Stock Company Naftogaz of Ukraine et al. versus The Russian Federation PCA Case No. 2017-16
Naftogaz vs Russia
On 24 December 1993, the Cabinet of Ministers of Ukraine and the Government of the Russian Federation signed the Agreement on the Encouragement and Mutual Protection of Investments. Pursuant to Article 9 thereof, any dispute between one of the Contracting Parties and an investor of the other Contracting Party arising in relation to investments, including disputes concerning the amount, terms or procedure for payment of a compensation, or the procedure for transfer of payments shall be the subject of a written notice accompanied by detailed comments, which the investor shall send to the Contracting Party involved in the dispute. The Parties shall attempt to resolve the dispute through negotiations.
However, if the dispute is not settled by negotiation within six months from the notice date, it may be referred to (a) the competent court or arbitral tribunal of the Contracting Party in whose territory the investment is made; (b) the Arbitration Institute of the Stockholm Chamber of Commerce; (c) an ad hoc arbitral tribunal in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL). The award of such arbitration shall be final and each of the Contracting Parties shall undertake all measures to enforce such award in accordance with its law.
The tribunal is considering the issue of the amount of damages caused to the Naftogaz Group. The respective award is expected no earlier than the end of 2020.
Naftogaz filed an application with the tribunal regarding the amount of compensation for losses caused by the expropriation of Naftogaz's assets in Crimea. Naftogaz and its subsidiaries are asking the tribunal to oblige the Russian Federation to pay USD 5.2 billion in favor of the claimants. The tribunal is expected to grant an award on compensation for damages not earlier than the end of 2020.
The arbitral tribunal issued a partial award on jurisdiction and liability in favor of Naftogaz. The tribunal recognized its jurisdiction over the claims and found that the RF shall be liable for violating a number of articles of the Agreement between the Cabinet of Ministers of Ukraine and the Government of the Russian Federation on the Encouragement and Mutual Protection of Investments, including the Article prohibiting expropriation.
Public hearings in this case were held in The Hague from 14 to 17 May 2018.
National Joint Stock Company Naftogaz of Ukraine and its six subsidiaries – PJSC State Joint Stock Company Chornomornaftogaz, PJSC Ukrtransgaz, Subsidiary Company Likvo, PJSC Ukrgasvydobuvannya, PJSC Ukrtransnafta, Subsidiary Company Gaz Ukraiiny (hereinafter referred to as Naftogaz) initiated an arbitration proceeding against the Russian Federation (hereinafter referred to as the RF) under the Agreement between the Cabinet of Ministers of Ukraine and the Government of the Russian Federation on the Encouragement and Mutual Protection of Investments. In its application, Naftogaz complains of a violation of its rights under the Agreement in connection with the expropriation of its assets and the assets of its subsidiaries in Crimea.