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Interim Award on Jurisdiction

LIST OF DEFINED TERMS

1991 FI Law Law on Foreign Investments in the RSFSR, 1991
1994 Joint EC Statement Joint statement on Article 45 of the European Energy Charter Treaty, made by the Council, Commission, and Member States of the European Community, 14 December 1994
1999 FI Law Law on Foreign Investments in the Russian Federation, 1999
Achmea Achmea v. Slovak Republic, PCA Case No. 2008-13, Award on Jurisdiction, Arbitrability and Suspension (26 October 2010)
Alpha Alpha Projektholding GmbH v. Ukraine ICSID Case No. ARB/07/16, Award (8 November 2010)
Alps Finance Alps Finance and Trade AG v. Slovak Republic (UNCITRAL Award) (5 March 2011)
Amto Limited Liability Company Amto v. Ukraine, SCC Case No. 080/2005, Final Award (26 March 2008)
August 2004 Loan The August 2004 loan, made to Yukos Oil by Yukos Capital, in the principal amount of USD 355 million
Brittany Brittany Assets Ltd.
Brittany Loan Agreement Agreement establishing a loan between Brittany (lender) and Yukos Capital (borrower) dated 20 November 2003
Caratube Caratube International Oil Company LLP v. Republic of Kazakhstan, ICSID Case No. ARB/08/12, Award (5 June 2012)
Claimant / Yukos Capital Yukos Capital S.à r.l., the Claimant
Constitution Constitution of the Russian Federation, 1993
Constitutional Court The Constitutional Court of the Russian Federation
Counter-Memorial Claimant's Counter-Memorial on Jurisdiction dated 3 November 2014
December 2003 Loan The December 2003 loan, made to Yukos Oil by Yukos Capital, in the principal amount of RUB 79.3 billion
Domestic Law Inconsistency Clause Article 45(1) of the Energy Charter Treaty: "to the extent that such provisional application is not inconsistent with its constitution, laws or regulations"
ECT / Treaty Energy Charter Treaty, 1994
Electrabel Electrabel S.A. v. The Republic of Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability (30 November 2012)
Emmis Emmis International Holding BV v. Hungary ICSID Case No. ARB/12/2, Award (16 April 2014)
FLIT Federal Law on International Treaties of the Russian Federation, 1995
GATT 1994 General Agreement on Tariffs and Trade
Gazprom O.J.S.C. Gazprom
Gazprom ECP Gazprom ECP S.A.
Hedgerow Hedgerow Ltd
Hedgerow Loan Agreement Agreement establishing a loan between Hedgerow (lender) and Yukos Capital (borrower) dated 18 August 2004
Hulley Enterprises Hulley Enterprises Limited v. Russian Federation, PCA No. AA226, Interim Award on Jurisdiction and Admissibility (30 November 2009)
Kardassopoulos Ioannis Kardassopoulos v. The Republic of Georgia, ICSID Case No. ARB/05/18, Decision on Jurisdiction (6 July 2007)
KT Asia KT Asia Investment Group B.V. v. Kazakhstan, ICSID Case No. ARB/09/8, Award (17 October 2013)

 

Loans The December 2003 Loan and the August 2004 Loan
Memorial Respondent's Memorial on Jurisdiction dated 28 July 2014
Notice of Arbitration Notice of Arbitration dated 15 February 2013
Oil Platforms Oil Platforms (Islamic Republic of Iran v. United States of America) (Preliminary Objection) [1996] ICJ Rep 803
Parties The Claimant and the Respondent
PCA Permanent Court of Arbitration
Phoenix Action Phoenix Action Ltd v Czech Republic ICSID Case No ARB/06/5, Award (15 April 2009)
Plama Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction (8 February 2005)
PO No. 1 Procedural Order No. 1 dated 24 April 2014
PO No. 2 Procedural Order No. 2 dated 20 January 2015
Rejoinder Claimant's Rejoinder on Jurisdiction dated 15 June 2015
Reply Respondent's Reply on Jurisdiction dated 2 March 2015
Resolution No. 8-P Resolution No. 8-P of the Constitutional Court of the Russian Federation dated 27 March 2012
Respondent / Russia / Russian Federation Government of the Russian Federation, the Respondent
 Romak Romak S.A. (Switzerland) v. Uzbekistan, PCA Case No. AA280, UNCITRAL, Award (26 November 2009)  
Rospan Rospan Overseas Ltd
Russia / Russian Federation / Respondent Government of the Russian Federation, the Respondent
Sibneft Sibneft, a joint stock company incorporated in the Russian Federation in 1995
Standard Chartered Bank Standard Chartered Bank v. Tanzania, ICSID Case No. ARB/10/12, Award (2 November 2012), para. 200
Stati Stati v. The Republic of Kazakhstan, SCC Case No. 116/2010, Award (19 December 2013)
Stichting Stichting Administratiekantoor Yukos International, a foundation incorporated in the Netherlands in 2005
Terms of Appointment Terms of Appointment between the Parties appointing the Tribunal dated 17 February 2014
The Hague District Court Judgment Judgment dated 20 April 2016 of a District Court sitting at The Hague in action nos C/09/477160 / HA ZA 15-1, C/09/477162 / HA ZA 15-2 and C/09/481619 / HA ZA 15112 re: Hulley Enterprises Ltd/Yukos Universal Ltd (Isle of Man)/Veteran Petroleum Ltd (Cyprus) v. Russian Federation
TMF (or TMF Luxembourg) TMF Corporate Services S.A. and TMF Management Luxembourg S.A., the Claimant's corporate and management service providers in Luxembourg
Toto Costruzioni Toto Costruzioni Generali S.p.A. v. Lebanon, Decision on Jurisdiction (11 September 2009)
Treaty / ECT Energy Charter Treaty, 1994
UNCITRAL Rules Arbitration Rules of the United Nations Commission on International Trade Law, 1976
USSR FLIT Law of the USSR dated 6 July 1978 "On the Procedure for Conclusion, Performance, and Denunciation of International Treaties of the USSR"
USSR Fundamentals Fundamentals of Legislation on Foreign Investments in the USSR, 1991
VCLT Vienna Convention on the Law of Treaties, 1969
Yukos Capital / Claimant Yukos Capital S.à r.l., the Claimant
Yukos Capital Loan Agreement Agreement establishing a loan between Yukos Capital (lender) and Yukos Oil (borrower) dated 2 December 2003
Yukos Oil Yukos Oil Company OJSC, a joint stock company incorporated in the Russian Federation in 1993
Yukos Finance Yukos Finance B.V., a private limited liability company incorporated in the Netherlands
Yukos International Yukos International UK B.V., a private limited liability company incorporated in the Netherlands

I. INTRODUCTION

A. The Parties

1.
The Claimant in this arbitration is Yukos Capital S.à r.l. ("Yukos Capital," or the "Claimant"), a private company organized and existing under the laws of Luxembourg, incorporated in Luxembourg on 31 January 2003, as a "société à responsabilité limitée," with its registered address at 46A, Avenue J. F. Kennedy, L-1855 Luxembourg P.O. Box 415, L-2014 Luxembourg. The Claimant is represented in these proceedings by Mr Cyrus Benson, Ms Ceyda Knoebel, Ms Gail Elman, Ms Penny Madden QC, Mr Piers Plumptre, and Ms Sophie Cuss of Gibson, Dunn & Crutcher LLP, Telephone House, 2-4 Temple Avenue, London EC4Y 0HB, United Kingdom.
2.
The Respondent is the Government of the Russian Federation ("Russia," or the "Russian Federation," or the "Respondent"). The Respondent is represented by Mr David G. Sabel of Cleary Gottlieb Steen & Hamilton LLP, City Place House, 55 Basinghall Street, London EC2V 5EH, United Kingdom, and Ms Claudia Annacker, Mr Cameron Murphy, and Ms Laurie Achtouk-Spivak of Cleary Gottlieb Steen & Hamilton LLP, 12, rue de Tilsitt, 75008 Paris, France.

B. Background to the dispute

3.
A dispute has arisen between Yukos Capital and the Russian Federation in respect of which the Claimant commenced arbitration pursuant to the Energy Charter Treaty (the "ECT," or the "Treaty").1
4.
The subject matter of this dispute concerns the Claimant's alleged investments by way of loans to its parent company in Russia, Yukos Oil Company OJSC ("Yukos Oil"), the Russian Federation's alleged expropriation of the Claimant's purported investment, and the Russian Federation's allegedly unfair and discriminatory treatment of Yukos Capital.

II. PROCEDURAL HISTORY

5.
By letter dated 23 May 2008, the Claimant "notified the Russian Federation, through the Russian Ministry of Justice, of its claims under the ECT, accepted the Russian Federation's offer to arbitrate and invited the Russian Federation to engage in settlement discussions."2
6.
On 22 August 2008, the Ministry of Justice informed the Claimant that receipt of the notice was not within the Ministry's competence.
7.
On 27 August 2008, the Claimant forwarded the notice to the Government of the Russian Federation and to the Administration of the President of the Russian Federation.3
8.
By Notice of Arbitration dated 15 February 2013 ("Notice of Arbitration"), the Claimant initiated arbitration proceedings against the Russian Federation pursuant to Article 26(4)(b) of the ECT and the 1976 Arbitration Rules of the United Nations Commission on International Trade Law (the "UNCITRAL Rules").4
9.
By its Notice of Arbitration, the Claimant notified the Respondent of its appointment of Mr J. William Rowley QC as the first arbitrator. Mr Rowley's address is 20 Essex Street, London WC2R 3AL, United Kingdom.
10.
By letter to the Claimant dated 30 May 2013, the Respondent appointed Professor Brigitte Stern as the second arbitrator. Professor Stern's address is 7 rue Pierre Nicole, 75005 Paris, France.
11.

