Russia will have to pay Naftogaz of Ukraine $5 billion for lost assets in Crimea, at least according to the Arbitration Tribunal at the Permanent Court of Arbitration in The Hague. The company, and then the court, assessed 15 oil and gas fields, 43 gas distribution stations, 29 ships and four floating drilling rigs, more than 1,000 kilometers of gas pipelines and a number of other objects at this amount.
The verdict itself is not new, the court sided with Ukraine back in 2019; now the hearings on the amount of compensation are over. Naftogaz does not particularly hope for a voluntary implementation of the decision. Already in a press release, the company speaks of mechanisms for the forced recovery of compensation from Russia “on the territory of those states” where Russian assets are located. Oleksiy Karpenko, Senior Partner at Forward Legal Law Office, comments:
“We went through this story when the same The Hague awarded the shareholders of Yukos about 55 billion, if my memory serves me right, and there were attempts to seize the property of the Russian Federation in various jurisdictions. I think that now Naftogaz will try in those countries where Russian property is found to take measures to seize this property, put it up for auction, sell it and collect money. Accordingly, Russia will defend itself by referring to state immunity, to the fact that the property claimed by Naftogaz has immunity, diplomatic immunity and cannot be arrested, cannot be sold at auction in order to pay money to the claimant, in in this case, Naftogaz. I think that this, just like in the case of the Yukos shareholder lawsuit, will last for years.”
Unlike Naftogaz, the suit of Yukos shareholders moved through the courts in the 1910s, when the West did not yet have such a “collateral” in the form of frozen Russian assets worth hundreds of billions of dollars. This week, the German Die Welt (the website of the newspaper is blocked in the Russian Federation) published an article stating that the European Commission came to the conclusion that these funds should be returned to Moscow after the end of the conflict over Ukraine. However, while the confrontation continues, the Ukrainian plaintiffs will certainly try to claim a piece of the frozen pie.
A couple of days before the verdict of the Hague arbitration, it became known about a new lawsuit against Russia – businessman Rinat Akhmetov demanded compensation for assets in the territories occupied by Russia. In both cases, the prosecution refers to the Russian-Ukrainian agreement on the protection of investments and to the actual control of Russia over these regions, even if their status is not recognized in the West. And this is hardly the last such case, continues Ekaterina Dukhina, managing partner of the law firm Dukhina and Partners, specialist in international law:
“To date, after the decision was announced, it entered into force exclusively in the state where the international tribunal took place. To enforce it, you need to go through the appropriate procedures. Within the EU there is an agreement on the mutual enforcement of the decisions of such tribunals. What worries me in this situation is that this precedent can become the basis for future court decisions against Russia on any occasion. Today there is no way to simply take and impose a penalty on the arrested gold and foreign exchange assets. Neither European legislation, nor the legislation of the Eurasian Union, nor the legislation of individual countries provides for automatic confiscation. But if there is an appropriate decision, it is possible, both in relation to the funds stored on the account and related to the Russian Federation, and in relation to property, including real estate – land plots, buildings, etc.
On Thursday, the press secretary of the Russian president, Dmitry Peskov, said that the relevant departments are already studying the position of The Hague and are preparing further actions. As a Kremlin spokesman put it, the “litigation” is not new, but the solution is new, “needs to be analyzed.” The Russian side has previously — both after the initial arbitration decision in favor of Naftogaz and in similar cases — declared that it did not recognize the jurisdiction of the court or disagreed with the verdicts.
