U.S.-based attorneys with international law firm Hughes Hubbard & Reed are helping a collection of Ukrainian retail gas companies in their fight to claw back funds from Russia following the 2014 seizure of their property during Vladimir Putin’s annexation of Crimea.
The filing, submitted April 9 on behalf of Ukraine-based Stabil LLC, Rubenor LLC, Rustel LLC, and other owner-operators of Crimean petrol stations, asks a D.C. federal judge to enforce an over $34 million award issued by the Geneva-based Permanent Court of Arbitration in 2019. The complaint points to the Swiss tribunal’s ruling, which found Russia violated international law when it nationalized the companies after taking over the peninsula.
The effort hangs in the shadow of Russia’s ongoing invasion of its western neighbor as companies in the U.S. and internationally debate their ongoing presence in the former Soviet nation.
The dispute points to an international trial, one Russia refused to participate in, which rendered an award on jurisdiction in 2015 after the tribunal found the taking violated the Encouragement and Mutual Protection of Investments treaty signed in 1998 between the two countries.
“The property in question which is the matter of the claims is situated in the territory of the Crimea and Sevastopol, i.e., in the territory that was a part of Ukraine but at the present time pursuant to the will of people forms an integral part of the territory of the Russian Federation and cannot be regulated by the [treaty],” read the only correspondence sent by Russia’s Ministry of Justice in the dispute. “The Russian Federation does not recognize the jurisdiction of an international tribunal at the Permanent Court of Arbitration in settlement of the abovementioned claims.”
Russia disputed the award but failed to convince the Swiss Federal Supreme Court, which upheld the ruling and found the expropriation of the companies required financial sanction.
“The tribunal finds it particularly telling that the amendments to the Nationalization Decree and the Sevastopol Order, which nationalized the claimants’ properties and proclaimed them to be the property of the Republic of Crimea and Sevastopol, made no attempt to justify the taking by reference to a public purpose,” wrote Presiding Arbitrator Gabrielle Kaufmann-Kohler. The tribunal panel also included U.S.-based arbiter Daniel M. Price and University of Paris professor Brigitte Stern.
Kaufmann-Kohler’s order details how, following the annexation, the newly installed Russian leadership in Crimea created local militias, which went door-to-door demanding companies “either continue working for the ‘new owner,’ or leave Crimea immediately.”
Stabil and the other plaintiffs eventually had their assets nationalized under the Federal City of Sevastopol.
The April 9 30-page filing retells the story of Russia’s aggression in the neighboring country, noting the Swiss tribunal’s determination that Russia committed several treaty violations, including Russia citing alleged evidence of the companies’ pro-Ukrainian support to justify seizing their assets. It points to a quote from the Russia-installed head of Crimea, Sergei Aksyonov, who decreed “our compatriots are being killed [in southeast of Ukraine] therefore, it is our moral right and our moral duty to carry out this nationalization” before unleashing the militias on Crimean businesses.
“The Russian Federation has never paid for any of its treaty breaches in Crimea, but we hope to change that situation,” said Hughes Hubbard partner John M. Townsend on Monday.
A judge has not yet been assigned to the dispute.
Attempts to reach the Russian embassy were not returned by press time.