the case of The Russian Federation, with its official seat
Moscow, the Russian Federation, v 1. Hulley Enterprises Limited, with its registered office
Nicosia, Cyprus (hereinafter referred to as “Hulley”), 2. Veteran Petroleum Limited, with its registered office
Nicosia, Cyprus (hereinafter referred to as “VPL”), 3. Yukos Universal Limited, with its registered office
Douglas, Isle of Man (hereinafter referred to as “YUL”), (hereinafter collectively referred to as "HVY") Table of contents 1.
troduction 1.1
terpretation of Article 45
troductory remarks 3.11 Ground for Cassation 2.2: Article 26 ECT 3.20 Ground for Cassation 2.3: jurisdiction of the Tribunal 3.23 Ground for Cassation 2.4: Limitation Clause 3.31 Ground for Cassation 2.5: 'not
consistent'
consistent with Russian law? 3.58 Ground for Cassation 2.7: questions referred to the ECJ for preliminary rulings? 3.60 Ground for Cassation 2.8: complaint building therefrom 3.75 Ground for Cassation 3:
terpretation of Article 1
vestment and
vestor) 3.76 Ground for Cassation 3:
troductory remarks 3.77 Ground for Cassation 3.2: 'U-turn construction' 3.84 Ground for Cassation 3.3: actual economic contribution to the economy of the host country 3.115 Ground for Cassation 3.4: 'piercing the corporate veil' 3.120 Ground for Cassation 3.5: questions referred to the ECJ for preliminary rulings regarding Article 1
terpretation of Article 1
vestments) 3.132 Ground for Cassation 4.2: existence of legality requirement 3.136 Ground for Cassation 4.3: illegal conduct 3.142 Ground for Cassation 4.4: violation of public policy 3.147 Ground for Cassation 4.5: questions referred to the ECJ for preliminary rulings regarding Article 1
troductory remarks 3.157 Ground for Cassation 5.2: mandatory nature of Article 21
troductory remarks 3.183 Grounds for Cassation 6.2.1-6.2.3: discussion of complaints 3.188 Ground for Cassation 7: lack of reasoning? 3.202 Ground for Cassation 7:
troductory remarks 3.203 Ground for Cassation 7.2: discussion of complaints 3.206 Ground for Cassation 8: catch-all complaint 3.215 Conclusion
principal appeal 3.217 4. Discussion of provisional ground for cross-appeal
cassation 4.1 5. Conclusion 5 1Introduction 1.1 The Russian Federation was ordered
arbitration proceedings to pay damages to HVY for breaching its obligations under the Energy Charter Treaty (referred to hereinafter as the “ECT”). The Russian Federation
stituted a claim with the Dutch courts to set aside the arbitral awards
question (also referred to hereinafter as the “Yukos Awards”). The District Court allowed the claim based on the lack of a valid arbitration agreement. On appeal, the Court of Appeal set aside the District Court's judgment and still rejected the Russian Federation's claims. The Russian Federation has
stituted an appeal
cassation against the judgment of the Court of Appeal. 1.2 This case is still governed by the former arbitration law, which is to say by the Fourth Book of the Dutch Code of Civil Procedure (“Arbitration”) as it applied until the implementation of the Arbitration Law Modernization Act on 1 January 2015. Unless stated otherwise, the references
this Opinion refer to the earlier law. For an
troduction to the setting aside proceedings of Articles 1064, et seq., DCCP, I refer to the opinion I submitted on the Russian Federation's application to suspend enforcement.The Supreme Court rejected this application
its decision of 4 December 2020. 1.3 A large number of the complaints concern the
terpretation of provisions of the ECT.
cassation, the Russian Federation argues that the Court of Appeal based its conclusion that the dispute between HVY and the Russian Federation is covered by the ECT on an
correct
terpretation of the relevant treaty provisions, meaning that its finding that a valid basis for arbitration exists is
correct. This concerns,
particular, the
terpretation of the terms “
vestor” and “
vestment” from the ECT and the scope of Article 45
to effect.
this
troduction, I will briefly discuss the purpose and the formation of the ECT and the options that the ECT provides for resolving
vestment disputes.
the discussion of the various parts of the principal ground for cassation, I will go on and discuss
more detail the
terpretation of the specific provisions of the ECT. 1.4 The ECT was concluded
Lisbon on 17 December 1994 with the aim of establishing cooperation
the energy sector,
particular between the Member States of the then-European Economic Community (EEC, currently the European Union) and States
Central and Eastern Europe,
cluding the present Russian Federation. This political desire had already been expressed previously
the non-binding European Energy Charter from 1991. The ECT lays down the agreements from the Energy Charter
a binding
strument. The ECT entered
to force on 16 April 1998, after having been ratified by thirty States,
cluding the Netherlands (see Article 44
formed the depositary of the ECT (Portugal) that it no longer
tended to ratify the ECT. From that moment on, the Russian Federation was no longer obliged to provisionally apply the ECT, except for the provisions relating to
vestment protection and dispute resolution
so far as these relate to
vestments already made (Article 45
terms of substance, the provisions of Part III of the ECT, pertaining to “Promotion, Protection and Treatment of
vestments”, are most relevant to this case. These provisions offer protection to
vestors who have made an
vestment
the area of one of the Contracting Parties. They cover the right to fair treatment and non-discrimination (Article 10 ECT) and protection from expropriation (Article 13 ECT). 1.6 The ECT also provides for a mechanism whereby
vestors can enforce compliance with these rights. Article 26 ECT stipulates that
vestors can submit disputes regarding alleged violations by a Contracting Party of one of the provisions of Part III of ECT to an arbitral tribunal, among other things. Article 26
ternational Centre for Settlement of
vestment Disputes (ICSID)
Washington, on the basis of the ICSID Convention, provided that both ECT Contracting Parties
question are parties to the ICSID Convention (or, if one of the ECT Contracting Parties is a party to the ICSID Convention, on the basis of the Additional Facility Rules appurtenant to that convention); b) arbitration by a sole arbitrator or ad hoc arbitral tribunal established under the Arbitration Rules of the United Nations Commission on
ternational Trade Law (UNCITRAL), which happened
the present case; c) arbitration at the Arbitration
stitute of the Stockholm Chamber of Commerce. 1.7 This means that disputes on rights under the ECT can be submitted to various arbitral tribunals. Several decisions rendered by these tribunals will be discussed
this Opinion. The question that arises is what significance must be attributed to these decisions,
respect of which I note the following
this
troduction. 1.8 According to the Vienna Convention on the Law of Treaties (referred to hereinafter as “VCLT”), arbitration case law is not a source for the
terpretation of treaties. This case law can, however, provide
sight
to the manner
which a treaty is applied
actual practice. Arbitration case law can be used to demonstrate the existence of a principle of customary
ternational law which must be taken
to account
the
terpretation of a treaty pursuant to Article 31
ternational law. 1.9 Arbitral tribunals are not bound by decisions rendered by other arbitral tribunals, because the principle of binding precedent (stare decisis) does not apply. Therefore, there may be differences between decisions – which can of course also be explained by the facts and the manner of litigation. Care must be taken to prevent drawing conclusions on the basis of a single decision or a few decisions. Also, unanimous decisions carry more weight than decisions
respect of which dissenting opinions have been written. 1.10 The ICSID Convention provides a procedural framework for the resolution of
ternational
vestment disputes between States and
vestors and does not relate to disputes between States and their own citizens. The ICSID Convention does not stipulate when an
ternational
vestment is
volved, but leaves this up to the ICSID arbitral tribunals to decide, with their decision
that regard to be based
part on the
vestment treaty (usually a bilateral
vestment treaty (BIT)) underlying the dispute. Therefore, the approach adopted by an arbitral tribunal
a case under the ICSID Convention depends on the underlying
vestment treaty. ICSID tribunals will only assume jurisdiction if the
vestment also falls within the scope of protection provided by the ICSID Convention.
practice, ICSID tribunals therefore sometimes impose more stringent requirements than the underlying
vestment treaties themselves,
particular when concerning the term “
vestment”. Those requirements may also be more stringent than those of other commercial or other arbitral tribunals which do not base their jurisdiction on the ICSID Convention. 1.11 The foregoing is relevant because the ground for cassation refers
a number of places to ICSID decisions to substantiate the assertion that a generally accepted principle of
ternational
vestment law is reflected therein (see subground 3 of the principal ground for cassation).
the assessment of this assertion, it must be considered that the ICSID Convention
some respects imposes requirements itself which may be more stringent than the requirements imposed
vestment treaties. Also, for all arbitration case law, it must always be considered whether the approach adopted therein generally applies or is based on the specific formulations of the underlying
vestment treaty. 1.12 Concluding this
troduction, I will now proceed to a presentation of the facts and the course of the proceedings and a discussion of the principal ground for cassation. 2The facts and the course of the proceedings 2.1 Briefly put, this case concerns the following. HVY are, or were, shareholders
Yukos Oil Company (referred to hereinafter as "Yukos"), an oil company based
the Russian Federation, which was declared bankrupt on 1 August 2006 and deleted from the Russian Trade Register on 21 November 2007. 2.2
2004, HVY
itiated arbitration proceedings against the Russian Federation based on Article 26 ECT. They asserted that the Russian Federation had expropriated and failed to protect their
vestments
Yukos,
violation of the ECT. HVY were seeking damages from the Russian Federation. The location of the arbitration proceedings was The Hague. 2.3 The tribunal appointed pursuant to the UNCITRAL Arbitration Rules (referred to hereinafter as the “Tribunal”) ruled on a number of preliminary defences raised by the Russian Federation,
cluding
relation to the jurisdiction of the Tribunal,
three separate
terim Awards on Jurisdiction and Admissibility of 30 November 2009 (referred to hereinafter as the “
terim Awards”).
