Dutch court backs $50bn Yukos claim against Russia

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Yukos logo in July 2003, MoscowImage source, AFP
Image caption,
Yukos was previously Russia's biggest oil and gas firm

A Dutch court has upheld an appeal by shareholders demanding billions of dollars in compensation from the Russian state for breaking up the once-mighty Yukos oil company.

The Appeals Court in The Hague said a previous Dutch court ruling in favour of the Russian state was incorrect.

Tuesday's ruling restores the original $50bn (£38bn) compensation award, made by the Permanent Court of Arbitration.

Russia now plans to appeal, so the legal wrangling is set to continue.

Russia's reaction makes it questionable whether any Russian state assets abroad can be seized to enforce the shareholders' rights.

The Yukos affair became a symbol of President Vladimir Putin's determination to rein in the power of billionaire oligarchs who got rich from controversial privatisation auctions in the 1990s.

Yukos Oil's former chief Mikhail Khodorkovsky, a prominent critic of Mr Putin, was arrested in 2003 and the firm went bankrupt in 2006.

In 2014 the Permanent Court of Arbitration (PCA), based in The Hague, ruled that Russian officials had manipulated the legal system to bankrupt Yukos. The bankruptcy followed a Russian government demand for billions of dollars in back taxes.

The PCA ruling was upheld by the appeals judges on Tuesday, who said Russia was obliged to enforce the 1994 international Energy Charter Treaty, "unless it was in breach of Russian law". "This court finds that there was no breach of Russian law," they said.

Mr Khodorkovsky spent 10 years in jail, before being pardoned by Mr Putin, and now he lives in exile in London.

The bulk of the Yukos business was taken over by state-run Rosneft, which is now one of Russia's most powerful energy firms.

Image source, AFP
Image caption,
Mr Khodorkovsky continues campaigning for a democratic alternative to President Putin

Mr Khodorkovsky transferred his Yukos stake in 2005 to his former Russian-Israeli business partner Leonid Nevzlin, who now stands to be the main beneficiary of the compensation. Mr Nevzlin, based in Israel, heads the shareholders' group called GML.

Mr Khodorkovsky now runs a pro-democracy activist group called Open Russia, which was blacklisted as an "undesirable organisation" by the Russian authorities in 2017.

In a tweet, Mr Khodorkovsky said "the Kremlin has lost" and the court ruling "confirmed not just the legal case but the essence: 'the seizure of Yukos is not about taxes, but about a battle with political opponents'."

Russia's justice ministry said the government would appeal, as the Dutch court had "failed to take into account the illegitimate use by former Yukos shareholders of the Energy Charter Treaty, that wasn't ratified by the Russian Federation".