YUKOS Oil Company Wins Major Ruling from the European Court of Human Rights
Strasbourg 20 September 2011: After seven years' careful consideration the European Court of Human Rights (ECtHR) today ruled that YUKOS Oil Company was denied a fair trial in contesting the tax liabilities imposed on it suddenly in 2004. It also ruled that the enforcement of those tax liabilities, penalties, fines and interest breached the company's Convention rights and dealt it a 'fatal blow'.
Former chief financial officer, Bruce Misamore, commenting on the ruling, said:
Steven Theede, former chief executive officer of YUKOS Oil Company said:
"The Court found the crux of the case was the speed with which the Russian authorities demanded that YUKOS pay the taxes, despite the fact its assets were frozen, and the decision to choose to 'auction' OAO Yuganskneftegaz , its main production unit, to meet the asserted liabilities. The Court found it 'obvious' that the choice of auctioning OAO Yuganskneftegaz as the 'first disposal' was a 'fatal blow to YUKOS' ability to survive the tax claims and continue its existence'".
The Court went on to state that the Russian authorities should have given very serious considerations to other options, "especially those that could mitigate the damage to YUKOS' structure".
Another factor which seriously affected YUKOS' position in the enforcement proceedings was the imposition of a 7% enforcement fee by bailiffs, amounting to 1.15 billion euros, the payment of which could not be suspended or rescheduled. This sum was "completely out of proportion" stated the Court and "because of its rigid application it contributed very seriously to YUKOS' demise". The Court emphasized that the Russian Authorities were "unyieldingly inflexible as to the pace of enforcement acting very swiftly and consistently refusing to concede YUKOS' demands for additional time". The authorities "failed to take proper account of the consequences of their actions" and so breached YUKOS' property rights (Article 1 of Protocol Number 1)
In addition the Court found that fines, which doubled the asserted tax liabilities, were retrospectively and unlawfully applied together with further collection penalties imposed by the bailiffs.
For more information, please visit The Yukos Library, an online resource providing a wealth of information about Yukos and its legal battles with the Russian authorities.