The dispute arose out of three loans concluded between Yukos Capital, a company organised under the laws of Luxemburg, and Okrtytoye Aktsionernoye Obshestvo "Tomskneft" Vostochnoi Neftyanoi Kompanii, a company organised under the laws of Russia. Both parties were subsidiaries of Yukos Oil.

The loans, concluded on 20 July, 27 July and 4 August 2004, exceeded 4 billion Russian rubles (together, the "Loan Agreement"). The original version of the Loan Agreement was governed by Russian law and provided for arbitration before the International Court of Commercial Arbitration of the Chamber of Commerce and Industry of the Russian Federation (ICAC). In November 2005, the parties agreed to an amendment modifying the dispute resolution provisions, providing for the Loan Agreement to be governed by New York law and providing for arbitration under the auspices of the International Chamber of Commerce (ICC), seated in New York.

Under the Loan Agreement, Yukos Capital was entitled to claim repayment of the loan before its maturation date if it had reason to believe that Tomskneft would be unable to meet its repayment obligations. Yukos Capital exercised this right on 1 December 2005, requesting repayment of the loan.

Not having received repayment, Yukos Capital filed a request for arbitration on 12 January 2006. Tomskneft received the notification by courier on 26 January 2006. In response to a letter received from Yukos on 10 March 2006 requesting its input on the nomination of a sole arbitrator, Tomskneft stated that it opposed the request and suggested a meeting between the parties to pursue a mutually acceptable agreement to their dispute. On 13 April 2006, Tomskneft acknowledged receipt of a letter from the ICC setting out the advance on costs, and replied that it opposed the procedure and denied the validity of the arbitration clause. The same day, Tomskneft was informed of the nomination of an arbitrator by the ICC Court. Draft terms of reference were received by Tomskneft on 30 June 2006, and the final version on 21 July 2006. The arbitrator forwarded the procedural timetable by fax and courier on 24 August 2006.

On 12 February 2007, the tribunal rendered its decision, ordering Tomskneft to repay Yukos Capital the principal, interest, and penalty fees provided for under the Loan Agreement, as well as the costs of the arbitration and Yukos' legal fees. The award was received by Tomsknet via DHL on 17 February 2007.

On 20 July 2010, Yukos Capital sought and obtained exequatur of the award from the President of the Paris Court of First Instance.

On the 22 February 2011, Tomskneft appealed this decision on four grounds:

The Court of Appeal held that the award could not be recognised in France and reversed the decision granting exequatur.

The court addressed Tomskneft's first and third submissions.

On the question of Yukos' legal interest in seeking exequatur, the court rejected Tomskneft's submissions, noting that, under Article 1498 of the French Code of Civil Procedure, an arbitral award may be recognised in France irrespective of the presence of assets in France or the prospects of an eventual execution of the award.

With respect to the issue of procedural fairness raised by Tomskneft, the court agreed that the tribunal had violated the adversarial principle. In arriving at this conclusion, the court noted that the arbitrator was subject to a strict obligation to respect the procedural rights even in the case of a party refusing to participate in the arbitration. In the present case, Tomskneft had denied receiving the following documents:

The court reasoned that, despite Tomskneft's refusal to participate in the case management conference and hearing, the arbitrator was still obliged to communicate the updated procedural timetable, invite Tomskneft to participate in the hearing, and invite it to present its observations on new exhibits submitted by Yukos Capital. The burden of proving that these documents had been received was borne by the party seeking enforcement. For each of the above documents, Yukos Capital had no evidence of receipt by Tomskneft. Rather, it argued that if the arbitrator had received a notice from the courier DHL, stating that it had been unable to deliver the relevant document to Tomskneft, this would have been indicated in the award. The court found that this argument did not discharge Yukos's burden of proof.

It has not yet been confirmed whether Yukus will challenge the decision before the French Supreme Court (Cour de cassation).

The decision is the second in recent months in which French courts have addressed the issue of a tribunal's obligation to respect principles of procedural fairness (see also Legal update, Paris Court of Appeal upholds arbitral award despite arguments of violation of procedural fairness).

In the present case, the court was clear that, despite a party's refusal to participate in procedural phases of an arbitration, it is still entitled to continue receiving information on any changes to the procedure, to be summoned to participate in the hearing, and to be invited to comment on any new evidence submitted by the adverse party. While past decisions have addressed arbitrators' obligation to respect principles of procedural fairness, the present decision centres as much on the obligations of a party seeking enforcement. The decision is not premised on a finding that the notices listed above were not received, but rather on a finding that the party seeking enforcement could not provide sufficient proof of their having been received.

Claimants faced with a defaulting respondent would, therefore, be well-advised to maintain detailed records of the correspondence exchanged during the arbitration, including evidence of all attempts to deliver relevant documents to the Respondent.