the
terim Awards, the Tribunal rejected several arguments on jurisdiction and admissibility and decided with regard to other preliminary defences that the decision
this respect would be stayed until the merits phase of the proceedings. 2.4
three separate Final Awards of 18 July 2014, the Tribunal rejected the remaining arguments on jurisdiction and/or admissibility advanced by the Russian Federation, ruled that the Russian Federation violated its obligations under Article 13
the amount of USD 8,203,032,751 (to VPL), USD 1,846,000,687 (to YUL) and USD 39,971,834,360 (to Hulley). The Tribunal ruled, succinctly put, that by imposing a number of taxation and collection measures against Yukos, the Russian Federation
tentionally bankrupted Yukos for no purpose other than to eliminate Mr Mikhail Khodorkovsky, the Chairman of Yukos and one of its shareholders, as a potential political opponent of President Putin, and to acquire Yukos' assets. 2.5
separate summonses of 10 November 2014, the Russian Federation summoned Hulley, VPL and YUL to appear before the District Court of The Hague seeking to have the District Court set aside the
terim Awards and Final Award rendered by the Tribunal
each of their cases. These three cases were joined by the District Court based on a request from the Russian Federation. 2.6 On 20 April 2016, the District Court set aside the
terim Awards and the Final Awards
a single judgment that was rendered
the three joined cases, based on the lack of a valid arbitration agreement. HVY lodged an appeal against this judgment with the Court of Appeal
The Hague. 2.7
an
terim judgment of 11 October 2016, the Court of Appeal ordered a personal appearance of the parties, which was held on 16 January 2017. 2.8
an
terim judgment rendered on 25 September 2018, the Court of Appeal assessed several preliminary objections raised by HVY
respect of the handling of certain assertions put forward by the Russian Federation. These
cluded – to the extent still relevant at this time – the assertion by the Russian Federation that HVY committed fraud
the arbitration proceedings by submitting false statements and withholding documents (paras. 5.1-5.2). HVY objected to this,
cluding on the ground that the fraud should have been raised
separate revocation proceedings based on Article 1068 DCCP (para. 5.3(b)). 2.9 The Court of Appeal allowed HVY's objection. To that end, briefly put, the Court of Appeal held that the alleged fraud could only be raised
revocation proceedings based on Article 1068 DCCP, and could not still be raised
setting aside proceedings based on Article 1065 DCCP. Although both of these types of proceedings lead to the setting aside of the arbitral award, they are characterised by different time limits and different competent courts. Revocation proceedings may be
itiated within three months after discovery of the fraud, even if more than three months have passed since the arbitral award acquired res judicata effect. Furthermore, revocation proceedings have only one fact-finding
stance: the Court of Appeal. Both the applicable terms and this exclusive jurisdiction of the Court of Appeal would be circumvented if the alleged fraud could still be raised
the setting aside proceedings by means of an
crease of claim. Such a consequence is unacceptable (para. 5.7). 2.10 By
terim judgment of 18 December 2018, the Court of Appeal rendered a number of decisions on the further course of the proceedings. 2.11 The merits of the case were assessed by the Court of Appeal
its final judgment of 18 February 2020. 2.12 HVY's grounds for appeal
cluded those directed against the District Court's opinion that the Tribunal lacked jurisdiction because Article 26 ECT – which makes arbitration possible – is contrary to Russian law. The Court of Appeal assessed these grounds for appeal
paras. 4.4, et seq.
terpretation of the Limitation Clause 2.13 The Court of Appeal assessed whether a valid arbitration agreement had been concluded between the parties (Article 1065
terpretation of Articles 26 and 45 ECT
light of the law of the Russian Federation (para. 3.1.2). The position of the Russian Federation is, essentially, that although it signed the ECT, it never ratified that treaty. Although Article 45
consistent with its constitution, laws or regulations" (referred to hereinafter as the “Limitation Clause”). According to the Russian Federation, the arbitration provision of Article 26 ECT is contrary to the Russian Constitution and to several statutory provisions entailing that disputes of a public law nature cannot be resolved by arbitration. 2.14 HVY took the principal position that the
terpretation of Article 26 ECT is about whether the principle of provisional application is contrary to Russian law. On appeal, HVY argued
the alternative that what matters is whether provisional application of one or more provisions of the ECT cannot be reconciled with the law of a Contracting Party, not whether a specific provision of the ECT is contrary to that law (paras. 3.3.2 and 4.2.2). 2.15
paras. 4.4.3-4.4.7, the Court of Appeal held that it was entitled to base its opinion on this alternative position taken by HVY regarding the
terpretation of Article 26 ECT, regardless of the fact that this was not put forward
the arbitration proceedings, and therefore that the Tribunal did not base its jurisdiction on it. Any other opinion would make it necessary to set aside an arbitral award because the Tribunal assumed jurisdiction on erroneous grounds, even though the national court was of the opinion that the Tribunal actually had jurisdiction on other grounds. This is contrary to the principle that the national court has final say on this point. 2.16 The Court of Appeal went on to assess HVY's alternative position (paras. 4.5.8-4.5.48).
para. 4.5.48, the Court of Appeal arrived at the conclusion that the Limitation Clause must be
terpreted to mean that a signatory State that has not delivered the declaration referred to
so far as provisional application of one or more of the provisions of the ECT are contrary to its national law,
the sense that the laws or regulations of that State exclude provisional application of specific provisions or categories of provisions
a treaty. According to the Court of Appeal, provisional application of Article 26 ECT was not proven to be contrary to Russian law (para. 4.6.1). The Court of Appeal superfluously assessed whether, departing from the Russian Federation's
terpretation of the Limitation Clause, Article 26 ECT might be contrary to provisions of Russian law (paras. 4.6.2-4.7.65). The Court of Appeal answered that question
the negative. 2.17 According to the Court of Appeal, HVY's grounds for appeal are well-founded
part and cannot support the reasons given by the District Court for its opinion that no valid arbitration agreement had been concluded (para. 4.9.1). Based on the devolutive effect of the appeal, the Court of Appeal assessed whether the other assertions put forward by the Russian Federation, to argue that the Tribunal had no jurisdiction, were well-founded. This concerned the assertions pertaining to (i) the
terpretation of Article 1
vestment" and "
vestor"); (ii) the
terpretation of Article 1
vestments); and (iii) the tax measures imposed by the Russian Federation that constituted legitimate exercise of the Russian Federation's authority and that are covered by Article 21
terpretation of Article 1
vestment and
vestor) 2.18 The Russian Federation argued that the requirement of Article 26 ECT that there be an
vestment within the meaning of Article 1
vestors within the meaning of Article 1
vested was not foreign, but Russian (paras. 3.3.2 and 5.1.3). 2.19 The Court of Appeal arrived at the opinion
para. 5.1.7.3 that an
vestment within the meaning of Article 26 ECT exists when a legal person that is
corporated
accordance with the law of one Contracting Party makes an
vestment
another Contracting Party. To determine the nationality of an
vestor, it was decided to opt,
the ECT, for "the right of the country according to the laws of which the
vestor is organised". The authors of the ECT did not want to impose any further requirements on the
ternational nature of the
vestments. Therefore, the ECT does not require the
vestor to have actual ties to the country according to the laws under which it is organised (para. 5.7.1.2).
addition, Article 17 ECT does not imply that
vestments like those made by HVY fall outside the scope of protection of the ECT because they are allegedly "U-turn
vestments" (paras. 5.1.8.1., et seq.). (ii)
terpretation of Article 1
vestments) 2.20 The Court of Appeal assessed the Russian Federation's position that the ECT does not offer protection to
vestments made contrary to the law of the host country (paras. 3.2.3 and 5.1.11.1). According to the Court of Appeal, Article 1
clude any explicit legality requirement. Consequently, an
vestment is expressly not required to have been made
accordance with the law of the host country. With regard to the access to arbitration referred to
ECT, as well, the text of the ECT does not contain any limitations on this point (para. 5.1.11.5). The Court of Appeal held that the Russian Federation's reliance on Article 1
tended to collect taxes, but were more likely directed at bankrupting Yukos and removing Khodorkovsky from the political arena (paras. 5.2.15 and 5.2.16). 2.22 The Court of Appeal concluded that none of the grounds put forward by the Russian Federation to argue that there was no valid arbitration agreement could support that conclusion, meaning that there was no cause to set aside the Yukos Awards on the basis of Article 1065
paras. 6.1, et seq., went on to discuss the assertions put forward by the Russian Federation
connection with the ground for setting aside based on failure to comply with the mandate (Article 1065
the Tribunal; and (
paras. 6.1, et seq., the Court of Appeal discussed the assertion that, contrary to Article 21
any way prejudiced by this (para. 6.3.2). According to the Court of Appeal, it must be assumed that during the Tribunal's extensive hearing of the dispute, the Russian Federation submitted, or could have submitted, all of the relevant
formation that the Tribunal also could have obtained by seeking advice from the Russian tax authorities. It is difficult to imagine what additional
formation the Tribunal could have obtained from the Russian tax authorities that would have led to a different opinion about the "allocation of
come from the empty trade companies (...) to Yukos" (para. 6.3.3). 2.25 The Russian Federation also asserted that the dispute should have been submitted to the tax authorities of Cyprus and of the United Kingdom. According to the Court of Appeal, this assertion fails because Article 21
paras. 6.4.1.-6.4.27, the Court of Appeal devoted extensive attention to the Russian Federation's assertion that the Tribunal violated its mandate by awarding damages based on its own new and highly defective calculation method, which deviated from the debate between the parties and
respect of which the parties were not heard, meaning that the decision was a surprise. The Court of Appeal concluded that the decision was not a surprise (para. 6.4.23), and that the manner
which the Tribunal determined the damages did not constitute a violation of the Tribunal's mandate. (c) Decision by guesswork and exceeding the limits of the legal dispute 2.27
paras. 6.5.1-6.5.15, the Court of Appeal assessed the Russian Federation's assertion that the Tribunal's decision was based on its own speculations regarding what the Russian Federation might have done
a fictional scenario rather than on what the Russian Federation actually did. The Court of Appeal arrived at the conclusion that the Russian Federation's arguments failed and that
this respect, the Tribunal did not violate its mandate nor fail to provide valid reasons for its opinion. There is no question of a violation of public policy, either (para. 6.5.15). (d) The role played by the assistant
the Tribunal 2.28
paras. 6.6.1-6.6.15, the Court of Appeal discussed the Russian Federation's argument that the Yukos Awards should be set aside due to disproportionate
volvement of the Tribunal's assistant, Martin Valasek,
drafting those awards (para. 6.6.1). According to the Russian Federation, that
volvement violated the principle that the arbitrators must perform their assigned task personally, as a result of which the Tribunal did not adhere to its mandate (Article 1065
addition, Valasek's
volvement actually meant the
volvement of a "fourth arbitrator", as a result of which the Tribunal was composed
violation of the applicable rules (Article 1065
dependently took decisions that were part of the arbitrators' essential duties (para. 6.6.10). The fact that the Final Awards were signed by three arbitrators implies that these three rendered those awards, meaning that there had not been an even number of arbitrators (para. 6.6.13). If it were to be assumed that the Russian Federation's assertion that Valasek was only
troduced as an assistant and a contact person is correct, then it Tribunal could be said to have failed to fully
form the parties on this point about the nature of Valasek's activities. However,
the given circumstances, this would not constitute such a serious failure to comply with the mandate that it should lead to the setting aside of the arbitral awards (para. 6.6.14.2). (e) The lack of reasons 2.30
paras. 8.4.1-8.4.17, the Court of Appeal discussed the Russian Federation's reasoning that the arbitral awards were improperly reasoned (Article 1065
respect of the Russian Federation's assertion that Yukos' Mordovian companies were sham companies. The Tribunal arrived at the final conclusion that no evidence of this could be found
the "quite substantial case file", referring to the case file that had been submitted
the tax proceedings conducted by Yukos
Russia. According to the Court of Appeal, this concerned the lack of evidence
that file, and the numerous references made by the Russian Federation to evidence it submitted
to those proceedings were irrelevant for that reason (para. 8.4.13). The Court of Appeal arrived at the conclusion that the complaint regarding the reasons for the opinion that there was no evidence submitted demonstrating that the Mordovian companies were sham companies, necessarily failed (para. 8.4.17). 2.31 The Court of Appeal arrived at the conclusion that HVY's grounds for appeal succeeded at least
part, and that the Tribunal had jurisdiction to hear and decide on HVY's claims. The other grounds for setting aside raised by the Russian Federation could not lead to the setting aside of the Yukos Awards (para. 10.1). The Court of Appeal set aside the District Court's judgment and, readjudicating the matter, dismissed the Russian Federation's claims (para. 10.3 and operative part). 2.32 The Russian Federation lodged a timely appeal
cassation against the
terim judgment of 25 September 2018 and the final judgment of 18 February 2020, referred to hereinafter as the
terim judgment and the final judgment, respectively. HVY asserted a defence and lodged a conditional cross-appeal
cassation. The parties submitted written explanations and presented oral arguments on 5 February 2021, followed by a reply and a rejoinder
writing. 2.33 Within the context of its appeal
cassation, the Russian Federation filed an application seeking (among other things) suspension of the enforcement of the Yukos Awards and an order for HVY to provide security.
