Yukos - Yukos Oil Company Claim in The European Court of Human Rights

Yukos Oil Company Claim in The European Court of Human Rights

On 23 April 2004, shortly after the imposition of the tax assessment for the year 2000, the former management of Yukos submitted an application to the European Court of Human Rights.

Yukos’ claim in the ECHR argues that the company's rights, protected by the European Convention on Human Rights, were violated in Russian courts, which led to its bankruptcy and liquidation; it also argues that Yukos has been singled out for discriminatory treatment.

Yukos complained that their rights were breached under several articles of the Convention, specifically: “Under Article 6 (right to a fair trial) of the Convention, the applicant company complains about various defects in the proceedings concerning its tax liability for the year 2000. Under Article 1 of Protocol No. 1 (protection of property), taken alone and in conjunction with Articles 1 (obligation to respect human rights), 13 (right to an effective remedy), 14 (prohibition of discrimination) and 18 (limitation on use of restrictions on rights) of the Convention, it complains about the lawfulness and proportionality of the 2000-2003 Tax Assessments and their subsequent enforcement, including the forced sale of OAO Yuganskneftegaz. Lastly, the applicant company complains, under Article 7 (no punishment without law) of the Convention, about the lack of proper legal basis, selective and arbitrary prosecution and the imposition of double penalties in the Tax Assessment proceedings for the years 2000-2003.”

Following an admissibility assessment that took five years, the court declared the Yukos application admissible on 29 January 2009.

This in itself was a significant achievement for Yukos, as the Court declares admissible only less than 5% of all submitted applications.

The hearing on merits of the Yukos Oil Company v Russia case in the European Court of Human Rights took place on 4 March 2010. Yukos Oil Company was represented by Piers Gardner, Barrister of Monckton Chambers. The Russian side was represented by a team of lawyers, which included Georgy Matyushkin, Representative of the Russian Federation at the European Court of Human Rights, and British lawyer Michael Swainston.

The claim before the ECHR amounted to US$98 billion. This was the largest claim to be brought in the court’s 60-year history. The claim is an estimate of what the value of Yukos would have been if its assets had not been stripped away and the company had not been liquidated in 2007.

The decision on this case was announced on 20 September 2011.

The court announced that the Russian state violated the human rights of Yukos by agreeing that there had been a violation of Yukos' right to fairness in legal proceedings in relation to a tax re-assessment for 2000. The court also established that there had been a violation of the right to protection of property through enforcement proceedings carried out over tax assessments from 2000-2003.

The interpretation of the tax liabilities which were applied to Yukos was foreseeable, but the court still noted that the crux of the case was the rapid and inflexible enforcement of those liabilities. Yukos had been effectively paralysed because all of its assets were frozen from the first assessment. The court held that two factors in particular contributed to Yukos' demise and violated Article 1 of Protocol No. 1:

''1. The bailiff's choice of Yukos' principal subsidiary as the first target for auction, without considering the implications for the company's future: this dealt Yukos a 'fatal blow';

2. The Russian authorities were unyielding and inflexible in response to requests for time to pay and the bailiffs imposed additional fines amounting to €1.15 Bn, which had to be paid before the taxes, but the payment of which was prohibited under the freezing orders."

The court did however note that the tax assessments themselves were not considered disproportionate. It was agreed that there was not enough evidence to suggest that Yukos had been treated differently from other companies and so no violation of Article 14 was found. The court denied an allegation that Russia misused legal procedures to dismantle Yukos despite the court's nine-judge panel finding that Russia violated three articles of the European Convention on Human Rights.

Both sides have claimed victory over the ruling.

No monetary amount has been awarded after the European Court of Human Rights found the question of damages as "not ready for decision". Both parties have three months to reach a settlement.

The ECHR ruling became final on 8 March 2012 when the ECHR Grand Chamber did not accept the request of the Yukos Oil company to have its application to the court referred to the Grand Chamber.