The award, which was granted to GML Ltd.—formerly Group Menatep—the owner of 60 percent of Yukos, was larger than any prior international arbitration award, and the arbitrators did not mince their words in condemning the action as an illegal confiscation of one of the country’s most valuable assets.
The importance and implications of this case can hardly be overstated. First, the size of the award is enormous, no less than 2.5 percent of Russia’s GDP. Second, Russia is not likely to pay. Should Russia reject the ruling, operations of Russian state companies will suffer from major disruptions, with their bank accounts, commercial ships, and cargo seized around the world. Third, Putin is likely to continue to withdraw from international cooperation and cancel Russia’s ratification of various international treaties and conventions. The ultimate message to Putin is that he cannot go around confiscating companies without fearing consequences.
With his conspiratorial frame of mind, Putin will likely presume that this verdict is part of the Western sanctions that have been ratcheted up over the Russian annexation of Crimea and interference in Ukraine. In fact, the economic impact of the tribunal’s judgment is likely to be greater than the cost to Russia of the sanctions. The Russian RTS index fell by 3 percent today (July 28). But the interpretation that it is related to Ukraine would not be warranted. One of the three arbitrators was nominated by Russia. The tribunal was supposed to render its verdict in the first quarter of this year, but it was delayed to June, then to the middle of July. The ruling was dated July 18, though it was made public today. The reason for the delay is unclear, but this has been a big case with a large volume of evidence.