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.
Ukraine’s Naftogaz says UK High Court has recognised USD 4.2 billion treaty award against Russia
PCA Case No. 2017-16
Institution: PCA (Permanent Court of Arbitration)
Tribunal: William Ian Corneil Binnie (President), Charles H. Poncet (Appointed by the claimants), Maja Stanivuković (Appointed by the appointing authority)
Seat of Arbitration: The Hague, The Netherlands
On December 19th, Ukraine’s Naftogaz announced that the High Court of Justice of England and Wales had recognised a USD 4.2 billion award against Russia. The UK High Court issued an order on December 5th recognising the partial and final awards.
Naftogaz is actively pursuing enforcement of these awards in the United States “as well as other target jurisdictions”.
The dispute originates from Russia’s seizure of Naftogaz’s assets in Crimea in 2014. Naftogaz initiated arbitration under the Russia–Ukraine BIT in 2016.
In a February 2019 Partial Award, the tribunal upheld jurisdiction and ruled that Russia had unlawfully expropriated the investments and breached the BIT. Subsequently, in April 2023, the tribunal awarded Naftogaz USD 4.2 billion in damages plus interest, in addition to approximately USD 24 million for legal fees and arbitration costs.
Naftogaz says the award is now worth USD 5 billion and that it will “continue to leverage all available mechanisms to recover these funds in target jurisdictions hosting russian assets”.
Singapore Court of Appeal upholds enforcement of USD 93 million treaty award against India
PCA Case No. 2014-10
Institution: PCA (Permanent Court of Arbitration)
Tribunal: Gabrielle Kaufmann-Kohler (President), Daniel M. Price (Appointed by the claimant), Brigitte Stern (Appointed by the State)
Seat of Arbitration: Geneva, Switzerland
On December 15th, the Singapore Court of Appeal dismissed India’s appeal against the enforcement of a USD 93 million treaty award. The Court applied the principle of transnational issue estoppel, preventing India from raising issues previously adjudicated by the courts of the seat in set-aside proceedings.
The dispute, which has spanned multiple arbitration and court proceedings, stems from a contract signed in 2005 between Devas Multimedia Private (“Devas”) and Antrix Corporation (the commercial arm of the Indian Space Research Organisation) for the procurement of S-band satellites aimed at providing high-speed internet services.
Following Antrix’s termination of the contract, citing essential security interests, Devas initiated ICC arbitration against Antrix in 2011. In 2015, the tribunal awarded Devas more than USD 562 million plus interest, with the award today worth over USD 1.3 billion. However, the award was annulled by the Delhi High Court in 2022. The Supreme Court of India confirmed the annulment earlier this year.
Simultaneously, three Mauritius-based shareholders of Devas launched an arbitration under the Mauritius – India BIT in 2012 (CC/Devas v. India 1) which resulted in a USD 111 million award in favour of the investors. A second treaty arbitration between the parties is currently pending at the PCA (CC/Devas v. India 2). (See our previous digests here; here; here).
Deutsche Telekom (“DT”), a minority indirect shareholder of Devas, also launched an arbitration under the Germany – India BIT (“BIT”) in 2013.
In a December 2017 Interim Award, the tribunal upheld jurisdiction and found that India breached the BIT’s fair and equitable treatment standard. India sought to set aside the award at the seat in Switzerland, but the Swiss Federal Tribunal (“SFT”) dismissed the request in December 2018.
In a May 2020 Final Award, the tribunal held India liable for USD 93.3 million in damages plus interest and a part of DT’s costs.
In parallel, Devas faced winding up proceedings in India. In 2021, the National Company Law Tribunal ruled that the company was established for unlawful purposes, and the 2005 contract was void ab initio. The Indian Supreme Court confirmed Devas’ liquidation in 2022.
India, notably relying on Devas’ liquidation and the Indian Supreme Court judgment, applied to the Swiss Federal Tribunal to set aside both interim and final awards, arguing fraudulent and unlawful investments, and sought remittance of the case to the arbitral tribunal.
However, in March 2023, the Swiss Federal Tribunal dismissed India’s request without addressing the fraud allegations.
