Tatneft v. Ukraine
| Decision Date | 24 August 2020 |
| Docket Number | Civil Action No. 17-582 (CKK) |
| Parties | PAO TATNEFT, Petitioner/Plaintiff, v. UKRAINE, Respondent/Defendant. |
| Court | U.S. District Court — District of Columbia |
Pending before this Court is Petitioner Pao Tatneft's [1] Petition to Confirm Arbitral Award and to Enter Judgment in Favor of Petitioner.1 Pao Tatneft, formerly known as OAO Tatneft, brings this action to enforce a 2014 foreign arbitral award entered in favor of Petitioner Pao Tatneft and against Respondent Ukraine by the International Arbitral Tribunal in OAO Tatneft v. Ukraine, an arbitration seated in Paris, France and conducted pursuant to the Rules of the United Nations Commission on International Trade Law ("UNCITRAL"). Pao Tatneft was awarded $112 million plus interest accruing at the U.S. dollar LIBOR rate plus 3%, compounded every three months, with further instructions about accrual of interest. See Merits Award (also referred to as the "FinalAward") , attached as Ex. A to Declaration of Jonathan Blackman, ECF No. 1-3.2
For the reasons set forth herein, the Court GRANTS Pao Tatneft's [1] Petition to Confirm Arbitral Award, and requests that the Petitioner file a proposed order of judgment reflecting the amount of the constituent parts of the award, along with a brief summary of the interest calculations, and Respondent have the opportunity to respond thereto.
Petitioner Pao Tatneft (hereinafter referred to as "Pao Tatneft" or Tatneft") is a "publicly-traded open joint stock company, established and existing under the laws of the Russian Federation. See Pao Tatneft Pet., ECF No. 1, at ¶ 1. On July 4, 1995, Tatarstan and Ukraine entered into an agreement to create CJSC Ukrtatnafta Transnational Financial and Industrial Oil Company ("Ukrtatnafta"), a Ukrainian joint stock company that operates the largest oil refinery in Ukraine, with Tatneft, Ukraine, and Tatarstan as its three major shareholders. See Declaration of Jonathan I. Blackman in support of Petition ("Blackman Decl."), ECF No. 1-3, Ex. A (Merits Award), ECF No. 1-4, at ¶¶ 57-59. Tatneft and Tatarstan were initially slated to make capital contributions of oil-related fixed assets to Ukrtatnafta, but later agreed to make contributions of cash and other assets in 1997 and 1998. Merits Award, ECF No. 1-4, at ¶¶ 61, 174, 176.
In 1998 and 1999, the United States-based Seagroup International, Inc. ("Seagroup") and Switzerland-based AmRuz Trading Co. ("AmRuz") acquired shares in Ukrtatnafta, and togetherwith Tatneft and Tatarstan (the four entities are collectively referred to as the "Tatarstan Shareholders"), they owned a majority 56% of Ukrtatnafta's shares, and they agreed to vote as a bloc. See Merits Award, ECF No. 1-4, at ¶ 141; ECF No. 1-6, at ¶ 562 & n.903. In January 2007, the Ukrainian Privat Group acquired a 1% interest in Ukrtatnafta. Id., ECF No. 1-4, at ¶ 143; ECF No. 1-5, at ¶¶ 223, 268. The Privat Group subsequently obtained Ukrainian judgments that purportedly invalidated the 1997 and 1998 shareholder resolutions whereby Tatartan and Tatneft obtained their interests in Ukrtatnafta, and resulted in the Tatarstan Shareholders being barred from management of Ukrtatnafta and ownership of its shares. Id., ECF No. 1-4, at ¶¶ 126-28, 147, 156, 159-62, 169-71, 174-76; ECF No. 1-5, at ¶¶ 221-38, 276-80, 316, 320, 325; ECF No. 1-6, at ¶ 465.
On December 11, 2007, Tatneft sent a Notice of Dispute to Ukraine, requesting negotiations pursuant to Article 9 (1) of the Russia-Ukraine Bilateral Investment Treaty ("Russia-Ukraine BIT" or "BIT"). Merits Award, ECF No. 1-4, at ¶ 6; Blackman Decl., ECF No. 1-3, Ex. B (Russia-Ukraine BIT), ECF No. 1-8, at art. 9(1). On May 21, 2008, after trying to resolve the dispute for approximately five months, Tatneft served Ukraine with a Notice of Arbitration and Statement of Claim under UNCITRAL, alleging that Ukraine had violated its obligations with regard to granting legal protection to and disallowing discrimination against investors from Russia, such as Tatneft, under the Russia-Ukraine BIT. Merits Award, ECF No. 1-4, at ¶ 7; Russia-Ukraine BIT, ECF No. 1-8, at arts. 2, 3(1).
The Russian-Ukraine BIT provides for arbitration by "an ad hoc arbitration tribunal in accordance with the Arbitration Rules of the United Nations Commission on International Trade law (UNCITRAL)." Russia-Ukraine BIT, ECF No. 1-8, at art. 9(2)(c); Merits Award, ECF No. 1-4, at ¶ 6. Furthermore, the Russia-Ukraine BIT sets out a procedure for selecting members of the arbitral tribunal:
Each [of the] Contracting Parties shall appoint one member of the arbitration tribunalwithin two months of receiving the arbitration notice. Those two tribunal members shall then select a citizen of a third country who with the consent of both Contracting Parties shall be appointed as a chairperson of the tribunal within one month of the appointment of the two other tribunal members.
