The European Court of Human Rights on Thursday ordered Russia to pay former shareholders in defunct oil giant Yukos almost 1.9 billion euros ($2.5 billion), the largest-ever award by the court. The ruling comes just days after an international arbitration court in The Hague made a similar order for a record $50 billion (37 billion euros) in compensation over Russia's seizure of the company once owned by Kremlin critic Mikhail Khodorkovsky.
The ECHR in Strasbourg was ruling on tax claims by Moscow that forced Yukos into bankruptcy in 2007 but Russia rejected its decision as unfair and biase. The company first appealed to the court in 2004 after facing several years of onerous tax demands and fines. In its majority ruling, the court said the "disproportionate character of the enforcement proceedings had significantly contributed to Yukos' liquidation". In September 2011, the court had found that certain parts of the tax enforcement procedures against Yukos were a breach of shareholders' fundamental rights.
The 1.9 billion euros will be divided between the company's 55,000 former shareholders - if it is ever paid out. Although they had sought nearly 38 billion euros in damages, the final amount was still 21 times larger than any previous award by the court. "We are very pleased that the ECHR has awarded substantial damages for the Russian Federation's illegal, unfair, hasty enforcement measures, including fines and bailiffs charges, which resulted in the destruction of Yukos," said Bruce Misamore, a former Yukos chief financial officer. "However, the ECHR has failed to recognise the true economic losses sustained by Yukos shareholders." Another former executive and shareholder, Leonid Nevzlin, said "the verdict shows that the Russian government did not try to find a compromise" in the dispute.
'Obviously senseless' - He said Yukos had been forced to pay taxes and penalties over several years that surpassed the company's income. "I think this was obviously senseless, and that the Russian government was penalised for this obvious senselessness," he told Echo of Moscow radio.
Yukos was once Russia's biggest oil company but was broken up after Khodorkovsky was arrested in 2003, shortly after President Vladimir Putin warned Russia's growing class of oligarchs against meddling in politics. The company was sold off in a series of opaque auctions between 2004 and 2006, with state-owned Rosneft buying up most of its operations.
Russia is already under pressure over the conflict in Ukraine, after the United States and the European Union this week imposed tough new sanctions on its finance, defence and energy sectors. After the European court ruling, Russia's justice ministry said it "does not consider the verdict to be a fair and impartial approach to the evaluation of the legal and factual situation in the case".
The ministry said in a statement it had three months to appeal the case without saying whether Russia would do so. Khodorkovsky - who is no longer a shareholder and is not a party to the legal proceedings - was released last year after more than a decade in prison in Russia. "The Yukos case has been an instance of unabashed plundering of a successful company by a mafia with links to the state," he had said in a statement after the court decision in The Hague.
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