Investment Treaty Arbitration: Russia

Abkhazia (9 February 2011)*

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Albania (29 May 1996)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Algeria (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Angola (12 January 2011)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Argentina (20 November 2000)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Armenia (8 February 2006)

No

Yes

Yes

No

No

6 months

Yes

Yes

Austria (1 September 1991)

Yes

Yes

Yes

Yes

No

3 months

No

Yes¹

Azerbaijan (16 November 2015)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Bahrain (25 December 2015)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Belgium–Luxembourg (18 August 1991)²

Yes

Yes

Yes

Yes

No

6 months

No

Yes³

Bulgaria (19 December 2005)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Canada (27 June 1991)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Cambodia (7 March 2016)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

China (1 May 2009)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Croatia (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Cuba (8 July 1996)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Cyprus (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Czech Republic (6 June 1996)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Denmark (26 August 1996)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Ecuador (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Energy Charter Treaty (not in force)⁴

Yes

Yes

Yes

Yes

Yes

3 months

Yes

Yes

Equatorial Guinea (3 March 2016)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Eurasian Economic Union Treaty (1 January 2015)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Egypt (12 June 2000)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Ethiopia (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Finland (15 August 1991)⁵

Yes

Yes

Yes

Yes

No

3 months

No

Yes⁶

France (18 July 1991)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Germany (5 August 1991)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes⁷

Greece (23 February 1997)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Guatemala (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Hungary (29 May 1996)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

India (terminated on 27 April 2017)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Indonesia (15 October 2009)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Iran (6 April 2017)

Yes

Yes

No

Yes

No

6 months

Yes

Yes

Italy (7 July 1997)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Japan (27 May 2000)

Yes

Yes

Yes

Yes

No

No

No

Yes

Jordan (17 June 2009)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Kazakhstan (11 February 2000)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Korea (10 July 1991)

Yes

Yes

Yes

Yes

Yes

3 months

No

Yes⁸

Kuwait (30 May 1996)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Laos (22 March 2006)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Lebanon (11 March 2003)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Libya (15 October 2010)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Lithuania (24 May 2004)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Macedonia (9 July 1998)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Moldova (18 July 2001)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Mongolia (26 February 2006)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Morocco (not in force)

No

Yes

Yes

Yes

No

6 months

Yes

Yes

Namibia (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Netherlands (20 July 1991)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes9

Nicaragua (3 September 2013)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Nigeria (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

North Korea (9 January 2006)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Norway (21 May 1998)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Palestine (8 November 2017)*

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Philippines (29 November 1998)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Poland (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Portugal (not in force)

Yes

Yes

No

Yes

No

6 months

Yes

Yes

Qatar (4 June 2009)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Romania (20 July 1996)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Serbia (19 July 1996)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Singapore (16 June 2012)

Yes

Yes

No

Yes

No

6 months

Yes

Yes

Slovakia (2 August 1996)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Slovenia (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

South Africa (12 April 2000)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

South Ossetia (10 February 2011)*

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Spain (28 November 1991)

Yes

Yes

Yes

Yes

No

6 months

No

Yes10

Sweden (7 July 1996)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Switzerland (26 August 1991)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes¹¹

Syria (13 July 2007)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Tajikistan (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Thailand (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Turkey (15 May 2000)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Turkmenistan (23 August 2010)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Ukraine (27 January 2000)

No

Yes

Yes

Yes

No

6 months

Yes

Yes

United Arab Emirates (19 August 2013)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

United Kingdom (3 July 1991)

Yes

Yes

Yes

Yes

Yes

3 months

No

Yes¹²

United States of America (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Uzbekistan (14 January 2014)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Venezuela (26 October 2009)

Yes

Yes

Yes

Yes

No

5 months¹³

Yes

Yes

Eurasian Economic Union – Vietnam (5 October 2016); Protocol No. 1 Between the Russian Federation and the Socialist Republic of Vietnam (5 October 2016); Protocol No. 2 Between the Russian Federation and the Socialist Republic of Vietnam (5 October 2016)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Vietnam (3 July 1996)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Yemen (21 July 2005)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Zimbabwe (10 September 2014)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Seat of the investor

Most Russian investment treaties, as well as the 2001¹⁴ and the 1992¹⁵ Russian model BITs, provide that a juridical person incorporated or duly organised according to the laws of a contracting party is an ‘investor’. However, 18 BITs in force (including treaties with Austria, Belgium/Luxembourg, China, France and others) require that the investor also have its ‘seat’ within the territory of the relevant contracting party. Additionally, some BITs in force (eg, with Switzerland) require that the investor carry out economic activities in the contracting party in addition to incorporation there.¹⁶ The 2016 Guidelines on the negotiation of BITs¹⁷ stipulate that BITs should require that investors carry out ‘substantial economic activity’ in the contracting party. Conversely, the Philippines BIT extends protection to companies not incorporated in a contracting party but effectively controlled by nationals or companies of that contracting party.