On 8 October 2013, the Claimant requested that the Secretary-General of the Permanent Court of Arbitration (the "PCA") act as the appointing authority with regard to the appointment of a presiding arbitrator, pursuant to Articles 6 and 7 of the UNCITRAL Rules. In its submission, the Claimant stated that the Parties were "in agreement as to the employment of the list-procedure referred to in Article 6(3) of the 1976 Rules ..., but wish for the list to be provided by the Secretary-General to include at least five names."5

12.
On 9 October 2013, the PCA proposed to the Parties the use of a modified list procedure, allowing each of the Parties to eliminate a maximum of three names from a list of seven and requiring each Party to rank by preference the remaining names. On 15 October 2013, each of the Parties agreed to the PCA's proposal.
13.
In a letter of 4 November 2013, the PCA implemented the modified list procedure, sending each Party a list of seven candidates who could be appointed as Presiding Arbitrator, and, in separate letters of 19 November 2013, each Party submitted comments to the PCA regarding the list of candidates.
14.
On 22 November 2013, Professor Campbell McLachlan QC was appointed as Presiding Arbitrator by the Secretary-General of the PCA. Professor McLachlan's address is Victoria University of Wellington, School of Law, Old Government Buildings, 55 Lambton Quay, Wellington, New Zealand.
15.
By 18 February 2014, both Parties and all Tribunal members had signed the Terms of Appointment, confirming that: (a) the members of the Tribunal had been validly appointed in accordance with the ECT and the UNCITRAL Rules; (b) the proceedings shall be governed by the UNCITRAL Rules; (c) the Tribunal shall determine the legal seat of the arbitration in Procedural Order No. 1 after hearing the Parties on the issue; (d) the language of the arbitration shall be English; (e) the International Bureau of the PCA shall act as registry; (f) the issues in dispute shall be decided in accordance with the ECT and applicable rules and principles of international law; and (g) the arbitral proceedings shall be held in private and all documents in these proceedings created for the purpose of the arbitration as well as all other documents or evidence produced by either Party shall be confidential, unless the Parties expressly agree in writing to the contrary.
16.
On 31 March 2014, each Party submitted arguments regarding the Tribunal's determination of the seat of the arbitration. The Respondent proposed Vienna, Austria or Frankfurt, Germany, but indicated that it would also support the designation of Geneva, Switzerland or Paris, France. The Claimant proposed The Hague, the Netherlands or London, United Kingdom.
17.
On 14 April 2014, the Tribunal convened a preliminary procedural hearing in Vienna, Austria. At the hearing, the Tribunal heard the Parties regarding the determination of the seat of arbitration and the issue of whether or not to bifurcate proceedings, and the Tribunal and Parties discussed a draft Procedural Order No. 1 and the procedural calendar. The following individuals attended the hearing before the Tribunal:

Claimant

Mr Cyrus Benson
Ms Ceyda Knoebel
Gibson, Dunn & Crutcher LLP
Mr Daniel Feldman

Party Representative

Respondent

Mr David Sabel
Ms Claudia Annacker
Mr Cameron Murphy
Cleary Gottlieb Steen & Hamilton LLP

Registry

Mr Hanno Wehland PCA

Court Reporter

Ms Claire Hill

19.
Pursuant to PO No. 1, the Parties submitted the following pleadings and evidence:

(a) On 28 July 2014, the Respondent filed a Memorial on Jurisdiction, together with an Expert Report of Professor Anton V. Asoskov ("Asoskov 1").

(b) On 3 November 2014, the Claimant filed a Counter-Memorial on Jurisdiction ("Counter-Memorial"), together with a Witness Statement of Bruce K. Misamore ("Misamore 1") and Expert Reports of Professor Paul B. Stephan ("Stephan 1"), Stuart B. Gleichenhaus ("Gleichenhaus 1"), and Professor Justice J. H. M. Willems ("Willems 1").

(c) On 2 March 2015, the Respondent filed a Reply on Jurisdiction, together with a Second Expert Report of Professor Asoskov ("Asoskov 2") and Expert Reports of Professor Thomas Z. Lys ("Lys"), Lionel Noguera ("Noguera"), and Professor Dr. Riemert Pieter Jan Lucris Tjittes ("Tjittes").

(d) On 15 June 2015, the Claimant filed a Rejoinder on Jurisdiction, together with a Second Witness Statement of Mr Misamore ("Misamore 2"), further Expert Reports of Professor Stephan ("Stephan 2"), Mr Gleichenhaus ("Gleichenhaus 2"), and Professor Willems ("Willems 2"), and Expert Reports of Professor Stephen E. Shay ("Shay") and Andrew Grantham ("Grantham").

20.
Following the exchange of the first round of pleadings, the Parties made a simultaneous exchange of requests for the production of documents from each other as provided by PO No. 1. Following the exchange of responses and replies, a number of requests remained outstanding, and, on 18 December 2014, each Party submitted a Redfern Schedule together with introductory comments, requesting that the Tribunal make an order on those requests. On 20 January 2015, the Tribunal set forth its decision on the Parties' requests by issuing Procedural Order No. 2 ("PO No. 2").
21.
Following the issuance of PO No. 2, the Parties exchanged correspondence on their respective compliance with the Tribunal's decisions in that Order. By letter dated 26 March 2015, the Tribunal determined a number of requests made by the Respondent in relation to the Claimant's compliance with the Tribunal's Order. By letter dated 4 May 2015, the Tribunal determined a number of requests made by the Claimant in relation to the Respondent's compliance with the Tribunal's Order.
22.
Following a pre-hearing conference call held by the Chairman with the Parties on 29 July 2015, the Chairman issued a Minute on Arrangements for Hearing on 31 July 2015.
23.
The Hearing on Jurisdiction was held over five days from 31 August to 4 September 2015 at the Peace Palace in The Hague. The following persons attended the Hearing before the Tribunal:

Claimant

Mr Cyrus Benson
Ms Penny Madden
Ms Ceyda Knoebel
Mr Piers Plumptre
Ms Sophy Cuss
Mr Sergey Okoev
Gibson, Dunn & Crutcher LLP
Mr David Godfrey
Ms Natalia Kantovich
Ms Sophy Bae

Party Representatives

Mr Bruce K. Misamore

Fact Witness

Professor Paul B. Stephan
Mr Stuart B. Gleichenhaus
Professor Stephen E. Shay
Mr Andrew Grantham FCA
Professor Justice J.H.M. (Huub) Willems LLM

Expert Witnesses

Respondent

Dr Claudia Annacker
Mr David G. Sabel
Mr Lawrence B. Friedman
Mr Matthew D. Slater
Mr Larry C. Work-Dembowski
Dr Enikő Horvath
Ms Laurie Achtouk-Spivak
Mr Lorenzo Melchionda
Ms Ksenia Khanseidova
Ms Aija Lejniece
Ms Sarah Schröder
Mr Sean McGrew

Cleary Gottlieb Steen & Hamilton LLP

Mr Andrey Kondakov

Party Representative

Mr Jesse Stevenson

Trial Graphic Consultant

Professor Anton V. Asoskov
Professor Thomas Z. Lys
Professor Dr. Riemert P.J.L. Tjittes

Expert Witnesses

Tribunal Assistant

Mr Jack Wass

Registry

Dr Hanno Wehland

Mr Robert James

PCA

Court Reporter

Mr Trevor McGowan

Interpreters

Ms. Irina van Erkel
Mr Sergei Mikheyev

24.
The Hearing proceeded by way of opening arguments, witness and expert testimony, and closing arguments. All of the witnesses who had submitted written evidence were required for cross-examination, save that the Claimant did not request to cross-examine Mr Noguera.
25.
By agreement of the Parties, neither Professor Tjittes nor Professor Willems was cross-examined but instead were collectively questioned by the Tribunal, following which the Parties were given the opportunity to ask questions arising.9
26.
At the conclusion of the Hearing, the Parties confirmed that they had no further procedural matters to draw to the attention of the Tribunal.10

III. THE FACTUAL BACKGROUND

A. The Energy Charter Treaty

31.
On 17 December 1994, the ECT became open for signature, with the purpose of establishing "a legal framework in order to promote long-term co-operation in the energy field ... in accordance with the objectives and principles of the Charter."12
32.
Having signed the ECT, subject to ratification, on 17 December 1994, the Russian Government presented it for ratification to the State Duma in August 1996.13
33.
The State Duma did not ratify the Treaty.14 On 20 August 2009, the Russian Federation notified the depository of the ECT that it did not intend to become a contracting party to the Treaty.15

B. Yukos Capital's Loans

35.
The purpose of this restructuring, according to the Claimant, was to protect Yukos Oil's foreign assets from being confiscated by the Russian State. Yukos Oil was dissolved in 2007 at the conclusion of bankruptcy proceedings in Russia.18
36.
At the core of the present dispute are two loans that the Claimant extended to Yukos Oil in December 2003 (the "December 2003 Loan") and August 2004 (the "August 2004 Loan" and, together with the December 2003 Loan, the "Loans"). The Claimant alleges that those loans constitute an investment, and that, by various acts attributable to it, the Respondent expropriated that investment.19
37.
The Respondent relies, inter alia, on Yukos Capital's financial statements and affidavits as well as witness statements of former Yukos Oil and Yukos Capital executives to assert that the Claimant "essentially acted as an 'intermediary'" by receiving the funds for the December 2003 Loan from Yukos Oil subsidiaries solely for the purpose of making loans to other Yukos Oil subsidiaries, and that the Loans were part of a "tax-efficient dividend repatriation strategy."20 It is on the basis of this characterisation that the Respondent rests its second objection to jurisdiction: that the Loans do not qualify as Investments in terms of Article 1(6) of the ECT. Further background to the Loans is described below.

