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International Arbitration Forum

Volga-Dnepr Airlines LLC v. Canada

Case summary

At a glance

Parties
Volga-Dnepr Airlines LLC v. Government of Canada
Case no.
PCA Case No. 2025-09
Forum and rules
Ad hoc arbitration under the UNCITRAL Arbitration Rules 1976, administered by the PCA; place of arbitration Singapore
Treaty
Agreement between Canada and the Union of Soviet Socialist Republics for the Promotion and Reciprocal Protection of Investments (Canada–USSR BIT)
Tribunal
Professor Lawrence Boo (President), Professor Georges Affaki, Ms. Jean E. Kalicki
Sector
Air transportation; aircraft leasing
Outcome
Procedural Order No. 3 (9 August 2025) bifurcated the proceedings: Canada's objections on standing, on the existence of an investment and on the MFN claim will be heard first. Liability and quantum follow in a second phase.

The dispute

Volga-Dnepr Airlines LLC brought claims against Canada under the Canada–USSR BIT over its air transportation business to and from Canada. The claims include an aircraft that the Claimant leased and that remained in Canada until it was seized. The Claimant says its investment is a unity of assets, contracts and know-how, including the Aircraft, a License and an FAOC, built up over 25 years of operations in Canada. It also invokes the BIT's most-favoured-nation clause to import two protections from the 2018 Canada–Moldova BIT: Article 8(3) on Entry of Personnel and Article 12 on Transparency. Canada objects that the Claimant, as lessee, has no standing to claim for the Aircraft owned by the lessor. It also objects that the Claimant has no qualifying investment under Article I(b) of the BIT, and that the MFN clause cannot import substantive protections from other treaties. Canada asked that these objections be heard in a preliminary phase.

Key holdings

  1. The Tribunal did not decide whether Article 21(4) of the UNCITRAL Rules 1976 creates a presumption in favour of bifurcation. Any such presumption is limited, because the Rules let a tribunal defer jurisdictional pleas to the final award. PO3 ¶ 26
  2. None of Canada's three objections is frivolous or vexatious. The ratione materiae objection, if upheld, would dispose of the whole case, and the ratione personae objection may do so as well. The MFN objection on its face would not. PO3 ¶ 29
  3. The objections require serious examination of facts and evidence. These include the Claimant's economic activities in Canada over 25 years, and its rights under the lease, which is governed by the laws of the Russian Federation. These facts are sufficiently distinct from the merits issues of Canada's alleged breaches, causation and quantum, so any intertwining is likely to be limited. PO3 ¶¶ 30–32
  4. The Tribunal proposed an alternative: hearing jurisdiction and liability together and deferring quantum. The Parties could not agree on it. The Tribunal then held that the request was sufficiently made out to bifurcate two issues: the Claimant's legal standing, and whether it has an investment under Article I(b). PO3 ¶¶ 33–34
  5. The MFN objection would not by itself justify bifurcation. It will still be heard in the preliminary phase because that is more convenient and more efficient in cost and time. PO3 ¶ 35
  6. Phase 1 covers jurisdiction: standing, qualifying investment, and the MFN importation of two Canada–Moldova BIT protections. Phase 2 covers liability and quantum. The arbitration follows the bifurcated calendar annexed to PO1. The costs of the application are deferred. PO3 ¶ 36

Procedural history

  1. 8 June 2023Order Respecting the Seizure of Property Situated in Canada (listed in the case record; its text is not included here).
  2. 26 August 2024Press release on the Notice of Arbitration (listed in the case record; its text is not included here).
  3. 11 March 2025Procedural Order No. 1 sets the briefing schedule on bifurcation and two alternative timetables.
  4. 22 April 2025Canada files its Request for Bifurcation of Certain Jurisdictional Objections.
  5. 2 June 2025The Claimant files its Response opposing bifurcation and seeks its costs.
  6. 21 July 2025Oral hearing on bifurcation held via Zoom.
  7. 1–4 August 2025The Parties fail to agree on hearing jurisdiction and liability together. Canada maintains its request for bifurcation.
  8. 9 August 2025Procedural Order No. 3: the proceedings are bifurcated into a jurisdiction phase and a liability and quantum phase.

Tribunal, counsel and experts

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Keywords

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

Country
Economic sector
Treaty
Canada - Russian Federation BIT (1989)