The EconomistFebruary 22nd 2020 Europe 532
R
arely arethe ramifications of a four-
letter word so great as in the case of Yu-
kos, a defunct Russian oil firm. On Febru-
ary 18th a Dutch appeals court ruled that the
Russian state owes Yukos’s shareholders
$50bn, one of the largest awards ever, for
bankrupting the company using bogus tax-
fraud charges. That reinstated a decision in
2014 by the Permanent Court of Arbitration
(pca), an international dispute-resolution
court in The Hague. In 2016 a lower Dutch
court had overturned the ruling, finding
that thepcalacked jurisdiction. The issue
largely hinged on a single clause in an in-
ternational energy treaty—specifically on
how to interpret its use of the word “such”.
The seizure of Yukos was a turning-
point in President Vladimir Putin’s con-
solidation of power. In 2003 Mikhail Kho-
dorkovsky, then Yukos’sceo and largest
shareholder (and Russia’s wealthiest man),
had begun financing opposition parties
and hinted at running for president. Mr Pu-tin confronted him, and the government
charged the company with $27bn in tax vi-
olations. Mr Khodorkovsky went to prison
for a decade. Yukos was broken up and sold
to state-controlled firms at fire-sale prices.
As the company was being devoured, its
owners and managers began filing law-
suits. They no longer included Mr Khodor-
kovsky, who during his trial had trans-
ferred his shares to a partner. The biggest
case was the one launched at the pcaby a
holding company called gmlthat repre-
sents Yukos’s biggest shareholders. gml
claimed that Russia’s seizure had violated
the Energy Charter Treaty, an international
investor-protection agreement that pre-
scribes arbitration in case of a dispute. Rus-
sia had signed the ectin 1994 but never rat-
ified it. But the treaty states that signatories
agree to apply it provisionally until ratifi-
cation, “to the extent that such provisional
application is not inconsistent with [their]
constitution, laws or regulations”.
Here things get tricky. Russian law, like
that of many countries, does not normally
allow arbitration between private entities
and the state. Russia’s lawyers thus argued
that the parts of the ectproviding for arbi-
tration did not apply, and the pcahad no
jurisdiction. But the pcaruled that it did,
because “such” provisional application re-
fers to that of the treaty as a whole, includ-
ing the bits about arbitration.
Russia appealed to a Dutch district
court, which rejected the pca’sinterpreta-
tion because it would render the phrase “to
the extent that” meaningless. But last week
the appeals court found that the pcawas
right. Russia plans to take the case to the
Dutch Supreme Court, a lengthy process.
gml’s lawyers still have to recover the
money. Their efforts to do so in 2015, after
the initial pcaruling, did not go well. In
Belgium efforts to seize Russian embassy
bank accounts ran up against diplomatic
immunity. When they tried to claim a
$700m French government payment to
Roscosmos, the Russian space agency,
French courts ruled it was a private com-
pany unconnected to state debts. Belgium
and France have since passed “Yukos laws”
making it harder to attach the assets of
sovereign states. Russia is pushing
through constitutional changes that sub-
ordinate international law to its own.
Russia’s low regard for international
law was highlighted again last week in a re-
port that fingered the fsb, Russia’s main
spy agency, in the killing of a Chechen dis-
sident in Berlin last August. The report by
Bellingcat, a cyberforensic investigative
group, and journalists at the Insiderand Der
Spiegelused leaked mobile-phone meta-
data to identify an fsbassociate as the like-
ly assassin. The Yukos case will be less viol-
ent; the Kremlin has threatened tit-for-tat
retaliation against any country that up-
holds seizures of its assets. 7THE HAGUE
A $50bn ruling turns on one wordRussia v YukosMuch ado about
“such”
corted by Swedish diplomats. The Swedes
have been repeatedly denied consular ac-
cess to Mr Gui; China claims he does not
wish to see them. The authorities say he
tried to leak state secrets to foreigners.
The bookseller’s case has poisoned Chi-
nese-Swedish relations. In November,
when he received an award from the Swed-
ish branch of pen,a free-speech group, the
Chinese embassy demanded it be rescind-
ed. Then Ambassador Gui warned of “con-
sequences” if Sweden’s culture minister
participated in the ceremony. (The minis-
ter ignored the warning.) In December the
ambassador warned that China would re-
strict trade with Sweden in retaliation.
All this bluster has won no concessions.
Sweden’s government plans to subject Chi-
nese investments in Swedish companies to
more scrutiny. The business press has also
turned more sceptical of Chinese invest-
ment. In November the parliament passed
a law that allows for a national-security re-
view of Huawei as a potential supplier to
Sweden’s 5gnetwork. That could mean fa-
vouring Ericsson, a Swedish native, over
the Chinese firm. In December some oppo-
sition mps called for Ambassador Gui to be
declared persona non grata. The public is
no more friendly: in a survey of 34 coun-
tries last year by the Pew Research Centre,
70% of Swedes had an unfavourable opin-
ion of China. Only Japan was more hostile.
China may be using Sweden to send a
message to the world—just as it shunned
Norway for years after the Nobel Peace
Prize was awarded to Liu Xiaobo, a man
who argued that the Chinese people should
be allowed to select their own rulers. Am-
bassador Gui recently remarked to a Swed-
ish newspaper that, for all his talk of shot-
guns, Sweden was “not important enough
to threaten”.
Still, the ambassador’s non-threats
seem to have had an effect. Last year the
United Nations Development Programme’s
office in Stockholm cancelled a human-
rights gala at the last minute; Chinese dip-
lomats reportedly objected because it in-
volved photos of the Dalai Lama. And a for-
mer Swedish ambassador to China will
stand trial in March for allegedly arrang-
ing, without authorisation, talks between
Chinese representatives and the daughter
of the imprisoned Mr Gui, in an apparent
effort to secure the daughter’s silence.
Some China-watchers worry that the gov-
ernment secretly wanted the bookseller’s
case shoved under the rug.
A rapprochement looks improbable,
and it is hard to imagine Ambassador Gui
helping to achieve one. He is described by
Swedes who have met him as an old-school
party apparatchik, less polished than some
of his foreign-ministry colleagues. A Rus-
sian-speaker with little English whose pre-
vious post was in Moscow, he was an odd
choice for Stockholm. Meeting with Swed-ish sinologists at his residence not long
after his arrival in 2017, Mr Gui said he had
no idea why he was sent there. He then of-
fered a toast in Chinese over a glass of grain
alcohol. “To Gui Minhai’s victim!” he de-
clared, an apparent reference to the car ac-
cident for which the bookseller was nomi-
nally jailed, and emptied his tumbler. His
appalled guests did not join him. 7No more Mr Nice Gui