The Hague’s arbitration court ruled Monday that Russia owes former shareholders of the now-defunct oil giant Yukos over $50 billion in damages for seizure of the company.
GML Ltd, the holding company for Yukos’ former main shareholders, said Monday that the decision showed Russia’s campaign against Yukos was “politically motivated”.
Yukos crushed with tax claims
Yukos was once Russia’s largest oil company, but was crushed with tens of billions of dollars in back-tax claims starting in 2004, and its main assets were eventually sold off to state-controlled Russian companies. The destruction of Yukos was widely considered to be coordinated by the Kremlin’s to crush its politically ambitious chief executive officer and main shareholder, Mikhail Khodorkovsky.
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He served over 10 years in jail for fraud and tax evasion before he was released in December after being pardoned by Russian President Vladimir Putin. Both Khodorkovsky and his business partner Platon Lebedev were jailed in 2003 and convicted in 2005.
Minority shareholders left out
GML Ltd held 60% of Yukos, while an employee pension fund, which is also a party to the litigation, owned about 10%. Four other Russians, including Platon Lebedv hold the remaining 30% of GML. Leonid Nevzlin, a former Yukos vice-president is the biggest single beneficiary who owns 70% of GML. During his trial, Khodorkovsky signed over his Yukos stake to Nevzlin in 2005.
However, the Monday ruling won’t benefit the 55,000 former minority shareholders of Yukos, though it could set a precedent that would help them bring new arbitration cases against Russia.
Emmanuel Gaillard, one of GML’s lawyers said: “A superpower like Russia has been unanimously held accountable for its violation of international law by an independent arbitration tribunal of the highest possible repute”. The Monday’s ruling against Russia means fresh trouble for President Vladimir Putin. The ruling is set to exacerbate tensions with the west as the U.S. and EU weigh even tougher sanctions against Moscow over its continuing support for separatist rebels in eastern Ukraine.
According to the court ruling, Russia was required to start paying the compensation by January 2 next year, or face interest on the fine. However, it is anticipated that Russia will use all available legal possibilities to defend its position.