Cogito Ergo Non Serviam

Dutch Court Awards Yukos Shareholders $50 Billion, Russia Will Fight On

The Permanent Court of Arbitration in The Hague has ordered the Russian authorities to pay the shareholders of defunct oil company Yukos $50 billion in compensation. The court held that the Russian government had acted in violation of the Energy Charter Treaty when it drove Yukos into bankruptcy and sold its assets off at fire-sale prices. Naturally, the Russian government plans to fight.

Naturally the claimants' lawyers were satisfied with the result. Their lawyer Emmanuel Gaillard said, "This is an historic award. It is now judicially established that the Russian Federation's actions were not a legitimate exercise in tax collection but, rather, were aimed at destroying Yukos and illegally expropriating its assets for the benefit of State instrumentalities Rosneft and Gazprom."

Sergei Lavrov, the Russian Foreign Minister, took a different view, "The Russian side, those agencies which represent Russia in this process, will no doubt use all available legal possibilities to defend its position." An appeal would tie things up for a while longer, but it is unclear just where and how there is an appellate process.

"There is no appeal," Mr. Gaillard said. "It has been decided and now it has to be enforced." That is probably where the Russians will make their stand. Having won the right to compensation, the claimants now have to collect. Recent history shows that getting paid when Russia loses is the tricky part. Seizing assets is an ugly business. However, there are ways to do this. BP, for instance, owns 20% of Rosneft, which bought many of the assets of Yukos. The law may well permit the claimants to take BP's assets anywhere in the world.

The whole mess stems from the desire of Yukos's founder Mikhail Khordokovsky to use his billions to fund politicians who opposed Vladimir Putin. Until then, Mr. Khordokovsky was just another oligarch who had profited through his connections and access as the Soviet Union collapsed. However, once he tried to turn his economic power into political influence Yukos was slapped with tax evasion charges, and he was arrested and jailed for fraud, embezzlement and tax evasion. He was pardoned in December after about a decade in jail. This journal believes he, and the other oligarchs, should have been imprisoned for the original thefts from the Russian people of state assets. Still, one is happy he was jailed at all.

Mr. Khordokovsky stated, "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 has conveniently forgotten that he was once one of those oligarchs, or mafiosi if one prefers.

A further complication comes in the form of ant-Putin sanctions by the EU over the disaster that is eastern Ukraine. Should the EU decide to freeze Russian assets, it is not entirely clear if the claimants could attach those. Moreover, sanctions will make it less likely that the Russian authorities pay out from assets in Russia.

Tim Osborne, director of GML, the holding company created by Mr. Khodokovsky, said, "We are thrilled with this decision, although we know it is not the end of the road." One might add that it is an unpaved, single-lane road through the back of beyond. The smart money says the claimants won't see a penny for another decade.

© Copyright 2014 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.



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