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Challenge to Yukos Capital jurisdictional award is premature

17 August 2017

Author: Philippe Bärtsch

The Swiss Supreme Court has dismissed a motion to set aside an interim award on jurisdiction rendered by an arbitral tribunal in a dispute between Yukos Capital and the Russian Federation, in which the former is bringing claims against the latter under the Energy Charter Treaty (ECT). The Russian Federation had raised five jurisdictional objections, but the arbitral tribunal decided on only three of those objections in a preliminary phase, reserving its decision on the remaining two objections for the merits phase. One of the three objections rejected by the arbitral tribunal related to the provisional application of the ECT by the Russian Federation, an issue that has ramifications in a number of other pending Yukos-related arbitration and state court proceedings.

The Supreme Court examined whether the arbitral tribunal's "partial" interim award on jurisdiction was open to an immediate challenge under Swiss law. It found that this was not the case, as according to the relevant provision of the Swiss Private International Law Act, a party may only challenge a decision in which the arbitral tribunal "wrongly accepted or declined jurisdiction", which implies that the decision on the issue of jurisdiction must be final. The ruling makes sense from both a legal and practical perspective, as the main advantage of an immediate challenge against an award on jurisdiction is to definitively resolve that issue.

In the present case, the parties will be entitled to challenge the arbitral tribunal's interim award together with the final award. Therefore, the Supreme Court may yet be called upon to examine the issue of the provisional application of the ECT, should the arbitral tribunal choose to affirm its jurisdiction in the final award. (Decision 4A_98/2017.)

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Pubished in Practical Law Arbitration

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