Page 13 - bne_May magazine 2023_20230503 BRICS

bne May 2023 Companies & Markets I 13
The Hague’s Arbitration Tribunal orders Russia to pay Naftogaz $5bn compensation for loss of Crimean assets
bne IntelIiNews
The Hague’s Arbitration Tribunal has ordered Russia
to pay Ukraine’s state-owned natural gas champion $5bn in compensation for losses and damage caused by Moscow’s seizure of Naftogaz’s Crimean assets during the annexation of the peninsula in 2014, the company said on April 13 in a press release.
The court found that compensation should be equal to the fair market value of Naftogaz assets before expropriation.
"The Naftogaz team has won a key victory on the energy front. Despite Russia's attempts to obstruct justice, the Arbitration Tribunal ordered Russia to compensate Naftogaz for losses
of $5bn. This relates to the seizure of our assets in Crimea by Russia in 2014. Russia must now comply with this decision
in accordance with its obligations under international law," commented Naftogaz CEO Oleksiy Chernyshov in the release.
In September 2017, Naftogaz filed a lawsuit against Russia with the International Tribunal demanding compensation
for lost assets in Crimea. The list of property valued
includes the production assets of the company’s subsidiary Chernomorneftegaz, gas in an underground storage facility in Crimea, as well as assets of other subsidiaries of Naftogaz.
The ruling is a big blow for Russia, as it sets a precedent that makes the Kremlin liable to compensate all Ukrainian companies that have lost assets after Russia took over the peninsula following a highly controversial referendum.
The court also ruled that Russia must reimburse Naftogaz for the costs associated with the arbitration proceedings. The award is the largest compensation ever awarded by an International Arbitration Tribunal as indemnity for the expropriation of assets by Russia in Crimea.
Previously, the Stockholm Arbitration court ordered Russia’s state-owned gas behemoth Gazprom to pay Naftogaz a total of $2.6bn in March 2018, ending a four-year legal battle over gas supply contracts. The ruling follows on from the court's rejection of Gazprom’s claim for a payment of $56bn by Naftogaz for undelivered gas under the take-or-pay clauses of its supply deal to Ukraine.
While Gazprom initially resisted paying, the company
eventually conceded defeat and coughed up. At the time it was by far the largest award made in Ukraine’s favour from among the numerous legal cases the two countries brought against each other as energy relations deteriorated in recent years.
The new award by the court in The Hague is twice as large, but will be even more difficult to collect, now that diplomatic relations between Russia and Europe have been cut off in all but name.
Arbitration awards can be executed through an enforcement mechanism, as the legal order allows European countries to seize Russian government state property and Gazprom assets based in Europe.
If Russia refuses to voluntarily execute the decision, Naftogaz has the right to initiate the process of recognition and admission to enforce the award in the territory of those states where assets of the Russian Federation are located, Naftogaz said in the press release.
In October 2016, Naftogaz and six other companies of Naftogaz Group initiated arbitration proceedings against the Russian Federation based on the Agreement between the Cabinet of Ministers of Ukraine and the Government of the Russian Federation on the Encouragement and Mutual Protection of Investments, also known as the Ukrainian- Russian Investment Treaty, the company reports.
Naftogaz requested the Tribunal to force the Russian Federation to pay compensation for violation of the investment treaty including for the illegal expropriation of
“If Russia refuses to voluntarily execute the decision, Naftogaz has the right to initiate the process
of recognition and admission to enforce the award in the territory of those states where assets of the Russian Federation are located”
www.bne.eu