JSC Dtek Krymenergo v The Russian Federation

Hearing dates: 9 and 10 April 2025

Approved Judgment

This judgment was handed down remotely at 10.30am on 2 May 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Introduction

There are two applications before the Court, an application by the Defendant, the Russian Federation (“Russia”) for a stay and an application by the Claimant for the stay to be refused or in the alternative for the stay to be granted subject to a condition for Russia to make a payment into Court.

The applications arise out of an arbitration award in JSC DTEK Krymenergo v. The Russian Federation, PCA Case No. 2018-41 which was made on 1 November 2023 in an amount of USD 207,800,000 plus interest in favour of the Claimant (the “Award”).

The Claimant was given permission to enforce the award by an order of Andrew Baker J on 15 November 2023 (the “Enforcement Order”).

The Defendant made an application on 1 February 2024 to annul the award before The Hague Court of Appeal on the basis that the tribunal did not have jurisdiction to hear the dispute (the “Annulment Proceedings”).

By an application dated 22 October 2024 the Defendant made an application in the English Courts to set aside the Enforcement Order on the grounds of State Immunity or for a stay of the Immunity Application (the “Stay Application”) until the Annulment Proceedings have been finally determined by the Dutch Courts and no further appellate recourse is available to the parties.

The Immunity Application is an application by the Defendant asserting that (i) the Defendant is immune from the jurisdiction of the English Courts pursuant to s.1(1) of the State Immunity Act 1978 (the “SIA”); and (ii) the Defendant has not agreed to submit this dispute to arbitration in writing or otherwise pursuant to s.9(1) of the SIA and therefore, the Enforcement Order should not have been granted.

By an application dated 10 December 2024 the Claimant applied for the Stay Application to be refused or the Stay Application be granted subject to the Defendant paying the amount of the Award, interest and costs into Court (the “Security Application”).

By a consent order issued by Bryan J dated 18 November 2024 the parties agreed that the Stay Application would be heard before the Immunity Application and by a consent order issued by Cockerill J dated 14 January 2025 the parties agreed that the Security Application and the Stay Application would be heard together.

This is the reserved judgment on the Stay Application and the Security Application following a remote hearing on 9 and 10 April 2025. The hearing was held remotely as directed by Henshaw J, Judge in charge of the Commercial Court, due to the fact that leading counsel for the Defendant is presently overseas on another matter.

Evidence

In support of the Stay Application the Defendant relied on the First Witness Statement of Ms Luciana Ricart, a partner at the law firm of Curtis, Mallet-Prevost, Colt & Mosle LLP (“Curtis”) having conduct of this matter on behalf of the Defendant, dated 22 October 2024 and her Second Witness Statement (“Ricart 2”) dated 3 February 2025.

In support of the Claimant's response to the Stay Application and in support of the Security Application, the Claimant has filed the second witness statement of Mr Jonathan Gimblett (“Gimblett 2”), partner in the law firm of Covington & Burling LLP (“Covington”) having conduct of this matter on behalf of the Claimant, dated 10 December 2024 and the witness statement of Mr Oleksandr Fomenko, the Chairman of the Management Board of DTEK Energy B.V., dated 10 December 2024. There is also a third witness statement from Mr Gimblett dated 17 February 2025 in reply to Ricart 2.

By a consent order dated 4 March 2025 Henshaw J granted permission for the parties to rely on expert evidence as to Dutch law and procedure. Accordingly the Court has before it the following:

a. Letter dated 31 January 2025 from Mr Cornegoor (“Cornegoor 1”) of Hoff Advocaten commenting on Gimblett 2;

b. Letter from Ms Mirjam van de Hel-Koedoot partner of NautaDutilh NV dated 17 February 2025 (“Nauta 1”);

c. A further letter dated 3 March 2025 from Mr Cornegoor (“Cornegoor 2”) replying to Nauta 1; and

d. A further letter from Ms van de Hel-Koedoot dated 28 March 2025 commenting on paragraph 4 of Cornegoor 2 (“Nauta 2”).

Background

The Claimant in the Arbitration Proceedings and in these proceedings is JSC DTEK Krymenergo, a Ukrainian company indirectly majority-owned by DTEK Energy B.V., which is a Dutch subsidiary of DTEK Group B.V.

