Hague revenge: what does the decision of the Dutch court in the Yukos case

That decided by the Dutch court?

District court of the Hague ruled that an international arbitral Tribunal did not have jurisdiction to entertain the dispute between the Russian Federation and the former shareholders of Yukos: Russia in the 1990-ies signed a multilateral Energy Charter Treaty (ECT, it sued former shareholders of Yukos), but has not ratified it. Therefore, Russia had not consented to arbitration under the ECT with foreign investors, according to the court decision. Thus, the Dutch court agreed with the arguments of Russia and overturned the decision of 2014, according to which the Russian Federation had to pay more than $50 billion (a record amount in the history of international arbitration) for “expropriation” of Yukos. Russia is no longer obliged to pay compensation to the companies Hulley Enterprises, Yukos Universal and Veteran Petroleum, according to the judgment of the district court.

What are the arguments used by Russia?

Protection of Russia, in particular, argued that the arbitration had no right to consider the claim of shareholders of Yukos under the Energy Charter Treaty, because Russia has signed the energy Charter Treaty (1994), but has not ratified, and because the company-the plaintiffs, from the outset of their investment in YUKOS was only a dummy offshore companies, which have always been Russian “oligarchs” (, Mikhail Khodorkovsky, Leonid Nevzlin and others), — in other words, were not genuine and bona fide foreign investors. Special attention is also paid to the fact that the arbitrators did not personally fulfill their mandate: according to the Russian defense, court assistant Martin Valasek actually played the role of the fourth referee, having written the bulk of the solution.

“This domestic thing — the Russian tax dispute between the Russian oligarchs and the Russian Federation concerning Russian tax measures against Russian companies” — explains why the Hague Tribunal was not required to consider the Yukos affair, the lawyer of the Russian Federation albert Jan van den Berg at the hearing on 9 February.

The dispute is over?

No. Litigation will continue as the company GML (represents the interests of the former majority shareholders of Yukos) has already said it filed an appeal against the decision of the district court. And the future verdict of the Hague court of appeal still can be challenged in the Supreme court of the Netherlands, so the trials could take at least another two years. “We will file an appeal against this unexpected decision of the Hague court and are fully confident that the law and justice in the end will prevail,” — said the head of the GML Tim Osborne on Wednesday.

Will the Yukos shareholders to continue the arrest of Russian assets?

Yukos shareholders will continue to campaign for the enforcement of the Hague arbitration decisions in other countries. “According to the new York Convention of 1958 the courts in different jurisdictions will have discretion to decide whether to recognize the decision of the Hague arbitration, regardless of the position of the Dutch courts,” says GML. Previously, Yukos shareholders have launched processes in six countries — Belgium, France, the UK, Germany, USA and India, in order to forcibly exact from Russia $50 billion France and Belgium the local law allowed the shareholders to immediately arrest the Russian assets, although you can take them and sell at public auction, and it is impossible to review all appeals.

As the court of the Netherlands took the side of Russia, most countries can now refuse to enforce an arbitral award in favor of Yukos. Most, but not all. In some jurisdictions (the best example is France) the decision of the international arbitration is treated as “an act of international justice”, not be canceled by a local court of the country, where by coincidence located one or another international Tribunal. French courts did not take into account the process in a Dutch court, so the former Yukos shareholders were able to arrest the appropriate assets in France without regard to the Hague district court. In such countries as Belgium, USA, UK, local courts in principle can allow an arbitral award annulled in the country of basing of arbitration, but rather in exceptional cases.