THE AUTHOR:
Zeyad Abouellail, Legal Content Officer at Jus Mundi
Introducing “Arbitration Aftermath” by Zeyad Abouellail: Your guide to the latest post-award developments in the evolving landscape of investor-State and commercial arbitration. Each week, Zeyad explores a range of post-award news involving sovereign States with a global perspective –– from post-award settlements, compliance with awards, to recognition and enforcement procedures, annulment, and more.
Yukos Universal v. Russia
Hulley Enterprises v. Russia
Veteran Petroleum v. Russia
Amsterdam Court of Appeal rejects Russia’s challenge to USD 50 billion Yukos awards
PCA Cases No. 2005-03/AA226, 2005-04/AA227, 2005-05/AA228
Institution: PCA (Permanent Court of Arbitration)
Tribunal: L. Yves Fortier (President), Charles H. Poncet (Appointed by the claimants), Stephen M. Schwebel (Appointed by the State)
Seat of arbitration: The Hague, Netherlands
On 20 February, the Amsterdam Court of Appeal dismissed Russia’s latest attempt to set aside the Yukos awards, finding that the state’s procedural fraud claim was untimely and that documents relied on by Russia are unlikely to have altered the tribunal’s substantial findings.
Background
In April 2016, the Hague District Court granted Russia’s request to set aside the USD 50 billion awards, holding that the tribunal lacked jurisdiction to hear the dispute under the Energy Charter Treaty. However, the Hague Court of Appeal reinstated the awards in February 2020.
In November 2021, the Dutch Supreme Court dismissed Russia’s jurisdictional challenge to the award and most of its other objections. However, after finding that Russia could raise procedural fraud claims in the set aside proceedings – not only in the context of revocation proceedings as the Hague Court of Appeal had ruled – the Supreme Court remanded the case to the Amsterdam Court of Appeal to address Russia’s procedural fraud arguments.
Before the Amsterdam Court of Appeal (“the Court”), Russia contended that the awards contravened public policy because the investors engaged in fraudulent practices during the arbitration. This included submitting false statements, withholding documents, and making secret payments to one of their witnesses.
Dismissal of Russia’s Request to Set Aside the Awards
Court Rules That Russia’s Claim Is Untimely
Russia maintained that Russian oligarchs unlawfully acquired the shares in Yukos in 1995 and 1996, retaining uninterrupted control thereafter. The state said that in 2003, the oligarchs transferred their shares to a group of trusts in Guernsey and Jersey.
Russia explained that the investors denied many times during the arbitration that oligarchs had control over Yukos – they argued that the shares were held by trustees in Guernsey and Jersey – and that documents that have surfaced post-2015 have debunked this claim.
The Court found that Russia had become aware of the alleged fraud in 2015 or 2016 during the Hague District Court proceedings but had only raised the claims for the first time before the Hague Court of Appeal – only to strengthen its argument that the awards were contrary to public policy. These allegations were further elaborated upon following a referral from the Supreme Court, with new documents submitted.
Consequently, the Court deemed Russia’s action of raising the claim solely during the appeal, and not at the district court level upon learning of new evidence, as contrary to the principles of due process.
The Court thereby ruled Russia’s claim as untimely and dismissed it.
Court Analyses Whether the Claim Would Have Been Successful if Not Untimely
For the sake of completeness, the Court proceeded to examine the merits of Russia’s claim.
The Court found that documents concerning the control over Yukos were unlikely to affect the arbitrators’ judgment since the matter was not pivotal to their decision. It emphasised that the arbitrators recognised the shareholders as protected investors under the ECT, irrespective of ownership or control issues.
Similarly, concerning Russia’s allegations about USD 200,000 payments made to one of the investors’ witnesses, the Court found that although the witness was referenced in the award, the tribunal did not deem his/her statement as critically important. It contrasted with other witness statements highlighted for their significance. The tribunal considered the witness’s statement only as part of the broader factual context. The Court concluded that this statement had no substantial impact on the arbitrators’ decision, and it was highly improbable that awareness of the payment would have led to a different outcome.
Other Developments
In November 2023, the High Court of Justice of England and Wales ruled that Russia cannot invoke sovereign immunity, finding that the State’s jurisdictional defence had already been litigated in the context of set-aside proceedings in the Netherlands (see our previous digest here).
Later the same month, the US District Court for the District of Columbia similarly ruled that it has jurisdiction over Russia and dismissed the state’s sovereign immunity defence (see our previous digest here).
