The case of the day is NJSC Naftogaz of Ukraine v. Russian Federation (D.D.C. 2026). When Russian took control of Crimea, it also took control of the investments of Ukrainian oil and gas companies there. The companies commenced an arbitration against Russia under the countries’ bilateral investment treaty. The tribunal issued a partial award in their favor. Russia sought to set the award aside in the Dutch courts, but those courts largely rejected the challenge. The tribunal then issued a final award, awarding damages of $4.2 billion plus interest. Russia again brought proceedings in the Netherlands to set aside the award, and the companies sought recognition of the award in Washington. Russia challenged the court’s subject-matter jurisdiction and personal jurisdiction.

On subject-matter jurisdiction, the court held that the Ukrainian companies proved all three “jurisdictional facts” prima facie. They proved the existence of an agreement to arbitrate by proving the existence of a treaty containing the agreement to arbitrate and the notice of arbitration that commenced the arbitration. They proved the existence of the award. And they proved that the award was covered by the New York Convention, because the dispute was commercial.

In light of Stabil LLC v. Russian Federation, 167 F.4th 506 (D.C. Cir. 2026), the court held that some of Russia’s counterarguments failed.¹ Under Stabil, the arguments about the agreement to arbitrate went to the scope of the agreement, not its existence, and the dispute was commercial, not geopolitical. The remaining argument, which Stabil had not resolved, was whether the arbitration exception applies only to disputes between states and private parties, not to disputes between states: Russia argued that the plaintiffs, which were state-owned enterprises, were not private parties and therefore could not invoke the exception.

The arbitration exception, 28 U.S.C. § 1605(a)(6), makes an exception to foreign sovereign immunity in cases:

in which the action is brought, either to enforce an agreement made by the foreign state with or for the benefit of a private party to submit to arbitration all or any differences which have arisen or which may arise between the parties with respect to a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration under the laws of the United States, or to confirm an award made pursuant to such an agreement to arbitrate, if … (B) the agreement or award is or may be governed by a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbitral awards ….

The court reasoned that the statute did not require that the action be brought by a private party, but that it had to be brought to confirm an award made pursuant to an agreement to arbitrate that the foreign state made with or for the benefit of a private party. Russia didn’t make the agreement to arbitrate with Ukrainian investors. It made the agreement with Ukraine. But it made the agreement for the benefit of investors. That’s the whole point of investment treaties. What the arbitration exception really does, the court observed, is to give state-to-state arbitrations special treatment, but this wasn’t a state-to-state arbitration.

1. D.C. Circuit precedent also foreclosed the personal jurisdiction challenge. ↩︎