January 15, 2021

On the 4th of December the Supreme Court of the Netherlands denied the complaint of Russia which objected the obligation to pay the damages award to the former shareholders of the oil company Yukos (declared bankruptcy in August, 2006).

The so-called ‘€˜Yukos case’€™ lasted for seventeen years. The event, which marked substantial progress in the case, occurred in 2014, when the United Nations Commission on International Trade Law (UNCITRAL) arbitral tribunal, held under the auspices of Permanent Court of Arbitration, ordered Russia to make compensation repayment estimated at 50 billion dollars to the Yukos shareholders. Later, in 2016, the decision was revised and canceled – however, in 2020, came into force again, obliging Russia to pay additional 7 billion dollars interest.

Russia attempted to avoid the verdict referring to the legality of the measures taken against Yukos at the beginning of 2000s. Notwithstanding the objections of Russia, Hague unambiguously concluded: Yukos was illegally expropriated and later nationalized by Russia in 2006.

Yukos was created as a joint-stock company in 1993 and privatized in 1995. The main office of the company was situated in Moscow. The controlling interest of 71,5% belonged to foreign entities, not the Russian state. They were Hulley Enterprises Limited, Veteran Petroleum Limited (both based in Cyprus) and Yukos Universal Limited (Isle of Man). This kind of ownership differed from the model of Lukoil company where the board of owners still consists of mainly Russian shareholders. In 2002, Yukos successfully became Russia’€™s largest oil company, took the first positions in the Russian oil industry and was named one of the world’€™s top ten oil and gas companies by market capitalization -€“ a year after, Russia launched a set of measures which led to the bankruptcy of Yukos in 2006.

The company was unreasonably blamed of non-payment of taxes. At the same time CEO of Yukos Mikhail Khodorkovsky was sentenced to ten years of imprisonment. The director of Hulley Enterprises and Yukos Universal Platon Lebedev was also judged for fraud and money laundering and sentenced to nine years in prison. He was sent into exile. Organizations specializing in human rights protection reported that the trial was held with the violation of international laws. For instance, a witness Vasilii Aleksanian, former vice-President of Yukos and the head of legal department, was held in unsanitary pre-trial detention conditions and was denied access to essential treatment. Aleksanian has claimed before the Russian Supreme Court that while he was in pre-trial detention he was approached by prosecutors – they offered access to medical care in exchange for testifying against Khodorkovsky and Lebedev.

This example was not the only one. Russian court has declined to summon key witnesses and experts requested by the defense, excluded potentially exculpatory evidence from the trial record, as well as refused to disclose potentially exculpatory evidence which was in possession of the prosecution and third parties. Measures taken by Russia regarding Yukos and its board exposed obvious intention of the Russian state to put Khodorkovsky and Lebedev in jail and get access to the assets of Yukos.

Not accidentally the main buyers of Yukos assets were Russian state-owned companies Rosneft and Gazprom. In 2006, the assets of Yukos were sold off. The price paid for them was deliberately reduced. For instance, the price Rosneft paid for Yukos assets was estimated as 12% less of their real market value. Today these Russian companies are oil and gas giants which displace competitors from the European gas market, and despite the fact that no less than four countries are participating the construction of controversial pipeline Nord Stream 2, exactly Gazprom has the controlling interest -€“ consequently, the right to take final decisions.

Yukos was used as a financial platform for Russian gas monopoly. In fact, Yukos investors were robbed and former company’€™s directors became victims of political repressions. The decision of the Supreme Court of the Netherlands, denying claims and objections of Russia, is certainly important. Russia has been recognized a debtor country which violated international law and, as a result, is now obliged to pay compensation for this.

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