Oil Report

European court hears charge Moscow destroyed YUKOS

* YUKOS case goes before European Human Rights Court

* Plaintiffs accuse Russia of illegally destroying the firm

* Verdict not due for several months

STRASBOURG, France, March 4 (Reuters) - Executives of bankrupt oil company YUKOS took Russia to Europe’s top human rights court on Thursday, accusing Moscow of destroying the firm through illegal, crippling tax demands.

The plaintiffs, including former U.S. directors at the company, are seeking a record $98 billion in damages.

Once Russia’s largest oil firm, YUKOS was brought to its knees in 2006 after a multi-billion-dollar tax claim that its directors say was driven by then President Vladimir Putin, who was consolidating his power at the expense of tycoons.

“This was an expropriation in everything but name,” said Piers Gardner, a lawyer for YUKOS shareholders.

Former YUKOS owner Mikhail Khodorkovsky, once Russia’s richest man, is serving an eight-year prison sentence on fraud and tax evasion convictions and could face a further 22 years behind bars if convicted in a second trial underway in Moscow.

Convinced they could not get a fair hearing in Russia, YUKOS representatives turned to the Strasbourg-based European Court of Human Rights in 2004 and complain that the company was forced into liquidation by unlawful tax penalties.

The court, which has jurisdiction over 47 countries and deals with alleged violations of the European Convention on Human Rights, ruled that the complaint was admissible last year.

Thursday’s hearing was the only session scheduled in the case. The panel of judges is expected to deliver its verdict in several months.


Russia has denied charges of wrongdoing and its ambassador to the Council of Europe has accused the court of playing politics by agreeing to hear the YUKOS case.

A lawyer for Moscow, Britain’s Michael Swainston, told the court on Thursday that Russia had had the right to reclaim unpaid taxes and said numerous trials showed that YUKOS had illegally concealed its profits and defrauded the state.

“YUKOS lost five legal cases before different judiciary,” he said.

Russia has regularly run foul of the European Human Rights Court, repeatedly losing cases for abuses in Chechnya, Russian prisons and elsewhere. In 2007, the court ruled that Russia violated the rights of Khodorkovsky’s partner Platon Lebedev during his arrest and ordered Moscow to pay a small fine.

Khodorkovsky alleged his trial and the legal assault against YUKOS were orchestrated by enemies inside Putin’s team to punish him for challenging the Kremlin and to strengthen the state’s grip over the oil industry. The oil firm was hit by a series of tax audits from late 2002 onwards. It was found guilty of repeated fraud and ordered to pay huge fines which the plaintiffs say forced it to close.

They say Russia violated various aspects of European law, including the right to a fair hearing and the right to protection of property. (Writing by Crispian Balmer; Editing by Elizabeth Fullerton)