Yukos v. Russia: The Largest Arbitral Award Ever

In an historic arbitral award rendered on July 18, 2014, an Arbitral Tribunal sitting in The Hague under the auspices of the Permanent Court of Arbitration (PCA) held unanimously that the Russian Federation breached its international obligations under the Energy Charter Treaty (ECT) by destroying Yukos Oil Company and appropriating its assets.

The Tribunal ordered the Russian Federation to pay damages in excess of USD 50 billion to the majority shareholders of Yukos Oil Company. The Tribunal also ordered the Russian Federation to reimburse the shareholders USD 60 million in legal fees, which represented 75% of the fees incurred in the proceedings, and EUR 4.2 million in arbitration costs. This is by far the largest award ever rendered by an arbitral tribunal. 

“This award is a major victory for us. After intense scrutiny, the Tribunal confirmed what the Claimants have been saying all along, namely that Yukos was destroyed, and its assets expropriated, for political reasons”, said Tim Osborne, director of GML, the holding company that indirectly owned the majority of Yukos’ shares.

According to Emmanuel Gaillard, Head of Shearman & Sterling’s International Arbitration Group,“this is a great day for the rule of law: a superpower like the Russian Federation is held accountable for its violations of international law by an independent arbitral tribunal of the highest possible calibre”. 

“The award is final and binding, and is now enforceable in 150 States under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards”, said Yas Banifatemi, International Arbitration partner in charge of the Shearman & Sterling LLP’s Public International Law practice.