The Hague District Court's written ruling overturned a July 2014 decision by the Permanent Court of Arbitration, which ruled that Moscow had used tax claims to seize control of Yukos in 2003 and silence its CEO, Mikhail Khodorkovsky.

The Hague district court ruled Wednesday that the Permanent Court of Arbitration had not been competent to rule on the matter in 2014 and therefore that "the Russian Federation is no longer liable for paying compensation to these parties."

The move is a major victory for Moscow in the dispute over the dismantling of what was once Russia's largest oil producer.

Happy lawyers

The bankrupt company's main former shareholders - Yukos Universal Limited, Hulley Enterprises Limited and Veteran Petroleum Limited - immediately vowed to continue their legal battle for compensation and said they will appeal the decision.

After Moscow originally refused to pay the award in 2014, GML - a holding company belonging to four former Yukos owners - launched proceedings in France, Belgium, Germany, the US and the UK to attempt to enforce it by confiscating Russian state assets.

Moscow meanwhile appointed US law firm White & Case, which argued that Yukos shareholders were not protected by the Energy Charter Treaty as it was designed to protect "legitimate foreign investors," but the claimants were Russian and had acquired Yukos through "murky" auctions in 1995.

Russia also argued that the Yukos shareholders had committed "massive" tax evasion, including tax fraud by routing oil sales through regions set up by the Russian government with special low tax rates.

From R-L: Tim Osborne (Executive Director, GML Ltd), Emmanuel Gaillard (head of Shearman & Sterling's International Arbitration practice) and Yas Banifatemi (head of Shearman & Sterling's Public International Law practice)

Politically motivated?

Khodorkovsky - originally an ally of President Vladimir Putin - began to use his wealth to fund opposition parties that challenged Putin's power. He was arrested in 2003 and jailed for 10 years on fraud charges that were widely seen as politically motivated.

Tim Osborne, director of GML, said the analysis of the "politically motivated destruction of Yukos" had been correct. "We will appeal this surprise decision by The Hague Court and have full faith that the rule of law and justice will ultimately prevail," he said in a statement.

Russian assets worth more than $1 billion have already been frozen in France and Belgium, and court battles are ongoing in Germany, the US, the UK and the Netherlands. Osborne has pledged to expand litigation into other countries in a process he expects to last a decade or more.

The Hague court ordered the former shareholders to pay 16,801 euros ($19,072) in court expenses to Russia.

jbh/jil (AFP, AP)