Russia’s Policy on International Investment Agreements: Reflections After The Yukos Awards - Chapter 10 - Leading Practitioners’ Guide to International Oil & Gas Arbitration

Author(s):

Sophie Nappert

Yulia Selivanova

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80 pages

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Published:

August, 2015

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I. INTRODUCTION

The need for stability in the relationship between investors and

host governments is particularly acute in the energy sector, where

projects tend to be long-term and highly capital-intensive.1

International investment treaties aim at providing this stability and

predictability. After the collapse of the USSR, Russia and other

resource-rich countries in the territory of the former Soviet Union

were in dire need of investment. Consequently, a policy of active

participation in bilateral investment treaties, and later the Energy

Charter Treaty (ECT), was put in place as of 1989-1990. Over two

decades later, the economies of many of these producer states have

recovered due to high oil prices.

This chapter takes stock of the role played by international

investment treaties in Russia and the evolution of Russian policy

towards both these treaties and the investor-state dispute settlement

process for which they provide.

The present chapter was written as the Awards in the ECT

arbitration proceedings between Russia and three of Yukos’

shareholders were issued. Concurrently, Russia has been facing

pressure regarding its future participation in the Energy Charter

process. After Russia suspended its provisional application of the

ECT as of 20 October 2009, it was unclear whether or not it would

or could continue as a participant in the Energy Charter process

without also being a Contracting Party to the ECT. It was argued that

Russia’s participation in the process in this manner was possible, in

light of the active participation of other countries, such as Norway,

that were not provisionally applying the ECT or contemplating its

ratification in the future. Indeed, it appeared that other Contracting

Parties were intent on Russia remaining in the Energy Charter process,

even with its participation limited to discussing energy policy

developments. Notwithstanding Russia’s decision as to its future

participation or non-participation in the process, Article 45(3)(b) ECT

ensures that investments made in Russia in the energy sector during its
provisional application of the ECT remain protected until 2029.