Zeyad Abouellail, <\/strong>Legal Content Officer at Jus Mundi<\/strong><\/a><\/strong><\/p>\n\n\n\n
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\nIntroducing “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 \u2013\u2013 from post-award settlements, compliance with awards, to recognition and enforcement procedures, annulment, and more.<\/p>\n\n\n\n
\nDiscover more digests<\/a><\/div>\n<\/div>\n<\/blockquote>\n\n\n\n<\/div>\n\n\n\n
\n\n\n\nYukos Universal v. Russia<\/strong><\/a>
Hulley Enterprises v. Russia<\/strong><\/a>
Veteran Petroleum v. Russia<\/strong><\/a><\/h2>\n\n\n\nDutch Advocate-General recommends upholding of attachment of Russian IP assets by Yukos investors<\/strong><\/h4>\n\n\n\n
<\/div>\n\n\n\nPCA Cases No. 2005-03\/AA226, 2005-04\/AA227, 2005-05\/AA228<\/strong>
Institution<\/strong>: PCA (Permanent Court of Arbitration)<\/a>
Tribunal<\/strong>: L. Yves Fortier<\/a> (President), Charles H. Poncet<\/a> (Appointed by the claimants), Stephen M. Schwebel<\/a> (Appointed by the State)
Seat of arbitration<\/strong>: The Hague, Netherlands<\/a><\/p>\n\n\n\n
\n\n\n\n<\/div>\n\n\n\nDocuments filed in US enforcement proceedings reveal that Dutch Advocate-General Paul Vlas has recommended that the Supreme Court uphold attachments obtained by investors in Yukos Universal, Hulley Enterprises, and Veteran Petroleum over Russian assets in state-owned FKP Sojuzplodoimport (\u201cFKP\u201d). FKP owns trademarks and copyrights for various Russian vodka brands.<\/p>\n\n\n\n
Advocate-General Vlas presented his Opinion<\/a> on September 22nd at a hearing before the Dutch Supreme Court. He stated that the awards are enforceable in the Netherlands, despite a prior Supreme Court decision that set aside judgments upholding the awards. The case was then referred to the Amsterdam Court of Appeals to determine whether the awards were obtained through fraudulent means and in violation of Dutch public policy.<\/p>\n\n\n\n
Background: set-aside proceedings<\/strong><\/h5>\n\n\n\n
In April 2016, the Hague District Court granted<\/a> Russia\u2019s request to set aside the infamous USD 50 billion awards<\/a>, holding that the tribunal lacked jurisdiction to hear the dispute under the Energy Charter Treaty<\/a>. After the investors appealed the judgment, the Hague District Court reinstated<\/a> the awards in February 2020. In November 2021, the Dutch Supreme Court\u00a0rejected<\/a>\u00a0Russia\u2019s jurisdictional challenge to the award, along with most of its other grounds for challenge, but remanded the case to the Amsterdam Court of Appeal to address the State\u2019s fraud arguments.<\/p>\n\n\n\n
Attachment of Russian assets in FKP<\/strong><\/h5>\n\n\n\n
After the District Court of The Hague granted leave to enforce the awards in April 2020, the investors targeted Russian assets in FKP, attaching trademarks and copyrights used in the marketing of Russian vodka in the Benelux region.<\/p>\n\n\n\n
However, the attachments were partially lifted<\/a> by the the Hague District Court in October 2020. The same court then confirmed<\/a> in June 2022 its partial lifting of the seizures \u201cto the extent that it has been imposed at the expense of FKP<\/em>\u201d and to \u201cthe copyrights on the design of the products produced and sold under the Brands by or with the permission of FKP and\/or the Russian Federation.<\/em>\u201d<\/p>\n\n\n\n
The Hague District Court ruled that the November 2021 Supreme Court decision<\/a> did not result in the reinstatement of the decisions that had set aside the awards and did not suspend the enforcement of the awards.<\/p>\n\n\n\n
It found that FKP did not have full ownership of the attached assets, as Russia had legal and operational control over them. The court also rejected Russia’s sovereign immunity arguments, affirming that the IP rights were intended for purposes other than non-commercial government purposes under Article 19 of the Convention on Jurisdictional Immunities of States and their Property<\/a>.<\/p>\n\n\n\n
Advocate-General Vlas, in his Opinion<\/a>, confirmed the reasoning of the Hague District Court and recommended that the Supreme Court uphold the partial attachment. He clarified that the November 2021 Supreme Court decision<\/a> has no bearing on the enforceability of the awards in the Netherlands.<\/p>\n\n\n\n
