In 2015, at the request of one of Yukos's main former shareholders, assets in Belgium belonging to Russia were frozen. The Brussels Court of First Instance has now lifted that order. This decision follows a recent ruling of the Belgian Constitutional Court upholding the so-called 'Yukos Act' of 23 August 2015 which reinforces state immunity from enforcement in Belgium.
As is well-known, in 2014, former majority shareholders of the oil and gas company Yukos were awarded $50 billion against Russia in three Energy Charter Treaty arbitrations administered by the Permanent Court of Arbitration (“PCA”) in The Hague.
The former shareholders then launched attachment and enforcement proceedings in several jurisdictions where Russia has assets, including Belgium. In those Belgian proceedings, the Brussels Court of First Instance, in a judgment of 24 June 2015, declared the PCA’s awards enforceable (against which Russia has launched applications before the Brussels Court of Appeal and the Belgian Supreme Court (Cour de cassation/Hof van cassatie)). Further, at a similar time in mid-2015, but using separate Belgian procedures, Yukos Universal Ltd (one of the former majority shareholders of Yukos), was able to rely on the PCA’s awards to obtain attachment orders which froze certain assets located in Belgium and belonging to Russia.
In the meantime, in April 2016, the Yukos awards were set aside on jurisdictional grounds by a District Court in The Hague. The former majority shareholders have appealed this decision.
The Brussels Court of First Instance unfreezes Russia’s assets
In response to the Belgian attachment orders, Russia brought proceedings before the Brussels Court of First Instance asking for the orders to be lifted. In two judgments dated 8 June 2017 (which can be found here and here), the Brussels Court of First Instance has ordered the lifting of the attachment orders over the assets belonging to Russia and located in Belgium. The Court ruled that the Dutch setting aside decision of April 2016 had to be recognised in Belgium pursuant to the 1925 Convention on the mutual recognition of judgments and arbitral awards concluded between Belgium and The Netherlands. It meant that Yukos Universal lost its enforceable title and that Russia’s assets had to be unfrozen. Yukos Universal is likely to appeal the judgment.
The Court did not address the validity of the Belgian enforcement order, which will be discussed in the ongoing proceedings before the Brussels Court of Appeal and the Belgian Supreme Court which are likely to be impacted by the results of the annulment procedure in The Netherlands. However, even if they were to be victorious in those proceedings, the former shareholders will have to overcome the Belgian state immunity regime which has recently been strengthened, as we discuss below.
The Belgian Constitutional Court upholds the Belgian Act of 23 August 2015 on State Immunity
A few months after the freezing of Russia’s assets in Belgium, the Kingdom’s Parliament adopted the Act of 23 August 2015 which inserted a new “Article 1412quinquies” on state immunity from execution into the Belgian Code of Civil Procedure. An almost identical provision was adopted by the French Parliament in December 2016. These Acts are widely seen as a consequence of the diplomatic crisis caused by the launch of attachment and enforcement proceedings against the Russian Federation in both jurisdictions following the PCA’s awards.
In a nutshell, Article 1412quinquies provides that foreign states’ assets located in Belgium cannot be subject to enforcement proceedings by creditors save for three narrow exceptions: (i) the foreign state has “expressly” [and “specifically”] consented to the seizure of the assets; (ii) the foreign state has reserved or allocated the assets to the enforcement of the claim which gives rise to the seizure; or (iii) the assets are used for an economic or commercial activity (as opposed to a public service activity).
Yukos Universal, together with an American hedge fund holding debt securities against Argentina, filed an application against the new Act before the Belgian Constitutional Court. The applicants alleged that the new regime breached the principle of equality and non-discrimination (enshrined in Articles 10 and 11 of the Belgian Constitution) by imposing disproportionate hurdles to creditors of foreign states as compared to other types of creditors.
The application was dismissed by the Constitutional Court in a decision dated 27 April 2017. The Court considered that the difference in treatment (i) relied on an objective criterion (i.e. the nature of the debtor); (ii) was legitimated by the Act’s aim of fostering international comity; and (iii) was proportionate since it reflects customary international law. The court did, however, strike out, for the first exception, the requirement that the state must have “specifically” consented to the seizure, finding that this went too far as compared to customary international law.