a decision dated 25 September 2020, the Supreme Court ruled that it had jurisdiction to take cognisance of this application. The Supreme Court rejected the Russian Federation's application
a decision dated 4 December 2020. 3Discussion of the principal ground for cassation 3.1 The principal ground for cassation comprises eight grounds for cassation, which are divided
to several subgrounds. Ground for Cassation 1: violation of public procedural policy / exclusivity Article 1068 DCCP 3.2 Ground for Cassation 1 is directed against the Court of Appeal's judgment
paras. 5.6-5.8 of the
terim judgment and para. 9.7 of the final judgment. Put succinctly, the Court of Appeal found therein that the Russian Federation's objections regarding HVY's alleged fraud
the arbitration proceedings could only be addressed by means of a claim for revocation based on Article 1068 DCCP. The complaints entail that,
doing so, the Court of Appeal failed to appreciate that such fraud should also be able to lead to the setting aside of the arbitral award on the basis of Article 1065
the discussion of this ground for cassation, I note the following first and foremost. There is no question that public policy has been violated whenever an arbitral award is the result of fraud or deceit perpetrated by one of the parties to the proceedings. After all, there has been no due process
such case. Sanders therefore correctly writes that the grounds for revocation laid down
“as many violations of public policy". 3.4 Although the legislature has provided for separate revocation proceedings
which fraud can be raised, this does not mean that these proceedings are to be followed exclusively. The legislative history does not dictate
any way whatsoever that the legislature, by providing for those separate proceedings, wanted to limit the possibilities to address fraud. After all, the claim seeking revocation arises from general civil procedure and might overlap the ordinary legal remedies, such as the possibility to lodge an appeal. The revocation of a court decision (Article 382 DCCP) is an extraordinary legal remedy through which a culpable act of the other party, such as fraud, can be addressed. If an ordinary legal remedy is still available, the ordinary legal remedy takes precedence.
deed, the claim seeking revocation can only be
stituted if the relevant judgment has acquired res judicata effect and has done so within three months after the discovery of the fraud (Article 383
ordinary civil proceedings, therefore, there are options for addressing that fraud other than through a claim seeking revocation. The added value presented by the revocation proceedings is that they give the
jured party the opportunity to present the fraud to the courts after the term for the ordinary legal remedies has expired. Revocation thus constitutes a supplement to the existing ordinary legal remedies. 3.5 There are no
dications that the legislature
tended for the revocation proceedings
arbitration law (Article 1068 DCCP) to be the exclusive remedy for fraud
the proceedings. This cannot be
ferred from the fact that the legislature set up separate proceedings for that purpose, because
ordinary civil proceedings the claim seeking revocation co-exists with other legal remedies. The fact that there is only one
stance
the revocation proceedings also does not
dicate that those proceedings are the only proceedings to be followed. The legislative history does not provide any points of reference for this. It can rightly be argued that the party deciding to present the fraud to the court
the setting aside proceedings thereby “obtains” an additional
stance. For this to happen, though, the party must put forward the fraud as a ground
the setting aside summons right away (Article 1064
This means that the risk identified by the Court of Appeal, of the fraud being presented
the setting aside proceedings through a change of claim more than three months after its discovery, is not realistic. After all, the rule of Article 1064
para. 5.7 that fraud can only be addressed
revocation proceedings under Article 1068 DCCP, because otherwise the term stipulated therein could be circumvented, among other things. It follows from the foregoing that this assumption is,
general,
correct. This does not mean, however, that the Court of Appeal's final decision is also
correct.
deed, according to the Russian Federation, the alleged fraud was discovered after the District Court rendered its judgment on 20 April 2016. It has been established as fact that this was first relied upon
the defence on appeal. The rule of Article 1064
the summons on pain of forfeiting the right to do so entails that the alleged fraud could no longer be advanced
the setting aside proceedings already pending. After all, this should have been done
the
itiating summons, on pain of forfeiting the right to do so. For this reason, the alleged fraud, as the Court of Appeal found, could only be addressed
revocation proceedings and could not be advanced through a defence on appeal
the setting aside proceedings. 3.8 Ground for Cassation 1 fails on account of the foregoing. Ground for Cassation 2:
terpretation of Article 45
terpretation of Article 45
terpretation is contained
paras. 4.5.1 to 4.5.48 of the final judgment. The ground for cassation is divided
to eight subgrounds. 3.10 The main argument of Ground for Cassation 2 is that there is no valid arbitration agreement as required by Article 1065
so far as such provisional application is not contrary to their domestic legal order. The Russian Federation's view is that the Court of Appeal applied an
correct standard
this respect by ruling that the point was not whether Article 26 ECT as such was contrary to Russian law, but whether the provisional application of Article 26 ECT was contrary to that law.
troductory remarks 3.11 Before discussing the complaints of Ground for Cassation 2, I would like to make a few comments about the provisional application of treaties
general and about the provisional application of the ECT
particular. The provisional application of a treaty entails that the treaty is applied before it enters
to effect through ratification. Article 25
the negotiations have agreed such
a different manner. According to Article 25
the negotiations have agreed otherwise, the provisional application of a treaty or part of a treaty ends for a State if this State
forms the other States between whom the treaty is provisionally applied of its
tention not to become a party to the treaty. Provisional application may ensure that the desirable effects of the treaty are
troduced without the need for often long-term national ratification procedures being completed first. Provisional application is also subject to criticism, because it may conflict with the national ratification procedures and thereby the separation of powers. 3.12 As stated, Article 45 ECT provides for the provisional application of the ECT. The authentic English-language text (Treaty Series 1995, 108) and the Dutch-language translation (Treaty Series 1995, 250) read as follows: Article 45 Provisional application 1. Each signatory agrees to apply this Treaty provisionally pending its entry
to force for such signatory
accordance with Article 44, to the extent that such provisional application is not
consistent with its constitution, laws or regulations. 2. a) Notwithstanding paragraph 1 any signatory may, when signing, deliver to the Depositary a declaration that it is not able to accept provisional application. The obligation contained
paragraph 1 shall not apply to a signatory making such a declaration. Any such signatory may at any time withdraw that declaration by written notification to the Depositary. b) Neither a signatory which makes a declaration
accordance with subparagraph a nor
vestors of that signatory may claim the benefits of provisional application under paragraph 1. c) Notwithstanding subparagraph a), any signatory making a declaration referred to
subparagraph a shall apply Part VII provisionally pending the entry
to force of the Treaty for such signatory
accordance with Article 44, to the extent that such provisional application is not
consistent with its laws or regulations. 3. a) Any signatory may terminate its provisional application of this Treaty by written notification to the Depositary of its
tention not to become a Contracting Party to the Treaty. Termination of provisional application for any signatory shall take effect upon the expiration of 60 days from the date on which such signatory's written notification is received by the Depositary. b)
the event that a signatory terminates provisional application under subparagraph a, the obligation of the signatory under paragraph 1 to apply Parts III and V with respect to any
vestments made
its Area during such provisional application by
vestors of other signatories shall nevertheless remain
effect with respect to those
vestments for twenty years following the effective date of termination, except as otherwise provided
subparagraph c).
Annex PA. A signatory shall be removed from the list
Annex PA effective upon delivery to the Depositary of its request therefor. 4. Pending the entry
to force of this Treaty the signatories shall meet periodically
the provisional Charter Conference, the first meeting of which shall be convened by the provisional Secretariat referred to
paragraph 5 not later than 180 days after the opening date for signature of the Treaty as specified
The functions of the Secretariat shall be carried out on an
terim basis by a provisional Secretariat until the entry
to force of this Treaty pursuant to Article 44 and the establishment of a Secretariat. 6. The signatories shall,
accordance with and subject to the provisions of paragraph 1 or subparagraph 2c) as appropriate, contribute to the costs of the provisional Secretariat as if the signatories were Contracting Parties under Article 37
to force of this Treaty. 7. A state or Regional Economic
tegration Organization which, prior to this Treaty's entry
to force, accedes to the Treaty
accordance with Article 41 shall, pending the Treaty's entry
to force, have the rights and assume the obligations of a signatory under this Article. Artikel 45 Voorlopige toepassing 1. Elke Ondertekenende Partij stemt ermee
dit Verdrag voorlopig toe te passen
afwachting van de
werkingtreding voor deze Ondertekenende Partij krachtens artikel 44, voor zover deze voorlopige toepassing niet strijdig is met haar constitutie, wetten of voorschriften. 2. a. Ongeacht het eerste lid kan een Ondertekenende Partij op het tijdstip van ondertekening bij de Depositaris een verklaring
dienen dat zij niet kan
stemmen met voorlopige toepassing. De
het eerste lid vermelde verplichting geldt niet voor een Ondertekenende Partij die een dergelijke verklaring aflegt. Die Ondertekenende Partij kan te allen tijde haar verklaring
trekken door middel van een schriftelijke kennisgeving aan de Depositaris. b. Een Ondertekenende Partij die een verklaring aflegt als bedoeld
het tweede lid, letter a, en
vesteerders van die Ondertekenende Partij kunnen geen aanspraak maken op de voordelen van voorlopige toepassing krachtens het eerste lid. c. Ongeacht het tweede lid, letter a, moet een Ondertekenende Partij die een verklaring aflegt als bedoeld
het tweede lid, letter a, Deel VII voorlopig toepassen
afwachting van de
werkingtreding van het Verdrag voor de Ondertekenende Partij overeenkomstig artikel 44, voor zover die voorlopige toepassing niet strijdig is met haar wetten of voorschriften. 3. a. Een Ondertekenende Partij kan de voorlopige toepassing van dit Verdrag beëindigen door middel van een schriftelijke kennisgeving aan de Depositaris van haar voornemen geen partij bij het Verdrag te worden. De beëindiging van de voorlopige toepassing wordt voor een Ondertekenende Partij van kracht na het verstrijken van zestig dagen na de datum waarop de schriftelijke kennisgeving van die Ondertekenende Partij door de Depositaris is ontvangen. b.
