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02:15 GMT +3 hours22 December 2014
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Court Orders Russia to Compensate Yukos Investors

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An international tribunal has ordered the Russian government to compensate a group of Spanish investors for the losses they suffered when Russia placed Yukos Oil Company under state control, Covington & Burling, the law firm which represented the plaintiff’s interests, said on Thursday.

An international tribunal has ordered the Russian government to compensate a group of Spanish investors for the losses they suffered when Russia placed Yukos Oil Company under state control, Covington & Burling, the law firm which represented the plaintiff’s interests, said on Thursday.

The Arbitration Institute of the Stockholm Chamber of Commerce valued Yukos, once Russia’s biggest oil company, at more than $60 billion at the time the company was nationalized.

The Spanish investors sought compensation under a bilateral investment treaty between Spain and Russia. The court ruled that the Russian government issued illegitimate tax bills and brought Yukos' assets under state control through a series of enforcement actions and eventual bankruptcy.

The tribunal concluded "that Yukos' tax delinquency was indeed a pretext for seizing Yukos assets and transferring them to Rosneft… The finding supports the Claimants' contention that the Russian Federation's real goal was to expropriate Yukos, and not to legitimately collect taxes," Covington & Burling said in a statement.

The claim, Quasar de Valores SICAV S.A., et al. v. The Russian Federation, was filed in March 2007 under the jurisdiction of the Stockholm Chamber of Commerce.

“This case stands for an important principle: If Russia violates its treaty obligations and harms investors, there will be consequences,” said Marney Cheek, a partner at Covington & Burling LLP who represents the Spanish investors.

“The panel’s decision holds Russia accountable and awards compensation to the former shareholders of Yukos,” Cheek added.

Yukos founder Mikhail Khodorkovsky was jailed for eight years in 2005 for fraud and tax evasion. He was sentenced again to seven years at a second trial in December 2010 (later reduced to six years), and he is now not eligible for release until 2016.

Khodorkovsky says he is the victim of a politically-motivated campaign, a charge denied by the authorities.

This latest ruling is the second by an international tribunal entitling Yukos investors to compensation. In a similar case in 2010, an international arbitration tribunal in Stockholm found Russia liable for expropriating a minority shareholder's investment in Yukos and ordered Russia to pay $3.5 million to RosInvestCo UK Ltd., an affiliate of the prominent U.S.-based hedge fund Elliot and Associates.