Four new decisions have been added to the already gargantuan Yukos arbitration record, arising out of arbitral awards with a combined total of US$50 billion against the Russian Federation and in favor of the former majority shareholders of Yukos Oil Company -- Hulley Enterprises Limited (Hulley Enterprises), Veteran Petroleum Limited and Yukos Universal Limited (together, the Yukos award creditors).

The Hague District Court set aside the arbitral awards earlier this year, however this has not prevented the award creditors from seeking enforcement in other jurisdictions. The French courts, in particular, have issued a handful of Yukos arbitration enforcement-related decisions throughout 2016. A key issue in these proceedings has been whether property owned by State enterprises, or companies in which the State holds shares, is property of the State and capable of attachment. The more notable developments occurring last year were:

  • On 28 April 2016, an enforcement judge at the Paris Tribunal de Grande Instance held that an Orthodox church and cultural center Russia built near the Eiffel Tower was protected by sovereign immunity and could not be seized by Hulley Enterprises.
  • On 5 October 2016, the First President of the Paris Court of Appeal suspended the lower court's decision to lift attachments previously obtained by Hulley and Veteran Petroleum on assets owned by SA Arianespace and Roscosmos, the Russian State Corporation for Space Activities.
  • On 4 November 2016, an enforcement judge at the Paris Tribunal de Grande Instance upheld 12 attachments against Russian State property secured by Hulley Enterprises. The decision is not publicly available, however, according to reports, the attachments included a bank account held by the Office of the President of the Russian Federation, and a guarantee Socit Gnrale owed to Rosoboronexport, Russia's intermediary agency for the import/export of defense-related and dual use products, technologies and services.
  • On 23 November 2016, the First President of the Paris Court of Appeal confirmed the lower court's decision to lift attachments obtained by Hulley Enterprises against 400 million in assets purportedly owned by three Russian State enterprises on the basis that an attachment on monetary claims against a third party who has a direct personal debt towards the award/judgment debtor.

While Russia has argued that the setting aside of the Yukos arbitral awards in The Hague should render all enforcement actions obsolete, none of the French court decisions regarding the attachment of Russian assets have tackled this issue. This is because the enforcement of the Yukos awards are based on an exequatur, which the Paris Tribunal de Grande Instance granted to the Yukos award creditors on 1 December 2014. Russia's argument regarding the setting aside of the Final Award are therefore not within the jurisdiction of the courts currently dealing with the enforcement actions.

In addition to challenging the Yukos award creditors' attempts to seize Russian property and enforce the arbitral award, Russia has challenged the exequatur of both the Interim and Final Awards before the Paris Court of Appeal. The challenge is pending. The French courts will rule on the effect of the setting aside on the enforcement in France in the context of these proceedings. As will be discussed below, the setting aside is unlikely substantially to derail the enforcement of the awards in France.

Enforcement in France of Awards Set Aside at the Seat

On 20 April 2016, the District Court of The Hague set aside the Yukos arbitral awards. In France, however, a competent State authority setting aside an award at the seat of arbitration does not constitute grounds for refusing recognition and enforcement. While France is a signatory of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) -- Article V(1)(e) of which provides that a court may refuse recognition and enforcement if a competent authority in the country in which the award was made has set aside the award -- French courts have consistently held that they retain full discretion to enforce an award that a foreign court has set aside.

French case law considers that an international arbitral award is delocalized and therefore not integrated in the legal system of the State where the award was adopted. Thus, an award remains in existence even if set aside at the seat, and its recognition and enforcement depend only on the rules applicable in the State where recognition and enforcement is sought. Under Article 1525 of the French Code of Civil Procedure, courts can only refuse an international arbitral award's enforcement in situations that are also the basis for setting aside an international arbitral award rendered in France. These partly mirror Article V of the New York Convention and are enumerated in Article 1520 of the Code of Civil Procedure: the arbitral tribunal wrongly upheld or declined jurisdiction; the tribunal was not properly constituted; the tribunal overstepped its mandate; there was a violation of due process, or recognition or enforcement of the award is contrary to international public policy. French jurisprudence does not consider the recognition and enforcement of an award that has been set aside at the seat to contradict international public policy.

French courts have likewise referred to Article VII of the New York Convention, which provides that the Convention shall not "deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon." Since French law does not provide that the setting aside at the seat constitutes grounds for refusal of recognition or enforcement of an arbitral award, French courts consider it to be more preferential to a party seeking recognition or enforcement than the New York Convention.

Consequently, the District Court of The Hague's setting aside of the Yukos arbitral awards will unlikely, in itself, stand in the way of the award creditors enforcing the Yukos awards in France.