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Executive Board 2019-2020

What to make of the Yukos v. Russia dispute? 0

19 Apr 2019 Editor-in-Chief

Lesley Gangelhoff
What to make of the Yukos v. Russia dispute?
Managing Editor
Dr. Halil Rahman Basaran* Anna Walls

Executive Editor
Jeff Christensen
Abstract
Public Service Liaison
International law is often viewed by skeptics as unenforceable, incongruent, and lacking force. This Brad Lyman
paper addresses those common misconceptions. The question of “what law governs” can be
properly analyzed through the Yukos v. Russia dispute. By analyzing the dispute from its origins Technical Editor
through the arbitral award to Yukos and the appeal presently pending before the Hague Court of Sara Duross
Appeals, the dispute demonstrates the predominance and preeminence of governments in the
functioning and enforcement of international law. Even when governments take on large, powerful, Articles Editors
and resourceful private companies, powerful governments have a unique sway in international Sam Baker and Kaitlin Loomis
investment law and arbitration. Further, a provisional application clause in a treaty may lead to
Symposium Editor
national interpretations by powerful states, in favor of the government over private entities.
Madi Bates

Introduction

Yukos is a now-defunct Russian oil and gas company that was absorbed by its former Russian state-
owned rival, Rosneft.[1] Yukos and its former shareholders have confronted Russia on various
international platforms. This global battle between a Russian company and the Russian government
has taken place in the international investment arbitration forum[2] (the Permanent Court of
Arbitration), the European Court of Human Rights, various national courts, and the international media
in both popular and academic publications. It has widespread implications for international law
politics.[3]

First and foremost, this article posits that relations between corporations and governments can be
viewed through the prism of traditional public international law, where inter-governmental relations are
dominant. The secondary argument of this article is that international law inherently involves a modus
vivendi among governments. While “not a term of art in international law,”[4] modus vivendi, in the
form of provisional agreements between governments, is nonetheless critical to foreign policy and
treaties. The dispute between the Yukos company and the Russian government has led to the
establishment of a modus vivendi between western governments and the Russian government,
excluding the Yukos company.

Part I of this article gives the background and a summary of the Yukos v. Russia dispute, Part II
discusses the concept of modus vivendi, while Part III explores the primacy of governments in
international law. Part IV then examines the relationship between national law and international law
before Part V highlights the concept of public law. Part VI debates the continuing international
“lawfare” between the former shareholders of Yukos and the Russian government.

I. Background of the Yukos v. Russia Dispute

After the end of the Cold War and the dissolution of the Soviet Union in 1989, serious economic
hardships plagued the fledgling Russian state, to the extent that in 1998, Russia declared a
moratorium on its debts.[5] Due to the difficulties Russia had in servicing its foreign debt in 1995 and
1996, the Russian government decided to sell state companies either partly or in whole to a number
of newly emerging Russian businesspersons and corporations.[6] The urgent sale of public assets
was seen as a panacea, and terms of this deal between the Russian government and the relevant
businesses have long been a cause for public debate in Russia.[7] Russian procurement and
government contracts are, indeed, sensitive public law issues.

An accumulation of capital through government consent may have taken place due to the debt-
related difficulties of the Russian government during the transition from communism to the free
market system. Gitas Povilonis Anilonis explained that the 1995 and 1996 “loans-for-shares
auctions” were created as a means of raising funds for the Government to pay off the growing
national debt.[8] The loans-for-shares auction participants, namely businesspersons and
corporations, would each offer to make a loan to the Government, which would be secured by
specific collateral the shares of a large state-owned enterprise. The participant that offered the
largest loan would win the auction. If the Government defaulted on the loan, the auction winner
would then sell the shares of the state-owned enterprise to a third party.[9] Some argue that this
process allowed the oligarchs to use collusive bidding and maintain the control of Yukos.[10] This led
to a period of extensive privatization of Russian assets in the 1990s that President Putin halted when
he took office.[11] The Yukos case is illustrative of the sense of injustice over the notion that the
newly wealthy class had enriched themselves at the expense of the general public and the Russian
state.[12]

The former owner of Yukos, Mr. Khodorkovsky, participated in political activity in Russia, backed by
Yukos’ growing economic power. Russian authorities perceived his political activities as a threat.[13]

After Vladimir Putin became president[14], the former shareholders of Yukos were charged with tax
evasion and fraud in Russia.[15] Russian authorities carried out tax reassessments and imposed
penalties on Yukos. The major shareholder of Yukos, Mikhail Khodorkovsky, was ultimately convicted
of fraud.[16] In the end, Yukos declared bankruptcy, and the government transferred Yukos’ assets to
government-owned companies.[17] In the meantime, Yukos was internationalized within a scheme of
fund and asset transfers abroad via various trusts and foreign companies.[18]

Hence, the Energy Charter Treaty (ECT) entered the equation.[19] Russia signed but never ratified the
ECT.[20] In short, the ECT protects foreign energy investments and provides for international
investment arbitration. Under the ECT, the former shareholders of Yukos invoked their foreign
investment rights and resorted to international arbitration under the ECT against the Russian
government.[21]

Russia objected to the jurisdiction of the arbitral tribunal.[22] Yet, the arbitral tribunal confirmed its
jurisdiction and passed to the merits phase, at the end of which the tribunal decided in favor of
Yukos’ former shareholders.[23] The former shareholders are still working to have the Yukos arbitral
verdict recognized and enforced worldwide. Thus, in several countries, including the United States,
Belgium, and France, former Yukos shareholders and the Russian state are engaged in lawsuits in
national courts. So far, former shareholders have not been successful in any of the enforcement
proceedings in national jurisdictions. Thus, the battle between the former shareholders and Russia
has spurred diplomatic entanglements between in overseas countries where former Yukos
shareholders have sought to enforce the arbitral award.

The intense interaction and diplomacy between governments and the current state of affairs in the
Yukos v. Russia dispute leads to two discussions: first, the unavoidable dominance of governments in
international law, and second, the search for a modus vivendi among governments pending a
definitive solution.

II. Modus vivendi (Mode of Living)

Modus vivendi aims at a stable coexistence of disputing parties. It is an unperfected international

legal act,[24] which does not create rights or obligations.[25] In this respect, the ECT is the focus of
the dispute between Russian and former Yukos shareholders, and the interpretation of the ECT is an
attempt at modus vivendi. Article 45(1) of the ECT implicitly recognizes modus vivendi in that it
provides that the ECT is to be applied even without the national ratification of the signatory countries:

Each signatory agrees to apply this Treaty provisionally pending its entry into
force for such signatory in accordance with Article 44, to the extent that such
provisional application is not inconsistent with its constitution, laws or
regulations.[26]
When a country applies a treaty after a mere signature, without national ratification, it signifies a
provisional understanding – a modus vivendi – among governments. This upgrades the status of a
signature to a treaty significantly. Under normal circumstances, “the only function of the signatures of
the negotiators [is] to authenticate the text that had been agreed upon.”[27] Yet, Article 45(1)
oversteps this normal understanding of the signature of a treaty and attributes thereto a binding
force, which is typically reserved for ratification. This is indeed an example of strong modus vivendi.

Article 45(1) does not speak of “entry into effect” of the ECT but just “application” for a temporary
period. This application is permissible to the extent that it is compatible with the national
constitution, laws and regulations of signatory nations. The ECT does not discard national
ratification,[28] but it creates a provisional application process whereby the signatories promise to
support peace, stability, and predictability in the field of energy investments until respective national
ratifications. Based on purely inter-governmental relations, such a formulation of a modus vivendi
treads the fine line between international law and international politics. On the one hand, it enables
immediate application of a treaty much in need. On the other, it does not require the commitment of
the signatories. A signatory does not necessarily ratify the treaty, which is the drawback of
provisional application – it leaves space to maneuver for states that wish to renege on their
signatures.

Article 45(1) of the ECT, by explicitly referring to “national constitution[s], laws and regulations” and
acknowledging that they may limit complete compliance during the provisional application period,
granted a substantial amount of flexibility to governments in deciding the interpretation and
application of the ECT. This structure connotes strong deference to national law — the basic
philosophy behind the domestic law of the country enters into the interpretation of the ECT. Such a
formulation favors the country – e.g., Russia – which would prefer to invoke its own notions of
domestic law against the application of the ECT.[29]

Modus vivendi does not require commitment. Indeed, “to talk without danger of commitment is
important for international politics.”[30] Thus, one should be careful not attribute too much value to
modus vivendi as it may be fragile. The modus vivendi of the ECT merely serves to maintain peaceful
co-existence in the field of energy investment pending definitive ratification by national parliaments.
The national ratification of a treaty may seem a mere technicality.[31] However, it has an important
public policy function in that it distinguishes law from non-law.[32] Ratification is a definitive and valid
legal act, but it is neither necessary nor optimal in every case, as countries may comply with treaty
obligations even without ratification.

