Vasilisa Ershova and Jegor Jeršov v. Republic of Bulgaria

Case summary

At a glance

Parties: Vasilisa Ershova and Jegor Jeršov (Lithuania) v. Republic of Bulgaria
Case no.: ICSID Case No. ARB/22/29
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules 2006 (confirmed in Procedural Order No. 1)
Treaty: Energy Charter Treaty (Article 26)
Tribunal: Juan Fernández-Armesto (President), Jan Paulsson, Toby Landau
Sector: Oil and gas; energy
Outcome: Bulgaria's Rule 41(5) objection that the claims were manifestly without legal merit was dismissed on 25 July 2023, and the case proceeds. Costs were reserved.

The dispute

The claimants are the two Lithuanian children and heirs of Denis Jeršov, a Lithuanian citizen. Jeršov's companies won the 1999 privatisation tender for a majority stake in the Bulgarian energy company Petrol and later held over 95% of its shares through Petrol Holding AD (PEHOLD). The claimants allege that Bulgaria acted against Jeršov's interests. In 2001 the National Security Agency imposed a ban on him, which was overturned four years later. The State is also said to have colluded with his business partner Mitko Sabev, so that Jeršov lost control of PEHOLD, and on 2 December 2013 PEHOLD's shares in Petrol were sold at one third of their trading price. Jeršov died in 2017 without starting proceedings under the ECT. His heirs brought claims under Article 26 of the ECT, alleging breaches of Articles 10 and 13. Bulgaria objected that Jeršov never consented to arbitration, that the heirs are not "Investors" who owned or controlled an "Investment", and that the ECT does not allow claims to be brought on a deceased investor's behalf.

Key holdings

The claimants consented in writing to ICSID arbitration in their Notice of Intent of 27 April 2021. Nothing in Article 26 of the ECT prevents an investor from consenting at the same time as it seeks amicable settlement. The word "further" in Article 26(4) means consent further to the State's consent, not a later stage of consent. PO1 ¶¶ 29–34
Benabderrahmane v. Qatar does not help Bulgaria. That case arose under a different treaty, it accepted that consent may be given before the request for arbitration, and its notice of dispute was ambiguous. PO1 ¶¶ 35–39
Under Article 44 of the ICSID Convention, the date of consent is 27 April 2021, so the 2006 ICSID Arbitration Rules apply rather than the 2022 Rules. This holding is without prejudice to Bulgaria's objection that the claimants are not Investors. PO1 ¶ 40
An objection under Rule 41(5) must be established clearly and obviously, with relative ease and dispatch. It must raise a legal impediment, not a factual one, and it may go to jurisdiction or to the merits. Rule 41(5) Decision ¶¶ 56, 66
The real issue is whether heirs have standing to bring claims of an investor who died before consenting. The Tribunal called this a novel question that raises complex points of Lithuanian law and international legal principles, which need fuller argument. The claims are therefore not manifestly without legal merit, and Bulgaria's application is dismissed. Rule 41(5) Decision ¶¶ 76–79
The costs of the Rule 41(5) application are reserved for a future decision. All other requests, including the claimants' request for an immediate adverse costs order, are dismissed. Rule 41(5) Decision ¶¶ 80–81
The Tribunal refused the claimants' request to reconsider the deadline for the Counter-Memorial and kept the timetable in Annex A of Procedural Order No. 2 unchanged. PO3 ¶¶ 16–23

Procedural history

27 April 2021The claimants serve a Notice of Intent on Bulgaria, which contains their consent to ICSID arbitration.
2 November 2022Request for Arbitration filed. ICSID registers it on 11 November 2022.
4 May 2023Tribunal constituted.
30 May 2023Bulgaria files its preliminary objection under Rule 41(5).
23 June 2023First session held by videoconference.
18 July 2023Procedural Order No. 1: the 2006 ICSID Arbitration Rules apply.
25 July 2023Decision dismissing Bulgaria's Rule 41(5) objection.
22 September 2023Procedural Order No. 2 sets the procedural timetable.
13 October 2023Procedural Order No. 3 dismisses the claimants' request to reconsider the timetable.