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Russia to contest Hague court ruling on YUKOS within 3 months - deputy minister

The complainants’ representatives said earlier that Russia had ten days to contest the ruling

MOSCOW, July 30, /ITAR-TASS/. Russia may go to a Dutch court to contest the Hague arbitration court’s ruling ordering Moscow to pay compensation to YUKOS’ former shareholders, Deputy Finance Minister Sergei Storchak said on Wednesday.

The Hague court this week ordered Russia to pay 50 billion U.S. dollars to former YUKOS shareholders. Foreign Minister Sergei Lavrov said the legal process was not completed and Russia would contest it.

“We have three months, but there is no decision [on when to appeal] yet,” Storchak said.

The complainants’ representatives said earlier that Russia had ten days to contest the ruling.

Lawyers speciliasing in international arbitration confirmed to ITAR-TASS that under Dutch legislation an arbitration tribunal’s ruling can be appealed within three months, but only procedural matters, not on the merits.

“If a ruling has been cancelled in the country where the arbitration took place, it may not be implemented by the general rule, even though there can be exceptions,” Alexei Dudko, a partner at Hogan Lovells, said.

Another option for the respondent would be to contest a ruling in the national courts of the countries where the complainant intends to enforce the ruling.

Lawyers from Cleary Gottlieb Steen & Hamilton LLP and Baker&Botts represented Russia in court. But the professional community was surprised by their agreement to have the matter examined within the framework of the European Energy Charter which Russia signed but never ratified, and the choice of the arbiters in the case.

The Russian authorities have flatly denied that the prosecution of YUKOS, its top managers and shareholders was politically motivated. The Russian court found several of the company’s former top officials guilty of a number of criminal offences. Former YUKOS CEO Mikhail Khodorkovsky was given a long prison term for fraud and tax evasion, and his deputy Leonid Nevzlin, who is hiding from the law in Israel, was awarded a life sentence for having organised contract murders and property embezzlement.

The Russian Finance Ministry said the Hague court ruling was contrary to the conclusions made by two chambers of the European Court of Human Rights. “The European Court of Human Rights ruled twice that YUKOS had committed large-scale tax evasion, that the company management was aware of the violations, that the additional tax assessment was legitimate and lawful, that YUKOS had not been discriminated against, and that the Russian state bodies’ actions were not politically motivated,” the ministry said.

It said the Hague arbitration court had no jurisdiction to examine the matter. Russia has not ratified the Energy Charter Treaty and has never consented in any of its more than 50 international agreements on the protection of capital investment to have disputes with investors examined by an arbitration tribunal before ratifying such an agreement as this would run counter to Russian legislation.

The Hague Permanent Court of Arbitration has ordered Russia to pay 50.085 billion U.S. dollars in compensation to former YUKOS shareholders after examining three lawsuits filed by former stakeholders who had jointly demanded 103 billion U.S. dollars.

The court ruled that Russia’s actions against YUKOS could be regarded as expropriation of investments in breach of Article 45 of the Energy Charter which Russia had signed in the 1990 but never ratified.

The biggest sum, 39.97 billion U.S. dollars, is to be paid to the Cypriot offshore company Hulley Enterprises Limited related to YUKOS former shareholder Group Menatep Limited (subsequently renamed GML).

The sum of 8.20 billion U.S. dollars was awarded to another Cypriot company, Veteran Petroleum, which had acted as a pension fund for the YUKOS employees.

Compensation to Man-registered Yukos Universal Limited is 1.85 billion U.S. dollars.

Russia will also have to compensate the complainants for their legal expenses in the amount of 64 million U.S. dollars within 180 days (until January 15, 2015). If the money is not paid within this period, interest will be charged initially at a rate matching the return on the 10-year U.S. Treasury bonds as of January 15, 2015 and then every year on the corresponding date.

The lawsuit from GML, which had held more than 50% of YUKOS shares before the company’s bankruptcy, was filed in 2007. The initial sum claimed was 28.3 billion U.S. dollars which later increased to 103 billion U.S. dollars.

YUKOS founder Mikhail Khodorkovsky owned 70% of GML shares until 2003. After his arrest he transferred the shares to his business partner Leonid Nevzlin. Apart from Nevzlin, other major GML stakeholders are Platon Lebedev, Mikhail Budno, Vladimir Dubov, and Vasily Shakhnovsky (each holding 7.3-8.6% of shares).

GML officials told a news conference in London on Monday that the recourse for 50 billion U.S. dollar compensation from Russia might be sold.