Arbitration Quarterly 1 January 2015 Issue Number 6
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Arbitration Quarterly 1 January 2015 Issue Number 6 Arbitration Quarterly IN THIS ISSUE Investment Arbitration 03 Yukos v. Russian Federation: Largest Arbitration Award to Date 08 EU Issues Injunction to Obstruct Payment of ICSID Award 11 EU and Canada Conclude Free Trade Agreement with Investment Chapter 14 EU Publishes New Regulation Concerning Financial Responsibility in Investor- State Dispute Settlement 18 UN Adopts Convention on Transparency in Treaty-Based Investor- State Arbitration Regional Focus 21 Agreement for Shanghai – Seated ICC Arbitration Recognized in China 25 Singapore High Court Decision in FirstLink Investments Corp Ltd v. GT Payment Pte Ltd Editors’ Remarks 28 Grynberg v. BP and Statoil: NY Court Disqualifies Arbitrator Welcome to the 2015 opening edition awards and Russia challenges them, will 31 NML v. Argentina: the Lasting Effects of Argentina’s Default of Arbitration Quarterly, Debevoise & provide the denouement and no doubt 34 Refusing to Pay the Advance Plimpton LLP’s review of significant provide arbitration commentators with on Costs: Repudiatory Breach of Contract? developments in international much to feast on. Likewise, the European 37 Indian Supreme Court arbitration over the last few months. Union’s increasing engagement in Continues Pro-Arbitration 2014 was a busy year in international investor-state disputes has prompted Trend arbitration. much discourse. Its “suspension” 40 J&P Avax v. Tecnimont SPA In the investment disputes arena, in injunction preventing Romania from 43 Russian Arbitration Reform Yukos v. Russia the Claimants were paying an ICSID award has generated 45 Russia’s Supreme Arbitrazh Court’s Legacy collectively awarded over US$50 billion, concern about the status and application Arbitration Practice following the tribunal’s ruling that Russia of investment agreements signed by 50 New LCIA Arbitration Rules had breached the Energy Charter Treaty. EU Member States. The EU has also Published This award provided persuasive evidence enacted a new regulation that allocates 54 ICDR Revised Rules Update of the potentially immense impact of financial responsibility, and provides 57 Arbitration Round-up investment agreement protections. Of for cooperation between, the EU and 60 Recent Events course, the next steps in the long-running Member States involved in defending 64 Debevoise International saga, as the Claimants seek to enforce the investment disputes. It will be interesting Dispute Resolution Group Continued on page 2 www.debevoise.com Arbitration Quarterly 2 January 2015 Issue Number 6 Editors’ Remarks to observe how the EU’s more active the Singapore High Court has provided Continued from page 1 involvement will influence the conduct of welcome clarification to the question of investment disputes. the proper law of an arbitration, holding In the United States, the U.S. Supreme that absent an express choice of law, it Court has been occupied by litigation will generally be the law of the seat of the arising from Argentina’s sovereign debt arbitration. This approach accords with a default in 2012. In that context, it has had new specific provision in the LCIA Rules. to consider important issues relating to Arbitral institutions have also been busy. state sovereignty. In particular, it held Both the LCIA and ICDR launched new that the Foreign Sovereign Immunities arbitration rules. In a novel Act does not operate to limit or provide development, both institutions expressly immunity from discovery. In a separate considered the conduct of parties’ judgment, the Supreme Court upheld representatives. While the ICDR injunctions that sought to prevent cautiously indicated that it may in future Argentina from making payment to its supplement its rules to regulate parties’ bondholders that had participated in the representative conduct, the LCIA Rules debt restructuring, without making adopted the more radical step of including payment or settling with other mandatory Guidelines setting a minimum bondholders (including NML) that had standard of conduct, directly enforceable refused to participate in the debt by LCIA tribunals. New arbitration restructuring and instead had obtained centers have also sprung up, in Melbourne, judgments to collect on the defaulted bonds. Australia; Riyadh, Saudi Arabia and Domestic courts have also grappled Belgrade, Serbia, reflecting a trend for with a plethora of significant arbitration- more localized arbitration offerings. related cases, generally continuing a trend These important developments will be of of judgments that promote international interest to businesses operating in a range arbitration as a dispute resolution of jurisdictions. If you wish to discuss mechanism. In China, the