IISD | September 2014
Yukos v. Russia: Issues and legal reasoning behind US$50 billion awards
by Martin Dietrich Brauch
- In addressing the two jurisdictional issues it had postponed in the 2009 interim award, the tribunal upheld its jurisdiction, finding that the claims were not barred because of the claimants’ illegal conduct or because of the taxation measures carve-out of ECT Article 21.
- The arrests, tax reassessments, fines and the forced sale of the Yuganskneftegaz production facility, among other measures imposed on the claimants, amounted to an indirect expropriation of Yukos, in breach of Russia’s obligations under the ECT during the country’s provisional application of the treaty. The tribunal did not see a need to consider whether Russia also breached the treaty’s fair and equitable treatment standard.
- Along the lines of the award in Occidental v. Ecuador, issued by a tribunal also chaired by Yves Fortier, a 25 per cent reduction in the amount of damages was determined, due to the claimants’ contributory fault in their abuse of the low-tax regions within Russia and their misuse of the Cyprus-Russia tax treaty.
- The claimants were awarded three heads of damages: the value of their shares in Yukos, the value of lost dividends, and interest on both. The tribunal valuated the damages based on a comparable companies method advanced by the claimants’ and corrected by Russia. The valuation date chosen was the award date, as the resulting amount of damages was higher.
- The tribunal granted simple pre-award interest and annually compounded post-award interest. Russia was given a 180-day grace period to pay the US$50 billion in total damages, to reimburse the claimants for the €4 million they had deposited with the PCA for costs, and to repaythem about 75 per cent (US$60 million) of their legal fees.
Full analysis (pdf)