Big changes often start in unexpected places. Very few who have followed Russia's political development over the last decade have kept faith with the idea that international law might act as a source of restraint and influence over the actions of its ruling elite. But a judgment announced by an international arbitration panel sitting in The Hague might just be about to change all that.

In an action brought by the former shareholders of Yukos Oil – the private energy company seized and dismantled by the Russian state in 2004 – the panel was asked to rule on Russia's status under the Energy Charter Treaty (ECT). Thought by many to be a dead letter after Russia signed but then refused to ratify, the ECT turns out to have the legal equivalent of an afterlife. In a landmark decision, the panel ruled that Russia had accepted provisional application of the treaty when it signed and was fully bound by its provisions at the time of its expropriation of Yukos.

The decision opens the way for a claim of damages against the Russian state under the ECT's tough investor protection rules. The shareholders dispossessed by the demise of Yukos will now ask the arbitration panel to rule on the merits of the case, with a compensation claim estimated to be in the region of $50bn-$100bn. Those hearings will probably take two or three years to conclude and the result cannot be predicted with absolute certainty. But to avoid a hefty bill the Russian authorities will have to do something they have conspicuously failed to do so far: to convince an independent court that the seizure of Yukos was a legal act and not a politically inspired violation of property rights.

Sceptical observers might question whether any of this matters. After all, the wastepaper bins of the Kremlin are full of discarded rulings by the European court of human rights. Surely the Russian government could ignore a demand for compensation just as easily as it ignores demands for the extradition of Andrei Lugovoi, wanted in the UK in connection with the murder of Alexander Litvinenko. Well, the long arm of the law appears to be longer in some cases than in others. Under the terms of the New York convention, compensation awards by international arbitration tribunals are recoverable against assets held in any country that adheres to it. In the event of an eventual award against it, any property owned by the Russian state or state-owned enterprises in any of the 142 countries that have adopted the convention would be vulnerable to an enforcement order and seizure.

Perhaps the most interesting thing about this case is that it lays bare the limits of Russia's unofficial state ideology of "sovereign democracy". Developed for the purpose of freeing Russia from foreign dependency and recasting it as an autonomous force in world affairs, its bullish assumptions about Russia's national capacities always ignored the reality of its reliance on access to foreign markets to drive economic growth. Consider, for example, Gazprom's extensive portfolio of infrastructure assets in the downstream European energy market. Carefully built up as a means of increasing its position as a dominant energy provider, this now looks more like a potential source of national vulnerability.

Another significant aspect of this is what it says about the enduring importance of international law as a factor in global politics. Hard power enthusiasts in Russia and the US alike are often dismissive of Europe's preference for a rules-based approach to international relations. But law has a persistent, entangling quality that should not be underestimated as a real and positive constraint on state behaviour. Whereas politicians and business leaders are often biddable and sometimes bribeable, judges in the developed world are usually of a stubbornly independent turn of mind. That may be why Russian policymakers failed to see this coming. In a country where the political elite is more accustomed to seeing the law as an extension of its own power, instead of an independent source of authority over it, the potential consequences of flouting a normally obscure international legal instrument must have been hard to anticipate.

The most sensible course of action for Russia now would be to seek an early out-of-court settlement with Yukos's shareholders. That would allow it to remove uncertainty and prevent disruption to its external economic relations at a time when it is struggling to recover from a severe downturn. It would also go some way to restoring the idea that Russia offers a business climate friendly to foreign investors. It will certainly need foreign capital and technology if it wants to refurbish its increasingly dilapidated energy sector.

But for elements of the ruling elite in Moscow there is a heady mix of pride and profit at stake. The attack on Yukos was the moment that Vladimir Putin established his political authority over the country's once powerful business class and enabled him to distribute the spoils in a way the reinforced his own power base. That would be hard to give up without loss of face and loss of power, yet the alternative could be worse if Russia stumbles on only to face the seizure of up to $100bn of its overseas assets. Either way, it may turn out that the founding act of Putinism also sowed the seeds of its eventual destruction.