The website of the International Court of Arbitration in The Hague (Permanent Court of Arbitration, PCA) published a verdict in the Yukos case, which obliges Russia to pay $50 billion to the plaintiffs. In addition, Russia was ordered to compensate legal costs of $65 million.

International Court of Arbitration in The Hague (Photo: AP)

The plaintiff was the company Group Menatep Limited, representing the interests of Leonid Nevzlin and Vladimir Dubov. GML initially insisted on compensation of $114 billion.

The arbitration panel ruled that in the Yukos case, Russia violated the Energy Charter and de facto expropriated the oil company from its rightful owners. The plaintiffs argued that the state directly benefited from the bankruptcy of Yukos, since the company's key asset, Yugansneftegaz, came under the control of state-owned Rosneft.

As follows from the court materials, the testimony of the plaintiffs in the case is set out on 424 pages. They are accompanied by 1,045 documents, as well as testimony from 12 witnesses. The defendant's testimony runs to 787 pages. In addition, the defendant attached 2,868 documents and 8 witness statements.

The plaintiff's answering affidavit runs to 474 pages. Over 60 documents are attached to them. The defendant's secondary objection runs to 819 pages. Attached to them are over 1,700 various documents and the testimony of seven witnesses. After the hearing, the plaintiff and defendant submitted briefs of their positions, which each ran to over 100 pages.

During the hearings on the merits, eight people testified on the side of Yukos and GML, including GML beneficiaries Leonid Nevzlin and Vladimir Dubov, as well as former adviser to the President of the Russian Federation Andrei Illarionov. The Russian Federation, according to the court decision, did not present “testimony of actual witnesses” in the Yukos case, instead providing 11 expert reports. Only two witnesses were cross-examined by the Russian Federation: London Business School finance professor James Dow and Herbert Smith LLP partner and head of the firm's tax practice in Moscow Oleg Konnov.

The decision of the International Arbitration in The Hague was the result of a trial that lasted almost ten years. It started in 2005. - in the same year, Mikhail Khodorkovsky was convicted of fraud (the businessman was arrested in 2003). In 2005 Khodorkovsky sold his stake in Yukos to GML, which thus gained control of 70.5% of the oil company.

As Kommersant notes in its July 28 issue, arbitration proceedings can be divided into two stages. Until 2009 Russia tried to prove that arbitration could not consider GML's claim, and also insisted on the absence of violations of the Energy Charter, signed but not ratified by the Russian Federation in 1994. In the event that the arbitration agreed with the arguments of the Russian side, GML's claims should have been considered in Russian courts.

In 2009 the arbitration began considering the claim “on the merits,” still agreeing that Russia is obliged to apply the Energy Charter. At this stage of the investigation, the court sided with the plaintiffs, who argued that through selective justice the state intended to take Yukos away from its rightful owners. Yukos as an independent oil company existed from 1993 to 2007. The process against the company began in 2003 following an unscheduled tax audit.

Despite the decision of the International Arbitration in The Hague in favor of GML, experts interviewed by RBC were skeptical about the company’s prospects of receiving these funds from Russia.

The decision of the Permanent Court of Arbitration in The Hague in the Yukos case to award the plaintiffs $50 billion was the largest in the history of the court, Dmitry Labin, a professor at the Department of International Law at MGIMO and lawyer, told RBC. According to him, before this, a kind of record for compensation belonged to Ecuador, which was ordered to pay investors from the United States $1 billion 200 thousand.

Labin added that implementing the arbitration verdict may face many legal difficulties. In particular, Russia does not participate in international conventions that could oblige Moscow to pay the plaintiffs the amount they demand. For example, we are talking about the Washington Convention of 1965. It provides for the possibility of recovering funds from states that have signed this convention.

As the expert noted, if the defendant does not voluntarily agree to payments, the plaintiff can appeal to the national courts of various countries. GML will have to prove its rights to Russian property. Moreover, in order to sue Russia for any assets, it is necessary to prove that they are used in commercial activities. It is prohibited to alienate state property that is used for public purposes. In addition, accounts used to collect payments and taxes cannot be seized.

If GML wants to seize Russian property on the territory of the country, then the company must apply to Russian arbitration. True, according to Labin, the chances of success for such a claim are minimal.

The expert emphasized that the decision of international arbitration can be challenged in the court of the state in whose territory it is located, that is, in this case, in the Netherlands. The basis for challenging the verdict may be a violation of the public order of the arbitration hearings.

