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Blow to Putin as Russia faces UK trial over $60bn Yukos oil battle

MSN | 2 November 2023

Blow to Putin as Russia faces UK trial over $60bn Yukos oil battle

by Matt Oliver

The Russian state will go on trial for failing to pay $60bn (£49bn) to former shareholders of defunct oil behemoth Yukos, after a British judge blocked the country’s bid for immunity.

In a blow to Vladimir Putin, the ruling by London’s High Court means the Kremlin must now answer a case brought by Hulley Enterprises, Yukos Universal and Veteran Petroleum.

The three ex-Yukos shareholders are fighting to enforce a 2014 arbitration award by a Dutch tribunal, which found Russia owed them $50bn in compensation.

Yukos was seized by the Kremlin in 2003 after Mikhail Khodorkovsky – the company’s former boss and at the time Russia’s richest man – fell out with Mr Putin and was jailed for alleged tax evasion and fraud.

His downfall was seen as a pivotal moment in Mr Putin’s rise, helping to cement the president’s power.

Since the Dutch ruling nine years ago, a string of legal battles have ensued across the globe – causing the amount owed to balloon to almost $60bn as interest piled up.

The shareholders are trying to enforce the arbitration ruling in Britain, the US and the Netherlands.

In London, lawyers for Russia argued that it never submitted to the Dutch arbitration, that the UK was the wrong place to hear the case and that, regardless, it should be granted state immunity.

But those arguments were rejected on Wednesday by Mrs Justice Cockerill, a High Court judge, who denied Russia immunity and an option to appeal.

Russia can still apply directly to the Court of Appeal for permission to challenge the ruling.

Tim Osborne, chief executive of the GML shareholder group, which previously held a majority stake in Yukos through its subsidiaries, welcomed the ruling as “getting us closer to the moment when the Russian Federation will have to pay for its illegal actions”.

Before the company’s seizure, Yukos was a sprawling energy empire that produced more than a fifth of Russia’s oil, earning its owner, Mr Khodorkovsky, a vast fortune.

But Mr Khodorkovsky became a target for Mr Putin’s wrath after he accused the Russian president of presiding over corruption and accepting huge bribes during a televised meeting in 2003.

Just eight months later, Mr Khodorkovsky was arrested on the runway of a Siberian airport. He and his business partner, Platon Lebedev, were later jailed on charges of tax evasion and fraud, described by Amnesty International as “deeply flawed and politically motivated”.

Yukos, meanwhile, was stripped of its assets by the Kremlin, which sold them on to political allies.

In the years afterward, former Yukos shareholders waged a long battle to claim compensation by suing the Russian state in The Hague.

The charges were brought on the basis of the Energy Charter Treaty, an agreement signed by Russia in 1994 and designed to reassure investors over its respect for the rule of law and the rights of international investors.

In 2014, an independent tribunal overseeing that arbitration in The Hague unanimously decided that Yukos had been illegally expropriated as part of a political vendetta against Mr Khodorkovsky.

The tribunal awarded GML, the holding company representing the oil firm’s former shareholders – not including Mr Khodorkovsky, who had already passed on his stake – compensation worth $50bn (£41bn), the largest-ever payout of its kind.

However, getting the money has not proved easy as Russia has sought to challenge or evade the ruling.

A lawyer representing Russia in the London case declined to comment on Wednesday’s ruling, according to Reuters.

 source: MSN