Russia has found an error in the amount of $21.7 billion in the decision of the Hague Court on Yukos

The former owners of Yukos had no right to sue Russia in the Hague, the international arbitration awarded them "extra" $21.7 billion of compensation, and Vladimir Putin meant something different. RBC studied the appeal of Russia in the Yukos case.
Origin source
On Friday, the press service of the Ministry of Finance announced that on 28 January the Russian Federation filed in the District Court of The Hague application to set aside the decisions of the International Court of Arbitration, which in July 2014 decided to recover from the Russian Federation in favor of the former shareholders of Yukos $ 50 billion compensation for the expropriation of the company. Within six months, Russia has not complied with the court's decision, and 15 January on the above amounts began to accumulate interest - at $ 2.4 million per day.

In total, Russia has submitted three applications - the number of plaintiffs who sought compensation in the Yukos case. They were Yukos Universal, Hulley Enterprises and Veteran Petroleum, affiliated with Group Menatep Limited (GML) and monitor with approximately 70.5% of the oil company. Proceedings in The Hague they initiated in February 2005 on the basis of the Energy Charter Treaty.

RBC has studied the Russian Federation an appeal submitted 250 pages (excluding expert opinions - another 150 pages), and understood in its arguments.

Arbitrator and Baron

Russia in the new process will be represented by an attorney, Albert Jan van den Berg, a partner Bel'giiCoy law firm Hanotiau & van den Berg, said in the petition. Van den Berg - President of the NGO International Council for Commercial Arbitration (of ICAA), he enters the referees panel around the world: the American Arbitration Association (New York), the Court of Arbitration of the Federal Economic Chamber (Vienna), the Netherlands Institute of Arbitrators (Rotterdam) , China international economic and trade arbitration Commission (Beijing), the national arbitration (Jakarta) Indonesian Council, the Singapore international arbitration, and others. as a consultant for the law of the Netherlands will be the Baron Louis van Utenhove of Dutch law firm Wessel Tideman & Sassen.

For work the same team of lawyers during the first trial in The Hague, Russia has paid $ 27 million, it follows from the judgment. Her interests were also two law firms - Cleary Gottlieb Steen & Hamilton and Baker Botts.

controversial Charter

The Energy Charter Treaty, which cited in its lawsuit the former shareholders of Yukos, was created to promote international cooperation in the energy sector, its signatureAli 48 countries. This it is, including investment protection and dispute settlement mechanisms between investors and the state.

Russia signed a contract to charter 17 December 1994, but the State Duma has not ratified it. Russia has agreed to only use it on a temporary basis, that is, only "to the extent that the provisional application is not inconsistent with its constitution, laws or regulations." On this basis, the Russian Federation insists that the international arbitration could not consider the requirements of the former shareholders of Yukos.

In addition, Russia believes that the share of the former owners of Yukos are not investments that fall under the protection of the Charter. All three of the plaintiff, who spoke against the Russian Federation, registered in the countries - participants of the Energy Charter Treaty - Hulley Enterprises and Veteran Petroleum - Cyprus, Yukos Universal - the Isle of Man. But they "are part of an extensive network of dummy companies" created by the Russian oligarchs, to provide a "favorable tax system" upon receipt of dividends, according to the appeal. "Through an opaque network of trAstove and other holding structures "these companies are controlled by the citizens of Russia: Mikhail Khodorkovsky, Leonid Nevzlin, Platon Lebedev, Vladimir Dubov, Mikhail Brudno and Vasily Shakhnovsky (in October 2003, co-owners of Yukos transferred their shares of GML in trusts established under the laws of. Guernsey, and have appointed themselves, along with their family members, trustees and beneficiaries. in 2005, Khodorkovsky has ceased to be a beneficiary of the trust on. Guernsey, in this capacity, he was replaced by Nevzlin). Co-owners of Yukos is not brought into the company of foreign investment, and therefore the dispute is not related to the Energy Charter and should be addressed as an in-Russian, Russian is spoken in the application.

Not the mandate

Another reason for the cancellation of the decision by the Russian view is that the former shareholders of Yukos challenged the tax assets to the company, and such matters are subject to a reservation agreement on the Energy Charter, which excludes proceedings in the Arbitration Court. But international arbitration ruled previously that the main purpose of the Russian authorities did not sanctiontaxes, and the expropriation of the oil company.

Russian is also confident that the arbitration provision violated the Energy Charter Treaty, which provides that disputes on expropriation should be considered first by the tax authorities actors: in this case - in Cyprus, the United Kingdom and Russia. And after receiving their expert opinions The arbitral tribunal may make a decision, but the Hague tribunal "inexplicably" did not.

The extra billions

The amount of compensation awarded by the Hague tribunal in favor of the former shareholders of Yukos - $ 50 billion - is considered the largest in the history of arbitration. This score was originally losses are faced with many difficulties, because the court had to handle the scenario "if it were not." In other words, it was necessary to answer the question, how rich would Yukos shareholders, if the company has not been eliminated in 2004-2007.

Russian Defence in its application describes the problem as follows: The court determines the "hypothetical value of a hypothetical company and timesmeasures hypothetical dividends that this hypothetical company would be paid for the period of ten and a half years "(2004-2014 years).

The main Russian claim is that the Court has used 'own non-standard methodology "for calculating that led to the" error ". In this case the arbitrators did not give the defendant an opportunity to present arguments against the methodology. Therefore, the court once again exceeded its authority, considers the protection of Russia. Because of the "significant flaws in the methodology of the Arbitration Court" former shareholders of Yukos unfairly awarded at least $ 21.7 billion loss, according to Russian.