Indeed, Russia’s refusal to ratify the ECT is not without effect. The Russian ratification of the ECT
would directly impact Russian law; it would represent an incorporation of the ECT’s terms into
Russian public policy. In this respect, the Russians claim that Russian public policy, or “public law,”
does not allow arbitration of public law matters such as taxation, bankruptcy, and energy (natural
resources) investment disputes. Hence, Russia takes the position that the arbitration clause[33] of
the “unratified” ECT cannot apply.

Public law is the branch of Russian law that directly concerns Russian sovereignty. Indeed, current
Russian overtures to the governments of the countries where former Yukos shareholders are trying to
enforce the Yukos arbitral award represent an effort to recall the public law dimension of the Yukos
dispute. Russia does not accept or allow its fundamental national legal conceptions and
conceptualizations to be decided and enforced by an investment arbitral tribunal or by foreign
national courts. Russia regards that as a direct challenge to and attack on its sovereignty.

True, the international community may have a fundamental problem in the context of law-making in
the field of natural resources and energy; there is limited regulation of trade and investments in this
sector.[34] Thus, there may be a sense of urgency in this weakly-regulated area. This made a modus
vivendi in the shape of Article 45(1) necessary during negotiations for the ECT. Yet, it does not justify
circumventing the Russian parliament’s inherent right to formally ratify international treaties or
violating Russia’s conception of public law. Such a disregard of a national fundamental value – the
non-arbitrability of energy or natural resource investment disputes – would have repercussions for the
international public order. The Russian public order is, after all, an integral part of the international
public order.

The urgency in the making of the ECT cannot justify the violation of an essential domestic
understanding of law in Russia – that is, the Russian rationality of law. In this regard, rationality may
best be defined as a mechanism and a conceptualization for survival.[35] The Russian state’s
rationality attaches a great deal of significance to its natural resources for the survival of the Russian
state and people. Natural resources and the property relationships that govern them constitute an
essential issue of survival for the entity known as Russia. Russia, as an entity, a unit, and a collective,
is meant to live for a long time[36] and surviving over an extended period is seen as the result of
successful rational behavior. The Yukos arbitration should thus be seen in this light. Russia demands
“respect” from its peers in the global arena for its rationality and for its conception of domestic public
law [37]

Likewise, international law also presumes a certain rationality, which is linked to its close interaction
with domestic politics. That is, the survival and the future effectiveness of international law depend
on its ability to influence and alter domestic politics.[38] Article 45(1) of the ECT should be
considered an attempt by international law to influence national law and politics in the field of energy
investment and national resources – an inadequately regulated area of international law. The still
undefined and difficult to delineate concept of provisional application should be seen in this light.
International law tries to shape national law through the institution of provisional application, which
intensifies the interaction between international law and domestic politics.[39] Yet, there is a
deliberate ambiguity within the concept of provisional application. The Yukos v. Russia dispute
proved that this ambiguity may seriously test international law.

Challenging this ambiguity, Russia argues that it has never consented to the application of the
arbitration clauses of the ECT.[40] Russia completely excludes the provisional application of
arbitration to matters of Russian public law as such arbitration would be contrary to the Russian
constitution, laws, and regulations. Any prospective advantage Russia may gain from the provisional
application of the ECT would never compensate for the arbitration of issues of Russian public law,
such as those pertaining to energy, natural resources, and taxation. Indeed, Russia so far, as an
insistent minority,[41] seems to have convinced the international community in this respect; no
country has, to date, been able to enforce the Yukos arbitral award against Russia.

In that regard, there has been a strong dialogue between Russia and six countries (the United States,
France, Belgium, Germany, India and Armenia) after the announcement of the Yukos arbitral award in
2014. This reaction is not unique to the Yukos dispute.[42] Instead of serving as the final word on a
dispute, often “the court influences [post-adjudicative] negotiations by changing the bargaining
power and positions of the disputants.”[43] The Yukos arbitral award has become another source of
tension between Russia and the six aforementioned governments. These intensive negotiations
between governments indicate that, at its root, international investment law, boils down to inter-
governmental relations. Corporations and their owners, such as Yukos and its former shareholders,
are relegated to a second rank, despite arbitral awards in their favor.

III. Governments and International Law

The counterargument is that one should not overgeneralize the circumstances of the ECT, extrapolate
from the Yukos investment dispute, and infer conclusions for the whole of international law. One
cannot attribute that much value to a single dispute between a corporation and government. In this
regard, the Yukos case is merely idiosyncratic and represents an exceptional situation in the
international landscape and the media focus on this case is merely hype. However, the Yukos vs.
Russia is an appropriate test case in that it represents the relative powers of governments and
businesspersons in the formation and enforcement of international law.

A. Amount of Dispute

First, the amount of the dispute is huge. The investment arbitral tribunal has calculated the damages
to be paid by Russia to Yukos ex-shareholders to be around 50 billion dollars; this is the “highest
known investment treaty award to date.”[44] Indeed, Yukos was the largest oil company in the
Russian Federation after the collapse of the Soviet Union.[45] Likewise, the European Court of
Human Rights has decided Russia is to pay approximately two billion dollars in damages[46]
stemming from the violation of (Yukos’) right to property, right to defense, and right to a fair trial. This
constitutes the highest amount of damages decided in the history of the European Court of Human
Rights, an amount that has become especially significant due to Russia’s status in international law
as a “challenger.”

B. Russia as a Challenger

Second, Russia is the most important challenger to the current international system. Russia’s military
interventions into Georgia, the Ukraine,[47] and Syria, its strong criticism of the North Atlantic Treaty
Organization, its significant role in the international oil and gas market, and its boldness in laying
claim to the Arctic zone are typical examples of Russia’s power. Russia confirmed its position in the
2016 Joint Declaration of the Russian Federation and the People’s Republic of China on the
Promotion of International Law. Article 2 of the declaration says, “States have the right to participate
in the making of, interpreting and applying international law on an equal footing.”[48] This provision
signals that Western states’ approaches should not constitute or modify norms of international law to
the exclusion of non-Western countries.[49]
Others may argue that Russia is simply requesting that its dignity and status in the global system as
the successor to the Soviet Union are recognized. A superpower for half a century and one of the
two poles of the bipolar system, the Soviet Union was dissolved in 1991. Russia has since
endeavored to maintain a sound position in the international system. Indeed, as the “continuator
state,” Russia automatically and without objection assumed the permanent member status in the
United Nations Security Council that had belonged to the Soviet Union. In 2012, Russia became a
member of the World Trade Organization in order to be further integrated into the international
system. Yet, Russian authorities have maintained that international law must also acknowledge
Russian sovereignty, national traditions, and manners of interpreting international law.

In other words, according to Russia, international law has a domestic dimension, is rooted in
domestic law, and must give some weight to Russia’s approach.[50] This domestic dimension is
more than just “domestic law, but also includes domestic politics.”[51] In this regard, international
law is not separate from domestic law and politics. There cannot be an isolated understanding of
international law. Rather, “the future of international law lies in its ability to affect, influence, bolster,
backstop, and even mandate specific actors in domestic politics.”[52]

Arguably, Russia’s way of interpreting international law has a significant place in the discourse on
international law.[53] Russia’s view is that there is no single understanding of international law; rather,
there is an American understanding, a European one, a Chinese one, etc.;[54] and the Russian
approach to international law should have a legitimate place among them. It should not be
marginalized in international (and national) judicial and arbitral proceedings. This demand is clear in
the Yukos episode. Interestingly, Russia hired western counsel in the Yukos arbitration. To make its
national viewpoint known and accepted by the foreign national and international public opinion and
foreign national courts, Russia hired lobbyists and law firms based in the United States and in
European countries.[55]

Importantly, the Russian challenge to the Western understanding of international law is apparent on
the question of sovereign immunity. Article 8 of the Joint Declaration of the Russian Federation and
the People’s Republic of China on the Promotion of International Law states:

The Russian Federation and the People’s Republic of China assert that international obligations
regarding immunity of States, their property and officials must be honored by States at all times.
Violations of these obligations are not in conformity with the principle of sovereign equality of States
and may contribute to the escalation of tensions.[56]

Article 8 is against the seizure of a state company’s commercial assets.[57] It is well known that
China has always supported the doctrine of absolute immunity, while Russia has demonstrated
ambivalence in this regard. Article 8 of the Russia-China declaration evinces the fact that these two
major powers are still not ready to accept the “Western” restrictive immunity doctrine which permits
the seizure of the state’s commercial assets. The Yukos dispute is important in this respect as Russia
strongly condemns and retaliates against the attempts of seizure of the assets of the Russian state
companies abroad by the national authorities, whereas former Yukos shareholders try to enforce the
Yukos arbitral award. Indeed, no enforcement of the Yukos arbitral award over the Russian assets
have so far taken place. This is in line with the Russian understanding of vital interests.