geval een Ondertekenende Partij de voorlopige toepassing van dit Verdrag beëindigt overeenkomstig het derde lid, letter a, blijft de krachtens het eerste lid op die Ondertekenende Partij rustende verplichting om Deel III en Deel V toe te passen ten aanzien van
vesteringen die tijdens die voorlopige toepassing op haar grondgebied zijn gedaan door
vesteerders van andere Ondertekenende Partijen, evenwel van toepassing voor die
vesteringen gedurende twintig jaar na de datum van beëindiging, tenzij anders bepaald
het derde lid, letter c. c. Het bepaalde
het derde lid, letter b, geldt niet voor de
bijlage PA vermelde Ondertekenende Partijen. Een Ondertekenende Partij wordt van de lijst
bijlage PA geschrapt zodra zij bij de Depositaris een verzoek daartoe
dient. 4.
afwachting van de
werkingtreding van dit Verdrag komen de Ondertekenende Partijen op geregelde tijdstippen bijeen
het kader van de voorlopige Conferentie van het Handvest, waarvan de eerste vergadering uiterlijk 180 dagen na de
artikel 38 vermelde datum van openstelling voor ondertekening van dit Verdrag door het
het vijfde lid bedoelde voorlopige Secretariaat wordt bijeengeroepen. 5. Tot de
werkingtreding van dit Verdrag overeenkomstig artikel 44 en de oprichting van een Secretariaat worden de taken van het Secretariaat op tijdelijke basis verricht door een voorlopig Secretariaat. 6.
overeenstemming met dan wel onder voorbehoud van de bepalingen van het eerste lid of het tweede lid, letter c, al naar gelang het geval, dragen de Ondertekenende Partijen bij
de kosten van het voorlopige Secretariaat alsof zij Verdragsluitende Partijen
de zin van artikel 37, derde lid, waren. Eventuele door de Ondertekenende Partijen
bijlage B aangebrachte wijzigingen vervallen bij de
werkingtreding van dit Verdrag. 7. Een Staat of regionale organisatie voor economische
tegratie die, vóór de
werkingtreding van dit Verdrag, overeenkomstig artikel 41 tot het Verdrag toetreedt, heeft
afwachting van de
werkingtreding van het Verdrag de rechten en verplichtingen van een Ondertekenende Partij krachtens dit artikel. 3.13 The objective pursued with provisional application does not follow from the ECT. The literature
dicates that provisional application is provided to make an advance start with setting up the
stitutional framework of the ECT and to create momentum for the energy cooperation that the ECT aims to establish. 3.14 The question that arises
the present case
cassation is how the phrase “to the extent that such provisional application is not
consistent with its constitution, laws or regulations” from Article 45
terpreted. Three different
terpretations of Article 45
these proceedings. 3.15 The first view is that Article 45
this case Russian law.
the first
stance, this view was principally defended by HVY (see para. 4.5.4 final judgment). This
terpretation is referred to as the “all or nothing” approach, also by the Court of Appeal (para. 4.5.10 final judgment). This view is based mainly on the use of the word “such”, which refers back to the first half of the sentence: ‘Each signatory agrees to apply this Treaty provisionally’.
addition, Article 45
the second view, which is defended by the Russian Federation, Article 45
terpreted such that the point is whether a separate provision of the ECT is contrary to the law of the signatory. According to this view, Article 26 ECT is contrary to Russian law (para. 4.5.3 final judgment). What speaks
favour of the second view is mainly that
the "all or nothing” approach the phrase “to the extent” from Article 45
dicate that variation is possible to the extent to which the States provisionally apply the ECT. The second view, on the other hand, entails that there must be ongoing monitoring
to whether or not any provision from the law of a signatory is contrary to the ECT, even though there are no
dications that the authors of the treaty
tended this.It was also on the basis of this argument that the Tribunal subscribed to the first view
the
terim Awards.
addition, the Tribunal pointed out the principle of
ternational law (laid down
VCLT) that States cannot rely on their national law
order to justify their non-implementation of a treaty.
the setting aside proceedings, the District Court subscribed to this second view (see paras. 5.23 of the judgment of 20 April 2016). 3.17 The third view entails that Article 45
terpreted
such a way that the ECT must be provisionally applied by the signatory, unless provisional application of one or more provisions of the ECT are irreconcilable with national law.According to this view, the issue is not whether or not a provision of the ECT is contrary to national law, but whether the provisional application of a specific provision is contrary to the national law of the signatory.
the appeal of the setting aside proceedings, HVY,
the alternative, adopted this position (para. 4.5.4 final judgment). This view was subscribed to by the Court of Appeal (paras. 4.5.14, 4.5.33 and 4.5.48 final judgment). According to the Court of Appeal, this
terpretation does justice both to the phrase “to the extent” and to the phrase “such provisional application”, and therefore does justice to the objections raised to the other two
terpretations as well. 3.18 Concluding this explanation, I will now return to the various complaints of the ground for cassation. 3.19 Ground for Cassation 2.1 only comprises an
troduction and does not contain a complaint. Ground for Cassation 2.2: Article 26 ECT 3.20 Ground for Cassation 2.2 is directed against para. 4.3 (
particular para. 4.3.4) of the final judgment. The Court of Appeal found there that the Russian Federation unambiguously consented to arbitration. The complaint
the ground for cassation is that this finding is
correct. Article 26 ECT provides that “each Contracting Party” unambiguously consents to arbitration. However, the Russian Federation never became a Contracting Party because it only signed the ECT and never ratified it. As it is unclear whether Article 26 ECT also relates to States that merely signed the treaty (“signatories”), there can be no question of clear and unambiguous consent, according to the ground for cassation. 3.21 Contrary to what is asserted
the ground for cassation, the Court of Appeal did not fail to recognise that an arbitration clause must be agreed upon unambiguously. After all, the Court of Appeal used that standard for assessment purposes
an apparent manner
para. 4.3.4. Furthermore, the Court of Appeal, contrary to what is argued
the ground for cassation, did not fail to recognise that Article 26 ECT only creates obligations for Contracting Parties but not for signatories. The Court of Appeal did not confuse these terms either.
deed, the Court of Appeal
ferred that Article 26 ECT also creates obligations for signatories from Article 45
terpretation of Article 45
light of the law of the Russian Federation” must not be construed such that it is unclear, according to the Court of Appeal, to what extent a signatory is bound by Article 26 ECT. After all, the Court of Appeal concluded on the basis of an analysis of Article 45
vain. Ground for Cassation 2.3: jurisdiction of the Tribunal 3.23 Ground for Cassation 2.3 is directed against paras. 4.4.3-4.4.6 of the final judgment. The essence of those findings is that there is no reason for setting aside an arbitral award
the event that the arbitral tribunal has assumed jurisdiction on erroneous grounds, but the regular court, on different grounds, arrives at the conclusion that the jurisdiction opinion was correct. According to the Court of Appeal it is unacceptable for the regular court to proceed with assessing the dispute if a valid arbitration agreement is
place merely because the arbitral tribunal, which
this case
fact does not have the final say, based its opinion on jurisdiction on erroneous reasoning (end of para. 4.4.3). The complaint
the ground for cassation is that the legal system of the forum for the setting aside proceedings does not allow this. According to the ground for cassation, HVY were not free to advance new grounds for jurisdiction
the setting aside proceedings, at least not as late as on appeal. 3.24 The basic tenet is that, unlike with the other grounds for setting aside laid down
this context. After all, the issue is whether the arbitral tribunal has jurisdiction, and not about what the arbitral tribunal based its jurisdiction on. 3.25 Ultimately, therefore, it is up to the regular court to make a final decision on whether or not the arbitral tribunal has jurisdiction. The regular court may conclude that the arbitral tribunal did have jurisdiction, but perhaps on different grounds than those advanced by the arbitral tribunal itself for its finding of jurisdiction. The ground for cassation essentially defends the view that the court should only be allowed to assess whether the arbitral tribunal assumed jurisdiction on the proper grounds and should set aside the arbitral award if that is not the case, even though it is clear that the arbitral tribunal has jurisdiction on other grounds. This view of the law is
correct and contrary to the right of access to justice guaranteed by Article 6 ECHR, from which it follows that the regular court has the right to examine the jurisdiction of the arbitral tribunal. This also does justice to the
tention of the parties to submit their dispute to arbitration and prevents the parties from still having to conduct proceedings before the regular court while they never
tended to do so. 3.26 So the court may supplement the grounds for the jurisdiction of the Tribunal, but it must obviously observe the rules on the supplementation of legal grounds
doing so.