Legal capacity to invest

Several Russian BITs (including treaties with Argentina, the Czech Republic, Egypt, Spain, Switzerland, Ukraine and Lithuania) stipulate that in order to qualify for protection as an ‘investor’, a legal person must have the capacity under the laws of its home jurisdiction to invest in the other contracting party.

Control by a non-national

Most Russian BITs in force extend protection to otherwise-qualifying juridical persons that are owned or controlled by investors of a third party. The exception is the Japan BIT, which in certain circumstances excludes the application of MFN treatment to companies that are under the ‘decisive influence’ of third-party nationals. The 2016 Guidelines provide for the exclusion of companies owned or controlled by nationals of a third state.

Dual nationals

Russian BITs do not expressly exclude the protection of investments made by dual nationals. The 2016 Guidelines exclude investments made by individuals who are nationals of the host state or were nationals of the host state at the time when the investment was made. The 2016 Guidelines also provide for the exclusion of companies owned or controlled by nationals of the host state. It is notable that on 31 May 2018, Russia enacted amendments to its Foreign Investment Law stipulating, inter alia, that foreign nationals who also have Russian nationality shall not be considered foreign investors in the meaning of the Foreign Investment Law. In light of these, it is expected that future Russian BITs will expressly exclude from protection investments made by dual nationals. It is noteworthy that the tribunal in a recent but yet unpublished award in Pugachev v Russian Federation rejected Russia’s argument that the Russia-France BIT did not allow claims by dual nationals.

Permanent residents

With respect to natural persons, the concept of ‘investor’ in Russian BITs is normally limited to citizens or nationals of a contracting party. This is the approach adopted in the 2001 and 1992 model BITs, as well as in the 2016 Guidelines. However, three BITs (with Canada, Germany and Kazakhstan) also extend protection to permanent residents of a contracting party. The Argentina BIT disqualifies Russian citizens who, at the time when the investment was made, had been living in Argentina for more than two years, unless it is proven that the source of the investment was foreign.

Eligible assets

Russian BITs include a broad, non-exhaustive definition of eligible assets. Typically the definition of investment expressly includes shares and other forms of participation in legal entities. However, the 2016 Guidelines provide that future BITs shall apply only to specific assets listed in an annex to each BIT. The 2016 Guidelines also provide that BITs shall not apply to services ‘provided for the purposes of performing state functions by governmental bodies of the state party or legal entities authorised to perform such duties by a state party’. Such services shall include ‘services and other types of activities supplied or performed not for the purpose of obtaining profits and in the absence of competition of other commercial entities’. This guideline appears to carve out such sectors as utilities, which in Russia are referred to as ‘natural monopolies’, from the sphere of application of future BITs.

Indirect control of assets

Neither the 2001 nor the 1992 model BIT specifies whether indirectly controlled investments are protected. The majority of Russian BITs follow this approach, with the exception of six BITs in force (with Belgium/Luxembourg, Canada, France, Kuwait, Sweden and Switzerland), which expressly cover investments made through an intermediary entity incorporated in a third party.¹⁸

Commencement of coverage

The 1992 and 2001 Russian model BITs, as well as the 2016 Guidelines, restrict the scope of protection to investments made after the BIT’s entry into force. However, the majority of Russian BITs (with the exception of several treaties in force, such as treaties with Angola, Armenia, Jordan, Qatar and Syria) do not follow this approach. Typically Russian BITs specify that investments made after a certain date prior to the conclusion of the BIT benefit from protection. For example, the BIT with France applies to investments made since 1 January 1950. Some other treaties stipulate that only disputes arising after the entry of the treaty into force can be brought under the treaty (BITs with China, Indonesia, Kazakhstan, Libya, Lithuania, Singapore and Venezuela). Several BITs do not address the scope of temporal application (those with Cuba, Philippines and Romania).

Accordance with local laws

Most Russian BITs, following the 1992 and 2001 model BITs, stipulate that only investments made in accordance with the law of the host state benefit from BIT protection (with the exception of the BITs with Bulgaria, Canada, Japan, Republic of Korea and Switzerland). The 2016 Guidelines contain a similar provision: however, they also stipulate that this should be without prejudice to the host state’s obligations under the relevant BIT.

Relationship with customary international law

All Russian BITs in force (with the exception of the treaties with Ukraine and Armenia) include a fair and equitable treatment clause. The wording of the fair and equitable treatment provision in Russian BITs is generally standard. Only a few BITs (eg, the treaties with Canada and France) refer to fair and equitable treatment as being ‘in accordance with principles of international law’. In a departure from earlier Russian BIT practice, the 2016 Guidelines do not envisage that future BITs should contain a fair and equitable treatment clause; however, they envisage a prohibition of arbitrary treatment in future BITs, stipulating that laws and other regulations of general application ‘shall be applied reasonably, objectively and impartially’.

