WASHINGTON, Sept. 11, 2014 /PRNewswire-USNewswire/ -- The Stockholm District Court today dismissed the Russian Federation's jurisdictional challenge to a previous arbitration ruling that ordered Russia to compensate a group of Spanish investors for the losses they suffered when the government expropriated the Yukos Oil Company, one of the largest oil and gas companies in the world. The Court also awarded costs to the Spanish funds.
Russia asked the Stockholm court to declare that an international arbitral tribunal had no authority under the Spain-Russia bilateral investment treaty to hear Spanish investor claims regarding the seizure of Yukos. The Swedish court soundly rejected Russia's challenge.
The Swedish court concluded that the bilateral investment treaty between Spain and Russia gave the arbitration tribunal authority to hear the Spanish claims and dismissed Russia's action. It then concluded that despite Russia's objections, the Spanish funds should be awarded costs.
In July 2012, the arbitral tribunal Jan Paulsson, Toby Landau and Judge Charles Brower concluded unanimously that Russia expropriated Yukos and compensation is due to Spanish minority investors.
The case, Quasar de Valores et al. v. Russian Federation, is one of three investment treaty arbitrations where Russia has been found liable for the expropriation of Yukos. The tribunals in all three arbitrations decided that Russia's tax measures against Yukos, its enforcement of those measures, including the rigged auction of Yukos's most valuable asset, and the subsequent liquidation of Yukos in bankruptcy proceedings constituted an expropriation.
The Swedish court decision rejecting Russia's jurisdictional challenge comes on the heels of a July 18 arbitration ruling under the Energy Charter Treaty that also found Russia had expropriated Yukos and ordered it to pay $50 billion in compensation to the company's majority shareholders.
"The writing is on the wall. Once again, Russia has been held accountable for its actions," said Marney Cheek, a partner at Covington who represents the Spanish investors. "Now that the Swedish court has rejected Russia's challenge, we call upon Russia to accept its international responsibility to compensate Yukos investors."
"This decision is significant because it suggests that Russia will have no more success avoiding its treaty obligations in appeals to national courts than it had in the underlying arbitrations," said partner Jonathan Gimblett, who represented the Spanish minority shareholders alongside Ms. Cheek.
Russia has initiated a second action to challenge the merits award in the Swedish courts, but that challenge has been stayed pending the Stockholm District Court proceeding decided today.
In addition to Ms. Cheek and Mr. Gimblett, the Covington team involved in the original arbitration included former partner O. Thomas Johnson, Jr., partner David Pinsky, and associates Alexia DePottere-Smith and Alexander Berengaut. Mr. Johnson retired from Covington in April 2012.
Covington's Swedish co-counsel and counsel of record in the Stockholm District Court proceedings were Kaj Hobér of Mannheimer Swartling Advokatbyrå, Paulo Fohlin of Advokatfirman Odebjer Fohlin, and Silvia Dahlberg of Advokatfirman Vinge.
Covington's Spanish co-counsel in this representation is Jorge Capell of Cuatrecasas, Gonçalves Pereira.
In an increasingly regulated world, Covington & Burling LLP provides corporate, litigation, and regulatory expertise to help clients navigate through their most complex business problems, deals and disputes. Founded in 1919, the firm has more than 800 lawyers in offices in Beijing, Brussels, London, New York, San Diego, San Francisco, Seoul, Shanghai, Silicon Valley, and Washington.
Contact: Rebecca Carr
SOURCE Covington & Burling LLP