By HRC Correspondent, 21 September 2011
The Russian state violated the human rights of the Yukos Oil Company, specifically the right to a fair trial and the right to protection of property, according to a judgement at the European Court of Human Rights.
Yukos' filed its complaint against the Russian state back in April 2004, complaining that the Russian authorities had hit it with a series of hefty and unexpected tax claims from 2000-2003, prevented it from paying them and then purposefully dismantled it.
In terms of the European Convention of Human Rights, the company alleged a violation of Article 6, the right to a fair trial; several violations of Article 1 of Protocol 1, the right to protection of property; as well as a violation of Article 14, the general prohibition on discrimination; and a violation of Article 18, which offers protection against a states’ miss-use of its powers. Both those last were in conjunction with Article 1 of Protocol 1.
The court found much in Yukos’ favour. It ruled that there had been a violation of Yukos' right to fairness in legal proceedings in relation to a tax re-assessment for 2000, in view of the amount of time the company was given to respond. The Russian authorities had hit Yukos with a re-calculated tax bill for about €2.9bn ($3.9bn) and when Yukos disputed it, the company was given just four days to study more than 43,000 pages of documents. Then, just 21 days from the end of those proceedings, the company's appeal went before an appeals court.
Secondly, the Court ruled that there had been a violation of the right to protection of property, mainly through the speed and inflexibility of enforcement proceedings carried out over tax assessments from 2000-2003. The Russian authorities applied huge fines and enforcement fees (as much as 7% of the total debt) and auctioned off Yukos' prize asset, Yuganskneftegaz, to cover a tax debt that the company might have been able to pay had the Russian authorities not frozen its assets.
The Court also considered retrospective changes to Russian criminal law that affected the 2000 tax assessment proceedings and hiked the fines imposed in the 2001 tax assessment as a violation of Article 1 of Protocol 1.
But the Court did not rule in Yukos' favour in every respect, something parts of the Russian media have been quick to point out. The tax assessments themselves were not considered disproportionate and the Court found there was not enough evidence to suggest that Yukos had been treated differently from other companies and so found no violation of Article 14.
That was perhaps to be expected, in several instances in the past - including the case brought earlier this year by the former owner of Yukos, Mikhail Khodorkovsky - the Court has concluded that there is not enough evidence to indicate a political motive on the part of the Russian authorities.
In general, the court sets robust standards for proving a violation of the prohibition against discrimination, usually requiring some form of documentary evidence to support such an allegation.
Speaking at a news conference following the ruling, Piers Gardner, the barrister representing Yukos in the Court, said: “There are aspects of Yukos' complaint on which Yukos did not meet the high threshold that the European Court imposes to establish a violation, whereas in the important areas ... the absence of a fair trial and the draconian enforcement of the liabilities, the court was satisfied that the rights of Yukos had been violated.”
One intriguing part of this case for observers of the human rights of companies is what will happen about compensation. The sheer size of the company involved - Yukos had been Russia's largest oil company - means the compensation could potentially be enormous.
Yukos is demanding €81bn ($109bn), which is not unrealistic since Yukos' key assets now make up about 80% of Rosneft, the Russian state oil company, which has a stock market valuation of nearly $100bn.
But the Court traditionally does not award those kind of sums for compensation, either in cases involving individuals or companies.
So another milestone in the human rights of companies could still be ahead. The court's September 20 ruling was not final - there is a three month period in which the parties can reach a settlement on damages.