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An arbitration court recognized in the summer of three former Yukos shareholders entitled to damages of 50 billion dollars. Law expert Jan D. Bayer analyze which risks could threaten the future of billions of investment protection methods against this background, the Federal Republic.

1. The relevance of the arbitration judgment in Yukos case

In Germany this political award was hardly noticed. The Federal Republic of Germany or German companies did not seem affected, apart from the involvement of German commercial banks in the case from which could yet have a sequel. In Germany the Yukos arbitration award made ​​only for political storm, as the Yukos shareholders announcing its damage claims against assets situated in Germany Russian and Russian-controlled companies such as Rosneft Show chartand Gazprom Show chartwant to enforce. The policy concern since that Germany or German companies possible Russian "retaliatory measures" could be suspended if German courts would allow such enforcement against Russian assets.

Both the non-observance of the Yukos arbitration award and the frantic reaction to the announcement of enforcement measures in Germany did not meet the true meaning of Yukos arbitration judgment for the Federal Republic.

The scope of the Yukos arbitration award is not in potentially strenuous enforcement measures against Russia in Germany, because they are as good as hopeless. This is especially true for enforcement measures against Russian state company Rosneft or Gazprom as, for example through garnishment of payment claims from oil or gas supplies for German customers.

The resulting from the Yukos arbitration danger for Germany is on a different level:

On the one hand meets the award far-reaching findings concerning certain relevant for Germany clauses of the Energy Charter Treaty, as Vattenfall is based on his claim for compensation of 4.7 billion euros due to the nuclear phase-out. Due to the scale in the Yukos arbitration width of entitlement and the low requirements on a "foreign investment" and the term "expropriation" of the circle of possible claimants in an investment protection proceedings under this contract is unmanageable in the future. This is especially true in light of the nuclear phase-out and the energy transition, since the contract foreign investment not only in the oil and gas sector, but also in the areas includes nuclear power, solar, wind and other forms of renewable energy.

On the other hand, the Yukos arbitration award clearly that an international arbitral tribunal can come to decisions that had not been hit by a German court in applying the statutory burden of proof rules with high probability.

The award is accordingly a very graphic example of what the Federal Republic could threaten the future of investment protection method. This applies both to the Energy Charter Treaty itself, its scope was greatly expanded in the Yukos arbitration award. This is true on the other hand - and still increasing degree - if such investment protection provisions and arbitration should be included in the TTIP.

Part 2: 2. The Yukos arbitration

The Yukos arbitration award is a result of the "Khodorkovsky affair" from the years 2003 and 2004, which led not only to long-term detention of Mikhail Khodorkovsky in Russia, but also for the indirect nationalization of Yukos.

The arbitral judgment of the Tribunal in The Hague against the Russian Federation follows from the findings of the tribunal, after which the Russian state specifically for this began excessive tax claims against Yukos, to expropriate Mikhail Khodorkovsky and other shareholders and to nationalize the assets of Yukos without adequate compensation. The Russian state not acted directly here, but pushed by the Tribunal considers, among other coercive measures and intergovernmental influence the state oil company Rosneft names before, so as to achieve an indirect nationalization of Yukos.

After tax claims of the Russian state in multi-billion dollar financial difficulties of Yukos had caused the Russian state distrained the valuable participation of Yukos and let this auction. For a small price (and within ten minutes) this participation auctioned initially a formally independent from the Russian state and Rosneft acquisition company, without having ever have the financial resources for the payment of the purchase price. The shares in the acquiring company were then passed before the completion of the acquisition of the state Rosneft, the so took over the contract and the Yukos stake acquired.

Later agreed the state Rosneft with a syndicate of Yukos - which also includes the German Bank Show chartand Commerzbank Show chartbelonged - that Rosneft will repay the bank debt of Yukos to the bank consortium, if the bank consortium in return ask a bankruptcy petition against Yukos. After the banks had fulfilled their part of the agreement and the bankruptcy on the Yukos assets had been opened, Rosneft and Gazprom auctioned more Yukos assets parts. The tax liability of Yukos was reduced after the takeover by the Rosneft to 75 percent.