IV. LEGAL PROVISIONS RELEVANT TO THE DISPUTE

38.
The Tribunal shall apply substantive law in accordance with Article 26(6) of the ECT, including the substantive provisions of the ECT, interpreted under the Vienna Convention on the Law of Treaties (the "VCLT"),21 and any rules and principles of international law that are applicable.

V. OUTLINE OF THE PARTIES' SUBMISSIONS

A. The Respondent's submission

40.

The Respondent contends that the Tribunal lacks jurisdiction to hear Yukos Capital's claims. The Respondent bases its argument on three grounds:

(i) Arbitration of the present dispute is inconsistent with the Russian Federation's "constitution" and "laws" for purposes of Article 45(1) of the ECT, and, accordingly, the obligation to provisionally apply the ECT did not extend to Article 26; the arbitration agreement on which the Claimant seeks to rely is "null and void";22

(ii) Yukos Capital has not made an Investment protected under Article 1(6) of the ECT, because the purported Loans were in substance dividends designed to repatriate to Russia the profits of Yukos Oil's Russian trading subsidiaries, in which Yukos Capital played no meaningful role and should be "disregarded";23 and

(iii) The Respondent is entitled to deny the Claimant the benefits of Article 17 of the ECT because the Claimant is a shell company with "no substantial business activities" in Luxembourg and is controlled by nationals of a third state, namely the United States nationals who are members of the Stichting's board.24

B. The Claimant's submission

41.
The Claimant submits that the Tribunal should reject each of the Respondent's objections to the Tribunal's jurisdiction, arguing as follows:

(i) In relation to Article 45(1), the Claimant makes three independent submissions: first, a signatory may avoid provisional application only where the principle of provisional application itself is inconsistent with domestic law – Article 45(1) does not contemplate a "piecemeal" comparison of specific provisions of the Treaty with domestic law;25 second, provisional application is not inconsistent with Russian law because the executive had authority to commit the Respondent to provisional application of Article 26 (and that renders it consistent with Russian law); third, even examined on a piecemeal basis, Article 26 – the arbitration of investment disputes – is not inconsistent with Russian law.26

(ii) The Loans qualify as "Investments" under Article 1(6) of the ECT;27 the Claimant rejects the argument that they fail a test derived from "general international law" as to what qualifies as "investment."28

(iii) The Respondent's attempt to invoke Article 17(1) cannot give rise to a jurisdictional challenge, since the Respondent would only be entitled to deny the benefits of Part III of the ECT (whereas Article 26 is found in Part V);29 the Claimant submits that the Respondent's purported invocation of Article 17 after the arbitration had been commenced could not operate retrospectively to deny the Claimant accrued rights;30 and that the Respondent cannot make out the two substantive requirements of the Article.

VI. RELIEF REQUESTED

42.
The Respondent requests that the Tribunal:

(i) Decline to exercise jurisdiction over the Claimant's claims;

(ii) Order the Claimant to pay to the Respondent the full costs of this arbitration, including, without limitation, arbitrators' fees and expenses, administrative costs, counsel fees and expenses and any other costs associated with this arbitration;31

(iii) Order the Claimant to pay to the Respondent interest on the amounts awarded under (ii) above until the date of full payment; and

(iv) Grant any further relief to the Respondent as it may deem appropriate.32

43.
The Claimant requests the Tribunal to dismiss all of the jurisdictional objections raised by the Respondent and to proceed to the merits stage of the proceedings.33 In its Notice of Arbitration, it also seeks "its arbitration costs, including attorneys' fees."34

VII. THE OBJECTIONS TO JURISDICTION

44.
The three objections raised by the Respondent to the jurisdiction of the Tribunal raise distinct points of substance. Each one of them would, if held to be well founded, operate to exclude the jurisdiction of the present Tribunal over the whole of the Claimant's claims.
45.

Pursuant to Article 21(1) of the UNCITRAL Rules, "[t]he arbitral tribunal shall have the power to rule on objections that it has no jurisdiction, including any objections with respect to the existence or validity of the arbitration clause or of the separate arbitration agreement." This provision reflects the concept, fundamental to international arbitration, of compétence–compétence, namely that an international tribunal has jurisdiction to rule upon its own jurisdiction.

46.
In view of the distinct character of each of the objections, the Tribunal shall proceed by considering each in turn, setting forth the Parties' arguments followed by its own analysis and decision.

A. Does the provisional application of the ECT in the Russian Federation, pursuant to Article 45 of the ECT, provide a basis for the Tribunal's jurisdiction?

47.
The first of the jurisdictional objections for the Tribunal's determination is whether Article 45 provides a jurisdictional predicate for the present claim, and in particular whether the proviso to Article 45(1), which provides for provisional application "to the extent that such provisional application is not inconsistent with its constitution, laws or regulations" (the "Domestic Law Inconsistency Clause") excludes the provisional application of Article 26.
48.
The Parties' first point of disagreement concerns the scope of that clause. The Claimant's case is that a respondent state may only rely on that limitation where the principle of provisional application itself is inconsistent with the state's "constitution, laws or regulations": the limitation is "all-or-nothing." Since the Respondent does not deny that Russian law recognizes the principle of provisional application (albeit subject to limits), the disposition of this issue in the Claimant's favour would dispose of the Respondent's first jurisdictional objection. The Respondent, on the other hand, submits that the clause contemplates a piecemeal analysis, such that a state will not be obliged to provisionally apply any individual provision of the Treaty that is inconsistent with its domestic law.
49.
The second sub-issue that arises under this head is whether Article 26 itself, or its provisional application, is inconsistent with Russian law. The Tribunal now summarizes the submissions of each Party on both of these issues before coming to its own decision on provisional application as a whole.