AHS Niger and Menzies v. Niger
Niger Faces Enforcement of Decade-Old ICSID Award in the US
ICSID Case No. ARB/11/11
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Fernando Mantilla-Serrano (President), Patrick Hubert (Appointed by the claimants), Gaston Kenfack Douajni (Appointed by the State)
On 19 February, a Luxembourg subsidiary of the Scottish group Menzies lodged a petition to enforce a 2013 ICSID award against Niger in the United States District of Columbia.
The dispute arose out of Niger’s termination of an investment agreement entered into with AHS Niger, in which Menzies had a majority stake, to provide ground handling services at the Niamey International Airport. In 2011, AHS Niger and Menzies launched arbitration on the basis of the investment agreement as well as Niger’s investment law.
Niger challenged the tribunal’s jurisdiction and subsequently ceased to participate in the proceedings. It was deemed to be in default under ICSID Arbitration Rule 42. In March 2013, the tribunal upheld jurisdiction over the claims.
In July 2013, the tribunal rendered its final award, deeming the termination of the investment agreement as “unfounded and irregular,” and determined that Niger had violated its obligations under the agreement. The tribunal further found that the requisitioning of the investors’ equipment “had the effect of depriving the Claimants of the control, ownership, use, and enjoyment of their investment and therefore constitute an expropriation”. Consequently, the tribunal ordered Niger to pay EUR 4.6 million in damages plus interests, along with the entire costs of the arbitration and nearly 75% of the investors’ legal fees.
CC/Devas v. India (I)
Assignees of BIT award allowed to intervene in French enforcement proceedings against India
PCA Case No. 2013-09
Institution: PCA (Permanent Court of Arbitration)
Tribunal: Marc Lalonde (President), David R. Haigh (Appointed by the claimants), Anil Dev Singh (Appointed by the State, replaced Francisco Orrego Vicuña)
Seat of arbitration: The Hague, The Netherlands
On 13 February, the Paris Court of Appeal allowed* three US assignees of the USD 111 million CC/Devas (I) award to intervene in the pending enforcement proceedings.
* The Court rendered two separate judgments, respectively for the proceedings concerning the merits award (22/11814) and the quantum award (22/11819).
Background
The dispute stems from India’s cancellation of a contract for the procurement of S-band satellites. This protracted legal battle has spawned over three treaty arbitrations (CC/Devas v. India (I), CC/Devas v. India (II), Deutsche Telekom v. India) and an ICC arbitration between Devas Multimedia (“Devas”) and Antrix (the commercial arm of the Indian Space Research Organisation). It also saw the liquidation of Devas by the National Company Law Tribunal of India in 2021, a decision later confirmed by the Supreme Court of India in 2022.
In CC/Devas v. India (I), brought forth by three Mauritian shareholders of Devas (“the investors”) under the Mauritius – India BIT, a 2016 Award on Jurisdiction and Merits partially upheld jurisdiction over the claim. The arbitrators found that the State’s decision to terminate the contract was partly directed toward safeguarding essential security interests. Nevertheless, it ruled that India’s actions amounted to unlawful expropriation and violated the BIT’s FET provision. In an October 2020 Award on Quantum, the tribunal awarded the investors USD 111 million plus interest and USD 10 million in legal costs.
The partial award was upheld by the Dutch Supreme Court in February 2023. In October 2023, the Hague District Court rejected India’s request to set aside the quantum award and dismissed its fraud allegations (see our previous digest here).
In December 2021, the investors entered into an assignment agreement with three US entities: CCDM Holdings LLC, Telcom Devas LLC, and Devas Employees Fund US LLC (“the assignees”). Under the agreement, the assignees would pursue enforcement of the awards in return for a 1% payment of amounts recovered. Additionally, a promissory note was executed between the investors and the assignees, whereby the latter promised to pay the investors the amount of damages and interest awarded by the tribunal in 2026, extendable until 2031.
In France, the investors obtained exequatur of the awards in May 2021. India appealed the exequatur orders to the Paris Court of Appeal in July 2022.
The assignees sought permission to intervene in the proceedings before the Paris Court of Appeal, a move that was met with resistance from India.
Paris Court of Appeal Finds No Objection to Intervention of Assignees
India contended that the assignees, being third parties to the arbitration agreement, were precluded from participating in the proceedings. It maintained that the transfer of the award did not include the assignment of the arbitration agreement itself.
The Court determined that the inherent contractual nature of arbitration does not preclude third parties, who have been subrogated to the rights of the original parties to the arbitration, from intervening in enforcement or set aside proceedings. It found that the assignment agreements operated transfer of rights for the benefit of the assignees, thus conferring on them standing to intervene.