The tribunal said the Yukos shareholders for breach of the expropriation prohibition in the Energy Charter Treaty by the Russian Federation a claim for damages totaling about 50 billion US dollars, because it all behavior of state-owned Rosneft immediately the Russian state imputing. Rosneft was to be regarded as a mere tool or vehicle for the Russian government to enforce Russian government interests in the Yukos case.

The arbitration award has - without having to be faulty as a result - serious weaknesses in the plausibility of the cause of the relationship between government transfers and asset acquisition by Rosneft. According to German legal principles it would have been on the plaintiffs to prove that Rosneft acted alone on the instructions of the Russian state.

The findings of the tribunal to the chain of command between the state, Rosneft and acquisition company based next to the prosecution of Mikhail Khodorkovsky solely on circumstantial evidence, to statements by Russian President Putin "known nearby active parties to the Kremlin" in press conferences or. The claim for damages is thus based on a factual situation which might have occurred after human Hold For so, but must have occurred not necessarily so.

For the outlined in the Yukos arbitration facts could give just that the Rosneft Board at the State only reinsured and the green light for an acquisition of Yukos assets received after the auction of Yukos participation was announced. So the statements by President Putin could be understood in press conferences and so that the Russian state had no objection to the acquisition, while Rosneft is held for bid for Yukos assets in the context of Russian laws and just did not trigger expropriation liability of the Russian state. For such a course speaks not least the structured approach of Rosneft, whose handwriting points rather to international investment banks and law firms than on Russian ministries.

Anyway, seems extremely doubtful whether a German court would have been in this situation situation to the same terms without judgment in any case explicit reference to a reversal of the burden of proof.

Part 3: 3. Formal eligibility under the Energy Charter Treaty after Yukos arbitration

The Yukos arbitration award includes not only the decision on the merits interpretations of the Energy Charter Treaty, which could increase future liability of the Federal Republic under the Agreement bounds.

So it was in the Yukos shareholders to non-functional intermediate companies based in European tax havens like Cyprus and the Isle of Man, were thereby able alone to enjoy the protection of the Energy Charter Treaty. The Tribunal made solely on the foundation of the intermediate companies in these countries, it was irrelevant that the intermediate companies were Russian nationals and the shares were held even likely trust for Russian citizens.

In future could therefore also foreigners from non-Contracting States and German nationals who hold their investment in a protected German energy project or companies that make claims under the Energy Charter Treaty against the Federal Republic claims when they interpose only a company established in another Contracting State, be it about the Netherlands, Luxembourg, Switzerland or Liechtenstein. Formal eligible are also about Luxembourg investment funds and registered shares how she has spent about E.on, could be obtained through proxy shareholders domiciled in a Contracting State Convention protection.

This attendant risk is all the greater, considering the concept of "investment" under the Energy Charter Treaty, as it the Yukos tribunal has determined. The term includes according to the text, among other things, any kind of asset, owned by an investor directly or indirectly, or controlled by him, including all tangible and intangible assets, contracts and any resulting claims, licenses and concessions, any form of equity participation in a company or a commercial enterprise and any income, including bonds and (bank) loans to a company for the exercise of economic activities in the energy sector.

One of the spare corrected Yukos shareholders held just 2.5 percent of Yukos. Nevertheless the Yukos tribunal rejected any restrictive interpretation of the term "investment" and turned from exclusively from the wording of the Energy Charter Treaty, according to which only the (small) equity ownership of an energy company for a formal eligibility sufficient. It follows from the future, the risk that foreign shareholders, bondholders, foreign banks and foreign parties may assert claims against the Federal Republic formally, if a German energy company suffers losses due to legislative or other public activity or even go bankrupt.