22 Jun 2011

The assessment of “good faith” in the the yukos saga - Institutional overlap in times of political uncertainty

NCCR Trade Working Paper No 2011/60 by Andreas R. Ziegler

The political and legal issues relating to the tax and criminal proceedings against Yukos – a major petroleum company - and its owners and mangers in Russia since 2003 have led to many debates. This paper is using the example of the various legal proceedings before international courts and arbitral bodies in order to study the question of institutional or legal overlap. I analyses the various proceedings to this stage tries to answer the question whether the various institutions involved have engaged in judicial dialogue or other mechanisms to create coherence within a fragmented international system in the application and interpretation of international law. In order to do so it does leave aside purely procedural questions (like the use of MFN clauses in BITs) and focuses on the factual and legal findings as to whether the tax assessment of Yukos as well as the insolvency and liquidation proceedings in Russia constituted an unlawful expropriation: as it will be shown this involves the more detailed questions as to whether in these proceedings the due process of law and the principle of non-discrimination were observed.While it may be too early to answer these questions in view of the fact that so far only one arbitral tribunal has handed down its final award with at least three other instances being currently treating the matter one can certainly conclude that the existence of various venues increases the debate and analysis regarding certain legal questions and thereby reduces the risk that potentially dangerous developments go unnoticed. It comes to the conclusion that investor-State arbitral tribunals have developed a strong tendency in recent years to make use of similar awards in the field although not always doing full justice to each other and certainly being far from completely coherent. This is seen as the lesser problem in comparison to a perceived lack of judicial dialogue between human rights tribunals, such as the ECHR and investor-State arbitral tribunals when it comes to questions involving the taking of property where a better integration of the two fields may be wanted. As an example it is shown that the issue of “good faith” regarding the Yukos by the Russian authorities in the first final investor-State award (RosInvestCo UK Ltd. v. The Russian Federation, Stockholm Chamber of Commerce Case No. Arb. V079/2005, Final Award, 12 September 2010) had absolutely no effect on the judgement of the European Court of Human Rights, Khodorkovskiy v. Russia, Application No. 5829/04, Judgement of 31 May 2011. 

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