Receiving money from Russia may take years, says Dmitry Gololobov, former head of the legal department of NK Yukos and Yukos-Moscow. “Russia will refuse to pay in accordance with the court order, and seizing Russian assets abroad is a difficult task,” he told Bloomberg . “Russia has the money to hire the best international lawyers, and it will not go down without a fight,” Gololobov says. “And that’s why the Yukos case could last another ten years,” he adds.

The report of the Accounting Chamber states that at the beginning of September 2012, the Register, the functions of the owner of which is carried out by the Administration of the President of the Russian Federation, contains information about 973 foreign objects of federal real estate (166 land plots with a total area of 661,937.23 sq. m, as well as 807 buildings, premises, structures with a total area of 561,177.08 sq. m), the total book value of which amounted to 7,957,531.2 thousand rubles.

Reaction to the decision of the International Arbitration in The Hague

Tim Osborne, Managing Director of GML

Managing Director of GML Tim Osborne, who won a claim against Russia in the Arbitration Court in The Hague in the YUKOS case, was pleased with the verdict. He called it “very profitable” and added that the $50 billion compensation that the court ordered Russia to pay to Yukos shareholders was “the largest ever awarded.” The plaintiff, represented by GML, estimated its losses from the bankruptcy of Yukos at $114 billion. The court was officially scheduled to announce its verdict on Monday, July 28. However, on Monday night, the Kommersant newspaper reported on the contents of the verdict, and a little later , a Reuters source said that on Sunday the parties had already received a 500-page verdict, but agreed not to comment on its contents until the official announcement.

Mikhail Khodorkovsky

from the businessman was published on the website of Mikhail Khodorkovsky, the former main shareholder of Yukos Shortly after the publication of the verdict of the International Arbitration Court in The Hague, a statement :

I was pleased with the decision of the International Arbitration Court. This is the first independent court to study the YUKOS case in its entirety, examining evidence and hearing witnesses. The conclusions are predictable for every unbiased observer of the shameful Basmana trials: the YUKOS case from beginning to end is an open plunder of a successful company by a para-state mafia. It’s great that the company’s shareholders get a chance to compensate for their losses. It’s sad that this compensation will come from the pockets of the state, and not from the pockets of near-government mafiosi and Putin’s oligarchs. At the same time, I confirm that I am not a party to this lawsuit and do not claim any personal financial benefits from its results.

Leonid Nevzlin, one of the co-owners of Yukos

“I am very pleased with the decision of the International Court in The Hague, which found Russia to have violated international law and called the expropriation of Yukos illegal,” the businessman told Reuters .

“Of course, I am satisfied. I, of course, did not expect that Group Menatep Limited would win the full amount, but I also did not expect that it would be so large, that is, it was like some kind of gift. GML demanded compensation of $ 114 billion, but the court assessed the losses approximately 50 billion dollars,” Nevzlin said (quoted by ITAR-TASS). “I am not a shareholder of Group Menatep Limited, I am a beneficiary of the factions that own GML, one of the main ones. Based on this position, so that there is no double interpretation, I naturally welcome the decision of the court in The Hague,” he added (quoted by ITAR- TASS).

"Rosneft"

Rosneft was not a party, did not participate in these disputes and is not a defendant in the published decisions. Rosneft believes that all of its transactions to acquire former Yukos assets, as well as all of its other actions in relation to Yukos, were completely lawful and carried out in accordance with applicable law. “Rosneft does not believe that any claims may be brought against the company in connection with the published decisions or that these decisions may adversely affect the company’s business activities or assets,” Rosneft said in a statement.

As of 13:10 Moscow time on the Moscow Exchange, ordinary shares of Rosneft fell in price by 1.51% - to 217.30 rubles. for one share. On the London Stock Exchange, Rosneft GDRs fell by 2.57%.

$50 billion is:
- about 13% of Russian budget revenues for 2014.
- 75% of Rosneft’s capitalization
- about 3 fortunes of USM Holdings founder Alisher Usmanov, the richest Russian entrepreneur, according to Bloomberg
- 1.2 times more than was spent on the Olympics in Sochi
- 4 annual investment programs of Russian Railways
- 58.2 million average salaries of Russians
- 162 million monthly pensions
- 14,000 T-90 tanks

Russian Foreign Ministry

Commenting on the arbitration decision, Russian Foreign Minister Sergei Lavrov promised to take all possible legal measures to protect Russia's rights.

“The Russian side and those departments that represent Russia in this process will certainly use all available legal opportunities to defend their position,” the head of the Foreign Ministry said (quoted by RIA Novosti)

Alexander Ratnikov, Ivan Tkachev, Elizaveta Dobkina

International arbitration in The Hague has published a verdict in the Yukos case