The Russian Federation contested the March 2022 petition filed by Yukos Capital Limited (the former structure of the liquidated Yukos Group) in the U.S. Court for the District of Columbia, and its first argument is procedural: the plaintiff served the court documents to the Russian authorities in an improper manner. Yukos Capital is asking an American court to recognize and enforce in the United States an international arbitration award that in 2021 awarded $2.6 billion with interest for recovery from Russia.
Despite geopolitical tensions in relations between Russia and the United States, proceedings in the US judicial system with the participation of official Moscow continue. The Prosecutor General’s Office is responsible for representing Russia’s interests in such international cases (since 2021, before that, the Ministry of Justice).
A “courier package” meant to notify Russia of Yukos Capital’s petition was delivered to the Ministry of Foreign Affairs in Moscow on June 29, 2022, the director general of the International Legal Remedy Center (ICHR, an autonomous non-profit organization set up specifically to escort legal defense against foreign lawsuits of the former structures of Yukos – RBC) Andrey Kondakov. After that, the MTSPZ and the Prosecutor General’s Office “began to work tirelessly to find competent lawyers” to defend against the Yukos lawsuit, Kondakov wrote.
In July 2022, Yukos Capital told the court that the court documents were actually served by mail to the head of the Russian Ministry of Foreign Affairs (Sergey Lavrov), according to a document filed with the court by representatives of the Russian Federation on November 23. To which Russia objected: in 2001, joining the Hague Convention on the Service Abroad of Judicial or Extrajudicial Documents in Civil or Commercial Matters of 1965, it made a statement that documents intended for the Russian Federation or its government should be sent “to diplomatically”, i.e. “by transmission by means of notes verbale by the diplomatic missions of foreign states”. Delivery of documents by mail is not allowed.
“Any service of procedural documents on the territory of the Russian Federation can be carried out only by Russian courts at the request of a foreign court <…>. Any direct service of procedural documents for the Russian Federation by a clerk of a foreign court on the territory of the Russian Federation by courier delivery is a violation of the sovereignty of Russia, ”Kondakov writes. “To put it simply, an attempt to deliver documents for the Russian Federation on its territory through a courier was a gross violation of the sovereignty of the Russian Federation,” he said. As a result, a note verbale was sent to the US Embassy in Moscow on September 9 to return the package of court documents.
In March 2022, Yukos Capital asked a U.S. court to uphold a Swiss arbitration award awarding $5.03 billion to Russia, including $2.63 billion in principal compensation for what the arbitration considered “illegal expropriation of loans that Yukos Capital issued to its former parent company (Yukos). If the court confirms the arbitration award, Yukos Capital will be able to claim Russian state assets in the United States.
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Yukos Capital asked the US court to make a decision upholding the arbitration award without a hearing on the merits of the case on the grounds that Russia failed to properly express its participation in the process in time (Moscow says it wants to participate, but requires proper service of documents). On the contrary, as representatives of the Russian side told the court, at the end of January 2023, Russia, having learned about Yukos’s petition to the American court even through “invalid” service of documents, immediately began looking for lawyers to participate in the process. Yukos Capital believes that Russia “is using every opportunity to delay the process.”
Russia has other arguments against the Yukos Capital lawsuit. In particular, Moscow insists that under the Foreign Immunities Act (FSIA) a US court must re-determine whether an international arbitration in Switzerland had jurisdiction to hear a dispute with Russia under the Energy Charter Treaty. Russia’s official position is that at one time it agreed to apply the treaty temporarily, but with the exception of those provisions that were contrary to Russian laws and, accordingly, could not be applied. One of these inapplicable provisions, according to Russia, was the article of the treaty on the submission of disputes to international arbitration. Yukos Capital believes that Russia, by signing this agreement in 1994, agreed to arbitrate disputes arising out of Yukos’ investments in Russia.