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“The team was recently visible advising on a number of pharmaceutical cases. Sources agree that the team is “moving in the right direction” and are particularly impressed by its work in the pharmaceutical sector”.

 

“Crimea is ours”: possible legal consequences of international contract of Ukrinterenergo

03.02.2015

Dmytro Shemelin, Lawyer at Ilyashev & Partners Law Firm
Source: RBK Ukraine

While Cabinet of Ministers of Ukraine is finding out whether the Crimea was indicated as the Federal District in the contracts concluded with Ukrinterenergo, let’s turn our attention to the experience of international courts regarding such controversial territorial disputes. The basic principle applicable in these cases is the principle of consent. If, for example, Ukraine, explicitly or implicitly agrees that the Crimea is owned by Russia, it becomes Russia’s property under the law.

Specific forms of indirect (implicit) consent can differ considerably. For example, in the Case Concerning the Temple of Preah Vihear (ICJ decision of 1962) when during his visit to the disputed territory the Minister of Internal Affairs of Thailand was by the French guard of honor with the French flag. The Minister did not lodge any protest against the French flag on his native land – and the court ruled that this (among other things) constituted acceptance by Thailand of the fact that the territory belongs to France (now to Cambodia).

In the Eastern Greenland Case (resolution of 1933) Norway occupied a part of Greenland, declaring it to be “no man’s land”. Denmark believed that it owned the whole territory of Greenland. Permanent Court of International Justice resolved as follows: after the moment when Norway entered into international treaties where Greenland is named to be Denmark’s territory, Norway has no rights to claim otherwise.

In Arbitral Award Case (ICJ resolution of 1960) Nicaragua requested annulment of the decision issued by the King of Spain regarding Nicaraguan territorial dispute with Honduras. The ICJ ruled that Nicaragua had forfeited the right to rely on the invalidity of the decision as soon as the President of Nicaragua in his telegram congratulated the President of Honduras with adoption of a controversial decision and the decision itself was published in the official Nicaraguan newspaper.

It means that the controversial contract of Ukrinterenergo could be interpreted as indirect consent to annexation of Crimea if it demonstrates Ukraine’s intention to consider it to be the Russian territory. But did Ukrainian side have such an intention?

To answer this question you need to initially ask yourself whether Inter RAO – the Russian contractor of Ukrinterenergo – could sign a contract where Crimea was meant to be called and referred to Ukrainian or neutral territory? With a very high probability we can give a negative answer. Russia is rather an authoritarian country and such liberties definitely would be worth to someone”s head.

 Did Ukrinterenergo have a chance to opt out of signing the contract for political reasons? This is a difficult question, but circumstances suggest that it could rather not.

 According to the press the contract did not look too balanced at all. The contract stipulated the law of Russian Federation as the applicable law, all arbitration disputed were to be resolved in Russia, fines were stipulated only for the Ukrainian side, the price of Ukrainian energy was reduced, the price of Russian energy had not been established at all, prepayment for the Ukrainian energy constituted only 50%.

 In such situation the International Court of Justice will likely not fantasize about the “surrender of national interests” and will come to conclusion that unequal conditions were caused by objective reasons: Ukrainian party needed the contract much more than the Russian one. And if so, there is no necessity to be too serious about the reference to “the Crimean Federal District” because Ukrinterenergo had to make sacrifices to get energy.

So, for example, in Jan Mayen case (ICJ decision in 1993) with involvement of Denmark and Norway the International Court declined certain statements concerning the disputed border put forward by Denmark. The statements were rather unfortunate which played into favor of Norway. The Court decided that these expressions were tamed down so as to avoid difficulties with Norway.

Situation similar to the aforementioned apparently occurs in case of Ukrinterenergo. It is clear that a contract entered into under pressure of Russian Federation in the situation when Ukraine is already experiencing rolling blackouts is unlikely reflecting the true position of the state towards such sensitive matter as the Crimean Peninsula. Accordingly, the international law will unlikely attach significance to “Crimean Federal District”.

 
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