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.
Heirs to the Sultanate of Sulu v. Malaysia
Malaysian State-Owned Petronas Files for §1782 Discovery in View of Actions Relating to the Sulu v. Malaysia Arbitration
Institution: Ad hoc Arbitration
Tribunal: Gonzalo Stampa (Sole arbitrator)
Seat of arbitration: Paris, France
On 28 May, Petronas, Malaysia’s national oil and gas company, filed for discovery in the United States pursuant to 28 U.S.C. § 1782, in light of civil and criminal proceedings it intends to initiate in Spain and Luxembourg relating to the Sulu v. Malaysia arbitration.
The application is filed by two Luxembourg-based subsidiaries of Petronas against Therium Capital (which provided funding for the arbitration), Evergreen (the parent entity of Therium), and several banking entities. Petronas asserts that, according to public sources, Therium has provided more than USD 20 million in funding to the Sulu claimants.
The application pertains to the now-infamous USD 15 billion award rendered in 2022 by Spanish arbitrator Gonzalo Stampa. During the arbitration, Mr. Stampa moved the seat from Madrid to Paris after a Madrid court had annulled his appointment. This notably led to his criminal conviction in Spain in December 2023. The appeal of the conviction was dismissed by the Madrid Court of Appeal last month.
Petronas says that the Sulu claimant’s efforts to enforce the award have caused it “significant damages in seeking to set aside attachments that have been improperly levied over their bank accounts by the Sulu Claimants“. Petronas contends the final award is “highly irregular” and “bears no connection whatsoever to the value of the annual lease payments […] a mere US $1,050.”
The application has been filed in view of four actions Petronas plans to launch:
- A civil claim in Spain against Mr. Stampa for damages arising as a result of the “rogue arbitration“.
- A civil claim in Spain against the Sulu claimants, their attorneys and the entities funding and/or supporting the Sulu claimants in the arbitration and enforcement proceedings for “for acting with willful negligence by purposefully ignoring the revocation of Mr. Stampa’s authority as arbitrator by the Spanish Courts“.
- A private criminal prosecution against the Sulu claimants, their Spanish attorneys, and/or the funders “for inducing Mr. Stampa to commit a criminal offence“.
- Civil claims in Luxembourg against the Sulu claimants and the funder to recover the losses arising out of the attachments.
The applicants seek documents and bank records relating to any money transfers between entities within the Therium Group of companies and Mr. Stampa, or any person who may have conspired with Mr. Stampa, as well as documents relating to “the level of control and direction which entities within the Therium Group have over the Sulu Claimants’ legal strategy“.
In Luxembourg, the Sulu claimants attached assets belonging to the two Petronas entities in July 2022, but the attachment was set aside in January 2023. Earlier this year, in February 2024, the Sulu claimants filed for another attachment. The proceeding is currently pending.
The Sulu claimants have initiated enforcement proceedings in multiple jurisdictions. In November 2023, Malaysia overturned an order authorising the attachment of three diplomatic buildings in Paris (see our previous digest here).
CEF Energia v. Italy
Svea Court of Appeal Sets Aside Intra-EU ECT Award
SCC Case No. 2015/158
Institution: SCC (Stockholm Chamber of Commerce)
Tribunal: Klaus Reichert (President), Klaus M. Sachs (Appointed by the claimant), Giorgio Sacerdoti (Appointed by the State)
Seat of arbitration: Stockholm, Sweden
On 27 May, the Svea Court of Appeal set aside an intra-EU ECT award that ordered Italy to pay Dutch company CEF Energia EUR 9.6 million in damages plus interest and costs.
Background
Following incentive schemes implemented by Italy in the early 2000s to encourage investment in renewable energies, CEF Energia invested in photovoltaic plants between 2010 and 2012. However, Italy later enacted several reforms that reduced the value of the tariffs.
In response, CEF initiated arbitration in 2016 under the Energy Charter Treaty (ECT).
In a January 2019 award, the arbitral tribunal dismissed Italy’s intra-EU objection to jurisdiction but declined jurisdiction over certain measures due to the ECT taxation carve-out. On the merits, the tribunal found that a 2014 decree reduced the tariff cuts and breached the investor’s legitimate expectations. Italy was ordered to pay the investor EUR 9.6 million in damages plus interest and a portion of the investor’s legal and expert fees.
Italy sought to set aside the award at the seat of arbitration in Stockholm. In April 2019, the Svea Court of Appeal stayed enforcement of the award pending the conclusion of the set aside proceeding.
Concurrently, CEF filed for enforcement of the award in the US in August 2019. The proceeding has been stayed since July 2020 pending the conclusion of the Swedish proceeding.
Svea Court of Appeal Finds Award Incompatible with Swedish Public Policy and EU Law
In its judgment, the Svea Court of Appeal (“Svea Court”) recalled the CJEU judgments in Achmea, Komstroy, and PL Holdings. It highlighted that in PL Holdings, the CJEU ruled that the arbitration clause contained in Article 26 of the ECT does not apply to disputes between an EU member state and an investor from another member state. The Svea Court explained that it follows from PL Holdings that arbitration clauses contained in investment treaties between member states are contrary to the principles of mutual trust, sincere cooperation, and the autonomy of EU law.
The Svea Court elucidated that following the CJEU’s ruling in PL Holdings, the Swedish Supreme Court set aside the award, considering that it is “incompatible with the fundamental rules and principles governing the legal system of the EU and thus also of Sweden”.
As such, the Svea Court found that the award, which involved an investment dispute between a member state and an investor from another member state, is “manifestly incompatible” with Swedish public policy and must be set aside. It did not rule on Italy’s remaining grounds.