Russian-Ukraine BIT, ECF No. 1-8, at art. 10.
In accordance with the Russia-Ukraine BIT, Tatneft appointed one member of the tribunal, Professor Rudolph Dolzer, and Ukraine appointed The Honorable Marc Lalonde, and these two appointees appointed the third and presiding member of the panel - Professor Orrego Vicuña. Merits Award, ECF No. 1-4, at ¶ 8. Ukraine challenged Tatneft's appointment of Professor Dolzer, and after the challenge was sustained, Tatneft appointed the Honorable Charles N. Brower instead. Merits Decision, ECF No. 1-4, at ¶ 9. Ukraine did not object to Judge Brower or to Professor Vicuña, who is a "law professor with extensive experience as an arbitrator in international disputes, and is a judge of the International Monetary Fund's Administrative Tribunal, among other appointments." Tatneft Reply, ECF No. 35, at 8.4
Following written submissions and a hearing, the arbitral tribunal issued a September 28, 2010 decision confirming its jurisdiction over Tatneft's claims (the "Jurisdiction Decision"), and after receiving additional written submissions and documents, the arbitral tribunal held a merits hearing from March 18, 2013 to March 27, 2013, wherein fact and expert witnesses testified. Merits Award, ECF No. 1-4, at ¶¶ 6-46. On July 29, 2014, the arbitral tribunal issued its Merits Award, whereby it concluded that Ukraine's actions resulted in a "total deprivation of [Tatneft's] rights as a shareholder of Ukrtatnafta" and further, that Ukraine had failed under the Russia-Ukraine BIT to provide fair and equitable treatment (FET) to Tatneft. Merits Award, ECF No. 1-5, at ¶ 412; ECF No. 1-6, at ¶ 464. Ukraine was ordered to "pay [Tatneft] the amount of US $112million as compensation for its breaches of the Russia-Ukraine BIT" along with interest at the U.S. dollar LIBOR rate plus 3% compounded every three months, with further instructions about the accrual of interest. Merits Award, CF No. 1-6, at ¶ 642(1)-(3). Each party was ordered to bear its own costs, and each party was ordered to pay half the cost of the arbitration. Merits Award, ECF No. 1-6, at ¶ 642 (5),(6).
On July 22, 2011, in the period between the issuance of the Jurisdiction Decision and the Merits Award, Professor Vicuña was appointed as an arbitrator by Cleary Gottlieb, the law firm representing Tatneft, in an unrelated arbitration (DP World, et al. v. Republic of Peru), and he accepted the appointment on September 21, 2011. Ukraine Opp'n., ECF No. 22, at 6; Pao Tatneft Reply, ECF No. 35, at 4. The appointment was reported by Global Arbitration Review, "a publication and database that is regularly read and used by virtually all international arbitration practitioners[.]" Pao Tatneft Reply, ECF No. 35, at 9. Professor Vicuña "did not update his original disclosures in the Arbitration to include his DP World appointment." Id.
During this same period between the issuance of the Jurisdiction Decision and the Merits Award, on April 30, 2013, Ukraine's law firm from the arbitration - King & Spaulding - appointed Professor Vicuña as an arbitrator in South American Silver Ltd. v. Bolivia, a case where the claimant (represented by King & Spalding) seeks more than $300 million, and this appointment was not disclosed in the arbitration at issue in this case. Pao Tatneft Reply, ECF No. 35, at 9-10.
On August 27, 2014, Ukraine brought an action before the Paris Court of Appeal in France to annul both the Merits Award and the earlier Jurisdiction Decision. Blackman Decl. ¶ 5. On November 29, 2016, the Paris Court of Appeal rejected Ukraine's annulment request, upheld both the Jurisdiction Decision and the Merits Award, and ordered Ukraine to pay fees and costs to Tatneft. Id. In connection with Ukraine's effort to annul the Merits Award, Ukraine argued that ProfessorVicuña's failure to disclose his DP World appointment was grounds for vacating the Merits Award. See June 26, 2017 Declaration of Jean-Yves Garaud, ECF No. 16-1 ("Garaud Decl."), at ¶ 3; Ex. A-2 (Paris Court of Appeal Order), ECF 16-3, at 12.5 This argument was rejected by the Paris Court of Appeal in its November 29, 2016 decision confirming the Merits Award, when that court found that: "Ukraine fail[ed] to demonstrate how a single appointment in the course of the seven years that the arbitration lasted, which did not characterize a history of business between the arbitrator and this law firm, had the potential to raise a reasonable doubt about the independence and impartiality of Mr. Orrego Vicuña." ECF No. 16-3, at 13.
Ukraine filed a subsequent request for appeal, on March 21, 2017, to the French Court of Cassation. On December 29, 2016, Tatneft sent a letter to Ukraine demanding payment of the Merits Award amount and noting that if payment was not made by February 15, 2017, Tatneft would commence enforcement proceedings. See Blackman Decl., ECF No. 1-3, Ex. C (Dec. 29, 2016 Demand Letter), ECF No. 1-9, at 2. Tatneft filed its Petition to...
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