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International Arbitration Forum

Russian Fund v. Lithuania

Case summary

At a glance

Parties
The Fund for Protection of Investors' Rights in Foreign States (Russia) v. the Republic of Lithuania
Forum and rules
Ad hoc arbitration under the UNCITRAL Arbitration Rules; related US court proceedings under 28 U.S.C. §1782
Treaty
Russia–Lithuania BIT (Agreement on the Promotion and Reciprocal Protection of the Investments), Article 10
Court
Supreme Court of the United States (Nos. 21–401 and 21–518, consolidated); opinion by Justice Barrett for a unanimous Court
Sector
Banking (AB bankas SNORAS)
Outcome
The US Supreme Court held on 13 June 2022 that the ad hoc treaty panel is not a "foreign or international tribunal" under §1782, so the Fund could not obtain the discovery it sought. According to Lithuania's press release, the arbitral tribunal refused on 1 July 2022 to hear the claim and ordered the Fund to pay costs.
Amount
Damages claimed are not stated in the published documents. The Fund was ordered to pay Lithuania's costs of the proceedings, with interest.

The dispute

The Fund for Protection of Investors' Rights in Foreign States is a Russian corporation. It said it was the assignee and successor of Vladimir Antonov, a Russian investor and former shareholder of AB bankas SNORAS (Snoras), a Lithuanian bank. In 2011 Lithuania's central bank nationalized Snoras and appointed Simon Freakley as temporary administrator. Lithuanian authorities then started bankruptcy proceedings and declared the bank insolvent. In April 2019 the Fund started an ad hoc UNCITRAL arbitration under the Russia–Lithuania BIT, claiming that Lithuania had expropriated the investment. To support the arbitration, the Fund applied to a US federal court under 28 U.S.C. §1782 for discovery from Freakley and AlixPartners, LLP. They argued that the ad hoc panel was a private body and not a "foreign or international tribunal" under the statute.

Key holdings

  1. Section 1782 covers only governmental or intergovernmental adjudicative bodies. A "foreign tribunal" exercises governmental authority conferred by one nation. An "international tribunal" exercises governmental authority conferred by two or more nations. Private adjudicatory bodies fall outside the statute. Slip op., p. 11
  2. The test is whether Russia and Lithuania intended to give governmental authority to an ad hoc panel formed under the treaty. A State on one side of the dispute and an arbitration option written into a treaty are not decisive in themselves. Slip op., pp. 12–13
  3. The ad hoc UNCITRAL panel under Article 10 is not governmental. The treaty does not create the panel. The panel works independently of both States, its members have no official affiliation, it receives no government funding, and its proceedings are confidential. Its authority comes from the consent of Lithuania and the Fund, as in private arbitration. Article 11, on State-to-State disputes, shows a higher level of government involvement by contrast. Slip op., pp. 13–15 and n. 4
  4. The Fund relied on the I'm Alone commission and the United States–Germany Mixed Claims Commission. These analogies are not decisive: the treaties behind those bodies provided for each State's involvement in forming them and, for the Mixed Claims Commission, for its funding. The Second Circuit's judgment in No. 21–518 is reversed. Slip op., pp. 15–17
  5. According to Lithuania's press release, the tribunal issued a final decision on 1 July 2022 refusing to hear the Fund's claim and ordered the Fund to pay the costs of the proceedings with interest. Lithuania states that all its litigation costs were reimbursed. The press release does not give the tribunal's reasons. Press release, p. 1

Procedural history

  1. 2011Lithuania takes over the Snoras shares for public needs and appoints Simon Freakley as temporary administrator.
  2. 29 April 2019The Fund files its Notice of Arbitration under the Russia–Lithuania BIT.
  3. 18 December 2019The tribunal issues an order on Lithuania's request about the Fund's §1782 application.
  4. 2021The District Court for the Southern District of New York grants the Fund's §1782 discovery request, and the Second Circuit affirms (5 F. 4th 216).
  5. 23 March 2022Oral argument before the US Supreme Court, in a case consolidated with ZF Automotive v. Luxshare.
  6. 13 June 2022The US Supreme Court reverses the Second Circuit: the ad hoc panel is not a §1782 tribunal.
  7. 1 July 2022Final decision of the arbitral tribunal: it refuses to hear the claim and orders the Fund to pay costs with interest.
  8. 13 July 2022Lithuania's Ministry of Finance announces the outcome in a press release.

Tribunal, counsel and experts

For the respondent
DLA Piper LLP (US) · Ellex Valiunas and partners

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Keywords

Summary generated with AI from the published documents — refer to the award for the authoritative text.

Country
Treaty
Lithuania - Russian Federation BIT (1999)
Documents