Republic of the Philippines

National Capital Judicial Region

Regional Trial Court
Makati City
Branch III

HULLEY ENTERPRISES LTD, Civil Case: 123456

YUKOS UNIVERSAL LTD, and For: Recognition and
VETERAN PETROLEUM LTD, Enforcement of
Claimants Foreign Arbitral Award
-versus-

THE RUSSIAN FEDERATION,

Respondent

x--------------------------------------------x

DECISION

Synopsis:

The dispute arose when a tribunal chaired by Canada's Yves Fortier

QC and including Switzerland's Charles Poncet, appointed by the
claimants, and the US's Stephen M Schwebel, appointed by Russia,
on 18 July 2014, unanimously found in favor of the claimants, which
collectively owned a 70 per cent shareholding in Yukos and ordered
Russia to pay more than US$50 billion to former majority
shareholders. It was alleged that Russia expropriated Yukos, once
the largest oil company in Russia in terms of daily crude production.
Such expropriation made by Russia was purportedly made in a series
of politically motivated attacks and that the State measures ultimately
led to the financial collapse and dismantling of Yukos, and the
transfer of nearly all of its assets to the Russian Federation or its
State-owned enterprises, principally including the State-owned oil
major Rosneft.

Subsequently on 20 April 2016, the Hague District Court set aside the
decision of the arbitral tribunal on jurisdictional grounds. The District

1
Civil Case: 123456
For: Recognition and Enforcement of Foreign Arbitral Award
HULLEY ENTERPRISES LTD, YUKOS UNIVERSAL LTD, and VETERAN PETROLEUM LTD
vs.THE RUSSIAN FEDERATION
x-----------------------------------------------------------------------------------------------------------------------------------------x

Court accepted Russia's reading of Article 45 of the Energy Charter

Treaty on provisional application and held the state – which never
ratified the treaty – was only bound by those provisions reconcilable
with Russian law, including the 1993 Russian Constitution.

In the meantime, herein claimants found assets in the Philippines

specifically the following: (i) €300 million owed by Globe Telecom to
former Russian space agency Roscosmos and its partners, over
services performed under two contracts relating to the launch of
satellites; (ii) 8,000 square-metre site in Quezon City, which was
acquired by Russia in 2010 to build a giant Russian Orthodox
Cathedral; (iii) real estate in Manila registered in the name of Rosneft;
(iv) €640,000 in Russian funds held in bank accounts at BDO and
BPI, including an account in the name of the Russian Centre for
Science and Culture in Taguig and third-party accounts holding rental
deposits; (v) the Russian embassy in Dasmarinas Village in Makati.
Hence, claimants filed a Petition to enforce the foreign arbitral award
with this court.

STATEMENT OF FACTS

The facts of the case as stipulated by the parties are as follows:

1. Claimants are all part of Yukos group of companies whereas

Respondent is the Russian Federation.

2. The Russian Federation is a signatory to the 1958 New York

Convention.

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Civil Case: 123456
For: Recognition and Enforcement of Foreign Arbitral Award
HULLEY ENTERPRISES LTD, YUKOS UNIVERSAL LTD, and VETERAN PETROLEUM LTD
vs.THE RUSSIAN FEDERATION
x-----------------------------------------------------------------------------------------------------------------------------------------x

3. Hulley Enterprises, Yukos Universal and Veteran Petroleum are

involved in daily crude production and held collectively 70.5%
shareholding in Yukos.

4. The dispute between Yukos and Russia started with Moscow’s

pursuit of Yukos and its chief executive, Mikhail Khodorkovsky
for alleged tax evasion.

5. The Russian Federation, with its tax measures, unlawfully

expropriated Yukos in a series of politically motivated attacks.

6. State measures ultimately led to the financial collapse and

dismantling of Yukos. Nearly all of its assets were transferred
to the Russian Federation or its State-owned enterprises.

7. Russia sold in auction YNG, a primary asset of Yukos, wherein

a State-owned oil major named Rosneft acquired it. The
proceeds of the said sale were intended to cover the alleged
unpaid taxes of Yukos.

8. With President Putin’s statements indicating that the State

accepted responsibility for auction of YNG and other actions
bearing on the destruction of Yukos, the State’s agencies and
owned enterprises acted in implementation of the policy of the
Russian Federation. Therefore, all who acted pursuant to the
policy should be held liable as well.

