AMSTERDAM // The Russian government was ordered on Monday to pay US$50 billion in damages to shareholders in the defunct oil giant Yukos.
The international court of arbitration in the Netherlands ruled that Russia forced its biggest oil company into bankruptcy with excessive tax claims and sold its assets to state-owned businesses.
“The primary objective of the Russian Federation was not to collect taxes but rather to bankrupt Yukos and appropriate its valuable assets,” the court said.
The award, nearly Dh184bn, is the largest in the court’s history and another blow to investment in a Russian economy already suffering international sanctions over Moscow’s involvement in separatist unrest in eastern Ukraine.
It also comes at a time of strained relations between Russia and the Netherlands over the shooting down of a Malaysian airliner over Ukraine, in which 194 Dutch citizens died.
The Russian foreign minister Sergei Lavrov said Moscow would “use all of its legal options to defend its position”, but the ruling is not subject to appeal.
Yukos was owned by the former tycoon Mikhail Khodorkovsky, an outspoken critic of the Russian president Vladimir Putin. It was broken up after Mr Khodorkovsky was arrested in 2003, shortly after Mr Putin warned Russia’s growing class of oligarchs against meddling in politics.
“Russian courts bent to the will of Russian executive authorities to bankrupt Yukos, assign its assets to a state-controlled company, and incarcerate a man who gave signs of becoming a political competitor,” the court said in its ruling.
Mr Khodorkovsky, who was released last year after spending more than a decade in prison, is no longer a shareholder and is not involved in the company.
“It is fantastic that the company shareholders are being given a chance to recover their damages,” he said on Monday.
He was not a party to the legal proceedings and said he did not seek to benefit financially from the outcome.
The case was brought by subsidiaries of GML, the main shareholder in Yukos. “The tribunal specifically and unanimously confirmed that the attacks by the Russian Federation on the Yukos oil company … were politically motivated,” GML executive director Tim Osborne said.
The panel of judges, who have been reviewing the case since 2005, said “these have been mammoth arbitrations” with total claims having reached US$114bn – four times the shareholders’ total investment in the company, to take into account what it would be worth today, plus interest.
Moscow was ordered to pay damages to compensate shareholders, but the tribunal said there was also some fault on behalf of claimants, which had led to a reduction in the size of the award.
“This is an historic award,” said Emmanuel Gaillard, head of Shearman & Sterling’s International Arbitration Group, which represented the claimants.
“It is now judicially established that the Russian Federation’s actions were not a legitimate exercise in tax collection but, rather, were aimed at destroying Yukos and illegally expropriating its assets for the benefit of state instrumentalities Rosneft and Gazprom.”
Despite the award being around half of the original claim, Mr Gaillard said that the ruling was “a great day for the rule of law”.
He also said there was “no reason to believe that Russia will not satisfy its international obligations”, pointing out that there was no chance of appeal.
Mr Osborne said the ruling would hurt investment in Russia. “I suspect at the moment Russia is a place where not many people are going to be investing,” he said.
“The majority shareholders of Yukos Oil were left without compensation for the loss of their investment when Russia illegally expropriated Yukos.
“It is a major step forward for the majority shareholders, who have been battling for over 10 years for this decision.”
* Reuters and Agence France-Presse
