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 The arbitration panel in the Netherlands said it had awarded
shareholders in the GML group just under half of their $114 billion
claim, going some way to covering the money they lost when the
Kremlin seized Yukos, once controlled by Mikhail Khodorkovsky.
"The award is a slam dunk. It is for $50 billion, and that cannot be
disputed," said Tim Osborne, director of GML. "It's now a question
of enforcing it."
But Foreign Minister Sergei Lavrov said Moscow would most likely
appeal the decision, so shareholders, who have battled through the
courts for a decade, might have longer to wait.
"The Russian side, those agencies which represent Russia in this
process, will no doubt use all available legal possibilities to
defend its position," he said when news of the award leaked ahead of
the official announcement.
Lawyers, however, said there were only limited grounds on which to
appeal.
The panel of judges, which has been reviewing the case since 2005,
concluded that officials under President Vladimir Putin had
manipulated the legal system to bankrupt Yukos.
"Yukos was the object of a series of politically motivated attacks
by the Russian authorities that eventually led to its destruction,"
the court said. "The primary objective of the Russian Federation was
not to collect taxes but rather to bankrupt Yukos and appropriate
its valuable assets."
ECONOMIC IMPACT
The ruling hits Russia at a time when it faces international
sanctions about its role in Ukraine and anger over the downing of a
Malaysian airliner over eastern Ukraine, where Moscow-backed rebels
are fighting a separatist campaign. The country is also grappling
with slowing economic growth.
"This decision affects the assessment of the long-term financial
stability of Russia and could become the basis for arguments for
revising Russia's ratings by international rating agencies," said
Credit Suisse economist Aleksei Pogorelov.
The $50 billion represents about 2.5 pct of Russia's total GDP
worth, or 57 pct of Russia's Reserve Fund, which is earmarked to
cover budget holes.
The ruling hit Russian stocks. The RTS index <.IRTS> of Russian
shares was down 2.8 percent by 0615 ET.
Separately, The European Court of Human Rights (ECHR) in Strasbourg
is expected on Thursday to announce a separate decision on Yukos's
multi-billion-dollar claim against Russia, ruling on 'just
satisfaction' or compensation, a Yukos spokeswoman said.
Yukos's application in the ECHR, which is on behalf of all Yukos
shareholders, argued that Yukos was unlawfully deprived of its
possessions by the imposition of bogus taxes and a sham auction of
its main asset.
RECLAIMING ASSETS
GML may now face a battle to claim the money from Russia.
"The question is whether Russia will pay that award, which I very
much doubt," said Jan Kleinheisterkamp, an Associate Professor of
Law at the London School of Economics. "This means that ultimately
the shareholders will start to chase Russian assets abroad, which is
a very tedious and usually not very fruitful business."
Antonios Tzanakopoulos, a law professor at Oxford University, said
if assets were to be seized, they would have to be purely commercial
in nature to be expropriatable, meaning it would not be possible to
get an order that an embassy building or a docked Russian warship
should be handed over.
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Russia must pay the compensation to subsidiaries of Gibraltar-based
Group Menatep, a company through which Khodorkovsky, once Russia's
richest man, controlled Yukos.
Group Menatep now exists as holding company GML, and Khodorkovsky is
no longer a shareholder in GML or Yukos.
"We didn’t go into this for a pyrrhic victory to make a point .. We
still believe that we will ultimately collect on this award," said
Osborne.
NO CASH FOR KHODORKOVSKY
Any funds claimed will be shared among the shareholders. The biggest
ultimate beneficial owner is Russian-born Leonid Nevzlin, a business
partner who had fled to Israel to avoid prosecution. He has a stake
of around 70 percent.
Khodorkovsky ceded his controlling interest in Menatep, which owned
60 to 70 percent of Yukos, to Nevzlin, after he was jailed.
Khodorkovsky, who is not a party to the legal action, was arrested
at gunpoint in 2003 and convicted of theft and tax evasion in 2005.
"It is fantastic that the company shareholders are being given a
chance to recover their damages," Khodorkovsky said in a statement,
adding he would not seek to benefit financially from the outcome.
Khodorkovsky's company, once worth $40 billion, was broken up and
nationalized, with most assets handed to Rosnef , a company run by
Igor Sechin, an ally of President Vladimir Putin.
Putin pardoned Khodorkovsky in December after he had spent 10 years
in jail. He now lives in Switzerland.
"I am very pleased the international tribunal in the Hague decided
that Russia violated international laws and illegally nationalized
Yukos," said Nevzlin
The other four ultimate beneficial owners, each of whom owns an
equal stake, are Platon Lebedev, Mikhail Brudno, Vladimir Dubov and
Vasilly Shaknovski. Rosneft, which is not a defendant in the case,
said it expected no claims to be made against the company and that
the ruling would not have a negative impact on its "commercial
activity and assets".
Rosneft bought the bulk of Yukos assets through auctions after the
company was declared bankrupt. Its shares were down 2.5 percent at
0615 ET.
(Reporting by Tom Miles in Geneva, Vladimir Soldatkin, Megan Davies,
Oksana Kobzeva, Lidia Kelly and Alessandra Prentice in Moscow, Tova
Cohen in Tel Aviv, Thomas Escritt and Anthony Deutsche in Amsterdam,
Editing by Elizabeth Piper and Will Waterman)
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