Padraic McCafferty
The conflict between Russia and Ukraine continues not only on the battlefield, but also in arbitration and in the courts. On 1 July 2025, the Paris Court of Appeal (“the Court”) dismissed a set-aside application by Russia of a $1.1 billion award in favour of a Ukrainian state-owned bank, relating to the annexation of Crimea. The Court, on remand from the French Cour de Cassation, found, inter alia, that the arbitral tribunal did have jurisdiction under the Russia-Ukraine Bilateral Investment Treaty (1998) (“BIT”) and that three other grounds to set aside were insufficient.
In the present case, a Ukrainian state-owned bank (“Oschadbank”) brought a claim against the Russian Federation (“Russia”) for the expropriation of assets it owned in Crimea, following the annexation of Crimea by Russia in 2014. On 20 January 2016, Oschadbank commenced arbitration against Russia for expropriation pursuant to the BIT. On 26 November 2018 (“2018 Award”), the Paris-seated tribunal, under the auspices of the Permanent Court of Arbitration (“PCA”), ordered Russia to pay Oschadbank a sum in excess of $1.1 billion. Russia had not participated in the arbitration. On 30 March 2021, the Court set aside the 2018 Award, on the basis of lack of jurisdiction, viz. that the temporal condition of the BIT had not been met. On 7 December 2022, the Cour de Cassation overturned the decision of the Court, confirming that the Court had to verify only if the dispute had arisen after entry into force of the BIT. The case was then remanded back to the Court of Appeal.
Russia put forward four pleas in law to set aside the 2018 Award, namely:
- Lack of jurisdiction;
- Breach of international public policy;
- Failure of the tribunal to comply with its mandate; and
- Lack of independence and impartiality of co-arbitrator.
The first ground was the alleged lack of jurisdiction, and it contained three branches: ratione temporis; ratione loci; ratione materiae. With regard to jurisdiction ratione temporis, Russia argued that the investment preceded the BIT’s effective date of 1 January 1992. With regard to jurisdiction ratione loci, Russia contended that the BIT excluded Crimea due to ambiguity as to whether the term “territory” included Crimea. Russia also argued that “reciprocity” was at issue. Oschadbank submitted that reciprocity represented a substantive condition, which is not a ground for setting aside the award. With regard to jurisdiction ratione materiae, Russia argued that the investment could not be considered “foreign”, asserting that it had been made by a Ukrainian company in Ukraine.
The second plea to set aside the Award alleged a breach of international public policy. Russia claimed that Oschadbank had committed fraud by withholding documents from the Tribunal. The Court noted that Article 1520(5) of the French Code of Civil Procedure provides for setting aside an award on the basis of a breach of international public policy. Nevertheless, the Court held that the alleged procedural fraud had not been established.
The third plea alleged that the arbitral tribunal failed to comply with its mandate. Russia alleged that the tribunal had devoted over 800 hours to the case, which they argued was insufficient, and that, as a result, the tribunal had acted in breach of its mandate. Russia further submitted that a claim seeking a review of the merits of the award would not be permissible under Article 1520(3) of the French Code of Civil Procedure.
The fourth plea alleged irregularity in the constitution of the arbitral tribunal. The plea relied on the fact that a co-arbitrator, Charles N. Bower, had submitted an amicus curiae brief in a completely separate case in 2024, some five years after the 2018 Award, in opposition to Russia. The Court held that this did not constitute a ground for annulment under Article 1520(2) of the French Code of Civil Procedure.
The Court held that none of the four grounds pleaded was sufficient to set aside the 2018 Award and accordingly dismissed Russia’s application for setting aside. Consequently, the dismissal granted the exequatur of the 2018 Award, pursuant to the second paragraph of Article 1527 of the French Code of Civil Procedure. Russia was also ordered to pay Oschadbank €300,000 under Article 700 of the French Code of Civil Procedure.
It is likely that a number of Ukraine v Russia cases will continue to be brought, particularly in light of Russia’s invasion of Ukraine in February 2022. Therefore, the concepts of territory, reciprocity and “foreign” character of an investment will remain relevant. This case also underscores the risks associated with non-participation in arbitration, as it may lead to potential substantive arguments being inadmissible in subsequent set-aside proceedings.