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International Arbitration Forum

Everest Estate LLC et al. v. The Russian Federation

Case summary

At a glance

Parties
Everest Estate LLC and 17 other Ukrainian companies, and one Ukrainian individual ("Everest c.s."), v. the Russian Federation
Case no.
PCA Case No. 2015-36
Forum and rules
Ad hoc arbitration under the UNCITRAL Arbitration Rules 1976, administered by the PCA; seat: The Hague
Treaty
Ukraine–Russia BIT of 27 November 1998
Tribunal
Dr. Andrés Rigo Sureda (Presiding Arbitrator), Prof. W. Michael Reisman, Prof. Dr. Rolf Knieper
Sector
Real estate in Crimea (resorts, hotels, apartments, land)
Outcome
Unanimous award of 2 May 2018: Russia illegally expropriated the claimants' properties in breach of Article 5 of the BIT. Russia's set-aside claim failed at the Hague Court of Appeal (2022). The Dutch Supreme Court quashed that judgment and referred the case to the Amsterdam Court of Appeal (6 December 2024).
Amount
Claimed: about USD 232 million. Awarded: about USD 129 million in compensation, interest from the expropriation dates at 12-month LIBOR plus 1%, compounded annually, the claimants' costs of USD 8,583,110.02, and the Tribunal's and PCA's costs of EUR 650,000.

The dispute

The claimants were 18 Ukrainian legal entities and one Ukrainian national. They owned real estate in Crimea: resorts, sanatoria, hotels, apartment complexes and land, including the Nautilus Complex, the Lazurny Bereg and Tavria resorts, the Admiralteisky Complex and the Solnechny Bereg Sanatorium. After Russia incorporated Crimea in March 2014, the State Council of the Republic of Crimea adopted a nationalisation decree on 30 April 2014. An amendment of 3 September 2014 added an annex, and later extensions of that annex brought the claimants' properties within the decree. The claimants argued that the Crimean authorities' acts were attributable to Russia, which had expropriated their investments without compensation in breach of Articles 2, 3 and 5 of the 1998 Ukraine–Russia BIT. Russia did not take part in the arbitration. In letters of August and September 2015 it stated that it did not recognise the tribunal's jurisdiction, because the property lay in territory that was now part of Russia. In the Dutch set-aside proceedings it also argued that the investments were not protected under the BIT, that they had been acquired through fraud, corruption and violence, that a multi-party arbitration was not allowed, that the awards breached public policy, and that the awards should be revoked because the claimants had withheld documents.