that context, the Russian Federation argued that the Court of Appeal was not allowed to take
to account the ground for the Tribunal’s jurisdiction suggested by HVY, because HVY did not advance this ground until the appeal. The Russian Federation thereby fails to appreciate that the Court of Appeal was required to supplement the legal grounds of its own motion if need be, within the scope defined by the grounds for appeal (Article 25 DCCP). It has not been disputed that HVY's grounds for appeal are directed against the way
which the District Court has
terpreted Article 45
vestigate how this provision should be
terpreted and to take new legal arguments
to account
doing so. I would like to point that
para. 4.4.6 of the final judgment the Court of Appeal qualifies the
terpretation propounded by HVY as a purely legal argument. That qualification has not been challenged
cassation. Contrary to what is argued
the ground for cassation, the Court of Appeal was therefore allowed to take
to account the legal ground that HVY did not advance until the appeal. 3.27 Furthermore, it cannot be understood how Article 1052
which the arbitral tribunal has declared that it lacks jurisdiction, after which the ordinary court has jurisdiction to hear the case. Article 1052
the proceedings to prevent the performance of unnecessary procedural acts as much as possible should a reliance on the lack of a valid arbitration agreement at a later stage (during the arbitration proceedings or before the ordinary court) result
a ruling that the arbitral tribunal has no jurisdiction.” Whether new factual or legal positions can be put forward
the setting aside proceedings will have to be assessed on a case-by-case basis, also given the requirements of due process of law. 3.28 As an aside, I point out that the explanation to Article 1065a (new) DCCP,
so far as relevant, cannot be
terpreted such that it denies the court the opportunity to rectify an erroneous jurisdiction opinion –
the sense that the court can refer the case back to the arbitral tribunal on that ground. The point is that the court will not remit the case if it arrives at the opinion that a valid arbitration agreement is lacking. After all, remission would be pointless
such a case. 3.29 Ground for cassation (no. 28) also argues that the Court of Appeal's opinion
para. 4.4.6 of the final judgment – that HVY should have advanced their new position during the arbitration proceedings or
the first
stance – defies comprehension. It follows from the above that this complaint must fail. 3.30 The conclusion is that ground for cassation 2.3 fails as a whole. Ground for Cassation 2.4: Limitation Clause 3.31 Ground for Cassation 2.4 complains that the
terpretation given to the Limitation Clause of Article 45
correct. The ground for cassation summarises the Court of Appeal's
terpretation (at 2.4.1) and formulates a number of complaints (at 2.4.2). 3.32
paras. 4.2.1, et seq., of the final judgment, the Court of Appeal presented a framework – not disputed
cassation – about the method of
terpreting treaties. I will summarise this briefly below. Articles 31 and 32 VCLT provide guidelines for the
terpretation of treaty provisions. Treaty
terpretation is always aimed at ascertaining the
tention of the contracting parties. The text of the relevant treaty provision serves as a guiding principle
that respect (para. 4.2.2). The text must be considered
its context, as well as
light of the object and purpose of the treaty. Pursuant to Article 31
terpretation must take place
good faith (para. 4.2.3). According to Article 31
addition to the context, any subsequent practice
the application of the treaty which establishes the agreement of the parties regarding its
terpretation must be taken
to account as well (para. 4.2.4). Lastly, according to Article 32 VCLT, the preparatory work of the treaty (“travaux préparatoires”) may be considered. This, however, is a supplementary means of
terpretation which is only employed to confirm the
terpretation according to Article 31 VCLT or if the
terpretation leads to an unclear or unreasonable outcome (para. 4.2.5). 3.33 The ground for cassation (no. 34) complains that the Court of Appeal's
terpretation is contrary to the ordinary meaning of the words of Article 45
the complaint is that there is nothing
the wording of Article 45
dicate this. 3.34 Para. 4.5.10
dicates that the Court of Appeal based this
terpretation on the ordinary meaning of the words “to the extent”
the text of Article 45
the first
stance that, on the basis of Article 45
paras. 4.5.10, et seq., that that
terpretation did not do justice to the ordinary meaning of the phrase “to the extent” from that provision.
deed, that phrase
dicates, according to the Court of Appeal, that there may be degrees
the extent to which the provisional application of the ECT must be left out of consideration due to their
compatibility with national laws. Contrary to what is argued
the complaint, the ordinary meaning of the words of Article 45
terpretation. The complaint does not clarify why the ordinary meaning of these words as established by the Court of Appeal is supposedly
correct, which is why the complaint fails. 3.35 The ground for cassation also complains (no. 35) that the
terpretation is contrary to the context
which the words “to the extent” are used. The ground for cassation points out that Article 45
that context, however, refer to specific parts of the ECT, which the Court of Appeal supposedly endorses
para. 4.5.19. According to the complaint, the
terpretation of Article 45
consistent with this. 3.36 But contrary to the argument
the complaint, there is no question of
consistency.
para. 4.5.19, the Court of Appeal subscribed to the District Court's opinion that the words “to the extent”
terpreted the provisions consistently.
so far as the complaint is
tended to argue that the words “to the extent”
terpreted as referring to specific parts of the ECT, and that the Court of Appeal endorsed this, the complaint is based on an
correct
terpretation of the contested finding. 3.37 The ground for cassation (nos. 36-37) further complains that the Court of Appeal failed to appreciate the rationale underlying limiting the scope of provisional application. According to the ground for cassation, the rationale underlying provisional application is the provision of “a facility for government officials seeking to impart structure to
ternational cooperation and wishing to respect the
ternal ratification procedures at the same time”. Because of this, Article 45 ECT is consistent with the ECT's object to impart structure to ECT-based
ternational cooperation as soon as possible while establishing,
due time, a sound and binding
ternational legal basis for that cooperation, with the ground for cassation referring to a passage from the Preamble to the ECT. 3.38 This complaint pertains to the way
which the Court of Appeal
terpreted Article 45
light of the object and purport of the ECT.
paras. 4.5.22, et seq., the Court of Appeal found as follows
that regard. The goal of the ECT is to attract
vestments by creating a stable and safe
vestment climate and by promoting transparency, legal certainty and
vestment protection. The provisional application of the ECT is aimed at ensuring that the obligation to create the desired
vestment conditions would be
troduced immediately after signing (para. 4.5.26). According to the Court of Appeal, the
terpretation defended by the Russian Federation is less compatible with this goal, because an
vestor would always have to take
to account the possibility that the provisions of the ECT would be prejudiced by national laws and regulations (para. 4.5.26). The principal and alternative
terpretations of Article 45
volve the drawback of being unclear and unpredictable, according to the Court of Appeal (para. 4.5.27). 3.39 The complaint does not dispute this representation of the object and purport of the ECT
and of itself, but essentially asserts that the goal of the provisional application of the ECT – which is to enable government officials to sign the ECT while simultaneously respecting national ratification procedures – should have been
cluded
the equation as well. The passage from the Preamble (4th paragraph) to the ECT as cited
the complaint reads as follows: “Recalling that all signatories to the Concluding Document of the Hague Conference undertook to pursue the objectives and principles of the European Energy Charter and implement and broaden their cooperation as soon as possible by negotiating
good faith an Energy Charter Treaty and Protocols, and desiring to place the commitments contained
that Charter on a secure and binding
ternational legal basis”. 3.40
and of itself, it is correct that the preamble to a treaty is relevant for establishing the object and purport of the treaty
question. To establish which object is expressed
the Preamble, the Preamble must be
terpreted according to the rules of Articles 31, et seq., VCLT. Apparently, the assumption
the complaint is that the cited passage from the Preamble expresses that one of the goals of the ECT is to give governments the time to create a binding legal basis
their own legal order (through ratification). This view cannot be accepted. The final phrase of the fourth paragraph of the Preamble relates to the desire “to place the commitments contained
[the ECT] on a secure and binding
ternational legal basis” (my italics, AG). These words refer to the ECT itself and not to its ratification by the signatories. This is confirmed by the context
which these words are found, given that the ECT constitutes the binding legal basis for obligations already contained
the non-binding European Energy Charter. Neither the Preamble nor the provisions of the ECT
dicate that part of the object and purport of the ECT would be to give government officials the time to create a binding domestic legal basis. Even if the Preamble were to be
terpreted
the way proposed by the complaint, it would still hold true that the Court of Appeal took this
to account
paras. 4.5.34, et seq. After all, and superfluously at that, the Court of Appeal found
those paragraphs, on the basis of the travaux préparatoires, that the aim of Article 45
compatible with national law. The Court of Appeal thus considered the fact that the ECT, or at least Article 45
the ground for cassation (no. 37) is that the Court of Appeal erred
referring to “transparency” as being one of the goals of the ECT. According to the complaint, Article 45
para. 4.5.23, the Court of Appeal substantiated, with references to the text of treaty, that transparency is one of the goals of the ECT. As Article 45
terpreted
light of the object of the ECT, it cannot be understood why the Court of Appeal supposedly erred by
corporating the goal of transparency
the
terpretation of that provision. 3.43 The ground for cassation (nos. 38-42) complains about the Court of Appeal's finding that there is
sufficient evidence of established state practice
dicating an
terpretation different from its own (paras. 4.5.28-4.5.33). The complaint refers to several statements, which the Court of Appeal has failed to recognise, that supposedly demonstrate such state practice. 3.44 Article 31
addition to the context, account must also be taken of “any subsequent practice
the application of the treaty which establishes the agreement of the parties regarding its
terpretation”. This requires all Contracting Parties to have accepted this practice
the application of the relevant treaty, either explicitly or implicitly. State practice is also relevant when it has developed after the conclusion of the treaty (“subsequent practice”). 3.45 The complaint refers to several statements from which a state practice is said to follow that is
compatible with the
terpretation of Article 45
para. 4.5.29 and held that it was not
compatible with HVY's alternative
terpretation. The ground for cassation complains that this
terpretation by the Court of Appeal is
correct and that Article 45
terpretation is correct. 3.46 Contrary to what the Russian Federation argues, the Joint Statement can be read
such way that Article 45
compatible with the domestic legal order of the Signatories,
the sense that the provisional application of ECT provisions
compatible with that domestic legal order is excluded. Even if the Joint Statement were
terpreted
the manner advocated by the Russian Federation, it would only concern a statement by the then-EC Member States. It does not demonstrate that all then-Contracting Parties of the ECT, let alone all current Contracting Parties of the ECT, endorsed this
terpretation. I would like to point out that, strictly speaking, the Joint Statement was issued before the date on which the ECT was concluded, so that, if only for that reason, there can be no question of a “subsequent practice”. The complaint therefore fails. 3.47 The ground for cassation (no. 41) also complains that
paras. 4.5.31 and 4.5.32 the Court of Appeal erroneously and/or without comprehensible reasoning held that, put succinctly, statements by Dutch officials, by the Finnish government, and by the Foreign Secretary of the United Kingdom were supposedly
compatible with the Court of Appeal's
terpretation of Article 45 ECT. 3.48 This complaint does not hold water, either. The Court of Appeal's finding on the Finnish government's statement is correct
light of the aforementioned rule that state practice is only relevant when endorsed by all Contracting Parties. The same applies to the Court of Appeal's findings about comments by Dutch officials. Contrary to what is argued
the complaint, the Court of Appeal did not find that these statements were
compatible with the
terpretation of Article 45
dicative of a state practice as referred to
The Court of Appeal rightly found that these statements (
cluding the statement by the Foreign Secretary of the United Kingdom) were not part of state practice, but were part of the travaux préparatoires, which were taken
to account
that context. 3.49 The ground for cassation (no. 42) also asserts that the
terpretation accepted by the Court of Appeal essentially dictates that some EC Member States must provisionally apply the ECT
its entirety. According to that
terpretation, the ground for cassation asserts, representatives of those States supposedly exceeded their
ternal powers. 3.50 The ground for cassation essentially asserts that the
terpretation of Article 45
paras. 4.5.9-4.5.33, the Court of Appeal
terpreted Article 45
its context and
light of the object and purport of the ECT. The question of whether the
terpretation arrived at through the application of Article 31 VCLT is irreconcilable with the domestic legal order of Contracting Parties is not part of the rule of
terpretation contained
What is possible on the basis of Article 32(b) VCLT, however, is for a treaty provision to be
terpreted on the basis of the travaux préparatoires
the event that the application of Article 31 VCLT leads to a result that is manifestly absurd or unreasonable. To the extent that the ground for cassation should be
terpreted such that the
terpretation by the Court of Appeal is absurd or unreasonable, the Court of Appeal substantiated its
terpretation
paras. 4.5.34, et seq., with references to the travaux préparatoires. 3.51 The ground for cassation (nos. 43-49) directs a complaint against paras. 4.5.34-4.5.40, where the Court of Appeal devoted attention to the travaux préparatoires to the ECT. 3.52
para. 4.5.35, the Court of Appeal superfluously held that the travaux préparatoires confirmed its opinion on the
terpretation of Article 45
terpretation according to Article 31 VCLT is manifestly absurd or unreasonable. This is not the case, opined the Court of Appeal. As the complaints about the application of Article 31 VCLT fail, the Court of Appeal had no need to take recourse to the travaux préparatoires, meaning the opinion expressed thereon
para. 4.5.35 was rendered superfluously. This means that the complaints directed thereagainst lack
terest. 3.53 The conclusion is that all complaints
ground for cassation 2.4 fail. Ground for Cassation 2.5: “not
consistent”
terpretation of the words “not
consistent”
It is argued
the ground for cassation that the Court of Appeal,
addition to its own
terpretation of the treaty, developed an alternative
terpretation
paras. 4.5.41-4.5.47 and 4.7 of the final judgment. According to the ground for cassation, this alternative
terpretation entails – contrary to what the Court of Appeal held
paras. 4.5.1-4.5.40 – that
the context of Article 45
which respect the ECT must always be regarded as part of said legal order. This
terpretation is
correct, asserts the ground for cassation, because the Court of Appeal erred
assuming that Article 26 ECT was applicable
the Russian legal order. Referred to as an example is para. 4.7.49,
which the Court of Appeal held that the question of whether the Tribunal has jurisdiction must be assessed on the basis of Article 26 ECT and not on the basis of Russian law. Supposedly,
so doing, the Court of Appeal assumed that arbitration could be based on Article 26 ECT and that that provision was therefore applicable
the Russian legal order, which must still be proven, however. 3.55
para. 4.5.41, the Court of Appeal held as follows: “The meaning of the words ‘not
consistent’ follows from the Court of Appeal's
terpretation of the Limitation Clause. That
terpretation is about whether there are national laws or regulations that exclude provisional application of certain treaty provisions or certain categories of treaty provisions. If the latter is the case, then the provisional application of those types or categories of treaty provisions is ‘
consistent’ with national law.” 3.56
paras. 4.5.42, et seq., the Court of Appeal superfluously devoted attention to the debate conducted by the parties on the question of how the phrase “(not)
consistent” must be
terpreted, starting from the Russian Federation's
terpretation of Article 45
which respect it must be examined whether a provision of the ECT is contrary to the laws of a Signatory.