1. The correct interpretation of Article 45(1)

(a) The Respondent's position

50.
The Respondent contends that, pursuant to Article 45(1), a signatory applies the ECT provisionally pending its entry into force for that signatory "to the extent that such provisional application is not inconsistent with its constitution, laws or regulations." The Respondent argues that, accordingly, the Domestic Law Inconsistency Clause of Article 45(1) applies (a) to conceptual inconsistencies (e.g. the non-recognition of the principle of provisional application in constitutional law) and also (b) to inconsistencies of individual treaty provisions (e.g. Article 26 of the ECT on the settlement of disputes between "Investors" and "Contracting Parties") with the laws or regulations of a signatory.35
52.
The Respondent points out that, while the Claimant attempts to draw support for its interpretation from an expert Opinion submitted by Professor Reisman on behalf of the claimant in Hulley Enterprises Limited v. Russian Federation42 ("Hulley Enterprises") Professor Reisman expressly rejected the Claimant's position in a 2011 article, noting that "[i]f Article 45(1) had been intended to refer to the notion of the permissibility of the provisional application of a treaty as such, it would not have been necessary to introduce the phrase 'to the extent'."43 The Respondent refers to several further authorities in accord with this view.44
53.
The Respondent also sees as significant the inclusion of "laws" and "regulations" in the "to the extent" clause, observing that a prohibition of provisional application typically results from constitutional requirements or acts of legislation implementing constitutional principles; in contrast, such prohibition typically would not result from "several laws" or "hierarchically lower legal acts" such as regulations.45 Thus, the Respondent argues that the inclusion of "regulations" in the Domestic Law Inconsistency Clause confirms "that not only conceptual inconsistencies, but also specific inconsistencies of particular treaty provisions with domestic laws and regulations are covered."46 The Respondent cites the same article by Professor Reisman as confirmation of this observation.47
54.
The Respondent submits that its interpretation is supported by the context of the provision. Firstly, with regard to the Claimant's argument that "'provisional application' has the same meaning under both Articles 45(1) and 45(2)(a) (i.e. application of the Treaty as a whole),"48 the Respondent disagrees, arguing that "provisional application" does not have the same meaning in Article 45(1) of the ECT as in Article 45(2) of the ECT. In contrast to Article 45(1), with its "to the extent" language, Article 45(2)(a) allows a signatory state to opt out of provisional application entirely. Further, under Article 45(2)(c), a signatory must still provisionally apply the provisions of Part VII ("Structure and Institutions") "to the extent that such provisional application is not inconsistent with its laws or regulations."49 Thus, "[p]ursuant to Article 45(1) ECT, a signatory applies all parts of the ECT, but subject to inconsistencies with its domestic law. Pursuant to Article 45(2)(c) ECT, a signatory applies only Part VII, but again subject to inconsistencies with its domestic law."50
55.
The Respondent contends that, "[s]ince a signatory that applies Part VII on a provisional basis pursuant to Article 45(2)(c) ECT has already opted out of provisional application entirely," the Domestic Law Inconsistency Clause in Article 45(2)(c) of the ECT can only refer to "inconsistencies between that signatory's 'laws or regulations' and specific obligations under Part VII of the ECT."51 Moreover, the Respondent points out that a facsimile sent by the U.S. Department of State to the Energy Charter Conference Secretariat in the context of the ECT negotiations supports this view.52
56.
Secondly, the Respondent rejects the Claimant's assertion that Article 45(3)(b) of the ECT supports an "all-or-nothing" approach to Article 45(1),53 arguing that "Article 45(3)(b) ECT says nothing about the scope of a signatory's provisional application under Article 45(1) ECT."54
57.
Thirdly, the Respondent rejects the Claimant's argument that Article 45(6) of the ECT supports the Claimant's "all-or-nothing" approach to Article 45(1),55 since the language of Article 45(6) "simply confirms that Article 45 provides for two distinct regimes of provisional application." The Respondent further notes that, if the Claimant were correct in its contention that Article 45(1) is an "all-or-nothing" provision, there would be no reason for Article 45(6) to provide expressly that cost contributions be made "in accordance with and subject to the provisions of paragraph (1)."56
58.
Fourthly, the Respondent rejects the Claimant's argument that Article 45(2)(b) of the ECT reflects a reciprocity of obligations and provides that investors of a signatory may not claim Treaty benefits unless the signatory consents to apply the Treaty in its entirety.57 The Respondent points out that Article 45(2)(b) makes explicit reference to the "benefits of provisional application under paragraph (1)" (thus including the Domestic Law Inconsistency Clause), rather than to "this Treaty." Therefore, according to the Respondent, the reciprocity limitation provided in Article 45(2)(b) only applies to a signatory if it has opted out of provisional application pursuant to Article 45(2)(a).58
59.
The Respondent also regards the Claimant's argument in relation to Article 27 of the VCLT as misguided, noting that, while "Article 27 VCLT prohibits a State from invoking its domestic law as justification for failure to perform a treaty," "[a] State that invokes its internal law pursuant to a 'to the extent' clause does not seek to justify its failure to perform a treaty obligation," but rather does so "to determine the extent and content of the obligations it has accepted under a treaty."59 In this regard, the Respondent points out that, contrary to the Claimant's argument,60 Professor Lefeber's 1998 article and its 2011 entry in the Max Planck Encyclopedia fully support its position, acknowledging the ECT as an example of a treaty providing "that its provisional application is subject to national law, which means that, in case of conflict national law prevails over the treaty."61 According to the Respondent, other commentators are in accord.62
60.
The Respondent takes the view that the authorities cited by Claimant for the proposition that the Respondent's interpretation of the Domestic Law Inconsistency Clause runs against Article 27 of the VCLT "are unavailing."63 The Respondent submits that the Claimant's citation of Resolution No. 8-P ("Resolution No. 8-P") rendered in 2012 by the Constitutional Court of the Russian Federation (the "Constitutional Court") is irrelevant because the quoted statement dealt with treaties that had entered into force, and the ECT has not yet entered into force for the Respondent.64 In like manner, the Respondent rejects the notion that the expert opinion of Professor Reisman in the Hulley Enterprises arbitration provides authority for the proposition that the Respondent's interpretation of the Domestic Law Inconsistency Clause runs counter to Article 27 of the VCLT.65
61.
The Respondent further contends that the Claimant's citation of an expert opinion submitted by Professor James Crawford in Hulley Enterprises is unavailing, as "[n]o authority is cited to support the statement that Article 27 VCLT has been relied upon to reduce the scope of a 'to the extent' clause to the principle of provisional application."66 The Respondent also dismisses the relevance of the jurisdictional awards in Kardassopoulos v. Georgia ("Kardassopoulos") and Hulley Enterprises relied on by the Claimant,67 pointing out in particular that both cases were chaired by the same arbitrator and that the Hulley Enterprises award is currently subject to set aside proceedings in the Netherlands.68
62.
The Respondent further contends that the Claimant has inaccurately conflated the Domestic Law Inconsistency Clause under Article 45(1) of the ECT and the grounds for invalidating consent under Article 46(1) of the VCLT.69 According to the Respondent, the two provisions have an "essentially different nature and function" and stand in marked contrast with regard to their language and the conditions under which they may be invoked.70 In particular, the Respondent points out that it "does not seek to vitiate its consent to apply the ECT on a provisional basis" (as it might under Article 46(1) of the VCLT), but that it is invoking "its domestic law pursuant to the 'to the extent' clause in Article 45(1) ECT to determine the extent of its obligations under the ECT."71
64.
In response to a question from the Tribunal, the Respondent identified a number of provisions of the ECT that it considered were provisionally applied by the Russian Federation because they reflected existing protections in Russian law.79 To that extent an investor has the protection of substantive treaty obligations, although it may only enforce them in the Russian domestic courts.80 In the Respondent's submission, each investor must be aware of the domestic law limitation in Article 45 of the ECT, and is responsible for conducting due diligence with the assistance of local counsel to determine which of the provisions of that treaty it will be entitled to rely on.81
65.
The Respondent goes on to argue that its interpretation is also in line with the "purpose and effect" of Article 45(1) of the ECT, which "is to accommodate the domestic law problems that provisional application raises for most States by limiting provisional application to those treaty provisions that are consistent with each signatory's domestic laws."82 The Domestic Law Inconsistency Clause was, according to the Respondent, "clearly motivated by this goal," having been introduced according to a proposal by the United States in the draft Basic Protocol of October 1991.83 As the Respondent highlights, the United States admitted in a facsimile that it "d[id] not have any legal difficulty with provisional application per se" and found the language of the Domestic Law Inconsistency Clause "essential to any provisional application obligation."84 The European Community likewise recognized the principle of provisional application, relying on the Domestic Law Inconsistency Clause itself to limit its provisional application to provisions within its competence.85
66.
The Respondent further alleges that the "vast majority" of ECT negotiating states recognized the principle of provisional application, yet "had to accommodate domestic law constraints through the 'to the extent' clause."86 In particular, the Respondent pleads that Germany limited provisional application to obligations that "were consistent with its legislation or within executive competence, not requiring parliamentary approval."87 Likewise, the Netherlands only allowed the executive to agree to provisional application "if a treaty did not deviate, or necessitate deviation from, the Constitution, and to the extent its provisions did not deviate from Dutch legislation or necessitate such deviation."88 Similarly, the Respondent contends that France "recognized the principle of provisional application, but only permitted the provisional application of treaties on matters falling within the power of the executive or after parliamentary authorization had been granted."89
67.
The Respondent further contends that its interpretation is in line with "the circumstances of the ECT's conclusion and the signatories' practice in interpreting and applying Article 45(1) ECT."90 The Respondent highlights that, while a number of signatories of the ECT made declarations pursuant to Article 45(2)(a) when signing the ECT, others chose to expressly rely on the Domestic Law Inconsistency Clause of Article 45(1) to exclude or limit the provisional application of the ECT.91
68.
The Respondent points out that, contrary to the Claimant's assertion,92 the fact that "these ECT signatories invoked the 'to the extent' clause to exclude provisional application does not support an inference that they interpreted Article 45(1) ECT as an all-or-nothing provision."93 In fact, according to the Respondent, two of the relevant signatories "expressly stated that Article 45(1) ECT 'does not create any commitment beyond what is compatible with the existing legal order of the Signatories'."94
69.
In addition, the Respondent contends that even where signatories made no declaration whatsoever, internal documents show that they shared the Respondent's interpretation of Article 45(1) of the ECT. In particular, the Respondent refers to several documents prepared by the Finnish Government,95 as well as a 1994 Statement by the Council, the Commission and the Member States of the European Community on Article 45 of the European Energy Charter Treaty (the "1994 Joint EC Statement").96 The Respondent argues that, in the 1994 Joint EC Statement, the European Community and its then twelve Member States, by stating that Article 45(1) of the ECT "does not create any commitment beyond what is compatible with the existing internal legal order of the Signatories," relied on that provision to determine that a signatory of the ECT would not have to file a declaration of non-application pursuant to Article 45(2), in order to exclude the non-application of parts of the ECT not compatible with its legal order, as this is an automatic consequence from the text of Article 45(1).97 The Respondent adds that the Member States that adopted the 1994 Joint EC Statement did not communicate their position to the other ECT negotiating states, as such communication was not required of them.98
70.

The Respondent also refers to the "'to the extent' clause in paragraph 1(b) of the Protocol of Provisional Application" of the General Agreement on Tariffs and Trade ("GATT"), pointing out that there is a "consistent body of GATT case law" confirming that "GATT Contracting States were entitled to and did invoke specific inconsistencies of their domestic laws with particular GATT obligations."99 The Respondent also argues that there was "never any suggestion that consent by the executive to provisional application may suffice to eliminate inconsistencies" between domestic law and GATT obligations.100

71.
Furthermore, the Respondent disputes the Claimant's allegation101 that the "Respondent 'at all relevant times made clear' that it applied the ECT provisionally as a whole."102 The Respondent alleges that the "Claimant has failed to point to a single statement by Respondent in the course of the ECT negotiations or at the time of the Treaty's signature that 'made clear' that it would apply the ECT provisionally as a whole."103 In particular, the Respondent takes issue with the Claimant's "selective" and "out of context" quotation104 of background information published on the website of the Ministry of Foreign Affairs, which according to the Respondent "does not state that Respondent applies the ECT as a whole."105 Likewise, the Respondent rejects the Claimant's argument106 that a statement made by the Russian delegation at the 2002 Energy Charter Conference proves that the Respondent believed it was bound to provisionally apply the ECT as a whole.107 In contrast, the Respondent argues that the statement does not address the scope of provisional application.108
73.
The Respondent also quotes the former chairman of the legal advisory committee to the European Energy Conference, Mr Bamberger. In an article on the subject of the provisional application of the ECT's dispute resolution provisions in energy transit disputes, Mr Bamberger acknowledged that:

[e]ven in the case of a state not making such a declaration [pursuant to Article 45(2)(a) of the ECT], it could prove extremely difficult to ascertain the extent to which the provisions of the ECT are inconsistent with the particular signatory's constitution, laws or regulations.112

74.
The Respondent submits that Mr Bamberger's article supports the proposition that "the operation and effectiveness of the transit dispute settlement mechanism ... depends on the consistency of that mechanism with each signatory's domestic law."113

(b) The Claimant's position

75.
Against the Respondent's position, the Claimant contends that Article 45(1) of the ECT permits a signatory to avoid provisional application of the ECT as a whole "only to the extent the principle of provisional application is inconsistent with their domestic law."114 The Claimant contends, that this was "not the case with Russia, nor does Respondent suggest that it is."115 The Claimant additionally points out that, whilst a signatory to the ECT may elect not to apply the Treaty provisionally by making a declaration under Article 45(2) ECT, "Respondent did not do so."116 The Claimant argues that the Respondent's interpretation of the Domestic Law Inconsistency Clause represents a "piecemeal argument" that would make "the specific scope of provisional application entirely dependent on the degree and nature of each signatory's invocation of its internal laws." Such an interpretation would "run[] counter to cardinal principles of international law."117
76.
The Claimant argues for an interpretation of Article 45(1) grounded in the "ordinary meaning" of the provision, emphasizing the need for reading the provision in the context of the ECT's object and purpose, in line with Article 31(1) of the VCLT.118 Accordingly, the Claimant contends that the limiting language of Article 45(1) "applies only to 'such provisional application'," the meaning of which must be the foundation of a proper interpretation of Article 45(1).119
77.

