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Yukos International Arbitration Yields Record $50 Billion Award

Tuesday, August, 12, 2014


An international arbitration panel convened at The Hague has issued a record-setting $50 billion award against Russia in favor of Mikhail Khodorkovsky, former owner of Yukos, an energy company.  The Russian government has been accused of engineering a state takeover of the hugely profitable business, including fabricating back tax claims against Khodorkovsky and then using those claims as an excuse to seize the company’s operations.

 

The $50 billion award is the largest ever issued, but does not include an addition $60 million Russia has been ordered to pay in legal fees.  Russia has not made any public statement on the award.  If the award has not been paid in full by January, 2015, interest charges will start to accrue on any outstanding amount.

 

The legal costs of the arbitration were astounding as well, with law firms (mainly based in the United States) billing more than $100 million in direct fees as well as expert witness fees and other professional fees.  Khodorkovsky’s lawyers, for example, billed more than 120,000 hours for the arbitration process at rates ranging from $235 to $1065 an hour.

 

The tribunal went out of its way to praise the attorneys and other experts involved in the lengthy and complex arbitration hearing process, stating that ‘each party was represented by eminent counsel.  The quality of the written and oral pleadings was outstanding.  Counsels of both parties are commended for their high professionalism.’

 

Russia is a major supplier of oil and natural gas to Europe and other regions, and the Russian government has been particularly aggressive in nationalizing energy companies in Russia that found independence after the fall of communism.