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Russia Guilty Of Violations, But Not Anti-Yukos Campaign

  • RFE/RL

Russian antiriot policemen pass by the Yukos logo during the auction for the sale of the company's key assets at Yukos's Moscow headquarters in May 2007.

Russian antiriot policemen pass by the Yukos logo during the auction for the sale of the company's key assets at Yukos's Moscow headquarters in May 2007.

Europe's top human rights court has condemned the Russian government over the demise of oil company Yukos but rejected claims that its colossal failure was the result of a government vendetta.

The court in Strasbourg, France, did not rule on the issue of compensation sought by the former management of Yukos, saying there was no evidence that the tax probes which led to the company's bankruptcy in 2006 were illegal or politically motivated.

Yukos was dismantled after the 2003 arrest of its CEO Mikhail Khodorkovsky, who was later convicted of fraud, tax evasion, and embezzlement in a case his supporters say was aimed at thwarting his political ambitions.
Yukos was dismantled after the 2003 arrest of its CEO, Mikhail Khodorkovsky

In its September 20 verdict, the European Court of Human Rights faulted Moscow for unfairness in the way it handled the bankruptcy proceedings against Yukos.

The judges in Strasbourg ruled that Russia violated some basic safeguards enshrined in the European Convention on Human Rights, RFE/RL's Russian Service reported. They said the right to a fair trial had been violated because Yukos and its executives had insufficient time to prepare parts of their case before the lower courts.

The Strasbourg-based court also criticized the calculation of "disproportionate" tax debt penalties in the case, and the way Yukos was forced to sell off the firm Yuganskneftegaz.

No Campaign

But the judges rejected the claim that the case against Yukos was politically motivated, saying the proceedings by the Russian courts had "resulted from legitimate actions by the Russian government" to respond to tax evasion by Yukos.

The court also said there was insufficient evidence to support claims that Yukos had been treated differently from other companies in Russia.

Thus, the judges wrote, "there was no indication of any further issues or defects in the proceedings against Yukos" that would support the claim that Russia misused the courts to destroy Yukos and take control of its assets.

Nonetheless, Bruce Misamore, the former chief financial officer for Yukos, told a press conference in New York on September 20 that he was "personally satisfied" with the decision.

He maintained that the ruling had confirmed that Yukos was destroyed by the way tax debt penalties were enforced by Russia:

"It wasn't the tax that caused the company to fail," he said. "It was the inability of Yukos to pay those taxes because of the freezes on all our assets. So that was really a very key part of the whole Yukos story and as a result we are very, very pleased with the rulings that have come out today."

Misamore added that he still expected the court to rule on the plaintiffs' claim for some $100 billion in damages from Moscow as a result of the demise of Yukos -- funds they say would be distributed to former shareholders and other stakeholders.

Piers Gardner, a lawyer representing Yukos, acknowledged that the legal and management team would have "preferred a different conclusion" from the court on the claim of political motivation.

Asked by RFE/RL why the Yukos team was treating today's ruling as a victory, Gardner responded by highlighting issues in which the Strasbourg court had ruled in Yukos' favor.

"There is no question at all that the finding -- of the unfairness of the proceedings whereby the tax liabilities were imposed on Yukos -- is a finding by the European Court that Yukos' rights were violated," he said.

"Similarly, the finding that penalties and fines were imposed on Yukos without a legal foundation is a finding of a violation of [the 1950 European Convention on Human Rights] and naturally it's one of great importance."

'Indisputable Victory'

The judgment is not final. During the next three months, any party involved can request that the case be referred to the Grand Chamber of the Court.

If such a request is made, a panel of five judges would consider whether the case deserved further examination. If the case were accepted, the Grand Chamber's eventual ruling would be the final judgment. But if the referral request were rejected, the September 20 ruling would be considered the final word.

Mikhail Barshchevsky, the government's representative at Russia's high courts (file photo)
In an initial reaction, the government's representative at Russia's high courts, Mikhail Barshchevsky, was quoted in Russian media as hailing the ruling as "an indisputable victory for Russian envoys in the court."

Irina Yasina, an economist and journalist in Moscow who once headed the Yukos-funded educational foundation Open Russia, told RFE/RL that she was surprised by the ruling.

"I am surprised, to be honest, because I thought that anyone who followed the situation understood what was going on here," Yasina said. "But, once again, Europe's respect for the letter of the law played a bad joke -- the law, the taxes, that everything should be just right."

Yasina added that "they don't get our situation at all. They don't understand that any law can be put in quotation marks here" in Russia.

However, prominent Moscow-based lawyer Vladimir Gladyshev, who has testified in several extradition cases involving Yukos managers, told RFE/RL that the decision is the first time the human rights court has taken up a case that considers whether tax laws were used to violate broader rights.

Human rights activists allege that Russian authorities have repeatedly used tax cases to target individuals or seize their holdings.

“In this case the court established a precedent that is important not only for the Yukos case but also for other companies that now can go to court and show that unfair taxing -- unfair application of the tax laws -- could lead to the violation of their private property rights and not only their right to fair legal treatment,” Gladyshev said.

In May, the court in Strasbourg found that Khodorkovsky's rights were violated after his arrest in 2003 but rejected his complaint that the prosecution against him was politically motivated. Khodorkovsky is due to remain in jail until 2016.

The case that was decided on September 20 is not formally related to the case of Khodorkovsky or that of his former business partner who is also serving jail time, Platon Lebedev.

Rights activists and opposition politicians in Russia recently appealed to the U.S. Senate, urging them to blacklist 305 officials in Russia involved in the prosecution of Yukos and Khodorkovsky.

written by Ron Synovitz based on RFE/RL Russian Service reports