para. 4.5.48, the Court of Appeal reached the conclusion that Article 45
terpreted to mean that a signatory State that has not delivered the declaration referred to
so far as provisional application of one or more of the provisions of the ECT are contrary to its national law,
the sense that the laws or regulations of that State exclude provisional application of the Treaty for specific treaty provisions, or types or categories of treaty provisions. Based on this
terpretation, the Court of Appeal ruled that the provisional application of Article 26 ECT is not contrary to the “constitution, laws or regulations” of the Russian Federation (para. 4.6.1). Para. 4.6.2
dicates that the Court of Appeal superfluously examined
para. 4.7 whether Article 26 ECT is contrary to the laws of the Russian Federation when adhering to the Russian Federation's
terpretation of the Limitation Clause of Article 45
cluded for paras. 4.7, et seq. – which were also
cluded superfluously. The complaints of Ground for Cassation 2.5 therefore fail for lack of
terest. Ground for Cassation 2.6: Article 26 ECT
consistent with Russian law? 3.58 Ground for Cassation 2.6 is directed against para. 4.7, where the Court of Appeal addresses the question of whether Article 26 ECT is contrary to the laws of the Russian Federation. 3.59
the discussion of Ground for Cassation 2.5, I already noted that para. 4.7 was
cluded superfluously, which is evident from para. 4.6.2. Therefore, the complaints of the ground for cassation lack
terest and need not be discussed.
cidentally, the complaints also relate to the
terpretation and application of Russian law and fail against the provisions of Article 79
volving an assessment of the accuracy of the Court of Appeal's finding on the substance and
terpretation of Russian law. Ground for Cassation 2.7: questions referred to the ECJ for preliminary rulings? 3.60 Ground for Cassation 2.7 does not contain an
dependent complaint, but asserts that the Supreme Court must refer questions on the
terpretation of Article 45
which respect reference is made to Grounds for Cassation 2.2, 2.4, 2.5 and 2.6. It is also stated
the ground for cassation that it would be contrary to EU law for a judicial
stitution of a Member State to accept an
terpretation of a mixed treaty, such as the ECT, that is not
line with the common
terpretation of the Commission, the Council and the Member States. As multiple
terpretations of Article 45
to by both the EU and the Member States pursuant to a shared competence (see Article 4 TFEU). Both the EU and the separate EU Member States are parties to the ECT, because some of the subjects arranged
the ECT are part of the competence of the Member States. Established case law dictates that an
ternational agreement concluded by the EU constitutes an act by one of the
stitutions of the EU within the meaning of Article 267, first paragraph at (b) TFEU, so that the ECJ has jurisdiction to hand down a ruling on the
terpretation of such an agreement. The provisions of such an agreement are an
tegral part of the legal order of the EU. 3.62 The question arises as to whether the ECJ has jurisdiction to
terpret a mixed agreement
its entirety or that the jurisdiction is limited to certain subjects of that agreement and, if that is the case, what the demarcation criterion is. It can be
ferred from ECJ case law that a question about a mixed agreement that has been referred to the ECJ for a preliminary ruling must relate to a subject
respect of which the EU has exercised its powers
ternally to a sufficient extent. I will explain this
the following. 3.63 The ECJ
various decisions assumed jurisdiction to
terpret mixed agreements. However, it was not always clear
which
stances the Court's
volvement was necessary. The Court provided clarity about this
the Merck Genéricos case by concluding that the Court's authority to give a preliminary ruling
respect of mixed agreements only concerns the spheres
which the EU has exercised its powers at
ternal level to a sufficient extent. 3.64
its judgment
the matter of Lesoochranarske VLK, the ECJ continued building upon this case law. This case concerned the question of whether a provision of the Aarhus Convention had direct effect, which led to the question of whether the Court actually had the authority to issue a preliminary ruling on the relevant provision. The Court held as follows: "30. The Aarhus Convention was signed by the Community and subsequently approved by Decision 2005/370. Therefore, according to settled case-law, the provisions of that convention now form an
tegral part of the legal order of the European Union (see, by analogy, judgment of 10 January 2006, Case C-344/04 IATA and ELFAA [2006] ECR I-403, paragraph 36, and 30 May 2006 Case C-459/03 Commission v Ireland [2006] ECR I-4635, paragraph 82). Within the framework of that legal order the Court therefore has jurisdiction to give preliminary rulings concerning the
terpretation of such an agreement (see,
ter alia, judgments of 30 April 1974, Case 181/73 Haegeman [1974] ECR 449, paragraphs 4-6, and 30 September 1987, Case 12/86 Demirel [1987] ECR 3719, paragraph 7). 31. Since the Aarhus Convention was concluded by the Community and all the Member States on the basis of joint competence, it follows that where a case is brought before the Court
accordance with the provisions of the EC Treaty,
particular Article 234 EC thereof, the Court has jurisdiction to define the obligations which the Community has assumed and those which remain the sole responsibility of the Member States
order to
terpret the Aarhus Convention (see, by analogy, judgments of 14 December 2000, Joined Cases C-300/98 and C-392/98 Dior and Others [2000] ECR I-11307, paragraph 33, and 11 September 2007, Case C-431/05 Merck Genéricos – Produtos Farmacêuticos [2007] ECR I-7001, paragraph 33). 32. Next, it must be determined whether,
the field covered by Article 9
those circumstances, it would be for the courts of those Member States to determine, on the basis of national law, whether
dividuals could rely directly on the rules of that
ternational agreement relevant to that field or whether the courts must apply those rules of their own motion.
that case, EU law does not require or forbid the legal order of a Member State to accord to
dividuals the right to rely directly on a rule laid down
the Aarhus Convention or to oblige the courts to apply that rule of their own motion (see, by analogy, Dior and Others, paragraph 48 and MerckGenéricos – Produtos Farmacêuticos, paragraph 34). 33. However, if it were to be held that the European Union has exercised its powers and adopted provisions
the field covered by Article 9
ternational agreement
question has direct effect. 34. Therefore, it is appropriate to examine whether,
the particular field
to which Article 9
that connection, it must be observed first of all, that,
the field of environmental protection, the European Union has explicit external competence pursuant to Article 175 EC, read
conjunction with Article 174
agreements concluded by the European Union and the Member State and it concerns a field
large measure covered by it (see, by analogy the judgment of 7 October 2004, Case C‑239/03 Commission v France [2004] ECR I‑9325, paragraphs 29 to 31).” (my italics, AG) 3.65 This case law
dicates that if the EU has established provisions for the implementation of a mixed agreement, the ECJ has jurisdiction to
terpret the agreement.
deed,
such case there is a need for a uniform
terpretation of the relevant EU law and clarity about the division of powers between the EU and the Member States. It is not
dispute that the ECJ is authorised to express an opinion on its own jurisdiction. 3.66 The extent to which EU legislation exists that implements the ECT or specific provisions thereof is relevant to the present case
cassation. While there is extensive EU legislation on energy that mainly provides for the organisation of the
ternal market for gas and electricity, networks and other
frastructure, energy efficiency and sustainable energy, there is no EU legislation that aims to provide
vestment protection to businesses
the energy sector,
cluding oil companies. To my knowledge, only a single
strument was adopted, namely the – now-lapsed – Council Regulation (EC) No 701/97 of 14 April 1997 amending a programme to promote
ternational cooperation
the energy sector (“Synergy programme”). This Regulation aimed to streamline the
ternational cooperation between the EC and third countries
the field of energy. The Regulation did not contain any
dications that substantive provisions of the ECT were thereby implemented for what is now the EU. 3.67
its judgment of 6 March 2018 (Slovak Republic v. Achmea), the ECJ held that Article 8 (the arbitration clause) of the bilateral
vestment treaty between the Netherlands and the Slovak Republic was contrary to Articles 267 and 344 TFEU. To this end, the Court ruled that questions regarding the
terpretation or application of EU law may also play a role
arbitration proceedings based on the BIT. As EU law is part of the laws applicable
the Member States, an arbitral tribunal constituted on the basis of Article 8 BIT must apply EU law. According to the Court of Appeal, a situation
which such arbitral tribunals are unable to refer questions to the Court for a preliminary ruling because they are not part of the judicial organisation of the Member States is
consistent with Articles 267 and 344 TFEU. The Slovak Republic v. Achmea judgment relates solely to
vestment arbitrations
which a Member State is a defendant. The outcome of the judgment is that Member States can no longer consent to arbitration beforehand on the basis of a BIT and thereby waive the jurisdiction of their regular courts. The Slovak Republic v. Achmea judgment has caused the basis for
tra-EU
vestment arbitration to lapse. 3.68 On 15 January 2019, 22 Member States of the EU issued a declaration on the consequences of the Achmea judgment for arbitration on the basis of the ECT.