Adequate and effective compensation

Both the 1992 and 2001 model BITs, as well as the 2016 Guidelines, provide that investments may only be nationalised when such a measure is accompanied by prompt, adequate and effective compensation. Most Russian BITs impose this same requirement, with some exceptions. For example, the BIT with Spain refers to ‘appropriate’ compensation, while the BIT with the Netherlands provides for ‘just’ compensation, representing the ‘real value’ of the investment.

Prompt compensation

Both the 1992 and 2001 model BITs provide that compensation for expropriated property shall be paid ‘without undue delay’. There is some variation in Russian BIT practice in this regard. While some treaties follow the model approach (eg, the treaty with Spain), most stipulate a specific deadline within which compensation must be paid (eg, two months in the BITs with Canada and Korea; three months in the treaties with Italy, Austria and Finland). The 2016 Guidelines provide that, in the event that such compensation is delayed, investors would be entitled to interest at market rates.

Valuation of the investment for the purposes of compensation

The 2001 Russian model BIT provides that the market value of the investment is to be determined for the purposes of compensation as of the date when it became known that the asset in question would be nationalised, while the 1992 BIT stipulated that market value should be assessed as of the moment immediately prior to the announcement of the nationalisation. The 2016 Guidelines similarly stipulate that the fall in value of the expropriated investments should be taken into account if it took place as a result of the planned or completed expropriation becoming public. These approaches have been followed in several treaties in force (eg, the BITs with Greece, Denmark and Romania follow the 1992 model and the BIT with Armenia follows the 2001 model). Some BITs offer a choice between these two dates (eg, the BIT with the Czech Republic).

Indirect expropriation

Most Russian BITs, in line with the 1992 and 2001 model BITs, expressly prohibit measures tantamount or having an effect equivalent to expropriation (eg, BITs with France, Singapore and the UK). The 2016 Guidelines clarify that the fact that an investment was damaged, including by measures undertaken by the host state, does not automatically mean that such investment was expropriated: BITs should stipulate that, in determining whether expropriation has taken place, the character, nature as well as the achieved and declared aims of the government measures should be taken into account. The impact of the measures on the fair market value of the investments, as well as the duration and consequences of the measures should also be taken into account when determining whether they amount to expropriation. The 2016 Guidelines also specify that the following do not constitute expropriation: interim measures undertaken by the host state's courts, taxation measures (so long as they are not arbitrary or discriminatory based on the origin of capital), customs regulation measures, compulsory IP licences and emergency seizure as a result of natural disasters.

Right to arbitration

A number of Russian BITs only provide a right to arbitration where a dispute relates to the amount of compensation payable as a result of the expropriation of property. 

Scope

While the majority of Russian BITs feature both national treatment and most-favoured-nation clauses, some do not contain either guarantee (eg, the BIT with Armenia). The treaties with Belgium/Luxembourg, Germany, Switzerland and the Netherlands only establish MFN treatment, but not national treatment.

Exceptions to national treatment

The 1992 Russian model BIT reserved the state parties’ right to identify industries and spheres of activity in which foreign investment is prohibited or restricted, while the 2001 model gives the state parties even broader discretion to ‘apply and introduce exemptions from national treatment with respect to foreign investors and their investments, including reinvested investments’. Most Russian BITs contain similar exceptions to national treatment. Many treaties, including the BITs with Albania, Bahrain, Bulgaria, Cuba, the Czech Republic, Egypt, Hungary, Kazakhstan and Lithuania, follow the 1992 model, and the treaties with Azerbaijan, Cambodia, Denmark, Equatorial Guinea, Greece, Iran, Indonesia, Jordan, Korea, Nicaragua, Singapore, the UAE, Uzbekistan and Zimbabwe follow an approach similar to the 2001 model BIT (some of these latter treaties specify that such exceptions to national treatment will apply only to investments made after entry into force of the exception). Ten BITs (those with Argentina, Austria, Canada, China, Finland, France, Italy, Norway, Spain, and Turkey) contain no such exception.

Exceptions to benefits under certain other treaties

The 1992 model BIT provides that the MFN regime will not apply to benefits under free trade agreements, customs or economic unions, as well as under double-taxation treaties and other fiscal agreements. The 2001 model adds to this list of carve-outs any agreements with former republics of the USSR. It also provides that the contracting parties will accord to each other a regime no more favourable than that imposed by the WTO (see, eg, BITs with Venezuela, Jordan and Singapore). Most Russian BITs contain exceptions along these lines. The 2016 Guidelines specify that an MFN clause cannot be used to import dispute resolution mechanisms from other treaties.

Extent of obligations

Most Russian BITs contain a full protection and security guarantee (with the exception of the BIT with Singapore). However, the precise formulation varies slightly from treaty to treaty. The 1992 model refers to ‘full and unconditional protection in accordance with legislation [of the host state]’, while the 2001 model BIT stipulates that the host state ‘guarantees full protection, in accordance with its legislation, of investments in its territory by investors of the other Contracting Party’. The slightly narrowed protection and security guarantee of the 2001 model has been used in many recent BITs (including those with Armenia, Indonesia, Syria and Zimbabwe), while the somewhat more robust 1992 formulation has been incorporated into older treaties (eg, the BITs with Albania and Slovakia). Some BITs limit the protection guarantee to ‘legal protection’ (eg, the BIT with Kazakhstan). The 2016 Guidelines do not envisage including the full protection and security guarantee in future BITs.