Vlas further explained that the Court of Appeal fully justified its decision to lift the attachment insofar as it was imposed on FKP, which is an independent legal entity with its own independent capital, that did not have operational control over the IP rights.<\/p>\n\n\n\n
He also pointed out that the risk of non-recoupment and the duration of the set-aside proceedings were significant factors that the Court of Appeal considered when rejecting Russia\u2019s request for a stay of enforcement.<\/p>\n\n\n\n
* Only an unofficial English translation of the Opinion of the Advocate-General was filed in the US enforcement proceedings.<\/p>\n\n\n\n
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\n\n\n\nIraq v. Turkey<\/strong><\/a><\/h2>\n\n\n\n
Iraq and Turkey are at odds over identifying the correct creditor of ICC award in US enforcement proceedings, while set-aside is pending in Paris<\/strong><\/h4>\n\n\n\n
<\/div>\n\n\n\nICC Case No. 20273\/AGF\/ZF\/AYZ\/ELU<\/strong>
Institution<\/strong>: ICC (International Chamber of Commerce)<\/a>
Tribunal<\/strong>: David A.R. Williams<\/a> (President), Christopher John Greenwood<\/a> (Appointed by Iraq), Peter Tomka<\/a> (Appointed by Turkey)
Seat of arbitration<\/strong>: Paris, France<\/a><\/p>\n\n\n\n
\n\n\n\n<\/div>\n\n\n\nIraq and Turkey are locked in a debate over the correct party entitled to damages after a disagreement over interest rate calculation in the context of US enforcement proceedings.<\/p>\n\n\n\n
Background<\/strong><\/h5>\n\n\n\n
In a February 2023 Final Award<\/a>, an ICC tribunal brought an end to a 9-year dispute relating to the export of crude oil pursuant to a 1973 agreement entered between both States.<\/p>\n\n\n\n
Iraq launched the arbitration in 2014 against Turkey and state-owned enterprise BOTA\u015e Petroleum Pipeline Corp (\u201cBOTAS\u201d), alleging that Turkey violated the agreement by allowing crude oil from the Kurdistan Region of Iraq to flow through the pipelines without the consent of Iraq\u2019s Ministry of Oil.<\/p>\n\n\n\n
Turkey and BOTAS objected to the tribunal\u2019s jurisdiction, which led to a 2016 Partial Final Award on Jurisdiction<\/a>. The tribunal found that Iraq\u2019s claims under the 1973 agreement are arbitrable but denied jurisdiction over BOTAS, ruling that it is not a party to the arbitration agreement \u201cas it did not act independently or for its own benefit<\/em>\u201d and that its participation in the agreement \u201cdid not extend beyond acting as Turkey\u2019s agent<\/em>\u201d.<\/p>\n\n\n\n
In its final award<\/a>, the tribunal awarded more than USD 1.9 billion to Iraq plus interests, while also admitting Turkey\u2019s counterclaims and granting more than USD 500 million plus interests.<\/p>\n\n\n\n
US enforcement action<\/strong><\/h5>\n\n\n\n
In April 2023, Iraq filed a petition for enforcement<\/a> in the US District Court for the District of Columbia, seeking a judgment of USD 1.4 billion in conformity with the terms of the award.<\/p>\n\n\n\n
While Turkey did not object<\/a> to confirmation of the award, it contended that it should be recognized as the rightful award-creditor, rather than Iraq. Factoring in the prejudgment interest owed, Turkey maintained that it was entitled to net damages of USD 956 million.<\/p>\n\n\n\n
According to Turkey, \u201cIraq fails to account for the impact of the tribunal\u2019s granting of pre-award interest on the respective total amounts of compensation due to each party under the award and the implications of pre-award interest<\/em>\u201d.<\/p>\n\n\n\n
Turkey further disclosed that it sought a partial set-aside of the award at the seat of arbitration in Paris as regards certain damages awarded to Iraq. It argued that if its application to set-aside is upheld, it will be the net award-creditor \u201cregardless of whether the tribunal\u2019s grant of pre-award interest is taken into account.<\/em>\u201d<\/p>\n\n\n\n
In its most recent submission<\/a> last week, Iraq argued that, with post-award interest calculated as of September 15, 2023, Turkey is liable for USD 601 million in net damages, with interest continuing to accrue until full payment.<\/p>\n\n\n\n
Iraq alleged that Turkey\u2019s erroneous interest calculation applied fixed rates to each component of its damages, rather than the average annual rate ordered by the tribunal, thereby inflating its claim. <\/p>\n\n\n\n