Interpreting Article 45(1) in this manner, the Claimant focuses on the word "such," which it alleges was "ignored by Respondent."120 The plain meaning of "such" in this context is, according to the Claimant, "of the kind specified."121 The Claimant further argues that "the kind of provisional application specified is that '[e]ach signatory agrees to apply [the ECT] provisionally pending its entry into force for such signatory'."122 Therefore, as the Claimant contends, "the limiting 'to the extent' language ... operates only where applying 'this Treaty' (i.e., the principle of provisional application itself) is inconsistent with the signatory's constitution, laws or regulations."123 The Claimant notes that such an interpretation is consistent with the findings of the tribunals in Hulley Enterprises124 and Kardassopoulos.125

78.

The Claimant further contends that "'provisional application' has the same meaning under both Articles 45(1) and 45(2)(a) (i.e. application of the Treaty as a whole)."126 According to the Claimant, the Respondent concedes that the Claimant "is correct that the phrase 'such provisional application' refers to the provisional application previously mentioned in Article 45(1) ECT, namely the provisional application of 'this Treaty'."127 After making such a concession, however, the Claimant asserts that the Respondent offers a rebuttal128 that is no more than a tautology and a "confused commentary devoid of any apparent logic."129 The Claimant adds that the Respondent's authorities in this regard do not support the Respondent's position.130

79.
The Claimant rejects the Respondent's assertion that the Claimant's interpretation of Article 45(1) "deprives the term 'to the extent' of any meaning and would effectively substitute for it 'if', 'unless' or 'where',"131 noting that the Respondent's interpretation "cannot be gleaned from the language on any logical basis."132 Although it accepts that deleting "such" or replacing it with "if" would also convey the meaning for which the Claimant contends, it maintains that this does not change the proper interpretation of the clause.133
80.
The Claimant also rejects the Respondent's reliance on the word "regulations" as being within the Domestic Law Inconsistency Clause,134 noting that the word was added at the request of the Japanese delegation late in the drafting process and "attracted no attention."135 The Claimant criticizes the Respondent's "very selective use of the travaux"136 and sees no reason to conclude that "the addition of 'regulations' ... somehow signalled a consensus understanding that Article 45(1) would be subject to a piecemeal interpretation."137
81.

The Claimant also disputes the Respondent's contention that the Claimant's interpretation renders Article 45(1) "superfluous."138 The Claimant notes that, for signatories that do not make an opt-out declaration, Article 45(1) "provides a safety net that ... permits [signatories] to ... avoid provisional application if, and only if, it is inconsistent with their laws to so apply the Treaty," as opposed to opt out declarations made pursuant to Article 45(2)(a), which "may be made for any reason."139 So if any state had a concern with provisional application, they were free to opt out pursuant to that clause.140 They could also opt out of the 20 year tail.141

82.

The Claimant rejects the Respondent's interpretation of other provisions in Article 45 as well, finding the Respondent's contentions142 regarding Article 45(3)(b) "impossible to comprehend."143 The Claimant criticizes the Respondent's interpretation as ignoring the fact that Article 45(3)(b) holds that, under Article 45(1), there exists an "obligation ... to apply Parts III and V," the effect of which is to "strip[] Article 45(3)(b) of all meaning for any signatory claiming that Parts III and V are inconsistent with its domestic law."144 What this conveys, according to the Claimant, is that "under any interpretation of Article 45(1), signatory states are applying provisionally Parts III and V."145

83.
Further, the Claimant finds the Respondent's arguments146 regarding Article 45(2)(b) to be "unclear" and "circular and of no apparent significance," contending instead that "Article 45(2)(b) simply provides for reciprocity."147 According to the Claimant, the Respondent's position148 on Articles 45(1) and 45(2)(b) is a "piecemeal approach" in which "signatory states could invoke their own domestic law to determine which Treaty obligations they would apply provisionally."149 Under the Respondent's interpretation, for states applying the ECT provisionally, "there would then be no legal obligation of reciprocity whatsoever, either to or from them: signatory states would be free to adopt (or not) their own subjective, non-transparent policies of reciprocity ... based upon their domestic-law infused provisional application," thereby creating a system in which investors would face the impossible job of deciphering a "non-reciprocal patchwork of 'reciprocity'."150 The Claimant refers to commentary characterizing such a system as lacking "harmonisation, standardisation or unification of conduct" since "the reach of international law would be limited by approximately [40] internal legal orders."151
84.
As the Claimant notes, Article 17(1) of the VCLT provides that "the consent of a State to be bound by part of a treaty is effective only if the treaty so permits or the other contracting States so agree."152 The Claimant contends that Article 45(2)(c) of the ECT is an example of a provision that expressly provides for provisional application of only part of the ECT, as it requires a signatory that has made a declaration under Article 45(2)(a) to "apply Part VII provisionally ... to the extent that such provisional application is not inconsistent with [their] laws or regulations."153 Thus, "Article 45(2)(c) creates a specific exception where parties are to apply only Part VII."154 In contrast, the Claimant notes that Article 45(1) does not contain such express authorisation for a signatory to apply provisionally only a part of the Treaty, "mak[ing] clear that the use of 'provisional application' in Articles 45(1) and 45(2)(c) refers to application of the Treaty as a whole."155
85.
The Claimant cites Article 45(2)(a) of the ECT as support for this argument, since the provision entitles the signatory to deliver a declaration after signing the ECT that the signatory "is not able to accept provisional application." According to the Claimant, Article 45(2)(a) therefore "provides that a declaration removes '[t]he obligation contained in paragraph (1),' making clear that 'provisional application' has the same meaning under both Articles 45(1) and 45(2)(a) (i.e., application of the Treaty as a whole)."156
86.

The Claimant also cites Article 45(2)(b) of the ECT and its "reciprocity of obligations," providing that "investors of a signatory may not claim [ECT] benefits unless the signatory consents to apply [the ECT] provisionally (i.e., in its entirety)."157 On such obligations, the Claimant references Hulley Enterprises for the proposition that "[a]llowing a State to modulate ... the obligation of provisional application ... would undermine the principle that provisional application of a treaty creates binding obligations,"158 thus "creat[ing] unacceptable uncertainty in international affairs."159 It would also mean that one state could be "provisionally applying virtually nothing and receive all of the benefits from states that are applying the whole thing."160

87.
Commenting on the Respondent's submissions as to what provisions were provisionally applied by the Russian Federation, the Claimant suggests that "the Russian Federation provisionally applied nothing" but just invited investors to avail themselves of the protections available under existing Russian law.161
88.
The Claimant rejects the Respondent's critique162 that the Hulley Enterprises tribunal's decision regarding Article 45(1) issues was based merely on policy considerations.163 The Claimant notes that Articles 27 and 46 of the VCLT "reflect the strong presumption in international law of the separation of international law and domestic law," and that, in spite of the Respondent's arguments to the contrary,164 these articles are relevant to the interpretation of the Domestic Law Inconsistency Clause.165 Further, the Claimant notes that "legal certainty" is more than a policy issue, considering it instead "a fundamental principle of international and national law" that "informs" Articles 27 and 46 of the VCLT.166 Thus, the Claimant argues that, "if Article 45(1) was to depart from [these principles of international law] it would need to expressly state that that is what it is doing," noting that Article 45(1) does not do so.167
89.

The Claimant also rejects the Respondent's citation of Professor Reisman's critique of the same position that the Claimant has adopted in this arbitration,168 noting that the Respondent omits a portion of Professor Reisman's analysis that shows that Professor Reisman, Hulley Enterprises, and Kardassopoulos are all in accord with the proposition that a signatory state wishing to avoid provisional application "must duly notify in advance that its constitution, laws or regulations disable it from provisional application" and that, for investors having already invested in a State, "Part III and Part V of the ECT remain in force for 20 years with regard to any investments made in that state during the provisional application unless a declaration rejecting the 'tail' is made at the time of signature."169

93.

The Claimant further rejects the Respondent's interpretation arguments, noting that "[m]ost of the Respondent's arguments in support of its ... approach may be described as supplementary means of interpretation arguments."179 The Claimant contends that Article 45(1) of the ECT is not "ambiguous or obscure" and that interpreting the ECT using a plain language approach does not lead to a "manifestly absurd or unreasonable" result. Thus, according to the Claimant, the Respondent's arguments are "unnecessary and should not be considered pursuant to Article 32 of the [VCLT]."180

95.
Moreover, the Claimant argues that the Respondent "at all relevant times made clear that it was provisionally applying 'the Treaty', not merely some unidentified part of it."185 As evidence for this proposition, the Claimant highlights the fact that the Respondent failed to notify the ECT Secretariat of any desire to be excepted from provisional application on the basis of either Article 45(1) or Article 45(2)(a) of the ECT, even though the Secretariat had "asked all delegations wishing to make a request to be excepted from provisional application to notify it."186
97.