Scope

The 1992 and 2001 model BITs, like the majority of Russian BITs, do not include umbrella clauses, and the 2016 Guidelines do not envisage the inclusion of such clauses in Russia’s future BITs. Only 12 Russian BITs in force contain umbrella clauses (those with France, China, Germany, Greece, Denmark, Japan, Korea, Kuwait, the Netherlands, Switzerland, Turkey and the UK).

Wording

The few Russian BITs that contain umbrella clauses stipulate that the host state shall observe ‘any obligation’ it may have ‘entered into with regard to’ investments of the other contracting party’s investors.

Armed conflict/civil unrest

The 2001 Russian model BIT, unlike its 1992 predecessor, introduces ‘most favoured nation’ treatment with respect to compensation paid to local investors or third-party nationals in the case of armed conflict, civil unrest or similar circumstances. This guarantee appears in many of the BITs that the Russian Federation has concluded since 2001 (including treaties with Venezuela, Libya, Syria and Yemen), as well as in certain earlier treaties (such as the BITs with Canada, Italy and the UK). The 2016 Guidelines also recommend that such a provision be included.¹⁹

Free transfer of payments

The free transfer of payments guarantee is typical of Russian investment treaties, and is found in the 1992 and 2001 model BITs, in the 2016 Guidelines and virtually all Russian BITs in force. The guarantee generally specifies that transfers should be permitted in a convertible currency. This right of the investor is usually subject to the satisfaction of applicable tax requirements. Some BITs also stipulate that the transfer be made in accordance with the exchange regulations in force in the host state (including the BITs with Belgium/Luxembourg and Denmark).

Scope of arbitration clause

A number of Russian BITs concluded in the late 1980s and in the 1990s include an arbitration clause of limited scope, providing consent to resolve only disputes related to the ‘amount or mode of payment of compensation for expropriation’ (the BITs with Belgium/Luxembourg, Finland and Spain). The scope of the arbitration clause of several other BITs is limited to questions regarding the breach of the free transfer provision, as well as the amount of compensation for expropriation (the BITs with Austria, Germany, Switzerland, Korea, the Netherlands and the UK). Claimants in a number of cases have argued that such apparently narrow arbitration clauses should nevertheless be interpreted to authorise the tribunal to determine whether expropriation has taken place. While this argument was rejected by the tribunal in Berschader v Russian Federation,²⁰ more recently some tribunals have viewed such clauses as sufficiently broad to adjudicate the fact of expropriation as well as appropriate compensation.²¹ Claimants have also invoked the most-favoured-nation clauses in Russian treaties to access less restrictive arbitration clauses in other Russian BITs, with varied success.²² A few Russian BITs have clauses that contain closed lists of issues that can be brought to investor-state arbitration, such as the effects of a measure taken by the host state on the management, use, enjoyment or disposal of an investment (see, eg, BITs with Canada and France). Arbitration clauses in more recent Russian BITs, as well as the 1992 and 2001 model BITs and under the 2016 Guidelines, are broad.

Institutional or ad hoc arbitration

The 1992 model BIT gives the investor the choice between arbitration under the Rules of the Arbitration Institute at the Stockholm Chamber of Commerce (SCC) or ad hoc arbitration under the UNCITRAL Rules. The 2001 model has replaced SCC arbitration with arbitration under the ICSID Convention or the ICSID Additional Facility Rules (in case the ICSID Convention has not entered into force for one or both of the contracting parties when arbitration is initiated). BITs concluded in the 1990s generally provide for SCC arbitration and UNCITRAL ad hoc arbitration (including the BITs with Belgium/Luxembourg, the UK and Spain), while some subsequent BITs provide a choice between ICSID/ICSID Additional Facility arbitration and UNCITRAL ad hoc arbitration (for example, the treaties with Yemen, Syria and Singapore). A number of BITs only provide for ad hoc arbitration: with no rules stipulated (the Netherlands, Switzerland and Germany) or under the UNCITRAL Rules (Canada, France and Egypt). The 2016 Guidelines provide for the possibility of both institutional and ad hoc arbitration, as agreed in future BITs; the Guidelines do not prescribe which institutional rules should be used.

