Hulley v. Russia 2014

preparation of Respondent’s Rejoinder on the Merits dated August 16, 2012; preparation of Respondent’s Post-Hearing Brief dated December 21, 2012;

Correspondence and various procedural submissions with the Tribunal and Claimants’ counsel;

Attendance at hearings of May 7, 2010, May 9, 2011 and from October 10 to November 9, 2012.

Lawyers Involved in Phase 2

Partners (5), billing range $775-950/hour, in excess of 7,000 hours Associates (20), billing range $375-$675/hour, in excess of 25,000 hours

Paralegals/stagiaires/trainees (15), billing range $150-$275/hour, in excess of 10,000 hours TOTAL US$ 27,000,000

C. Experts’ Fees and Expenses

For services provided by expert witnesses in connection with preparation of expert reports for submission with Respondent’s First Memorials on Jurisdiction and Admissibility, Second Memorials on Jurisdiction and Admissibility, Counter-Memorial on the Merits and Rejoinder on the Merits and preparation for testimony at the hearings on jurisdiction and admissibility and the merits and remaining jurisdiction and admissibility issues, and related expenses.

TOTAL US$ 4,500,0002455

3.Respondent’s Comments on Claimants’ Submission on Costs

1857. With respect to Claimants’ request for costs, Respondent says it is “plainly excessive and unprecedented in its amount” and opines that it “raises serious questions of credibility.”2456

1858. Respondent submits that Claimants’ characterization of the proceedings amounts to “outright misrepresentations rather than the actual facts.”2457 According to Respondent, the alleged misrepresentations of Claimants include: Claimants’ “continued disregard for the ECtHR’s unanimous rejections of the essential premise for Claimants’ contentions here,”2458 “misrepresentation that Respondent abandoned its unclean hands defense,”2459 “mischaracterization of Respondent’s justified requests for extensions of deadlines, alleged ‘delay tactics’ and approach to document production,”2460 “meritless criticisms of Respondent’s

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presentation of its case,”2461 and “conspicuous silence concerning their own misconduct in these arbitrations.”2462

D.TRIBUNAL’S DECISION ON COSTS

1.Fixing and Allocation of Costs of the Arbitration Pursuant to Article 40(1) of the UNCITRAL Rules

1859. The Parties deposited with the PCA a total of EUR 8,440,000 to cover the costs of the arbitration; EUR 4,240,000 by Claimants and EUR 4,200,000 by Respondent.2463 In determining the amount of its members’ fees, the Tribunal has taken account of Article 39(1) of the UNCITRAL Rules, pursuant to which “[t]he fees and expenses of the arbitral tribunal shall be reasonable in amount, taking into account the amount in dispute, the complexity of the subject matter, the time spent by the arbitrators and any other relevant circumstances of the case.”

1860. The fees of Mr. Daniel Price, the arbitrator initially appointed by Claimants, amount to EUR 103,537.50. Mr. Price’s expenses amount to EUR 3,678.99. The fees of Dr. Charles Poncet, the arbitrator appointed by Claimants following the resignation of Mr. Price, amount to EUR 1,513,880. Dr. Poncet’s expenses amount to EUR 85,549.64.

1861. The fees of Judge Stephen M. Schwebel, the arbitrator appointed by Respondent, amount to EUR 2,011,092.66. His expenses amount to EUR 51,927.29.

1862. The fees of The Hon. L. Yves Fortier, PC CC OQ QC, the Chairman, amount to EUR 1,732,937.50. The Chairman’s expenses amount to EUR 51,782.24.

1863. The fees of Mr. Martin J. Valasek, the Assistant to the Tribunal, amount to EUR 970,562.50. Mr. Valasek’s expenses amount to EUR 51,718.96.

1864. Pursuant to the Terms of Appointment and the agreement of the Parties, the PCA SecretaryGeneral served as the Appointing Authority, and the International Bureau of the PCA was

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designated to act as Registry in these arbitrations. The PCA’s fees for its services amount to EUR 866,552.60.

1865. Other tribunal costs, including court reporters, interpreters, hearing rooms, meeting facilities, travel and all other expenses relating to the arbitration proceedings, amount to EUR 996,780.12.

1866. Accordingly, the costs of the arbitration, including all items set out in paragraphs (a), (b), (c),

(d) and (f) of Article 38 of the UNCITRAL Rules, amount to EUR 8,440,000 for the jurisdiction and merit phases.

1867. The Tribunal recalls again the terms of Article 40(1) of the UNCITRAL Rules:

Except as provided in paragraph 2, the costs of arbitration shall in principle be borne by the unsuccessful party. However, the arbitral tribunal may apportion each of such costs between the parties if it determines that apportionment is reasonable, taking into account the circumstances of the case.

1868. The costs are therefore to be awarded to the successful party and against the unsuccessful party, unless the circumstances of the case justify a different approach.

