THE AUTHOR: Sandra Gradziel, Lawyer at PDGB law
The World Arbitration Update (WAU) addresses key and novel topics of investment and international commercial arbitration, as well as public international law. WAU has an objective to connect the different regions with the global community, creating a unique space for practitioners, private parties, arbitrators, academics and students to discuss and network. WAU nourishes the conversation by following a distinct format, in a decentralized forum in which each day the focus is on a specific region, starting with the Americas (Monday), Africa and MENA (Tuesday), Asia Oceania (covered in this post), Europe (Thursday), and lastly Friday was dedicated to diverse topics.
One of the themes of this year’s World Arbitration Update’s (WAU) cycle of conferences was “The Actions of Russia, Countermeasures and Resulting International Disputes, Including Investor-State and Commercial Arbitration”, on day 3 which covered Asia & Oceania. The event was held in the K&L Gates Straits Offices in Singapore and online.
The panel explored legislative and case developments following the Russian invasion of Ukraine, and its consequences for the Investor-State and Commercial Arbitration landscape. It was composed of Rob Houston (K&L Gates Straits Law LLC), Tatyana Slipachuk (Sayenko Kharenko Law Firm), Raja Bose (K&L Gates Straits Law LLC), Dr. Romesh Weeramantry (Clifford Chance Asia), and Hamish Egan(HKA)
First, Mr. Ian A. Laird (Crowell & Moring LLP) and Mr. José Antonio Rivas (Xtrategy Center LLP) greeted the attendees and the panellists, before leaving the floor to the moderator of the conference, Mr. Gene Burd (FisherBroyles).
Mr. Burd kicked off the event by offering a general introduction on Russia’s invasion of Ukraine, causing major shifts not only in the realm of international politics and business, but also in the legal ambit of international dispute resolution.
He explained two major legal implications for international business, such as a broad range of sanctions by the UN G7 States toward Russia, but also conversely counter-sanctions made by Russia and the drastic fluctuation of the energy market, which has already impacted multiple stakeholders globally.
A general interrogation on whether the existing legal system is able to provide the appropriate recourse to aggrieved parties was put as a challenge for the five panellists.
Tridimensional Timeline for the Events in Ukraine & the Corresponding Legal Issues
The panel discussions started with Mr. Rob Houston (K&L Gates Straits Law LLC) providing a comprehensive timeline of developments and related legal issues of the Russian aggression on Ukraine from three different perspectives: the past (recent developments), the present (current landscape), and the future (anticipated legal issues).
From the recent developments perspective, he recalled the Russian annexation of Crimea in 2014 and more recently, the Russian invasion of Ukraine in 2022.
On the other side of the spectrum, there were also the actions from Russia, notably Russian’s veto on the Security Council action in February 2022 with respect to Ukraine, as well as a series of Russian economic measures imposed on nationals of “Unfriendly States”. Undeniably, these actions may be a catalyser for a multitude of Private and Investor-State proceedings against Russia.
With regards to the current landscape, he noted the paradox between about 63 Bilateral Investment Treaties (BITs) currently signed with Russia, which provide protections for foreign investments, and in the other hand the Russian economic sanctions implemented by thus far 27 States, perceived as “unfriendly” by the Russian government.
The anticipation of the potential legal issues, both from the State perspective (e.g., State immunity and Investor-State disputes that can arise from the sanction imposed on and by Russia) and Private sector perspective, such as a compliance issue with competing sanction regimes, contractual disputes and damages evaluation, award enforcement and supply chain and insolvency risks, have therefore to be taken into consideration. Thus, the concept of countermeasures and collective countermeasures, particularly in relation to future Investor-State arbitrations should not be overlooked.
Mr. Houston concluded by rising the interrogation of a potential impact of the countermeasures brought by the Russian State, and their possible interpretation by arbitral tribunals.
Ukraine’s Response on the Legal Front: Establishing Facts & Compensation for Damage
Ms. Tatyana Slipachuk (Sayenko Kharenko Law Firm) continued the discussion by presenting the conflict from the Ukrainian legal perspective. She explained the importance of a broad use of the panoply of legal possibilities open to Ukraine in the international legal framework.
