With more than $50 billion on the line, Russia will appeal an international court ruling that handed down the biggest compensation package to date.
The Hague’s Permanent Court for Arbitration ruled Monday that Russia owed more than $50 billion to shareholders of former oil giant Yukos for legal manipulations that bankrupted the company.
The decision stated that Russia’s President Vladimir Putin’s government had not acted in good faith when it brought the massive tax claims against Yukos in 2003 that eventually led to the imprisonment of its CEO, Mikhail Khodorkovsky and the seizure of the company’s main assets by the Kremlin.
Yukos was the largest oil producer in Russia at the time and the actions of the Russian government were widely considered to be President Putin’s retribution for Khodorkovsky’s funding of opposition parties challenging Putin’s power.
Shareholders of GML (formerly known as Group Menatep Ltd.) — once the biggest investor in Yukos — brought the suit against the Russian government. Although the award still fell more than $50 billion short of what they were asking for in lost revenue, GML director Tim Osborne called the ruling a “slam dunk.” He also acknowledged that enforcing it may prove difficult.
Monday’s ruling adds tension to the declining relations between Russia and the West over Russia’s handling of the Ukraine crisis. The Hague’s decision could also put increased pressure on the Russian economy as the United States and Europe debate new sanctions in response to the downing of Malaysia Airlines Flight 17 over the separatist-controlled region of eastern Ukraine.
Russian’s main stock index fell about 2 percent. State-owned oil company Rosneft, which bought Yukos’ most important assets after the company declared bankruptcy, saw shares fall by just over 2 percent.
Russia’s Finance Ministry declared the ruling was “flawed,” “one-sided” and “politically biased,” adding that it believed The Hague did not have the jurisdiction to decide the case.
Russia’s Foreign Minister Sergey Lavrov promised that his country intended to dispute the court’s ruling. “Authorities who are representing Russia in this trial will use all possible legal means to defend their position,” Lavrov said.