1869. In the present proceedings, it is clear that Claimants have prevailed and been successful in both the jurisdiction and merits phases. The Tribunal can see no reason why Respondent, the unsuccessful party, should not bear the costs of the arbitration, EUR 8,440,000, and it so orders Respondent to bear such costs and to reimburse the contributions that Claimants deposited in the amount of EUR 4,240,000.2464

1870. There is no unexpended balance on deposit.

2.Fixing and Allocation of Costs for Legal Representation and Assistance of the Parties Pursuant to Article 40(2) of the UNCITRAL Rules

1871. The Tribunal recalls again the terms of Article 40(2) of the UNCITRAL Rules:

With respect to the costs of legal representation and assistance referred to in article 38, paragraph (e), the arbitral tribunal, taking into account the circumstances of the case, shall be free to determine which party shall bear such costs or may apportion such costs between the parties if it determines that apportionment is reasonable.

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1872. Paragraph (e) of Article 38 provides that the term “costs” includes:

The costs for legal representation and assistance of the successful party if such costs were claimed during the arbitral proceedings, and only to the extent that the arbitral tribunal determines that the amount of such costs is reasonable.

1873. The Tribunal observes that Claimants’ costs for their legal representation and the assistance of their experts amount to USD 79,628,055.56 plus an additional GBP 1,066,462.10, which, Claimants submit, are “reasonable” taking into account the circumstances of the case.

1874. Respondent, on the other hand, provides the Tribunal with a schedule indicating the “types of costs” incurred by Respondent in its defence. It presents a “total” figure of USD 27,000,000 which does not adequately assist the Tribunal in assessing the reasonableness of the Parties’ respective costs.

3.Conclusion on the Award of Costs

1875. It is well established that an UNCITRAL tribunal such as the present one has the unfettered discretion to fix and to decide in what proportion the costs for legal representation and assistance of the parties shall be borne by the Parties.

1876. In the present case, the Tribunal has formed the view that Claimants, the successful Party, should be awarded a significant portion of their costs of legal representation and assistance. The Tribunal now has to determine the portion which it considers reasonable. In determining this reasonable portion, the Tribunal takes into account a number of relevant factors. The Tribunal will now proceed to review some of the factors which it considers particularly relevant in the instant case.

1877. Claimants, in their prayer for relief, asked the Tribunal to order Respondent to pay to Claimants damages of more than USD 100 billion.

1878. The stakes were high and, if Claimants were thorough and vigorous in pressing their claims, Respondent was no less thorough and vigorous in presenting its defences.

1879. The thousands of pages of written pleadings and exhibits submitted by the Parties, the myriad requests for production of documents, the Tribunal’s lengthy procedural orders, the ten days of hearings in The Hague in the fall of 2008 on Respondent’s objections to jurisdiction and admissibility, the 21 days of Hearings on the Merits in The Hague in the fall of 2013, all demonstrate the importance which both sides attached to this arbitration.

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1880. The Parties litigated vigorously. Each Party was represented by eminent counsel. The quality of the written and oral pleadings was outstanding. Counsel of both Parties are commended for their high professionalism.

1881. In the circumstances, it is unsurprising that the cost submissions of the Parties, as to their amounts, should reflect the very considerable work which each Party was required to expend in order to, on the one hand, press its claims and, on the other hand, defend itself.

1882. It also is not surprising that Claimants’ costs in this case should be higher than those of Respondent since they bore the burden of proof for their claims under the ECT and produced many fact witnesses in the Hearing on the Merits whereas Respondent produced no fact witness.

1883. However, the Tribunal agrees with Respondent that some of the fees of Claimants’ experts are “plainly excessive”.

1884. Another factor which the Tribunal considers relevant in fixing the costs of Claimants which should be borne by Respondent is the fact that, at the end of the day, Claimants’ experts were of limited assistance to the Tribunal in its determination of Claimants’ damages.

1885. Even if Claimants were successful in asserting the Tribunal’s jurisdiction over Respondent, in prevailing on the liability of Respondent and being awarded an immense sum in damages, at the end of the day, as was seen in Part XII, the damages awarded to Claimants were reduced significantly by the Tribunal from the claims advanced by them.

1886. Finally, a factor which the Tribunal has considered particularly relevant in fixing the portion of their costs which Claimants should be awarded is the egregious nature of many measures of Respondent which the Tribunal has found were in breach of the ECT.

1887. Having scrutinized the costs for legal representation and assistance of Claimants and taking into consideration all the factors traversed above, the Tribunal, in the exercise of its discretion, considers that reimbursement by Respondent to Claimants of USD 60,000,000 as part of their costs would be fair and reasonable in the circumstances and it so orders.2465 The Tribunal notes that USD 60,000,000 is approximately 75 percent of Claimants’ grand total of costs for the jurisdiction and merits phases, namely USD 79,628,055.56 and GBP 1,066,462.10.

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ANNEXES

A.ANNEX A1: APPENDIX 1.1, APPENDIX J.1 AND APPENDIX J.2 TO SECOND DOW REPORT

(modified as described in note 2401 of the Award)

(a)Appendix 1.1

A-1

(b)Appendix J.1 New

A-2