UK-BASED JKX Oil & Gas is seeking US$180 million from the Ukrainian government through arbitration, claiming the country has violated international treaties.

The claims spring from a Ukrainian Government decree issued on 29 November 2014 which directed major industrial buyers to acquire their gas solely from Ukrainian state-owned gas company Naftogaz for a three-month period.

“A number of these named entities were previously contracted to receive gas produced by JKX’s Ukrainian subsidiary in the period,” the company said at the time.

The company sold 80 per cent of its December gas production to industrial customers, it said in a January announcement, with only 20% of its gas production capacity shut-in during the month.

The proceedings were brought under the Energy Charter Treaty between the UK and Ukraine and a parallel treaty between Ukraine and the Netherlands, JKX said in an announcement.

The company said it was seeking compensation for what it said were Ukrainian treaty violations, alleging the nation had failed to comply with commitments made in respect of JKX’s investments and a failure to treat those investments in a “fair and equitable” manner.

The US$180 million in question covered the rental fees JKX Oil & Gas had paid on production of oil and gas in the country since 2011.

Ukraine was ordered in January not to impose royalties of more than 28% (as opposed to the 55% rate applicable under Ukrainian law) on the production of gas by JKX’s Ukrainian arm by an emergency arbitrator, appointed under the Arbitration Rules of the Stockholm Chamber of Commerce.

The emergency award is binding under international law, but if Ukraine refuses to comply with the Award, JKX will seek to have it recognised and enforced by the Ukrainian courts, it said in a statement.

The company suspended its 2015 capital investment program in Ukraine in January, saying it was waiting for the economic parameters for investment to improve.
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