Russia's constitutional court overturns European ruling on Yukos compensation

By bne IntelliNews January 20, 2017

Russia’s constitutional court has overturned the ruling by the European Court of Human Rights that Moscow should pay €1.9bn in damages awarded to shareholders of the dismantled oil company Yukos, arguing that the decision by the Strasbourg-based tribunal violated the country’s constitution.

The decision comes as significant first move under a law passed in Russia in 2015 allowing it to overrule European human rights court judgements, despite being bound by the European Convention on Human Rights to implement decisions of the Strasbourg court.

“Today’s decision will surprise nobody but confirms what we already know, that the Russian Federation will go to any lengths to undermine the democratic process and democratic institutions,” a spokesman for former Yukos controlling shareholders told the Financial Times.

In April 2016, Russia with the help of a leading US law firm delivered a first blow to former Yukos shareholders by overturning a ruling ordering the country to pay $50bn.

“With the arbitration awards quashed,” the April 20 verdict by a court in The Hague said, “the Russian Federation is no longer liable for paying compensation”.

The surprising victory also impacted previous rulings in France and Belgium that allowed the Yukos shareholders to seize Russian state assets to compensate for their losses when the independent oil company of billionaire Mikhail Khodorkovsky was broken up in 2006.

Yukos was bankrupted and its core assets sold off in suspect auctions (largely to  nascent Russian state oil company Rosneft) after Khodorkovsky fell out with President Vladimir Putin.

Khodorkovsky, arrested on fraud and embezzlement charges in 2004, subsequently jailed and only released in late 2013, has since become a prominent figure of Kremlin opposition in London.

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