Hughes Hubbard Wins Jurisdiction Decisions in Crimea Arbitration

March 1, 2017 — Hughes Hubbard won decisions accepting jurisdiction over the claims of two Ukrainian businesses in two arbitrations against the Russian Federation.
 
On Feb. 24, 2017, a tribunal administered by the Permanent Court of Arbitration at The Hague concluded that it has jurisdiction in two cases brought by HHR under a 1998 bilateral investment treaty (BIT) between Ukraine and Russia to hear claims against the latter related to acts committed in Crimea after its invasion and formal annexation of that peninsula in March 2014.
 
The claimants in the first arbitration are Ukrainian businessman Igor Valerievich Kolomoisky and Aeroport Belbek LLC (owned by Kolomoisky), the owner and operator of a private airport near Sevastapol that was taken by the Russian authorities without compensation. The lead claimant in the second is PrivatBank, formerly Ukraine's largest private bank. Before Russia's annexation, Privatbank operated 337 branches in Crimea, which accounted for 30 percent of its deposits. The Russian authorities closed all of PrivatBank's operations in Crimea and seized all of its assets there, again without compensation.
 
The interim awards issued on Feb. 24 are the first decisions by any international tribunal to apply a BIT to the occupying power in control of territory occupied in defiance of international law. The treaty, intended to encourage economic cooperation and expansion between Ukraine and Russia, allows investors of one country whose property has been expropriated by the other to initiate arbitration proceedings either under the Arbitration Rules of the U.N. Commission on International Trade Law (UNCITRAL). Both cases now move forward to a merits phase.
 
HHR commenced five arbitrations under the UNCITRAL Arbitration rules against the Russian Federation in 2015. The various claims range from approximately $20 million to $1 billion and include claims for the seizure of banking operations, Belbek Airport, gas stations, and real estate. Russia has refused to participate in the proceedings, saying the tribunals have no jurisdiction to hear the claims. HHR is still waiting for decisions on jurisdiction in the three other Crimea arbitrations, which are pending before different tribunals.
 
The interim awards made headlines in Investment Arbitration Reporter, Global Arbitration Review and Law360.
 
John Townsend, Marc-Olivier Langlois and Jim Boykin lead the HHR team, which includes Vitaly Morozov, Leon Ioannou, Marina Drapey, Sam Cowin, Malik Havalic, Andreas Baum, Eleanor Erney, Alexander Bedrosyan and paralegals Svitlana Stegniy and Katya Botchkareva.