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Judge Rejects Russian Bid, Clearing the Way for Former Yukos Investors

LONDON (AP) — In a dramatic legal confrontation, Russia's attempt to shield itself behind the cloak of state immunity has been thwarted. A judge's ruling on Wednesday paves the way for former Yukos Oil investors to enforce an arbitration award nearing $60 billion, despite Russia's spirited defense.

A Costly Legacy for Russia

Judge Sara Cockerill delivered a resounding rejection of the Russian Federation's High Court bid, asserting that it couldn't invoke state immunity to evade claims brought by three companies representing former Yukos investors. Yukos, once Russia's largest oil company, crumbled under government pressure in 2006, setting the stage for this monumental legal battle.

The award, originally exceeding $50 billion, was granted by an arbitration tribunal in The Hague under the international Energy Charter Treaty of 1991. Over the years, it has accrued nearly $8 billion in interest, with counsel for the investors estimating interest at a staggering $2.8 million per day.

Judge Cockerill's verdict tilted in favor of the investors, represented by Hulley Enterprises Ltd., Veteran Petroleum Ltd., and Yukos Universal Ltd. She ruled that Russia's attempt to rehash arguments about state immunity, previously rejected in Dutch courts, was invalid.

A Momentous Precedent

In a legal twist that added an element of perplexity to the case, Judge Cockerill invoked the Civil Jurisdiction and Judgments Act 1982. This act allows foreign rulings on state immunity to be enforced in England if the same decision would have been reached in the local jurisdiction.

The judge emphasized, "It follows that I conclude that there is no reason why, if the relevant hurdles are cleared, there cannot be an issue estoppel arising out of a foreign judgment against a state, just as there can be against an ordinary company or individual."

The Dutch Decisions

The investors had previously contended that Russia, as per Dutch rulings, had submitted to arbitration. This crucial point served as a barrier to Russia's re-argumentation in the High Court.

Notably, the judge dispelled any notion of "special circumstances" that would allow re-argumentation. This case's complexity and the involvement of a multilateral treaty did not dissuade her. "Each of those elements can be grappled with, and a clear path discerned," Judge Cockerill affirmed.

Tim Osborne, chief executive of GML, the majority stakeholder in Yukos, portrayed Russia's legal strategy as a relentless attempt to re-litigate a case that had suffered multiple defeats. He saw this ruling as a step closer to holding the Russian Federation accountable for its actions.

Russia's representation was minimal due to White & Case LLP's withdrawal from the case following the country's invasion of Ukraine. In support of the Ukrainian people, the firm closed its Moscow office and issued a statement.

Repercussions and Ongoing Battles

This legal saga involves multiple twists and turns. While the District Court of The Hague set aside the awards two years after their issuance, this decision was reversed in February 2020 by The Hague Court of Appeal. The Dutch Supreme Court's refusal to entertain Russia's jurisdictional challenges in November 2021 set the stage for a reconsideration of allegations of procedural fraud in the arbitration proceedings.

The shareholders are also waging a battle against Russia's claims of sovereign immunity in a parallel legal confrontation in the U.S.

Despite multiple hurdles, Russia also failed to overturn a $5 billion award won by the financing arm of Yukos at the Swiss Supreme Court. The court dismissed Russia's arguments regarding jurisdiction and public policy violations.

Judge Cockerill's judgment underscored the finality of the Dutch decisions on state immunity, pending a potential referral to the European Court of Justice. The judgment clarified that Russia's successful appeal based on fraud did not affect the question of jurisdiction.

In a final twist, Judge Cockerill rejected Russia's bid to appeal her finding, stating that the grounds of appeal lacked realistic prospects of success. However, she left the door open for Russia to present its case to the Court of Appeal.

As this high-stakes legal battle continues, it remains to be seen how the Russian Federation will navigate these stormy waters.