The Claimant further contends that, regarding state practice, the Respondent only analyzes the practice of one State – Finland – and that, moreover, the documents it relies on fail to "provide evidence of 'any agreement' between the parties or an instrument accepted by the other parties on signature or any 'subsequent agreement' or 'practice' establishing the agreement of the parties for purposes of Article 31 of the [VCLT]."191 Additionally, the Claimant finds the other documents cited by the Respondent to be irrelevant and, "in any event, consistent with the Claimant's interpretation."192

98.

The Claimant argues that state practice in fact provides support for its interpretation, noting that, during the negotiating process, an "emphasis on legal certainty prevailed over opposition from various delegations"193 and referring to the Energy Charter Conference Secretariat's request to the delegations that they notify the Secretariat of their intention not to provisionally apply the ECT.194 The Claimant notes that nine states – Iceland, Malta, Bulgaria, Cyprus, Switzerland, Turkmenistan, Norway, Japan, and Poland – made declarations pursuant to Article 45(2)(a), and that Hungary made a declaration citing Article 45 without specifying a particular paragraph.195 The Claimant cites the Hulley Enterprises decision, which highlighted that no state relied on Article 45(1) for "selective or partial application of the ECT based on the non-application of only those individual provisions that are claimed to be inconsistent with a signatory's domestic law."196 According to the Claimant, the Respondent has not provided evidence that any signatory that did not give notice or make a declaration adopted the Respondent's "piecemeal approach" to Article 45(1).197

99.

The Claimant also refers to the Decision of the Energy Charter Conference of 7 December 2000 recording the termination of certain transitional arrangements contained in Annex T by Armenia and Russia, noting that the decision does not suggest an understanding that, after the transitional arrangements were terminated, Russia would only apply in part the substantive obligations referred to in Article 32(1), since such a point would have been recorded.198 The Claimant sees further support for its interpretation of Article 45(1) in "the practice of the ECT Secretariat concerning transitional provisions in Article 32 in relation to, inter alia, Article 10(7) on non-discrimination."199

100.
The Claimant submits that GATT practice is not informative on this point because the provisional application regime is different.200

2. Is Article 26 or its provisional application inconsistent with Russia's constitution, laws or regulations?

(a) The Respondent's position

120.
The Respondent contends that "[n]either of the two court decisions cited by Claimant and its expert for the proposition that the terms of a provisionally applied treaty necessarily apply in lieu of Russian federal law supports such a proposition."248 Resolution 8-P holds that agreement to provisional application of a treaty means that the treaty becomes part of Russian law and must be applied on the same basis as treaties that have entered into force, but the Russian Federation may condition provisional application of a treaty prior to its entry into force by compliance with the Constitution, laws and other regulatory acts of the Russian Federation.249 The Respondent argues that Professor Stephan accepts that this expression refers to the same three types of legal acts as Article 45(1) of the ECT: the constitution, laws and regulations.250
121.
The Respondent submits that this confirms the general application of Article 15(4) of the Constitution, but the treaty in question takes its place in the hierarchy of Russian law according to the body that expressed consent to be bound by it. So where consent to be bound (or consent to provisional application) was expressed by the government, the treaty is incorporated at the level of a government resolution and does not prevail over federal law.251
122.
The Respondent also disputes the Claimant's assertion252 that signatories of the ECT expressly recognized, in the sixteenth understanding of the Final Act of the Energy Charter Conference253, the possibility that Article 26 of the ECT would be incorporated into domestic legal systems and would prevail over conflicting domestic law.254 The Respondent contends that, "[o]n its face, Understanding No. 16 does nothing more than clarify that an ECT Contracting Party is not required to enact the substantive investment protections in Part III into its domestic law in order to allow an investor to submit a dispute to its courts or administrative tribunals, recognizing that self-executing treaty provisions are directly applicable in the legal systems of many ECT Contracting Parties," and that "Understanding 16 thus does not go to the question whether or not arbitration of the present dispute is consistent with Respondent's 'constitution, laws or regulations'."255
123.
The Respondent further rejects the argument of the Claimant that Article 26 of the ECT and Russian law cannot possibly be inconsistent because President Yeltsin signed the ECT and thereby expressed the consent of the Respondent State to be bound by the ECT.256 The Respondent notes that the ECT was not signed by President Yeltsin but rather by the Deputy Chairman of the Government of the Russian Federation, Mr Davydov.257 It challenges Professor Stephan's opinion that the powers of the President to negotiate and to sign treaties are exclusive, and that Mr Davydov as a member of the Government was acting under a form of delegation.258 In addition, the Respondent points out that, since Article 39 of the ECT expressly required ratification of the Treaty, its signature was "only 'a stage in the conclusion of' the ECT."259
124.
The Respondent rejects the Claimant's view260 that Russian domestic law and Article 26 of the ECT cannot be inconsistent since the Claimant seeks to enforce rights that arise under the ECT and that are interpreted pursuant to public international law.261 The Respondent submits that the Claimant ignores the fact that Article 26 of the ECT is qualified by the Domestic Law Inconsistency Clause of Article 45(1), and argues that the two textbooks cited by the Claimant in this regard262 are not relevant to addressing this issue.
125.
The Respondent also rejects the Claimant's expert's contention that Yukos Capital's claims are arbitrable because the Claimant does not request the annulment of public acts such as tax assessments, enforcement measures, and decisions of the receiver in bankruptcy proceedings.263 Professor Stephan's evidence is that matters such as tax assessments must be challenged before the Russian courts "[a]bsent some derogation."264 The Respondent cites Professor Asoskov as authority for the proposition that a review of the legality of such acts would be "inevitably" necessary to determining compensation claims derived from those acts of governmental authority.265 The Respondent also quotes Professor Skvortsov in concluding that "a dispute for compensation of damages caused by the unlawful actions of State bodies and their officials exercising their public law functions may not be referred for resolution to an arbitral tribunal."266
126.
The Respondent argues that disputes between a foreign investor and the host state are generally within the jurisdiction of the host state's courts, regardless of whether the investor invokes protections under treaty or domestic law.267 Under Russian law, claims for the wrongful exercise of state power are heard by the courts of general jurisdiction and the arbitrazh courts.268
127.
The Respondent further argues, citing the First Opinion of Professor Asoskov, that certain public law disputes "have always been non-arbitrable under Russian law," including disputes regarding tax assessment, sanctions levied by tax authorities, the enforcement of decisions by tax authorities, actions or omissions of state authorities in enforcement proceedings, and bankruptcy issues.269 Specifically, the Respondent claims that "arbitration of the present dispute is inconsistent with Russian federal laws, including the Tax Code, the Civil Procedure Code, the Arbitrazh Procedure Code, the Law 'On Enforcement Proceedings' and the Law 'On Insolvency (Bankruptcy) of Business Entities'."270
128.
Addressing the Claimant's view that limitations on arbitrability are not applicable to state authorities acting in a public law capacity,271 the Respondent contends that this "turns the principle of non-arbitrability on its head."272 According to the Respondent, "[p]ublic law disputes are not arbitrable precisely because the principles of freedom of contract and procedural discretion, which allow parties to refer disputes to arbitration in the sphere of private law, are not present in the sphere of public law."273 As a consequence, the Respondent quotes Professor Asoskov to the effect that a legal regulation that involves an exercise of sovereign power is a public law regulation (alleging that the Claimant chose not to cross-examine Professor Asoskov on this point274) and "[p]ublic law disputes are not arbitrable unless a federal law expressly provides an exemption."275
129.
Specifically, the Respondent argues that this dispute is to be settled in the Moscow Arbitrazh Court pursuant to Article 35 of the 2002 Arbitrazh Procedure Code.276 Article 4(6) of that Code authorises parties to displace the jurisdiction of the arbitrazh courts by virtue of an arbitration agreement only if the dispute arises out of civil law relations, which, according to Professor Asoskov, are relations based on the principle of coordination, as opposed to public law relations, which are based on the principle of subordination or involve a state party, public interest and the expenditure of public funds,277 or otherwise "involves appreciation of [the] legality of the legal acts of state or municipality."278 The Respondent says that on either standard the present dispute that concerns taxation measures, tax enforcement measures and bankruptcy issues, arises out of public law relations and thus cannot be referred to arbitration.279 The consequence is that, according to the Constitutional Court, "the current legal system does not permit the arbitration of disputes arising out of administrative and other public law relations" unless there is a derogation provided by federal law.280 Professor Stephan's response is that "'do not allow' is not the same as 'forbid'."281 The Respondent cites a decision of the Supreme Arbitrazh Court and commentary in support, but accepts that there is no case holding that a claim based on the breach of an investment treaty is not arbitrable in Russia.282 Professor Stephan accepts that neither the Civil Procedure Code nor the Arbitrazh Code contain any authorisation to refer disputes arising out of public law relations to arbitration, but says that nor do they contain any "language of prohibition."283
130.
The Respondent emphasizes that several laws on foreign investment, namely the 1991 Fundamentals of Legislation on Foreign Investments in the USSR (the "USSR Fundamentals"), the 1991 Law on Foreign Investments in the RSFSR (the "1991 FI Law") and the 1999 Law on Foreign Investments in the Russian Federation (the "1999 FI Law"), do not provide any exception to this general rule of non-arbitrability of public law disputes.
131.
In the first place, the Respondent contends that these laws do not apply to the present dispute,284 arguing that, in order for a transaction to qualify as a "foreign investment" under Russian law, foreign capital must be injected into "objects of entrepreneurial activity" in the territory of the Russian Federation and result in a capital increase in the Russian economy from foreign resources.285 The Loans do not meet these requirements for a "foreign investment" as they "were in fact profits made by Yukos Oil Company's trading subsidiaries and other entities controlled by Yukos Oil Company" and failed to involve any "injection of foreign capital into the Russian Federation."286
132.
In any event, the Respondent submits that the abovementioned laws "do not authorize the submission of investment disputes arising out of public law relations to arbitration."287 Thus, both Article 43 of the USSR Fundamentals and Article 9 of the 1991 FI Law would only allow investment disputes "arising out of civil law relations" to be submitted to arbitration, whilst state courts would have jurisdiction over disputes regarding sovereign acts or omissions unless (in the words of the 1991 FI Law) "another procedure is established by an international treaty in force in the territory of the RSFSR."288
133.
In like manner, according to Article 10 of the 1999 FI Law, investment disputes would be arbitrable only "in accordance with international treaties of the Russian Federation and its federal laws."289
134.
The Respondent argues that Article 10 of the 1999 FI Law itself "does not address the issue of arbitrability," as it merely "conditions an investor's right to submit investment disputes to arbitration on an international treaty or a federal law providing for such a right."290 The Respondent submits that "[n]o federal law has been enacted that authorises the arbitration of disputes arising out of public law relations, including claims for compensation based on allegedly unlawful taxation measures, enforcement measures related to tax assessments or actions or omissions of State organs in bankruptcy matters."291 The Respondent relies on Professor Asoskov's evidence that Article 10 is a "declaratory norm" or "blanket provision" which does not itself provide an independent basis for resort to arbitration.292 The consequence is that, although the provision does not prohibit arbitration, a claimant must be able to point to another federal law or treaty which provides for the right to arbitrate.293 Where a treaty provides for arbitration, it must either be ratified or (where provisionally applied) the treaty terms must be permitted by Russian law.294 The consequence is that, under current law, it is never possible to provide for provisional application of an international treaty's provision for investor-state dispute settlement through arbitration.295
135.
The Respondent submits that the reference to treaties in force in the 1991 FI Law means ratified treaties, consistent with the distinction in the VCLT between the entry into force of a treaty and its provisional application,296 while the references to an "international treaty of the Russian Federation" in the 1999 Law means an international agreement concluded by Russia,297 to which Russia had given consent to be bound.298 The ECT is not, according to the Respondent, a treaty to which the Respondent has consented to be bound.299
136.
The Respondent submits that it does not matter at which time piecemeal provisional application is assessed, since disputes such as the present dispute have always been non-arbitrable. While states may have been free to change their law during the period of provisional application, it was expected that "more of it [would become] provisionally applicable over time."300 Nevertheless, the Respondent submits that the question of whether the Russian Federation consented to arbitration must be assessed by reference to the 1991 FI Law in force when the ECT was signed.301
137.
The Respondent further argues that there are no federal laws that authorise arbitration of the present dispute. Because the ECT, "through the renvoi to Russian federal law" in Article 45(1), provides for arbitration only to the extent not inconsistent with Russian federal laws, the ECT does not "establish another procedure for the resolution of investment disputes"; such disputes are exclusively within the jurisdiction of domestic courts.302
140.
In the context of the ECT, the Respondent points out that the explanatory note prepared by the Government as part of its attempt to persuade the State Duma to ratify the ECT and relied on by the Claimant311 "does not express a view on whether arbitration under Article 26 ECT, or the implementation of any other ECT provision, is inconsistent with Russian law for purposes of Article 45(1) ECT."312 The Respondent submits that the Claimant relies on a mistaken English translation of the explanatory note, which, when properly translated, only states that Article 45(1) of the ECT (rather than the application of the ECT in general) conformed with Russian law.313 The Respondent points out that Professor Stephan also accepted that, properly translated, the reference to "provisions on provisional application" should refer to "provision" in the singular, and understood that as a reference to Article 45.314 Professor Stephan also accepted that the term "legal regime of foreign investments" was the same term as used in Article 6 of the [1991 FI Law] then linguistically it does not refer to "investor-state arbitration."315
141.
With regard to the Claimant's quotation of the explanatory note that "[t]he provisions of the ECT are consistent with Russian legislation,"316 the Respondent claims that this has been taken out of context.317 The Respondent explains that there are three categories of legislative treaties whose ratification is contemplated by Article 15(1)(a) of the FLIT, namely, (i) treaties that require enacting federal laws to amend federal laws already in existence, (ii) treaties that require adopting new federal laws for implementing non-self-executing treaty provisions, and (iii) "treaties that provide for derogations from federal laws applicable solely in specific relations with other Contracting States and their citizens and nationals," which do not require adopting new federal laws or amending existing ones, instead being "appl[ied] directly in the Russian legal system and prevail[ing] over inconsistent federal laws pursuant to Article 15(4) of the Constitution."318
142.
According to the Respondent, the explanatory note placed the ECT within the third category of treaties, with the consequence that it did "not require the enactment of any concessions or the adoption of any amendments" since if it "set out rules different from those provided for by a law, the rules of the international treaty shall apply."319 The fact that the ECT contained a number of provisions yet to be reflected in Russian legislation was not an obstacle to ratification because legislation aligning Russian law with GATT and WTO standards was in the process of being enacted.320 So the list of provisions relied on by the Claimant does not list all those provisions inconsistent with federal law, but rather contains a non-exhaustive list of provisions whose implementation will require the enactment of new federal laws.321
143.
Article 26 falls into the category of ECT provisions that are inconsistent with federal law but will, following ratification, prevail over that federal law.322 So where the explanatory note records that inconsistent provisions of the ECT would prevail over domestic law in relations with other contracting parties pursuant to Article 15(4) of the Constitution, the Respondent contends that this is a "post-ratification analysis" that does not address whether the ECT is subject to ratification or contains provisions inconsistent with Russian law in the absence of ratification;323 in other words, the explanatory note does not discuss whether ratification is required, but is based on the premise that it is.324

