Russian Federation v. Everest Estate LLC and others

At a glance

Parties

Russian Federation (applicant) v. Everest Estate LLC and 18 other Ukrainian companies and one individual (Everest c.s.)

Case no.

Gerechtshof Den Haag, No. 200.250.714/01 (ECLI:NL:GHDHA:2019:1452)

Court

Court of Appeal of The Hague (civil division): M.M. Olthof, D.A. Schreuder, P. Glazener

Underlying award(s)

PCA arbitration under the Russia–Ukraine BIT, seated in The Hague: Decision on Jurisdiction of 20 March 2017 and Decision on the Merits of 2 May 2018 (tribunal: A.R. Sureda (President), W.M. Reisman, R. Knieper)

Treaty

Russia–Ukraine BIT of 27 November 1998

Sector

Real estate and resorts in Crimea

Outcome

Russia's request to suspend enforcement of the awards, and its alternative request for security, were refused (11 June 2019).

Amount

Russia was ordered to pay costs of EUR 714 (court fee) and EUR 3,222 (counsel's fees), plus EUR 157 in post-judgment fees (EUR 82 more if served).

The dispute

Everest Estate LLC and other Ukrainian companies, together with one Ukrainian individual, claimed that their property in Crimea was expropriated without compensation after Russia annexed Crimea in March 2014. On 19 June 2015 they started arbitration at the PCA under the 1998 Russia–Ukraine BIT. Russia refused to take part and objected to jurisdiction. The tribunal, seated in The Hague, upheld its jurisdiction on 20 March 2017 and largely granted the claims on 2 May 2018. Russia then sued in the Court of Appeal of The Hague to set aside and revoke the awards. In the separate proceeding summarised here, it asked the court under Article 1066(2) of the Dutch Code of Civil Procedure (Rv) to suspend enforcement of the awards, which had begun in Ukraine, or in the alternative to order security. Russia argued that there was no valid arbitration agreement, for six reasons, and that the investments had been obtained by fraud and corruption. Everest c.s. contested the court's jurisdiction to suspend enforcement taking place abroad.

Key holdings

1. The court that hears the setting-aside claim has jurisdiction to suspend enforcement under Article 1066(2) Rv even though no enforcement is pending in the Netherlands. Articles V(1)(e) and VI of the New York Convention and Article 36 of the UNCITRAL Model Law distinguish suspension of an award by the court of the seat from adjournment by the enforcement court. They do not limit suspension to enforcement in the seat country. ¶¶ 4.5–4.9
2. The test is how likely the setting-aside or revocation claim is to succeed, weighed against the parties' interests, the irreversible effects of enforcement and the risk of not recovering payments. At this stage the court reviews the setting-aside grounds with restraint. ¶¶ 5.1–5.2
3. Russia's objections on territory, investment and investor do not have a high chance of success. The situation is unusual and both sides filed opposing expert opinions. At least five arbitral tribunals in seven cases, and the Swiss Federal Supreme Court, have rejected the first two objections. ¶ 6.3
4. The illegality objection (fraud, corruption and violence) largely does not concern Everest c.s. or the assets in dispute. Even if proven, it would at most lead to partial annulment or remission to the tribunal, not annulment of the whole award. Article 10 of the BIT, on disputes between the two States, does not apply to this investor-State dispute, and the awards make no ruling on Crimea's status. Article 9 allows several investors to bring claims together. ¶¶ 6.5–6.9
5. Setting-aside grounds that the suspension request only referred to in general terms are disregarded. The revocation claim for fraud appears to be time-barred under Article 1068(2) Rv: Russia had received all the documents during the arbitration, so it has not shown that it could not have discovered the fraud then. ¶¶ 7.3, 8.3–8.4
6. The balance of interests does not favour suspension or security. The attachments have been partly lifted, no other enforcement proceeding has been shown, and Russia holds property of Everest c.s. that it can sell. Suspension and security are refused, and Everest's conditional request for security lapses. Russia must pay ordinary costs; actual costs are not awarded. ¶¶ 9.2–11.3; Decision

Procedural history

1. 19 June 2015Everest c.s. file a request for arbitration with the PCA under the BIT.
2. 12 August 2015Russia informs the PCA, by letter (with a cover letter of 15 September 2015), that it considers any tribunal to lack jurisdiction.
3. 20 March 2017Decision on Jurisdiction: the tribunal holds that it has jurisdiction.
4. 2 May 2018Decision on the Merits: the claims are largely granted.
5. 29 August 2018Russia summons Everest c.s. before the Court of Appeal of The Hague to set aside and revoke the awards.
6. 4 December 2018Russia files its request to suspend enforcement of the awards.
7. 9 April 2019Oral hearing on the request.
8. 11 June 2019The Court of Appeal refuses suspension and security.

Tribunal, counsel and experts

Decided by

• M.M. Olthof Judge, Gerechtshof Den Haag
• D.A. Schreuder Judge, Gerechtshof Den Haag
• P. Glazener Judge, Gerechtshof Den Haag

For the claimant

M. van de Hel-Koedoot · G.J. Meijer

For the respondent

R.S. Meijer · M.E. Koppenol-Laforce · R.R. Verkerk

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Keywords

• Crimea
• Russia–Ukraine BIT
• suspension of enforcement
• Article 1066 Rv
• set-aside
• revocation
• New York Convention Article VI
• New York Convention Article V(1)(e)
• security
• annexation
• expropriation
• territorial scope
• illegality of investment
• fraud
• mass claims
• Lazurny Bereg
• Permanent Court of Arbitration

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