If Russia refuses to voluntarily comply with the Arbitration Tribunal’s decision, Naftohaz has the right to start enforcing it in those states where Russia’s assets are located.
The Russian media reacted with a wave of disinformation to the Arbitration Tribunal’s decision at the Hague Arbitration Court Permanent Chamber, obliging Russia to pay Ukrainian Naftohaz compensation for seizing Crimean assets. Pro-Kremlin media claimed that Russia allegedly will not suffer financially from the decision of the Hague Court. Russian media also called the court’s decision politicized and aimed at ‘legitimizing the looting of Russian assets, illegally seized by Western countries.’
‘The assets of the Russian Central Bank have been frozen, for example, in European banks, but any withdrawal of funds from these assets and their transfer to someone else will be property theft,’ Russian media write.
On April 12, 2023, the Arbitration Tribunal at the Hague Arbitration Court Permanent Chamber ordered Russia to pay five billion US dollars to Naftohaz of Ukraine for damages caused by Russia seizing the assets of Naftohaz companies in Crimea in 2014. The international court proceedings between the Ukrainian company and Russia lasted for seven years.
Naftohaz of Ukraine initiated international legal proceedings with Russia over Crimean assets in late 2016. The company demanded compensation for losses of assets as a result of Russia occupying Crimea.
As expected, Russia tried to challenge the jurisdiction of the Tribunal, but in 2019 the Court placed full responsibility for seizing the Naftohaz group’s assets in Crimea on Russia. In 2020, the second stage of the arbitration proceedings began. It was dedicated exclusively to determining the amount of compensation for Naftohaz’s losses, since Russia had already been found guilty. Ukraine received the final decision in April 2023. The Arbitration Tribunal established that the amount of such compensation should equal the fair market value of Naftohaz’s assets before their expropriation. It is five billion US dollars. Russia must also reimburse Naftohaz all costs related to this arbitration.
The Kremlin’s statements that the court’s decision will allegedly not affect Russia financially are not true as such arbitration decisions can be implemented forcibly. If Russia refuses to voluntarily comply with the court’s decision, according to the New York Convention of 1958, Naftohaz has the right to enforce the decision in those states where Russian assets are located.
The process is facilitated by the fact that due to Russia’s full-scale invasion of Ukraine a number of countries have already frozen Russian assets. Thus, they are available for recovery, Lana Zerkal, adviser to the Ukraine Energy Minister, Extraordinary and Plenipotentiary Ukrainian Ambassador, explained in a comment to Radio Svoboda.
‘This is actually the last stage. And now it is much easier to implement it than before February 24, 2022, when Russia was still protected by its immunities and was at least roughly within the framework of international law. Given the fact that Russia does not comply with international law, given that it has violated everything possible and impossible, the courts of various jurisdictions [these are the 172 countries that have joined the New York Convention] are already more favorable to implement arbitration awards than before. And they understand that it must be done as soon as possible,’ Zerkal emphasized.
Before the Russian occupation of the Ukrainian Crimea, the subsidiary of Naftohaz — Chornomornaftohaz — had a huge list of properties on the peninsula. Russia not only seized the drilling rigs (known as ‘Boiko towers’), but also underground storage facilities, the company’s fleet, employees’ apartments and many other properties of the state-owned company, as well as gas fields that are actively being developed today. In total, the Kremlin expropriated more than 60 categories of Naftogaz assets in Crimea.
The Russian narrative that a number of countries that have frozen Kremlin assets due to its illegal full-scale invasion of Ukraine are allegedly robbing Russia is also fake. The StopFake team refuted this narrative in the stories Fake: The UN General Assembly Legitimizes Robbing Russia and Fake: European Parliament Recognizing Russia as a Terrorism Sponsor Has No Consequences.
