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The Swiss Federal Tribunal rejected Russia's petition for appealing decisions on jurisdiction and ruled to recover from Russia legal costs and compensation to Ukrainian companies worth CHF 550,000.
Ukraine's largest oil producer, Ukrnafta, and 11 other Ukrainian companies secured a significant victory over the Russian Federation in the Swiss Federal Supreme Court in proceedings related to the annexation of Crimea.
The decision taken on October 16, 2018, after a rare public hearing confirms the authority of international arbitration courts to satisfy claims of Russia's liability for violations of international law on the Crimean peninsula.
The decision is likely to influence legal proceedings initiated by other Ukrainian companies against Russia due to unlawful seizure of Ukrainian property in Crimea.
By its decision, the Supreme Court of Switzerland has refused the Russian Federation to appeal against the two earlier issued arbitral awards, which confirmed the right of Ukrainian companies to sue Russia in relation to their investments in Crimea. These two decisions were taken in the cases of PJSC Ukrnafta against the Russian Federation and Stabil LLC and others against the Russian Federation.
The lawsuits were filed due to the seizure of two gas stations networks in Crimea by representatives of Russia and the subsequent nationalization by the so-called "State Council of Crimea" after the Russian invasion and annexation of the territory of Crimea in 2014.
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In 2015, Ukrnafta and the plaintiffs in the Stabil case filed claims against Russia with an international arbitration court, citing Russia's breach of the 1998 Russian-Ukrainian investment agreement. Both arbitrations were administered by the Permanent Court of Arbitration at The Hague. Russia did not recognize jurisdiction of the arbitral tribunal and refused to participate in arbitral proceedings.
But in June 2017, the composition of the arbitration decided it was authorized to consider both claims in accordance with the Russian-Ukrainian agreement, despite Russia's refusal to participate in proceedings. The court ruled Russia was responsible under the Ukrainian-Russian treaty for the seizure of Ukrainian investments made in the territory of Crimea before the annexation.
The decisions of the arbitrators on jurisdiction in these two cases were the fourth and fifth in a row arbitral decisions on jurisdiction rendered against the Russian Federation in relation to the annexed Crimea and are the first decisions, whose appeal was considered by the court. In all five arbitrations in which written decisions on jurisdiction had been made, the arbitrators confirmed the competence to consider claims against Russia filed by Ukrainian investors, whose investments in Crimea were expropriated after the Russian seizure of the territory in 2014. These five decisions have for the first time proclaimed that a bilateral investment agreement applies to the actions of the occupation authorities in a territory that the international community recognizes as illegally annexed.
The proceedings in said cases were held in Geneva, and after the adoption of jurisdictional decisions, Russia appealed to the Swiss court with a petition for their cancellation. Now the Swiss Federal Tribunal ruled against Russia and concluded that the arbitration decisions were legitimate.
Accordingly, the Swiss Federal Tribunal rejected Russia's petition for appealing decisions on jurisdiction and ruled to recover from Russia legal costs and compensation to Ukrainian companies for their legal costs in the appeal process worth CHF 550,000. The arbitration proceedings will continue. It is expected in the near future that the arbitral tribunals will make their final decisions on the merits of claims of Ukrainian Ukrnafta and Stabil against Russia for expropriating their assets worth over $100 million.
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To date, at least eight arbitration claims against the Russian Federation are being considered due to its actions in Crimea, but so far, only one of them has seen a final decision on merits. On May 2, 2018, the arbitration tribunal in The Hague, the Netherlands, in the Everest Estate case against the Russian Federation, ruled to recover from Russia in favor of Ukrainian investors $159 million for the confiscation of their real estate in Crimea. The decision is currently subject to enforcement proceedings in Ukraine.
Two Swiss arbitrations in which decisions on jurisdiction were made in Geneva: PTS case No. 2015-34, PJSC Ukrnafta v. Russia; as well as PTS case No. 2015-35, Stabil LLC and others v. the Russian Federation. Decisions of the Swiss Federal Tribunal: Urteile vom 16 Oktober 2018 (4A_396 / 2017, 4A_398 / 2017). The decision on the merits of May 2, 2018 was made in The Hague in the case of Everest Estate LLC v. The Russian Federation, PTS case No. 2015-36.
The plaintiffs in all three international arbitrations were represented by Hughes Hubbard & Reed LLP, a law firm from Washington, DC, USA and Paris, France. During the process of appealing Swiss arbitral awards in the Swiss Supreme Court, the Ukrainian claimants were represented by Lalive from Zurich and Geneva.