SWEDISH COURT OF APPEAL FINDS YUKOS INVESTMENT TRIBUNAL LACKED JURISDICTION
Pieter Bekker, Artem Rodin and Jessica Foley
Summary
A Court of Appeal in Sweden has held that a Stockholm Chamber of Commerce arbitral tribunal had no jurisdiction to hear an expropriation claim brought by four Spanish companies against Russia. The judgment, which overturned a 2014 ruling of the Stockholm District Court, turned on the interpretation of a narrowly drafted dispute resolution clause and a most-favoured-nation clause in the 1990 bilateral investment treaty (BIT) between Spain and the then USSR. The decision is significant because there is no unified approach in international investment law to the interpretation of narrow dispute resolution clauses, common to Soviet-era BITs, that purport to limit arbitration to disputes relating to the amount or method of payment of compensation for expropriation. The Court’s analysis might be applied in future cases concerning BITs containing similar provisions, although, as discussed below, not necessarily with the same result.
Background
The four claimants were Spanish investment funds which held American Depository Receipts in respect of Yukos Oil Company (Yukos) - once the largest company in Russia. The claimants alleged that Yukos’ bankruptcy in the mid-2000s amounted to an expropriation by Russia of their investments without compensation. They filed a request for arbitration in March 2007, claiming that the measures adopted by Russia constituted a violation by Russia of the Spain-USSR BIT. In 2009, a tribunal issued an award on jurisdiction in the claimants’ favour, finding that it had jurisdiction under the dispute resolution clause of the BIT to decide whether compensation was due. In 2012, the tribunal then unanimously found that there had been an expropriation. Russia challenged the award on jurisdiction before the Stockholm District Court without success and then appealed to the Svea Court of Appeal.
Dispute Resolution Clause
Article 10 of the BIT provides that investment disputes relating to “the amount or method of payment the compensation due under article 6” [the expropriation clause] may be referred to arbitration. Russia argued that the scope of this clause confined the tribunal’s jurisdiction to disputes concerning thequantum of compensation, and that the assessment as to whether the criticised measures were in fact expropriatory was reserved for another forum, such as Russia’s national courts. The Claimants disagreed, arguing that the scope of the clause extends to disputes over the entitlement to compensation in the first place. The arbitral tribunal (and District Court) agreed with the claimants, finding that the tribunal had jurisdiction to decide whether compensation was “due” to the claimants under international law by reason of Russia’s conduct (and if so in what amount).