THE HAGUE, Netherlands – A Dutch court on Wednesday quashed a $50 billion award Russia had been ordered to pay the former majority shareholders of Yukos, a major win for Moscow in the high-stakes dispute over the dismantling of what was once Russia’s largest oil producer.
The former shareholders immediately vowed to continue their legal battle for compensation and to appeal the decision, while the Kremlin hailed it as a key legal victory that should halt a slew of cases around the world aimed at enforcing the award.
The Hague District Court’s written ruling overturned a July 2014 decision by the Permanent Court of Arbitration, which said that Moscow used massive tax claims to seize control of Yukos in 2003 and silence its CEO, Mikhail Khodorkovsky.
Khodorkovsky, an opponent of President Vladimir Putin, had begun to use his vast wealth to fund opposition parties challenging Putin’s power.
The Dutch court said the Hague-based arbitration panel did not have jurisdiction to rule in the case because the arbitration was based on an energy treaty that Russia had signed but had not ratified.
Tim Osborne, director of GML, the company that indirectly owned the majority of Yukos’ shares, said the company maintains that the 2014 award for what he called the “politically motivated destruction of Yukos” was right.
“We will appeal this surprise decision by The Hague Court and have full faith that the rule of law and justice will ultimately prevail,” he said in a statement.
Lawyers for the former shareholders said that regardless of the Dutch court’s ruling they would continue efforts they have started in several countries to enforce the arbitration award by attempting to seize Russian assets in countries including the United States, the United Kingdom, France, Belgium, Germany and India.
Attorney Yas Banifatemi said courts in other countries “will be at liberty to assess the award for themselves, irrespective of what the Dutch courts have to say on the matter.”
That tactic also has run into legal hurdles. Last week, a French court invalidated the seizure last July of 400 million euros that French company Eutelsat owed to Russian company RSCC for satellite co-operation deals. The French judge also annulled seizures at news agency RIA Novosti, now called Sputnik, and the Russian agency for management of state property abroad.
Carolyn Lamm, a U.S.-based lawyer hired by Russia, said that she would file a new motion to dismiss enforcement proceedings in the United States.
She said the international arbitration case, “was entirely inappropriate in the first place. They were Russian nationals with tax problems.”
In its 2014 award, believed to be the largest ever in an international arbitration case, the Permanent Court of Arbitration ruled that Russia was not acting in good faith to collect taxes when it levied massive claims against Yukos, even though some of the company’s tax arrangements might have been questionable.
The state launched “a full assault on Yukos and its beneficial owners in order to bankrupt Yukos and appropriate its assets while, at the same time, removing Mr. Khodorkovsky from the political arena,” the arbitrators said.
Khodorkovsky was arrested at gunpoint as he boarded a plane in Siberia in 2003 and spent more than a decade in prison as Yukos’ main assets were sold to a state-owned company. Yukos ultimately went bankrupt.
Osborne said Khodorkovsky gave up his interest in GML in 2005 and was not part of the proceedings.
“The West has decided to release the pressure,” Khodorkovsky said on Twitter. “My friends will keep up the fight. I have been pushing and will keep pushing for a regime change with other means.”
The dismantling of Yukos and the arrest of Khodorkovsky were a defining moment in Putin’s rule. It was then that his government began to take back control of the country’s energy industry and sought to re-assert itself internationally as a force to be reckoned with rather than a crumbling post-communist shell.
Andrey Kondakov, Director General of the International Centre for Legal Protection, which Moscow set up to fight the case, said in a statement Wednesday: “We are grateful to the District Court of The Hague for its sensible decision to reject the flawed arbitration award. Justice has been done.”
Welcoming the ruling, Putin’s spokesman Dmitry Peskov said, “We expect that the enforcement of the (original) ruling will be stopped immediately in all countries.”
Peskov added, however, that “we realize that this is not the end of the story.”
Nataliya Vasilyeva and Katherine Jacobsen in Moscow contributed to this report.