Yukos shareholders v. Russia are several international court and arbitral cases seeking compensation from the government of Russia. The former shareholders of Yukos claim that Russian courts were not acting in good faith in launching tax evasion criminal proceedings against Yukos, which led to the bankruptcy of the company.
The Yukos Oil Company's former shareholders and management filed a series of claims in courts and before arbitration panels in various countries, seeking compensation for their expropriation. The largest, for over $100 billion, was filed at the international Permanent Court of Arbitration in The Hague in 2007Gregory L. White (September 21, 2011), European Rights Court Delivers Split Yukos Ruling Wall Street Journal.Irina Reznik, Henry Meyer and Alex Sazonov (July 14, 2014), Khodorkovsky Partners Turn Hunters as $140 Billion Rulings Near Washington Post. and resulted in the arbitrators awarding Yukos majority shareholders over US$50 billion in damages. This decision was appealed by Russia and overturned by the Hague's district court, before being upheld by the Court of Appeal of the Hague. On 5 November 2021 the Dutch supreme court struck down the order for Russia to pay $50 billion to former shareholders and referred the case back to the Amsterdam Court of Appeal.
Observers note the bad timing of the final rulings on the majority shareholders' claim for Russia amid the Russo-Ukrainian war. Russia intends to fight these decisions of the international courts.Russia ordered to pay $50 billion over Yukos, Associated PressRussia to appeal against $50bn Yukos shareholder payout, BBCRussia Must Compensate Yukos Shareholders, Says European Court, The Wall Street Journal
US and Russian investors, representing about 15 percent and 5 percent of Yukos, respectively, lack the benefit of an investment treaty. The sole remedy of US-based investors in seeking approximately $12 billion in redressMegan Davies and Douglas Busvine (February 12, 2014), With Khodorkovsky out, Yukos investors fight on Reuters. is to request the State Department and the Office of the United States Trade Representative to espouse the claim to their Russian counterparts, as it is determined by the Magnitsky Act of 2012;Yukos - GML Background Note Shearman & Sterling. State Department officials have reportedly raised Yukos investors' concerns at deputy prime minister level in the past.Megan Davies and Douglas Busvine (February 12, 2014), With Khodorkovsky out, Yukos investors fight on, Reuters, February 12, 2014.
Court proceedings of Yukos management
Claim in Houston court
In 2005, Yukos unsuccessfully asked a US court in Houston to send its multibillion-dollar tax dispute with the Russian authorities to an international arbitration forum.Saeed Shah (February 2, 2005), "Yukos wants international arbitration in tax dispute", The Independent. By bringing the case in a US court, Yukos sought to focus international attention on its travails and increase pressure on Russian authorities.Yukos Seeks Refuge in a U.S. Court", by Gregory L. White, Russell Gold and Thaddeus Herrick, online.wsj.com, December 16, 2004; accessed August 4, 2014.
Claim in the European Court of Human Rights (ECtHR)
Application and admission On April 23, 2004, shortly after the imposition of the tax assessment for the year 2000, the former management of Yukos (OAO Neftyanaya kompaniya YUKOS) submitted an application to the European Court of Human Rights.
Yukos’ claim in the ECHR argued that the company's rights, protected by the European Convention on Human Rights, were violated in Russian courts, which led to its bankruptcy and liquidation; it also argued that Yukos has been singled out for discriminatory treatment. Yukos officials complained that their rights were breached under several articles of the Convention, specifically:“Under Article 6 (right to a fair trial) of the Convention, the applicant company complains about various defects in the proceedings concerning its tax liability for the year 2000. Under Article 1 of Protocol No. 1 (protection of property), taken alone and in conjunction with Articles 1 (obligation to respect human rights), 13 (right to an effective remedy), 14 (prohibition of discrimination) and 18 (limitation on use of restrictions on rights) of the Convention, it complains about the lawfulness and proportionality of the 2000–2003 Tax Assessments and their subsequent enforcement, including the forced sale of OAO Yuganskneftegaz. Lastly, the applicant company complains, under Article 7 (no punishment without law) of the Convention, about the lack of proper legal basis, selective and arbitrary prosecution and the imposition of double penalties in the Tax Assessment proceedings for the years 2000–2003.”
Following an admissibility assessment that took five years, the court declared the Yukos application admissible on 29 January 2009. The Court declares admissible only less than 5% of all submitted applications.
Proceedings The hearing on merits of the Yukos Oil Company v Russia case in the European Court of Human Rights took place on 4 March 2010. Yukos Oil Company was represented by Piers Gardner, Barrister of Monckton Chambers. The Russian side was represented by a team of lawyers, which included Georgy Matyushkin, Representative of the Russian Federation at the European Court of Human Rights, and British lawyer Michael Swainston. The claim before the ECHR amounted to US$98 billion – as majority shareholders did in the arbitration case before the Permanent Court of Arbitration in The Hague – but later reduced the claim."Moscow ordered to pay Yukos shareholders €1.9bn", by Neil Buckley, Financial Times, July 31, 2014. This was the largest claim to be brought in the court's history. The claim was an estimate of what the value of Yukos would have been if its assets had not been stripped away and the company had not been liquidated in 2007. The decision was announced on September 20, 2011.
