Yukos Oil shareholders win case

Hague court tells Russia to pay $50 billion in theft of firm

LONDON -- An international tribunal in The Hague has awarded the shareholders of the now-defunct Yukos oil company about $50 billion, in a ruling on claims that the Russian government illegally seized the company from one of the country's most powerful oligarchs.

"We are thrilled with this decision, although we know it is not the end of the road," said Tim Osborne, director of GML, the holding company created by Yukos founder Mikhail Khodorkovsky.

The verdict Monday by a three-judge arbitration panel is an important development in a saga that began in 2003 when Russian authorities arrested Khodorkovsky, Russia's richest man at the time, and began breaking up and selling his main asset, Yukos Oil.

For the past decade, Yukos shareholders have been fighting in courts outside Russia for compensation.

Khodorkovsky, who has always contended that the charges of embezzlement and tax fraud brought against him were baseless and politically motivated, was pardoned by President Vladimir Putin last year, after having spent about 10 years in jail.

The verdict could increase pressure on Russia at a time when its economy is already under threat after the United States and the European Union imposed sanctions on a selection of Russian individuals and companies over its support for separatists in Ukraine.

There could also be implications for Rosneft, the state-controlled Russian oil company that acquired the most important Yukos oil assets in 2007, and for the British oil giant BP, which owns close to 20 percent of Rosneft.

The ruling Monday concerned a case brought in 2005 in The Hague by former majority shareholders of Yukos under the provisions of the 1994 Energy Charter Treaty, which sets rules for cross-border energy transactions. Russia signed the treaty but never ratified it.

Russia could challenge the ruling by saying it was not bound by the treaty, although it had pledged to abide by it.

Before the ruling, the Russian foreign minister, Sergey Lavrov, said Moscow would consider appealing a decision in favor of the shareholders.

The shareholders were seeking compensation from the Russian government of $100 billion in damages, their estimation of the value of Yukos in 2007, when it was liquidated. The Russian government had charged the company with tax evasion that caused its stock price to collapse three years earlier.

Osborne said in an interview Friday that the Russian government "played a very full and complete part" in the legal process and that he hoped it "would abide by this decision."

If not, he said, shareholders would attempt to collect the award by seizing "Russian assets outside of Russia."

The claimants argued that the Russian government destroyed Yukos by creating sizable spurious tax claims against the company and then expropriating its assets to pay them.

It is unlikely that Khodorkovsky will benefit financially from the verdict, as he says he handed over his stake to a partner, Leonid Nevzlin, who lives in Israel, in 2005.

In addition to Nevzlin, the claimants include Platon Lebedev, Vasily Shakhnovsky, Mikhail Brudno and Vladimir Dubov, as well as a pension fund set up by GML on the behalf of about 30,000 former Yukos employees.

Before it was taken over by the government, Yukos was producing more than 1 million barrels per day, making it the largest privately owned energy company in Russia, according to legal documents. The company helped lead the revival of the Russian oil industry in the 1990s, after the fall of the Soviet Union.

A Section on 07/29/2014

Upcoming Events