Russia Must Compensate Yukos Shareholders, Court RulesToday’s WSJ article:
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MOSCOW—A court in The Hague has ruled that Russia owes former shareholders of the now-defunct oil giant Yukos more than $50 billion in compensation for the government's seizure of the company, describing the Kremlin's actions under President
Vladimir Putin as "a devious and calculated expropriation" of assets to destroy the firm.
The ruling by the Permanent Court of Arbitration in The Hague is the largest ever rendered by the court, lawyers said, but the compensation is only half of what the shareholders had sought, basing their claim on a valuation of just over $100 billion for the company. They are now faced with the perhaps more difficult task of how to collect, as plaintiffs in similar cases in the past have had mixed results attempting to seize Russian assets overseas.
"It may be another long battle," admitted Emmanuel Gaillard, the lawyer who represented GML Ltd., the Gibraltar-registered vehicle formerly known as Menatep, through which Yukos former owner Mikhail Khodorkovsky and his colleagues held their controlling stake.
The panel of three arbiters—two members of which were appointed by each side in the case, while the third was appointed by the Dutch court—based its compensation figure on how much the company was valued at in 2003 when the government began taking steps to take control of it.
"It is the tribunal's view that Yukos was the object of a series of politically-motivated attacks by the Russian authorities that eventually led to its destruction," the ruling said.
The plaintiffs are now faced with the task of filing claims in any jurisdiction where they think they can reclaim Russian or Russian-related assets.
Russia's finance ministry called the ruling "seriously flawed" and "politically biased" and vowed to appeal.
But Mr. Gaillard said the arbitration ruling is binding and leaves little room for Russia to maneuver.
"There is no appeal," he said. "It has been decided and now it has to be enforced."
Once Russia's largest oil company, Yukos was crushed with tens of billions of dollars in
back-tax claims starting in 2004, and its main assets were sold off to state-controlled Russian companies.
Although Russian officials maintain the case was purely a matter of tax evasion, the destruction of Yukos was widely viewed as the Kremlin's effort to crush Mr. Khodorkovsky, the company's politically ambitious chief executive officer and main shareholder, who served more than 10 years in jail for fraud and tax evasion—charges widely criticized as politically motivated.
The arbitration claim was brought by two units of GML Ltd. and the Yukos pension fund, which together held a 60% stake in Yukos. Mr. Khodorkovsky said several years ago that he gave up his Yukos stake to his colleagues in an effort to fend off the attack on the company.
Mr. Khodorkovsky
was freed in December after being pardoned by Russian President
Vladimir Putin. Mr. Khodorkovsky and his business partner Platon Lebedev were jailed in 2003 on charges of fraud and tax evasion and convicted in 2005. As their original sentences wound down, a second trial for embezzlement and money laundering was held in 2010 that initially resulted in their prison terms being extended until late 2016, with the terms being reduced on appeal.
The two men's trial was a watershed event in Mr. Putin's rule, seen by critics as the beginning of Kremlin efforts to stifle dissent. Mr. Khodorkovsky and his supporters long proclaimed his innocence, insisting the cases against him amounted to political retribution.
GML is now controlled by Leonid Nevzlin, Mr. Khodorkovsky's longtime partner who lives in Israel and has been convicted of several crimes in Russia in absentia, including embezzlement, murder and attempted murder. He has denied the charges and said the cases against him were "show trials." The rest is owned by other Yukos partners, including Mr. Lebedev.
Mr. Nevzlin told Russia Ekho Moskvy radio station the shareholders would spare no cost in pursuing Russian assets.
"The shareholders are ready for the next step. If Russia refuses to pay, we will search for and freeze Russian assets around the world," he was quoted as saying.
Mr. Khodorkovsky said he was deeply satisfied by the court's ruling.
"It is fantastic that the company shareholders are being given a chance to recover their damages. It is sad that the recompense will have to come from the state's coffers, not from the pockets of Mafiosi linked to the powers that be and those of Putin's oligarchs," he said.
Russian oil giant OAO Rosneft,
which took control of the bulk of Yukos' assets through a series of bankruptcy proceedings the plaintiffs have said were illegal, said it doesn't consider itself a party to the decision and doesn't believe any claim can be made against it.
"Rosneft isn't a party, isn't a participant in the suits and isn't a defendant in the announced decisions," the company said. "Rosneft believes that all the deals to purchase former assets of Yukos, as well as all of its other actions in relation to Yukos, were fully lawful and conducted in accordance with the applicable legislation."
Tim Osborne, the director of GML said the plaintiffs were working on a strategy on how best to recover assets and suggested companies like
BPBP.LN -0.66% PLC, which owns around 20% of Rosneft, could become a target.
"It is safe to say that nobody is safe. We will look at everything," he said.
Yukos' management has filed a separate expropriation claim on behalf of minority shareholders worth up to $38 billion in the European Court of Human Rights in Strasbourg. A ruling in that case could come as early as this week, Yukos says. A ruling in that case is scheduled to be released on Thursday.