Yukos

Yukos Oil Company
Native name
Нефтяна́я Компа́ния Ю́КОС
Industry
  • Oil and gas exploration
  • Oil and gas production
FoundedMoscow, Russia (April 15, 1993 (1993-04-15))
DefunctNovember 21, 2007 (2007-11-21)
FateBankrupted
Headquarters,
Russia
Key people
Revenue5,860,000,000,000 Russian ruble (1994) Edit this on Wikidata
Number of employees
31,565

OJSC "Yukos Oil Company" (Russian: ОАО Нефтяна́я Компа́ния Ю́КОС, IPA: [ˈjukəs]) was an oil and gas company based in Moscow, Russia. Yukos was acquired from the Russian government by Russian oligarch Mikhail Khodorkovsky's Bank Menatep during the controversial "loans for shares" auctions of the mid 1990s.[1] Between 1996 and 2003, Yukos became one of the largest and most successful Russian companies, producing 20% of Russia's oil output. In the 2004 Fortune 500, Yukos was ranked as the 359th largest company in the world.[2] In October 2003, Khodorkovsky—by then the richest person in Russia and 16th richest person in the world—was arrested, and the company was forcibly broken up for alleged unpaid taxes shortly after and declared bankrupt in August 2006.[3] Courts in several countries later ruled that the real intent was to destroy Yukos and obtain its assets for the government, and act politically against Khodorkovsky. In 2014, the largest arbitration award in history, $50 billion (€37.2 billion), was won by Yukos' former owners against Russia.[4] This $50 billion award by the Permanent Court of Arbitration was ruled invalid by the District court in The Hague in 2016,[5] but reinstated by the Court of Appeal of the Hague in 2020.[6]

From 2003 to 2004 onwards, the Russian government presented Yukos with a series of tax claims totaling US$27 billion (€20,1 billion). As the government froze Yukos' assets at the same time, and alternative attempts to settle by Yukos were refused, the company was unable to pay these tax demands.[7] Between 2004 and 2007, most of Yukos's assets were seized and transferred for a fraction of their value to state-owned oil companies.[8]

The Parliamentary Assembly of the Council of Europe condemned Russia's campaign against Yukos and its owners as manufactured for political reasons and a violation of human rights.[9] Between 2011 and 2014 several court cases were won by the former company's management and investors against Russia or against the companies that acquired Yukos assets. The European Court of Human Rights ruled that there had been unfair use of the legal and tax system; the Arbitration Institute of the Stockholm Chamber of Commerce, an established neutral body used by Russia and the West since the 1970s for trade disputes,[10] concluded that the government's action was an "unlawful expropriation" using "illegitimate" tax bills, whose effect was intended to "destroy Yukos and gain control over its assets".

The Permanent Court of Arbitration in The Hague ruled unanimously upon awarding compensation of $50 billion for the company's assets, that Yukos was the target of a series of politically motivated attacks by Russian authorities that eventually led to its destruction, and that Russia had expropriated Yukos' assets in breach of the Energy Charter Treaty.[11][12] The treaty does not prohibit governments seizing or nationalizing commercial assets, but requires investors to be fairly compensated. Though Russia never ratified the full treaty, these clauses were still legally binding under both the treaty and Russian law until 2029.[13][14] According to the Permanent Court of Arbitration's ruling, the primary objective of the Russian Federation was not to collect taxes but rather to bankrupt Yukos, appropriate its assets for the sole benefit of the Russian state and state-owned companies Rosneft and Gazprom, and remove Khodorkovsky from the political arena.[15][16]

  1. ^ "Timeline: The rise and fall of Yukos". news.bbc.co.uk/2/hi/business/4041551.stm. 31 May 2005. Archived from the original on 24 July 2012.
  2. ^ "Fortune 500". Retrieved 10 October 2020.
  3. ^ "Yukos Creditors Told Russian Oil Company Is Doomed". Bloomberg. 25 July 2006. Retrieved 31 August 2008.
  4. ^ "Yukos shareholders $50 billion win is largest arbitration award..." Reuters. 28 July 2014.
  5. ^ Corder, Mike (20 April 2016). "Dutch court quashes $50 billion Yukos shareholders' award". AP NEWS.
  6. ^ Puertas, Omar. "The Yukos Appeal Decision on the Role of Arbitral Tribunal's Secretaries". International Bar Association.
  7. ^ "Yukos case against Russia begins at European court". BBC News. 4 March 2010.
  8. ^ "Russian state oil company wins another Yukos auction". The New York Times. 8 August 2007.
  9. ^ Council of Europe, Parliamentary Assembly. "Resolution 1418 (2005)". Archived from the original on 24 November 2006. Retrieved 6 April 2010.
  10. ^ "Arbitration Institute of the Stockholm Chamber of Commerce: About Us". Archived from the original on 27 September 2014. Retrieved 4 August 2014.
  11. ^ "Permanent Court of Arbitration: Final Awards Issued in 3 Arbitrations Between Former Shareholders of Yukos and the Russian Federation" Archived July 29, 2014, at the Wayback Machine, pca-cpa.org. Retrieved July 30, 2014.
  12. ^ "Court orders Russia to pay $50 billion for seizing Yukos assets", reuters.com, July 28, 2014. Retrieved July 30, 2014.
  13. ^ "Energy Charter Treaty: Coming up for 20 years", published 2014, by Norton Rose Fulbright partners and associates Deborah Ruff, Julia Belcher and Charles Golsong. From p.5: "[A]rticle 45 of the ECT required Russia to apply the ECT 'provisionally'. The tribunal found that Russia could not simply apply the ECT piecemeal, and that Russia had – by signing the ECT – agreed that the treaty as a whole would be applied... On 20 August 2009, Russia gave notice that it wished to [withdraw from] the ECT... Russia is, however, still under an obligation (until 19 October 2029) to afford the investment protection under Part III of the ECT to investments made before 19 October 2009 for 20 years."
  14. ^ Russia Rejects Energy Charter Treaty: A New Era for Investment Arbitration? Archived 24 September 2015 at the Wayback Machine, International Law Office, 22 October 2009.
  15. ^ "Hague court to rule on $50 billion Russian payout to Yukos shareholders", themoscowtimes.com. Retrieved July 30, 2014.
  16. ^ "Yukos shareholders awarded about $50 billion USD", The New York Times; July 29, 2014.