The court found two grounds for the refusal. First, the respondent had been unable to present his case due to the tribunal's failure to notify him of the proceedings. In the course of the case, the tribunal sent all correspondence to ZAO YUKOS RM, the respondent's management company. However, the respondent argued that since 20 June 2006 such notifications were improper as on that day Tomskneft terminated its management agreement with ZAO YUKOS RM and signed a new one with ZAO YUKOS EP.

The second ground for the refusal was that enforcement of the award could be contrary to Russian public policy. The court relied on the evidence circulated in YUKOS' civil and criminal cases in Russia and Netherlands. According to this evidence, the loan was, in fact, a fictitious transaction ordered by OAO NK YUKOS (a major shareholder of Tomskneft) to cover a return of profit back to Tomskneft which was previously withdrawn as a result of transfer pricing within the YUKOS group. The court believed that enforcement of the award, based on such a transaction, would contradict Russian public policy. However, the judges did not specify any relevant laws or specific principles.

It is unclear whether the court held that the loan agreements were invalid as they were fictitious or whether the judges based their findings just on an allegation that the agreements were fictitious. Most probably, their findings were based just on an allegation because the court did not hear the case on the merits due to limitations set by the 1958 New York Convention. Since the issue of validity of a contract concerns the merits of the case, the court was not authorised to decide on this. However, to base the decision just on an allegation appears to be unlawful.

Case: A67-1438/2010.