On 13 July 2018, the Commercial Court handed down a decision in PAO Tatneft’s effort to enforce its US$112 million BIT award against the state of Ukraine (under section 101 of the Arbitration Act 1996). (PAO Tatneft v Ukraine  EWHC 1797 (Comm)).
The award concerned the direct and indirect shareholdings of PAO Tatneft in a company known as Ukrtatnafta, which owned and operated the Kremenchug Refinery. Broadly, the award found Ukraine to be liable to PAO Tatneft in respect of two claims: for breach of the fair and equitable treatment standard (“FET”) in relation to (i) its own shares in Ukrtatnafta; and (ii) PAO Tatneft’s shareholding in a Swiss entity and a US entity, each of which held shares in Ukrtatnafta.
Ukraine claimed that it was entitled to state immunity on the basis that section 9 of the State Immunity Act 1978 did not apply because the arbitration agreement contained in the BIT did not confer jurisdiction on the tribunal in respect of the matters it purported to decide (or at least in respect of some of them). In particular, Ukraine contended: (i) that by the BIT Ukraine did not agree to submit to arbitration any claim for breach of the FET standard because the BIT did not itself include that standard and it was not incorporated by means of the Most Favoured Nation provision in the BIT (as Tatneft contended); (ii) alternatively, that Ukraine did not agree to submit to arbitration the claim in respect of the Swiss and US entities because (a) it did not relate to an investment by Tatneft in Ukraine (“the No Investment Point”); or (b) because Tatneft had only acquired its shares in those companies after the dispute had arisen or at a time when the dispute was reasonably foreseeable and for the purposes of bringing the dispute within the scope of the BIT.
Mr Justice Butcher ruled against Ukraine on each of these grounds (but gave permission to appeal on the No Investment Point (only)).
Ukraine also contended that PAO Tatneft had failed in its duty of full and frank disclosure. Mr Justice Butcher also rejected that contention and refused permission to appeal in respect of it.
Three members of Essex Court Chambers appeared in this matter: David Foxton QC and Emily Wood on behalf of PAO Tatneft, instructed by Sunil Gadhia and Cameron Murphy of Cleary Gottlieb; Anton Dudnikov on behalf of Ukraine, instructed by Maria Kostytska of Winston Strawn.