Client Alerts

Dutch Court of Appeal reinstates USD 50 billion Yukos awards

Volterra Fietta Client Alert
24 March 2020

On 18 February 2020, The Hague Court of Appeal reinstated three landmark arbitral awards ordering the Russian Federation to pay approximately USD 50 billion in total in damages to three former shareholders of Yukos Oil Company.

This decision of the Dutch Appeal Court revives the largest compensation awards ever issued in investment treaty arbitration.  It also provides a valuable ruling on the provisional application of the Energy Charter Treaty (the “ECT”), including with regard to Russia, and with regard to provisional application under customary international law generally.

The decision of the Dutch Appeal Court is available here (in Dutch).  A short press release by the Dutch judiciary on the decision can be found here (in English).  Russia has announced that it will appeal the decision to the Dutch Supreme Court.


Yukos used to be one of the largest oil and gas companies in the world.  In 2014, in three parallel arbitral awards, an arbitral tribunal held that Russia had expropriated the Claimants’ majority interest in Yukos in violation of the ECT.  It therefore ordered Russia to pay an unprecedented USD 50 billion in compensation (the “2014 Awards”).

Notably, Russia had signed but never ratified the ECT.  Therefore, the tribunal’s finding that it had jurisdiction over Russia, embodied in interim awards on jurisdiction and admissibility (the “2009 Interim Awards”), was necessarily based on the ECT’s provisional application clause found in Article 45(1) of the ECT.

The tribunal’s finding that it had jurisdiction pursuant to Article 45(1) of the ECT, together with certain other jurisdictional findings, then became the subject of Dutch court proceedings.  In 2014, Russia initiated proceedings before the District Court of The Hague to set aside the 2009 Interim Awards and the 2014 Awards, including on the ground that the tribunal was not entitled to assert jurisdiction because Russia had never ratified the ECT.  In 2016, the District Court of The Hague agreed with Russia on this issue, setting aside the 2009 Interim Awards and the 2014 Awards on the basis that the tribunal did not have jurisdiction under the ECT’s provisional application clause.  The Claimants appealed that decision to the Dutch Appeal Court, which considered the jurisdictional issue de novo.

Key issue

Where a State has signed but not ratified the ECT and has not declared pursuant to Article 45(2) that it does not accept the ECT’s provisional application, each provision of the ECT applies provisionally to that State, unless such application of a provision is inconsistent with that State’s domestic law regarding provisional treaty application of that type or category of treaty provision.

Overturning the lower court’s finding, the Dutch Appeal Court decided that the tribunal had jurisdiction on the basis of the ECT’s investor-State arbitration clause, on the basis of Russia’s provisional application of the ECT pursuant to Article 45(1) of the ECT.

Article 45(1) of the ECT provides:  “Each signatory agrees to apply this Treaty provisionally pending its entry into force for such signatory […] to the extent that such provisional application is not inconsistent with its constitution, laws or regulations.”

According to the Dutch Appeal Court’s interpretation of Article 45(1), a signatory State must provisionally apply a provision of the ECT unless the signatory’s domestic law excludes the provisional application of that (type or category of) treaty provision.  The Court said (in English translated from the Dutch):

“the Limitation Clause must be understood to mean that a signatory State (…) is required to provisionally apply the [ECT], except to the extent that provisional application of one or more provisions of the ECT are inconsistent with national law in the sense that the laws and regulations of that contracting State excludes the provisional application of certain types or categories of treaty provisions.”

(paragraph 4.5.33 of the Dutch Appeal Court decision, unofficial translation, emphasis added).

The Dutch Appeal Court, applying the above interpretation of Article 45(1) which neither the Claimants nor Russia had argued at first instance or in the underlying arbitration proceedings but which the Claimants proposed before the Appeal Court, then found that there was no Russian legal provision prohibiting the provisional application of the ECT’s arbitration clause.  On that basis, the Court found that tribunal did have jurisdiction.

Other issues

The Hague Court of Appeal also made the following four determinations, among others:

1. The ECT protects investments in a signatory State even where the ultimate beneficial owners are nationals of that State: The Dutch Appeal Court found that the ECT or customary international law did not prohibit foreign entities from raising claims against Russia simply because some or all of their ultimate beneficial owners were Russian nationals.  It said (in English, translated from the Dutch):

“It does not follow from the text of art. 17 ECT that investments via the U-turn construction (…) fall outside the protection of the ECT.  (…) The Russian Federation has furthermore invoked a rule of customary international law which, in its opinion, means that a national is not allowed to bring an action under international law against his own State. According to the Russian Federation, this also applies to companies in which nationals of the respondent State have a controlling interest. (…)  The Court of Appeal rejects the argument that there is a rule of customary international law in the sense intended by the Russian Federation.”

(paragraphs of the Dutch Appeal Court decision, unofficial translation).

2. The ECT does not require that an investment, in order to be protected, makes an economic contribution to the host State: Russia had argued that the Claimants’ investments did not fall within the ECT’s definition of investment – and were thus outside the ECT’s scope – as those investments, being circular, had made no net economic contribution to Russia. The Dutch Appeal Court, however, rejected this argument, at least in relation to non-ICSID proceedings.  It said (in English, translated from the Dutch):

“[T]here may be a rule of unwritten law that an investment within the meaning of the ICSID can only exist if the investor makes an economic contribution to the host country. This in no way implies the existence of an internationally recognized principle of investment law, which means that each investment treaty only protects investments that make an economic contribution to the host State, whether or not the treaty contains a definition of the term investment.”

(paragraph of the Dutch Appeal Court decision, unofficial translation).

3. The ECT’s tax carve-out does not affect the tribunal’s jurisdiction: The Dutch Appeal Court found that the ECT’s tax carve-out (Article 21), which excludes bona fide tax measures from the ECT’s scope, did not affect the jurisdiction of the tribunal. Further, it considered that even if this carve-out were to impact a tribunal’s jurisdiction, it would be for that tribunal to judge the bona fide or mala fide nature of a tax measure in question without reference to the tax authorities involved.

4. The role of the tribunal’s assistant: The Dutch Appeal Court rejected Russia’s plea to set aside the 2014 Awards in light of the contribution made by the assistant of the tribunal to the 2014 Awards. The Court considered that, even if this assistant had drafted sections of the 2014 Awards, this did not imply that the tribunal was wrongly constituted or acted outside its mandate.

Next steps

Russia has indicated that it will appeal the Dutch Appeal Court’s decision to the Dutch Supreme Court.

The Dutch Appeal Court’s decision and possibly the 2014 Awards are provisionally enforceable irrespective of any appeal to the Dutch Supreme Court.  The Claimants likely will seek enforcement in various jurisdictions.  This will raise several issues of public international law, most notably in relation to sovereign immunity.

The Dutch Supreme Court is a Court of cassation.  As such, it will only determine whether the Dutch Appeal Court interpreted and applied the law correctly.  The Dutch Supreme Court will face complex questions of public international law, in particular pertaining to the interpretation of the ECT and international investment law.  A first indication of how the Dutch Supreme Court may rule will be the Dutch Advocate General’s advisory opinion on the case.

For further information, please contact Graham Coop (, Robert Volterra ( or Florentine Vos (