Russia won a major legal victory Wednesday when a Dutch court overturned a ruling awarding a record $50 billion in damages to the former shareholders of the now-dismantled Russian oil giant Yukos.
In the latest step in a complex, multi-country legal saga, the district court in The Hague ruled the international Permanent Court of Arbitration (PCA), also based in the Dutch city, was "not competent" to rule in the matter.
Therefore "the Russian Federation is no longer liable for paying compensation to these parties" which the PCA had awarded in 2014.
Moscow, which is still under international sanctions due to the Ukraine conflict, swiftly welcomed the ruling, while the disappointed shareholders told reporters they had been surprised and would appeal.
Yukos was once Russia's biggest oil company but was broken up after its former owner Kremlin critic and ex-tycoon Mikhail Khodorkovsky was arrested in 2003.
His arrest had come shortly after President Vladimir Putin warned Russia's growing class of oligarchs against meddling in politics.
Yukos was sold off in opaque auctions to state companies led by Rosneft between 2004 and 2006. State-owned Rosneft was then small, but has become a leading global player among the world's biggest listed oil companies by production volume.
The claimants, led by the former main shareholder GML, have sought since 2005 to win compensation for what they say are their losses caused by the break-up of Yukos
In a major coup for the claimants, the Permanent Court of Arbitration (PCA) ruled in 2014 that Russia had forced Yukos into bankruptcy with excessive tax claims and sold off its assets to state-owned companies.
It based its ruling on the provisions of a multilateral 1994 accord, the Energy Charter Treaty, which aims to promote energy security, and ordered Moscow to pay in "excess of $50 billion" to the former shareholders -- a record award for the arbitration tribunal.
- 'Surprise' decision -
In a legal game of cat-and-mouse, the claimants have lodged cases in seven different countries including Britain, France and the United States seeking the seizure of Russian assets abroad after Moscow refused to pay out.
But Moscow has long fought the award, and the district Dutch court on Wednesday ruled in its favour.
"The Hague District Court has reversed the awards of the international arbitrators on the grounds that they lacked jurisdiction to arbitrate the cases," the tribunal said in its written decision.
The Hague Court found that since Russia has signed but not ratified the energy treaty, the PCA could not rule in the case. It further ruled that there is no provision in Russian law for arbitration in such disputes.
"This judgement protects the Russian people from the unfounded demands of the Yukos shareholders," the Russian government said in a statement.
Kremlin spokesman Dmitry Peskov said separately "that the process of halting enforcement proceedings will begin in all countries".
But representatives for the shareholders said they believed the district court had "misapplied the law."
"We will appeal this surprise decision by The Hague Court and have full faith that the rule of law and justice will ultimately prevail," said Tim Osborne, director of GML whose group represents about 70 percent of the shareholders.
The shareholders now have three months in which to file an appeal with the Dutch court of Appeal.
Osborne told AFP: "We are not going to be hanging around. We will want to move forward, but it will take us a little while to digest the findings."
Khodorkovsky, who is no longer a stakeholder, slammed the court's decision saying in a Tweet that "the West has decided to weaken the pressure" on Moscow, adding his friends would continue their resistance.
He spent a decade in prison on charges of tax evasion, fraud and embezzlement which he and his supporters say were trumped up in revenge for his political ambitions.
He was suddenly pardoned by Putin in 2013 and flown out of the country.
Russia won a major legal victory Wednesday when a Dutch court overturned a ruling awarding a record $50 billion in damages to the former shareholders of the now-dismantled Russian oil giant Yukos.
In the latest step in a complex, multi-country legal saga, the district court in The Hague ruled the international Permanent Court of Arbitration (PCA), also based in the Dutch city, was “not competent” to rule in the matter.
Therefore “the Russian Federation is no longer liable for paying compensation to these parties” which the PCA had awarded in 2014.
Moscow, which is still under international sanctions due to the Ukraine conflict, swiftly welcomed the ruling, while the disappointed shareholders told reporters they had been surprised and would appeal.
Yukos was once Russia’s biggest oil company but was broken up after its former owner Kremlin critic and ex-tycoon Mikhail Khodorkovsky was arrested in 2003.
His arrest had come shortly after President Vladimir Putin warned Russia’s growing class of oligarchs against meddling in politics.
Yukos was sold off in opaque auctions to state companies led by Rosneft between 2004 and 2006. State-owned Rosneft was then small, but has become a leading global player among the world’s biggest listed oil companies by production volume.
The claimants, led by the former main shareholder GML, have sought since 2005 to win compensation for what they say are their losses caused by the break-up of Yukos
In a major coup for the claimants, the Permanent Court of Arbitration (PCA) ruled in 2014 that Russia had forced Yukos into bankruptcy with excessive tax claims and sold off its assets to state-owned companies.
It based its ruling on the provisions of a multilateral 1994 accord, the Energy Charter Treaty, which aims to promote energy security, and ordered Moscow to pay in “excess of $50 billion” to the former shareholders — a record award for the arbitration tribunal.
– ‘Surprise’ decision –
In a legal game of cat-and-mouse, the claimants have lodged cases in seven different countries including Britain, France and the United States seeking the seizure of Russian assets abroad after Moscow refused to pay out.
But Moscow has long fought the award, and the district Dutch court on Wednesday ruled in its favour.
“The Hague District Court has reversed the awards of the international arbitrators on the grounds that they lacked jurisdiction to arbitrate the cases,” the tribunal said in its written decision.
The Hague Court found that since Russia has signed but not ratified the energy treaty, the PCA could not rule in the case. It further ruled that there is no provision in Russian law for arbitration in such disputes.
“This judgement protects the Russian people from the unfounded demands of the Yukos shareholders,” the Russian government said in a statement.
Kremlin spokesman Dmitry Peskov said separately “that the process of halting enforcement proceedings will begin in all countries”.
But representatives for the shareholders said they believed the district court had “misapplied the law.”
“We will appeal this surprise decision by The Hague Court and have full faith that the rule of law and justice will ultimately prevail,” said Tim Osborne, director of GML whose group represents about 70 percent of the shareholders.
The shareholders now have three months in which to file an appeal with the Dutch court of Appeal.
Osborne told AFP: “We are not going to be hanging around. We will want to move forward, but it will take us a little while to digest the findings.”
Khodorkovsky, who is no longer a stakeholder, slammed the court’s decision saying in a Tweet that “the West has decided to weaken the pressure” on Moscow, adding his friends would continue their resistance.
He spent a decade in prison on charges of tax evasion, fraud and embezzlement which he and his supporters say were trumped up in revenge for his political ambitions.
He was suddenly pardoned by Putin in 2013 and flown out of the country.
