The execution of awards of international arbitration courts issued not in favor of a state, in particular, the Russian Federation, remains difficult, Senior Lawyer of EVRIS Law Firm Maksym Zamikhovsky has said. “What unites Yukos, Crimea and Franz Sedelmayer? The awards of international arbitration courts to recover compensation for the actual expropriation of investments and assets of nonresident claimants from the Russian Federation, but another aspect unites all three lawsuits – the problematic recognition and enforcement of arbitral awards against the state,” he told the Kyiv-based Interfax-Ukraine news agency.
The lawyer said that, in particular, one of the complexities of execution of these awards is challenging the competence of the arbitration itself, which may entail the cancellation of its award on formal grounds.
“This is exactly what happened in the Yukos case and, probably, will be undertaken by the Russian Federation in a dispute with the owners of Crimean assets,” he said.
Zamikhovsky said that since the basis for applying to arbitration court is the relevant bilateral agreement between states or an international treaty, the Russian Federation uses a different interpretation of the terms “foreign investment”, trying to prove the absence of this element.
“For example, in the Yukos case the thesis of the internal nature of the dispute applied, since the beneficiaries of the plaintiffs are citizens of the Russian Federation. As for the Crimean assets, the Russian Federation does not recognize foreign investments, believing that they were committed by residents of Ukraine and on its territory.
“The fact of the subsequent expropriation of the assets of the Russian side in this case is silent,” he said.
At the same time, the lawyer said that the second, more large-scale obstacle is the concept of sovereign immunity, according to which recovery from the state without its consent is not allowed. However, immunity does not apply to disputes in which the state acts as a “private person” (jure gestionis), as well as cases where there is consent to its withdrawal.
“The question whether the ratification of the international treaty on investment protection is consent to possible enforcement of arbitration awards, due to violation of its terms, remains controversial. The answer to it will either fill the arbitration awards with real force, or make them no more than a beautiful declaration,” the lawyer said.