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US court backs 1990s Russian oligarchs

The former owners of the defunct oil major Yukos are seeking $50 billion from Moscow

A US court has dismissed Russia’s sovereign immunity defense in the high-profile Yukos case and upheld the enforcement of a $50 billion award to the former shareholders of the now-defunct company, RBK business daily reported on Sunday, citing documents.

Energy giant Yukos, once owned by ex-oligarch Mikhail Khodorkovsky, collapsed in 2006 after the company failed to pay billions of dollars in back taxes.

According to the report, the US District Court for the District of Columbia has rejected Russia’s request to recognize the $50 billion dispute with former Yukos shareholders as not subject to jurisdiction. On November 17, Judge Beryl Howell denied Russia’s motion, filed back in 2015, stating that the dispute with the shareholders was outside the jurisdiction of any foreign court.

“This case can now proceed to the merits to determine whether the final awards [issued in 2014 by the Permanent Court of Arbitration in The Hague – RBK] should be enforced according to the New York Convention,” the judge reportedly wrote, commenting on the order.

The ruling concerns a decade-long trial at the International Court of Arbitration in The Hague, which, in 2014, ruled that Moscow had violated its international obligations by taking steps to bankrupt the massive oil company in the early 2000s. The arbitration tribunal then ordered Russia to pay $50 billion in compensation to the former controlling shareholders of Yukos: Hulley Enterprises and Veteran Petroleum based in Cyprus and Yukos Universal based in the Isle of Man. The Dutch Supreme Court later overturned the ruling.

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Dutch Supreme Court backs Russia over Yukos oligarchs in $57 billion arbitration case

The ex-shareholders, who claim that the Russian government drove the company into bankruptcy for political reasons, later initiated proceedings in several jurisdictions, including the United States. Russia is still challenging the decisions of the Hague court in the Dutch judicial system.

The private company Yukos had been formed after a controversial auction of state assets following the fall of the Soviet Union and quickly became one of the world’s most valuable companies despite investors picking it up for a fraction of its worth.

The founder of the oil and gas giant, Mikhail Khodorkovsky, was arrested in 2003 on fraud charges. Once Russia’s richest man, Khodorkovsky was charged and imprisoned until 2013. Khodorkovsky claimed his arrest was politically motivated – an assessment widely accepted by the Western media.

Moscow denies the charges and says that foreign courts have not considered that national laws around fraud and other wrongdoing might have been broken. In 2020, the Constitutional Court, one of Russia’s highest judicial authorities, ruled that Russia could refuse to pay any settlement imposed by Dutch judges. The basis for the arbitration is the terms of the Energy Charter Treaty, which Moscow signed but never ratified.

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