The court concluded that the option of arbitration under Article 26 ECT for disputes such as the ones in these proceedings are contrary to written Russian law. In the arbitral proceedings, the investors mainly opposed the consequences of the tax measures the Russian state had imposed on Yukos. They believed that these measures essentially resulted in an expropriation of their shares without compensation.
The court finds that this dispute warrants a judicial assessment of public-law actions. The court’s examination of Russian legislation resulted in the finding that a legal provision is required for subjecting the Russian state to arbitration in such disputes; one which requires the approval (ratification) of the Russian parliament. Such provision does not exist, neither in a general sense nor in a specific sense for this case, as the Russian legislature has not ratified the ECT.
This means that the arbitral clause of Article 26 ECT does not apply through the provisional application of the treaty. The court finds that the arbitrators did not have jurisdiction to take cognizance of this case and were therefore wrong to declare themselves competent.