On April 12, 2023, the Arbitration Tribunal at the Permanent Chamber of the Arbitration Court in The Hague ruled in favor of Naftogaz of Ukraine, obliging Russia to pay Naftogaz $5 billion in damages caused by the seizure of assets of Naftogaz Group companies in Crimea in 2014. The Naftogaz press service reported this.
"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 USD 5 billion. 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.
According to Naftogaz, arbitral awards can be enforced through the enforcement mechanism. Therefore, in the event of Russia's refusal to voluntarily comply with the court decision, in accordance with the New York Convention of 1958, Naftogaz has the right to start the process of recognition and admission to the enforcement of the decision on the territory of those states where Russian assets are located.
In October 2016, Naftogaz and six other companies of the Naftogaz Group initiated arbitration proceedings (PCA case No. 2017-16) against the Russian Federation based on the Agreement between the Cabinet of Ministers of Ukraine and the Government of the Russian Federation on the Promotion and Mutual Protection of Investments, also known as the Ukrainian-Russian Agreement on investment protection.
Naftogaz asked the arbitration tribunal to oblige the Russian Federation to pay compensation for violations of the Agreement, including for the illegal expropriation of strategically important energy investments of Naftogaz, which became one of the main targets of the Russian Federation in Crimea in 2014.
In February 2019, the tribunal made a decision in favor of Naftogaz. The tribunal confirmed its jurisdiction and recognized that the Russian Federation illegally expropriated Naftogaz's investments in violation of its obligations under the Investment Protection Agreement. Accordingly, the current (second) stage of the arbitration proceedings concerns the determination of the amount of compensation for Naftogaz's losses.
