Today, the Court of the Appeal of The Hague dismissed the Russian Federation’s application to set aside the 2014 Yukos awards secured by Shearman & Sterling.

The historic awards were rendered by an Arbitral Tribunal sitting in The Hague under the Energy Charter Treaty (ECT), which held unanimously that the Russian Federation destroyed Yukos Oil Company and appropriated its assets in violation of international law. The Tribunal ordered the Russian Federation to pay damages in excess of US$50 billion to our clients who were the majority shareholders of Yukos Oil Company.  This remains the largest damages award in international arbitration.

Russia applied to set aside the awards before the courts at the seat of the arbitration, The Hague, alleging among other things that it had not agreed to be provisionally bound by the ECT’s arbitration clause.  On February 18, 2020, in a 134-page detailed and comprehensive decision, The Hague Court of Appeal reversed a first instance decision holding that Russian law conflicted with the ECT’s arbitration clause. “In the opinion of the Court, there is no question of conflict with Russian law”, said the Court of Appeal in its press release. The Court also dismissed all of Russia’s other arguments to set aside the awards, including those related to the privatization of Yukos in 1995-1996.

According to the Global Head of Disputes and Head of International Arbitration at Shearman & Sterling, “This is a landslide victory for our clients. By confirming the Arbitral Tribunal’s landmark decisions, The Hague Court of Appeal reinforces the finding that the Russian Federation was bound by its international obligations under the ECT and that it must be held accountable for the largest expropriation in modern history.”

The dispute attracted massive media attention, as it involved the Russian Federation’s attack on Yukos. In the words of the Tribunal, “Yukos was the object of a series of politically-motivated attacks by the Russian authorities that eventually led to its destruction,” the Russian Federation’s aim being “to bankrupt Yukos, assign its assets to a State-controlled company, and incarcerate [Mikhail Khodorkovsky] who gave signs of becoming a political competitor.”

The expropriation of our clients’ investment was achieved through a series of steps, which included paralyzing the Company, manufacturing tax claims, a pretext for the taking of the Company’s assets, using that pretext to take Yukos’ assets piece by piece, and later transferring all of the Company’s assets to Russian State-owned companies Rosneft and Gazprom. The Russian Federation’s actions culminated in the liquidation of Yukos in November 2007, and the complete and total deprivation of our clients’ investments.

Members of the Shearman & Sterling team having contributed to this victory included: in Paris, Ilija Mitrev Penusliski, Andrei Solin, Rudolf Simone-Pont, Elise Edson, Mariia Tsarova, Teresa Vega, Peter Petrov, Pierre Viguier, Anna Guillard Sazhko, François Bordes and Matthew Rogier; in Singapore, Emmanuel Jacomy and Dimitrios Katsikis; in Frankfurt, Yael Ribco; and in Austin, Sarah Kahloun.

The Team