Arbitration awards: Now try collecting | The Economist

Arbitration awards: Now try collecting | The Economist:



"RUSSIA breached its obligations under an energy treaty when it seized the assets of Yukos in 2006; so it must pay the former oil giant’s majority shareholders $50 billion. The award, made on July 28th by an international arbitration court in The Hague, was 20 times the previous record for such a case. The investors’ lead lawyer, Emmanuel Gaillard of Shearman & Sterling, says it shows that arbitration is “a mechanism with teeth”.



Russia has until next January to pay up, after which interest will start to accrue. It is unlikely to do so voluntarily. It called the award “politically biased”, implying it was motivated by Russia’s conflict with the West over Ukraine. Although it cannot appeal against the award itself, it may ask the Dutch domestic courts to rule that it was based on an incorrect reading of the law. In a separate case brought on behalf of all Yukos shareholders, on July 31st the European Court of Human Rights awarded them €1.9 billion ($2.6 billion) in compensation.



If Russia does not pay, the shareholders will have to persuade courts in some of the 150 countries that are signatories to a 1958 convention on the recognition of arbitral awards to “attach” any Russian assets in their jurisdictions—that is, declare that they can be seized. National sovereign-immunity laws ensure that things like embassies and military hardware are off-limits, but assets that are both part of the state apparatus and used for “commercial activity” are fair game. Yukos’s lawyers could thus take aim at the foreign refineries and pipelines of partly state-owned Russian energy firms such as Rosneft (which bought a lot of Yukos’s assets) and Gazprom."



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