Hague court orders Russia to pay £30bn in damages to Yukos shareholders

 

Russia is facing a global scramble to have its assets abroad confiscated after an international court ordered it to pay nearly £30bn in damages for a ruthless campaign to destroy the defunct oil giant Yukos.

State-owned property ranging from aircraft to art works loaned to foreign museums could be at risk of seizure after the Permanent Court of Arbitration in The Hague ruled that officials under President Vladimir Putin deliberately set out to bankrupt and nationalise Yukos in the middle of the last decade.

In a swingeing ruling which further isolates Mr Putin on the international stage while the European Union moves to impose further sanctions over the Ukraine crisis, the tribunal found that the Russian state launched a succession of “politically motivated attacks” on the now defunct oil company aimed at its destruction through spurious bankruptcy proceedings.

The Netherlands-based body also ruled that Moscow had subverted the courts to target Mikhail Khodorkovsky, the former majority shareholder of Yukos who was jailed for almost a decade, after it became clear he was a potential “political competitor” to Mr Putin.

In its ruling, the three-man tribunal panel said: “Russian courts bent to the will of the Russian executive authorities to bankrupt Yukos, assign its assets to a state-controlled company, and incarcerate a man who gave signs of becoming a political competitor.”

The award of $50.2bn (£29.4bn) in damages to a group of former shareholders in Yukos was the largest ever ordered by the arbitration tribunal - some 20 times bigger than its previous highest award of $2.5bn. The shareholders also won $60m (£35m) in legal costs.

Under the terms of the ruling, Moscow has until January to make payment in full, after which point interest begins accruing and the former shareholders can begin legal proceedings to enforce the judgment, including seeking the seizure of commercial assets of the Russian state held abroad.

The award of $50.2bn (£29.4bn) in damages to a group of former shareholders in Yukos was the largest ever ordered by the arbitration tribunal The award of $50.2bn (£29.4bn) in damages to a group of former shareholders in Yukos was the largest ever ordered by the arbitration tribunal (AFP)

Prominent entities either partly or wholly owned by Russia include the national airline, Aeroflot, which is 51 per cent owned by the state and Rosneft, the oil company which acquired many Yukos assets and is majority owned by the state with British  oil company BP holding much of the remainder.

The shareholders said that they expected Russia to honour its obligations and pay the damages rather than risk becoming a pariah among international investors, who have already taken $75bn of capital out of the country this year.

But they warned that all options were under consideration. In theory, any asset abroad which can be proven to be an “instrumentality” of the Russian state - ie under its direct ownership or control - could be the subject of a demand for seizure based on the arbitration court’s judgment.

Speaking at a press conference in London, Tim Osborne, executive director of GML, the company that now owns the majority of Yukos shares, said: “I think it is safe to say that nobody is safe. We will look at everything. We will take a view but it will be pragmatic approach.”

Rosneft, which is now Russia’s largest oil company, said it expected no claims to be made against its assets. Shares on the Russian stock exchange fell by 2.5 per cent today.

Indeed, the shareholders - led by Israel-based Russian Leonid Nevzlin, a former business partner of Mr Khodorkovsky - took a decade to obtain the ruling and now face a new battle, possibly of similar duration, to enforce the gargantuan damages award.

Russia said it will appeal the Hague ruling, claiming it was based on “serious flaws” and “politically biased”. In a statement, the Finance Ministry said: "The Russian Federation will challenge the arbitration court's decisions in the courts of the Netherlands."

The ruling will add to the tensions between Russia and the international community in the aftermath of the downing of Malaysian Airlines flight MH17 over eastern Ukraine. Downing Street hinted that a toughened sanctions regime, targeting key sectors of the Russian economy including finance, could be in place within days.

The Permanent Court of Arbitration in The Hague ruled that officials deliberately set out to bankrupt and nationalise Yukos The Permanent Court of Arbitration in The Hague ruled that officials deliberately set out to bankrupt and nationalise Yukos (EPA)

Although the damages are only half of the $100bn sought by the shareholders, who were told Yukos bore some responsibility for its own demise, they are still substantial, even for a country of Russia’s mineral wealth and government reserves of $175bn. The award is nearly as much as Russia spent on this year’s Winter Olympics in Sochi - the most expensive Games ever.

Mr Khodorkovsky, who was released from jail in December following a surprise pardon after a decade in prison camps, said he had learned of the ruling “with a feeling of satisfaction”.

The one-time richest man in Russia, who has repeatedly insisted he will gain nothing from the proceedings, said: “It is sad that the recompense will have to come from the [Russian] state’s coffers, not from the pockets of mafiosi linked to the powers that be and those of Putin’s oligarchs.”

The takeover of Yukos, which began in 2003, is widely seen as the beginning of a more authoritarian style of rule by Mr Putin. In its ruling, the Hague court described the seizure of the oil company’s assets as “devious and calculating” and said that the “highest officials” of Rosneft had worked “in close association with Mr Putin” to achieve the Russian state’s aims.

It added: “The tribunal has concluded that the primary objective of the Russian Federation was not to collect taxes but rather to bankrupt Yukos and appropriate its valuable assets.”

Experts said that the ruling placed Russia at a crossroads in its commercial dealings with the world.

David Clark, an adviser to former Foreign Secretary Robin Cook and chairman of the Russia Foundation, said: “Vladimir Putin now has a choice: He can ignore the ruling and seek the $50bn award enforced against Russian assets abroad or he can acknowledge responsibility by paying up.”

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Junior Web Designer - Client Liaison

£6 per hour: Recruitment Genius: This is an exciting opportunity to join a gro...

Recruitment Genius: Service Delivery Manager

Negotiable: Recruitment Genius: A Service Delivery Manager is required to join...

Recruitment Genius: Massage Therapist / Sports Therapist

£12000 - £24000 per annum: Recruitment Genius: A opportunity has arisen for a ...

Ashdown Group: Practice Accountant - Bournemouth - £38,000

£32000 - £38000 per annum: Ashdown Group: A successful accountancy practice in...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss