Unexpected Success for Russia in the Dispute over Yukos

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In the billion-dollar-dispute over the liquidation of the Yukos oil company, Russia has achieved a surprising success. Accordingly, Russia is not required any more, to pay 50 billion dollars to former Yukos shareholders.

Unexpected Success for Russia in the Dispute over Yukos

Originally appeared at DWN, translated by John T. Sumner exclusively for SouthFront

Now a court in the Netherlands has reversed a decision, which previously had obliged Russia to multibillion-dollar compensation payments towards former shareholders of the Yukos oil company. The Permanent Court of Arbitration, who had handed out the first verdict, had no jurisdiction in this matter, The Hague district court ruled on Wednesday. Therefore, Russia is not committed to pay the 50 billion dollars (44 billion euros), it was sentenced to before.

Background to the dispute is the liquidation of Yukos in 2003 after the arrest of CEO Mikhail Khodorkovsky amid extensive additional tax receivables. In a murky auction process, led by the energy group Rosneft, individual Yukos shares were then sold to state-owned Russian companies between 2004 and 2006.

The Permanent Court of Arbitration in The Hague had ruled in 2014, that by means of exaggerated tax demands, Russia had forced Yukos into bankruptcy and then sold its shares to state-owned companies. In the course of this process the Yukos shareholders were expropriated. Therefore, they could claim up to 50 billion dollars in damages from the Russian state, according to this verdict.

The Kremlin welcomed the new verdict. “Since the start of the first trial Russia has criticized, that the decision of the arbitral tribunal does not even consider the most important aspects of international law”, said the spokesman of President Vladimir Putin, Dmitry Peskov. Moscow had in fact not ratified the Energy Charter. “We understand quite well that the current ruling does not mean the end of legal procedures in this matter,” Peskov said. Presently, Russia would brace itself for the next instance in the dispute. Moscow had submitted the verdict to the Civil Court for consideration. However, the government would now hope that former Yukos shareholders would as well stop their efforts to confiscate Russian possessions in different countries with reference to the arbitration court ruling.

The former Yukos shareholders announced their intention to file for an appeal. “We still refer to the unanimous verdict of 2014 concerning the politically motivated destruction of Yukos,” said one of their representatives, Tim Osborne. “We have full confidence in the fact that ultimately the rule of law will prevail.”

According to the District Court, the Court of Arbitration had no jurisdiction in matters that relate to the so-called Treaty on the Energy Charter. This protects international investors in the energy sector. Accordingly, Russia had signed but not ratified that treaty. Therefore, the decision of the Arbitration Court was “inconsistent with Russian law”.

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