C. Vital Interests

The third factor highlighting the role of government is that, as Russia may claim, there are national
vital interests which can never be the subject of international law and international adjudication.[58]
These vital interests are to be dealt with only within a domestic context and are concerned with
purely domestic political matters. They cannot and should not be internationalized. In fact, each
nation’s determination of its vital interests is critical to self-determination.[59] That is because vital
interests are a matter of ultimate sovereign interests.[60] In case there is a dispute between nations
in respect of vital interests, nations should resolve them through negotiation, diplomacy, and
agreement. International courts cannot adjudicate vital interests, let alone private international
commercial and investment arbitrators.

But foreign investments may touch upon vital interests and may implicate national security concerns.
Countries may review foreign securities investments with national security matters in mind.[61] For
instance, in the United States, the Department of Treasury’s Committee on Foreign Investment fulfills
this function.[62] Russia reviews, in particular, investments concerning national defense, the building
of space equipment, and natural resources.[63] The Yukos episode is testimony to the fact that the
Russian state has entrenched its review power and dominance in the national economy.[64]

The Russian vital interest concerns the economic interests of Russia in the field of oil and gas, which
constitutes the highest contribution to the Russian state budget and has a direct influence upon
Russia’s security and the independence.[65] Yukos challenged Russia’s interest, and its monopoly, in
the energy sector by dealing with companies from other countries when its largest shareholder
started negotiating with foreign companies. This was of particular concern to Russia because oil is
Russia’s most important natural resource.[66] There was a potential partnership for Yukos with a
foreign investor, the Exxon Mobil company.[67] The Yukos arbitral tribunal confirmed that Yukos had
been engaged in merger negotiations with ExxonMobil and Chevron, two multinational oil and gas
giants.[68] This brings to mind the feasibility of the individual as a subject of international law.

D. Individual as Subject

The Russian attitude throughout the Yukos dispute clearly demonstrates that individuals still have a
tentative place in international law. Granted, at present, thanks to international and regional human
rights jurisprudence and international commercial and investment arbitration, individuals have an
elevated position in international law.[69] Individuals can challenge their own governments or foreign
governments by invoking human rights, investment and commercial rights. The individual’s right to
property is much more secure now than it was in the past. International law has advanced since the
days when an individual, such as the Greek businessperson Mavrommatis, could seek protection only
from his own government and could not directly challenge foreign governments.[70] The individual
and the businessperson (natural person or legal entity) now have an international standing.

Nevertheless, the individual’s upgraded status does not seem convincing before the behemoth that is
the government, particularly a government as powerful as Russia. The real systemic failure in
integrating individuals as self-standing subjects of international law emerges in test cases like the
Yukos v. Russia case. Russia does not consider individuals subjects of international law.[71] Even
though a corporation can make an agreement with Russia, it is not deemed equal to the Russian
state. When disputes arise, Russia talks to foreign governments to neutralize an individual or
corporation’s invocation of a foreign arbitral award. There is a similar Russian conservative approach
to sources of international law.

E. Sources of International Law

The Yukos dispute reminds us that the sources of international law may not practically be as
numerous as expressed in Article 38 of the statute of the International Court of Justice (ICJ).[72]
Article 38 provides that treaties, customs and general principles of law are sources of international
law.[73] Yet, the only sources that are ultimately enforceable may be treaties to which only
governments are parties. The majority rule concept (that customary law exists when a majority of
countries say so) and ambiguity in custom are sources of concern for countries like Russia. Indeed,
Sergey Lavrov, the Russian Minister for Foreign Affairs, stated:

No doubt, the legal norms in international affairs will be further adjusted as necessary. But these
transformations should be treated with utmost responsibility and full realization of serious risks
associated with them. Only consensus can be the criterion for their adoption. Violations of
international law should not be portrayed as their creative development.[74]

Ironically, in the Yukos arbitration, Russia forcefully argued that there is a customary law of “clean
hands” in international law.[75] The “clean hands” theory states that if a transaction, property or
asset is acquired through fraud, it cannot subsequently be legally and legitimately defended in law
before a court.[76] Russia argued that Yukos and its former shareholders did not have clean hands.
However, the Yukos investment arbitral rejected such a “custom” of clean hands. As there exists no
international treaty defining the clean hands theory,[77] Russia felt justified in its general stance that
only treaties are reliable sources of international law.

Russia prefers treaties, rather than custom and general principles of law, as a source of international
law.[78] Treaties as a source of international law are Russia’s primary connection to international law.
Importantly, Russia has felt secure with the formulation of Article 45(1) of the ECT; the direct reference
to individual countries’ domestic law to validate a treaty favors the Russian approach to international
law. The Yukos dispute’s focus on Article 45(1) of the ECT is secure terrain for Russia. This explains
Russia’s intense reaction to the “surprising” Yukos arbitral award and its effort to prevent its
recognition and enforcement in the Netherlands, Belgium, France, the United States, Germany, and
India. Russia does not want to lose a case based on the interpretation of the ECT, which clearly
provides for compatibility between national law and international law for its provisional application.

States directly control treaties, which is reassuring to states that are protective of their sovereignty,
such as Russia. The concept of sovereignty has endured because of the multiplicity of meanings and
interpretations it involves[79] – the Russian interpretation being one of them. Therefore, Russia’s
insistent focus on Article 45(1) of the ECT should be seen in this light. Russia has always argued that
Article 45(1) as a “treaty” provision is wholly clear in that it explicitly favors national constitutions,
laws, and regulations – that is, the Russian constitution, Russian laws, and Russian regulations.
Thus, Article 45(1) of the ECT may not be auspicious for international law.

F. Reference to National Law

The Yukos dispute proved that placing direct references to domestic law in treaties risks undermining
international law, rather than supporting it. That is because the interpretation of national law favored
by the government overrules the application of international law, particularly when a treaty envisages
provisional application of the treaty to operate in harmony with national law. Article 45 of the ECT is
the foremost example thereof. In contrast, the provisional application provision of the Vienna
Convention on the Law of Treaties (VCLT), does not acknowledge the potential for conflicts with
domestic law, but merely provides for provisional application of a treaty until its ratification by
signatory countries.[80] Article 25(1) of the VCLT states: “A treaty or a part of a treaty is applied
provisionally pending its entry into force if: (a) The treaty itself so provides; or (b) The negotiating
States have in some other manner so agreed.”[81]

Article 25 allows some flexibility in how provisional application will function.[82] The concept of
provisional application in Article 25 of the VCLT, lacks legal precision.[83] It seems to indicate that
“provisional application” is somehow different than “provisional entry into force”.[84] Interestingly,
there has always been ambiguity regarding this distinction in the international legal community.[85]
There is no authoritative explanation of the concept of “provisional application” in the Vienna
Convention. Arguably, “provisional application” is a practical and informal matter. Legal obligations
may not issue from Article 25. Provisional application emerges on the basis of a certain practice of
treaties followed by governments.[86] Indeed, Article 25 is amenable to enrichment and development
in practice.[87]

Even in purely intergovernmental relations, which exclude companies and other legal and natural
persons, the provisional application of a treaty may be problematic. Indeed, there had been
objections to the introduction of provisional applications into the VCLT.[88] Arguably, there was no
need to include the concept in the VCLT at all.[89] That is because rather than a well-defined legal
institution, provisional application smacks of international comity. The hope was that national
institutions would help the government accommodate this comity. That is, through a wholly informal
process, domestic institutions, such as the national parliament, may adapt their own governing
procedures to meet the requirements of “international activity” of the government perceived to be in
the national interest.[90]

Provisional application of a treaty is appropriate when quick implementation is critical.[91] It aims at

broad and immediate participation in particular sensitive sectors not easily amenable to international
regulation, such as energy investments. Importantly, “natural resource trade and investments have
fewer legal regulations than most other internationally traded commodities.”[92] Indeed, the World
Trade Organization does not challenge the national governments in controlling their natural
resources. “Commercialization” has still not taken place sufficiently in the international energy
investments.

