A Canadian judge has refused to restrict the evidence he’ll review when considering whether arbitrators can decide if Russia must compensate a former Yukos Oil Co. shareholder for causing the company's demise, saying that he’ll hear reports asserting the proceeding is illegal under Russian law.
Ontario Justice Sean F. Dunphy on Friday denied a bid by Luxtona Ltd. to strike evidence as Russia challenges a Toronto-seated tribunal's finding that it has jurisdiction over their dispute. Luxtona has argued the country violated certain provisions of the Energy Charter Treaty relating to the protection of Luxtona’s investment in Yukos, an oil company found to have been dismantled by Russia in a scheme to transfer oil-producing assets from Yukos to the state-owned oil company Rosneft.
In other cases, several of Yukos' former shareholders are trying to revive $50 billion in arbitral awards won in July 2014 related to the allegations that were set aside by the District Court of The Hague in April 2016.
In asking the Ontario court to flip the tribunal's decision on jurisdiction, Russia had submitted two reports from purported experts on its domestic laws that were not submitted to arbitrators, prompting Luxtona to complain that unless the court limits the scope of its review, the appeal would lack meaningful limits and the parties would be encouraged to withhold evidence from arbitrators.
But Justice Dunphy said Friday there was nothing to stop Luxtona from submitting its own evidence rebutting Russia's challenge, finding that there's no way to tell yet whether the reports are persuasive, only that they're permissible.
"In making its decision, the respondent must take into account that I am not confined to the findings of fact made in regard to Russian law by the tribunal where these relate to the question of jurisdiction nor am I confined to the record consulted by the tribunal in reaching its own conclusions," Justice Dunphy said. "This does not mean that those conclusions are not to be examined by me or that they lack persuasive authority. They shall be examined and respectfully so when this application is heard on the merits."
Russia has argued that its lawmakers never ratified the 1994 energy treaty, even though it was signed by a representative. The country contends that the shareholders therefore lack standing to arbitrate under the treaty's arbitration provision, since the international agreement was in place only to the extent that it was in line with Russian law.
Luxtona, which has argued that the treaty applies in full, launched the proceedings against Russia in June 2013, arguing that the country failed to protect its investment in Yukos and expropriated its assets in violation of the treaty.
In March 2017 arbitrators delivered an interim award dismissing Russia's objections to the tribunal's jurisdiction, prompting the instant case.
Russia has argued that nothing stopped the court from reviewing the dispute from its beginning when jurisdictional challenges were raised, and filed two legal opinions regarding Russian law that were not before the tribunal, as well as an affidavit of work documents.
In reaching his decision, Justice Dunphy noted instances when courts worldwide held that jurisdictional challenges could be fought with fresh evidence, saying such decisions reflect the global consensus and that Canadian lawmakers intended Ontario to be a venue for international arbitral proceedings.
The justice said he wouldn't ignore the tribunal's work, but did not have to confine himself to their record either.
"I cannot say now whether such evidence will prove persuasive when the matter is heard. I can say that such evidence is at least likely to be admissible and cannot be excluded in advance of a hearing."
Representatives for the parties did not immediately respond to requests for comment Tuesday.
Russia is represented by John Terry and Myriam Seers of Torys LLP.
Luxtona is represented by Lincoln Caylor, Matthew Kronby and Ranjan K. Agarwal of Bennett Jones LLP.
The case is the Russian Federation v. Luxtona Ltd., case number CV-17-11772-OOCL, in the Superior Court of Justice Ontario, Commercial List.