DT secured exequatur of the final award in Geneva and was successful in enforcing the award in Berlin (albeit the court only allowed enforcement up to USD 10 million, see Judgment of the Higher Regional Court of Berlin 12 Sch 7/21). It has also filed for enforcement in the US.
Enforcement Proceedings in Singapore
In September 2021, DT successfully obtained ex parte enforcement of the Final Award in Singapore.
In January 2023, the Singapore International Commercial Court (SICC) dismissed India’s objections to enforcement based on fraud and illegality.
The SICC ruled that the 2018 decision of the SFT has a “negative res judicata” effect, barring India from raising identical arguments in the Singapore proceedings.
The SICC emphasized that India’s failure to raise the illegality allegations before the arbitral tribunal led to a waiver of its right to raise those issues, pursuant to the law of the seat (Article 186(2) of the Swiss Federal Act on Private International Law).
Furthermore, the SICC stated that the liquidation decisions regarding Devas could not be considered as definitive findings of fraud against DT, as they were determined on a summary basis and without DT being a party to the proceedings.
India appealed the SICC’s decision in February 2023.
Dismissal of India’s Appeal Against Enforcement
India’s primary contention in the appeal was that the tribunal lacked jurisdiction to hear the dispute, thereby omitting the applicability of the sovereign immunity exception. India argued that the Singapore courts are not bound by the SFT’s decision unless the doctrine of transnational issue estoppel applies, which the State claimed is non-existent under Swiss law.
DT countered, asserting that India is barred from reiterating arguments previously rejected by the SFT and has waived the right to raise other jurisdictional objections by not presenting them before the arbitral tribunal. DT argued for the applicability of transnational issue estoppel and, alternatively, the “Primacy Principle”, which gives precedence “in the scheme of modern arbitration” to the seat court’s decisions unless they contravene fundamental notions of justice or the enforcing court’s public policy.
In its Judgment, the Singapore Court of Appeal (“the Court”) first assessed the applicability of transnational issue estoppel and the Primacy Principle in international commercial arbitration.
Transnational issue estoppel
The Court explained that transnational issue estoppel is an extension of common law issue estoppel to a transnational context. A party may be estopped from raising issues that were argued in prior foreign proceedings if some conditions are met:
- The foreign judgment must be capable of being recognised in Singapore: it must be a “final and conclusive decision on the merits”, originate from a court that has “transnational jurisdiction over the party sought to be bound” and not be subject to any defences to recognition (most commonly public policy).
- There must be a commonality of parties in both the prior and current proceedings.
- The subject matter of the estoppel must be the same as what has been decided in the foreign judgment.
The Court affirmed that issue estoppel is “grounded in the principle of finality of litigation” and that reopening a case would be “an abuse of process”. However, it emphasized balancing comity with the enforcing court’s duty to uphold the rule of law within its jurisdiction.
The Court determined that applying the principle in the context of international commercial arbitration does not violate Singapore’s arbitration law or the New York Convention. It explained that the New York Convention functions in tandem with the enforcement court’s law, including its conflict of laws provisions and how it treats foreign judgments. The Court also drew upon English legal precedents (see our previous digest).
The Court recalled that Singaporean courts typically exercise caution in enforcing awards that have been set aside by the court of the seat. This reflects a recognition of the seat court’s decisions, underlining the principle that courts “co-exist as part of an international legal order”.
The Court concluded that transnational issue estoppel does apply in the context of international commercial arbitration, “at least in relation to a prior decision of a seat court regarding the validity of an award”.
The Primacy Principle
Although the Court deemed it unnecessary to rely on the Primacy Principle due to the transnational issue estoppel’s applicability, it went on to formulate some observations on the function of the Primacy Principle in international arbitration. It noted the position in other common law jurisdictions, such as Australia and the United States.
The Court explained that the Primacy Principle derives from the view that the court of the seat enjoys a “position of primacy in the transnational framework that governs the conduct and supervision of international arbitration and the enforcement of awards”.
It said that in international commercial arbitration, the New York Convention, read with the UNCITRAL Model Law and the Singapore arbitration law, “recognise the special role and function of the seat court” and provide the basis for the Primacy Principle.
It explained that this view is aligned with the principle of comity.
