The Russian government will face legal proceedings for its failure to disburse $60bn (£49bn) to the former shareholders of the now-defunct oil giant Yukos, following a decision by a British judge to deny the country’s plea for immunity.
This represents a significant setback for Vladimir Putin, as the verdict from the High Court in London necessitates that the Kremlin respond to the lawsuit filed by Hulley Enterprises, Yukos Universal, and Veteran Petroleum.
These three former shareholders of Yukos are working to uphold a 2014 arbitration decision made by a Dutch tribunal, which determined that Russia is liable to pay them $50bn in damages.
The Kremlin took control of Yukos in 2003, after Mikhail Khodorkovsky, the company’s ex-CEO and then the wealthiest man in Russia, clashed with Mr. Putin and was subsequently imprisoned on charges of tax evasion and fraud.
This moment marked a critical point in Mr. Putin’s ascension to power, solidifying his influence and control.
Over the nine years since the Dutch tribunal’s decision, a series of legal confrontations have occurred worldwide, leading to an increase in the sum owed to nearly $60bn due to accruing interest.
The shareholders are actively seeking to enforce the arbitration decision in the United Kingdom, the United States, and the Netherlands.
In the UK, Russia’s legal representatives contended that the nation never agreed to Dutch arbitration, that the UK was an inappropriate venue for the case, and that Russia should be afforded state immunity regardless of these factors.
However, on Wednesday, these arguments were dismissed by Mrs Justice Cockerill, a High Court judge, who refused to grant Russia immunity and the opportunity to appeal.
Despite this, Russia retains the option to directly request permission to challenge this decision from the Court of Appeal.
Tim Osborne, CEO of the GML shareholder group, which once controlled the majority of Yukos through its subsidiaries, lauded the verdict, stating it brings them “closer to the moment when the Russian Federation will have to pay for its illegal actions.”
Prior to its seizure, Yukos was an extensive energy conglomerate, responsible for producing over 20% of Russia’s oil, amassing a substantial fortune for its owner, Mr. Khodorkovsky.
However, Mr. Khodorkovsky fell into disfavour with Mr. Putin after publicly accusing the Russian leader of engaging in corruption and taking massive bribes during a 2003 broadcast meeting.
A mere eight months later, authorities apprehended Mr. Khodorkovsky at a Siberian airport’s runway. Subsequently, he and his associate, Platon Lebedev, received jail sentences on allegations of tax evasion and fraud, charges that Amnesty International criticized as “fundamentally flawed and politically motivated.”
Simultaneously, the Kremlin confiscated Yukos’s assets and redistributed them to political affiliates.
In the ensuing years, former Yukos shareholders embarked on a protracted legal battle, seeking compensation from the Russian government in The Hague.
Their lawsuit was based on the Energy Charter Treaty, a pact that Russia endorsed in 1994, pledging its commitment to the rule of law and safeguarding the rights of international investors.
In 2014, a tribunal in The Hague, operating independently, ruled unanimously that the seizure of Yukos was an unlawful act of political retribution against Mr. Khodorkovsky.
GML, the holding entity representing the former shareholders of the oil company (excluding Mr Khodorkovsky, who had previously relinquished his shares), was awarded a record-breaking $50bn (£41bn) in compensation.
Nonetheless, the endeavour to collect the funds has been fraught with difficulties as Russia has consistently attempted to overturn or sidestep the tribunal’s decision.
An attorney speaking for Russia in the London case opted not to comment on the verdict delivered on Wednesday, as reported by Reuters.
