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Yukos Shareholders Capitulate, Settle Legal Dispute that Followed Khodorkovsky’s Arrest and Rosneft Takeover

Last year, an arbitration court in The Hague ordered Russia to pay a small group of majority shareholders and an employee pension fund $50 billion.

A Yukos facility before the company collapsed in 2007

Shareholders of what once was the Russian oil company Yukos, taken over by Russian state-owned oil company Rosneft after the arrest of Yuko’s founder and controlling shareholder Mikhail Khodorkovsky, have settled all litigation between them in all jurisdictions.

And yet, Rosneft announced the agreement “does not envisage any monetary or other payments from Rosneft or its subsidiaries.”

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Essentially, this deal means that the Yukos shareholders have done the math of what it would cost to beat Rosneft in court. Their statement Wednesday admitted the decision to settle was based on “the probability of success in litigation, the probability of success in collection, legal fees associated with future litigation and collection, the timeframe associated with collection and the impact of a settlement upon other ongoing litigation.”

But the deal will now permit the Dutch foundations to distribute payments to former shareholders, which they couldn’t do while those cases were held up in court. This comes to about $594 million. According to the Financial Times, the foundations have about the same amount tied up in a separate legal dispute with Promneftstroy, an investment vehicle controlled by U.S. businessman Stephen Lynch, which claims ownership of a Yukos subsidiary.

According to the FT, the settlement only covers disputes between the Yukos shareholders and Rosneft, separate from cases brought by former Yukos shareholders against the Russian government.

Last year, an arbitration court in The Hague ordered Russia to pay a small group of majority shareholders and an employee pension fund $50 billion.

Rosneft bought the majority of Yukos’s assets when the latter filed for bankruptcy in 2007, following the arrest of Khodorkovsky in 2003. Khodorkovsky served 10 years in jail and was pardoned in late 2013.

The takeover under those circumstances—a brutal assault on Yukos by the Russian state aparatus—generated a lengthy legal battle by two Dutch foundations representing Yukos’ shareholders, in an attempt to recover assets that were seized by Putin’s regime. What followed was a torrent of legal suits in several jurisdictions, including the U.S. and Singapore.

The settlement with the Yukos foundations is a major victory for Rosneft, whose strategy from the start had been to challenge every legal claims against it, and then turn around and file a countersuit in every case.



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