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Russia to appeal ruling of The Hague Arbitration Court — Finance Ministry

July 28, 2014, 18:12 UTC+3
Permanent Court of Arbitration in The Hague ruled on Monday that Russia must pay compensation to former shareholders of the defunct oil giant Yukos
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the Permanent Court of Arbitration

the Permanent Court of Arbitration


MOSCOW, July 28. /ITAR-TASS/. Russia will appeal the ruling of Permanent Court of Arbitration in The Hague, Russia's Finance Ministry has stated on Monday.

Russia will seek annulment of the Hague arbitration court ruling on Yukos, Deputy Finance Minister Sergei Storchak said. “It will be the annulment and contesting procedure in order to annul it [the court ruling],” he noted.

The Permanent Court of Arbitration in The Hague passed a ruling on Monday, obliging Russia to pay $50 billion in compensation to former shareholders of the now defunct oil firm Yukos.

The court’s ruling is based on the Energy Charter Treaty.

The Russian Finance Ministry has said, however, that “the conclusions by the Arbitration Tribunal run counter to the conclusions of the European Court of Human Rights.”

“The European Court of Human Rights has concluded twice that Yukos committed large-scale tax evasion and its management was aware of violations, that all extra tax payments required from Yukos were lawful and legitimate and that Yukos was not discriminated against and the actions by the Russian authorities were not politically motivated,” the Russian Finance Ministry said in a statement.

Russia has also drawn attention to other serious flaws in The Hague’s Arbitration Court’s ruling, including a one-sided investigation and one-sided use of evidence; an absolutely inadmissible review by The Hague Court of complex judgments by Russian courts, as if it were an additional authority for appeals against Russian courts’ judgments; unconfirmed conjectures by The Hague Arbitration Tribunal about the causes for the Russian state bodies’ actions, as well as the use by the Arbitration Tribunal of these conjectures for substantiating its conclusions that are not confirmed by facts; the denial by the Arbitration Court of the grounds for charging extra profit tax payments from Yukos as the Arbitration Court has actually rejected a host of judgments by Russian courts, including rulings by the Higher Arbitration Court that were passed many years before the emergence of this dispute; the senseless and completely speculative attempt to give a hypothetical appraisal of the Yukos value almost ten years after the alleged expropriation, the statement said.

It is fundamentally important that The Hague Arbitration Court had no jurisdiction to examine issues raised before it, the Russian Finance Ministry further said.

Russia has not ratified the Energy Charter Treaty. Besides, Russia has not given in any of more than fifty international treaties on investment protection its consent to arbitration in disputes with investors before ratification of this international treaty because this move would contradict the Russian legislation, the Finance Ministry said in a statement.

“Finally, bewilderment is caused by the unprecedented size of loss compensation awarded by rulings of the Arbitration Tribunal that were passed on the basis of the international treaty unratified by Russia and which come in direct conflict with the earlier judgments by the European Court of Human Rights,” the statement said.

“All these circumstances prove that the Arbitration Court has proved unable to address this dispute with judiciousness required from judges in such situations,” the Russian Finance Ministry said.

“Instead of an objective and unbiased consideration of the matter, the Arbitration Tribunal subjected its actions to situational considerations and, as a result, made politically motivated decisions,” the statement said.

“This approach undermines the authority of the Arbitration Tribunal and the Energy Charter Treaty whose implementation mechanism is acquiring ever more politicized nature and, as in this case, becoming a cause for abuse by internal investors evading tax payments,” the statement said.

Yukos, once Russia’s largest oil firm, was accused of tax crimes and declared a bankrupt by a court ruling in 2006 while its assets were sold at auctions during the liquidation procedure.

Yukos former head Mikhail Khodorkovsky and his business partner Platon Lebedev were found guilty of embezzlement and tax evasion in May 2005 and sentenced to nine years in prison.

While serving their prison term, both Khodorkovsky and Lebedev were found guilty of embezzlement and money laundering in a second criminal case in December 2010 and sentenced to 14 years in prison, with account taken of the jail term they had served.

Khodorkovsky was pardoned by Russian President Vladimir Putin and left the prison in December 2013. Lebedev was released from the jail in early 2014.

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