PAO Tatneft v Ukraine

A state relying on immunity must be afforded that immunity unless the court is satisfied that a statutory exception applies. Its participation in an investment arbitration, and its failure to raise a jurisdictional objection there, do not ordinarily prevent it from contesting immunity before the enforcement court. A waiver requires clear conduct showing an intention to abandon the point for that wider purpose.

An arbitration clause covering any dispute connected with an investment includes disputes about the substantive protections conferred by the treaty. A broadly defined investment includes a lawfully acquired host-state asset without requiring an active contribution of resources into the host state. However, treaty protection for an alleged breach is temporally limited to investments acquired before the impugned measure. Abuse of rights concerns admissibility for the tribunal, rather than the court's jurisdiction under State Immunity Act 1978.

Tatneft obtained an UNCITRAL arbitral award requiring Ukraine to pay US$112 million plus interest for breach of the fair and equitable treatment standard under a bilateral investment treaty. Teare J granted Tatneft leave, without notice, to enforce the award as a judgment. After correction and service of the order, Ukraine applied to set it aside.

Ukraine asserted state immunity. It contended that it had not agreed to arbitrate a fair and equitable treatment claim, or Tatneft's claim concerning shares indirectly held through Amruz and Seagroup. It also alleged material non-disclosure on the without-notice enforcement application. The central issue was whether the arbitration agreement brought the disputes within the exception to immunity and whether any disclosure failure required the enforcement order to be set aside.

1. Ukraine's application was dismissed. Ukraine was immune under State Immunity Act 1978 unless the statutory arbitration exception applied. The court had to determine for itself whether Ukraine had agreed in writing to arbitrate the relevant disputes. Ukraine was not barred from raising its present immunity points merely because it had not advanced them before the tribunal. A waiver would require clear conduct showing that Ukraine had abandoned the point not only in the arbitration but also for subsequent immunity proceedings; no such conduct was shown.

2. The bilateral investment treaty had to be construed under Articles 31 and 32 of the Vienna Convention on the Law of Treaties (1969). The primary exercise was textual. The ordinary meaning was to be read in context and in the light of the treaty's object and purpose. Supplementary materials could not alter a clear meaning obtained under Article 31.

3. The fair and equitable treatment issue was one of merits, not arbitral jurisdiction. Article 9 covered any dispute arising in connection with investments. A dispute about whether the treaty conferred a particular substantive protection fell within that broad agreement to arbitrate. The court therefore did not decide whether the most-favoured-nation clause incorporated a fair and equitable treatment obligation.

4. Tatneft's indirect interest in the Ukrainian company was an investment within Article 1(1). The definition focused on assets in the host state in which an investor had an interest. It did not require Tatneft to have actively contributed resources into Ukraine, nor did it exclude a secondary acquisition through companies incorporated elsewhere. In any event, Tatneft's substantial expenditure to acquire a controlling indirect interest would satisfy an active-investment requirement.

5. The tribunal had temporal jurisdiction. A protected investment must be acquired before the alleged treaty breach. Where conduct forms a sequence, the critical date is the host state's adoption of the measure that crystallises the alleged breach. The final deprivation of the Amruz and Seagroup shares occurred after Tatneft acquired them.

6. An allegation that Tatneft acquired the shares abusively raised admissibility, not jurisdiction. Whether there was an abuse of the arbitral process was for the tribunal, particularly given the fact-sensitive inquiry and high threshold. Finally, Tatneft's disclosure on the without-notice application was not substantially deficient. Its evidence sufficiently disclosed possible jurisdictional objections and the prospect that Ukraine might claim immunity. The omitted details of foreign proceedings would not materially have altered the court's view.

High Court (Commercial Court): This was a first-instance determination of Ukraine's application to set aside a without-notice order enforcing an arbitral award. The judgment records the earlier enforcement order made by Teare J, but no appellate history is stated.