this declaration, they stated, among other things, that arbitration between an EU Member State and an
vestor from another EU Member State was contrary to EU law as a consequence of this judgment.
the context of the ongoing negotiations about the modernisation of the ECT, the European Commission made a proposal to amend Articles 26 and 27 ECT. Further to this, Belgium requested the ECJ on the basis of Article 218
December 1994, so that neither the January 2019 declaration nor the December 2020 request for an opinion are relevant at this time. 3.69 It is also worth noting that the Cour d’appel de Paris
tended
2017 to refer questions to the ECJ for a preliminary ruling on the
terpretation of the ECT –
cluding Article 1
a case related to the present arbitration. As regards the jurisdiction of the ECJ, the Cour d’appel confined itself
its judgment to concluding that mixed treaties are part of the European legal order. However, these proceedings at the Cour d’appel were withdrawn. 3.70 By order of reference of 24 September 2019, the Cour d’appel de Paris,
a different dispute (Republic of Moldova v. Komstroy), asked the ECJ questions about the
terpretation of Article 1
the context of the question of whether an ad hoc arbitral tribunal constituted on the basis of Article 26
connection with an agreement regarding the sale of electricity. Put succinctly, the facts of this case are as follows.
1999, a Ukrainian electricity producer (Ukrenergo) sold electricity to the Energoalians company, a Ukrainian distributor of electricity, which then resold the electricity to Derimen, a company with its registered office
the British Virgin Islands. Derimen
turn resold the electricity to Moldtranselectro, a Moldovan state-owned company. The volumes of electricity to be supplied were established on a monthly basis between Moldtranselectro and Ukrenergo and the electricity was supplied as far as to the Ukrainian side of the Ukraine-Moldova border. Energoalians was to be paid by Derimen for the electricity supplied and Derimen
turn was to receive payment from Moldtranselectro. On 1 January 2000, Moldtranselectro's debt to Derimen amounted to over USD 18 million. Moldtranselectro satisfied only part of its payment obligation to Derimen, so that a debt of over USD 16 million still remained. Derimen assigned its claim against Moldtranselectro to Energoalians, which attempted to collect the claim from Moldtranselectro and to that end
stituted proceedings before the Moldovan court and later before the Ukrainian court. Energoalians took the position that Moldova breached certain obligations under the ECT and to that end
stituted arbitration proceedings on the basis of Article 26
Paris ruled that Moldova failed to comply with its obligations under the ECT and ordered it to pay a certain amount. Moldova subsequently filed a claim with the French court to set aside the arbitral award for violation of public policy, namely the jurisdiction of the ad hoc arbitral tribunal.
the end, the Cour d’appel submitted the following questions to the ECJ: “Must Article 1
terpreted as meaning that a claim which arose from a contract for the sale of electricity and which did not
volve any contribution on the part of the
vestor
the host State can constitute an ‘
vestment’ within the meaning of that Article? Must Article 26
terpreted as meaning that the acquisition, by an
vestor of a Contracting Party, of a claim established by an economic operator which is not from one of the States that are Parties to that Treaty constitutes an
vestment? Must Article 26
terpreted as meaning that a claim held by an
vestor, which arose from a contract for the sale of electricity supplied at the border of the host State, can constitute an
vestment made
the area of another Contracting Party,
the case where the
vestor does not carry out any economic activity
the territory of that latter Contracting Party?” 3.71
this case, AG Szpunar submitted his Opinion on 3 March 2021. The Advocate General first addressed the jurisdiction of the ECJ and noted
that regard that "this could be discussed, as it concerns the
terpretation of an
ternational treaty
the context of a dispute that, at least prima facie, has all the characteristics of a situation that can be referred to as being “purely external”. AG Szpunar concluded that the ECJ has jurisdiction to give preliminary rulings because the provisions of the ECT
respect of which an
terpretation is sought may also apply
situations that fall within the legal order of the EU, for which reason the EU has an
terest
the uniform
terpretation of the relevant provisions.
cidentally, AG Szpunar
dicated that he had to “tone down [this finding] right away” (para. 46), asking the ECJ to consider providing clarity about the consequences of the Achmea judgment for the applicability of Article 26 ECT (para. 48). He concluded that it was not a foregone conclusion that Article 26 ECT could never be applied within the EU as a consequence of the Achmea judgment, because questions regarding the compatibility of provisions of the ECT with EU law can also arise
national court proceedings (para. 90). As concerns the jurisdiction of the ECJ, AG Szpunar concluded that Article 26 ECT was
compatible with EU law
so far as this provision provided recourse to an arbitral tribunal, so that such a system for dispute resolution could not be applied within the legal order of the EU (para. 98). The Advocate General believed that the possibility could not be excluded that the substantive provisions of the ECT,
cluding Article 1
vestment”) and Article 26 ECT, may apply within the legal order of the EU (para. 99). What is striking, by the way, is that AG Szpunar did not devote any attention to ECJ case law, which dictates that the ECJ has jurisdiction to
terpret a mixed agreement if the EU has established provisions for implementation. 3.72
the remainder of his Opinion, AG Szpunar focused on the question of whether a claim under an agreement to supply electricity can be regarded as an
vestment within the meaning of Article 1
Moldova v. Komstroy. An agreement to supply electricity is a simple commercial transaction that is not covered by the definition of “
vestment” within the meaning of Article 1
vestment. 3.73 Assuming that the ECJ will adhere to AG Szpunar's opinion and find that it has jurisdiction to hear questions regarding the
terpretation of the ECT – and I repeat that it is up to the ECJ to rule on its jurisdiction – it still holds true,
full, that the referral of questions to the ECJ for preliminary rulings must also be necessary for the settlement of the complaints. With regard to the present case, I am of the opinion that the referral of questions to the ECJ for preliminary rulings is not necessary for the settlement of the complaints
Ground for Cassation 2. I explain this as follows. Grounds for Cassation 2.2 and 2.3 relate to questions of Dutch arbitration law and civil procedure. Grounds for Cassation 2.5 and 2.6 are directed against the Court of Appeal's findings
the final judgment, which were
cluded superfluously and fail for that reason alone. Ground for Cassation 2.4 concerns the
terpretation of Article 45
which the Court of Appeal dealt with certain arguments. As I have discussed
this Opinion, these complaints must fail because they are premised on an erroneous
terpretation of the contested judgment (see the discussion of Ground for Cassation 2.4.2). I have also demonstrated that the complaints
the ground for cassation relate to the failure to appreciate the state practice, because there is no evidence of any such state practice. Complaints (see paras. 42, et seq., of the
itiating Document) have been directed against a superfluous finding as well. It follows from all this that the referral of questions to the ECJ for preliminary rulings is not necessary for the outcome of the opinion on Ground for Cassation 2.4. To this I add that,
ternational law, a provision on the provisional application of a treaty (such as Article 45 ECT) is a frequently occurring provision, for which,
general, no EU legislation exists. And the present dispute is not about the provisional application of the ECT
the EU or
an EU Member State, but
the Russian Federation. 3.74 The conclusion is that the referral of questions to the ECJ for preliminary rulings is not necessary for the settlement of the Russian Federation's complaints
cassation. 3.75 Ground for Cassation 2.8 reiterates the assertion that there is no clear and unambiguous consent to arbitration on the part of the Russian Federation. The ground for cassation does not contain a separate complaint and builds upon the previous grounds for cassation, meaning a separate discussion can be omitted. Ground for Cassation 3:
terpretation of Article 1
vestment and
vestor) 3.76 Ground for Cassation 3 is directed against para. 5.1 of the final judgment, where the Court of Appeal
terpreted the terms “
vestment” and “
vestor” within the meaning of Article 1
terpretation is
correct. The Russian Federation opines that HVY are not actually foreign
vestors and that their
vestments do not qualify as foreign
vestments, but are actually “U-turn constructions” –
vestments made by
vestors who are
fact controlled by citizens of the host country,
this case the Russian Federation. The ground for cassation is directed against a large number of complaints against the Court of Appeal's dismissal of the Russian Federation's argument.
troductory remarks 3.77 Before discussing the complaints of this ground for cassation, I would like to make a number of
troductory remarks.
so far as relevant, Article 1
the authentic English-language text: Article 1 Definitions As used
this Treaty: (...) 6. “
vestment” means every kind of asset, owned or controlled directly or
directly by an
vestor and
cludes: a) tangible and
tangible, and movable and immovable, property, and any property rights such as leases, mortgages, liens, and pledges; b) a company or business enterprise, or shares, stock, or other forms of equity participation
a company or business enterprise, and bonds and other debt of a company or business enterprise; c) claims to money and claims to performance pursuant to contract having an economic value and associated with an
vestment; d)
tellectual Property;
the Energy Sector. (...) 7. “
vestor” means:
that Contracting Party
accordance with its applicable law; (ii) company or other organization organized
accordance with the law applicable
that Contracting Party; b) with respect to a “third state”, a natural person, company or other organization which fulfils, mutatis mutandis, the conditions specified
subparagraph a) for a Contracting Party;
the Dutch translation: Artikel 1 Definities
dit Verdrag wordt verstaan onder: (...) 6. „
vestering": elke vorm van activa die een
vesteerder
eigendom heeft of waarover hij direct of
direct zeggenschap heeft, met
begrip van: a. lichamelijke en onlichamelijke en roerende en onroerende zaken alsook andere rechten, zoals huur-, hypotheek-, retentie- en pandrechten; b. een vennootschap of onderneming, of aandelen of andere vormen van vermogensdeelneming
, en obligaties en andere schuldbewijzen van een vennootschap of onderneming; c. aanspraken op geld en aanspraken op prestaties volgens een contract met een economische waarde en
verband met een
vestering; d.
