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Interview: Expert Says Yukos Ruling Could Take Years To Enforce

Yukos was formerly owned by Mikhail Khodorkovsky, who served eight years in prison on tax-evasion and embezzlement charges before being pardoned last year.
Yukos was formerly owned by Mikhail Khodorkovsky, who served eight years in prison on tax-evasion and embezzlement charges before being pardoned last year.

In what has been the largest such ruling of its kind, an international arbitration court in The Hague has ruled against Russia and awarded former majority shareholders of the Yukos oil company $50 billion for Moscow's seizure and sale of the corporation's assets. But Loukas Mistelis, the director of the School of International Arbitration at Queen Mary University of London, told RFE/RL's Glenn Kates that it could be more than a decade before investors recover these assets.

RFE/RL: Moscow has said it will contest today's ruling in Dutch courts. What are its options?

Loukas Mistelis: There's no appeal mechanism. What there is is a challenge of the award. And the challenge of the award will be an annulment process by national courts that can only be done on procedural grounds.

So [the award could be annulled in that national jurisdiction] if a national court were to find that the tribunal had manifestly exceeded its powers, or there was a significant procedural irregularity or a violation of due process, or the tribunal [was found to be in a country that] shouldn't have had jurisdiction.

So they're entirely procedural grounds. It's not an appeal. An appeal process would effectively modify the decision. The challenge process is that of a process of extinguishing the award, but rarely successful. (Editor's note: After the ruling Moscow claimed that the Dutch court does not have jurisdiction because Russia has signed but not ratified the European Union's Energy Charter, under which the decision was made.)

RFE/RL: If the award is upheld and Russia does refuse to pay, what are the likely consequences and how can Yukos investors be expected to recover the award?

Mistelis: What can happen is of course there are different things of different consequences. The refusal of the Russian Federation to pay would have an [impact] on their credit rating.

The Yukos investors will try to enforce wherever they can enforce. There is a precedent with a case called Franz Sedelmayer versus the Russian Federation. It took him about 10 to 15 years to try to enforce against Russian assets. And he obtained court decisions in Germany and in Sweden, effectively ordering the execution of the award.

RFE/RL: Will other countries work to seize Russian assets?

Professor Loukas Mistelis
Professor Loukas Mistelis

Mistelis: In the European Union there is precedent...where the national courts of these countries will be prepared to enforce against commercial assets of the Russian Federation. So the question will be: What is a commercial asset? So, I'm not sure whether Aeroflot is a state-run company, but it's certainly a commercial company so one could technically enforce against Aeroflot. (Editors' note: Aeroflot is 51 percent owned by the Russian state.)

A fleet in the country -- could enforce against a commercial merchant fleet. They could enforce against other property -- for example, a language school which is owned by the Russian Federation. For assets that will qualify as commercial property, most European jurisdictions will be prepared to enforce.

RFE/RL: How long would you expect this process to continue?

Mistelis: I think it's going to be a long process. It's going to be quite a long process. The Franz Sedelmayer award took nearly 10 years to enforce so I will not be surprised if the Yukos shareholders will need to dedicate 10 or 12 years to recover a substantial part of the award but maybe not the whole award.

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