HE HOODIE THAT
Shearman & Sterling’s
Yas Banifatemi wore as
she prepared for trial
in October 2012 had
the Russian word for “Victory” on the
back. On the front was a shirtless Vladimir Putin riding on the wings of a raptor.
Banifatemi was about to second-seat
a $114 billion arbitration brought by the
majority shareholders of OAO Yukos
Oil Company against the Russian Fed-
eration. To raise the spirits of the Shear-
man team as they prepped their case,
she had sponsored a contest for joke
T-shirts and sweatshirts. Other lawyers
wore T-shirts displaying Putin as Uncle
Sam, pointing his finger and declaring,
“I want Yukos!”
That Putin coveted their company
was long obvious to Yukos’ majority
shareholders. In fall 2003, Russia arrested
Yukos chair Mikhail Khodorkovsky on
charges of fraud [see “The Struggle for
Yukos,” pae 92]. In spring 2004, Russia
hit the company with a wave of punitive
fines for back taxes. By the end of that
year, Russian marshals had auctioned off
Yukos’ core asset, which quickly passed
into state hands. Yukos’ remaining assets
met a similar fate after the company was
driven to bankruptcy. Following Shear-
man’s advice, the men who controlled
Yukos filed an investor-state arbitration
in 2004 under the Energy Charter Treaty
before a panel administered by the Per-
manent Court of Arbitra-
tion. On the basis of the
hearing in October and
November 2012 in The
Hague, a panel of three
arbitrators headed by L.
Yves Fortier would de-
cide whether Putin had
truly wanted Yukos—and
had violated international law to get it.
In her flying Putin hoodie, the
45-year-old Banifatemi talked trial strategy with her mentor, Emmanuel Gaillard. At 60, the silver-helmeted Gaillard thought he had seen everything in
arbitration. A few months earlier he had
helped to set a new record for arbitration damages, by winning an award of
over $2 billion for Dow Chemical Company against Kuwait. But this was a case
on the scale of oligarchical wealth.
Shearman’s problem was that oli-
garchs are not very likable plaintiffs.
The man who stood to gain most from
the award was Leonid Nevzlin, who
owned about half of Yukos after he
was gifted the shares of company chair
Mikhail Khodorkovsky. Aside from be-
ing Yukos’ head of public relations,
Russia said, Nevzlin was the company’s
enforcer, and in 2008 he was convicted
in absentia of five murders. Nevzlin,
who had already fled to Israel, regards
the charge as another facet of a Rus-
sian vendetta against Yukos. The Israeli
courts have refused to extradite him.
Gaillard and Banifatemi reviewed the
trial strategy they had agreed upon years
earlier. They would obtain immunity
for Nevzlin to testify—and let the pan-
el judge for itself if he was a murderer.
Shearman believed they had nothing to
hide, and everything to show. They re-
solved to call a long list of fact witnesses
and to reconstruct Russia’s historical re-
cord in incriminating detail.
Somewhere in the Kremlin, or perhaps in the conference room of its lawyers at Baker Botts or Cleary Gottlieb
Steen & Hamilton, Russia made the opposite decision. For better or worse,
they would call no fact witnesses.
That left the Yukos fact witnesses free
to mold the narrative. And so they did.
THE TRIAL CONVENED OCT. 10 IN THE
Peace Palace in The Hague, a neo-Re-
The Path to
Ten years after Russia seized oil giant Yukos, arbitrators found it liable for one of the
largest damages awards ever. The inside story on Shearman & Sterling’s winning strategy.
By Michael D. Goldhaber
Even with a client who had been convicted of murder in
Russia, the Shearman team believed the facts were on
their side. They called a long list of witnesses to reconstruct the seizure of Yukos in incriminating detail.