Reuters | 11 October 2022

Yukos shareholders seek to enforce $50 bln award against Russia in London court

By Sam Tobin

Oct 11 - Former shareholders of defunct oil giant Yukos on Tuesday asked a judge in London to allow the enforcement of a $50 billion arbitration award against Russia, arguing that recent sanctions against the country make it more likely that state-owned assets will be removed from Britain.

The former shareholders are applying to London’s High Court to lift a temporary block on enforcement of the judgment in the UK it imposed in 2016, arguing that a November 2021 ruling by the Dutch Supreme Court means the block should be lifted.

The Permanent Court of Arbitration in the Hague ruled in 2014 that the company had been subjected to “a series of politically motivated attacks by the Russian authorities” designed to bankrupt Yukos, formerly Russia’s largest oil company, and ordered the state to pay a group of major shareholders just over $50 billion, which is thought to be the world’s biggest ever arbitral award.

Read also: Yukos vs. Russia : Bonanza for lawyers and investors

The former shareholders, Hulley Enterprises Ltd, Yukos Universal Ltd and Veteran Petroleum Ltd, have since attempted to enforce the award – which has swelled with interest, currently running at $2.8 million a day, to more than $57 billion – in Britain, the U.S. and the Netherlands.

Their lawyer Jonathan Crow said the Dutch Supreme Court had rejected all of Russia’s arguments challenging the arbitration tribunal’s jurisdiction – though it did send the case back to a lower court to consider Russia’s allegations of “procedural fraud” during the arbitration.

He also told Judge Christopher Butcher that Russia’s invasion of Ukraine has “prompted an international response which now makes it far more likely … that the Russian Federation will withdraw assets” from the UK.

“There will be an increasing number of creditors pursuing a diminishing pool of assets,” Crow said.

Russia is not represented at the hearing but argued in written submissions that the shareholders’ application “seeks to ignore the pending fraud challenge to the arbitral awards before the Dutch courts”.

Mikhail Vinogradov, director general of Russia’s general directorate for international legal cooperation, said in the document that the application is “a transparent attempt to take advantage of a situation in which the defendant is bereft of legal representation”.

It was represented by White & Case until June, when the law firm stopped acting for the state. White & Case, which condemned Russia’s “unjustified” invasion of Ukraine in a public statement in March, confirmed in a statement that it no longer represents Russia in proceedings in the UK.

In July, White & Case said in filings in a Washington, D.C., federal court case brought by Yukos shareholders in relation to the same arbitration award that it cannot yet leave that case without breaching its ethical duty not to harm its client.

A judge in D.C. had ruled in April that pausing that case again “is neither warranted nor appropriate”.

The case is Hulley Enterprises Limited and others v. The Russian Federation, CL-2015-000396.

For Hulley Enterprises and others: Jonathan Crow of 4 Stone Buildings, David Peters of Essex Court Chambers, and Stephenson Harwood.

For Russia: not represented.