Justice Delayed

Promising Justice and $50 Billion to Yukos Shareholders, Hague Verdict Raises Thorny Questions

Russian Foreign Minister Sergei Lavrov on July 28, 2014, at a Moscow press conference. Source AFP
Sergei Lavrov, Russia's foreign minister, said at a July 28, 2014 press conference in Moscow that Moscow will challenge a Hague court's $50 billion award to shareholders of the former energy firm Yukos.
  • Why it matters

    Why it matters

    The Hague arbitration court’s record penalty against Russia raises questions about the politicization and effectiveness of international judgments.

  • Facts

    Facts

    • The Hague court found that Russia under President Vladimir Putin conspired to bankrupt and seize Yukos and jail its owners.
    • Former Yukos owner Mikhail Khodorkovsky and his shareholders had no recourse in Russia’s corrupt judicial system, but this is not an issue in nations with established, independent judiciaries.
    • An international arbitration clause may be included in the proposed Transatlantic Trade and Investment Partnership between the United States and European Union.
  • Audio

    Audio

  • Pdf

For those who witnessed the dismantling of the Russian oil company Yukos in its home country, Monday was “the great day for justice.”

Those were the words of the lawyer representing financial holding company GML, the former major shareholders of Yukos, after the Permanent Court of Arbitration in The Hague ordered Moscow to pay €38.45 billion ($51.57 billion) in damages to shareholders of the defunct oil giant. The court found that Russian officials under President Vladimir Putin manipulated the legal system to force Yukos into bankruptcy, took over its assets and transferred them to a state-controlled company, and jailed oil tycoon Mikhail Khodorkovsky, who at the time was the richest man in Russia and a political rival to Mr. Putin.

The 2003 criminal proceedings against Mr. Khodorkovsky – who was brought into a Moscow courtroom like a caged beast – had nothing to do with the rule of law. In a rigged compulsory auction in December 2004, the core of his company was transferred to the completely unknown Baikalfinansgrup, which somehow secured a credit line of €1.26 billion from the state-owned Sberbank. From there the majority of Yukos was passed on to the state-owned oil company Rosneft. Consequently, Rosneft is now the world’s largest publicly traded oil company and includes British Petroleum as one of its major shareholders along with several Rosneft executives.

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