Local arbitration as dispute resolution option

Many Russian BITs in force, following the model BITs of 1992 and 2001, include references to a ‘competent court of arbitration of the Contracting Party’ alongside references to competent state courts as a possible avenue of recourse for the investor (including treaties with Lithuania, the Czech Republic, Italy and South Africa). It is unclear whether this is a reference to the system of Russian state commercial courts (known in Russia for historical reasons as arbitrazh or ‘arbitration’ courts), or whether this is indeed a submission to the jurisdiction of a local arbitral institution of the host state (such as arbitration under the rules of the Vilnius Court of Commercial Arbitration in the case of the Russian Federation–Lithuania BIT). Given the lack of specificity in indicating the competent local arbitral institution, the better view seems to be that references to a ‘competent court of arbitration’ of the host state was intended to refer to state economic courts. Furthermore, several BITs (including those with Argentina and Kazakhstan) separately list the option of ‘an international arbitration court of one of the chambers of commerce with the consent of both parties to the dispute’.

Cooling-off periods

The 1992 and 2001 model BITs both impose six-month cooling-off periods, and the 2016 Guidelines similarly recommend the inclusion of such a period in Russia’s BITs. Most Russian BITs in force contain a six-month cooling-off period, with the exception of the BITs with Austria, Finland, the Republic of Korea and the UK, which provide for a three-month cooling-off period, and the Venezuela BIT, which stipulates a five-month cooling-off period and an additional three-month period from the notice of the dispute for the parties to agree on a dispute resolution procedure. The Japan BIT does not impose a specific cooling-off period. Unusually, the 2016 Guidelines also suggest that future BITs impose a statute of limitations on treaty claims, whereby a notice of dispute cannot be sent more than two years after the investor learnt or should have learnt about the events giving rise to the claim; once a notice has been sent, arbitration would have to be initiated within three years of the notice.

Fork-in-the-road provisions

Fork-in-the-road provisions are uncommon in Russian BITs,23 although the 2001 model BIT requires that the investor choose between domestic litigation/arbitration and international arbitration (similar provisions are contained in the BITs with Angola, Bulgaria, China, Japan and Nicaragua).

Governing law

The 1992 and 2001 model BITs, as well as the 2016 Guidelines, do not specify what law is to be applied by the arbitral tribunal, and neither do most of Russia’s BITs. Several Russian BITs provide that the tribunal should apply, in addition to the treaty itself, the local law of the state parties and general principles of public international law (the treaties with Austria, Belgium and Luxembourg, China and Spain). The BIT with Italy indicates that the tribunal should apply the treaty itself and general principles of international law, while the BIT with the Netherlands stipulates that the tribunal must make its decision ‘on the basis of respect for the law’.

Suspension of the arbitration pending state consultations

The 2016 Guidelines recommend that future BITs provide for the possibility of consultations between state parties to the BIT with a view to rendering a binding interpretation of the provisions of the BIT raised in a dispute. Such consultations can be initiated at any time after the host state is notified of the dispute. In a novel development, no arbitration can be commenced pending the outcome of such consultations: if the arbitration has already been commenced it shall be suspended until the consultations have concluded. It remains to be seen whether such provisions will be included in future Russian BITs.

A notice of dispute against the Russian Federation should be sent to the Ministry of Justice.

Pursuant to Presidential Order No. 271 dated 28 May 2018, the Ministry of Justice is responsible for representing the Russian Federation in international arbitrations.

The Russian government has typically used external counsel in investment treaty arbitrations.²⁴ As part of a policy for reducing the government’s reliance on foreign advisers (‘import replacement’), the Russian government sought advice on investment treaty disputes from the government-affiliated International Centre for Legal Defence.²⁵

Russia signed the Washington Convention on 16 June 1992, but has not ratified it.

Russia is a state successor to the USSR, which signed and ratified the New York Convention by Order of the Presidium of the Supreme Council of the USSR of 10 August 1960. The New York Convention is currently implemented by the Law on International Commercial Arbitration, 7 July 1993 (as amended) and the Commercial Arbitrazh Procedure Code, Chapter 31.

Russia does not have a law that would specifically govern investment treaty arbitration. Any investment treaty arbitration, whether ICSID or non-ICSID, seated within its territory would be governed by the Law on International Commercial Arbitration, 7 July 1993 (as amended). The applicable legal regime would generally be the same as for commercial arbitration.

Russia appears to have failed to honour all of the awards in the public domain that have been rendered against it. It has challenged awards in local courts at the seat of arbitration (eg, in Swedish courts in the case of RosInvestCo v Russian Federation),²⁶ and has vigorously resisted the seizure of its assets by foreign courts pursuant to arbitral awards against it (eg, in German and Swedish courts in the case of Sedelmayer v Russian Federation).²⁷ On 18 July 2014, the Tribunal in the three parallel Yukos arbitrations against Russia brought under the Energy Charter Treaty has rendered the largest ever awards in the history of international arbitration (totalling US$50.2 billion in damages).²⁸ The Russian government challenged these awards in Dutch courts, The Hague being the seat of those arbitrations. On 20 April 2016, the District Court in The Hague set them aside, holding that the Tribunal could not have established jurisdiction based on the provisional application of the Energy Charter Treaty. Russia has also resisted the enforcement of the Yukos awards in a number of jurisdictions, and the Yukos claimants halted their attempts when The Hague District Court set the awards aside. On 18 February 2020, the Hague Court of Appeal reversed the lower court’s judgment and hence reinstated the awards. The Russian Federation has filed an appeal with the Dutch Supreme Court against the Court of Appeal in The Hague’s decision; this appeal is currently pending.

