The High Court of Justice of England and Wales Dismissed the Application by the Yukos Oil Company’s Former Majority Shareholders

On 14 April 2021, the High Court of Justice of England and Wales dismissed the application to lift the stay of the proceedings to enforce the US$50 billion Yukos awards in England initiated by the oil company’s former majority shareholders.

The stay was imposed by a consent order of the High Court in 2016. In 2020, former Yukos’s shareholders applied to lift a stay and initiated proceedings before the High Court in order to take advantage of the erroneous decision made by The Hague Court of Appeal (CoA) on February 18, 2020.

The High Court carefully evaluated parties’ arguments and agreed with the Russian Federation’s position that the enforcement in England should be stayed pending the resolution of the cassation proceedings in the Dutch Supreme Court. The High Court observed that the Russian Federation’s appeal in cassation was brought in good faith and has a realistic prospect of success. The High Court thoroughly evaluated the Russian Federation’s cassation grievances pertaining to proper interpretation of the ECT and found that the Russian Federation may prevail on these issues in the cassation proceedings with or without referral to the European Court of Justice under Article 267 TFEU. The judgment contains detailed analysis of the CoA’s decision. It confirms, inter alia, that the CoA’s novel interpretation of the limitation clause encompassed in Art. 45(1) of the ECT may be considered too narrow and incompatible with constitutional arrangements; that the alternative interpretation of Russian law by the CoA was based on the new interpretation of words “not inconsistent” in the ECT; that despite the CoA’s findings, the question whether the ECT can protect U-turn investments made through letterbox companies, is not clear in light of object and purpose of the Treaty.

Taking all these facts into account, as well as the risk of unfairness that would arise if the English Courts proceeded on the basis of the CoA’s decision that would later be quashed by the Dutch Supreme Court, “in the interests of comity, avoidance of inconsistent decisions and efficiency”, the High Court decided to dismiss the claimants’ application to lift the stay.

The former Yukos shareholders’ alternative claim to make continuation of the Stay conditional on the payment of security was also dismissed due to the lack of the High Court’s jurisdiction to do so unless and until the Russian Federation’s claim to state immunity has been determined. The High Court also superfluously asserted the balance of interest of the parties and concluded that it would not have required security even if had the relevant power.

The High Court’s judgement is in line with the position of US District Court for the District of Columbia, which granted the Russian Federation’s motion to stay the proceedings in the United States until November 2022 or the conclusion of the proceedings to set aside the awards in the Dutch Supreme Court.

The Russian Federation welcomes the judgement of the High Court and believes that it further confirms the ambiguous nature of the CoA’s interpretation of the ECT and the necessity of referral of the issues of proper interpretation of the Treaty to the European Court of Justice.