Saturday, 6 March 2010

Strasbourg Court to hear $98 billion Yukos vs Russia case

European Court of Human Rights is to hold a public hearings on the $98 billion case of Yukos executives against Russia on Thursday, March 4.

This case is the biggest to ever be taken to the Strasbourg court. The former Yukos executives claim that the Russian government concocted the tax evasion case against the company that caused its bankruptcy and that their rights for fair trial and private property were violated. The plaintiffs argue that the government selectively applied tax laws for political reasons, leading to the company's demise.

Yukos representatives filed the complaint to the European Court on April 24, 2004 claiming $98 billion in damages, and arguing that Yukos was "targeted by the Russian authorities with tax and enforcement proceedings, which eventually led to its liquidation," according to Associated Press. The claim is made on behalf of all the shareholders and creditors of Yukos.

This is the largest claim for damages submitted to the Strasbourg Court. $98 billion is an estimate of what Yukos would have been worth, had it not been stripped of its biggest assets, including Yuganskneftegaz in 2007. The biggest compensation the court ever awarded was in 1994 and would equal 16 million euro today, so it is very unlikely that if the decision is positive the plaintiffs will receive the compensation they were claiming.

The government filed a multi-million dollar tax claim against Yukos in 2004 that lead to the confiscation of the company's most valuable asset Yuganskneftegaz. It was later sold to state-owned Rosneft. Yukos head Mikhail Khodorkovsky, then Russia's richest man, was jailed and has since been serving an eight-year term in prison. He is currently tried for similar charges that could result in a 22-year spell in prison.

Today the Strasbourg Court will hold the first hearing on the case. Russia will be represented by 20 lawyers. The sides will present the case, list their arguments and answer any questions by the judges.

The hearing takes place days after Russian Constitutional Court ruled that the verdicts of the ECHR in Strasbourg are obligatory for Russian courts. However, experts say that in reality it is difficult to make Russia comply with the decisions. Stephen Jagusch, a partner at Allen & Overy, told The Times that: "For political and practical reasons enforcement action against Russia is not likely to be straightforward. It'll be a real problem for the claimants." The members of Council of Europe could exert pressure on Russia, but they cannot make it pay the damages.

The ECHR was established in 1959 under the auspices of the Council of Europe to deal with alleged violations of 1950 European Convention of Human Rights. It only agrees to hear about 5% of all the applications it receives. Most of the legal proceedings occur in written form, so the hearings take place only in the more complicated cases.

Last year the Court took up 219 cases from Russia and ruled against the Russian government 210 times. Three cases were settled out of court and the government was exonerated six times. In 2009 28% (33,550) of all the legal recourses were from Russia, more than from any other country.

The court is expected to publish the ruling on the Yukos vs Russia case in a few months.

The day before the ECHR hearing the former Yukos head Mikhail Khodorkovsky published an article in the Russian newspaper Nezavisimaya Gazeta, where he harshly criticized the Russian court system. He wrote that the law-enforcement agencies are "in essence a business that deals in legalizing the use of force." He also argues that there is little justice in the system. "The system is the assembly line of a gigantic factory. ... If you become raw material for the assembly line, then a Kalashnikov rifle is always produced -- that is, a guilty verdict. Any other result from the system's processing of raw material is viewed as a malfunction."

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