The DTEK Energy Group is a Ukrainian energy group whose ultimate beneficial owner is Ukrainian oligarch Mr Rinat Akhmetov.

The Respondent in the Arbitration Proceedings and the Defendant in these proceedings is Russia.

The Arbitration Proceedings

The arbitration proceedings which led to the Award concerned the alleged breaches by Russia of Articles 2, 3 and 5 of the Agreement between the Government of Russia and the Cabinet of Ministers of Ukraine on the Encouragement and Mutual Protection of Investments, dated 27 November 1998 (the “BIT” or the “Treaty”).

The terms of the arbitration agreement are at Article 9 of the Treaty. Article 9 of the Treaty states (so far as material):

“1. Any dispute between one Contracting Party and an investor of the other Contracting Party arising in connection with investments, including disputes concerning the amount, terms, and payment procedures of the compensation provided for by Article 5 hereof, or the payment transfer procedures provided for by Article 7 hereof, shall be subject to a written notice, accompanied by detailed comments, which the investor shall send to the Contracting Party involved in the dispute. The parties to the dispute shall endeavor to settle the dispute through negotiations if possible.

2. If the dispute cannot be resolved in this manner within six months from the date of the written notice mentioned in paragraph 1 of this article, it shall be referred to: …

c) an “ad hoc” arbitration tribunal, in accordance with the Arbitration Rules of the United Nations Commission for International Trade Law (UNCITRAL).

3. The arbitral award shall be final and binding upon both parties to the dispute. Each Contracting Party agrees to execute such award in conformity with its respective legislation.”

The dispute is summarised at paragraph 2 of the Award:

“The claimant is a Ukrainian joint stock company …which owned the formerly State-owned electricity network in Crimea, buying electricity from a Ukrainian state-owned wholesaler, and then selling the electricity to industrial and domestic customers in Crimea. Claimant alleges that it held an investment protected under the Treaty and that the Russian Federation took a series of measures that led to the dispossession and nationalization of its electricity network and associated assets in Crimea without any compensation. It therefore requests an award of USD 421.2 million … plus fees, costs, and interest in compensation for its expropriated assets.”

By letter of 5 April 2017, pursuant to Article 9(1) of the Treaty, the Claimant notified the Defendant of the existence of an investment dispute arising from the expropriation of its assets. Having received no response, and after more than the six months specified in Article 9(2) of the Treaty had elapsed, the Claimant commenced the ad hoc arbitration on 16 February 2018, by filing a notice of arbitration in accordance with the Rules of the United Nations Commission for International Trade Law 1976 (the “UNCITRAL Rules”).

On 16 February 2018, the Claimant appointed Mr J. William Rowley KC as its co arbitrator. Following the Defendant's failure to appoint an arbitrator within 30 days of notification of the appointment of the Claimant's party-appointed arbitrator, the Claimant requested that the Secretary General of the Permanent Court of Arbitration (the “PCA”) designate an appointing authority to appoint an arbitrator on behalf of the Defendant. The Secretary-General of the PCA designated an Appointing Authority which proceeded to appoint Professor Vladimir Pavic as co-arbitrator on 18 June 2018.

On 3 July 2018, the co-arbitrators appointed Mr Stanimir A. Alexandrov as presiding arbitrator.

On 7 December 2018, the Claimant submitted its Statement of Claim.

The Defendant initially did not participate in the proceedings. However on 5 April 2019, the Defendant wrote to the Tribunal indicating its desire to participate in the proceedings and requesting an extension of six months to the procedural timetable. In its Procedural Order No. 3 dated 23 April 2019, the Tribunal granted the Defendant until 23 May 2019 to file its Statement of Defence.

On 21 June 2020, Mr Alexandrov resigned as presiding arbitrator. On 29 June 2020, arbitrators Rowley and Pavic appointed Professor Juan Fernández-Armesto as the new presiding arbitrator.

Thereafter, both Parties participated in the arbitration proceedings, which involved rounds of written briefs, a week-long hearing in The Hague in September 2021, post-hearing briefs, and submissions on costs.

The Award

Before the Tribunal Russia raised four jurisdictional objections and one admissibility...