(b) The Claimant's position

145.
The Claimant also stresses that "provisional application is an extraordinary thing" and an exception to the separation of powers: that explains the requirement under Russian law to submit provisionally-applied treaties to the State Duma within six months.326 Thus, provisional application in accordance with Article 25 of the VCLT means that a state agrees to apply provisions of the treaty even though they require ratification and implementing legislation to become part of domestic law.327
146.
As a preliminary matter, the Claimant argues that the burden of proof to show that the provisional application of Article 26 of the ECT is inconsistent with Russian law is on the Respondent, and that the Claimant is not under any obligation to show that the arbitration of this dispute is consistent with Russian law.328 The Claimant asserts that, under the ordinary meaning of "inconsistent with" "only a direct conflict with Russian law existing at the time of the ECT's signature ... would satisfy the limitation in Article 45," and that the Domestic Law Inconsistency Clause could do no more than "absolve[] Respondent from an obligation to pass new legislation or modify existing legislation in case of a direct conflict with ECT provisions."329 The Claimant notes that this "requirement of a positive conflict" is consistent with state practice.330
147.

Likewise, the Claimant contends that tribunals in investment treaty arbitrations also have required "express prohibition under domestic law" in their determination of whether an inconsistency exists between treaty provisions and domestic law.331 The Claimant refers to the decisions in Kardassopoulos,332 Achmea v. Slovak Republic333 ("Achmea"), Electrabel v. Hungary334 ("Electrabel"), and Khan Resources v. Mongolia335 as authority for this proposition. In other words, only where domestic law "forbids compliance" will the necessary inconsistency exist – a vacuum is not sufficient.336 With these decisions in mind, the Claimant argues that the "Respondent fails to put forward any case to establish that Russian law existing at the time of ECT signature forbade arbitration of investment disputes or required Respondent to modify existing legislation – i.e., that a conflict existed."337 The Claimant cites authority from the GATT context in support, arguing that it was not the case that the Russian Federation had "no choice but to violate the treaty."338 So, where domestic law offers only one form of recourse, but the treaty provides an alternative, then provisional application will enable the claimant to take advantage of the treaty procedure.339