Supreme any of the issues raised in this publication People’s Court recognized for the first or any other international arbitration and time that a non-PRC arbitral institution dispute resolutions matters, we would be (in this case, the ICC) could administer delighted to hear from you. an arbitration seated in the PRC. The Very best wishes, Indian Supreme Court has continued its pro-arbitration trend in Reliance v. India, David W. Rivkin in which it held that the Indian courts John B. Missing have no jurisdiction to set aside an arbitral award seated in London and Aimee-Jane Lee where the arbitral agreement was and the International Dispute Resolution governed by English law. Also, in Asia, Group of Debevoise & Plimpton LLP www.debevoise.com Arbitration Quarterly 3 January 2015 Issue Number 6 Yukos v. Russian Federation: Largest Arbitration Award to Date On July 28, 2014, the Permanent Court for the repayment of Yukos’ tax debt; of Arbitration published Awards in the and three Yukos arbitrations against Russia • the initiation of bankruptcy proceedings 1 (the “Final Awards”). The Tribunal against Yukos and subsequent sale of the unanimously held that Russia had bankrupt’s property for the repayment unlawfully expropriated OAO Yukos of debts to creditors. Oil Company (“Yukos”) in violation of As a result of the sale of the property of its international law obligations under Yukos, most of the assets were in the end “ The Tribunal awarded the Energy Charter Treaty (the “ECT”). acquired primarily by the state-owned the Claimants Accordingly, the Tribunal awarded the companies, Gazprom and Rosneft. US$50.02 billion in Claimants US$50.02 billion in damages, In 2003, in parallel with the tax claims damages, ordered ordered Russia to pay US$60 million to filed against Yukos, a series of criminal Russia to pay US$60 cover approximately 75 percent of the investigations were launched against million to cover Claimants’ legal fees, and imposed the senior Yukos executives resulting in the approximately full costs of the arbitration on Russia. imprisonment of a number of executives. 75 percent of the Background Claimants’ legal fees, The Arbitration Proceedings The Dispute and imposed the The arbitration proceedings took place full costs of the The disputes arose out of actions that under the UNCITRAL Rules and lasted arbitration on Russia.” Russian state authorities took against nearly 10 years. The proceedings Yukos, starting in the early 2000s, were bifurcated, with a preliminary including: phase on jurisdiction and admissibility • in 2003 tax reassessments and (concluding with Interim Awards consequential fines covering the years on Jurisdiction and Admissibility in 2000-2004, that resulted in a record tax November 2009 (the “Interim Awards”)), bill of more than US$24 billion; followed by a merits phase that also • the freezing of Yukos’ assets by a incorporated some issues deferred from Russian court, and the seizing and the preliminary phase. For the merits subsequent auction of a key production phase alone, after receipt of voluminous subsidiary, Yuganskneftegaz (“YNG”), written submissions totaling 2,504 Continued on page 4 1. The Tribunal adjudicated three arbitrations, each brought by a different shareholder (Hulley Enterprises Limited, Yukos Universal Limited, and Veteran Petroleum Limited) (the “Claimants”). The arbitrations were heard in parallel, but the Tribunal issued three Awards. See Hulley Enterprises Limited (Cyprus) v. Russian Federation, PCA Case No. AA 226, Final Award (July 18, 2014); Yukos Universal Limited (Isle of Man) v. Russian Federation, PCA Case No. AA 227, Final Award (July 18, 2014); Veteran Petroleum Limited (Cyprus) v. Russian Federation, PCA Case No. AA 228, Final Award (July 18, 2014). The Awards are substantially identical; the only distinction being the damages owed to each shareholder. Collectively, the Claimants held a 70.5 percent shareholding in Yukos. Final Awards, ¶ 69. www.debevoise.com Arbitration Quarterly 4 January 2015 Issue Number 6 Yukos v. Russian Federation: pages, at least 6,281 exhibits, 9 witness the ECT and Russia’s internal laws were Largest Arbitration Award statements and 19 expert reports, the consistent. The Claimants argued that to Date Tribunal heard the parties in a 22 day the relevant issue was simply whether Continued from page 3 oral hearing held in The Hague in the principle of provisional application late 2012. Unsurprisingly, the dispute of a non-ratified treaty was consistent evolved during the course of the lengthy with Russian law. The Tribunal favored arbitration proceedings. The Claimants’ the Claimants’ interpretation and complaints covered conduct primarily found that the principle of provisional between July 2003 and November 2007, application was not inconsistent with after the arbitration