ECHR Awards Billions to Yukos Shareholders
Published: August 1, 2014 (Issue # 1822)
The European Court of Human Rights awarded the shareholders of defunct oil giant Yukos $2.6 billion in compensation Thursday, a ruling that has left political and legal analysts split about its significance for Russia's relations with the West.
Handed down at the height of tensions between Russia and the West over the crisis in Ukraine, the Strasbourg court's ruling comes on the heels of The Hague arbitration court's order Monday that Russia pay Yukos shareholders $50 billion in compensation by Jan. 15, 2015.
The oil company was bankrupted by multibillion-dollar back-tax claims that the company's owners maintain were politically motivated.
The ECHR ruled that the penalties imposed on the company through tax proceedings that stripped it of 300 billion rubles in 2004 and 2005 were "unlawful" and that Russian authorities had "failed to strike a fair balance" in their dealings with the company. The ECHR purported that the "disproportionate character" of the enforcement proceedings had catalyzed the company's liquidation.
Russia said it would appeal the award, with the Justice Ministry rejecting the ruling as an unfair and inequitable approach to the case and saying that the amounts awarded in compensation should not have been determined by the Strasbourg-based court, ITAR-Tass reported. It said earlier it would also appeal the arbitration court's ruling.
The timing of the ECHR and Hague arbitration court rulings, as well as the vertiginous amounts of compensation won by Yukos shareholders — the ECHR ruling is the biggest compensation award in the court's history — have sparked speculation that the rulings were molded by politics.
"I think the ruling of the European Court of Human Rights is politicized," said Alexander Nadmitov, managing partner at Nadmitov, Ivanov & Partners, a prominent Russian law firm. "There might have been procedural violations during the [original Yukos] case but the decision seems to be tainted by politics given the unprecedented size of the awarded compensation. It now puts in question Russia's participation in the Council of Europe."
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