Yukos Case against Russia on the Brink of Collapse

The proceedings brought against Russia by the shareholders of Yukos – Mikhail Khodorkovsky’s liquidated oil company – are sputtering to an end.

There are two relevant court Judgments.  The first is a Judgment of the European Court of Human Rights, which awarded the shareholders $1.86 billion.  That Judgment cannot be enforced through the civil courts, with enforcement only being possible through the political machinery of the Council of Europe.  The Russians have made clear they will not comply with this Judgment and the Council of Europe lacks the will and the means to enforce it.

The second Judgment is a whopping $50 billion awarded to the shareholders by the Permanent Court of Arbitration in The Hague.  I discussed here in detail why this Judgment is grossly politicised and obviously wrong.

The Yukos shareholders can in theory enforce the Hague Judgment if they can persuade the civil courts of any particular country to convert it into one of their own Judgments, thereby making enforcement in that country possible.  However given the obviously flawed and biased nature of the Hague Judgment I predicted that the Yukos shareholders would find it next to impossible to do it:

“The Russians know how to deal with this sort of thing. As Russian officials have said, they were expecting it.  There are numerous legal countermoves they can take, especially when some of the asset freezes are obviously illegal, and when they are made to enforce an obviously biased judgment, which is under appeal. Though legal action of one sort or another will doubtless go on for a long time, the eventual outcome is not in doubt . The Yukos shareholders — whether or not Khodorkovsky is behind them — will see at most only a fraction of the money they are claiming, and quite possibly nothing.”

So it is turning out.  First a court in the Netherlands overturned the whole Hague Judgment in so far as it applied to the Netherlands because it was so obviously wrong.  Then news came that legal proceedings to enforce the Hague Judgment in Britain and France have been suspended.  Now there is news the Yukos shareholders have abandoned a case they brought in Germany to enforce the Hague Judgment there.  Since the case brought in Germany was actually withdrawn as opposed to being merely suspended, in what for the Yukos shareholders must be an especially bitter twist, the Russian authorities are demanding they be ordered to pay the legal costs.

That leaves only the US where legal proceedings are still ongoing.  It seems the Yukos shareholders have asked the Russian authorities’ agreement to suspend those proceedings as well, presumably because they know they will lose them.  However the Russian authorities – scenting a kill – have refused.  Presumably those proceedings will shortly also be withdrawn.

These proceedings do not merely signal the probable final collapse of the Yukos case.  They show something else: that the “lawfare” that is being waged against the Russians in some courts has definite limits. 

Whilst it has proved possible to get some courts which administer issues of constitutional or administrative law on side, Western commercial courts – which traditionally strongly prize their independence and which also have to be wary of creating dangerous precedents – are far more resistant.  Contrast for example the completely different way the Commercial Court in London dealt with the issues in the Berezovsky/Abramovich case with the conduct of the public inquiry into the Litvinenko allegations.