Volga-Dnepr Airlines LLC (Russian Federation) v. Canada

At a glance

Parties

Volga-Dnepr Airlines LLC (Russian Federation) v. Canada

Case no.

PCA Case No. 2025-09

Forum and rules

UNCITRAL Arbitration Rules 1976; seat Singapore; the PCA acts as fundholder and as repository for published documents

Treaty

Agreement between the Government of Canada and the Government of the Union of Soviet Socialist Republics for the Promotion and Reciprocal Protection of Investments, dated 20 November 1989 (Canada–USSR BIT)

Tribunal

Professor Lawrence G S Boo (Presiding Arbitrator), Professor Georges Affaki, Ms Jean E. Kalicki

Sector

Air transportation; leased aircraft

Outcome

Pending. On 9 August 2025 the Tribunal bifurcated the proceedings and will decide Canada's jurisdictional objections, including the MFN objection, in a first phase. The published documents are procedural only.

The dispute

Volga-Dnepr Airlines LLC, a Russian airline, began this arbitration against Canada on 23 August 2024 under the Canada–USSR BIT. It says it operated air transportation services to and from Canada for 25 years. Its claimed investment consists of a leased Aircraft that was seized in Canada, a License and an FAOC, and its contracts and know-how. The Claimant refers to the sanctions Canada has imposed on Russian entities since 2014 and relies on the BIT's most-favoured-nation clause to import Article 8(3) (Entry of Personnel) and Article 12 (Transparency) of the Canada–Moldova BIT of 12 June 2018. Canada objects that the Claimant, as lessee, has no standing to claim for the Aircraft owned by the lessor. It also says 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.

Key holdings

1. The Tribunal did not decide whether Article 21(4) of the 1976 UNCITRAL Rules creates a presumption in favour of bifurcation. Any such presumption would be limited, because the Rules allow the Tribunal to 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 standing objection may do so as well. The MFN objection on its face would not. PO3 ¶ 29
3. The jurisdictional objections need close examination of facts: the Claimant's activities in Canada over 25 years, and its rights under the lease, which is governed by Russian law. These facts are still sufficiently distinct from the merits questions of breach, causation and quantum, so any overlap is likely to be limited and bifurcation would aid efficiency. PO3 ¶¶ 30–32
4. Bifurcation granted. Phase 1 covers the Claimant's standing, whether it has a qualifying investment under Article I(b), and whether the MFN clause allows it to import two protections from the Canada–Moldova BIT. Phase 2 covers liability and quantum. The MFN objection would not justify bifurcation on its own, but it is heard in Phase 1 for efficiency. The costs of the application are deferred. PO3 ¶¶ 34–36
5. HKIAC was first named as administrative institution. It could not assure that funds involving an OFAC-sanctioned party would be transferred, so the Tribunal designated the PCA as fundholder, at an annual fee of EUR 3,000. PO1-A ¶¶ 9–11; Annex II ¶ 5
6. Procedural orders, decisions and awards are to be made public, subject to redaction of Confidential and Restricted Access Information. Supporting documents, hearing transcripts and correspondence are not to be made public. PO2 ¶¶ 4.1, 6–8

Procedural history

1. 23 August 2024Volga-Dnepr Airlines LLC initiated the arbitration against Canada under the Canada–USSR BIT and the 1976 UNCITRAL Rules.
2. 7 February and 7 March 2025Procedural conferences on the organisation of the proceedings.
3. 11 March 2025Procedural Order No. 1 set the procedural rules, fixed Singapore as the seat and set a timetable for bifurcation submissions.
4. 3 April 2025Procedural Order No. 1-A replaced HKIAC with the PCA as fundholder.
5. 22 April 2025Canada filed its Request for Bifurcation of Certain Jurisdictional Objections.
6. 2 June 2025The Claimant filed its Response opposing bifurcation.
7. 26 June 2025Procedural Order No. 2 on confidentiality and transparency.
8. 21 July 2025Hearing on bifurcation held by Zoom.
9. 9 August 2025Procedural Order No. 3 bifurcated the proceedings into a jurisdiction phase and a liability and quantum phase.

Tribunal, counsel and experts

Decided by

• Lawrence Boo President
• Georges Affaki Co-arbitrator
• Jean E. Kalicki Co-arbitrator

For the claimant

Monastyrsky, Zyuba, Stepanov & Partners

For the respondent

Trade Law Bureau, Global Affairs Canada

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Keywords

• bifurcation
• jurisdiction ratione personae
• jurisdiction ratione materiae
• definition of investment
• lessee standing
• leased aircraft
• aircraft seizure
• sanctions
• OFAC
• most-favoured-nation clause
• Canada–USSR BIT
• Canada–Moldova BIT
• Article 21(4) UNCITRAL Rules 1976
• Salini criteria
• confidentiality and transparency
• fundholder
• air transportation

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