In an order signed Friday in New York, U.S. Magistrate Judge Sarah Netburn established a moratorium on discovery proceedings, ordering that the Russian company, PAO Tatneft, not move to compel banks it had identified in proceedings to comply with the subpoenas for the duration of the moratorium. Judge Netburn asked that both parties file a status letter by the end of May. Similarly, U.S. District Judge Colleen Kollar-Kotelly ordered a moratorium on discovery in her court in D.C.
The judges' orders were granted on the same day that counsel for both Ukraine and Tatneft filed a joint motion requesting a break in the proceedings "in the interest of justice." The motion makes it clear that the request is "due to the war in Ukraine," which has now claimed the lives of thousands and caused over 1 million Ukrainians to flee the country after Russia invaded the country, a move that has led to economic sanctions against Russian banks, elites and public officials.
The joint request to pause discovery is a shift in the case over a $112 million arbitration award — an amount that has accrued interest over the last eight years to just over $170 million — that has seen the two parties contend in American courts for more than three years.
Before Russia invaded Ukraine, Tatneft was pushing for discovery in the case in D.C. federal court, while Ukraine expressed concerns that opening its financial records could put the country at risk if the information were leaked to the Kremlin. In January, Ukraine urged both federal courts to issue a protective order as a matter of national security that would prevent Tatneft from accessing certain types of information, including information that is classified or otherwise nonpublic.
Tatneft, which is partially owned by the Russian republic of Tatarstan, is trying to track down Ukrainian assets to enforce the award, which it won nearly eight years ago from a tribunal in Paris after being ousted from a joint venture that operated Ukraine's largest refinery. The award was confirmed by Judge Kollar-Kotelly in August 2020, and that ruling was affirmed by the D.C. Circuit in December 2021.
The New York litigation was filed by Ukraine in March 2021 in an attempt to quash subpoenas issued by Tatneft's counsel to 25 banks demanding that they turn over documents in aid of its execution efforts. U.S. District Judge John G. Koeltl denied the bid in November, remanding the case to Judge Netburn to consider an "appropriate protective order" in light of Ukraine's objections.
In the D.C case, Judge Kollar-Kotelly had initially sided with the Russian company's arguments in early February, when she said the information being sought was unlikely to undermine Ukrainian national security if leaked. She said then that she had reviewed the documents at issue and was certain that treating them as outside counsel "attorney's eyes only" was enough to keep the case moving and keep Ukraine's interests protected.
The Russian invasion of Ukraine, which began Feb. 24 but had been brewing for weeks before that, spurred a muscular sanctions response from the U.S. and NATO governments, including a freezing of assets that began in February as Russian troops started to enter Ukraine, and the U.S., the U.K. and most of Europe barred Russian banks from using the global SWIFT financial messaging network.
Tatneft, Ukraine and Tatarstan were the three major shareholders in the joint venture when it was formed in 1995 to operate Ukraine's CJSC Ukrtatnafta Transnational Financial and Industrial Oil Co., the nation's largest refinery.
Two other companies were brought into the joint venture in 1998 and 1999, and together with Tatarstan and Tatneft, they held 56% of Ukrtatnafta's shares and agreed to vote as a bloc.
The trouble began in early 2007, when the facility's Tatneft-backed management team was allegedly ousted by a "black raider" action perpetrated by the Privat Group of companies, which is associated with Ukraine's PrivatBank and owned by a powerful Ukrainian oligarch named Igor Kolomoisky, who used Ukrainian courts in pretextual "strong-arm tactics" to wrest control of the company, according to Tatneft.
Tatneft initiated arbitration in late 2007 and won the award in July 2014.
Counsel for Ukraine and Tatneft did not immediately respond to requests for comment on Tuesday.
Tatneft is represented by Lauren K. Handelsman of Binder & Schwartz LLP in the New York case and by Jonathan I. Blackman and Nowell D. Bamberger of Cleary Gottlieb Steen & Hamilton LLP and Lauren K. Handelsman and Sarah Dowd of Binder & Schwartz LLP in the D.C. case.
Ukraine is represented by Maria Kostytska of Winston & Strawn LLP in both the New York and D.C. cases and also by Kelly A. Librera of Winston & Strawn LLP in the New York case.
The cases are Ukraine v. PAO Tatneft, case number 1:21-mc-00376, in the U.S. District Court for the Southern District of New York and PAO Tatneft v. Ukraine, case number 1:17-cv-00582, in the U.S. District Court for the District of Columbia.
--Additional reporting by Clark Mindock, Caroline Simson and Najiyya Budaly. Editing by Vaqas Asghar.
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