THE HAGUE: A Dutch court on Wednesday dealt a heavy blow to former shareholders of the dismantled Russian oil giant Yukos, throwing out a $50 billion compensation award by an international tribunal in a decision hailed by Moscow.
In the latest step in a complex, multi-country legal saga, the district court in The Hague ruled the international Permanent Court of Arbitration, also based in the Dutch city, was "not competent" to rule in the matter.
Therefore "the Russian Federation is no longer liable for paying compensation to these parties" which had been awarded in 2014.
Moscow swiftly welcomed the ruling, while the disappointed shareholders told reporters they had been surprised and would appeal a decision which they believed "incorrectly applies the law".
Yukos was once Russia's biggest oil company but was broken up after its former owner Kremlin critic and ex-tycoon Mikhail Khodorkovsky was arrested in 2003.
His arrest had come shortly after President Vladimir Putin warned Russia's growing class of oligarchs against meddling in politics.
Yukos was sold off in opaque auctions to state companies led by Rosneft between 2004 and 2006. State-owned Rosneft was then small, but has become a leading global player among the world's biggest listed oil companies by production volume.
The claimants, led by the former main shareholder GML, have sought since 2005 to win compensation for what they say are their losses caused by the break-up of Yukos.
In a major coup for the claimants, the Permanent Court of Arbitration (PCA) ruled in 2014 that Russia had forced Yukos into bankruptcy with excessive tax claims and sold off its assets to state-owned companies.
It based its ruling on the provisions of a multilateral 1994 accord, the Energy Charter Treaty, which aims to promote energy security, and ordered Moscow to pay in "excess of $50 billion" to the former shareholders.
In a legal game of cat-and-mouse, the claimants have lodged cases in various European courts seeking the seizure of Russian assets abroad after Moscow refused to pay out.
But Moscow has long fought the award, and the district Dutch court on Wednesday ruled in its favour.
"The Hague District Court has reversed the awards of the international arbitrators on the grounds that they lacked jurisdiction to arbitrate the cases," the tribunal said in its written decision.
The Hague Court found that since Russia has signed but not ratified the energy treaty, the PCA could not rule in the case. It further ruled that there is no provision in Russian law for arbitration in such disputes.
"We welcome the decision from The Hague district court," Kremlin spokesman Dmitry Peskov said, adding Moscow now hopes the proceedings in various countries will be dropped.
But representatives for the shareholders said they believed the district court had "misapplied the law."
"We will appeal this surprise decision by The Hague Court and have full faith that the rule of law and justice will ultimately prevail," said Tim Osborne, director of GML.
The shareholders now have three months to appeal to the Court of Appeal in The Hague, Osborne said, adding it would be up to Moscow to try to stay proceedings already underway in other countries, where each court could take a different view.
Khodorkovsky, who is no longer a stakeholder, spent a decade in prison on charges of tax evasion, fraud and embezzlement which he and his supporters say were trumped up in revenge for his political ambitions.
He was suddenly pardoned by Putin in 2013 and flown out of the country.