Tatneft to enforce arbitral award ordering Ukraine to pay $144 million to Tatneft

The $144m award ($112 million, plus interest to date) arose out of Ukraine’s breach of the Russia-Ukraine Bilateral Investment Treaty, and deprivation of Tatneft of rights as a shareholder in the Kremenchug Refinery, the largest in Ukraine.

The award was issued under the United Nations Commission on International Trade Law (UNCITRAL) Rules in Paris by a tribunal consisting of three arbitrators, following the review of the claim filed by Tatneft and concerning the illegal armed takeover in October 2007 of JSC Ukratatnafta’s (UTN) Kremenchug refinery.  A series of legal manoeuvres and litigations by Ukrainian state parties then followed which deprived Tatneft of its shares in UTN and transferred it to the Privat Group of Ukrainian oligarch Igor Kolomoisky.

The tribunal found that the takeover of the refinery and the actions afterwards were done with the complicity of Ukrainian government officials, including state bailiffs, public prosecutors and the Ukrainian courts, in a concerted effort to deprive Tatneft of its interest in UTN.  This violated Tatneft’s right to fair and equitable treatment of its investment under the Russia-Ukraine bilateral investment treaty.

Ukraine tried to set aside the award, but on November 29, 2016 the Paris Court of Appeal rejected this application.  Despite Tatneft’s repeated requests and despite a public statement by UTN, then controlled by Igor Kolomoisky, that it would reimburse Ukraine for payment of the award, Ukraine has refused to honour the award.  Hence the enforcement action has been brought to compel Ukraine to satisfy its obligations.

Tatneft is a public joint-stock company, with 35% of its capital held by the Republic of Tatarstan, and the rest by private shareholders.

The reasons for the arbitration proceedings commenced by Tatneft against Ukraine in 2008 are purely commercial.

In April 2016 Tatneft also brought an action in English courts against certain individuals in connection with the failure to make payments for the oil supplied by Tatneft to the Kremenchug Refinery.  In October 2016 the High Court dismissed the action, however Tatneft motioned for the leave to appeal, and the relevant hearing is scheduled to take place in July 2017.