News / Europe

Hague Court: Russia Must Pay Yukos Shareholders $50 Billion

Freed Russian former oil tycoon Mikhail Khodorkovsky speaks during his news conference in the Museum Haus am Checkpoint Charlie in Berlin, December 22, 2013.
Freed Russian former oil tycoon Mikhail Khodorkovsky speaks during his news conference in the Museum Haus am Checkpoint Charlie in Berlin, December 22, 2013.

The Hague's arbitration court ruled on Monday that Russia must pay a group of shareholders in defunct oil giant Yukos around $50 billion for expropriating its assets, a big hit for a country teetering on the brink of recession.

The Hague court said it had awarded shareholders in the GML group just under half of their $114 billion claim, going some way to covering the money they lost when the Kremlin seized Yukos, once controlled by Mikhail Khodorkovsky.

GML said the Permanent Court of Arbitration ruled that the Russian Federation sought to bankrupt Yukos and appropriate its assets and that it was determined to do whatever was necessary to achieve this purpose.

Tim Osborne, director of GML, welcomed the award, which he said was the largest ever, as “very favorable.”

Russia likely to appeal

But Foreign Minister Sergey Lavrov said Moscow would most likely appeal the decision, underlining that the shareholders, who have battled through the courts for a decade, will have to fight further to receive the compensation.

“The Russian side, those agencies which represent Russia in this process, will no doubt use all available legal possibilities to defend its position,” he said when news of the award leaked ahead of the official announcement.

The ruling hits Russia at a time when it faces international sanctions about its role in Ukraine and anger over the downing of a Malaysian airliner over eastern Ukraine, where Moscow-backed rebels are fighting a separatist campaign. The country is also grappling with slowing economic growth.

The court in the Hague announced that Russia must pay the compensation to subsidiaries of Gibraltar-based Group Menatep, a company through which Khodorkovsky, once Russia's richest man, controlled Yukos.

Group Menatep now exists as holding company GML, and Khodorkovsky is no longer a shareholder in GML or Yukos.

Khodorkovsky is not a party to the action.

His company, once worth $40 billion, was broken up and nationalized, with most assets handed to Rosneft, a company run by Igor Sechin, an ally of President Vladimir Putin.

Rosneft was not immediately available for comment.

Its shares were down 0.6 percent at 0830 GMT, while the RTS index of Russian shares was down 1.8 percent.

Human rights court case

Separately, The European Court of Human Rights (ECHR) in Strasbourg is expected on Thursday to announce a decision on Yukos's multibillion-dollar claim against Russia, ruling on 'just satisfaction' or compensation, a Yukos spokeswoman said.

Yukos's application in the ECHR, which is on behalf of all Yukos shareholders, argued that Yukos was unlawfully deprived of its possessions by the imposition of bogus taxes and a sham auction of its main asset.

In a case that Kremlin critics said offered a stark example of Putin's increasingly autocratic rule, Khodorkovsky was arrested at gunpoint in 2003 and convicted of theft and tax evasion in 2005.

Putin justified the move by saying: “A thief must be in jail,” quoting a popular Soviet blockbuster.

Putin pardoned Khodorkovsky in December after he had spent 10 years in jail. He now lives in Switzerland.

The newspaper Kommersant, which earlier reported the Hague ruling, said the court ruled that Russia had infringed an international energy charter, adopted in 1991, that envisaged legal issues for investments in energy sectors.

Russia will have 180 days, until January 15 2015, to start paying the $50 billion awarded by the Hague's arbitration court to a group of Yukos shareholders, a lawyer for the shareholder group said on Monday.

After that period, interest will start being accrued, said Emmanuel Gaillard, Lead counsel, Shearman and Sterling LLP.

The newspaper cited GML director Osborne as saying GML will force Russia to pay out the compensation “if it wouldn't make payments within the court-defined timeframe."

Any funds won will be shared amongst the shareholders.

Business partner

The biggest ultimate beneficial owner is Russian-born Leonid Nevzlin, a business partner who had fled to Israel to avoid prosecution. He has a stake of around 70 percent.

A spokesperson for Nevzlin declined to comment.

The other four ultimate beneficial owners, each of whom owns an equal stake, are Platon Lebedev, Mikhail Brudno, Vladimir Dubov and Vasilly Shaknovski.

After he was jailed, Khodorkovsky ceded his controlling interest in Menatep, which owned 60 to 70 percent of Yukos, to Nevzlin.

GML shareholders are not expecting to claim twice, so if they receive monies pursuant to one case it would reduce their claim under the other, Osborne had previously told Reuters.

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Comment Sorting
by: DellStator from: US
July 28, 2014 9:16 PM
Finally, someone with a memory pointing out that the "oligarchs" in Russia do not control Putin, Putin controls them. Any who annoy him the state seized their assests, their business (and if I recall in this instance, arrest them, try them and convict them).
As to Russia paying this fine, yeah right, the world can trust them to do that just like we could trust them not to invade the Crimea or send troops and arms into the Ukraine.
On the bright side, Russia raised it's interest rate, ahh, the good old days, when Russia was paying what 20%, 25% interest on it's bonds, until it defaulted.
Anyone who does business with Russia now and forever is either shilling for the Russian gov't and hoping Putin will make you an "Oligarch" or a fool about to be parted from your money.

by: Marios
July 28, 2014 2:51 PM
In whose world will Russia pay out, unlikely - if they can get away with the downing of the Malaysia airliner, what is a Court judgement? Watch this space,

by: Mario from: Italy
July 28, 2014 5:56 AM
We must punish Russia! It's nest of the evil in Europe!

by: Igor from: Russia
July 28, 2014 5:42 AM
You will see that the rulle of such western court is worthless to Russia because the court itself is manipulated by the West.

by: Andrew from: UA
July 28, 2014 5:22 AM
VOA could you pls provide more sources for this news

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