The attitude of the Russian government towards investment treaty arbitration is complex. On one hand, it has found itself at the receiving end of a number of investment treaty claims, some of particular political sensitivity (such as the multiple claims filed in relation to the Yukos saga or to the expropriation of assets in Crimea).²⁹ Russian officials have condemned, citing sovereign immunity, the enforcement of such awards against Russian state assets.³⁰ Most recently, the Russian government has condemned the awards against it in the Yukos-related arbitrations as politically motivated.³¹ While the Russian government chose, until recently, not to appear in the arbitrations arising out of the Crimean expropriations, it changed its strategy in mid-2019, appearing in the proceedings that were still pending and seeking the revision or set aside of awards already rendered.³² It is understood that Russia has refused to ratify the BIT with Cyprus and the Energy Charter Treaty because of the risk of claims under these treaties.³³ The Energy Charter Treaty was signed by the Russian Federation and provisionally applied until 18 October 2009, but it is not currently in force. On the other hand, the government has recognised the importance of investment treaty arbitration in protecting the rights of Russian investors abroad and has continued actively to negotiate robust investment protection treaties with jurisdictions it views as target locations for Russian investment.³⁴ The 2016 Guidelines prioritise the conclusion of BITs with countries where Russian investors have significant commercial interests.³⁵

Russian courts have never had to deal with an investment treaty arbitration seated in Russia. On 11 March 2019, the Arbitrazh Court for the Stavropol Region enforced the award in Tatneft v Ukraine against Ukraine’s property in that region.36 This is the first time that a Russian court has been called upon to enforce an investment treaty award. The decision of the Arbitrazh Court for the Stavropol Region followed an initial judgment of the Arbitrazh Court of Moscow which refused Tatneft’s enforcement bid, primarily on the grounds of sovereign immunity;37 however, the latter judgment was overruled by the Moscow circuit court.38 Russian courts have never been asked to enforce an award against the Russian Federation.

No

Yes39

Yes (protection and security; tax stability for up to seven years; free transfer of payments and other protections)

When provided for by law or an international treaty

When provided for by law or an international treaty

N/A

N/A

The Law provides that Russian organisations implementing investment projects in Russia (including foreign-owned companies) may enter into agreements for the promotion and protection of investments with Russia or its constituent entities. In exchange for the organisation’s commitment to invest over a certain threshold, the legal and regulatory regime applicable to such organisations may be stabilised, including in respect of taxes, customs duties and certain regulatory matters.

By default

If agreed between the parties. The arbitration must be seated in Russia and administered by a permanent arbitral institution (as defined in the Russian legislation, ie, an institution holding a special permit from the Russian government or exempted from that requirement).

No

Does not prohibit expropriation, but states that investments can only be nationalised if advance and equivalent compensation is paid.

Yes (national treatment; tax stability for up to seven years)

When provided for by law or an international treaty

When provided for by law or an international treaty

Multilateral Investment Guarantee Agency

Russia has ratified the Convention establishing the Multilateral Investment Guarantee Agency (MIGA) (Seoul, 11 October 1985).⁴⁰ Under the treaty Russian nationals and corporates are eligible to acquire, for the payment of a premium, political risk insurance from MIGA in respect of investments made in certain developing states provided that certain conditions are met. To be eligible for assistance, the investment must be medium to long term in nature, support the host country’s development goals, comply with MIGA’s Policy on Social and Environmental Sustainability and anti-corruption and fraud standards, and also be financially viable.

The Russian Agency for Export Credit and Investment Insurance (EXIAR)

EXIAR, which was established by Russian Government Decree No. 964 dated 22 November 2011, is the Russian government’s export credit agency. It insures exports of Russian goods and services abroad, provides export finance and insures Russian investments overseas. A Russian investor can insure funds invested overseas (such as investments into the statutory capital of local subsidiaries or shareholder loans) as well as an appropriate return on investments against a loss of control and/or ownership over investments or against the impossibility to conduct business activity as a result of political risks in the host state (for example, expropriation, nationalisation, moratorium, embargo, war, military operations, revolution or changes in legislation).

Sedelmayer v Russian Federation, ad hoc arbitration, Final Award, 7 July 1998.

Iurii Bogdanov, Agurdino-Invest Ltd and Agurdino-Chimia JSC v Republic of Moldova (SCC), Final Award, 22 September 2005.

Berschader and Berschader v Russian Federation, (SCC Case No 080/2004), Final Award, 21 April 2006.

RosInvestCo UK Ltd v Russian Federation (SCC Case No. Abr. V 079/2005), Award on Jurisdiction, 5 October 2007.

