US$50 bil award for shareholders of defunct oil firm Yukos upheld

Yukos Oil went bankrupt in 2006 after its former chief Mikhail Khodorkovsky fell out with Vladimir Putin. (AP pic)

AMSTERDAM: A Dutch appeals court on Tuesday overturned a lower court’s annulment of a US$50 billion award to shareholders in the now defunct Russian oil giant Yukos.

Yukos Oil went bankrupt in 2006 after its former chief Mikhail Khodorkovsky fell out with Russian leader Vladimir Putin and the Russian government began demanding billions in back taxes that ultimately resulted in its being expropriated by the state.

The verdict is the latest stage in a protracted legal battle, with Russia’s Justice Ministry saying in a reaction it would appeal at the Dutch Supreme Court.

In April 2016, The Hague’s District Court had overturned a decision by the Permanent Court of Arbitration (PCA) ordering the Russian state to compensate shareholders in the company once headed by fallen oligarch Khodorkovsky.

“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.”

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 roughly 70% of shares in Yukos.

The PCA had ruled in July 2014 that four plaintiffs – not including Khodorkovsky – were entitled to compensation for the loss of their holdings, entitling them to seize Russian state assets.

But in April 2016, the District Court of The Hague 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 a 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.”