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European Court Chides Russia On Yukos

The European Court of Human Rights has dealt with more cases from Russia than from any other country.  Today it gave its verdict on the most financially weighty case it has ever seen, namely claims of $100 billion in compensation from the former directors of Yukos, the oil company founded by Mikhail Khordokovsky.  The Financial Times reports on its findings:

The European Court of Human Rights, in a communiqué published on Tuesday, said Yukos had failed to show that it was a victim of selective justice and had been singled out for tax schemes that were widely used by other Russian oil groups and retroactively ruled unlawful.

“Yukos had failed to show that other Russian taxpayers used or continued to use the same or similar tax arrangement and that it was singled out,” the court said in the statement. “It was found to have employed a tax arrangement of considerable complexity, involving, among other things, the fraudulent use of trading companies registered in domestic tax havens.”

But the court also said that the Russian authorities had violated the rights of the oil company in pursuing enforcement of the tax claims so rapidly and in pursuing the sell-off of its main production unit, Yuganskneftegaz, in December 2004 in order to begin enforcing payment on the claims.

“Choosing to auction OAO Yuganskneftegaz first was capable of dealing a fatal blow to Yukos’ ability to survive the tax claims and stay in business,” the court said. “Given the pace of the enforcement proceedings, the obligation to pay the full enforcement fee and the authorities’ failure to take proper account of the consequences of their actions, the court found that the Russian authorities had failed to strike a fair balance between the legitimate aims sought and the measures employed.”