European court rules Russia must pay Yukos shareholders 1.9 billion euros

MOSCOW/STRASBOURG (Reuters) - Europe’s top human rights court awarded shareholders in Yukos 1.9 billion euros (£1.50 billion) in damages on Thursday, a new blow to Russia days after some of the former oil company’s shareholders won $50 billion in The Hague.

A Yukos oil well is seen at sunset near the Russian northern city of Nefteyugansk, December 19, 2004 in this file photo. REUTERS/Sergei Karpukhin

The Strasbourg-based court found that Russia had failed to “strike a fair balance” in its treatment of Yukos, once run by former oligarch turned Kremlin critic Mikhail Khodorkovsky, and had forced the company to pay excessive fees.

Yukos, once worth $40 billion, was broken up and nationalised a decade ago, with most of its assets eventually handed to Rosneft, an energy giant run by an ally of President Vladimir Putin.

Yukos had argued in the European Court of Human Rights that Russia had unlawfully seized it after imposing bogus taxes and via a sham auction.

The court’s decision goes some way to supporting critics of Putin who blame the Russian leader for riding roughshod over the rule of law for political aims.

And while the 1.9 billion euros awarded by the ECHR is a fraction of the 38 billion euros which Yukos sought, it hits Russia hard at a time when the country is on the brink of recession and is reeling from tougher sanctions imposed by the West this week over its actions in Ukraine.

“We received the news with a great joy, this is an unprecedented decision, the court has never ever awarded such a big sum,” said Olga Pispanen, a spokeswoman for Khodorkovsky, who was arrested at gunpoint in 2003 and convicted of theft and tax evasion in 2005.

He was released last year after 10 years in prison.

Bruce Misamore, former chief executive officer of Yukos, welcomed what he described as “substantial damages for the Russian Federation’s illegal, unfair, hasty enforcement measures, including fines and bailiffs charges, which resulted in the destruction of Yukos”.

He said more than 55,000 Yukos shareholders stood to receive compensation from Russia, adding: “This is a real step forward but in no way reflects the true damages suffered by the victims of the destruction of Yukos by the Russian Federation.”

Russia’s Justice Ministry said the ECHR ruling was unfair and biased and said it could appeal within three months.

Russia gave a similar reaction on Monday when an international arbitration court in The Hague found that Russian authorities had subjected Yukos to politically motivated attacks.


The court also ruled Russia should pay 300,000 euros in costs and expenses, plus any tax. Yukos had requested 4.3 million pounds in legal fees, $174,000 for costs of an expert report and $588,148 for other fees.

“The awarded amount is already totally unprecedented in the human rights field,” said Jan Kleinheisterkamp, associate professor of law at the London School of Economics. “1.9 billion euros is humongous in terms of compensation granted by the ECHR.”

An interim ruling by the ECHR in 2011 found that Russia had not misused legal proceedings to destroy Yukos but ruled that enforcement proceedings used against Yukos had been disproportionate.

It invited a claim for “just satisfaction”, or compensation, from Yukos. Yukos had sought compensation of just under 38 billion euros. This was based on a valuation by a specialist energy firm, according to a source close to the claim.

The damages were being sought on behalf of all Yukos shareholders.

“This is another confirmation of the fact that everything that Russia did against the oil company, was illegal,” Leonid Nevzlin, a former Yukos executive and top shareholder, told Echo Moskvy radio. He said this was a consequence of Russia’s refusing to seek for a compromise with Yukos abroad.

Additional reporting by Maria Kiselyova in Moscow; Editing by Elizabeth Piper and Alison Williams