Related documents<\/strong>:<\/p>\n\n\n\n
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- Expert Declaration of Annie Emery submitted in support of Iraq\u2019s application, 22 September 2023<\/a><\/li>\n\n\n\n
- Declaration of Aloysius P. Llamzon submitted in support of Turkey\u2019s application, 7 September 2023<\/a><\/li>\n<\/ul>\n\n\n\n
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\n\n\n\nStati v. Kazakhstan (I)<\/strong><\/a><\/h2>\n\n\n\n
Dutch Supreme Court confirms lifting of attachments of shares held by Samruk-Kazyna in KMG Kashagan<\/strong><\/h4>\n\n\n\n
<\/div>\n\n\n\nSCC Case No. 116\/2010<\/strong>
Institution<\/strong>: SCC (Stockholm Chamber of Commerce)<\/a>
Tribunal<\/strong>: Karl-Heinz B\u00f6ckstiegel<\/a> (President), David R. Haigh<\/a> (Appointed by the claimant), Sergei Lebedev (Appointed by the Arbitration Institute of the SCC)
Seat<\/strong> of arbitration<\/strong>: Stockholm, Sweden<\/a><\/p>\n\n\n\n
\n\n\n\n<\/div>\n\n\n\nOn the 25th of September, the Ministry of Justice of Kazakhstan announced in a press release<\/a> that the Supreme Court of the Netherlands had confirmed a prior decision<\/a> of the Hague Court of Appeal, which had lifted attachments obtained by the investors on shares held by sovereign wealth fund Samruk-Kazyna (\u201cSamruk\u201d) in KMG Kashagan (\u201cKMG\u201d)<\/p>\n\n\n\n
The Stati parties have been seeking enforcement in various jurisdictions in their decade-long pursuit of a USD 500 million award<\/a> granted under the Energy Charter Treaty (ECT)<\/a>.<\/p>\n\n\n\n
In the Netherlands, the investors attached Samruk\u2019s shares in KMG in 2017. This attachment was confirmed by the Amsterdam District Court in January 2018 and the Amsterdam Court of Appeal in May 2019<\/a>. However, the decision of the Amsterdam Court of Appeal was set aside<\/a> by the Supreme Court in December 2020.<\/p>\n\n\n\n
In June 2022, the Hague Court of Appeal (\u201cHague Court\u201d) confirmed the lifting<\/a> of all attachments on shares held by Samruk in KMG.<\/p>\n\n\n\n
According to Kazakhstan, the latest decision of the Supreme Court rejected the Statis\u2019 appeal of the Hague Court judgment. It upheld the reasoning that the Stati parties failed to prove that the shares held by Samruk were intended for purposes other than public purposes. The Hague Court had ruled that the participations held by Samruk are managed with the aim of increasing the national welfare of Kazakhstan and contributing to the economic development of the State. It also rejected the assumption that Samruk managing the shares in a commercial manner altered the wider objective of Samruk to contribute to the economic development of Kazakhstan.<\/p>\n\n\n\n
Earlier this year, the Amsterdam District Court denied<\/a> enforcement of the award, finding that the investors committed procedural fraud during the arbitration and that enforcement would be contrary to Dutch public order. The State\u2019s fraud argument also found success in Belgium (see Decision of the Brussels Court of Appeal, November 2021<\/a>). Meanwhile, Kazakhstan is seeking to overturn<\/a> enforcement of the award in the US.<\/p>\n\n\n\n
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\n\n\n\nDjibouti v. DCT and DP World<\/strong><\/a><\/h2>\n\n\n\n
US District Court denies Djibouti\u2019s motion to quash subpoenas obtained by award-creditor in post-judgment discovery<\/strong><\/h4>\n\n\n\n
<\/div>\n\n\n\nLCIA Case No. 142732<\/strong>
Institution<\/strong>: LCIA (London Court of International Arbitration)<\/a>
Tribunal<\/strong>: Richard Aikens<\/a> (President), Peter Leaver<\/a> (Appointed by the State), Leonard Hoffmann<\/a> (Appointed by the respondents)
Seat<\/strong> of arbitration<\/strong><\/strong>: London, United Kingdom<\/a><\/p>\n\n\n\n
\n\n\n\n<\/div>\n\n\n\nOn the 21st<\/sup> of September 2023, the US District Court for the District of Columbia upheld<\/a> subpoenas served by Doraleh Container Terminal (\u201cDCT\u201d) on 10 banks in its effort to enforce LCIA awards against Djibouti.<\/p>\n\n\n\n
Background and arbitration proceeding<\/strong><\/h5>\n\n\n\n
The dispute concerned a 2006 concession agreement entered between Djibouti and DCT, a joint venture between the Port of Djibouti and DP World, for the development and operation of the container terminal at the port of Doraleh, an extension of the Port of Djibouti located on the Red Sea.<\/p>\n\n\n\n
