It is not easy to make $50bn disappear. However, a Dutch court accomplished just such a feat in April when it struck down the largest ever arbitration verdict to arise from a foreign investment lawsuit.

The development was a major setback for the former owners of the Yukos Oil Company, who had managed in 2014 to win an arbitration ruling against Russia for the illegal dismantling and confiscation of the company. It now emerges that that $50bn verdict came with an Achilles’ heel.


First, some background: the arbitral panel had decided that it could sit in judgment of Russia’s actions thanks to the country’s signature to an obscure international agreement, the Energy Charter Treaty.

Although Russia signed the treaty, it never moved to ratify the agreement – a second step that is typically required for a treaty to have a binding effect on the signatory. Indeed, Russia later backed away from the treaty, and would eventually denounce it.

During the arbitration, Yukos’ former owners had argued – and the arbitrators had accepted – that the treaty nevertheless applied because it contained an obscure provision dictating that the treaty be applied on a “provisional” basis in the period between a country’s signature and its final ratification.

This provisional application ruling was the platform on which the case rested, including the tribunal’s later findings that Russia had unlawfully expropriated the investors’ investments and owed $50bn in compensation.

While Russia was thoroughly mauled in the arbitration, the country enjoyed limited right to appeal this ruling to the Courts of the Netherlands (where the arbitrators had been seated).

The Dutch court looked anew at the authority of the arbitrators to hear the Yukos case, and decided that it was insufficient. The court held that the arbitrators had blithely assumed that the treaty could be applied provisionally to disputes such as this, but that the Russian parliament ought to have been given the final word.

The Dutch court found that the arbitrators should have never heard the case, hence their $50bn verdict should be consigned to the dustbin.

This shocking outcome is obviously a major win for Russia, and the investors could be forgiven for feeling as if they have been expropriated for a second time as a result of their recent loss in the Netherlands.

Still, the investors can appeal the Dutch court ruling to a still-higher court in the Netherlands. Moreover, their struggles might embolden policymakers to look afresh at the establishment of a global court to resolve foreign investment disputes. Whatever one thinks of a global judiciary, the rulings of such a body might stand the test of time. As matters stand now, ad hoc arbitration verdicts must still run the gauntlet of reviews in a local court.

Luke Eric Peterson is the editor of, a specialist news service focused on the law and policy of foreign investment.