Taxation and Expropriation - the Destruction of the Yukos Oil Empire

By Stephan, Paul B. | Houston Journal of International Law, Winter 2013 | Go to article overview
Save to active project

Taxation and Expropriation - the Destruction of the Yukos Oil Empire


Stephan, Paul B., Houston Journal of International Law


  I. INTRODUCTION   II. THE RISE--YUKOS IN THE ERA OF COWBOY CAPITALISM      A. The Yeltsin Period--1990 to 1999      B. The Putin Period--2000 to 2008  III. THE FALL--EXPROPRIATION BY LITIGATION   IV. THE AFTERMATH--LITIGATION EVERYWHERE      A. Russian Claims on Foreign People and Property      B. Attacking the Yukos Transactions in National Courts      C. International Adjudication    V. IMPLICATIONS FOR THE GLOBAL ECONOMIC ORDER   VI. CONCLUSION 

I. INTRODUCTION

The rise, fall, and death agony of the Yukos conglomerate have all the elements of great literature. The tale features strong personalities, sudden twists of fate, and profound clashes of principle. The arc of the plot tracks Russia's deepest struggles in the two decades since the demise of the Soviet Union and Soviet Communism. Real individuals have suffered, one dying horribly in prison. The events have inspired books and movies, and the story is not close to ending. (1)

This article does not have literary aspirations, but it does press the importance of the Yukos affair as a window into contemporary Russia and, more generally, modern efforts to impose order on the world economy. It focuses not on the human drama of the story, great though it is, but rather on the episode's significance in the ongoing struggle over economic freedom and state sovereignty. Most importantly, the Yukos story indicates the limits to the international rule of law.

In a nutshell, the rise and fall of Yukos illuminates four narratives about the modern world economy. First, it exposes the challenges--some might say insuperable barriers--to creation of a liberal society on Russian soil. Second, it shows the deep problems with top-down law reform in societies undergoing rapid and wrenching political, economic and social change. Third, it demonstrates how renationalization works in a particularly high-stakes context. Finally, it reveals the capabilities and limits of international dispute settlement through courts, arbitration, and diplomacy when confronting profound conflicts between private rights and fiercely guarded national interests.

As for the first point, one must carefully distinguish liberalism from democracy. A democratic society gives the population power and influence through effective mechanisms that translate the popular will into government policy. Liberalism entails the maintenance of institutions, both public and private, that check government power and open up a space for private transactions and expression. Russia since the fall of Communism has enjoyed a robust if imperfect democracy. By every conceivable indicator, President Putin enjoys widespread popular support, with his actions against Yukos in particular bolstering his approval. But democracy does not necessarily lead to constraining the state, as the Yukos affair demonstrates. The voice of the polis can call out for and cheer on the destruction of over-mighty private actors: In Russia, it did. (2)

Law reform was a worldwide growth industry in the 1990s, the era that spawned the Yukos empire. The transition from totalitarian and authoritarian states with government monopolies over economic activity to something that might resemble liberal democracy inspired many to look to law as the midwife of a new order. Foreign specialists, myself included, flocked into the former Warsaw Pact countries in hopes of building new institutions, with law as the bricks and mortar. But for many of the reasons that liberalism did not take to Russian soil, legal reform all too often became a tool for expanding, rather than constraining, state power. The Yukos story is an exemplary tale of the perversion of legal instruments to empower arbitrary and exploitative bureaucrats to destroy private wealth. It also suggests something more general about the limits of law in shaping social change.

On a technical level, Yukos provides a textbook example of how formal legal requirements, in particular tax law, can lend themselves to a program of renationalization of the commanding heights of the economy.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Taxation and Expropriation - the Destruction of the Yukos Oil Empire
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?