An international arbitration tribunal in the Netherlands
has awarded the shareholders of the now-defunct Yukos oil company
more than US$50 billion (yep BILLION!), ruling that the Russian
government wrongly seized the company from investors.
The panel, in a roughly 600-page ruling, held that the seizure
of Yukos was a politically driven campaign to neutralise Yukos'
former chairman, Mikhail Khodorkovsky, and distribute the oil
giant's valuable assets to state-owned energy companies. The
award has proven a devastating blow to the Kremlin. Predictably the
Kremlin has already dismissed the decision and vowed to avenge
So how do you enforce a $50 BILLION award? Especially against a
state not known for playing by the rules.
Certainly a march on Moscow might have dramatic flair, but
it's far more likely that shareholders will achieve the results
they want by using courts worldwide to seize Russian state owned
property. The Federal Court of Australia has been prepared to help
in similar situations before. In 2011 it made freezing orders
against a party to arbitration proceedings in Switzerland in
relation to over AUD$700 million of shares in a publicly listed
Australian company (Fortescue Metals). This order was made despite
the fact that both parties were foreign, and the only connection to
Australia was the fact that the assets in contention were located
There are, of course, exceptions and sovereign immunity is the
big one here. If any assets were to be seized, they would have to
be commercial assets, so Yukos shareholders couldn't just claim
ownership over a Russian warship in Sydney Harbour, or ransack the
Russian embassy for fancy office supplies. Nonetheless, there are
still some pretty good prizes up for grabs. Gazprom and Rosneft
would be fair game, and they have significant assets located
outside of Russia. Although we don't imagine Yukos shareholders
will take a crowbar to Gazprom pipelines in Central Asia any time
soon, a court order freezing those assets coupled with a bottle of
vodka would cause the Kremlin to sit up and take notice.
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