9. Based on the unlawful expropriation, each of the defendants

requested arbitration under Article 26 paragraph 4 (b) of the
Energy Treaty and the Arbitration Rules of the United Nations
Commission on International Trade Law. After each of the

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Civil Case: 123456
For: Recognition and Enforcement of Foreign Arbitral Award
HULLEY ENTERPRISES LTD, YUKOS UNIVERSAL LTD, and VETERAN PETROLEUM LTD
vs.THE RUSSIAN FEDERATION
x-----------------------------------------------------------------------------------------------------------------------------------------x

parties had appointed an arbitration, the Secretary-General of the

Permanent Court of Arbitration in The Hague appointed a third
arbitrator on 21 July 2005, who was also Chairman of the arbitral
tribunal.

10. Arbitrations commenced on 31 October 2005. The place of

arbitration was The Hague. In the Arbitration, the defendants in
the proceedings -in brief - argued as respective claimants that
the Russian Federation had unlawfully expropriated their
investments in Yukos and had wrongfully failed to protect them
from it, resulting in substantial losses. The defendants claimed
compensation for these damages.

11. The disputes between the Parties to the present proceedings

involve various measures taken by Russia against Yukos and
associated companies primarily in the period July 2003 and
November 2007, when Yukos had emerged after the dissolution
of the Soviet Union to become the largest oil company in the
Russian Federation. The measures complained of include
criminal prosecutions, harassment of Yukos, its employees and
related persons and entities; massive tax reassessments, VAT
charges, fines, asset freezes and other measures against
Yukos to enforce the tax reassessments; the forced sale of
Yukos’ core oil production asset; and other measures
culminating in the bankruptcy of Yukos in August 2006, the
subsequent sale of its remaining assets, and Yukos being
struck off the register of companies in November 2007.
Claimants contend, and Respondent denies, that Respondent
failed to treat Claimant’s investments in Yukos in a fair and
equitable manner and on a non-discriminatory basis, in a
breach of Article 10(1) of the ECT, and that Respondent

4
Civil Case: 123456
For: Recognition and Enforcement of Foreign Arbitral Award
HULLEY ENTERPRISES LTD, YUKOS UNIVERSAL LTD, and VETERAN PETROLEUM LTD
vs.THE RUSSIAN FEDERATION
x-----------------------------------------------------------------------------------------------------------------------------------------x

expropriated Claimants’ investments in breach of Article 13(1)

of the ECT. Claimants seek full reparation in excess of USD
114 billion.

12. On 18 July 2014, the tribunal consisting of Yves Fortier QC,

Charles Poncet and Stephen Schwebel unanimously ruled in
favor of the claimants. In its award, the tribunal ordered Russia
to pay more than USD 50 Billion to former majority
shareholders.

13. Claimants seek to enforce the aforesaid Foreign Award in the

Philippines, a country which is also a signatory to the 1958 New
York Convention.

STATEMENT OF ISSUES

Respondent respectfully submits that the following are the pivotal

issues to be resolved:

I. Whether the Regional Trial Court can validly exercise its

jurisdiction against the Respondent.
II. Whether the assets within the Philippines held by the
Respondent can be attached for the satisfaction of the claim
filed by the Claimants against the former.
III. Whether the Foreign Arbitral Award rendered by the tribunal
can be enforced as a foreign judgment in the Philippines.

FINDINGS OF THE COURT

In resolving this dispute at hand, the Court must first answer the
question whether it has jurisdiction over the case since the other

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Civil Case: 123456
For: Recognition and Enforcement of Foreign Arbitral Award
HULLEY ENTERPRISES LTD, YUKOS UNIVERSAL LTD, and VETERAN PETROLEUM LTD
vs.THE RUSSIAN FEDERATION
x-----------------------------------------------------------------------------------------------------------------------------------------x

substantive issues raised in the pleadings and annexed as evidence

shall determine afterwards the contention on whether or not the
foreign arbitral award may be recognized or refused.
We find for the Claimant.

The Court agrees, as the Claimant contends, that matters pertaining

to recognition and enforcement of foreign arbitral awards shall be
governed by Rule 13 of Special Rules of Court on Alternative Dispute
Resolution (ADR) Special Rules of Court stating,
‘Rule 13.1. Who may request recognition and
enforcement. - Any party to a foreign
arbitration may petition the court to recognize
and enforce a foreign arbitral award.’ (emphasis
ours)
Furthermore, the same rules provide the for the recognition of the
foreign arbitral award,
‘Rule 13.4. Governing law and grounds to
refuse recognition and enforcement. - The
recognition and enforcement of a foreign
arbitral award shall be governed by the 1958
New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (the
"New York Convention") and this Rule.
(emphasis ours)
The court may, upon grounds of comity and reciprocity, recognize
and enforce a foreign arbitral award made in a country that is not a
signatory to the New York Convention as if it were a Convention
Award.

