## Facts

- Archangel Diamond Corporation (ADC), a Canadian diamond exploration company, entered into a joint-venture contract with Arkhangelskoye Geologodobychnoye Predpriyatiye (GPA), a Russian state-owned enterprise also known as Arkhangelskgeoldobycha.
- The venture concerned diamond exploration and development in Russia’s Arkhangelsk region and relied on a Russian subsurface (natural-resources) license associated with the project.
- The contract contemplated that if Russia later privatized GPA, the joint venture’s license would be transferred to a private entity as part of the parties’ intended post-privatization structure.
- The contract included an arbitration clause requiring that contract disputes be submitted to Swedish arbitrators in Stockholm under the Stockholm Chamber of Commerce (SCC) rules.
- Russia later privatized GPA.
- After privatization, ADC took steps aimed at implementing the contract’s contemplated license-transfer arrangement.
- GPA blocked or refused to complete the transfer.
- ADC commenced SCC arbitration in Stockholm, seeking relief based on the joint-venture agreement and the privatization-triggered transfer provisions.
- In addressing the dispute, the arbitral panel noted that Russian law likely assigned subsurface-license disputes to Russian tribunals, raising questions about how far arbitral relief could reach where state-issued mineral rights were involved.

## Issues

1. Whether the arbitration clause for “contract disputes” gave the SCC tribunal authority to hear claims tied to a promised transfer of a Russian subsurface license following privatization.
2. Whether, on the merits, ADC proved a contractual right to the post-privatization license-transfer arrangement (and related relief) despite the role of Russian licensing rules and privatization measures.

## Decision

- The SCC tribunal proceeded under the parties’ Stockholm arbitration agreement and treated the dispute as within its jurisdiction as a contract dispute, even though the requested outcomes implicated a Russian subsurface license.
- The tribunal considered the effect of Russian law and the state regulatory setting on the parties’ contractual arrangements, including limits on what could be achieved through a private adjudication seated outside Russia.
- On the merits, the tribunal largely rejected ADC’s claims and did not grant the license-transfer relief and related contract-based remedies ADC sought, resulting in an outcome favoring GPA.

## Legal Principles

- A broadly worded arbitration clause for contract disputes can reach claims arising from privatization-related performance questions, even when the dispute is connected to a state-issued natural-resources license.
- Arbitrability and remedial power are distinct: a tribunal may hear a contract dispute while still recognizing that host-state public law may restrict orders that would effectively reassign or control a subsurface license.
- Contract language anticipating a future license transfer may create conditional obligations, but it does not necessarily amount to an unconditional right to obtain the license if the transfer depends on state approval or other regulatory steps.
- In resource projects, arbitral tribunals may give weight to mandatory host-state rules and to acts of state bodies when assessing alleged breach, causation, and the proper scope of relief.

## Conclusion

The SCC arbitration arose from ADC’s attempt to enforce a joint-venture deal that anticipated a post-privatization transfer of a Russian diamond license, but the tribunal—while taking jurisdiction under the parties’ arbitration clause—treated the regulatory setting as a meaningful constraint and ultimately denied most or all of ADC’s requested contract-based relief, leaving the license-transfer arrangement unachieved.


Archangel Diamond Corp. v. OAO Arkhangelskoye Geologodobychnoye Predpriyatiye (Arkhangelskgeoldobycha), Case No. 01-CV-6514 (2001)