PAO TATNEFT V UKRAINE

[2020] EWHC 3161 (Comm), Queen’s Bench Division, Commercial Court, Sir Andrew Smith (sitting as a High Court Judge), 23 November 2020

Arbitration – Enforcement of New York Convention award – Defence based on illegality of submission to arbitration – Whether respondent was estopped from relying upon the defence – Whether the respondent had waived the defence – Arbitration Act 1996, sections 73 and 103(2)

Under a Bilateral Investment Treaty between Ukraine and Russia, which provided for investment disputes between a private investor from one of the signatory states and the other signatory state to be resolved in arbitration under UNCITRAL Rules, a Russian oil company, Tatneft, commenced arbitration in Paris against Ukraine. By a Merits Award in July 2014 Tatneft was awarded US$31 million in respect of shares acquired by Tatneft in a Ukrainian company, Ukrtatnafta, and US$81 million in respect of shares in Ukrtatnafta that Tatneft indirectly acquired by buying interests in two other companies, Seagroup and Amruz. An enforcement order was granted by Teare J in August 2017. Ukraine unsuccessfully challenged the award on state immunity grounds in proceedings brought before Butcher J in 2018. In the present application Ukraine sought to challenge enforcement under section 103(2)(d) of the Arbitration Act 1996, on the basis that the share issues to Seagroup and Amruz were illegal under Ukrainian law. The illegality defence had not been raised either before the tribunal or in the challenge to enforcement before Butcher J.