Russia has been ordered by the European Court of Human Rights to pay the shareholders of the oil company Yukos over $2.5 billion, or 1.9 billion Euros. The company originally sought 38 billion Euros. Earlier in the week, The Hague ordered Russia to pay an additional $50 billion dollars to Yukos shareholders. The courts ruled that Russia’s tax penalties on Yukos were too harsh, and in taking 300 billion rubles from the company in 2004 and 2005 it acted in an unfair manner. Mikhail Khodorkovsky, Yukos’s former head, was jailed for ten years for what many consider to be political reasons.
Three years ago, the European Court of Human Rights found that the Russian government had denied Yukos the rights to protection of property and a fair trial. The court said that Russia used its laws to effectively bankrupt the company, leaving its shareholders with no compensation. Russia will have six months to come up with a plan to pay back the shareholders. Three days before this ruling, The Hague called for Russia to pay Yukos shareholders an additional 50 billion Euro. This is the largest amount that The Hague has ever awarded. In a 600 page report, The Hague found that the reasons for Yukos’s dismantling was politically motivated, designed to strip Mikhail Khordorovsky of his wealth and power. The timing of this ruling comes during a period where Russia is facing harsh criticism from the outside world. Sanctions against Russia for its involvement in Ukraine have just been handed down as well.
Yukos’s head, Mikhail Khordorovsky, spent ten years in Russian prison for fraud charges. This was seen as a mostly political act, as Khordorovsky was Russia’s richest man at the time with many backers that were against Vladimir Putin’s leadership. In 2009, while still imprisoned, Khordorovsky was charged again with embezzlement. Khordorovsky was pardoned by Putin in 2013 and released. Putin stated that the reasons for his release were the length of Khordorovsky’s sentence and the fact that his mother was ill. Many political commentators believed that Khordorovsky’s release was intended to generate goodwill for Putin before the Olympics. Khordorovsky’s mother was reported to have died on Sunday.
The European Court of Human Rights did not find that Khordorovsky was targeted selectively. The Court also did not find that the Russian courts were misused. This is why the 1.87 billion Euros awarded comes in at far less than the 38 billion asked for. The Court did not find for any damages concerning the actual destruction of Yukos. The money awarded only comes from Yukos’s value at the time of it’s dismantling, and nothing for Yukos’s projected worth in the future. Russian spokesmen have stated that they find the ruling unfair. They have three months to appeal the decision. Russia’s ministry of justice called the ruling “inexplicable.” Much of their contention comes from the Russian government’s assertion that Yukos’s major shareholders engaged in illegal tax schemes.
The Hague and The European Court of Human Rights have ordered Russia to pay back the shareholders of the dismantled oil company Yukos over 50 billion Euros. The judgement comes from findings that the Russian government acted on political motivations when shuttering the oil giant and arresting its head, Mikhail Khordorovsky. Russia has six months to appeal.
By Bryan Levy