A group of former Yukos shareholders has begun its long promised legal campaign to sue the Russian government for damages caused by the unlawful nationalization of Yukos. GML (formerly known as Group Menatep) and a pension fund representing 40,000 former Yukos employees will have a two week private arbitration hearing at The Hague to determine whether or not Russia is bound by the terms of the Energy Charter Treaty – which it has signed but not ratified. GML is expected to argue that because of Article 45 of the ECT, which states that signatories are bound by the treaty whether they ratified or not, that Russia will be liable. There is coverage in the European Voice and the Times of London, which I extract below:
Tim Osborne, a director of GML, said that Russia was attempting to avoid its legal obligations in a bid to avoid compensating the Yukos shareholders. “Russia was desperate to have the treaty in force when it wanted foreign investment but now it doesn’t want to be hidebound by rules it previously agreed to,” Mr Osborne said.
If the tribunal rules that it has jurisdiction over GML’s claim, another hearing will be held at a later date to determine its merits. More significantly, lawyers said, such a ruling would establish a precedent that would expose Russia and the other states that have not ratified the ECT to lawsuits from investors who believe they have been treated unfairly.
Lawyers said the need for greater legal certainty for foreign investors wasimperative with more than $25 trillion expected to be spent on energy supplyinfrastructure by 2030, according to International Energy Agency estimates.
“This is a truly significant case,” Stephen Jagusch, an energy arbitrationexpert at Allen & Overy, the “magic circle” law firm, said. “In thescheme of things, GML’s claim is actually a drop in the ocean.”
GML’s 51 per cent stake in Yukos was left worthless after the oil company wasdeclared bankrupt in 2006. Unable to meet crippling demands for back taxes,its most valuable asset, Yuganskeneftgaz, was confiscated by Russianauthorities and sold to Rosneft, the state-controlled oil company. Itsfounder, Mikhail Khodorkovsky, was jailed.