Russia Slams "Puzzling And Unprecedented" $50 Billion Yukos Award, Challenges "One-Sided" Court Ruling

The Hague is not Vladimir Putin's favorite place today. Following the "war crime" comments earlier, the arbitration court's decision to rule in favor of Yukos shareholders (and thuis against the allegedly "politically motivated" confiscation of the firm's assets by the Russian government) with a $50 billion settlement (half what was sought) has prompted a quick and angry response from the Russian government. Blasting the "one-sided use of evidence," and re-iterating the massive tax evasion that the leadership were involved in, Russia slams "the puzzling unprecedented amount of damages" awarded, claiming the process is "becoming increasingly politicized."


As Bloomberg reports,

The Permanent Court of Arbitration in The Hague found that Russia is liable to pay just under half of the $114 billion sought, GML Ltd., the holding company for Yukos’s main owners, said today.


The decision showed the campaign against Yukos was “politically motivated,” GML head Tim Osborne said in London.

And Russia replies...

Today Permanent Court of Arbitration in The Hague issued a final judgment rendered in three interrelated arbitration proceedings initiated by the former majority shareholders of JSC "NK" YUKOS ". Decisions were based on the Energy Charter Treaty.

Conclusions of the Arbitration Court shall enter into a direct conflict with the findings of the two Houses of the European Court of Human Rights. The European Court of Human Rights twice concluded that JSC "NK" YUKOS "committed massive tax evasion that the leadership of" NK "YUKOS" aware of violations that additional charge of almost all taxes JSC "NK" YUKOS "was lawful and lawful that JSC "NK" YUKOS "was not subject to discrimination, and that the actions of Russian authorities were not of a political nature.

In the Russian Federation drew attention to other serious flaws in the decision of the arbitral tribunal. Among them:

- One-sided and one-sided use of research evidence;


- Completely unacceptable revision challenging the decisions of courts of the Russian Federation, carried out by the Arbitration Court in such a way as if the arbitral tribunal was more authority to challenge acts of the Russian courts;


- Speculative and not confirmed by the Court of Arbitration evidence assumptions about the reasons for the actions of state authorities of the Russian Federation, as well as the use of these assumptions, the Arbitration Court to justify its conclusions that are not supported by the facts;


- The denial of the validity of the Arbitration Court accrual of JSC "NK" YUKOS "income tax because the arbitral tribunal rejected the fact many acts of courts of the Russian Federation, including the decisions of the Supreme Arbitration Court, which have been handed down for many years before the emergence of the dispute;


- Failure of the Arbitration Court properly accommodate them recognized by the fact that several shell trading companies JSC "NK" YUKOS "used a similar scheme of tax evasion and later were reorganized several times and re-registered in places thousands of miles distant from their original location , in an attempt to avoid detection of violations and to prosecute the Russian authorities;


- The inability of the Arbitration Court to come to the obvious conclusion that the management of JSC "NK" YUKOS "aware of the permitted violations of tax legislation and acknowledged that used by trading companies JSC" NK "YUKOS" scheme of tax evasion, if disclosed, led to be "essential" for the financial consequences of the JSC "NK" YUKOS "; guide JSC "NK" YUKOS "also understood that performs actions on tax evasion and that his income trading companies with which taxes have not been paid will be treated as income of the JSC" NK "YUKOS";


- The denial of the validity of the Arbitration Court accrual of JSC "NK" YUKOS "value added tax on the basis of representations of the Arbitration Court on how to be Russian tax legislation and not on the basis of actual requirements of the tax legislation of the Russian Federation to the fact that the presence of such claims is recognized by the arbitral tribunal;


- Failure of the Arbitration Court to pass certain disputes to the competent bodies of the United Kingdom, Cyprus and the Russian Federation, despite the requirement in the Energy Charter Treaty, the transfer for consideration of such issue of whether the tax is an expropriation;


- Senseless and extremely speculative attempt to give a hypothetical valuation JSC "NK" YUKOS "after almost ten years after the alleged expropriation.

Of fundamental importance is the fact that the arbitral tribunal does not have jurisdiction to consider questions put before him. The Russian Federation has not ratified the Energy Charter Treaty. In accordance with paragraph 1 of Article 45 of the Treaty the Russian Federation has not applied any provision of the Agreement is temporarily in the extent to which the provisional application of the provisions of the Constitution, the laws and regulations of the Russian Federation.

In addition, the Russian Federation in any of its more than fifty international agreements on the protection of investments did not consent to arbitration of disputes with investors prior to the ratification of an international agreement, as it would contradict the Russian law.

Finally, the puzzling unprecedented amount of damages awarded by the arbitral award that is brought on the basis of the Russian Federation unratified international treaty and that, moreover, come into direct conflict with the earlier decisions of the European Court of Human Rights.

All these facts confirm that the arbitral tribunal was unable to come to the dispute with the prudence that is required of judges in such situations. Instead of objective, impartial consideration of the case the Arbitral Tribunal conquered their actions tactical reasons and eventually adopted politically biased decisions.

Such an approach undermines the authority of the Court of Arbitration and the Energy Charter Treaty, the mechanism for which is becoming increasingly politicized, as in this case, becomes the object of abuse by domestic investors, tax evaders.

For this reason, and also because of the presence in the arbitral award of significant flaws, the Russian Federation will challenge the arbitral award in the courts of the Netherlands and expects to achieve a fair outcome there.

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In conclusion, the Russian Federation will challenge the arbitration award in the Dutch courts and expects to achieve a fair outcome there; and we suspect the Yukos shareholders should not hold their breath as last time we checked Putin is not exactly "compliant" with arbitrary western propaganda decisions.