What’s Really Happening With the Yukos Case

Europe is indeed striking a belated blow for justice in a decade-old dispute over the dismantling of Yukos, once Russia’s biggest oil company. Courts in France and Belgium have ordered a freeze on nondiplomatic Russian state assets, including bank accounts and real estate, to partially satisfy a $50 billion judgment handed down last summer to former Yukos shareholders by an international arbitration panel in The Hague.

Confusion surrounded initial media reports on Wednesday, which spoke of Belgium’s “seizure” of 1.6 billion euros worth of Russian assets. In reality, former Yukos shareholders say, the total value of the assets is still unknown and could be higher than that figure, and they have simply been frozen — not yet taken from Russian authorities.

In countries such as France and Belgium, courts can “make sure that assets can’t be spirited out of the country” if and when last summer’s huge award becomes legally enforceable, said Tim Osborne, executive director of GML Ltd., which represents the former shareholders of Yukos.

“What we’ve done in France and Belgium is to protect these assets for the future so they can be given to us, or sold and the proceeds given to us,” he said.

Similar proceedings are underway in the United States and the United Kingdom, though different legal systems in those countries mean it could be a years-long process to get compensation, Osborne said. He is also pursuing similar actions in other European courts, including Germany.

Russia lashed out at the Belgian court’s move, calling it a “hostile act,” and threatening reprisals against Belgian diplomatic property in Russia. On Thursday, Russia summoned the Belgian ambassador to Moscow to protest what it called a “gross violation of the universally recognized norms of international law.” Russia was a cooperating party to the arbitration and is a signatory to a pair of international agreements that underpin the whole process, including the asset seizures.

The case dates back to 2003, when now defunct Yukos was broken up by Russian authorities, ostensibly over unpaid taxes. Former shareholders of what was once the jewel in Russia’s energy crown took the case to an international arbitration panel, which ruled last summer that senior Russian officials, including President Vladimir Putin, essentially stole Yukos’s assets to better the prospects of other Russian energy firms, including Rosneft. GML Ltd., which represents those shareholders, had sought compensation to the tune of $100 billion, but the court ruled that it was owed about $50 billion — still making it the largest commercial arbitration case ever.

Some of the casualties of the Yukos affair greeted the judicial actions with glee. Mikhail Khodorkovsky, the former Yukos boss who was imprisoned in Siberia, won’t see a dime from the settlement. “But this does not prevent me from sincerely rejoicing, as a Russian citizen, at what is happening now,” he said, according to the BBC.

In the future, former Yukos shareholders could land even bigger fish than a handful of bank accounts and office buildings. They could get their hands on assets belonging to mammoth Russian state-controlled firms, such as Rosneft and Gazprom, in order to fully satisfy last year’s ruling. To do so, they need to convince European courts that the firms are, in fact, state-controlled entities.

That task may be easier than it once looked, thanks to Russian energy bosses themselves. In a bid to fend off a separate European antitrust case earlier this year, Gazprom defined itself as a “strategic, state-controlled entity.”

Photo credit: LIONEL BONAVENTURE/AFP/Getty