OAO Tatneft v. Ukraine
PCA · Investment (ICSID and treaty) · Ukraine · 28 Sep 2010
Why it matters
This partial award is significant for its detailed analysis of jurisdictional issues under the Russia-Ukraine BIT, including the definition of investment and investor, and the application of MFN clauses to procedural and substantive protections. It also addressed the 'in accordance with host state law' requirement and the standing of a shareholder to claim for losses of its subsidiaries. The decision clarified the scope of BIT protections for indirect investments and the use of MFN clauses to import more favorable treatment from other treaties.
Summary
OAO Tatneft, a Russian oil company, initiated arbitration against Ukraine under the Russia-Ukraine BIT, alleging that Ukraine's actions regarding Ukrtatnafta, a joint venture in which Tatneft held shares, violated the BIT. Ukraine raised multiple objections to jurisdiction and admissibility. The Tribunal rejected most objections. It held that Tatneft's shareholding in Ukrtatnafta constituted an 'investment' under the BIT, and that Tatneft was an 'investor' despite Ukraine's argument that it was not the beneficial owner. The Tribunal also found that the BIT's requirement that investments be made 'in accordance with the legislation' of the host state did not bar jurisdiction, as the alleged illegality was not clear at the jurisdictional stage. Regarding admissibility, the Tribunal allowed Tatneft to pursue claims for losses of its subsidiaries Amruz and Seagroup, and for unpaid oil deliveries, finding that these were not separate claims but part of Tatneft's own investment dispute. The Tribunal also allowed Tatneft to rely on the MFN clause in Article 3(1) of the Russia-Ukraine BIT to invoke the shorter waiting period and substantive protections (fair and equitable treatment, full protection and security) from the UK-Ukraine BIT. The case proceeded to the merits.
The detail
Parties: OAO Tatneft v. Ukraine
Case number: PCA Case No. 2008-8
Outcome: The Tribunal upheld jurisdiction over most claims and dismissed Ukraine's objections to jurisdiction and admissibility, allowing the case to proceed to the merits.
Applicable law: Russia-Ukraine BIT (1998), UNCITRAL Rules
Issues in play: The case involved interpretation of the Russia-Ukraine BIT, particularly the definition of 'investment' and 'investor', and the application of the most-favored-nation (MFN) clause to import shorter waiting periods and substantive protections from the UK-Ukraine BIT.
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