In general, provisional application is still ambiguous.[93] Nonetheless, it has become popular due to
the urgency of matters regulated by treaties.[94] Indeed, the drafters of the ECT were well aware of
the urgent need for regulation in the field of energy investment and national resources. Pending
national parliaments’ ratification, governments would “apply” the unratified ECT. The provisional
application would not be too problematic if the dispute was merely between governments[95]
because diplomacy would likely prevail. However, where private individuals and corporations are
party to disputes, provisional application becomes a bit more confusing. Private investors may find it
difficult and surprising to be subject to the eventual non-application of a provisionally applied treaty.

The Yukos investment arbitral tribunal favored the Yukos company by affirming that the provisional
application of the ECT was compatible with Russian domestic laws. The arbitral tribunal held that
provisional application in Article 45(1) shall not be made dependent on Russian domestic law’s
content regarding the specific provisions of the ECT.[96] Rather, the tribunal considered whether the
provisional application of the ECT was compatible with Russian law in general, and it answered in the
affirmative. However, Article 45(1) contains such an explicit reference to domestic law that one
cannot talk about a balance between the private investor and the host state. Article 45(1) provides
for the primacy of “national law as interpreted by the host state.”[97]

IV. National Law – International Law

No sovereign nation would leave the matter of compatibility of its national constitution, laws, and
regulations with an international treaty to the discretion of international adjudication. The
appreciation of national law vis-à-vis the outside world is inherently a matter for a national legislature
and a national judiciary. If an international judicial or arbitral body deemed itself competent enough
to evaluate the compatibility of a signatory country’s national law with the provisions of a treaty, it
would effectively constitute intervention into that country’s national judiciary and parliament.

As a matter of fact, the ECT does not compel a signatory state to ratify the ECT or require a state to
give reasons for refusing to do so.[98] Article 45(1) gives leeway to signatory states. Rightly, the
Hague District Court, which set aside the Yukos arbitral award, held that Article 45(1) results in
uncertainty in international matters.[99] The uncertainty is “inherent” within Article 45(1).[100] That is,
the dominance of domestic law is apparent and notwithstanding the uncertainty caused by this
dominance, this is the intent behind Article 45(1). It is safe to argue that the balance tilts in favor of
national law. The Yukos arbitral tribunal was wrong when it argued that “this would create
unacceptable uncertainty in international affairs.”[101] In fact, this uncertainty is acceptable because
when a dispute arises, the ECT favors national law.

This imbalance between national law and international law in Article 45(1) is such that the theory of
separation between international law and national law does not hold. A direct reference to national
constitution, laws, and regulations favors national law and its interpretation by the state. There is no
presumption of the separation of international law from national law, which contradicts the finding of
the Yukos arbitral tribunal that there exists such a presumption of separation.[102] International law
and domestic law are intertwined. While the Yukos arbitral tribunal asserted that the content of
domestic law should not directly control the content of an international legal obligation,[103] this was,
in fact, exactly what Article 45(1) intended. With such a direct reference to domestic law, one cannot
argue that provisional application of the ECT is purely a question of public international law. Indeed,
international law has become dependent on national law with the formulation in Article 45(1). The
phrasing of Article 45(1) promotes the national approach to international law rather than a monolithic
universal one. Article 45(1) is unique in that it directly engages national law, and this is a testimony to
the domestic law difficulties of signatory countries in joining the ECT.[104]

Article 45(1) did not simplify the investor-state relationship with a view to the clarity of law. Laws
must be comprehensible so that citizens can understand and comply with them.[105] Public law may
not be as clear as private law, which is more concerned with systemic, society-level goals,[106] and
public law may be a barrier to treaty ratification.[107] The simple rules of private law based on
contract cannot be readily applicable to public law. Yet, public law influences private law.[108]

Arguably, the ECT tried to put the investor-host state relationship on a private law basis by acquiring
states’ consent to the provisional application of the ECT. Article 26, 5(b) of the ECT provides that any
claim submitted to arbitration under the ECT shall be considered to arise out of a “commercial”
relationship or transaction. Commercial law is not concerned with redistributive justice.[109] Public
law, on the other hand, deals with redistribution, for example through tax-and-transfer systems.[110]
The distributive battle between the former Yukos shareholders, the oligarchs, and the Russian state is
a matter for Russian public law. Hence, there is a clash between the Russian position of public law
and the commercial interpretation of the ECT by the Yukos arbitral tribunal.

Neither Article 45 of the ECT nor any other provision thereof mentions a competent authority for
determining the existence of compatibility between national law and the ECT. Article 26 of the ECT
provides for dispute settlement through arbitration, and the Yukos arbitral tribunal, established
pursuant to Article 26, held that the ECT was compatible with the Russian constitution, laws, and
regulations. But international arbitration does not have the exclusive right to evaluate the
compatibility of national constitution, laws, and regulations with the ECT.

In contrast to the Yukos arbitral tribunal, the Hague District Court indicated that the ECT arbitration
was not compatible with the Russian constitution, laws, and regulations. Interestingly, the Hague
District Court held that there were Russian constitutional limitations that prevented Russia from
accepting arbitration,[111] and that Russia’s mere signature of the ECT would not bind Russia – it
must also ratify the ECT.[112] Actually, Russia signed but did not ratify the ECT because it believed
the treaty went too far into domestic policies regarding management of its petroleum resources.[113]
This position comports with Russia’s protetion of permanent sovereignty over national resources.
[114]

The Hague District Court’s decision saved the Russian assets within the borders of the Netherlands
from attachment. Indeed, on July 6, 2016, just after the annulment of the arbitral award by the Hague
District Court on April 20, 2016, the Court of First Instance in Antwerp ordered that “no attachments
may in principle be levied on the basis of these awards.”[115] The Yukos case demonstrates the
power of the national courts in recognizing and enforcing international arbitral awards. There is a
balance between international arbitral autonomy and national judicial scrutiny.[116] An assertive
national court (Hague District Court) with a strong sense of national and international public policy
and international comity may favor the interpretation of the host state (Russia), and the idea of public
law as interpreted by the host state may also go on to play an important role in this respect.

V. The Idea of Public Law

The Hague District Court, in annulling the Yukos arbitral award, confirmed the Russian argument vis-
à-vis public law. The Court said, “[i]t is, rightly, not contested between the parties that the issue of
compatibility [between the ECT arbitration and the Russian constitution, laws and regulations] or
incompatibility should be answered according to Russian law.”[117]

Thus, the criterion is Russian law. Interestingly, the Hague District Court underlines the probability for
the ECT to touch upon contractual disputes concerning sensitive public law issues, saying,
“[d]isputes can have a public-law character, also when they arise from contracts, if there is a
concentration of socially significant public elements.”[118] Thus, the Court went on to say, “[t]he
public-law nature of the Russia-Yukos relationship is predominant.”[119]

The Hague District Court held that the Yukos dispute could not be arbitrated because the arbitration
clause in Article 26 ECT does not have a legal basis in Russian law.[120] Under Article 1(2) of the
Russian International Arbitration Law (1993) and Article 16 of the Russian Civil Code (1995), Russia
only permits arbitration of disputes arising from contractual and other civil law relations; public-law
legal relations are excluded from arbitration.[121] Exceptionally, a public-law matter may be subject
to arbitration if, but only if, the Russian parliament assents. The Russian parliament must ratify such
an exception, otherwise it would be a violation of the principle of separation of powers between the
executive, legislative and judiciary powers in Russia.[122]

Under domestic law, the Russian executive cannot exercise the power of the Russian legislature and
cannot consent to the arbitration of non-arbitrable disputes under Russian law. Taxation, bankruptcy,
and the regulation of energy resources are within the exclusive jurisdiction of Russia’s national courts;
they cannot be the subject of international arbitration. Russia’s provisional application of the ECT
does not include the arbitration of energy investments in Russia.[123] The Russian parliament must
ratify the ECT to make them subject to arbitration. The Russian government’s consent to the
provisional application of the ECT alone, which would put these non-arbitrable issues before arbitral
tribunal, is not sufficient.[124]

Russia argues that arbitrating energy investment disputes is inappropriate during the provisional
application of the ECT. Public law prevents the ‘arbitrability’ of a dispute under Russian law. The
principles of “party autonomy” and “freedom of contract” apply to a very limited extent within public
law relations.[125] Public law involves relationships of authority, hierarchy, and subordination.[126]
That is because public law entails significant public elements.[127] The paradox is that international
investment arbitration deals with these very public powers of the host state. Striking the right
balance between the understanding of public law of the state in which the investment takes place,
and the legitimate commercial interests of the investor has proven to be a challenge. In fact,
international investment arbitration pursues the objective of open markets. Yet, the national public
law understanding impedes open markets. Russia sees energy investment as an utmost issue of
sovereignty in the shape of public law. Thus, in Russia’s view, it can only be regulated via the
ratification of the ECT through essential legislative changes, which have not taken place to date.