Last April, the Svea Court set aside another intra-EU ECT award in Triodos v. Spain on the same grounds (see our previous digest here).
Related Greentech Action
In a Status Report filed in the US enforcement proceeding of the Greentech award, Italy stated that it expects the award to be set aside by the Svea Court of Appeal for the same reasons, “as the Greentech arbitration was conducted pursuant to the same clause in the Energy Charter Treaty” and “the two cases concern similar facts and involve identical legal issues”.
The Greentech investors were awarded EUR 11.9 million in damages plus interest and costs.
Oschadbank v. Russia
Arbitral Tribunal Dismisses Russia’s Request for Revision of USD 1.1 Billion Award
PCA Case No. 2016-14
Institution: PCA (Permanent Court of Arbitration)
Tribunal: David A.R. Williams (President), Charles N. Brower (Appointed by the claimant), Hugo Perezcano Díaz (Appointed by the Appointing Authority)
Seat of arbitration: Paris, France
On 11 December 2023, an arbitral tribunal dismissed Russia’s request for revision of an award that ordered it to pay Ukraine’s Oschadbank USD 1.1 billion in damages. The decision has recently surfaced in US enforcement proceedings.
Background
In November 2018, a UNCITRAL tribunal found Russia liable under the Russia – Ukraine BIT for expropriating Oschadbank’s (“the investor”) banking business in the Crimean Peninsula. It ordered the state to pay USD 1.1 billion in damages plus interest and costs.
In February 2019, Russia sought to set aside the award at the seat of arbitration in Paris.
In August 2019, it also filed an application for revision of the award pursuant to Article 1502 of the French Code of Civil Procedure (CCP). It requested the tribunal to revoke its Final Award and issue a new award declaring that it had no jurisdiction over Oschadbank’s claims. The original tribunal was reconvened, and the revision application was stayed pending the conclusion of the French set-aside proceedings.
The Paris Court of Appeal (“Paris CA”) first set aside the award in March 2021, finding that Article 12 of the BIT is a temporal condition to the offer to arbitrate and that the tribunal lacked jurisdiction ratione temporis as Oschadbank made its investments in Crimea before the 1st of January 1992.
The French Court of Cassation overturned the Paris CA’s decision in December 2022 and reinstated the award. It found that the Paris CA erred when it considered that Article 12 of the BIT set out a temporal condition to the offer to arbitrate. The Court of Cassation ruled that Article 12 of the BIT is not a jurisdictional requirement, but “substantive” in nature, and therefore was not in the scope of review of the set aside judge. The case was remanded back to the Paris CA for consideration of Russia’s other set aside grounds, including alleged violation of international public policy.
Dismissal of the Request for Revision
Under French Law, Article 1502 of the CCP states that the revision of the award “may be made in circumstances provided in Article 595 [of the CCP]”. Russia relied on sub-articles 1 and 2 of Article 595, which provide that an application for revision may be made when (1) “it comes to light, after the judgment is handed down, that it was obtained fraudulently by the party in whose favour it was rendered” or (2) “decisive evidence that had been withheld by another party is recovered after the judgment was handed down”.
Russia said it based its revision application on the discovery of three new documents that showed that the original bylaws of Oschadbank were approved in September 1991 and registered by the National Bank of Ukraine in December 1991. The state said that this information was not known by the arbitral tribunal at the time of the award and that knowledge of these documents would have led the tribunal to dismiss the case for lack of jurisdiction ratione temporis pursuant to Article 12 of the BIT.
The investor contended that Russia relied on the same arguments as in the French set aside proceedings. It argued that the Court of Cassation dismissed the state’s challenge to the tribunal’s jurisdiction ratione temporis and that “that same challenge in the Revision Proceeding […] must also fail”.
Russia also argued that as the set aside proceeding was remanded back to the Paris CA, the latter still has to consider all the other set aside grounds. The state considered the temporal requirement of Article 12 to be both a jurisdictional ground for set aside and a violation of international public policy.
The investor countered that Russia is attempting to recharacterise the Revision application “to avoid a res judicata finding”. The investor argued that the Court of Cassation has conclusively decided on the jurisdictional issue, which is Russia’s sole basis for seeking revision of the award.
In its Revision Decision, the tribunal first noted that “the Revision Application does not […] characterise the temporal restrictions of Article 12 as pertaining to either jurisdiction or the merits” and that “the sole relief requested is a finding that the Tribunal lacks jurisdiction”. It explained that it “agrees with [Oschadbank] that [Russia] cannot now recharacterize the issue as a broader concept pertaining to either jurisdiction or the merits”.
The tribunal clarified that even if the Paris CA is still to rule on Russia’s remaining set aside grounds, the issue of jurisdiction ratione temporis “has now been conclusively determined by the French courts”.
The tribunal considered that “it is beyond cavil” the elements necessary for the authority of res judicata are satisfied. It rejected Russia’s arguments that the subject matter was different because the Court of Cassation was considering whether to uphold the Paris CA judgment.
The tribunal thus refused to “make a finding on jurisdiction ratione temporis that is directly contradictory” to the finding of the Court of Cassation. It highlighted that “the fact that [Russia] considers the position of the Cour de cassation to be incorrect or at odds with the findings of other courts, does not allow it to circumvent the res judicata doctrine“.
The tribunal dismissed Russia’s revision application, concluding that “the door to the exceptional remedy of revision in Article 1502 has now been closed by the findings of the Cour de cassation”.
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.
