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Russia Wins $50Bln Yukos Battle, But War’s Not Over

It is a monumental diversion of attack and counterattack, a global onslaught with stakes of $50 billion.

Former shareholders in Yukos, the now gone oil firm, stalk many of world looking for cash, shares and property belonging to the Russian state, that they afterwards try to seize. Moscow, meanwhile, plays defense, assiduously veiling the resources and threatening to retaliate whenever one is found.

The story starts in 2014, that is when the Permanent Court of Arbitration in The Hague awarded $50 billion in compensation to Yukos’ former owners. The court concluded that Russian authorities had broken the company by punitive taxation claims in the early 2000s after the chief, the oligarch Mikhail Khodorkovsky, fell out with President Vladimir Putin’s Kremlin.

But on April 20, Yukos strike a snag, when a Dutch probity overturned the award, observant the arbitrators had exceeded their authority. Yukos shareholders vowed to continue to fight for asset seizures and appeal the ruling — a process that will take years.

The win strengthens Russia’s position in the cat and mouse game. Andrei Kondakov, the official in charge of coordinating the country’s counterattacks on Yukos, affianced to “fight in every probity and every jurisdiction, meaningful we have the facts, the rule of law, probity and now this preference on our side.”

Catch If You Can

The chase began in January 2015, when Russia missed the payment deadline for the $50 billion indemnification award, heading Yukos’ former owners to target resources in some of the 150 countries that have sealed the New York Convention, an international allotment coercion treaty.

Diplomatic and military security were stable by law. Yukos couldn’t incarcerate a Russian warship or thong off an embassy. On the other hand, any blurb skill tranquil by the Russian state was satisfactory diversion for confiscation. First adult were the most permitted targets, says Tim Osborne, executive of GML, the former Yukos holding association spearheading the litigation. That meant genuine estate and bank accounts.

Moscow immediately began countermeasures. As the first notifications of litigation arrived in Moscow in early 2015, Russia abruptly private open state databases of its abroad possessions. Its Foreign Ministry dressed down ambassadors and warned of “retaliatory steps” opposite the countries where Yukos was authorised to proceed. More subtly, when Osborne’s group identified a building they suspicion was blurb and owned by Russia and petitioned to have it frozen, the next day a plaque seemed on the wall indicating it was, in fact, an annex of the Russian Embassy.

Undeterred, Yukos’ lawyers non-stop record in courts in the United States, Britain, the Netherlands, Germany and India. In France and Belgium — where, distinct in other jurisdictions, resources can be solidified even before the arbitration statute is recognized — it is battling to impound resources value some-more than $1 billion.

Pierce the Veil

To get from the singular number billions toward $50 billion, however, Yukos prepared to target Russia’s state companies, initial and foremost, Gazprom and Rosneft. These dual appetite behemoths — Russia’s largest companies and both run by friends of Putin — were the main beneficiaries of the Yukos mangle up. Indeed, the dismantling of Yukos served not usually to ruin the uppity Khodorkovsky — who subsequently spent a decade in jail — yet to seize the commanding heights of Russia’s petro-economy for the Russian government.

These firms have large abroad industries and trading operations in countries from Vietnam to Brazil. Payments to them around unfamiliar banks could also be targeted by Yukos.

But conjunction association is entirely state-owned, and getting at them would meant proof they are “run as fiefdoms of the government,” Osborne said. Gazprom, at least, took the threat seriously: The company’s lawyers insisted it embody warnings about the effect of Yukos lawsuit in its new bond issuance.

All this has been thrown into doubt by the The Hague district court’s Apr 20 ruling. The court motionless the arbitration row did not have office to award remuneration since the arbitration was formed on an appetite covenant that Russia had sealed yet had not ratified.

After Yukos was acquired by Khodorkovsky and his partners in the midst 1990s, the shares were eliminated to offshore companies in Cyprus and the Isle of Man. It was with these offshore companies that the Yukos shareholders — yet not Khodorkovsky, who likely of his shares — sued for damages, claiming the status of foreign investors in Russia stable by an agreement called the Energy Charter Treaty.

Russia pronounced this was ludicrous. Its lawyers also argued the arbitration should not request since the claimants were Russian, not foreign, and that any remuneration was blank since Yukos’ privatization — partial of a widely cursed “loans for shares” intrigue that helped a handful of oligarchs benefit control of key Russian industries — was illegal.

“With the arbitration awards quashed,” the verdict by The Hague probity reads, “the Russian Federation is no longer probable for paying compensation.”

The Game Continues

If that sounds like the end of the matter, it isn’t.

“The probity has misapplied the law,” pronounced Osborne at a daring press discussion following the ruling. He insisted he had “full faith” in a successful appeal.

The ruling does not automatically impact lawsuit in other countries and enforcement courts are not thankful to defer to the Dutch judgement, says Yas Banifatemi, a lawyer representing Yukos.

But the bravado masks a genuine setback. Russia’s authorised team — led by David Goldberg, a Russian-born counsel for U.S. law organisation White Case once described by clients in a authorised office as “a rarely lerned cruel assassin” — will push the Dutch feat in other courts.

It could also change the potential sale of Yukos debt to third parties. A source tighten to the shareholders told The Moscow Times before the April 20 preference that rights to part of the $50 billion endowment could be sold — maybe to Ukraine, that could have used it to offset a $3 billion overdue loan owned to Russia. The source pronounced any sale was still usually a theoretical possibility, yet the decision to overturn the award weakens the enforceability, shortening the value and the odds that it will be sold.

Osborne denied carrying listened such conversations. He pronounced his concentration in on the two-way authorised conflict that he appears to relish. “We will only keep on until we’ve got to $50 billion dollars,” he says. “This is positively not the end of recognition and enforcement.”

Kondakov, however, is equally firm. No allotment is being discussed, he insists. “We don’t have to pay a single penny to this garland of guys,” he says, “It’s not about money. It’s a matter of principle.” 

Article source: http://www.themoscowtimes.com/article/566824.html