Public law connotes deference to sovereigns and involves margins of appreciation for the national
government.[128] The term “margin of appreciation” suggests the need for some level of deference
to the legislative choices made by the state.[129] Every state may form its own policy for foreign
investment. Actually, this is in line with the Nicaragua judgment of the International Court of Justice
(ICJ), which, in broad terms, endorses the foreign policy freedoms of every state: “it is sufficient to
say that State sovereignty evidently extends to the area of its foreign policy, and there is no rule of
customary international law to prevent a state from choosing and conducting a foreign policy in
coordination with that of another state.”[130]

Interfering with states’ sovereignty is illegal according to the Nicaragua judgment:

A prohibited intervention must…be one bearing on matters in which state is

permitted, by the principle of state sovereignty, to decide freely. One of these is
the choice of a political, economic, social and cultural system, and the formulation
of foreign policy. Intervention is wrongful when it uses methods of coercion in
regard to such choices, which must remain free ones.[131]
Russia, as a sovereign, is free to choose its own political and economic systems, the values of which
may be reflected. Likewise, the G20’s Guiding Principles for Global Investment Policymaking support
governments’ right to regulate investment for legitimate public policy purposes.[132] The novelty and
immaturity of investor-state arbitration in the field of energy investment becomes especially evident
considering that “no treaty-based investor-State arbitration had ever taken place anywhere in the
world prior to 1987.”[133] Article 18(1) of the ECT, which guarantees the system of property
ownership of energy resources and the state’s right to taxation of energy investments, highlights the
dominance of national sovereignty with respect to energy law.[134] The Russian Constitutional
Court’s decision to not apply the European Court of Human Rights’ decision in Yukos should be
interpreted in this light.[135] The Russian Constitutional Court invokes the principle of sovereignty
and non-interference in internal affairs and identifies them as jus cogens.[136]

Notably, the Hague District Court focused solely on Russia’s public law argument.[137] It did not look
at other arguments to annul the Yukos arbitral award. For instance, the Court did not analyze whether
there were fraudulent transactions underlying the transactions of former Yukos shareholders which
would violate Dutch public policy and/or international (transnational) public policy, and thus render
the Yukos arbitral award unenforceable in the Netherlands.[138] It did not discuss Russia’s argument
regarding the sham nature of shell companies and trusts located in a variety of offshore jurisdictions
(Jersey, Gibraltar, Cyprus, Isle of Man) that were used to transfer Russian assets abroad. The Hague
District Court focused solely on the Russian public law argument, which invoked the non-arbitrability
of the Yukos dispute under the ECT.

Interestingly, Russia also referred to Dutch public policy or to US public policy when Yukos
shareholders attempted to have the Yukos decisions enforced.[139] There was also a Russian effort
to bring together and harmonize Russian public policy with the public policies of other national
jurisdictions. For instance, the pleading notes of one expert (in favor of Russia) before the Hague
District Court, Professor A.J. van den Berg, consistently referenced Dutch public policy and to
Russian public policy with regard to the non-arbitrability of tax matters.[140] This public policy
argument constitutes part of the “lawfare” between Russia and the former shareholders of Yukos.

VI. The Continuing International Lawfare

“Lawfare” refers to the judicialization of disputes. In lawfare, international and national courts
become arenas for property relationships. Individuals and companies engage in a legal campaign in
multiple jurisdictions and venues against the state. Indeed, this is the case between the former
shareholders of Yukos and the Russian government. The former shareholders of Yukos have been
trying to have the Yukos arbitral decision recognized and enforced by the courts of several countries.
[141] Russia has consistently proffered to various national courts the exceptional nature of public
policy as an argument against the recognition and enforcement of the Yukos arbitral award. The
Russian public policy argument is articulated and expressed in the language of Russian “public law” –
that is, through (and part of) its sovereign and regulatory powers on energy, taxation, public
procurement, antimonopoly law, government contracts, bankruptcy, and policing. [142]

From the Russian point of view, the Yukos dispute and the Yukos arbitral award are not related to
commerce, and the legal relationship between the former Yukos shareholders and Russia is not
commercial. Russia engaged in a commercial relationship neither with Yukos nor with the former
Yukos shareholders. This is important in that the New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards requires both the public policy exception and the arbitral
award to be “commercial” in nature for it to be recognized and enforced.[143] Russia has argued that
the Yukos affair concerns the sovereign power of Russia, which neither international tribunal nor
foreign national courts can settle.[144] Likewise, Russia has argued in the United States court that it
has sovereign immunity and that it has never waived its sovereign immunity.[145]

The Russian government has always invoked the theory of “clean hands” to obstruct international
arbitration and national recognition and enforcement of arbitral awards. For instance, in countering
the former Yukos shareholders’ effort to enforce the arbitral award against Russia in the United
States, Russia argued that the arbitral award should not be recognized and enforced in the United
States because the Yukos shareholders and businessmen deceived the Tribunal as to their
relationships with Russian oligarchs and illegally obtained their investments from the Russian state.
[146] Russia claimed that an offshore network of shell companies was used to transfer Russian
assets abroad.[147] The Russian Federation and enforcement proceedings experts in the United
States District Court for the District of Columbia have consistently invoked the illegal and fraudulent
natures of the “underlying transactions.”[148] As the “clean hands” theory was rejected by the Yukos
arbitral tribunal, Russia has consistently emphasized in various national courts its alternative
argument for public law and the underlying public-policy nature of the transactions of the Yukos
affair. Indeed, this Russian strategy worked out with the Hague District Court.[149]
The public law argument focuses on the period of transition to capitalism, Russian oligarchs, in a
sense, usurped the Russian government and stripped the state of its most valuable assets, including
its oil and gas resources.[150] At that time, government officials allowed the transfer of state assets
to the newly affluent Russian elite.[151] However, Russia now argues that those transfers and the
laws and regulations that permitted them were not in fact legitimate.[152] The Russian government
argues it has nationalized the most important Russian assets, such as the Yukos oil and gas assets,
based on tax assessments, and has thus prevented the assets from being transferred abroad.[153]
After the fall of the Soviet Union, a Russian state capitalism formed.[154] The Yukos episode is a
prime example of this process.[155]

In this lawfare, the relationship between the Russian government and Russian big business has
become internationalized due to international investment arbitration, the national recognition and
enforcement proceedings of the Yukos arbitral award in various countries[156] (the United States,
Belgium,[157] France[158]), the European Court of Human Rights and the expert opinions from
international law professors from around the world. International law and diplomacy have suddenly
become the platform where parties debate property relationships within a country and the relations
between a government and big businesses. Although Russia objects to this internationalization, it
still participates in the battle on all these platforms.

For instance, after the Belgian court handed down a decision for the seizure of Russian assets in
Belgium, Russia, not surprisingly, “lashed out at the Belgian court’s move, calling it a hostile act and
threatening reprisals against Belgian diplomatic property in Russia.”[159] President Putin furthered
the attack by signing legislation to allow “tit-for-tat” seizure of other countries’ assets in Russia.[160]
Following the Hague District Court’s annulation of the Yukos arbitral award, the Belgian court unfroze
Russian assets in Belgium.[161] The Belgian court held that due to the annulation of the Yukos
arbitral award by the Dutch court, it immediately ceased to have effect in Belgium.[162] Thus, the
Dutch annulation ruling helped Russia to cancel the detainment of Russian assets in Belgium.
Actually, Russia has been using the Dutch ruling to annul the detainment and seizure of Russian
assets in other jurisdictions. Moreover, a Belgian law passed in 2015 makes the seizure of foreign
assets more difficult, in that it now requires the approval of a special judge before applying directly to
the bailiff.[163] The Belgian Constitutional Court, confirmed the law, holding that it intended to
promote international comity and diplomatic peace among nations.[164] The Russian influence is
obvious.

