In December 2009, we reported that an arbitral tribunal at the Permanent Court of Arbitration had ruled that the Russian Federation was bound by the Energy Charter Treaty (ECT) despite the fact that Russia had never ratified the treaty (see Legal update, Energy Charter Treaty binds Russia). The ruling was made in three interim awards on jurisdiction and admissibility, which have now been published on the Investment Treaty Arbitration website.

The decisions relate to claims by three former shareholders in Yukos Oil Company (Yukos): Hulley Enterprises Limited (Cyprus), Yukos Universal Limited (Isle of Man) and Veteran Petroleum Limited (Cyprus). All three commenced arbitration against Russia, alleging breaches of Part III of the ECT and arguing that their investment in Yukos was expropriated. Russia signed the ECT in 1994, but has not ratified it and argued that it was not bound by the treaty. It objected to the tribunal's jurisdiction and to the admissibility of the claims. In August 2009, Russia withdrew from the ECT, terminating the provisional application of the treaty. However, this has no effect on investments made before that withdrawal took effect on 19 October 2009 (see Legal update, Russia withdrawing from Energy Charter Treaty).

The tribunal held that Russia was bound by the ECT until 19 October 2009 (when its withdrawal took effect) by virtue of Article 45. Article 45 provides that each signatory agrees to apply the ECT provisionally pending its entry into force, to the extent that such provisional application is not inconsistent with its constitution, laws or regulations. The tribunal found that the principle of provisional application was not inconsistent with the Constitution, law or regulations of the Russian Federation. Therefore, the tribunal had jurisdiction over the claims.

The tribunal went on to find that the claimants were protected investors with an investment, within the meaning of the ECT, and that their claims were admissible. The arbitration will now proceed to the merits phase.

We will provide a full report on these decisions shortly.

Source: Investment Treaty Arbitration