149.
The Claimant submits that "Article 26 ECT is not inconsistent with Russian law,"343 since "[t]reaties become incorporated into Russian law at the time of expression of valid consent," even without an incorporating act.344 The Claimant maintains that this also holds true for treaties applied provisionally, as is the case with the ECT.345 The Claimant argues that an inconsistency between international treaties and Russian domestic law "cannot exist as a matter of Russian law," since the terms of international treaties would "apply in lieu of the rules provided by domestic law."346
150.
Contrary to allegations made by the Respondent,347 the Claimant contends that it is not "conflating provisional application with final entry into force," but "simply set[ting] out the implications of a treaty mechanism that Russia cannot deny it has consented to by its signature."348 The Claimant quotes from a Resolution of the Constitutional Court to support the proposition that "[a]greement to provisional application of an international treaty means that it ... must be applied on the same basis as international treaties that have entered into force ... since otherwise, provisional application would be meaningless."349 Further, the Claimant quotes the Russian delegate in the context of the ECT negotiations as understanding that there would be a "period of provisional application of the Treaty [that] would be a sort of running in period of the implementation of this most important instrument for international cooperation."350
151.
Against the Respondent's arguments as to why Russia was not bound, the Claimant notes that "a provisionally applicable treaty is binding and constitutes a legally enforceable instrument among signatory states," citing the ILC Commentary to Article 25 of the VCLT.351 The Claimant considers "irrelevant" the fact that President Yeltsin did not sign the ECT himself,352 noting that the Constitution grants the President the authority to express consent to be bound to treaties, and that the signature of a duly authorized representative of the president "is equivalent to the President's personal signature."353 The Claimant notes that no part of its case rests on an assumption that President Yeltsin himself signed the ECT.354
152.
The Claimant also contends that the Respondent "conflates international ratification with domestic consent to ratification."355 The Claimant cites Professor Stephan as authority for the proposition that "ratification of a treaty is an international process and occurs only when a treaty party renders the relevant documentation as specified by the treaty," noting that in the case of Russia the executive renders such documentation, not the legislature.356 The Claimant adds that Russian law does not require legislative domestic ratification of all treaties and that "Russian law indisputably provides for provisional application of treaties with signature in advance of, and thus independent of, subsequent domestic ratification."357
153.
Furthermore, the Claimant takes issue with the Respondent's argument that the ECT Secretariat's desire to see Russia's ratification of the ECT is evidence that the Secretariat recognized that "provisional application did not impose on Respondent the same obligations as ratification,"358 proposing instead that the Secretariat wanted Russia to ratify the ECT in order to affirm Russia's political commitment and to increase the treaty regime's legal certainty and stability.359
154.
According to the Claimant, a signatory commits to provisional application of all treaty provisions to which that signing authority can commit the state.360 The executive branch has authority under Article 86 of the Constitution to negotiate and sign treaties.361 When a treaty provides for signature to have the effect of accepting a binding obligation, the Russian Federation is bound by that.362 The executive is empowered to determine whether to agree to provisional application and therefore commit Russia to so apply a treaty.363 None of those propositions are said to be disputed. The only limitation, according to the Claimant, is that the executive may not agree to the provisional application of provisions that violate the Constitution itself.364
155.
This is because, the Claimant submits, Article 23 of the FLIT empowers the executive to commit to the provisional application of treaty provisions that conflict with domestic law provided that the treaty so provides.365 The Claimant cites a number of commentaries which opine that the purpose of provisional application is to apply a treaty immediately pending the fulfillment of specific procedures required for its entry into force (usually ratification),366 and rejects Professor Asoskov's contention that these are a minority view in the absence of any dissenting commentary on the record.367
156.
The Claimant also submits that in the only Russian decision on the record which addresses this point – the Lufthansa case – the court simply applies the treaty without regard to whether its provisions are consistent with domestic law,368 while the decisions on which Professor Asoskov relies for the proposition that only ratified treaties can prevail over federal law do not concern provisional application.369 Professor Stephan testified that the Chinese trespassers case involved a treaty that had been brought into legal effect by an exchange of notes, and did not provide for provisional application. In that context, the court's decision was that the exchange of notes did not substitute for ratification.370 The Claimant also put to Professor Asoskov a Council of Europe document which records the Russian Federation's statement that provisional application of a treaty is possible if the treaty so provides; Professor Asoskov's opinion was that the response was incomplete.371
157.
Although Article 23 was enacted after Russia signed the ECT, with the exception of the six-month requirement it reflected Article 25 of the VCLT,372 which Professor Asoskov testified had been ratified by the Soviet Union and thus formed part of Russian law.373 Professor Asoskov accepted there was no other restriction on the executive's power to commit to provisional application on the face of Article 23, but maintained that general principles on the limitations of the executive's power to conclude international treaties applied.374
158.
The consequence is that when the executive agrees to provisional application then the terms of the treaty become part of Russian law and are enforced as if the treaty were in force pursuant to Article 15(4) of the Constitution.375
159.
The Claimant submits that if (as is not disputed) the executive can commit the Russian Federation to provisionally apply a treaty that determines territorial boundaries (including one that is required to be ratified by Article 15(3) of the FLIT), it is "inconceivable" that it would not have the power to commit the state to arbitrate with an investor.376
160.
The Claimant accordingly rejects Professor Asoskov's "hierarchy argument," according to which a treaty in force in the Russian Federation that has not been ratified is subordinate to federal laws. The Claimant submits that none of the authorities on which Professor Asoskov bases this theory concerns provisional application. The "whole point" is that a provisionally applied treaty is applied as if it is in force,377 and it assumes the same hierarchy as if it were in force.378 Professor Asoskov's distinction between the authority of the Government and that of the President is beside the point, since although executive acts are subordinate to legislative acts the effect of provisional application is to apply the treaty as if it had been ratified.379
163.
Thus "[t]he fact that Russian public authorities used sovereign powers when effecting their expropriatory objectives does not disqualify this dispute as an investment dispute arbitrable under international law or somehow entrust its resolution to the Russian domestic legal order/system."389 Rather, the Claimant quotes Professor Stephan to make the point that the fact that Russia took measures "in [the] exercise of its public authority" makes this dispute arbitrable rather than precluding it.390
164.
On the contrary, and citing Professor Stephan's interpretation of the USSR Fundamentals, the 1991 FI Law and the 1999 FI Law, the Claimant argues that "Russian law positively recognizes that disputes under public international law instruments may be resolved by arbitration."391 The Claimant submits that the applicable foreign investment law is the one in force at the time Article 26 is invoked by the Claimant,392 so that a state may change its domestic law as long as it increases the scope of provisional application.393
165.
So, the 1999 FI Law provides that such disputes may be arbitrated, "if the treaty says so."394 So far as the 1991 FI Law refers to treaties "in force," the Claimant's answer is that provisionally applied treaties are applied as if they are in force.395 It is on this basis that the Claimant argues that, even if the executive was not empowered to commit the Russian Federation to treaty provisions that conflicted with federal law, the foreign investment laws do in fact contemplate the submission of disputes such as the present one to arbitration and, therefore, there is no inconsistency. In other words, the reference to "treaty" in those laws includes provisionally applied treaties396 and in those circumstances there is "by definition, a consistency."397
166.
The Claimant also relies on Professor Asoskov's opinion that the law on production sharing agreements authorizes arbitration, and submits that the language of the foreign investment laws is identical.398
167.
The Claimant also disputes the Respondent's arguments regarding Article 23(2) of the FLIT, which requires that treaties that are provisionally applied be sent to the State Duma for ratification within six months of being signed.399 The Claimant argues that "Article 26 ECT did not require the amendment or supplementation of existing Russian law," as it "became part of Russian law by operation of the Russian Constitution."400 Additionally, the Claimant maintains that Article 23(2) of the FLIT did not exist at the time that the ECT was signed by the Respondent and cannot be applied retroactively, since such retroactive reliance would be in violation of the Respondent's obligations pursuant to Article 27 of the VCLT.401
168.

In any event, the Claimant explains that, contrary to the Respondent's position, Article 23(2) recognizes that the termination of the provisional application of treaties operates by notification to other Contracting States, a fact that was also appreciated by the Respondent when it "communicat[ed] its termination of provisional application by a notification to the ECT depository on 20 August 2009."402 The Claimant provides authority for this proposition via references to Professor Stephan's first report,403 a note the Respondent submitted to the Secretariat of the ECT,404 and the Respondent's compliance with the ECT after the passage of the six-month period.405

169.
With regard to the Respondent's arguments based on Article 12 of the USSR FLIT,406 the Claimant submits that this law is not applicable, as it is in conflict with the Constitution.407 Even so, the Claimant maintains that the USSR FLIT did not preclude the provisional application of treaties.408
171.
The Claimant also takes issue with the Respondent's argument416 that there was not a "pre-existing legal basis" in Russian law for the application of Article 26 because there were no investment treaties in force between Russia and 21 ECT contracting states.417 The Claimant contends that the Respondent has not offered any support for the notion that there is a requirement that there must be a pre-existing legal basis for international obligations that states voluntarily assume, and notes that, even if valid, the principle does not establish any "inconsistency."418
172.
The Claimant also disputes the Respondent's contention419 that "several of Russia's BITs limited investor-State arbitration to civil law issues excluding arbitral review of sovereign acts or omissions."420 The Claimant submits that the Respondent did have BITs with other ECT contracting states that provided for settlement of investment disputes via arbitration, including the France-USSR BIT.421 The Claimant also notes that a Model BIT approved by Resolution of the Government of the Russian Federation in 1992 provides for the settlement of investment disputes by arbitration without limitations regarding civil law issues.422
173.
Finally, the Claimant argues that, if a state decides to invoke the Domestic Law Inconsistency Clause, it must do so in good faith.423 According to the Claimant, the Respondent has not done so, as its "'inconsistency' arguments are contrived with the aim to escape accountability for its actions."424

3. The Tribunal's analysis

(a) Introduction

178.
This rule is also important in the present case in view of the nature of provisional application. Both Parties accept that states that have entered into a treaty that they have agreed will be provisionally applied "to the extent that such provisional application is not inconsistent" with domestic law may progressively remove any such inconsistencies during the period of provisional application.429 As a result, the material time at which to determine whether the rule in Article 26 of the ECT is "not inconsistent with" Russian law is the time at which the Tribunal's jurisdiction is invoked.
179.
The Tribunal analyses the issue in the following sections:

(a) Section (b) analyses the proper interpretation of the regime of provisional application under Article 45 of the ECT in accordance with the general rule of interpretation set forth in Article 31(1) of the VCLT.

(b) Section (c) considers that regime against the background of the institution of provisional application in general international law (pursuant to Article 31(3)(c) of the VCLT).

(c) Section (d) examines relevant practice of the ECT States at the conclusion of the Treaty (Article 31(2)) and the preparatory materials for the Treaty (Article 32) as to the construction of Article 45.

(d) Section (e) considers the evidence as to Russian practice under the ECT.

(e) Section (f) addresses the extent to which Article 26 is "not inconsistent" with Russian law.

(b) The regime of provisional application under the ECT