Yukos Shareholder To Sue Russian Government

by Tatiana Smolenskaya, Tax-News.com, Moscow

08 September 2006

The majority shareholder in the bankrupt Russian oil company Yukos, formerly Russia's largest private entity, is suing the Russian government in the world's largest investment lawsuit.

According to a report in British daily The Times, the Energy Charter Treaty Claim is being brought by majority shareholder GML, formerly known as Group Menatep.

GML is arguing that the Russian government discriminated against Yukos and hastened its decline. Initially, it was estimated that the damages being sought stood at $30 billion, but The Times has learnt that this is to rise to about $50 billion because the price of a barrel of oil has risen substantially since a previous valuation.

The case is being heard by the United Nations Commission on International Trade Law in the Hague - a court which the Kremlin argues it is not officially bound by. According to the Times, the case will also not be heard until after next year's Russian presidential elections when Putin is due to stand down.

A previous effort by GML to settle with the Russian government over the Yukos affair met with no response from the Kremlin.

Yukos was brought to its knees by a succession of claims for back taxes by the Federal Tax Service which eventually amounted to almost $30 billion. Some say that this was political retribution after its former chief executive and founder Mikhail Khodorkovsky began supporting groups opposed to President Vladimir Putin.

Khodorkovsky was jailed in 2004 after being found guilty of tax evasion, fraud and embezzlement while the Moscow arbitration court declared the company bankrupt earlier this summer. A subsequent appeal against the bankruptcy decision was rejected.

Yukos's administrator is now preparing to sell off its remaining Russian assets, while the company's Dutch-based overseas holdings are also being liquidated.

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