Paris court confirms invalidation of seizing Russian space agency accounts in Yukos case

Business & Economy June 27, 2017, 12:38

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

PARIS, June 27. /TASS/. The Paris appeals court has confirmed the invalidation of the seizure of the Russian space agency Roscosmos’ accounts in the Yukos case, the court’s ruling said on Tuesday.

"The Paris appeals court confirms the invalidation of the seizure imposed on the demand of Hulley Enterprises Limited and Veteran Petroleum under Arianspace’s debts to Roscosmos as part of the program for the launch of Soyuz carrier rockets from the space center in Guiana," the court’s ruling says.

The Paris appeals court also noted in its ruling that Roscosmos was a "separate legal entity in Russia and could not be held accountable for debts of the Russian Federation."

2014 court rulings

The Permanent Court of Arbitration in The Hague passed a ruling in July 2014, obliging Russia to pay $50 billion compensation to former Yukos shareholders.

In its final awards, the arbitration tribunal ruled that Russia "had taken measures with the effect equivalent to an expropriation of claimants’ investments in Yukos" and thus had breached article 45 of the Energy Charter Treaty, which Russia signed but never ratified.

Russia subsequently appealed against The Hague Tribunal’s ruling.

The European Court of Human Rights (ECHR) ruled on July 31, 2014 to award over 1.866 billion euros in compensation payments to former Yukos shareholders under their complaint filed against Russia.

Attempts by former Yukos shareholders to seize Russia’s assets abroad

Former Yukos shareholders tried to use Russian assets abroad to enforce these arbitration rulings.

Media outlets had been numerously reporting since June 2015 that Yukos shareholders were seeking the seizure of the accounts of Russia and Russian companies in various European countries.

Specifically, Hulley Enterprises Limited representing the interests of former Yukos shareholders was seeking the termination of the construction of the Russian Spiritual and Cultural Center in Paris, threatening with penalties. However, the Paris court consistently declined to examine the claims of seizing this facility and suspending the works for the center’s construction.

In early April 2016, about $700 million worth of funds owned by Russia’s State Space Corporation Roscosmos and satellite communications operator Russian Satellite Communications Company (RSCC) were seized in France. The French court subsequently ordered to annul the seizure and unlock $300 million owed to Roscosmos. The court found that Roscosmos was a separate legal entity from the Russian government and its assets could not be qualified as the funds belonging to Russia.

The district court of The Hague ruled in April last year that the panel of judges who had passed a $50 billion compensation judgment in favor of former Yukos shareholders had no right to review the dispute. As the Dutch district court ruled, the arbitration tribunal misinterpreted Europe’s Energy Charter Treaty, which Russia signed but never ratified.

The Yukos case

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

In 2007, former Yukos shareholders filed a lawsuit with the Permanent Court of Arbitration in The Hague claiming that the Russian government had expropriated Yukos’s assets and demanding compensation for losses under article 45 of Europe’s Energy Charter Treaty.

The ex-Yukos shareholders initially claimed $28.3 billion in compensation from Russia but the sum was subsequently increased to $103 billion.

Russian Justice Minister Alexander Konovalov said on December 4, 2014 that in November Russia had challenged The Hague Tribunal’s $50 billion ruling (the examination of Russia’s appeal began on January 28, 2015).

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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