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Naftogaz claims intermediate victory on lawsuit against Russia over Crimean assets

The Permanent Court of Arbitration in The Hague finds Russia expropriated Naftogaz assets in Crimea in violation of investment treaty.

Photo: Naftogaz

The Permanent Court of Arbitration in The Hague found in favor of NJSC Naftogaz of Ukraine and six of its subsidiaries, concluding that the Russian Federation is liable for the unlawful seizure of Naftogaz assets in Crimea under the bilateral investment treaty between Ukraine and Russia.

“It’s a very important victory, which will help put the aggressor to justice for the stolen assets. Thanks to efforts by both the international community and Ukraine, the cost of the Crimea annexation for Russia will constantly grow. The tribunal’s decision is an important step in this direction,” Naftogaz CEO Andriy Kobolyev said, according to the company's website.

Naftogaz owned some of the most valuable energy assets in Crimea and was among the Russian Federation’s chief targets when, after unlawfully invading and occupying Crimea in 2014, Russia engaged in a scheme to confiscate Ukrainian assets in Crimea.

The arbitral tribunal concluded that the Russian Federation’s actions against Naftogaz were unlawful and violated the Russia-Ukraine bilateral investment treaty, which requires Russia to respect and protect Ukrainian-owned assets, including those in Crimea.

The tribunal will launch a second phase of the proceedings to determine the amount of compensation Russia owes to Naftogaz. Naftogaz experts have estimated the value of Naftogaz’s stolen assets at $5 billion.

Naftogaz commenced arbitration against the Russian Federation in October 2016 pursuant to the Agreement between the Government of the Russian Federation and the Cabinet of Ministers of Ukraine on the Encouragement and Mutual Protection of Investments, more commonly known as the Russia-Ukraine bilateral investment treaty, or BIT. A hearing on matters of jurisdiction and liability was held at the Permanent Court of Arbitration in The Hague in May 2018.

The six Naftogaz subsidiaries that commenced arbitration against the Russian Federation together with their corporate parent are National Joint Stock Company “Chornomornaftogaz,” JSC Ukrtransgaz, Likvo LLC, JSC Ukrgasvydobuvannya, JSC Ukrtransnafta, and Subsidiary Company Gaz Ukraiiny.

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