India also contended that it did not consent to arbitration with the US assignees and that they did not qualify as investors under the applicable BIT.
The Court clarified that the BIT’s definition of investor only conditions the right to resort to arbitration and does not affect the assignment of the award to third parties. It also noted that the assignees were permitted to partake in enforcement proceedings of the same award in other jurisdictions.
Further, India challenged the validity of the assignment agreement and promissory note, arguing that they constituted a sham under English law. It said that the assignment agreements give the illusion of a transfer of rights in exchange for the promissory notes, which can be terminated at any time by the investors, thus depriving the assignment of consideration within the meaning of English law. India also noted that the investors had already been placed under administration in Mauritius.
The Court disagreed with India and found that the agreements were not a sham. It reasoned that the promissory note explicitly delineates its conditions for termination. Moreover, the Court observed that the investors’ placement under administration occurred more than a year after the agreements were concluded, therefore not affecting the agreements’ legitimacy.
The Court also rejected India’s claims that the agreements contravened the doctrines of maintenance and champerty, establishing that these principles pertain solely to procedural rules applicable before English courts.
Regarding India’s allegations of fraud in the context of international public policy, the Court determined that such issues should be addressed during the appeal concerning the exequatur order, rather than in the current proceedings.
Finally, the Court refuted India’s contentions regarding the violation of Mauritius’ mandatory laws. India had argued that the agreements sought to circumvent the anti-suit injunctions imposed by Mauritian courts. However, the Court found that there is no substantial link to the French conception of international public policy.
Other Developments
The investors are concurrently pursuing enforcement in the US and Canada. In February 2022, they initiated a second treaty arbitration concerning India’s strategy to evade payment of the USD 562 million ICC award rendered in Devas v. Antrix.
In January 2023, the Supreme Court of Mauritius issued an injunction against the investors prohibiting them from pursuing the second BIT arbitration. However, in the Statement of Claim, the investors disclosed that in a March 2023 Interim Award, the tribunal ordered India to refrain from taking any action that may interfere with the tribunal’s mandate, finding that the Mauritian anti-arbitration injunction “severely undermine the procedural integrity of this arbitration”.
The tribunal hearing of the second arbitration (PCA Case No. 2022-34) is composed of Eduardo Zuleta Jaramillo (President), Stephan Schill, and Goda Raghuram.
von Pezold v. Zimbabwe
High Court of Malaysia recognises USD 200 million ICSID award against Zimbabwe
ICSID Case No. ARB/10/15
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: L. Yves Fortier (President), David A.R. Williams (Appointed by the investor), Michael Hwang (Appointed by the State)
Ad hoc Committee: Veijo A. Heiskanen (President), Azzedine Kettani, Jean E. Kalicki (Members)
In a decision that has only recently surfaced, on 27 November 2023, the High Court of Malaysia at Kuala Lumpur recognised a USD 200 million ICSID award against Zimbabwe, finding that sovereign immunity arguments are irrelevant at the recognition stage. This decision marks the first instance of a Malaysian court recognising an ICSID award.
Background
The dispute originated from Zimbabwe’s appropriation of land and other assets as part of its Land Reform Programme. The reforms resulted in the expropriation of the von Pezold family’s (“the investors”) assets. In response to these actions, in 2010, the investors initiated arbitration proceedings against Zimbabwe under the Switzerland-Zimbabwe and the Germany-Zimbabwe BITs. In 2015, the tribunal found Zimbabwe in breach of the BITs and ordered it to pay around USD 200 million in damages plus interest and costs.
Zimbabwe sought to annul the award. However, the application was dismissed by an ICSID ad hoc committee in 2018.
A parallel arbitration was initiated by the Border Timbers companies (in which the von Pezolds held a majority stake). It was heard by the same tribunal as the von Pezold arbitration but there was no formal consolidation of both proceedings. The tribunal awarded Border Timbers and associated entities approximately USD 125 million. Zimbabwe’s subsequent attempt to annul this award was also unsuccessful.
The von Pezolds sought recognition of the award in Malaysia in 2021. They were granted orders for service out of jurisdiction allowing them to serve Zimbabwe out of Malaysia. Zimbabwe resisted recognition of the award on various grounds including sovereign immunity and lack of procedural mechanism for enforcing ICSID awards in Malaysia. The state also sought to set aside the orders for service out of jurisdiction.