tellectuele eigendom; e. opbrengsten; f. een bij wet of contract of uit hoofde van overeenkomstig de wet verleende licenties en vergunningen verleend recht een economische activiteit
de energiesector te ondernemen. (...) 7. „
vesteerders": a. van een Verdragsluitende Partij, i. natuurlijke personen die het staatsburgerschap of de nationaliteit bezitten van of permanent verblijven op het grondgebied van die Verdragsluitende Partij conform haar toepasselijke wetgeving; ii. vennootschappen of andere organisaties opgericht conform op het grondgebied van die Verdragsluitende Partij toepasselijke wetgeving; b. uit een derde land, natuurlijke personen, vennootschappen of andere organisaties die mutatis mutandis voldoen aan de onder a. aan Verdragsluitende Partijen gestelde voorwaarden; 3.78 Strictly speaking, Article 1
vestment”, but stipulates that “every kind of asset” can qualify as an
vestment, providing a non-exhaustive list of assets that
any event can be regarded as
vestments. The definition of the term “
vestor”
vestment”: an
vestor is a natural person or legal entity that owns or controls such an
vestment. If the
vestor is a legal entity, the legal entity
question must be
corporated under the laws of a Contracting Party. This test is also referred to as the “
corporation test” and is distinct from other points of reference for the “nationality” of a legal entity, such as the place where the board of the legal entity is established or the nationality of the shareholders. Article 1
vestment, meaning shareholders are protected by the ECT as well, even if the company they
vested
is not regarded as an
vestor itself. 3.79 Article 26 builds upon the terms “
vestment” and “
vestor”. This Article provides that arbitration is open
“[d]isputes between a Contracting Party and an
vestor of another Contracting Party relating to an
vestment of the latter
the Area of the former (...)”. (
Dutch: ‘Geschillen tussen een Verdragsluitende Partij en een
vesteerder van een andere Verdragsluitende Partij over een
vestering van deze laatste op het grondgebied van eerstgenoemde Partij (_)’). Article 26 ECT thus requires, first, that there be an
vestment, second, that this
vestment be made by an
vestor based
a Contracting Party and, third, that this
vestment be made
the Area of a Contracting Party other than the one where the
vestor is based. 3.80 The question that Ground for Cassation 3 essentially addresses is whether the ECT implies even more requirements with regard to
vestments or whether the cross-border nature thereof is evident from Article 1
stance, the ground for cassation asserts (at 3.2.3), among other things, that the ECT only protects
ternational
vestments and therefore does not protect “U-turn constructions”, nor
vestments made by
vestors having no genuine connection to the State
which they are established (“letterbox companies”). Furthermore, not only the place of establishment of the
vestor should be assessed, but so should the party/parties controlling such
vestor (“piercing the corporate veil”, Ground for Cassation 3.4). An
vestment could only be said to exist if the
vestor actually made an economic contribution
the host country (Ground for Cassation 3.3). 3.81 The Court of Appeal's approach can be summarised as follows. According to the Court of Appeal, it is not
dispute that HVY are companies “organised
accordance with the law applicable
that Contracting Party”. Textually speaking, therefore, the requirements that Article 1
vestors within the meaning of the ECT (para. 5.1.6) have been satisfied. The shares
Yukos, which are owned by HVY, qualify as an “
vestment” within the meaning of the ECT. After all, “
vestment” is understood to mean “every kind of asset, owned or controlled directly or
directly by an
vestor”, while “shares” are part of the non-exhaustive list of “assets”
Additionally, the Court of Appeal held that,
a textual sense, the requirement of Article 26 ECT that there be a dispute between a “Contracting Party” (the Russian Federation) and
vestors from “another Contracting Party” (HVY, companies under the laws of Cyprus and the Isle of Man) “relating to an
vestment of the latter
the Area of the Former” had also been met (para. 5.1.6). According to the Court of Appeal, there is no reason to
terpret these provisions such that additional requirements should be imposed on the
ternational nature of the
vestments. The object and purport of the ECT do not lead to a different opinion, according to the Court of Appeal (para. 5.1.7.3). 3.82 Concluding these
troductory remarks, I will now return to the discussion of the ground for cassation and the complaints it contains. 3.83 Ground for Cassation 3.1 is an
troduction and does not contain any complaints. Ground for Cassation 3.2: “U-turn construction” 3.84 Ground for Cassation 3.2 is directed against the Court of Appeal's finding
paras. 5.1.5-5.1.8 and argues that the ECT does not protect domestic
vestments, even if these
vestments were made by sham companies (via a “U-turn construction”). This ground for cassation is divided
to four subgrounds (3.2.1-3.2.4). 3.85 Ground for Cassation 3.2.1 is a summary of the Court of Appeal's assessment and does not contain a complaint. 3.86 Ground for Cassation 3.2.2 complains that the Court of Appeal wrongly based its
terpretation of the terms “
vestment” and “
vestor” on a purely grammatical
terpretation of only part of the relevant text of the ECT, namely the definitions of Article 1
terpretation is contrary to Article 31
terpretation of the terms “
vestor” and “
vestment” on a purely grammatical
terpretation of Article 1
para. 5.1.6, the Court of Appeal found that the language of these provisions, according to the ordinary meaning thereof, serves as the premise for the
terpretation. The Court of Appeal thereby applied the correct standard
accordance with Article 31
paras. 5.1.7.1-5.1.7.4, the Court of Appeal subsequently discussed arguments of the Russian Federation relating to the context
which Article 1
accordance with Article 31 VCLT as well. The fact that the Court of Appeal used the elements of context, object and purport of the ECT on the basis of the arguments advanced by the Russian Federation makes sense and does not
dicate that the Court of Appeal failed to consider these elements as equal to the textual
terpretation. 3.88 The ground for cassation also complains that
para. 5.1.8.11 the Court of Appeal attributed too little significance to the subsequent state practice, which entails that a large number of parties to the ECT
later
vestment treaties excluded
vestments via the U-turn construction from the scope of application. 3.89 The Court of Appeal's opinion is correct because, as the Court of Appeal itself also held, this did not concern a state practice
respect of the implementation or
terpretation of the ECT, but choices that States made upon entering
to new treaties. That is not where the focus of Article 31 VCLT lies. Therefore, this complaint fails as well. 3.90 Ground for Cassation 3.2.3 directs a number of complaints against the Court of Appeal's
terpretation of the terms “
vestment” and “
vestor”. 3.91 Ground for cassation (nos. 111-112) argues that, by attributing meaning to the definition of the term “
vestment”
vestor” as well. According to that ordinary meaning, a case only
volves an
vestment if a party makes an economic contribution (
the host country,
this case the Russian Federation) and is exposed to a certain risk during a certain period of time. This was not the case here, according to the ground for cassation. The Court of Appeal rejected this position
paras. 5.1.9.1-5.1.9.5. That is what Ground for Cassation 3.3 is directed against (see below). 3.92 The complaint fails to recognise that the definition of a term
a treaty according to Article 31
the
terpretation of that term. That paragraph provides: A special meaning shall be given to a term if it is established that the parties so
tended. Therefore, a term from a treaty can be given a special meaning – that is to say a meaning different from the ordinary meaning – if it is established that the contracting parties
tended to give that special meaning to that term. The most obvious evidence for such an
tention is the
clusion of a definition. It may be, therefore, that a treaty provides a definition of a certain term that differs from its ordinary meaning.
that case, that definition and not the ordinary meaning must serve as a premise, as is evidenced by Article 31
this case rightly used the definition of the term “
vestment”
The case law referred to
the ground for cassation is irrelevant because it does not relate to the ECT, but to other
vestment treaties and to the ICSID Convention. To the extent that an ordinary meaning of the term “
vestment” could be distilled from that case law, such meaning does not apply to the ECT, as that treaty has its own definition of the term “
vestment”. The complaints fail on this basis. 3.93 The ground for cassation (nos. 113-115) also complains that the Court of Appeal failed to recognise the object and purport of the ECT
terpreting the terms “
vestment” and “
vestor”. The ground for cassation
dicates that the object and purport of the ECT are to promote
ternational
vestments. Supposedly, the Court of Appeal erred
holding
para. 5.1.7.3 that this did not allow the conclusion that the ECT imposes further requirements on the foreign nature of an
vestment. 3.94 The Court of Appeal held
para. 5.1.7.3 that the purport of the ECT did
deed
clude the promotion of
ternational cooperation
the field of energy and the protection of
ternational
vestments. However, the Court of Appeal did not find that further requirements which requirements do not ensue from the language of Article 26 ECT and Article 1
vestment. According to the Court of Appeal, the language of those provisions is sufficiently clear on its face: according to this language, an
vestment is covered by the scope of Article 26 ECT if the legal entity making the
vestment has been
corporated
accordance with the law applicable
the one Contracting Party and the
vestment as referred to
another Contracting Party. With this finding, the Court of Appeal did not err
its
terpretation of the law. After all,
the
terpretation of a treaty provision account must be taken of the object and purport of that treaty, but that does not mean that the object and purport can serve as a foundation for an
terpretation that is not supported by the formulation of the treaty provision. The object and purport serve as a means to establish the meaning of the words of a provision – which serve as the guiding principle – but are not more important than those words; they cannot negate those words. This means that the Court of Appeal could find that, although part of the ECT's purport is to protect
ternational
vestments, the words of the relevant provisions do not offer any support for the view that additional requirements can therefore be imposed on the
ternational nature of the
vestments or the nationality of an
vestor. This complaint of the ground for cassation fails for that reason. 3.95 The ground for cassation (no. 114) complains that the Court of Appeal failed to appreciate the context of Article 1
the State
which they are established) are not entitled to protection under the ECT if these letterbox companies are controlled by foreign
vestors from a third State. According to the complaint,
vestments by a host country's own citizens must perforce fall outside of the scope of the ECT as well. 3.96 To support the argument, the complaint refers to Article 10
vestors and a Contracting Party's “own
vestors”, according to the ground for cassation. I quote Article 10
the authentic English-language text and
the Dutch translation: Article 10 Promotion, protection and treatment of
vestments 2. Each Contracting Party shall endeavour to accord to
vestors of other Contracting Parties, as regards the Making of
vestments
its Area, the Treatment described
paragraph
vestors or to
vestors of any other Contracting Party or any third state, whichever is the most favourable. Artikel 10 Bevordering, bescherming en behandeling van
vesteringen 2. Elke Verdragsluitende Partij streeft ernaar
vesteerders van andere Verdragsluitende Partijen wat betreft het doen van
vesteringen op haar grondgebied de
het derde lid omschreven behandeling toe te kennen. 3.
dit artikel wordt onder „behandeling" verstaan een behandeling toegekend door een Verdragsluitende Partij die niet minder gunstig is dan die welke zij toekent aan haar eigen
vesteerders of aan de
vesteerders van een andere Verdragsluitende Partij of een derde staat, al naar gelang welke behandeling het gunstigst is. As the ground for cassation asserts, this article does
deed make a distinction between a
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