Key holdings

  1. The Tribunal unanimously upheld its jurisdiction (20 March 2017). In its unanimous award of 2 May 2018 it found that Russia had illegally expropriated the claimants in breach of Article 5 of the BIT. It awarded compensation for each property, with interest from the date of expropriation (mostly 3 September 2014), plus costs. Hague Court of Appeal judgment, ¶¶ 3.13–3.14
  2. Hague Court of Appeal (2022). Russia had not "appeared" in the arbitration: its letters returned the notices of arbitration and did not amount to even a brief statement of defence. Russia therefore kept the right to raise new jurisdictional objections in the set-aside proceedings. Judgment of 19 July 2022, ¶ 5.2.7
  3. Hague Court of Appeal (2022). Russia's legality objection was not substantiated with enough concrete facts for any property, so it raised no well-founded doubt that the investments were lawful. Article 9 of the BIT allows several investors to bring their claims together. The revision claim was time-barred. The court dismissed all of Russia's claims. Judgment of 19 July 2022, ¶¶ 5.8.45, 5.9.4, 5.13.3, 5.15.1
  4. Dutch Supreme Court. The Court of Appeal correctly applied Article 31 of the Vienna Convention when it held that "territory" in Article 1(4) of the BIT covers territory over which a State exercises jurisdiction and effective control, so it includes Crimea. The claim that the arbitrators had ruled on sovereignty over Crimea therefore also failed. Judgment of 6 December 2024, ¶¶ 3.2.2–3.3
  5. Dutch Supreme Court. The claimants bear the burden of alleging and proving that a valid arbitration agreement exists, including that the investments were legal. The Court of Appeal's findings on several properties were incomprehensible, insufficiently reasoned or applied the wrong standard: Lazurny Bereg, Tavria, Solnechny Bereg, Nautilus, Admiralteisky, and the Fiesta Complex / Broadcasting Company Zhisa. Its reasons for holding the revision claim time-barred were also insufficient. The judgment was quashed and the case referred to the Amsterdam Court of Appeal. Judgment of 6 December 2024, ¶¶ 3.4.2, 3.5.1–3.5.10, 3.8.2, Decision
  6. Dutch Supreme Court. The claimants' conditional cross-appeal failed. The Court of Appeal was entitled to hold that letters whose main message was that Russia would not take part were not an appearance under Article 1052(2) of the Dutch Code of Civil Procedure. Judgment of 6 December 2024, ¶ 4.6
  7. Ukrainian Supreme Court (2019). It upheld recognition and enforcement in Ukraine. By agreeing in Article 9 of the BIT to arbitration and to final and binding awards, Russia waived immunity from suit, from interim measures and from enforcement. It narrowed the interim measures to attachment of shares and property belonging to Russia itself. Judgment of 25 January 2019, ¶¶ 78, 119–123
  8. Ukrainian Supreme Court (2022). VEB.RF was the legal owner of 99.7726% of the shares in PJSC Prominvestbank. But it was in substance an organ and alter ego of Russia, so its shares could lawfully be enforced against for Russia's debts under the award. The court upheld the first-instance judgment rejecting VEB.RF's challenge to the auction. Judgment of 20 July 2022, ¶¶ 84–88, 111–120, 200

Procedural history

  1. 19 June 2015The claimants serve a Notice of Arbitration under the BIT and appoint W. Michael Reisman.
  2. 27 October 2015Tribunal constituted. Rolf Knieper is appointed by the appointing authority, Michael Hwang, and the co-arbitrators choose Andrés Rigo Sureda as presiding arbitrator. The Hague is the seat, and the proceedings are bifurcated.
  3. 20 March 2017Unanimous Decision on Jurisdiction, after a hearing held in New York on 15 December 2016.
  4. 2 May 2018Unanimous Award on the Merits, after a hearing held on 5–6 October 2017: illegal expropriation; about USD 129 million plus interest and costs.
  5. 25 September 2018Kyiv Court of Appeal recognises the award and grants leave to enforce it in Ukraine.
  6. 25 January 2019Ukrainian Supreme Court upholds recognition and narrows the interim attachment of Russian-owned bank shares.
  7. 11 June 2019Hague Court of Appeal refuses Russia's request to suspend enforcement and its request for security.
  8. 19 July 2022Hague Court of Appeal dismisses Russia's set-aside and revision claims.
  9. 20 July 2022Ukrainian Supreme Court upholds the enforcement sale of the Prominvestbank shares held by VEB.RF.
  10. 18 August 2022Dutch Court of Discipline upholds a complaint against the Hague Dean's refusal to assign a lawyer for cassation appeals in five related proceedings.
  11. 12 January 2024Advocate General Drijber advises the Supreme Court to quash the 2022 judgment and refer the case.
  12. 6 December 2024Dutch Supreme Court quashes the Hague Court of Appeal's judgment and refers the case to the Amsterdam Court of Appeal.

Tribunal, counsel and experts

Decided by
For the claimant
M. van de Hel-Koedoot · G.J. Meijer · F.E. Vermeulen
For the respondent
R.S. Meijer · M.E. Koppenol-Laforce · R.R. Verkerk
For other participants
Kokolskyi S.I. · Hapon V.S. · Volkova L.M. · Denysenko Oleksandr Mykhailovych · Pohruzhalska K.V. · Pozychaniuk K.I.

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Keywords

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

Case ID
PCA Case No. 2015-36
Economic sector
Treaty
Russian Federation - Ukraine BIT
Documents
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