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February 16, 2015

JKX seeks $180m compensation from Ukraine on treaty violations

Exploration and production firm JKX Oil and Gas has started arbitration proceedings against Ukraine under the Energy Charter Treaty for more than $180m in rental fees.

Exploration and production firm JKX Oil and Gas has started arbitration proceedings against Ukraine under the Energy Charter Treaty for more than $180m in rental fees.

The company and its Ukrainian and Dutch subsidiaries are seeking compensation for the losses they have suffered from the country’s treaty violations.

It also includes Ukraine’s failure to treat JKX’s investments in a sufficient manner and failing to comply with commitments made by the country.

"If Ukraine refuses to comply with the award, JKX will seek to have it recognised and enforced by the Ukrainian courts."

An emergency arbitrator, appointed under the Arbitration Rules of the Stockholm Chamber of Commerce, has issued an emergency award in January 2015, ordering Ukraine to refrain from imposing royalties of over 28% on the production of gas by JKX’s Ukrainian subsidiary.

The emergency award is binding on Ukraine under international law. However, if Ukraine refuses to comply with the award, JKX will seek to have it recognised and enforced by the Ukrainian courts.

JKX will also seek orders from the Tribunal constituted under the Energy Charter Treaty to compel Ukraine to comply with the award.

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JKX has licence interests in Ukraine, Russia, Hungary and Slovakia.

The company’s subsidiary Poltava Petroleum Company (PPC) holds 100% interest in four production licences in the Poltava region of Ukraine that include Ignatovskoye, Molchanovskoye, Novo-Nikolaevskoye and Rudenkovskoye.

Each production licence features fields, which form the Novo-Nikolaevskoye complex.

PPC also holds two exploration licences, Zaplavskoye and Elizavetovskoye, which comprise a total exploration area of 208km².

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