A Lifetime of
Can a dead oil company still hit a gusher?
By Michael D. Goldhaber
TATYANA MAKEYEVA/AFP/GETTY IMAGES
Seven years have passed since Russia began the campaign against OAO Yukos Oil Company that led to the renationalization of a business controlling more than 3 percent of world oil production, comparable in scale to Chevron Corporation. The dispossessed owners call it the biggest political expropriation
in history. The fall of Yukos has generated history’s biggest arbitrations—and by far the biggest human rights
claim ever—with stakes as high as $100 billion. The
director of the majority shareholder group, Timothy
Osborne, vowed a “lifetime of litigation” against those
responsible, and he is well on his way.
So far, the litigation is going well for the Yukos side.
The company’s former management or shareholders
have prevailed in jurisdictional fights in four different
cases—most recently, with a surprise victory late last
year at the Permanent Court of Arbitration in The
Hague. Now the real battle begins. In March, in a
second case, the main parties finally engaged on the
merits at oral hearing before the European Court of
Human Rights in Strasbourg, France. That court is
expected to render its judgment imminently. While the
damages in Strasbourg are unlikely to be substantial,
the decision could influence the arbitration in The
Hague—where a jackpot judgment is easily imagined.
(Collecting such a judgment is another matter.) And
the impending human rights ruling in Strasbourg may
be crucial to the more realistic hidden strategy of the
former Yukos management behind the ECHR claim.
To understand how the battlefronts fit together is to
see the state of play in international business disputes,
fought in multiple venues and requiring litigants to
engage in ever more complex strategic calculus. As the
Yukos dispute reaches the age of reason, it’s time for a
look back and a look forward.
The Yukos camp has largely persuaded Western
opinion leaders that it was the victim, and its lawyers
speak as if they can skip straight from jurisdiction to
damages without the intermediary step of proving
their claims. “The Russians’ best arguments were all
on jurisdiction and they’ve lost all of them,” asserts
O. Thomas Johnson, Jr., of Covington & Burling, who
represents minority Yukos shareholders. “The only
real issue left is deciding how much Yukos was worth.”
Agrees Emmanuel Gaillard of Shearman & Sterling,
who represents the majority shareholders in the Hague
arbitration: “Russia’s strategy is to postpone the inevi-
table point at which they lose.”
But Russia concedes nothing. Russia was fully justi-
fied in cracking down on a tax cheat, say its lawyers—
speaking for the first time with the press in the hope of
starting to reframe the public narrative.
“If you begin with the premise that Yukos committed
fraud,” argues Michael Goldberg of Baker Botts, who
counsels Russia on strategy, “then the government of
any country in the world had a right to go after that
fraud to the full extent of the law.” Russia has no intention of rolling over on the merits.