Clear and unambiguous from the words of the rules, the respondent’s
opposition to the petition for enforcement of the arbitral award in the

6
Civil Case: 123456
For: Recognition and Enforcement of Foreign Arbitral Award
HULLEY ENTERPRISES LTD, YUKOS UNIVERSAL LTD, and VETERAN PETROLEUM LTD
vs.THE RUSSIAN FEDERATION
x-----------------------------------------------------------------------------------------------------------------------------------------x

Philippines on the ground of lack of jurisdiction is bereft of merit. The

Philippines, the country where the arbitral award is sought to be
enforced and respondent country Russia, are signatories to the 1958
New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (hereafter referred to as “New York
Convention”). Rule 13.4 clearly states that the New York Convention
and the Alternative Dispute Resolution Rules shall govern the
enforcement. Therefore, where the enforcement power of such
arbitral award is granted, it follows that the jurisdiction is properly
vested within this court.

Assuming arguendo that Russia is not a signatory to the New York

Convention, as alleged by the respondents, the second paragraph of
Rule 13.4 provides that upon grounds of comity and reciprocity, the
court may still recognize and enforce a foreign arbitral award made
that country that is not a signatory to the said convention and treat
such award as if it were a Convention Award. Therefore, by virtue of
the New York Convention and this rules, the jurisdiction of the
Philippine Courts to enforce foreign arbitral awards as far as the other
requirement of the relevant laws has been met, cannot be denied.
Hence, jurisdiction is still within this court.

Enforcement of a foreign arbitral award

We rule for the Respondent. Rule 13.4 (b) of the ADR Special Rules
of Court states that:

“The recognition and enforcement of a foreign

arbitral award shall be governed by the 1958 New
York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (the "New
York Convention") and this Rule….

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Civil Case: 123456
For: Recognition and Enforcement of Foreign Arbitral Award
HULLEY ENTERPRISES LTD, YUKOS UNIVERSAL LTD, and VETERAN PETROLEUM LTD
vs.THE RUSSIAN FEDERATION
x-----------------------------------------------------------------------------------------------------------------------------------------x

…A Philippine court shall not set aside a foreign

arbitral award but may refuse it recognition and
enforcement on any or all of the following
grounds:
….
(b) the court finds that:

(i) The subject matter of the dispute is not capable of

settlement or resolution by arbitration under
Philippine law; or

(ii) The recognition or enforcement of the award

would be contrary to public policy.

This court takes note of The Hague District Court Decision setting
aside the Tribunal’s Interim and Financial Awards on ground of lack
of jurisdiction, and findings of the Tribunal where Yukos participated
in various tax fraud schemes allegedly resulting to the Russian
Federation exacting punitive measures as a means of collecting the
taxes due from Yukos.

The Tribunal further found that these fraudulent actions constituted

“material and significant misconduct by the Claimants and by Yukos
(which they controlled)” and that “Claimants should pay a price for
Yukos’ abuse of low-tax regions by some of its trading entities,
including its questionable use of the Cyprus-Russia DTA, which
contributed in material way to prejudice which they subsequently
suffered at the hands of the Russian Federation.”1 Notwithstanding
these unequivocal findings, the Tribunal did not consider these
fraudulent actions barred the claim, justifying on the ground that
public international law does not recognize an “unclean hands”
doctrine, thus enabling Claimants to profit from that wrongdoing.

8
Civil Case: 123456
For: Recognition and Enforcement of Foreign Arbitral Award
HULLEY ENTERPRISES LTD, YUKOS UNIVERSAL LTD, and VETERAN PETROLEUM LTD
vs.THE RUSSIAN FEDERATION
x-----------------------------------------------------------------------------------------------------------------------------------------x

Recognition or enforcement of an award that knowingly refuses to

hold Claimants accountable for such misconduct and, here too,
allows them to profit thereby, notwithstanding fundamental and
universally recognized principles of good faith, would be offensive to
public policy within the meaning of New York Convention Article
V(2)(b).

According to the International Law Association’s Final Report on

Public Policy as a Bar to Enforcement of International Arbitral
Awards, public policy justifying a court’s refusal to enforce a foreign
award includes “fundamental principles, pertaining to justice or
morality, that the State wishes to protect even when it is not directly
concerned.2

While Claimant’s contention that the Court cannot interfere on

matters pertaining to the merits of the Foreign Arbitral Award under
Rule 13.11 Special Rules of Court is correct, the same Rule provides
that the Court may refuse recognition and enforcement based on
grounds in Rule 13.4 as stated herein.