TSIKInvest LLC v Moldova (SCC Emergency Arbitration EA 2014/053), Emergency Decision on Interim measures, 29 April 2014.

RosInvestCo UK Ltd v Russian Federation, (SCC Case No. Abr. V 079/2005), Final Award, 12 September 2010.

Region of Kaliningrad v Lithuania (ICC) Final Award, 28 January 2009.

Yukos Universal Ltd v Russian Federation (PCA Case No. AA 227), UNCITRAL ad hoc arbitration, Interim Award on Jurisdiction and Admissibility, 30 November 2009.

Veteran Petroleum Ltd v Russian Federation (PCA Case No. AA 228), UNCITRAL ad hoc arbitration, Interim Award on Jurisdiction and Admissibility, 30 November 2009.

Hulley Enterprises Ltd v Russian Federation (PCA Case No. AA 226), UNCITRAL ad hoc arbitration, Interim Award on Jurisdiction and Admissibility, 30 November 2009.

Renta 4 SVSA and ors v Russian Federation (SCC Case No 24/2007), Award on Preliminary Objections, 20 March 2009.

Quasar de Valores SICA SA (formerly Renta 4) and ors v Russian Federation (SCC Case No 24/2007), Final Award, 20 July 2012.

Yury Bogdanov v Republic of Moldova (SCC Arbitration No. V (114/2009)), Final Award, 30 March 2010

Tatneft v Ukraine, UNCITRAL ad hoc arbitration, Partial Award on Jurisdiction, 28 September 2010 (not public)

Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v The Government of Mongolia, UNCITRAL ad hoc arbitration, Award on Jurisdiction and Liability, 28 April 2011

Cesare Galdabini Spa v Russian Federation, UNCITRAL ad hoc arbitration, Final Award, May 2011 (not public)

Mobile TeleSystems OJSC v Turkmenistan, ICSID Case No. ARB(AF)/11/4, (discontinued on 21 September 2012).

Yuri Bogdanov and Yulia Bogdanova v Moldova, SCC Case No. 091/2012, Final Award, 16 April 2013

Russian Federation v RosInvestCo Ltd, SVEA Court Ruling, 5 September 2013

Yukos Universal Ltd v Russian Federation (PCA Case No. AA 227), UNCITRAL ad hoc arbitration, Final Award, 18 July 2014

Veteran Petroleum Ltd v Russian Federation (PCA Case No. AA 228), UNCITRAL ad hoc arbitration, Final Award, 18 July 2014

Hulley Enterprises Ltd v Russian Federation (PCA Case No. AA 226), UNCITRAL ad hoc arbitration, Final Award, 18 July 2014

Valle Esina SpA v Russian Federation, UNCITRAL ad hoc arbitration, Award, June 2014 (not public)

Gazprom v Lithuania (PCA Case No. 2011-16), UNCITRAL ad hoc arbitration, discontinued in April 2015

Tatneft v Ukraine, UNCITRAL ad hoc arbitration, Award on the merits, 29 July 2014.

Russian Federation v GBI 9000 SICAV SA and ors, Stockholm District Court, Judgment, 11 September 2014

Sana Consulting v Russian Federation, UNCITRAL ad hoc arbitration, Final Award, June 2015 (not public)

Russian Federation v GBI 9000 SICAV SA and ors, Svea Court of Appeal, Judgment, 18 January 201.

Russian Federation v Veteran Petroleum and ors, The Hague District Court, Judgment, 20 April 2016

Russian Federation v Hulley Enterprises Ltd, The Hague District Court, Judgment, 20 April 2016

Russian Federation v Yukos Universal Limited, The Hague District Court, Judgment, 20 April 2016

Evrobalt LLC v Moldova (SCC Emergency Arbitration EA 2016/082), Award on Emergency Measures, 30 May 2016

Kompozit LLC v Moldova (SCC Emergency Arbitration EA 2016/082), Emergency Award on Interim Measures, 14 June 2016.

Igor Kolomoisky and Aeroport Belbek LLC v Russian Federation, UNCITRAL (PCA Case No. 2015-07), Award on Jurisdiction, 24 February 2017 (not public)

Privatbank and Finance Company Finilon LLC v Russian Federation, UNCITRAL (PCA Case No. 2015-21), Award on Jurisdiction, 24 February 2017.

Everest Estate LLC and others v Russian Federation, UNCITRAL (PCA Case No. 2015-36), Decision on Jurisdiction, 20 March 2017 (not public)

Luxtona Ltd v Russian Federation (UNCITRAL), Award on Jurisdiction, 22 March 2017

Stabil LLC and others v Russian Federation, UNCITRAL (PCA Case No. 2015-35), Award on Jurisdiction, 26 June 2017

PJSC Ukrnafta v Russian Federation, UNCITRAL (PCA Case No. 2015-34), Award on Jurisdiction, 26 June 2017

Evrobalt LLC v Moldova (SCC Emergency Arbitration EA 2016/082), Award, 2017 (not public, exact date unknown).

