Tatneft: the enforcement saga

One of the most widely discussed issues in the investment arbitration world is the state imminity. The recent decision highlighted the practical importance of this problem once again.

In 2010, Tatneft started proceedings against Ukraine under the UNCITRAL Arbitration rules, alleging breach of the majority of the investor’s rights guaranteed under the Russia-Ukraine BIT.

The tribunal concluded that Tatneft’s allegations of the breach of FET were justified. The claimant was divested from control and management of Ukrtatnafta, and ultimately of its ownership. In addition, Tatneft faced discriminatory treatment compared to the other companies. Moreover, the tribunal noted that Ukraine failed to grant appropriate police guardianship at the time of the refinery. Such conclusion was based on the analysis of particular circumstances of the case, including forcible entry into the premises of the refinery and the consecutive assistance of the Ministry of the Interior’s troops.Based on various violations of the BIT, the tribunal ruled in favor of the Tatneft.

Enforcement in Russia

Tatneft filed application for the enforcement in the Arbitrazh Court of Moscow due to the fact that Ukraine was an owner of a few buildings in Moscow, but it was rejected. The most relevant aspect of this decision is the argument concerning the absence of territorial “effective jurisdiction”. The buildings were used for the diplomatic purposes; therefore, the property enjoyed the immunity from enforcement.

The ruling was successfully challenged before the cassation court. It was held that the consent to arbitration in the BIT automatically meant that the state’s immunity was waived both in the respect of arbitration and enforcement proceedings. Moreover, the NY Convention does not include any grounds of refusal to enforce an award concerning the sovereign immunity, therefore, the analysis of the immunity was irrelevant at that stage of the proceedings.

The Arbitrazh Court of Moscow handed over the case to the Arbitrazh Court of the Stavropol Region, relying on the fact of the presence of Ukraine’s assets in the territorial jurisdiction of that court. In the ruling, the court did not make a distinction between “immunity from jurisdiction” and “immunity from enforcement”.

The Arbitrazh Court of the Stavropol Region disagreed with this argument. The court highlighted that “immunity from jurisdiction” and “immunity from enforcement” are two distinct notions. The position that Ukraine waived its immunity from enforcement proceedings by a mere fact of giving a consent to arbitration was also confirmed.

This case demonstrates that although widely discussed, the standards of sovereign immunity are not uniform and may vary from jurisdiction to jurisdiction.

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