By Andrei Skvarsky.
There is a next-to-zero chance of Russia successfully challenging the recent international court order that it pay more than $50bn to former majority shareholders of Yukos, according to international law firm Shearman & Sterling LLP.
If Moscow refuses to pay the award by January 15, 2015, the claimants may seek the seizure of Russian commercial assets abroad to compensate them for the state’s seizure of their money in liquidating Mikhail Khodorkovsky’s oil giant, Yas Banifatemi, head of public international law at Shearman & Sterling, told EmergingMarkets.me in an email .
Shearman & Sterling had represented the claimants in an arbitration in The Hague that resulted in the $50bn ruling.
A potential Russian action against the order of the Arbitral Tribunal “cannot take the form of an appeal as we know them in national judicial systems, as there is no such thing as a higher court in international law”, Banifatemi said.
All Moscow can do is to file for “setting aside”, i.e. overturning, the order, a procedure that would have to be handled in The Hague at the same tier of the international judiciary, he said.
“Arbitral awards are final and binding, and the only remedy that is available is what is called the setting aside of an award (which is based on very limited grounds, and does not concern the merits of the case), to be distinguished from an appeal (which normally allows a higher court to review the full case including on the merits),” Banifatemi said.
If Moscow loses a setting-aside action and still refuses to cough up the money by January 15, 2015, it may face the seizure of Russian commercial assets abroad, according to Banifatemi, who was one of the representatives of the Yukos ex-stakeholders at the litigation.
In spite of all this, Russia can hardly be imagined to pay the award. Doing so would mean acknowledgement of a huge political defeat and acceptance of the Arbitral Tribunal’s accusations of flagrant breaches of international law.
The destruction of Yukos and jailing of Khodorkovsky and his business partners has widely been seen as a Kremlin political scheme, and the Hague ruling accused Russia of breaching its obligations under the Energy Charter Treaty (Russia has never ratified the ECT, but the Arbitral Tribunal had argued in 2009 that the country was still bound by it by virtue of its provisional application).
The tribunal said Yukos had been “the object of a series of politically-motivated attacks by the Russian authorities that eventually led to its destruction”, and that the Russian government’s aim had been “to bankrupt Yukos, assign its assets to a State-controlled company, and incarcerate [Khodorkovsky,] who gave signs of becoming a political competitor”.
Most likely, Moscow will brand the ruling as “politicised” and “biased”, labels it has repeatedly used for foreign court rulings and international legal documents in the past, refuse to pay the award and knowingly face potential seizures of its foreign assets, no doubt with stern diatribes from its Foreign Ministry.
“The award is final and binding, and is now enforceable in 150 States under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards,” Banifatemi said.
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