As of today, Ukraine has initiated 5 proceedings before the International Court of Human Rights, (including one submitted in 2022 by different Governments and Non-Governmental Organisations), 2 cases before the International Court of Justice as well as many civil and criminal cases in local fora.
Ms. Slipachuk stressed that the main issue lies in the importance of these cases for both Commercial and Investor-State arbitration proceedings to establish the basic facts that could be crucial for all the proceedings in the pipeline. She also highlighted that fair compensation, with a possible establishment of an overall global mechanism of compensation for damages as well as the setting-up of ad hoc tribunals on the issues connected to the responsibility of Russia, appears to be the most impending issue.
She suggested the establishment and maintenance of an international register of damages with all the claims and all the damages in order to keep track and assist the international ad hoc commissions in dealing with these issues.
Impact of the Current Events on Commercial Arbitration
Mr. Raja Bose (K&L Gates Straits Law LLC) introduced the topic of the impact of the recent international sanctions on Commercial Arbitration. He started by laying down the types of factual scenarios that could present themselves in this situation and followed on a few general comments on the notions of force majeure, frustration, and illegality.
The question to be asked is: whether and if so, at what point, the Common Law doctrines of force majeure, frustration and/or illegality would be available to either party to excuse their non-performance. The main issue seems to lie in the wording of the specific contractual clauses and whether they cover the event at hand.
However, it goes without saying that many difficulties could also be related, procedurally, to the initiation of the arbitration proceedings against Russia (e.g., problems of legal representation on the Russian side; recognition and enforcement of the award, and solvency problems related to asset freezing measures).
Issues in Investment Arbitration
Dr. Romesh Weeramantry (Clifford Chance Asia) discussed the Investment Arbitration landscape and more specifically the International Treaties.
He mentioned that there are 80 Russian investment treaties, of which about 60 are today in force. However, he noted that Russia does not have a “very good record of compliance” with these treaties, which has to be taken into account, especially with the potential numerical growth of investment claims brought by investors from host countries against Russia. On the complexities of EU sanctions and their ramifications, he cited, as a recent example, the “Rosneft case”, whereby Rosneft, a State-controlled oil corporation, claimed before the High Court of the United Kingdom that the sanctions of the EU violate the rights of corporations based in Russia. More recently, Rosneft filed a claim in a German court against Germany upon its trusteeship of the company.
The importance of this issue seems to lie in the way investment treaty protections could be invoked against Russia and the scope of the dispute resolution clause on arbitration that is offered to investors. This seems to be a concrete difficulty, especially in view of the above-mentioned Russian low track record of compliance with treaty awards (i.e., Yukos).
Damages in Times of Conflict
Mr. Hamish Egan (HKA) closed the panel by discussing the impact of the valuation of damages in times of conflict. He started by providing an introduction on damages (their type and cause, and the role of the expert in measuring the consequential damages) and then followed with the economic impact and potential disputes arising out of the crisis between Russia and Ukraine.
The latest statistics quoted by Mr. Egan reflected the major changes in the business landscape (including in Asia), i.e., suspension or even complete withdrawal of business from the Russian territory. Looking at the economic impacts, the main transformations reside in commodity prices, investment risks, profit losses, but most of all the impact on some key industries such as energy, aviation, retail, agriculture, and infrastructure, which will most likely be followed by major arbitration claims.
In conclusion, a deep and comprehensive analysis of both Commercial and Investor-State arbitration and the general context of the situation in Ukraine took place in this panel, allowing for a better understanding of the current conflict and its consequences for the international business community in the legal realm, and beyond.
ABOUT THE AUTHOR
Sandra Gradziel is a lawyer at the Paris Bar practicing at PDGB law firm in Paris. She specializes in litigation and international arbitration. Prior to joining PDGB, she worked as an intern at leading French law firms such as Gide Loyrette Nouel and August Debouzy. She holds an LL.M. in International Business Law and Management from ESSEC and a French master’s degree in International Business Law from Aix-Marseille University