The European Court of Human Rights in Strasbourg on Thursday began hearing the biggest case in its history with managers from the defunct oil company Yukos claiming £65 billion (US$98 billion) in compensation from the Russian government.
Yukos — owned by the jailed oligarch Mikhail Khordokovsksy — claims the Kremlin deliberately bankrupted the firm in what it says was a “disguised expropriation.” It says the Russian authorities unjustly targeted Yukos with tax and other proceedings.
The £65 billion damages claim is a record for Strasbourg. The case was originally filed in April 2004, as the Yukos empire was forcibly dismembered. The court agreed to hear the case last year, accepting Yukos’ argument that it had little chance of receiving justice inside Russia itself.
Today’s hearing is the first time in six years that representatives from both sides have come face to face. Although a verdict is not expected for many months, the case will cause embarrassment for the Kremlin, which today dismissed Yukos’ accusations as “politicized.”
The break-up of Yukos was the most scandalous episode of former president Vladimir Putin’s controversial tenure. In 2003 Russian prosecutors moved against the oil company, arresting several of its senior executives, and accusing the firm of using shell companies to dodge billions of dollars in tax.
In reality, however, Putin’s grudge campaign against Yukos was politically motivated. It followed Khodorkovsky’s attempts to support opposition parties — and his refusal to heed Putin’s warning to oligarchs who grew rich through dubious state privatizations in the 1990s to stay out of politics. Khordokovsky also annoyed Putin by exploring a possible merger between Yukos and western oil companies.
Once Russia’s richest man, Khordokorvsky has been in jail since 2003. He is serving eight years in prison for tax evasion. His Yukos business was broken up, and handed over to Rosneft, a state-run oil corporation run by Putin’s ally and former KGB colleague Igor Sechin. Over the past year Khodorkovsky has been on trial again, facing further charges of stealing oil and tax evasion.
Khordorkovsky’s second trial has prompted concern in western capitals, with US President Barack Obama describing it as odd, and noting that the new charges were remarkably similar to the previous ones.
Yukos’ lawyers argue the Russian government’s actions were “unlawful, disproportionate, arbitrary, discriminatory and abusive.”
They point out that Russian courts demanded Yukos pay millions in back taxes for 2000 to 2003 — but simultaneously froze the company’s bank accounts. Officials then bankrupted the firm when it didn’t pay up. In 2006, Yukos was declared insolvent.
Foreign investors will watch today’s hearing with interest. Many western companies and shareholders lost millions of dollars invested in Yukos and have so far not been compensated.
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