Alleging corruption, Djibouti initiated arbitration<\/a> in 2014, seeking a declaration that it is entitled to rescind the concession agreement. The respondents brought counterclaims asserting that Djibouti breached the concession agreement by concluding an agreement with Chinese state-owned China Merchants Port Holdings in 2013 to build the new Doraleh multipurpose port. Djibouti later canceled the DCT concession in 2018.<\/p>\n\n\n\n
The tribunal dismissed the entirety of Djibouti\u2019s claims in 2017 and awarded the respondents GBP 7 million in costs, which were paid by Djibouti.<\/p>\n\n\n\n
The parties failed to settle the dispute regarding the counterclaims, and the tribunal issued its Third Partial Award<\/a> in 2019, awarding DCT USD 148 million in damages plus interests and costs. However, the tribunal issued an Award<\/a> correcting the amount of damages to USD 87 million. Later, in 2019, the tribunal awarded DCT USD 11.3 million in compound interest in a Fourth Partial Award<\/a>.<\/p>\n\n\n\n
US enforcement proceeding<\/strong><\/h5>\n\n\n\n
In September 2020, DCT filed a petition to confirm<\/a> the third and fourth awards in the US District Court for the District of Columbia.<\/p>\n\n\n\n
In February 2023, the District Court enforced<\/a> the awards. In a Memorandum Opinion<\/a>, it established subject matter jurisdiction, finding that Djibouti implicitly waived sovereign immunity under the Foreign Sovereign Immunities Act (\u201cFSIA\u201d) and that it has jurisdiction under the New York Convention<\/a> (\u201cNYC\u201d).<\/p>\n\n\n\n
The court rejected Djibouti\u2019s contentions that enforcement should be denied on the grounds of inadequate notice and violation of due process pursuant to Article V(1)(b) of the NYC. Additionally, it determined that enforcing the awards would not contravene public policy, in accordance with Article V(2)(b) of the NYC.<\/p>\n\n\n\n
Djibouti appealed<\/a> the judgment and moved to stay in enforcement<\/a> of the award. In April, the District Court refused<\/a> to stay enforcement absent posting of a bond by Djibouti. The court explained that \u201cDjibouti remains free to secure a stay in this matter by posting a bond<\/em>\u201d. The appeal proceeding remains pending.<\/p>\n\n\n\n
Post-judgment enforcement efforts<\/strong><\/h5>\n\n\n\n
As part of post-judgment discovery, DCT has served subpoenas on 10 banks to obtain information regarding transactions allegedly involving Djibouti\u2019s government. This includes dealings with Chinese state-owned companies and government organizations, Djibouti state-owned entities and government organizations, as well as companies in the port and shipping sector. The banks have not challenged the subpoenas and have cooperated with DCT.<\/p>\n\n\n\n
Djibouti challenged the subpoenas and on the 21st<\/sup> of September, the US District Court for the District of Columbia denied<\/a> Djibouti\u2019s motion. Although it found the motion timely, the court ruled that the subpoenas were proportionate to DCT attempts to enforce the awards.<\/p>\n\n\n\n
It found that even if the subpoenas require the production of eleven years\u2019 worth of information, they are limited to transactions of at least USD 25,000 and are not unreasonable. The court also rejected Djibouti\u2019s argument that only DCT\u2019s provisional administrator, and not DCT\u2019s counsel, had the authority to serve the subpoenas.<\/p>\n\n\n\n
Parallel arbitrations<\/strong><\/h5>\n\n\n\n
In 2018, DP World launched an LCIA arbitration against the Port of Djibouti (LCIA Case No. 184063). Sole arbitrator Maxi Scherer rendered an award in 2021 and the Port of Djibouti\u2019s challenged the arbitrator\u2019s jurisdictional findings under section 67 of the 1996 Arbitration Act. The award was upheld<\/a> by the High Court in London earlier this year.<\/p>\n\n\n\n
DP World and DCT initiated another LCIA arbitration in 2018 against Djibouti (LCIA Case No. 183886). In 2022, sole arbitrator Zachary Douglas found<\/a> Djibouti liable for around USD 180 million in damages and USD 16 million in interests. DP World filed a petition to enforce<\/a> the award in the District Court of Columbia earlier this year.<\/p>\n\n\n\n
\n\n\n\nABOUT THE AUTHOR<\/strong><\/p>\n\n\n\n
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