A Dutch appeals court on Tuesday (18 February) overturned the annulment of a $50 billion award to shareholders in the now defunct Russian oil giant Yukos, a surprise ruling 13 years after the assets came under control of the Kremlin.
Yukos Oil went bankrupt in 2006 after its former chief Mikhail Khodorkovsky fell out with Russian leader Vladimir Putin and the government began demanding billions of dollars in back taxes that ultimately resulted in its being expropriated by the state.
Tuesday’s verdict reinstates a decision by The Hague-based Permanent Court of Arbitration (PCA) ordering the Russian state to compensate shareholders in the company once headed by fallen oligarch Khodorkovsky. That decision had been overturned in April 2016 by The Hague District Court.
Russia’s Justice Ministry has said it will challenge the appeals court ruling at the Dutch Supreme Court.
“The (lower) court ruled in favour of the Russian Federation, but the court of appeal in The Hague today ruled that the court’s verdict is incorrect. This means that the arbitral award is again in force,” the appeals court said in a statement.
Most of Yukos’ assets were absorbed by the Kremlin’s flagship oil producer Rosneft, and its former owners have for years been trying to recover their possessions.
Legal proceedings seeking damages have been brought by GML, formerly known as Group Menatep Ltd., which held around 70% of shares in Yukos.
Rule of law
Tim Osborne, GML’s chief executive, said the latest ruling was “a victory for the rule of law.”
“The independent courts of a democracy have shown their integrity and served justice. A brutal kleptocracy has been held to account,” he said.
The PCA had ruled in July 2014 that four plaintiffs – not including Khodorkovsky – were entitled to compensation for the loss of their holdings, enabling them to go after Russian state assets.
But in April 2016, The Hague District Court said Russia had never ratified the treaty under which the PCA had claimed jurisdiction in the affair, although it had signed it.
“The arbitration court had jurisdiction under the Energy Treaty Charter (ECT),” the appeals court said in its statement.
“When Russia signed the ECT, it had the duty to enforce it provisionally, unless it conflicted with Russian law. According to this court there was no such conflict.”
In a statement, Russia’s Justice Ministry said “the Russian Federation will continue to defend its legitimate interests and, in an appeal, will challenge the verdict issued by the appeals court at the Supreme Court of the Netherlands.”
It would not be the first time the Yukos saga has reached the highest Dutch court.
In January 2019 it found that the 2007 takeover of the Dutch parts of Yukos Oil by Rosneft’s former subsidiary Promneftstroy was illegal.
That Supreme Court case had examined the transfer in 2007 of $307 million worth of shares in Yukos Finance BV, a Dutch holding company, to the state-controlled entity.