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."

Strasbourg Court Accepts $34Bln Yukos Case

The European Court of Human Rights has accepted a $34 billion lawsuit by former Yukos management against the government, apparently the largest claim ever made in the court. The claim is worth the tax collected from Yukos, the claimants’ spokeswoman Claire Davidson said in e-mailed comments Wednesday. The former managers say the charges against Yukos, once the country’s biggest oil firm, were fabricated so the government could snap up the firm. The Strasbourg-based court threw out some of the government’s key arguments against the litigation, including that Yukos no longer existed and the court lacked jurisdiction to hear the case. The court ruled that although Yukos had ceased to exist legally in 2007, the case had a lasting moral dimension. “All the more so if the issues raised by the case transcend the person and the interests of the applicant,” the court said in its decision to hear the case. The decision was made in late January but only published on the court’s web site this week. The court also dismissed the government’s argument that the claimants had failed to exhaust their appeals in Russian courts, siding with Yukos managers who said it would be hopeless to appeal in Russia. “The domestic courts consistently rejected the company’s attempts to contest the actions of the bailiffs, so the attempts would have been futile,” the court said. Human rights activists critical of the state’s onslaught against Yukos praised the court’s decision. “We welcome this decision and hope that the government will live up to its obligations under the European Human Rights Convention,” said Tatyana Lokshina of the Moscow bureau of Human Rights Watch. Former Yukos chief financial officer Bruce Misamore said the decision was good news for the company’s stakeholders. “This is an important step toward the vindication of the company’s belief in the rule of law — something it never secured in Russia,” he said in an e-mailed statement. It was unclear Wednesday when the court would actually make a ruling in the case. Davidson said the claimants had been asked to submit further information by April and noted that the case has been given priority. Kremlin spokesman Alexei Pavlov said Wednesday that he would only comment after the court made a final ruling.
Yukos managers filed the charges in 2004, when Yukos was targeted in a tax case that ultimately left the company bankrupt and several top managers in jail. Former Yukos CEO Mikhail Khodorkovsky was sentenced in 2004 to eight years in prison on charges of fraud and tax evasion, and the lion’s share of Yukos assets went to state oil company Rosneft in a series of auctions. Meanwhile, a senior federal prison official suggested that a second trial against Khodorkovsky could take place without the defendant actually being present. “Our pretrial detention facility can do a video conference with any Moscow court. This can be done if such a decision is made,” said Yunus Amayev, the head of the prison service’s branch in the Irkutsk district where Khodorkovsky is jailed, Interfax reported. Khodorkovsky’s lawyer Yury Shmidt said a court hearing without the defendant’s presence would not be legal. “I first thought this was a joke, but then these are the words of a senior prison service official,” Shmidt said by telephone from St. Petersburg. Prosecutors earlier this week filed new embezzlement and grand theft charges against Khodorkovsky and his business associate Platon Lebedev. Shmidt has called the new charges “nothing but nonsense.”