Pay for the Crimea: how the Ukrainian companies won for the first time from Russia

Ukrainian companies won the first international dispute against Russia over the nationalization of assets in the Crimea. Arbitration in The Hague awarded $ 159 million at the suit of 18 Ukrainian enterprises, among which there are associated with Igor Kolomoisky.
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The international arbitration made the first, a decisive decision on the merits in favor of Ukrainian companies that lost their assets in the Crimea as a result of the annexation of the peninsula to Russia in 2014. "The Arbitral Tribunal issued a unanimous decision (Award on the Merits) on issues of liability and damages," the Permanent Court of Arbitration in The Hague (PCA), which administers this and similar disputes, announced on May 9.

It is about taking a decision on the claim of OOO Everest Estate and 17 other Ukrainian structures, as well as one individual - former chairman of the board of Privatbank Alexander Dubilet, who accused Russia of expropriating their assets in the Crimea.

$ 159 million for "illegal expropriation"

PPTS does not disclose the essence of the decision under confidentiality rules, but authoritative legal publications Global Arbitration Review and Law360 reported that the Arbitration awarded the group of claimants compensation for a total of $ 159 million. The same Ukrainian media holding "1 + 1 media", which included the Crimean the television and radio company "ZHisa" is one of the plaintiffs. "The Arbitration Court in The Hague ruled that Russia should pay compensation to a number of Ukrainian investors for the annexation of the Crimea. In this case we are talking about the amount of $ 159 million The court ruled that Russia is responsible for the violation of the rights of Ukrainian investors since March 21, 2014 ", - quotes the message of the holding of the Ukrainian portal

The source of RBC, close to one of the plaintiffs, confirmed that the Arbitration rendered the final decision in favor of Ukrainian companies. According to the source, the Arbitration found that the Russian Federation unlawfully expropriated the property of the plaintiffs in the Crimea, and awarded them compensation for the loss of assets, as well as interest and reimbursement for legal fees and costs of arbitration.

According to the UNIAN agency, the amount of compensation consists of $ 130 million of estimated losses plus interest of about $ 20 million. The arbitration also obliged Russia to compensate the plaintiffs' expenses for lawyers and costs for participation in the trial. According to UNIAN, the claimants demanded to pay them about $ 220 million. A source close to the plaintiffs informed RBC in April 2017 that the amount of claims is $ 231 million. Thus, the arbitrators appeared to have satisfied their demands only partially.

Following the tracks of YUKOS

Now plaintiffs with an arbitration award on their hands can go to the courts of different countries for the recognition and enforcement of the Arbitration award, as former Yukos shareholders did. But to recover from a sovereign state such compensation is usually very difficult, since most of the state's assets in other countries are protected by sovereign immunity, and property of state companies is considered independent.

"As soon as the Arbitration decision is made, it is possible to begin the procedure for its recognition and enforcement in the territory of foreign states where there is property of the Russian Federation. At the same time, there is an opportunity to ask about the imposition of arrest on such property. However, the potential challenge to the Arbitration award on the part of the Russian Federation allows one to ask for the suspension of these processes, as happened, for example, in a number of states where YUKOS shareholders tried to enforce their Arbitration award against Russia, "says Herbert Smith Freehills partner Alexei Panich.

Ukrainian plaintiffs can "start political execution" for the execution of the arbitration award immediately, admits Panich. RBC sent inquiries to several applicant companies and to the Ministry of Justice of Ukraine, but received no reply.

Kolomoisky's interest

Some of the companies that initiated this trial in June 2015 are connected with the Ukrainian oligarch Igor Kolomoisky, against whom a criminal case has been opened in Russia. Kolomoisky is the ultimate beneficiary of "1 + 1 media", the group of which was the TRC "Gisa". The title plaintiff is Everest Estate (the developer of the Nautilus apartment complex in Gurzuf and the Crimean Yard hotel complex in Yalta) was connected with Privatbank, which Kolomoisky owned earlier, the Prosecutor General's Office of Ukraine reported. Also among the plaintiffs - the company "Dairys" and "Diline LTD", which owned land in Alushta and the beach in Foros; the ultimate beneficiaries of these companies are Kolomoisky and Gennady Bogolyubov, it follows from the Ukrainian register of legal entities. Another plaintiff - OOO "Sanatorium" Energetik "(the eponymous boarding house in Yalta) - belonged to Kolomoisky, according to Ukrainian media.

In Crimea, a law was adopted that determines the procedure for reimbursement to former Ukrainian owners for the nationalization of their assets on the peninsula, but it does not apply to persons against whom criminal proceedings are instituted in Russia "on the basis of an offense of extremist nature", so the Crimean authorities claimed that Kolomoisky will not receive. In Russia, Kolomoisky is accused of murder and "the use of prohibited means and methods of warfare."

The nationalization of property in the Crimea "concerned first and foremost only state institutions and organizations, and in the private sphere - only objects of companies and individuals affiliated directly with Kolomoisky and Privatbank, which caused the most damage to the Crimeans in the fact that they did not return deposits and deposits" , said RBC in April 2017 the head of the Republic of Crimea Sergei Aksenov. The Government of the Crimea plans to sell at auction 37 objects previously owned by Kolomoisky, including the boarding house "Cote d'Azur", health centers and apartments.

Russia did not participate, but can challenge

Russia did not participate in the arbitration process on the suit of "Everest Estate". Justifying its refusal, Russia notified the Arbitration in 2015 that the bilateral Russian-Ukrainian investment agreement of 1998 "can not serve as the basis for the formation of the Arbitration for the settlement of the dispute" and that it "does not recognize the jurisdiction of international arbitration in the Permanent Arbitration Tribunal" . Russia takes the same position a priori in all disputes initiated by Ukrainian companies in connection with the loss of their investments in the Crimea (such claims about a dozen). In particular, in August 2017 the lawsuit of Naftogaz Ukrainy began, which demanded that Russia pay damages of $ 2.6 billion related to the loss of assets in the Crimea. Later, Naftogaz increased the volume of claims to $ 5 billion.

The Hague was chosen as the place of arbitration in the Everest Estate lawsuit, therefore Russia, if it decides, will challenge the award for compensation in the Dutch national court in The Hague (RBC sent a request to the Ministry of Justice of Russia). At the same time, in two suits ("Ukrnafta" and "Stabil"), the arbitration tribunal chose the place of Switzerland. There, in June 2017, interim decisions were made that confirmed the jurisdiction of the Arbitration. And after that, Russia immediately, without waiting for final decisions on the merits of the dispute, appealed against interlocutory decisions in the court of Switzerland.

"In disputes with the place of arbitration in Switzerland, the presiding arbitrator is a lawyer from Geneva, so the choice of Switzerland as the venue for the dispute can be explained by simple convenience. Procedural issues and further challenges to the Arbitration award will be subject to local [Swiss] law, "Panich explains. When passing an intermediate decision of the Arbitration, it is reasonable for the defendant not to wait for the final decision on the merits of the dispute, but to immediately challenge the decision on jurisdiction, since it is in it that the key issue on the competence of the Arbitration is resolved, the lawyer adds.

Lawyers interviewed by RBC earlier noted that arbitration proceedings of Ukrainian companies against Russia are unique, since they deal with the question of the applicability of a bilateral agreement on the protection of investments to the situation when the territory changed its statehood.