Egorov Puginsky Afanasiev & Partners’ Litigation Practice team defended TOTAL in a multi-billion-dollar precedent dispute with the Volgograd and Saratov regions’ administrations (Russia), considered by ad hoc arbitrators in accordance with the UNCITRAL Arbitration Rules.
In 1992, the French company Elf Neftegaz (which parent, Elf Aquitaine, later became part of TOTAL S.A.) and Russian company AOZT Interneft entered into the cooperation agreement regarding prospective exploration and development of hydrocarbon fields in the Volgograd and Saratov Regions (Russia) on the terms of production sharing. The cooperation agreement was countersigned by the Minister for Fuel and Energy of the Russian Federation and representatives of the regions of Saratov and Volgograd.
The entry into force of the cooperation agreement was subject to conditions precedent, which were never met. The cooperation agreement lapsed in 1995 and none of the parties disputed that at the time.
However, in 2009 the Volgograd and Saratov regions’ administrations and a company OOO Interneft initiated arbitration proceedings against Elf Neftegaz (TOTAL), seeking reimbursement of lost profits evaluated at USD 22 bn caused by failure to perform the Cooperation Agreement. The Arbitration Institute of the Stockholm Chamber of Commerce had the competence to appoint arbitrators.
Egorov Puginsky Afanasiev & Partners’ lawyers have provided support to the client and to its lead arbitration counsel on the matters relating to the Russian law, as well as advised on on-going court proceedings in Russia.
In March 2015, the hearings on the case were held in Stockholm (Sweden). In June 2017, the arbitral award on the case was delivered to the parties in accordance with which the plaintiffs were refused to satisfy the claim for all the reasons stated.
The arbitrators dismissed the claims in their entirety, finding notably that OOO Interneft was neither party to the contract nor a legal successor of AOZT Interneft, that the regions were not parties to the contract, and that the claims were time-barred.
The legal position under Russian law developed by Egorov Puginsky Afanasiev & Partners team in cooperation with prominent Russian law professors was confirmed and reflected in the arbitral award.
“The matter is of interest for the legal system as a unique dispute in a first cooperation agreement entered into under a number of conditions precedent and relying on the rules of Russian law as in effect in 1991 – 1994.
In addition, under the proceedings, the Russian party insisted that the relations between the parties should be governed by the rules of international investment law, which is unique in itself for the international practice,” commented Ivan Smirnov, Managing Partner at Egorov Puginsky Afanasiev & Partners’ St. Petersburg office.
The project team included Managing Partner of the St. Petersburg office Ivan Smirnov, Senior Associate Evgeny Gurchenko, Associates Ays Lidzhanova and Alexander Miloserdov.