Yukos, Investment Round-Tripping, and the Evolving Public/Private Paradigm – Vol. 26 No. 3

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Author: Delphine Nougayrède*

Published: March 2016


The combined $50 billion awards  that were issued by the Yukos investment tribunal against the Russian Federation in July 2014 have already given rise to a considerable amount of commentary  – and more will no doubt be forthcoming. For its part, this article takes a critical look at the treatment by the investment tribunal of the multi-layered cross-border corporate structuring that was implemented by the Yukos shareholders outside of Russia. Beyond its use of Russian trading companies to minimize its Russian taxes, the Yukos group was a sophisticated example of investment round-tripping  by domestic investors, through the use of holding companies and trusts registered in Cyprus, the Isle of Man, Jersey, Gibraltar, the British Virgin Islands (“BVI”) and Guernsey. The paradox of course is that such vehicles are now increasingly viewed as susceptible to misuse and therefore targeted in a number of transparency initiatives, most notably under the auspices of the Financial Action Task Force (“FATF”), Organization for Economic Co-operation and Development (“OECD”) and European Union (“EU”). Important policy reproaches are made to investment round-tripping, notably that it enables tax and regulatory avoidance and that through the use of secretive corporate vehicles it facilitates the laundering of proceeds of criminal activities such as corruption. Such views eminently reflect public law concerns, where the aim is to protect collective welfare, regulate business activity and facilitate the work of law enforcement. But seen from a private law angle, however, round-tripping appears to be more acceptable, because it seeks to achieve other objectives that are considered legitimate in the global order – it enables investors from emerging markets to exercise their party autonomy and access more sophisticated legal orders, and it enables them to claim international property rights protection perceived to be stronger than property rights protection under their domestic laws.

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*Delphine Nougayrède is an adjunct lecturer at Columbia Law School. From 2006 to 2013 she headed DLA Piper’s corporate practice in Russia and the CIS. The author is grateful to Anthea Roberts for her comments on an earlier draft. This article reflects the personal views of the author only and not those of DLA Piper or any of her colleagues; all errors are her own.