Sometimes lawyers are the good guys. . . the fight for Putin’s billions
Martin Sixsmith’s Suing the Kremlin chronicles the international legal drama that unfolded when the Russian state seized the oil company Yukos
Corporate lawyers seldom cut a heroic figure, but if there is one undisputed hero in Martin Sixsmith’s Suing the Kremlin: The Battle for Putin’s Billions it is Vasily Alexanyan, the former general counsel of the defunct Russian oil and gas company Yukos.
After being arrested by Russian authorities on false charges, Alexanyan was pressured to perjure himself against other Yukos executives. He refused to do so, even when life-saving healthcare was withheld from him. “I will not commit perjury… I won’t lie. I will not incriminate innocent people,” he declared from pre-trial detention. Released under international pressure, he died aged 39 in 2011, the result of his squalid treatment and complications of the HIV/Aids he contracted from a blood transfusion he received after a car accident. He left behind a young son. On the shoulders of such anonymous men rest modern capitalism and the rule of law.
The legal aftermath of the Yukos saga, familiar to readers of the newspaper business section of a certain age, is the main subject of Sixsmith’s book. In its summary form, Mikhail Khodorkovsky, Yukos’s chairman and one of the infamous Russian oligarchs of the 1990s, had dared to challenge Vladimir Putin, who was then in his first of five terms (so far) as president of Russia.
Putin retaliated by imprisoning Khodorkovsky on spurious fraud and tax charges — he was jailed between 2005 and 2013 — while forcing Yukos into bankruptcy through tax reassessments. Its assets were scooped up in a fake auction by the rival company Rosneft, which promptly floated on the London Stock Exchange and made a killing in the process. Whether Putin personally made money from the dismemberment of Yukos is not known for certain, although Sixsmith notes that his personal wealth is conservatively estimated to be at $200 billion.
As Yukos was being dismembered, its former executives and shareholders plotted revenge from abroad. They hired lawyers who devised a clever strategy to get their money back and humiliate the Putin regime. Under various international treaties, Russia promised to protect foreign investors by allowing them to take Russia to binding arbitration, and this is exactly what happened.
Using the Energy Charter Treaty, which Russia signed in the 1990s to open its energy sector to Western investors, Khodorkovsky associates and the Yukos staff pension fund took Russia to the Permanent Court of Arbitration in the Hague, which despite its name is neither permanent nor a court, but an arbitration registry. There, their lawyers argued that Russia had stolen their money by forcing Yukos into a fake bankruptcy and that they were owed the fair market value of the company.
There followed years of legal wrangling accompanied by Russian skulduggery against the plaintiffs and their lawyers. In 2014 the three arbitrators ruled in favour of the shareholders and awarded them $50 billion, half of what the shareholders wanted but 20 times the previous record for an arbitration award. This led to more litigation from Russia, which attempted to quash the verdict, and from the shareholders who tried to get their money back by seizing Russian government assets across the world, efforts that are continuing.
Not everyone on the corporate side emerges with credit. Sixsmith is particularly scathing about the auditing firm PwC, which under Kremlin pressure withdrew a decade’s worth of audit reports for Yukos, and about the law firms that were more than happy to represent the Russian Federation until its second invasion of Ukraine. Countries such as France and Belgium also behaved in a cowardly fashion by making it hard for Yukos shareholders to enforce the award.
There is a healthy appetite for Russia-related books, and Sixsmith writes with great clarity, perhaps helped by being a non-lawyer and therefore able to extract the human drama from the bloodless meeting rooms of the Hague. But the reader will appreciate that this account is not for everyone: there are limits to how much disputes about the Russian tax code or the enforcement of arbitration awards in third countries against assertions of diplomatic immunity will appeal to most people, no matter how gifted the storyteller.
If there is something missing, it is the perspective of the shareholders. Although Sixsmith interviewed Khodorkovsky and at least two of the five key shareholders, the book is really centred on the corporate lawyers and directors who fought out the battle in courtrooms and boardrooms, who were more than happy to talk. Perhaps the exiled oligarchs preferred to enjoy the money in peace. Not Khodorkovsky, of course, who has become from exile one of Putin’s thorns (having given up his shares, he did not benefit from the arbitration victory, apart from moral vindication).
At its heart, Suing the Kremlin is about the less visible parts of international law. For every Lord Hermer litigating on behalf of Iraqi detainees or rent-seeking island states trying to grab sovereign British territory, there are many more City solicitors and barristers who practise the sort of international law that seldom attracts any public notice.
If you have ever flown abroad or bought a package from a Chinese seller on eBay or invested in a company that does business in a foreign country, you probably have benefited from the intricate web of commercial, trade and investment treaties that make the modern world function. Not even Putin, whose desire to destroy Yukos had to be weighed against the need to boost investors’ confidence in Russia, could afford to ignore them.
Suing the Kremlin: The Battle for Putin’s Billions by Martin Sixsmith (Swift Press £25 pp304). To order a copy go to timesbookshop.co.uk. Free UK standard P&P on orders over £25. Special discount available for Times+ members
