Tatneft Secures Dismissal of Ukraine’s Attempt to Overturn $170 Million Arbitral Award
June 4, 2020
Cleary Gottlieb represented Tatneft, a major Russian oil company, in a judgment issued on June 4, 2020, in which France’s highest judicial court (Court of Cassation) dismissed with prejudice Ukraine’s challenge to an arbitral award rendered in 2014 in favor of Tatneft.
The decision puts an end to six years of attempts by Ukraine to challenge the validity of the award at the seat of arbitration.
In 2008, Tatneft initiated an UNCITRAL arbitration seated in Paris against Ukraine under the Russia-Ukraine Bilateral Investment Treaty (BIT), over the loss of its investment in a joint venture operating Ukraine’s largest oil refinery.
In 2010, the arbitral tribunal issued a partial award on jurisdiction, unanimously agreeing with Tatneft’s arguments that the tribunal had jurisdiction over its claims.
In 2014, the arbitral tribunal found in its unanimous final award that Ukraine’s actions had violated its obligations under the BIT to provide fair and equitable treatment to Tatneft’s investment and awarded damages of $112 million (plus interest, which brings the current amount of the award to over $170 million).
Ukraine applied before the Paris Court of Appeal for the annulment of both awards. In 2016, the Paris Court of Appeals rejected Ukraine’s challenge, confirmed the validity of both awards, and ordered Ukraine to pay €200,000 in reimbursement of attorney’s fees.
Ukraine applied to the Court of Cassation in an attempt to overturn the Paris court decision. Tatneft moved to have the case withdrawn without prejudice under a French legal provision that prevents a party from having its cassation appeal heard unless and until it has executed the decision under review. Here, Ukraine did not pay any amounts due to Tatneft under the final award, nor did it pay the attorney’s fees awarded by the Paris court decision.
In 2017, Tatneft’s motion was granted. The practical result of this decision was that Ukraine’s cassation appeal was taken off the docket. Ukraine had two years to pay the award and pay the legal fees, lest the case be dismissed with prejudice.
In order to obtain the reinstatement of its case without having to pay, Ukraine engaged two legal actions. First, it initiated administrative proceedings before France’s highest administrative court, to obtain the abrogation of the decree that introduced the legal provision under which its cassation appeal was taken off the docket. Ukraine argued that this provision violated Ukraine’s sovereign immunity from pre-judgment attachment and judicial measures of constraint. On December 28, 2018, this action was dismissed. Second, on February 12, 2020 (i.e., days before the end of the two-year deadline after which its case would have been dismissed with prejudice), Ukraine filed a motion to reinstate its case before the Court of Cassation.
Even though it had not performed its obligations under the award or the Paris court decision, Ukraine claimed that it was entitled to reinstate its case based on a subsequent decision rendered in another matter, in which a different magistrate held that the non-performance by a party of its obligations under an enforceable arbitral award did not justify the taking off the docket of its claims before the Court of Cassation. Ukraine’s position was that this subsequent order reversed previous case law and reflected the current state of French law on the issue, and that Ukraine should be entitled to benefit from this alleged change in case law.
On June 4, 2020, the Court of Cassation ruled that Ukraine’s request for reinstatement of the case was meritless. It found that the disparity of the case law on the matter does not qualify as a new legal circumstance allowing the revision of the order dismissing its case without prejudice, Ukraine did not prove that it had been subjected to unfair treatment because there is a line of case law dismissing cases involving sovereign states that had not complied with the Court of Appeals’ decision they were seeking to reverse, and only complying with this decision (i.e., paying) would allow the reinstatement of the case. The court found Ukraine has not paid the amounts owed under the award or the legal costs owed under the Paris court decision and Ukraine has not argued that it cannot pay or that doing so would lead it to suffer “manifestly excessive consequences.” Therefore, since more than two years have elapsed since the notification of the order, Ukraine’s case was dismissed with prejudice.