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Washington, D.C. — August 5, 2025 — The U.S. Court of Appeals for the D.C. Circuit has ordered a lower court to independently determine whether Russia agreed to arbitrate with former shareholders of Yukos Oil Co., casting fresh scrutiny on a $50 billion arbitral award — one of the largest in history.

In a published opinion Tuesday, the D.C. Circuit vacated U.S. District Judge Beryl A. Howell’s 2023 ruling that rejected Russia’s claim to sovereign immunity. The appeals court concluded that Howell improperly deferred to the arbitral tribunal’s conclusion that Russia had agreed to arbitration under the Energy Charter Treaty (ECT).

“Whether an arbitration agreement exists is a jurisdictional fact under the [Foreign Sovereign Immunities Act] that must be independently evaluated by the district court,” the court wrote. “Because the district court gave binding effect to the arbitral tribunal's determination of this jurisdictional fact, we vacate the judgment.”

Core of the Dispute: Did Russia Consent to Arbitrate?

The case centers on whether Russia is bound by the arbitration clause in the ECT — a treaty it signed but never ratified. The former Yukos shareholders argue Russia provisionally applied the ECT, including its arbitration clause, enabling the tribunal in The Hague to issue the awards after a decade-long proceeding.

Russia counters that such provisional application is inconsistent with its domestic laws, meaning no valid arbitration agreement ever existed.

The D.C. Circuit remanded the case with instructions for the district court to independently assess whether the ECT’s provisional application aligns with Russian law, a key issue that determines the applicability of the FSIA’s arbitration exception.

Judge Howell’s Original Reasoning

In her November 2023 ruling, Judge Howell had ruled against Russia’s immunity defense, stating the Kremlin had clearly agreed to submit disputes over jurisdiction and arbitrability to the tribunal.

“The Russian Federation did clearly agree… to submit to the tribunal authority to resolve jurisdiction and arbitrability challenges,” Howell wrote, warning that allowing relitigation would undermine the foundational principle of arbitration — finality.

She also emphasized the importance of holding states accountable in international commerce, noting that accepting Russia’s argument would incentivize abuse of arbitration processes.

Background: The Yukos Saga

The Yukos shareholders secured the massive $50 billion award in 2014 after claiming Russia unlawfully expropriated the oil giant in the early 2000s. The enforcement of the award has since moved through several jurisdictions, including Dutch courts, where Russia has sought annulment.

The enforcement proceeding in Washington, D.C., was filed in 2014 but has been paused several times pending litigation abroad.

Next Steps

The district court will now reexamine whether the FSIA’s arbitration exception applies by scrutinizing whether Russia legally consented to arbitration. The outcome could have significant implications for the enforceability of investor-state arbitration awards against sovereign nations.

Judges on the panel: Chief Judge Sri Srinivasan, Judge Neomi Rao, and Judge Robert L. Wilkins.

Counsel:

• Russia: David P. Riesenberg, Pinna Legal US PLLC

• Yukos shareholders: Steven M. Shepard, Susman Godfrey LLP

Case: Hulley Enterprises Ltd. et al. v. Russian Federation, No. 23-7174, U.S. Court of Appeals for the D.C. Circuit