Naftogaz files US legal action against Russia to recover USD 5 billion awarded in The Hague

Naftogaz of Ukraine, together with five companies of Naftogaz Group, has filed a motion to the United States District Court for the District of Columbia to confirm the earlier award by the Arbitral Tribunal of the Permanent Court of Arbitration at The Hague that bound Russia to pay USD 5 billion (including interest) in compensation for the damages and lost property of Naftogaz in Crimea.

In accordance with the 1958 New York Convention, Naftogaz has the right to initiate the process of recognition of and admission to award enforcement in countries hosting Russian assets. 

Since Russia has not voluntarily paid the funds to Naftogaz as provided for by the award, we intend to leverage all available mechanisms to recover these funds. We are currently working on this in the United States and other target jurisdictions,” noted Naftogaz Group CEO Oleksiy Chernyshov.

In accordance with US laws, confirmation of the award is mandatory unless the court establishes the existence of causes to refuse or delay recognition or enforcement of the award set out in the New York Convention. Interest for non-payment of funds in accordance with the award continues to accrue until the full payment of compensation under the award.

For reference:

On 12 April 2023,  the Arbitral Tribunal of the Permanent Court of Arbitration at the Hague ordered Russia to pay USD 5 billion in compensation for losses caused by the seizure of Naftogaz Group’s assets in the Autonomous Republic of Crimea in 2014. The verdict came following hearings to determine the amount of compensation. These hearings ended in March 2022 amid Russia’s full-scale invasion of Ukraine.

Background: In October 2016, Naftogaz and six other companies of Naftogaz Group initiated arbitration proceedings (PCA case No. 2017-16) against Russia based on an agreement between the Cabinet of Ministers of Ukraine and the Government of the Russian Federation on the Encouragement and Mutual Protection of Investments (Ukrainian-Russian BIT).

Naftogaz called on the Arbitral Tribunal to oblige Russia to pay compensation for breach of the BIT, including for the illegal expropriation of strategically important Naftogaz energy investments, which were among the main Russian targets in Crimea in 2014.

Oral hearings on jurisdiction and liabilities were held at the Peace Palace in The Hague in May 2018. In February 2019, the Tribunal ruled in favour of Naftogaz. The Tribunal reaffirmed its jurisdiction to consider the case and established that Russia had illegally expropriated investments of Naftogaz in breach of its obligations under the BIT. Accordingly, the second phase of the arbitration proceedings was to determine the volume of compensation for losses caused to Naftogaz Group. In July 2022, The Hague Court of Appeal reaffirmed the jurisdiction of the Arbitral Tribunal over the case.

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