For Russia, every national jurisdiction and court is a new battleground where it can invoke the
unfairness of the Yukos arbitral award and public law and non-commercial nature of the dispute
between Yukos and the Russian government. Furthermore, in all the courts in which it confronts
former Yukos shareholders, Russia argues that it has never ratified the ECT and thus it has never
consented to the arbitration provision of the ECT.[165] Russia’s resolve is so extensive that it has
opposed the stay of proceedings in the United States District Court for the District of Columbia
regarding the recognition and enforcement of the Yukos arbitral award.[166] However, the District
Court in Washington, D.C. decided to stay proceedings until January 21, 2019, hoping the Hague
Court of Appeal would render an opinion.[167] When the stay expired and the Hague had still not
issued a decision, the D.C. District Court further demonstrated its respect for the Hague
(Netherlands) court – the seat for the Yukos v. Russia arbitration – by extending the stay to January
21, 2020.[168]

In defending its deferral, the D.C. District Court invoked “international comity” and the “avoidance of
conflicting judgments”.[169] The Hague Court of Appeal proceedings had already been initiated prior
to the D.C. proceedings and the Hague Court of Appeal has already taken action on the merits.[170]
It seems plausible that the D.C. District Court will respect the Hague Court of Appeal proceedings on
the set-aside of the Yukos arbitral award given that one of the reasons for the stay was avoiding
conflicting judgments.[171] This is in line with the Russian memorandum to the D.C. District Court.
[172] The D.C. District Court highlights the principle of cooperation between national courts and
reciprocity and thereby the promotion of predictability and stability through the satisfaction of mutual
expectations.[173]

Still, the D.C. District Court made clear that it would not thoughtlessly submit to the Hague District
Court’s or the Hague Court of Appeal’s decision, saying “no nation is under an unremitting obligation
to enforce foreign interests which are fundamentally prejudicial to those of the domestic forum.”[174]

This means that the Hague District Court’s and the Hague Court of Appeal’s decisions will be
considered and followed to the extent that American national interests are not harmed. Indeed, the
New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards makes it clear
that a national jurisdiction, where recognition and enforcement of foreign arbitral award is sought,
does not have to comply with the set-aside ruling of the national court of the place of arbitration.
[175] Yet, by staying the proceedings until the final decision of the Hague Court of Appeal, the D.C.
District Court demonstrated its prudence and respect for international comity.

In this respect, it is interesting to note that the Paris Court of Appeal has annulled the attachment of
the assets of Roscosmos, the Russian state company.[176] The court argued that the Russian state’s
control over this company did not necessarily make the company an emanation of the Russian state
and Roscomos was sufficiently autonomous.[177] This is a surprising line of reasoning, in that
Roscosmos, like the Russian Federal Space Agency, pursues the Russian state’s objectives and is a
typical Russian state company. It may not be a diplomatic agent of Russia, but it is a commercial
enterprise of the Russian state. Yet, the Paris Court has made considerable efforts to view
Roscosmos as a company distinct from the Russian state and thus not as liable for the Russian debt
stemming from the Yukos arbitral award. Interestingly, former Yukos shareholders, notwithstanding
their arbitration victory, have not yet been able to convince any national court to enforce the
arbitration decision on Russian public corporate assets and accounts[178] Moreover, due to Russian
lobbying and diplomatic overtures, both France and Belgium have amended their laws to make it
more difficult for creditors to attach the assets of sovereign states.[179]

Conclusion

At the time of this writing, national courts in multiple jurisdictions, former shareholders of Yukos, the
Russian government, and the international community are awaiting the judgment of the Hague Court
of Appeals. Be that as it may, Russia is determined not to pay damages to the former shareholders
of Yukos. Russia regards the matter as an issue of sovereignty and frames the dispute within the
language of “public law.” Indeed, the Hague District Court embraced Russia’s approach. Likewise,
no national court has ever enforced the Yukos arbitral award on Russian assets abroad. Russia’s
intense diplomatic and political overtures have led to a sort of modus vivendi between the Russian
government and other interested foreign governments.

The Yukos dispute demonstrates the predominance and pre-eminence of governments in the
functioning and enforcement of international law and international investment law and arbitration.
Even in the latter field, where private individuals and corporations possess considerable power,
governments still possess the upper hand. This is especially true when vital interests of a state or
matters of public law enter the equation. Furthermore, and more significantly, a provisional
application clause in a treaty, such as Article 45(1) of the ECT, which explicitly requires compatibility
with national law for its application, leads to a quite palpable primacy of a nation’s domestic laws and
that nation’s interpretation of the treaty’s compatibility with its laws.

* LL.M., Ph.D., LL.B.-Law, Associate Professor of International Law, Istanbul Sehir University,
Istanbul, Turkey [1]. Mike Eckel, In U.S. Court, Yukos Shareholders Try New Tactic: Go After the
Lawyers, RadioFreeEurope, RadioLiberty (June 30, 2017, 5:34 PM), https://www.rferl.org/a0
/russia-yukos-arbitration-shareholdersbaker-botts-courtruling/28588682.html.

[2]. Yukos Universal Ltd. v. Russ., PCA Case No. AA 227, Interim Award on Jurisdiction and
Admissibility (Perm. Ct. Arb. 2009), http://italaw.com/documents
/YULvRussianFederation-InterimAward-30Nov2009.pdf [hereinafter Interim Award].

[3]. Marcin Kaldunski, Some Reflections on Arbitration in the Yukos v. The Russian Federation
Case, 18 Comp. L. Rev. (Torun) 141, 166 (2014).

[4]. Wojciech Burek, Modus Vivendi, Oxford Public International Law, Max Planck
Encyclopedia of Public International Law, ¶ 1 (2011).

[5]. Volkan Özdemir, Rusya’nin kodlari [the codes of russia] 141 (2018).

[6]. See generally Richard Sakwa, Putin and the Oligarch: The Khodorkovsky-Yukos Affair
(2014).

[7]. Id.

[8]. Decl. of Gitas Povilo Anilonis at ¶ 18, Hulley Enterprises Ltd. v. Russ., 211 F. Supp. 3d 269
(D.D.C. 2016) (No. 1:14-cv-01996-ABJ), https://www.italaw.com/sites/default/files/
case-documents/italaw4439_1.pdf.

[9]. Id.

[10]. Resp’t’s Mot. to Dismiss the Pet. to Confirm Arbitration Awards for Lack of Subject Matter
Jurisdiction at 24, Hulley Enterprises Ltd. v. Russ., 211 F. Supp. 3d 269 (D.D.C. 2016) (No. 1:14-cv-
01996-ABJ) (https://www.italaw.com/sites/default/files/case-documents/italaw
4445_1.pdf) [hereinafter Mot. to Dismiss].

[11]. Simon Schuster, Why a Win in a Dutch Court is Making Vladimir Putin so Happy, Time (Apr.
20, 2016), http://time.com/4301475/russia-appeal-case-yukos-the-hague/.

[12]. Dmitry Gololobov, The Yukos Money Laundering Case: A Never-ending Story, 28 Mich. J.
Int’l L. 711, 715 (2007).

[13]. Kaldunski, supra note 3, at 143.

[14]. Kishore Mahbubani, Has the West Lost It? 48 (2018) (“The humiliation of Russia led to an
inevitable blowback. The Russian people elected a strongman ruler, Vladimir Putin, to defend Russian
national interests strongly.”).

[15]. Schuster, supra note 11.

[16]. Id.

[17]. Id.

[18]. Energy Charter Treaty, Dec. 17, 1991, 2080 U.N.T.S. 95

[19]. Id.

[20]. Id.

[21]. Id.

[22]. Mot. to Dismiss, supra note 10.

[23]. Yukos Universal Ltd. v. Russ., PCA Case No. AA 227, Final Award (Perm. Ct. Arb. 2014),
https://www.italaw.com/sites/default/files/case-documents/italaw3279.pdf [hereinafter Final Award].

[24]. W. Michael Reisman, Unratified Treaties and Other Unperfected Acts in International Law:
Constitutional Functions, 35 Vand. J. Transnat’l L. 729, 738 (2002).

[25]. Id. at 741.

