By Kounteya Sinha, TNN
Times of India
Times of India
LONDON: In a massive blow to Russian president Vladimir Putin, share holders of the defunct oil giant Yukos have won a decade-long court battle against Moscow with a Hague tribunal ruling that the Russian state had sought to bankrupt the company, appropriate its assets and prevent its owner Mikhail Khodorkovsky from entering politics.
The international arbitration panel ordered Moscow to pay a whopping $ 51.57 billion in damages to shareholders announcing that officials under President Vladimir Putin had manipulated the legal system to bankrupt the company.
Mikhail Khodorkovsky
The Permanent Court of Arbitration in The Hague issued rulings in three separate cases that had sought a total of over $100 billion from Russia for expropriating the assets of Yukos, formerly controlled by Mikhail Khodorkovsky, once Russia’s richest man.
Yukos was the largest oil company in Russia when in 2003, Khodorkovsky was arrested at gunpoint on an airport runway in Siberia.
GML Ltd., the former majority shareholder of Yukos Oil Company won the record award, the largest in international arbitration history, was brought under the Energy Charter Treaty (ECT). In the decision, an independent arbitral tribunal sitting in The Hague ruled unanimously that the actions of the Russian Federation were politically motivated and constituted expropriation of the majority shareholders’ investment in Yukos.
Tim Osborne, executive director of GML Ltd 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. It also demonstrates the vital role that international arbitration plays in resolving disputes of this nature. Without the binding terms of the Energy Charter Treaty, GML would have had a much tougher task to obtain justice”.
Emmanuel Gaillard, head of Shearman & Sterling LLP’s International Arbitration Group which represented the Claimants, said “This is an historic award. 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.”
The proceedings were initiated in early 2005 before an independent arbitral tribunal under the auspices of the Permanent Court of Arbitration in The Hague. The Claimants are two subsidiaries of former majority shareholder GML Limited, namely Hulley Enterprises Ltd. and Yukos Universal Ltd., as well as Veteran Petroleum Ltd., the pension fund set up by GML for the benefit of former Yukos employees.
In 2009, the Tribunal issued an Interim Award unanimously confirming that the claimants were protected investors holding a protected investment under the ECT, and that the Russian Federation is fully bound by the Treaty until its formal withdrawal from provisional application of the Treaty takes effect in October 2009 for new investments made in Russia.
In a damning indictment of the rule of law in Russia, the tribunal found that the country’s courts had bent to the will of Russian executive authorities to incarcerate a man who gave signs of becoming a political competitor.
In a damning indictment of the rule of law in Russia, the tribunal found that the country’s courts had bent to the will of Russian executive authorities to incarcerate a man who gave signs of becoming a political competitor.
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