However, the Court acknowledged circumstances that might necessitate deviating from the Primacy Principle, such as (i) when the decision conflicts with public policy, (ii) demonstration of serious procedural flaws in the decision-making process, or (iii) where it appears to the enforcement court that the decision of the seat court was “plainly wrong”.
Transnational issue estoppel precludes India from relitigating the same grounds to resist enforcement
India argued that only a part of the SFT decision has res judicata effect under Swiss law, which is the determination that the Interim Award should not be set aside. However, the factual findings, legal determinations, and rulings that are contained or led to the decision do not have the same effect.
The Court did not accept India’s argument and highlighted that the issue of the tribunal’s jurisdiction cannot be relitigated before the Swiss Courts.
It did not find any exception to the application of issue estoppel and found the SFT decisions to be “final and conclusive for the purpose of invoking the doctrine of issue estoppel”.
Ultimately, the Court upheld the award’s enforcement and affirmed the SICC’s dismissal of India’s opposition to enforcement.
Judge Jonathan Mance rendered a Concurring Opinion on the Primacy Principle.
ICSID ad hoc committee stays enforcement of USD 216 million award pending cross-annulment proceedings
ICSID Case No. ARB/12/37
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: William Ian Corneil Binnie (President, appointed following resignation of V.V. Veeder), Charles N. Brower (Appointed by the claimants), Brigitte Stern (Appointed by the State)
Ad hoc Committee: Lawrence Boo Geok Seng (President), Eva Kalnina, Doug S. Jones (Members)
On December 15th, the Ministry of Justice of South Korea announced that an ICSID ad hoc committee, hearing cross-annulment requests, has unconditionally agreed to maintain the stay of enforcement of the award pending the outcome of the annulment proceedings.
The announcement noted that the committee accepted the State’s argument that enforcement of an award which both parties are seeking to annul would be unfair.
Affiliates of the US private equity firm Lone Star Funds and South Korea each filed for annulment of the award in August and September this year, respectively. An identical ad hoc committee is appointed to consider both applications.
The dispute traces back to Lone Star’s divestment of its majority interest in Korea Exchange Bank (“KEB”). The initial sale agreement with HSBC collapsed in 2008 due to delayed regulatory approvals stemming from legal actions against Lone Star regarding its initial acquisition of KEB shares. Lone Star was convicted in 2011 in a stock manipulation case.
In January 2012, Lone Star sold its KEB stake to a Korean bank. The investors claimed the sale price was significantly reduced by regulatory influence. They initiated arbitration under the BLEU-Korea BIT later that year.
In August 2022, the tribunal found that South Korea breached the BIT’s fair and equitable treatment standard when it imposed a USD 432 million price reduction and ordered it to pay USD 216.5 million in damages plus interest out of USD 4.7 billion originally claimed. A Decision on Rectification in May 2023 adjusted the damages to USD 216 million.
Türkiye and US investor settle ICSID award
ICSID Case No. ARB/18/46
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: William Ian Corneil Binnie (President), Robert Volterra (Appointed by the claimant), Brigitte Stern (Appointed by the State)
On December 13th, Westwater Resources announced it had received a USD 3.1 million payment from Türkiye, settling an ICSID dispute.
The dispute stemmed from Türkiye’s revocation of Westwater’s licences for uranium exploration and development in Temrezli and Şefaatli. The investor’s Turkish subsidiary had exclusive rights to these projects since 2007 until their cancellation by the Turkish government in June 2018. In response, Westwater initiated arbitration under the US–Türkiye BIT in December of the same year.
In March 2023, the tribunal found that Türkiye had breached the BIT by revoking the licences. However, it awarded Westwater only USD 1.3 million in damages, plus interest, and USD 3.7 million in costs and fees (the award has not been made public – Westwater said in a regulatory filing that “tribunal disagreed with [its] projections of what its investment was worth and how much the investment would have returned if Turkey had not cancelled the licenses”).
Westwater filed for rectification, alleging miscalculations in the amount of the award. The request was rejected by the tribunal in July 2023.
Westwater now says the payment it received is a “complete, final, and full settlement of the matters at issue in the arbitration” and that both parties “released their respective right to enforce […] the awards” or “to seek to recover any further amounts arising out of the ICSID arbitration proceeding”.
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.