The court announced that the Russian state violated the human rights of Yukos by agreeing there had been a violation of Yukos' right to fairness in legal proceedings in relation to a tax re-assessment for 2000. The court also established that there had been a violation of the right to protection of property through enforcement proceedings carried out over tax assessments from 2000 to 2003. The interpretation of the tax liabilities which were applied to Yukos was foreseeable, but the court still noted that the crux of the case was the rapid and inflexible enforcement of those liabilities. Yukos had been effectively paralysed because all of its assets were frozen from the first assessment. The court held that two factors in particular contributed to Yukos' demise and violated Article 1 of Protocol No. 1:
''1. The bailiff's choice of Yukos' principal subsidiary as the first target for auction, without considering the implications for the company's future: this dealt Yukos a 'fatal blow';
2. The Russian authorities were unyielding and inflexible in response to requests for time to pay and the bailiffs imposed additional fines amounting to €1.15 Bn, which had to be paid before the taxes, but the payment of which was prohibited under the freezing orders." The court did however note that the tax assessments themselves were not considered disproportionate. It was agreed that there was not enough evidence to suggest that Yukos had been treated differently from other companies and so no violation of Article 14 was found. The court denied an allegation that Russia misused legal procedures to dismantle Yukos despite the court's nine-judge panel finding that Russia violated three articles of the European Convention on Human Rights. Both sides claimed victory over the ruling.
No monetary amount was awarded after the European Court of Human Rights (ECHR) found the question of damages as "not ready for decision". Both parties subsequently had three months to reach a settlement. The ECHR ruling became final on March 8, 2012 when the ECHR Grand Chamber did not accept the request of the Yukos Oil company to have its application to the court referred to the Grand Chamber.
The ECHR invited a claim for 'just satisfaction', or compensation, from Yukos, which sought compensation of just under 38 billion euros. These damages were being sought on behalf of all Yukos shareholders. There are around 55,000 named Yukos shareholders, some of which are funds representing a number of shareholders. On July 31, 2014, the ECHR awarded shareholders and their heirs €1.87 billion ($2.6 billion), finding Russia failed to strike a "fair balance" in its treatment of Yukos Oil Company. The ECHR also ruled Russia should pay 300,000 euros in costs and expenses, plus any tax. The award fell well short of the €37.98 billion in damages Yukos had asked for. It was also significantly less than the $50 billion in damages that its former majority owners were awarded by a tribunal at the Permanent Court of Arbitration earlier that same week.Gabriele Steinhauser and Gregory L. White, , Wall Street Journal, July 31, 2014. However, it was the largest compensation award made by the court. It was 21 times larger than any previous award by this court., AFP, August 1, 2014
Appeal Russia appealed against the ECHR ruling. In December 2014, however, the court rejected an appeal and decided Russia had six months to work out, together with the Council of Europe, the continent's main human rights and democracy forum, a plan "for distribution of the award of just satisfaction".Gabriela Baczynska (December 16, 2014), Top rights court rejects Russia's appeal over Yukos compensation Reuters.
Enforcement On June 15, 2015, Russia missed the deadline to submit to the Council of Europe a compensation plan for the distribution of the just satisfaction awarded to Yukos shareholdersNeil Buckley and Courtney Weaver (June 18, 2015), France and Belgium freeze Russian state assets over Yukos case Financial Times. after the Committee of Ministers of the Council of Europe issued a final reminder only a few days earlier.Case No. 18, 1230th meeting – 11 June 2015: Case against the Russian Federation Committee of Ministers of the Council of Europe. That same day, more than 90 deputies of the Russian State Duma sent a request to the country's Constitutional Court to clarify how ECHR writs of executions should be applied in Russia. On July 14, 2015, the court ruled that ECHR judgments did "not override the pre-eminence of the constitution in the Russian legal system" and that Russia "can step back from its obligations" if that is the only way to avoid violating its constitution;Russia puts its law above European court rulings BBC News, July 14, 2015. however, the judges also said that they had not yet reviewed the ECHR decision on Yukos since the case had not been filed to the Constitutional Court.
In 2017, the Constitutional Court of Russia overturned a demand by the European Court of Human Rights for the Russian government to pay €1.9 billion to shareholders of Yukos. In response, the Council of Europe condemned Russia's refusal to abide by the Court's ruling, arguing that the country's non-compliance "bears far-reaching consequences for human rights protection in Russia and elsewhere in Europe".Council of Europe in dispute with Russia over Yukos case BBC News, 20 January 2017.
Arbitration proceedings by Yukos Capital