However, Respondent’s argument that the Russian Federation did

not ratify the New York Convention is untenable. It was in fact only
the Energy Charter Treaty which is lacking ratification begging the
question whether the Russian Federation was ever bound by Article
263 and ever extended an offer to arbitrate to “Investor(s) of another
Contracting Party.” There would have been no agreement to arbitrate
if no offer was extended by the Russian Federation, hence, the
recognition and enforcement sought by claimant may be refused
under Article V (1) (a) of New York Convention which include those
agreements that are inoperative, incapable of being performed,

9
Civil Case: 123456
For: Recognition and Enforcement of Foreign Arbitral Award
HULLEY ENTERPRISES LTD, YUKOS UNIVERSAL LTD, and VETERAN PETROLEUM LTD
vs.THE RUSSIAN FEDERATION
x-----------------------------------------------------------------------------------------------------------------------------------------x

lacking consent or whose consent is marred by incapacity and

violation of public policy.

Foreign Arbitral Award was never confirmed.

As regards the third issue, we agree with the respondents that the
foreign arbitral award is never confirmed, hence, cannot be enforced
as a foreign judgment. Section 44 of Republic Act No.9285 (RA 9285)
provides:

A foreign arbitral award when confirmed by a

court of a foreign country, shall be recognized
and enforced as a foreign arbitral award and not a
judgment of a foreign court.
A foreign arbitral award, when confirmed by the
regional trial court, shall be enforced as a foreign
arbitral award and not as a judgment of a foreign
court.
A foreign arbitral award, when confirmed by the
regional trial court, shall be enforced in the same
manner as final and executory decisions of courts
of law of the Philippines.

It is the view of the claimants that since the Special Rules of Court
precludes the Philippine Court to set aside a foreign judgement—that
is tantamount to confirmation of the former which is the only
requirement of the Alternative Dispute Resolution Act of 2004. This
court is not convinced.

A foreign arbitral award is not ipso facto deemed confirmed in the

absence of an order of confirmation by the Regional Trial Court.
What the law requires for a foreign arbitral award to be deemed

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Civil Case: 123456
For: Recognition and Enforcement of Foreign Arbitral Award
HULLEY ENTERPRISES LTD, YUKOS UNIVERSAL LTD, and VETERAN PETROLEUM LTD
vs.THE RUSSIAN FEDERATION
x-----------------------------------------------------------------------------------------------------------------------------------------x

confirmed and subsequently be enforced as a foreign judgment is

that it must be confirmed “by a court of a foreign country,” or “by the
regional trial court.” The law is clear that either of the aforesaid
requirements must be complied with. Needless to say, in this case,
there is no clear showing that the arbitral award was confirmed by a
foreign court or the RTC.

Moreover, in the case of Korea Technologies v Lerma, the Court held

that foreign arbitral awards are similarly situated as that of “judgments
or awards given by quasi-judicial bodies like the National Labor
Relations Commission and Mines Adjudication Board, whose final
judgments are stipulated to be final and binding, but not immediately
executory in the sense that they may still be judicially reviewed, upon
the instance of any party. Therefore, the final foreign arbitral awards
are similarly situated in that they need first to be confirmed by the
RTC.

CONCLUSION

PREMISES CONSIDERED, with the failure of the Claimant to prove

that this court may not refuse to recognize to enforcement of the
foreign arbitral award and the unequivocal findings of the Tribunal on
fraudulent actions of Claimants which are offensive to public policy
coupled with an absent jurisdiction of a tribunal which rendered the
foreign arbitral award sought to be enforced, this Court rules in the
NEGATIVE as to the recognition and enforcement of such award.
Consequentially, the properties of Respondent may not be attached
by the Claimants.

SO ORDERED.

11
Makati, December 23, 2018

FRANCES JEMAINE GONZALES

Judge

CHRISTINE LEGASPI
Judge

MACY MARCELO
Judge

Footnotes:
1
Final Award
2
International Law Association, Final Report on Public Policy as a
Bar to Enforcement of International Arbitral Awards (2002), at 6,
Recommendation l(d). 84 Soleimany v. Soleimany, [1999] QB 785
(199
3
Article 26 of the ECT (“Settlement of Disputes between an Investor
and a Contracting Party”) provides in relevant part:
(1) Disputes between a Contracting Party and an Investor of
another Contracting Party relating to an Investment of the latter
in the Area of the former, which concern an alleged breach of
an obligation of the former under Part III shall, if possible, be
settled amicably.
(2) If such disputes cannot be settled according to the provisions of
paragraph (1) within a period of three months from the date on
which either party to the dispute requested amicable

12
 settlement, the Investor Party to the dispute may choose to
submit it for resolution:
a. To the courts or administrative tribunals of the Contracting
Party to the dispute;
b. In accordance with any applicable, previously agreed
dispute settlement procedure; or in accordance with the
following paragraphs of this Article.
(3) Subject only to subparagraphs (b) and (c), each Contracting
Party hereby gives its unconditional consent to the submission
of a dispute to international arbitration or conciliation in
accordance with the provisions of this Article.

13