[26]. Energy Charter Treaty, supra note 18, at art. 45 (emphases added).

[27]. Reisman, supra note 24, at 742.

[28]. Energy Charter Treaty, supra note 18, at art. 41.

[29]. Id. at art. 45.

[30]. Reisman, supra note 24, at 744.

[31]. Id. at 745.

[32]. Id.

[33]. Energy Charter Treaty, supra note 18, at art. 26(3)(a).

[34]. Ole Gunnar Austvik & Carolina Lembo, International Law and EU-Russian Gas Relations 2
(M-RCBG Ass’n Working Paper Series No. 53, 2016), https://www.hks.
harvard.edu/sites/default/files/centers/mrcbg/files/Austvik_final_53.pdf.

[35]. Nassim Nicholas Taleb, Skin in the Game: Hidden Asymmetries in Daily Life 4, 26 (2018).

[36]. Id. at 26.

[37]. Reinhard Wolf, Respect and Disrespect in International Politics: The Significance of Status
Recognition, 3 Int’l Theory 105, 105–08 (2011).
 [38]. Anne-Marie Slaughter, The Future of International Law is Domestic (or, the European Way
of Law), 47 Harv. Int’l L.J. 327, 329 (2006).

[39]. Id.

[40]. See generally Mot. to Dismiss, supra note 10.

[41]. See generally Taleb, supra note 35, at 26 (concerning the power of the “insistent
minority”).

[42]. Michael Gilligan et al., Strengthening International Courts and the Early Settlements of
Disputes, 54 J. Conflict Resol. 10 (2010).

[43]. Id. at 33.

[44]. Tania Voon & Andrew D. Mitchell, Ending International Investment Agreements: Russia’s
Withdrawal from Participation in the Energy Charter Treaty, 111 Am. J. Int’l L. 461, 462 (2018).

[45]. Interim Award, supra note 2, at ¶ 35.

[46]. ONO Neftyonava Kompaniva Yukos v. Russ., 2010 Eur. Ct. H.R. (2014), https://
www.italaw.com/sites/default/files/case-documents/italaw7752.pdf.

[47]. Mahbubani, supra note 14, at 69 (“It can be argued that given the impunity with which
international law and state sovereignty were being violated all around, the Russian step was merely
one—which the West now protests against the most—in a long list, including Iraq, Kosovo, Libya,
Syria, and Yemen.”) (quoting Hardeep Singh Puri, Perilous Interventions: The Security Council and the
Politics of Chaos 154 (2016).

[48]. The Declaration of the Russian Federation and the People’s Republic of China on the
Promotion of International Law, Ministry of Foreign Affairs of the Russian Federation (June 25, 2016),
http://www.mid.ru/en/foreign_policy/news/-/asset_publisher/
cKNonkJE02Bw/content/id/2331698.

[49]. Ingrid Wuerth, China, Russia, and International Law, Lawfare (July 11, 2016, 8:30 AM),
https://www.lawfareblog.com/china-russia-and-international-law.

[50]. Slaughter, supra note 38, at 350.

[51]. Id.

[52]. Id.

[53]. Angelika Nussberger, Russia, in Max Planck Encyclopedia of Public International Law ¶
152 (Rüdiger Wolfrum ed., 2009).

[54]. IIR Prague, Russian Approaches to International Law, YouTube (May 23, 2016),
https://www.youtube.com/watch?v=rkboSGR1YQw.

[55]. Ashley Balcerzak, Russia Hired Edelman in 2016 to Help Deal with Yukos Fallout,
OpenSecrets (March 13, 2017), https://www.opensecrets.org/news/2017/03/russia-hired-edelman/.

[56]. The Declaration of the Russian Federation and the People’s Republic of China on the
Promotion of International Law, supra note 48.

[57]. Id.

[58]. Julian Udich, Vital Interests, Oxford Public International Law, Max Planck Encyclopedia of
Public International Law, ¶ 3 (2013).

[59]. Id. at ¶ 5.

[60]. Id. at ¶ 28.

 [61]. William E. Pomeranz, Russian Protectionism and the Strategic Sectors Law, 25 Amer. Univ.
Int’l L. Rev. 213, 218 (2010).

[62]. Id.

[63]. Id. at 219–20.

[64]. Eckel, supra note 1.

[65]. Udich, supra note 58.

[66]. Schuster, supra note 11.

[67]. Andrew Jack & Carola Hoyos, Exxon May Offer $25 Billion for 40% of Yukos, N.Y. Times,
Oct. 2, 2003, https://www.nytimes.com/2003/10/02/business/exxon-may-offer-25-billion-for-40-of-
yukos.html.

[68]. Interim Award, supra note 2, at ¶ 46.

[69]. See generally Alexander Orakhelashvili, The Position of the Individual in International Law,
31 Cal. W. Int’l L.J. 241 (2000).

[70]. Mavrommatis Palestine Concessions (Greece v. Gr. Brit.), Judgments, 1924 P.C.I.J. (ser. A)
No. 2 (Aug. 30).

[71]. Mikael Baaz, International Law is Different in Different Places: Russian Interpretations and
Outlooks, 14 I•CON 262, 269 (2016).

[72]. Statute of the International Court of Justice, June 26, 1945, 59 Stat. 1055, 33 U.N.T.S.
933.

[73]. Id.

[74]. U.N. GAOR, 67th Sess., U.N. Doc. (Sept. 28, 2012) (emphasis added).

[75]. Martin Dietrich Brauch, Yukos v. Russia: Issues and Legal Reasoning Behind US$50 Billion
Awards, Investment Treaty News, Int’l Inst. for Sustainable Dev. ¶ 3.1 (Sept. 2014),
https://www.iisd.org/itn/wp-content/uploads/2014/09/iisd_itn_yukos_sept_2014_1.pdf

[76]. T. Leigh Anenson, Announcing the Clean Hands Doctrine, 51 U.C. Davis L. Rev. 1827,
1857–58 (2018).

[77]. Brauch, supra note 75.

[78]. Lauri Maliksoo, International Law in Russian Textbooks: What’s in the Doctrinal Pluralism?,
1 Göttingen J. Int’l. L. 279, 290 (2009) (Ger.) (“The Russian view of international law remains largely
positivist and is based upon textual interpretation.”).

[79]. See generally Stephen D. Krasner, Sovereignty: Organized Hypocrisy (1999).

[80]. Vienna Convention on the Law of Treaties, opened for signature May 23, 1969, 1155
U.N.T.S. 331.

[81]. Id. at art. 25.

[82]. Alex M. Niebruegge, Provisional Applicationof the Energy Charter Treaty: The Yukos
Arbitration and the Future Place of Provisional Application in International Law, 8 Chi. J. Int’l L., 355,
357 (2007).

[83]. Martin A. Rogoff & Barbara E. Gauditz, The Provisional Application of International
Agreements, 39 Me. L. Rev. 29, 41 (1987).

[84]. Daniel Vignesi, Une Notion Ambiguë: L’application a Titre Provisoire des Traites, 18
Annuaire Français de Droit Int’l 186, 188 (1972) (Fr.).
 [85]. Id. at 189.

[86]. Id. at 187.

[87]. Id. at 192.

[88]. See id. at 187.

[89]. Rogoff & Gauditz, supra note 83, at 46.

[90]. Id. at 63.

[91]. Niebruegge, supra note 82, at 358.

[92]. Austvik & Lembo, supra note 34, at 2.

[93]. Fenghua Li, The Yukos Cases and the Provisional Application of the Energy Charter Treaty,
6 Cambridge Int’l L.J. 75, 86 (2017).

[94]. Vignesi, supra note 84, at 182.

[95]. Id. at 183.

[96]. Final Award, supra note 23, at ¶¶ 314, 315.

[97]. Interim Award, supra note 2, at ¶ 169 (Expert Opinion of Angelika Nussberger).

[98]. Rogoff & Gauditz, supra note 83, at 34 n.27 (“Ratification is discretionary with signatory
states and may be withheld for any reason.”).

[99]. Russ. v. Yukos Universal Ltd., Judgment, 2016 I.C.J. ¶ 5.19 (Apr. 20, 2016),
https://www.italaw.com/sites/default/files/case-documents/italaw7258.pdf [hereinafter Judg-ment].

[100]. Id.

[101]. Interim Award, supra note 2, at ¶ 315.

[102]. Id. at ¶ 316, 320.

[103]. Final Award, supra note 23, at ¶ 315.

