The Yukos Arbitration Decision in a Nutshell

yukos_bigHere is a short summary of the most important points of the Yukos arbitration award which former shareholders are now trying to enforce in Belgium, France and other European countries. Diana Bentley of Lexis Nexis interviewed Yaraslau Kryvoi.

What was the dispute about?

The tribunal, the Permanent Court for Arbitration, constituted under UNCITRAL Rules and based in the Netherlands, considered claims that the Russian Federation violated rights of shareholders of Yukos Oil Company (Yukos), once the largest oil company of Russia.

What principles were involved?

Yukos shareholders complained of an unlawful expropriation of their investments by the Russian Federation, also arguing that it was subject to arbitrary, unfair and discriminatory treatment. Most of the award deals with protection of shareholders of Yukos who accused the Russian Federation of using taxation as a tool to expropriate the assets of Yukos.

What were the major issues involved in the case?

The award is over 600 pages long, so the tribunal covered a great number of issues. The major issues involved were whether the Russian Federation was acting in good faith initiating various tax reassessments, inspections and proceedings in relation to Yukos or whether it was a pretext to get its assets.

Another important issue related to whether certain actions of Rosneft, a state-owned Russian company, could be attributed to the Russian Federation. The Russian Federation argued that they were not attributable to it. However, the tribunal decided that there was plenty of evidence that Rosneft’s actions were attributable to the Russian Federation and even included several quotes from Vladimir Putin to illustrate the point. The tribunal also agreed with Yukos shareholders that the Russian Federation had actually expropriated their investments rather than legitimately used its power.

The tribunal ordered the Russian Federation to pay damages of over $50bn to the majority shareholders of Yukos. The tribunal also ordered the Russian Federation to reimburse to the claimants $60m in legal fees and  EUR 4.2m in arbitration costs.

What will happen next?

Russia has promised that it will challenge the award. In particular, the Russian Federation’s lawyers are likely to argue that tax disputes were supposed to be referred initially to Russian domestic courts rather than to an international tribunal. Because the tribunal rendered the award in the Netherlands, Dutch courts will consider the challenges.

Although the likelihood of a successful challenge is difficult to predict, certainly a more difficult task for the winning party would be to enforce the award against the Russian Federation. Russian courts will almost certainly refuse to recognise the award in Russia. The Yukos shareholders will have to chase various Russian assets abroad against which they could enforce the award.

Are there any lessons to be learnt in the arbitration community from this case and, in particular, in relation to arbitration against state entities?

The award became by far the largest award ever issued by an arbitral tribunal. It demonstrates the increasing role which private arbitrators can play in relation to countries in which the rule of law is weak.

The award also clarified a number of points, including the arbitrability of tax disputes, creeping expropriation and the attribution of the activities of state-owned companies to the state. For example, according to the tribunal the expropriation of Yukos was not in the public interest, that it was made ‘in the interest of the largest State-owned oil company, Rosneft, which took over the principal assets of Yukos virtually cost-free’. It also explained conditions under which actions of a state-owned company can be attributed to the state.

These and other findings of the tribunal will certainly have an effect on subsequent jurisprudence of arbitration tribunals.

Interviewed by Diana Bentley.


This is shortened version of an interview first published at Lexis PSL Arbitration.  

About the Author:

Professor Yarik Kryvoi, is the founder and co-editor of the CIS Arbitration Forum. He is the Senior Fellow in International Economic Law and Director of the Investment Treaty Forum at the British Institute of International and Comparative Law (BIICL). He holds law degrees from Harvard, Moscow and St Petersburg. Before moving to academia, he practiced law with Freshfields Bruckhaus Deringer, Morgan Lewis & Bockius and Baker & McKenzie in England, the United States and Russia. See full profile at

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