Russia’s government violated the rights of the now-defunct oil behemoth Yukos, the European Court of Human Rights ruled yesterday, but added it was not ready to rule on a claim for nearly US$100 billion in damages.
Russian authorities were unfair in meting out punishment to the company over tax violations and didn’t give Yukos enough time to prepare its defense, according to the ruling from the court in Strasbourg.
Yukos had sought US$98 billion in damages, in the largest claim ever filed in the court’s 50-year history and one of Russia’s biggest legal challenges to date.
The company — a major Russian taxpayer whose primary subsidiary once produced as much oil as all of Libya — was dismantled by Russian authorities after the 2003 arrest of its boss, Mikhail Khodorkovsky. His supporters say then-Russian president Vladimir Putin’s Kremlin mounted an orchestrated effort to destroy a tycoon seen as a threat to Putin’s rule.
The European court found that the question of damages “is not ready for decision” and gave both parties three months to reach an eventual settlement. If they don’t, the court will rule at later on whether to order any damages.
The court’s nine-judge panel found that Russia violated three articles of the European Convention on Human Rights, but rejected several other claims filed by Yukos. It also dismissed the Russian government’s argument that the case shouldn’t be heard by the European court at all.
Even without damages, the finding could still embarrass Russia and hurt its efforts to win back international investors scared off by Yukos and other legal cases in recent years. The court has repeatedly found Russia in violation of the 1950 European Convention on Human Rights, and deals with more cases involving Russia than any other country.
The Yukos case was unusually high-profile, and is being watched by investors hungry for profits from Russia’s lucrative markets, but wary of the country’s legal system, as well as by Western diplomatic observers and human rights activists.
Russian authorities had accused Yukos of using shell companies to hide revenue from tax authorities, and through the courts they ultimately froze its assets, forced it to sell its shares in other companies and declared Yukos insolvent in 2006 before the company was finally liquidated a year later. Many of its assets ended up in the hands of the state-run oil company Rosneft.
Those representing Yukos want the Russian government to pay back the taxes, fines and penalties that the company was charged.