The burden of proof lay in determining damages to the plaintiff, which was recognized by the court. The plaintiffs originally stated amount of $ 114 billion, which was based on the calculations of the expert Brent Kaczmarek from the estimated firm Navigant. Methodology Kaczmarek at the stage of the hearing has been criticized by the defendant's expert - Professor of Finance at the London Business School, James Doe. Moreover, Dow said bluntly that model Kaczmarek "so poorly written and so full of errors" that,of them can not be correct.

As a result, it decided to develop its own model for estimating the cost of a hypothetical Yukos and made it as characterizes Russia, "randomly selecting different parts and pieces of the data submitted by the parties and then combining and combining these parts in ways unforeseen and obviously wrong." Although the court recognized the right of the plaintiffs to recover damages, he concluded that the plaintiffs had failed to prove their size. Therefore, according to Russia, the court should refuse to award damages or at least ask the parties to submit further statements on the matter.

Precedent 1928

Criticizing the court's decision to award the plaintiffs damages in a certain amount, Russia refers to the case of a factory in the Polish city of Chorzow in 1928. This factory for the production of nitric acid, until 1922 there was in Germany, and then came under Polish jurisdiction. The German Government has submitted a complaint to the Permanent Court of Arbitration in The Hague, demanding to recognize the factory illegally confiscated. The Court recognized the right of Germany to the fair complexnsatsiyu, but in relation to one of the constituent parts of the alleged losses pointed to the lack of data needed to determine their size, and he refused to award.

To determine the hypothetical value of Yukos in the middle of 2014, when there was a verdict for compensation, the Court was guided by the assessment of the Company as of November 21, 2007 (the official date of liquidation of Yukos), adjusted for the change in the index "RTS - Oil and gas" for the period from 21 November 2007 to 30 June 2014. Unpaid dividends are estimated for the period from the end of 2004 (an auction to sell the key asset of YUKOS - "Yuganskneftegaz") by mid-2014. Thus, the court used a different starting date, and in calculating dividends for the most part relied on the model Kaczmarek that Professor Doe - an expert on the Russian side - considered untenable.

Russia accuses the arbitral tribunal that he "lost sight of the fundamental concepts of corporate finance theory." The Court in fact counted twice complainants the same redress, because the use contrary to the dyt another scheme of calculating shareholder value and dividends, according to the defendant.

From the theory of finance know that shareholder value of the company, which pays more dividends, growing more slowly than the cost of a similar company that pays a lower dividend (in the first is less money to invest in the creation of value). But the court, on the one hand, used to calculate the equity value of Yukos oil and gas dynamics of the RTS index, ie the growth of comparable oil and gas companies. On the other hand, the court used in the calculation of the hypothetical dividends Yukos model on which the dividend level "significantly exceeds" the dividends actually paid by the companies of the RTS index. As stated in the petition Russian, "both of these results can not both be right", ie "The arbitral tribunal, in fact, double the dividend owed to Yukos considered by awarding them, not only as a dividend, but also as a share of the plaintiffs in shareholder value."

"Rosneft" at anything

Protecting Russia also accuses the court thatin a number of key statements of the verdict, he relied on assumptions rather than on proven facts. In particular, the Court suggested that the state "Rosneft", submitting the application for the acquisition of Yukos assets at public auction, "it is quite possible," acted "on the instructions of the Russian state secret". In the July decision, the court noted that the most important argument in favor of this hypothesis is Vladimir Putin's statement at a press conference on December 23, 2004.

"Now for the acquisition of" Rosneft "well-known asset of the company, I do not remember exactly what it's called - Baikal investment company? In fact, "Rosneft" - a 100 per cent state-owned company - has acquired a well-known asset "Yuganskneftegaz". We are talking about it. In my opinion, everything is done completely by market means. [...] Today the state, using absolutely legal market mechanisms, ensure their interests. I think this is quite normal, "- Putin said then.

Protecting Russia believes that the Hague court had interpreted Putin's statement is incorrect. The Court found that Puin, referring to the "legal market mechanisms," actually admitted that the purchase of "Rosneft" shares "Yuganskneftegaz" at the auction winner - an unknown company "Baikal" - was made in the interests of the state.

But in the application it is approved by Russia, that Putin was not referring to the acquisition of Yukos assets, "Rosneft" and preceding the sale of an asset at a public auction. The President thus explained, is said in the petition that, by selling shares of "Yuganskneftegaz" at public auction, available for all participants, in order to increase the revenue of the treasury, the Russian Federation acted in accordance with "legal market mechanisms."
Suspicious assistant

Russia indicates that the arbitrators of the Hague court did not fulfill its mandate personally. From information recently provided by the parties, it became clear that the Court of Arbitration assistant Martin Valasek, previously presented as a person responsible solely for the performance of administrative work, in fact, devoted significantly more time cartstrazhnym proceedings, than any of the arbitrators, according to the petition.

Registry data show that Valasek billed for 3006.2 hours of work. And 2625 hours, of which he spent at the hearing on the merits. This is 65% more time is needed at this stage of the process of the court chairman Fortier (1592 hours), calculated RF.Valasek lawyers billed for their services at 970 562.50 euros (it costs amounted to EUR 51 718.96), it follows from Russian application.

Comparing the covers of two court decisions - interim dated November 2009 and the final on July 2014 (they provided the Tribunal, allegedly in a hierarchy), Russian defense notes that the status Valasek in the proceedings for Yukos after 2009 has been raised (meaning that his name became not go sixth, and the fourth number, immediately after the transfer of three arbitrators). Russia suspects that Valasek played a significant role in the analysis of the evidence, the court deliberations and the preparation of the final decision, which, in the opinion of the Russian Federation, is a violation of the mandate. At RBC request at the weekend not to ValasekTwet. "It" Bashneft "and" Yukos case ": that the gov