High Court Recognises von Pezold Award
Court Asserts Jurisdiction to Recognise ICSID Awards
The Court first confirmed that through the Malaysian ICSID Act (“ICSID Act”), Parliament has expressly vested jurisdiction on the High Court to recognise ICSID awards.
The Interplay Between Sovereign Immunity and the Recognition of ICSID Awards
The Court highlighted that the ICSID Convention employs different terms for the recognition and execution of awards. Upon differentiating between Articles 54 and 55 of the ICSID Convention, the Court determined that “the consideration of sovereign immunity is limited to the execution stage after the recognition of Tribunal awards as final judgments of the relevant Contracting State”.
The Court referenced decisions from the New Zealand High Court in Sodexo v Hungary [2021] NZHC 371 and the Australian Federal Court in Spain v Infrastructure Services Luxembourg [2021] FCAFC 3. In the latter, the Australian court emphasised the “unequivocal” obligation under Article 54 to recognise ICSID awards, which is unaffected by Article 55.
Further, the Court observed that during the annulment proceedings, Zimbabwe acknowledged the investors’ right to enforce the award in any ICSID contracting state, which “clearly displays the Defendant’s submission to domestic court jurisdiction and waiver of immunity for recognition and potential enforcement measures in foreign Contracting States”. Consequently, the Court ruled that Zimbabwe had submitted to the jurisdiction of the Malaysian courts for recognition of the award and simultaneously waived any claim to immunity for recognition purposes.
Zimbabwe contended that the land reforms underlying the tribunal’s decision were governmental acts, integral to its sovereign functions. The Court dismissed this contention, finding that the tribunal had already asserted its jurisdiction and that Zimbabwe is thus precluded from reopening the question of the tribunal’s jurisdiction.
The Court also dismissed as premature Zimbabwe’s jurisdictional objections regarding its possession of only diplomatic assets in Malaysia and the non-identification of commercial assets by the investors. The Court emphasised that the investors have not attempted execution and that such considerations are pertinent solely at that stage.
Lack of Procedural Framework for Recognition of Awards in the ICSID Act
Zimbabwe argued that the Court lacked jurisdiction since there is no procedural framework for the enforcement of ICSID awards. It highlighted that Section 3 of the ICSID Act merely equates the enforcement of ICSID awards to that of a court order, without delineating any specific procedural mechanisms.
The Court dismissed this contention, affirming that it remains “imbued with powers intrinsic and inherent to it, as a superior court of law, to adapt existing procedures to the extent required in service of the ends of justice”. It interpreted Section 3 as providing substantive authority to the Court to recognise ICSID awards.
Do the Swiss and German BITs limit enforcement within the jurisdiction of the contracting states?
Furthermore, the Court refuted Zimbabwe’s assertion that the Swiss and German BITs confine enforcement exclusively to Germany, Switzerland, and Zimbabwe — the signatories to the BITs. It concluded that imposing such a restriction would contradict the treaties’ Most Favoured Nation clauses.
Recognition of ICSID Awards Not Contingent on Identifying Seizable Assets
The Court dismissed Zimbabwe’s objection regarding the investors’ inability to identify Malaysian assets for seizure, clarifying that this does not impede the investors’ right to seek recognition of the award.
The Court again referenced the New Zealand High Court’s judgement in Sodexo, concurring with the rationale that “imposing an asset tracing requirement risks prejudice to the applicant’s subsequent attempts to locate and execute against assets” and that “recognition of an ICSID award remains proper at minimum to uphold treaty obligations of the recognising state under the expressly mandatory terms of the ICSID Convention”.
The Court further explained that “premature focus on assets also ignores that the place of enforcement can wait if needed until funds materialise”.
Court Upholds Orders for Service Out of Jurisdiction
Zimbabwe argued that Malaysia lacked specific legislation governing the service of process on foreign states, unlike the UK and Singapore.
However, the Court determined that the absence of specific legislation in Malaysia does not restrict its discretionary power to grant such orders in cases involving the recognition and enforcement of an international award.
It found that upholding the orders ensures “that the principles of international law and comity are respected, and Malaysia’s obligations under international conventions are fulfilled”.
ABOUT THE AUTHOR
Zeyad Abouellail is a Legal Content Officer at Jus Mundi and a PhD candidate & teaching assistant at Paris-Saclay University. His research focuses on the post-award phase in investment arbitration, and he also lectures on civil and contract law. He holds two Master’s Degrees in International Business Law from Paris-Saclay University and Paris 1 Panthéon-Sorbonne University. Prior to joining Jus Mundi, Zeyad interned at several law firms in international arbitration and corporate law in Cairo, Egypt.