Kompozit LLC v Moldova (SCC Emergency Arbitration EA 2016/082), Award, 2017 (not public, exact date unknown.

Everest Estate LLC and others v Russian Federation, UNCITRAL (PCA Case No. 2015-36), Final Award, 2 May 2018 (not public)

Russian Federation v GBI 9000 SICAV SA and ors, Svea Court of Appeal, Judgment, 7 June 2018

Everest and os v Russian Federation, Kyiv Court of Appeal, 25 September 2018

Tatneft v Ukraine, Arbitration Court of Moscow City, City of Moscow Case No A40-67511 / 17-29-659

Oschadbank v Russian Federation, (UNCITRAL ad hoc arbitration), Final Award, 26 November 2018

Oschadbank v Russian Federation, Decision of the Kyiv Court of Appeal, 17 July 2019

Russian Federation v Oschadbank, Decision, Paris Court of Appeal, 22 October 2019

Igor Kolomoisky and Aeroport Belbek LLC v Russian Federation, (PCA Case No. 2015-07), Award on liability, jurisdiction and admissibility, 4 February 2019

PJSC Ukrnafta v Russian Federation, (PCA Case No. 2015-34), UNCITRAL ad hoc arbitration, Final Award, 12 April 2019

Russian Federation v PJSC Ukrnafta, Swiss Federal Tribunal, 12 December 2019

Stabil LLC and others v Russian Federation (PCA Case No. 2015-35), Final Award, 12 April 2019

Oleg Deripaska v Montenegro, (PCA Case No. 2017-07), Award on Jurisdiction, 15 October 2019

PJSC Gazprom v Ukraine (PCA Case No 2019-10), Settlement, 30 December 2019

Tenoch Holdings Limited, Mr Maxim Naumchenko and Mr Andrey Poluektov v The Republic of India (PCA Case No 2013-23), Final award, 20 January 2020 (not public)

Veteran Petroleum Ltd and ors v Russian Federation, Decision, Court of Appeal of The Hague, 18 February 2020

Sergei Viktorovich Pugachev v Russian Federation, UNCITRAL ad hoc arbitration, Award on Jurisdiction, 22 June 2020

Privatbank and Finance Company Finilon LLC v Russian Federation (PCA Case No. 2015-21), Award on liability, jurisdiction and admissibility, 4 February 2019

State Development Corporation "VEB.RF" v Ukraine, SCC Case No. 2019/113 and V2019/088, Partial Award on Preliminary Objections, 31 January 2021

OOO Manolium Processing v The Republic of Belarus, PCA Case No. 2018-06, Final Award, 22 June 2021

Yukos Capital SARL v The Russian Federation, PCA Case No. 2013-31, Final Award, 23 July 2021

Hulley Enterprises Limited (Cyprus), Yukos Universal Limited (Isle of Man) and Veteran Petroleum Limited (Cyprus) v Russia, Supreme Court of the Netherlands, 5 November 2021

Sergei Pugachev v Russian Federation, Decision of the Superior Court of Justice of Madrid, 10 November 2021

Fund for the Protection of Investors’ Rights in Foreign States v Lithuania, PCA Case No. 2019-48, Award, 1 July 2022 (not public)

RusHydro v Kyrgyz Republic, PCA Case No. 2018-21, Final Award, 18 July 2022 (not public)

Russian Federation v Everest Estate et al, Russian Federation v Naftogaz, Russian Federation v Privatbank, Russian Federation v Aeroport Belbek and Igor Kolomoisky, Decision of the Hague Court of Appeal, 19 July 2022

Luxtona Limited v Russian Federation (PCA Case No .2014-09), UNCITRAL ad hoc arbitration.

Igor Kolomoisky and Aeroport Belbek LLC v Russian Federation (PCA Case No. 2015-07).

Privatbank and Finance Company Finilon LLC v Russian Federation (PCA Case No. 2015-21).

Artashes Rafikovich Amalyan v Russian Federation, UNCITRAL ad hoc arbitration.

Limited Liability Company Luzgor and others v Russian Federation (PCA Case No. 2015-29).

Naftogaz and others v Russian Federation (PCA Case No. 2017-16), UNCITRAL ad hoc arbitration.

Igor Boyko v Ukraine (PCA Case No. 2017-23). Ministry of Land and Property of the Republic of Tatarstan v Ukraine, UNCITRAL ad hoc arbitration.

GRAND EXPRESS Non-Public Joint Stock Company v. Republic of Belarus, ICSID Case No. ARB(AF)/18/1

Maria Lazareva v The State of Kuwait, UNCITRAL ad hoc arbitration.

Vnesheconombank v Ukraine (SCC arbitration).

PJSC DTEK Krymenergo v Russian Federation, UNCITRAL ad hoc arbitration.

NPC Ukrenergo v Russian Federation, UNCITRAL ad hoc arbitration.

Severgroup and KN-Holdings v France, UNCITRAL ad hoc arbitration.