The European Court of Human Rights (ECHR) ruled on Tuesday that an investigation by Russia’s tax authorities into collapsed Russian oil company Yukos was unfair and violated the firm’s property rights.
Yukos, once Russia’s biggest oil company, first became the subject of tax proceedings in 2002, when tax authorities accused it of setting up shell companies to hide revenue.
It was declared insolvent in 2006 and was liquidated the following year.
Yukos lawyers claim the firm was deliberately targeted by the Russian government, and that its actions amounted to “disguised expropriation” of the company.
The firm’s founder, Mikhail Khodorkovsky, was jailed in 2005 for fraud and tax evasion.
Ruling
The judges in Strasbourg ruled that the company had not had sufficient time to prepare its case concerning the 2000 tax assessment against Yukos.
The court also ruled that the enforcement proceedings were disproportionate, but dismissed claims the trial was politically motivated, saying the Russian authorities had not exceeded a limitation on restricting rights in using legal proceedings to destroy Yukos.
“There was no indication of any… issues or defects in the proceedings against Yukos which would have enabled the Court to conclude that Russia had misused these proceedings to destroy Yukos and take control of its assets,” the court said.
The judges also ruled that Yukos had not been treated differently from other companies.
“There had been no violation of Article 14 (prohibition of discrimination)… concerning whether Yukos was treated differently from other companies,” the court said.
Article 14 of the European Convention of Human Rights prohibits discrimination on any ground, including political status.
The court’s judgment will not deal with Yukos’ claim of $98 billion in damages, and is not final.
‘Yukos paid taxes’
Lyudmila Alexeyeva, the head of the Moscow Helsinki Group, a human rights body, told RIA Novosti she hoped a second ECHR ruling would be “in Yukos’ favor.”
“To me, it’s evident the case was politically motivated. Yukos paid its tax honestly,” she said.
The Yukos Library website said the firm would hold a news conference later on Tuesday.
Khodorkovsky – once Russia’s richest man and previously considered by many as a political threat to former President Vladimir Putin – had his term extended by another six years at his second trial in December last year. It was later cut by one year on appeal.
In a ruling in May, the ECHR said Russia violated Khodorkovsky’s conditions of detention after his arrest in 2003 but did not back allegations that the charges against him had been politically motivated.
No selective persecution for Yukos, Russian ministry says
The Russian justice ministry said the court acknowledged that Yukos used fraudulent companies to dodge taxes and said no evidence was presented that the Russian tax authorities were aware of the scheme.
“The ECHR noted that Yukos oil company had a complicated plan for minimizing their taxes, which envisaged fraudulent use of numerous sham companies, registered in Russian tax havens,” the ministry said in a statement.
The ministry also said the court rejected the Yukos claim that the Russian tax authorities or the national courts “knew, approved and previously upheld as lawful” Yukos tax arrangements which involved the use of fraudulently registered sham companies.
“The charges of “selective” and “individual” persecution have not been confirmed,” the justice ministry added.