Newsletters / Yukos Shareholders Obtain Historic Victories before ECHR and Hague Court of Arbitration

Last week the former shareholders of Yukos claimed two major victories against the government of the Russian state apparatus with regard to the decade-long struggle to recover damages from the destruction of the company and expropriation of its assets.

The historic rulings from the Hague Permanent Court of Arbitration and the European Court of Human Rights awarded damages to the shareholders totaling a combined $52.5 billion, ranking among the largest awards ever ordered in these courts against a sovereign.

The Hague ruling, which can be read in full here, made several findings regarding the “full assault on Yukos and its beneficial owners” by the state apparatus “in order to bankrupt Yukos and appropriate its assets while, at the same time, removing Mr. Khodorkovsky from the political arena.” (paragraph 515).

In paragraph 1583, the Tribunal ruled that “The harsh treatment accorded to Messrs. Khodorkovsky and Lebedev remotely jailed and caged in court, the mistreatment of counsel of Yukos and the difficulties counsel encountered in reading the record and conferring with Messrs. Khodorkovsky and Lebedev, the very pace of the legal proceedings, do not comport with the due process of law. Rather the Russian court proceedings, and most egregiously, the second trial and second sentencing of Messrs. Khodorkovsky and Lebedev on the creative legal theory of their theft of Yukos’ oil production, indicate that Russian courts bent to the will of 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.

Mikhail Khodorkovsky, who is not a party to either dispute, issued a response statement to the Hague ruling, commenting: “It is the first independent tribunal to have considered the YUKOS case in its entirety, to have examined the evidence and to have heard witness testimony. The findings were predictable for any unbiased observer of the disgraceful Basmannyi travesty of justice: from beginning to end, the YUKOS case has been an instance of unabashed plundering of a successful company by a mafia with links to the State.”

The ECHR ruling, which was made public on July 31, 2014, similarly found the Russian government responsible for violations of the European Convention with regard to forced auction of the company’s core assets.

Speaking in an interview with TV Rain, Khodorkovsky explained the differences between the two rulings, pointing out that although the $2.5 billion awarded by the ECHR is much smaller than the $50 billion awarded by the Court of Arbitration, this amount is still 100 times larger than any other ECHR award in history:

“Unlike the Hague tribunal, the European Court did not have the jurisdiction to consider the main issue in our relations with the Russian authorities – that of the fairness of the tax claims,” Khodorkovsky said. “Therefore, the judgment of the European Court regarding YUKOS’ application was somewhat technical. As in whether the money was justly or unjustly assessed – without considering the substance. This is why the amount is so small compared to award by the Hague tribunal.”

Khodorkovsky was also interviewed by Forbes Russia regarding the rulings, where he reiterated his opinion that Russian official Igor Sechin was one of the chief beneficiaries.

“We know perfectly well that, both factually, and in the arbitration award, Rosneft and its chief Igor Ivanovich Sechin were appointed the initial beneficiary, Sechin having been behind this entire act of manipulation,” he said.

Khodorkovsky continued: “That he first pushed forward Baikalfinansgroup as a screen, and then, as yet another smokescreen, Mr. Bogdanov [Surgutneftegaz CEO Vladimir Bogdanov] demonstrates just how thoroughly and rigorously he had prepared for subsequent court proceedings and to what extent Bogdanov, a seemingly independent oil man, depends on the Rosneft chief, Mr. Sechin who held an entirely different position at the time. In my opinion, neither Bogdanov, nor Surgut benefitted from this story in any way, shape or form.”

Read more responses and reactions to these historic rulings here.

Download the full Hague Permanent Court of Arbitration ruling here.

Download the full ECHR ruling here.

In Memory of Marina Filippovna Khodorkovskaya

Marina Filippovna Khodorkovskaya, the mother of Mikhail Khodorkovsky, passed away on August 2, 2014. She was affectionately regarded among the international community of supporters in this case, and was renowned for her courage and strength of character. Read more about her remarkable life here, and view a photo gallery of her work with Russian orphans at the Koralovo Lyceum here.