Yukos takes Russia to human rights court in Strasbourg

Defunct oil company owned by jailed oligarch Mikhail Khordokovsksy claiming £65bn in compensation over bankruptcy

The European court of human rights in Strasbourg is today hearing the biggest case in its history with managers from the defunct oil company Yukos claiming £65bn in compensation from the Russian government.

Yukos - owned by the jailed oligarch Mikhail Khordokovsksy - claims that the Kremlin deliberately bankrupted the firm in what it says was a "disguised expropriation". It says the Russian authorities unjustly targeted Yukos with tax and other proceedings.

The £65bn damages claim is a record for Strasbourg. The case was originally filed in April 2004, as the Yukos empire was forcibly dismembered. The European court of human rights agreed to hear the case last year, and accepted Yukos's argument that it had little chance of receiving justice inside Russia itself.

Today's hearing is the first time in six years that representatives from both sides have come face to face. Although a verdict is not expected for many months, the case will cause embarrassment for the Kremlin, which today dismissed Yukos's accusations as "politicised".

The break-up of Yukos was the most scandalous episode of Vladimir Putin's controversial presidency. In 2003 Russian prosecutors moved against the oil company, arresting several of its senior executives, and accusing the firm of using shell companies to dodge billions of dollars in taxation.

In reality, however, Putin's grudge campaign against Yukos was politically motivated. It followed Khodorkovsky's attempts to support opposition parties - and his refusal to heed Putin's warning to oligarchs who grew rich through dubious state privatisations in the 1990s to stay out of politics. Khordokovsky also annoyed Putin by exploring a possible merger between Yukos and western oil companies.

Once Russia's richest man, Khordokorvsky has been in jail since 2003. He is serving eight years in prison for tax evasion. His Yukos business was broken up, and handed over to Rosneft, a state-run oil corporation run by Putin's ally and former KGB colleague Igor Sechin. Over the past year Khodorkovsky has been on trial again, facing further charges of stealing oil and tax evasion.

Khordorkovsky's second trial has prompted concern in western capitals, with the US president, Barack Obama, describing it as odd, and noting that the new charges are remarkably similar to the previous ones. In a recent essay in the London Review of Books, Keith Gessen described the latest accusations against Khodorkovsky as "so absurd as to be almost metaphysical".

Yukos's lawyers argue that the Russian government's actions were "unlawful, disproportionate, arbitrary, discriminatory and abusive". They point out that Russian courts demanded Yukos pay millions in back taxes for 2000-03 - but simultaneously froze the company's bank accounts. Officials then bankrupted the firm when it didn't pay up. In 2006 Yukos was declared insolvent.

Foreign investors will watch today's hearing with interest. Many western companies and shareholders lost millions of dollars invested in Yukos and have so far not been compensated.

"Yukos's tens of thousands of stakeholders saw the company destroyed ... and taken away with the single swipe of a revengeful political hand," former CEO Steven Theede said, after the Strasbourg court agreed to hear the case last February.

Russian citizens have long turned to the European court after failing to find justice at home. Recently, however, Russia has moved to ease its hostility towards Strasbourg. In January, Russian lawmakers ratified an international agreement intended to strengthen and speed up the work of the court, after years of refusing to do so.


Luke Harding in Moscow

The GuardianTramp

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