Tuesday, July 23, 2024
 
 

Dutch court backs Russia, nixes $50m YUKOS penalty

Putin wins the day in The Hague

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On 20 April, the District Court of The Hague allowed the challenge brought by Russia to the landmark 2014 arbitral award ordering Russia to pay over $50 billion to the former majority shareholders of YUKOS, a victory for Moscow in long-standing series of court battles, following the breakup of the Russian oil major.

Immediately following the decision, the claimants confirmed in a statement that they would be exercising their right of appeal to the Court of Appeal in The Hague.

“We fully stand by the unanimous award received in 2014 for the politically motivated destruction of YUKOS,” Tim Osborne, director of GML, the company that indirectly owned the majority of YUKOS’ shares, said in the statement. “We will appeal this surprise decision by The Hague Court and have full faith that the rule of law and justice will ultimately prevail.”

Former YUKOS CEO Mikhail Khodorkovsky has sold his assets in YUKOS and is not expecting any awards from this case.

In 2014 an arbitral tribunal sitting in The Hague under the auspices of the Permanent Court of Arbitration ruled that through the investment protection clauses in the Energy Charter Treaty (ECT) there had been illegal expropriation with political motivation and no compensation of the former YUKOS shareholders.

On of the major arguments for Moscow that was brought up in the nine-year case that led to 2014 ruling was that Russia wasn’t bound by the Energy Charter Treaty because they signed it and did not ratify it. In 2009, there was a preliminary ruling in the major case in The Hague in the Permanent Court of Arbitration (PCA) that ruled that Russia was indeed bound by it.

“This is the same argument that Russia now brought to the Dutch District Court that is allowing the argument here. That’s why the lawyers are fairly confident that it won’t hold in appeal because it has already been unanimously ruled on by an expert arbitral tribunal,” a source close to YUKOS told New Europe.

The source noted that here is no direct link between this and the enforcement of the awards that is already ongoing. “This does not suspend any enforcement action and courts in countries where there is enforcement, in France, in Belgium, in the United Kingdom. It is too soon to comment on the global impact of this ruling but there is no automatic annulment or suspension of proceedings in other countries. In each country where the awards are being enforced they are multiple rulings, decisions ongoing with assets being frozen, Russian appeals of these assets; of course it is unfortunate, it’s a surprise. It’s one development among many, many which are ongoing,” the source said.

Russian President Vladimir Putin’s spokesman Dmitry Peskov hailed the ruling, saying the Kremlin expects that the enforcement of the original “ruling will be stopped immediately in all countries”.

Andrey Kondakov, Director General of the International Centre for Legal Protection, which Moscow set up to fight the case, said in a statement: “We are grateful to the District Court of The Hague for its sensible decision to reject the flawed arbitration award. Justice has been done”.

The YUKOS case has always been very complicated. The source told New Europe that they have seen increasing attempts by Russia to influence the various countries and governments where enforcement is taking place. “There is a very strong political angle,” the source argued.

Asked if YUKOS shareholders have seen any of the $50 billion awards, the source noted that it’s still blocked everywhere. “In each country where there have been frozen assets, Russia is obviously pushing back and appealing it so I think so far they haven’t got any. We are seeing more politicised case than we would have wished for,” the source said.

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Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

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