[104]. Expert Opinion of Prof. Rudolf Dolzer, Hulley Enterprises Ltd. v. Russ. (D.D.C. 2016) (No.
1:14-cv-01996-ABJ), https://www.italaw.com/sites/default/files/case-documents/
italaw4441_1.pdf.

[105]. Andrew S. Gold & Henry E. Smith, Sizing up Private Law 36 (2016).

[106]. Id. at 1.

[107]. John Eugene Harley, The Obligation to Ratify Treaties, 13 Am. J. Int’l L. 389, 397 (1919).

[108]. Gold & Smith, supra note 105, at 50 (“distributive justice or other society-wide aims [both
public law considerations] call for modifying the modular structures of private law.”)

[109]. Id. at 14.

[110]. Id. at 47–48.

[111]. Konstitutsiia Rosii skoi Federassii [Konst. RF] [Constitution] art. 4, 10, 15(1), 106 (Russ.);
Judgment, supra note 99, at ¶ 5.75–78.

[112]. Id. at ¶ 5.93.

[113]. Austvik & Lembo, supra note 34, at 2 (citing Andrei V. Belyi, A Russian Perspective on the
Energy Charter Treaty (ARI), Elcano Royal Instit. (June 16, 2009),
http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?
WCM_GLOBAL_CONTEXT=/elcano/Elcano_in/Zonas_in/ARI98-2009).

[114]. See generally G.A. Res. 1803 (XVII) (Dec. 14, 1962).

[115]. Court of First Instance, Rb. Antwerp June 16, 2016, 16/2008/B, (Univ. of Kalingrad) (Neth.),
https://www.italaw.com/sites/default/files/case-documents/italaw7436.pdf.

[116]. Li, supra note 93, at 77.

[117]. Judgment, supra note 99, at ¶ 5.34.

[118]. Id. at ¶ 5.38.

[119]. Id. at ¶ 5.41.

[120]. Id. at ¶ 5.65.

[121]. Li, supra note 93, at 81.

[122]. Judgment, supra note 99, at ¶ 5.9

[123]. Resp’t’s Mot. to Deny Confirmation of Arbitration Awards Pursuant to N.Y. Convention at
28, Hulley Enterprises Ltd. v. Russ., 211 F. Supp. 3d 269 (D.D.C. 2016) (No. 1:14-cv-01996-ABJ),
https://www.italaw.com/sites/default/files/case-documents/italaw4446_
1.pdf.

[124]. Interim Award, supra note 2, at ¶ 19.

[125]. Expert Report of Professor Anton V. Asoskov at ¶ 9, Hulley Enterprises Ltd. v. Russ., 211
F. Supp. 3d 269 (D.D.C. 2016) (No. 1:14-cv-01996-ABJ), https://www.italaw.com/sites/
default/files/case-documents/italaw4153.pdf.

[126]. Id. at ¶ 29–30.

[127]. Id. at ¶ 34.

[128]. Jose E. Alvarez, The Impact of EU Law on International Commercial Arbitration 57 (Franco
Ferrari ed., 2017).

[129]. Id. at 73.

[130]. Military and Paramilitary Activities in and Against Nicaragua (Nicar. v. U.S.), Judgment,
1986 I.C.J. Rep. 14, ¶ 265 (June 27, 1986).

[131]. Id. at ¶ 205.

[132]. Organisation for Economic Co-operation and Development, G20 Guiding Principles for
Global Investment Policymaking at 1, http://www.oecd.org/daf/inv/investment-policy/G20-Guiding-
Principles-for-Global-Investment-Policymaking.pdf.

[133]. Mem. of P. & A. in Supp. of Supplemental Mot. to Dismiss at 22, Hulley Enterprises Ltd. v.
Russ., 211 F. Supp. 3d 269 (D.D.C. 2016) (No. 1:14-cv-01996-ABJ), https://www.ita
law.com/sites/default/files/case-documents/italaw7502.pdf. [hereinafter P. & A.].

[134]. Energy Charter Treaty, supra note 18, at art. 18(2), (3).

[135]. Council of Europe in dispute with Russia over Yukos case, BBC (Jan. 20, 2017),
https://www.bbc.com/news/world-europe-38691148.

[136]. Iryna Marchuk, The Tale of Yukos and of the Russian Constitutional Court’s Rebellion
against the European Court of Human Rights, 1 Osservatorio
Costituzionanale 413, 418 (2017) (It.).
 [137]. See generally Judgment, supra note 99.

[138]. Id.

[139]. P. & A., supra note 133.

[140]. Rechtbank’s-Gravenhage [District Court of The Hague] Feb. 9, 2016, Pleading notes of
Prof. A.J. van den Berg (unofficial translation), ¶¶ 17, 22.

[141]. P. & A., supra note 133, at 2–5.

[142]. Id. at 18.

[143]. U.N. Comm’n on Int’l Trade Law, Convention on the Recognition and Enforcement of
Arbitral Awards at 8–10 (2015).

[144]. See generally P. & A., supra note 133.

[145]. Id.

[146]. Id.

[147]. Gololobov, supra note 12, at 741.

[148]. Expert Opinion of Professor George A. Berman at ¶ 9, Hulley Enterprises Ltd. v. Russ., 211
F. Supp. 3d 269 (D.D.C. 2016) (No. 1:14-cv-01996-ABJ), https://www.italaw.com/
sites/default/files/case-documents/italaw4442_0.pdf.

[149]. See generally Judgment, supra note 99.

[150]. Gololobov, supra note 12.

[151]. P & A, supra note 132, at 33–37.

[152]. Id.

[153]. Özdemir, supra note 5, at 136.

[154]. Id. at 137.

[155]. Niebruegge, supra note 82, at 363 (discussing “the Russian government’s fear
that Menatep was going to sell a significant share of its Yukos holding to Exxon Mobil”).

[156]. Eckel, supra note 1.

[157]. Paul Lefebvre, Belgian Court Unfreezes Russian Assets in Yukos Case (June 13, 2017),
https://www.iadclaw.org/belgian-court-unfreezes-russian-assets-in-yukos-case/ (dis-cussing the
attachments of the Russian assets in Belgium that caused diplomatic tension between Russia and
Belgium).

[158]. The Paris Court of Appeals decided the attached Russian assets belonged to a Russian
state company (FGUP/Societe Goszagransobstvennost), which was not liable for the Russian state
debts. Additionally, that company had a different legal personality, its own capital, and was managed
in autonomously, and therefore, it had an organic and decisional freedom apart from the Russian
state itself. Hence, the Court canceled the attachment of this Russian company’s assets. Cour
d’appel [CA][regional court of appeal] Paris, Pole 1, Chamber 5, Nov. 23, 2016, 16/09459.

[159]. Keith Johnson, What’s Really Happening With the Yukos Case, Foreign Policy, (June 19,
2015, 2:50 PM) https://foreignpolicy.com/2015/06/19/whats-really-happening-with-the-yukos-case-
russia-putin-belgium-france/.

[160]. Schuster, supra note 11.

[161]. Lefebvre, supra note 157.

 [162]. Id.

[163]. Lefebvre, supra note 157.

[164]. Id.

[165]. Hulley Enterprises, 211 F. Supp. 3d at 281.

[166]. Id. at 272.

[167]. Id. at 288.

[168]. Minute Order Granting the Parties’ 171 Joint Motion to Extend the Stay, Hulley Enterprises
LTD v. Russ., No. 1:14-cv-01996 (D.D.C. Dec. 27, 2018), https://www.court
listener.com/docket/4213209/hulley-enterprises-ltd-v-russian-federation/.

[169]. Hulley Enterprises, 211 F. Supp. 3d at 285.

[170]. Id. at 287.

[171]. Id. at 285.

[172]. P. & A., supra note 133.

[173]. Hulley Enterprises, 211 F. Supp. 3d at 285.

[174]. Id.

[175]. Convention on the Recognition and Enforcement of Arbitral Awards, supra note 143, at 10.

[176]. Cour d’appel [CA][regional court of appeal] Paris, Pole 4, Chamber 8, June 27, 2017,
459/17, 12–13.

[177]. Id. at 12.

[178]. Marine de Beilleul, The Three Hottest Energy Arbitrations of 2017, Kluwer Arbitration Blog
(Jan. 4, 2018), http://arbitrationblog.kluwerarbitration.com/2018/01/04/
three-hottest-energy-arbitrations-2017/.

[179]. Id.

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