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Hague court had no authority in Yukos case, ruling politicized – Moscow

Published time: July 28, 2014 18:38
ARCHIVE PHOTO (Reuters/Sergei Karpukhin)

ARCHIVE PHOTO (Reuters/Sergei Karpukhin)

The Hague’s arbitration court was not legally empowered to view the case of Yukos Oil Company v. Russia, and the court’s “one-sided” ruling disregards previous Strasbourg court decisions on the issue, the Russian Finance Ministry said in a statement.

READ MORE: 'Mega-arbitration’: Court orders Russia to pay $50bn in Yukos case

Viewing the case, filed by shareholders of former Russian oil giant Yukos against the Russian government, was not in the jurisdiction of the Permanent Court of Arbitration (PCA) in the Hague, as Russia has not ratified the Energy Charter Treaty, the ministry said on Monday.

The statement, following the court’s sensational Monday ruling that ordered Russia to pay $50 billion in damages, also provided a detailed list of issues, which, according to the ministry, make the decision “opportunistic” and “politically biased.”

First of all, The Hague court ignored the previous decisions of the Strasbourg-based European Court of Human Rights (ECHR), which in September 2011 ruled that the Russian authorities had carried out “legitimate” and not politically motivated actions against Yukos “to counter the company’s tax evasion,” the ministry noted. The ruling contradicted Yukos shareholders’ claims that the company’s assets were purposefully expropriated by Moscow.

The Russian Finance Ministry meanwhile blasted the arbitration ruling as based on “one-sided investigation with one-sided application of evidence.”

The Hague court in effect reviewed the decisions of Russian courts on Yukos “as if the arbitration court was an additional authority for appealing the court orders,” the ministry said. It has made “theoretical speculations not supported by evidence” over the motivation of the Russian authorities’ actions in the case of Yukos, it added.

The international body failed to note that the people who controlled Yukos, including the oil tycoon Mikhail Khodorkovsky released from jail in December, were apparently aware of financial machinations aimed at a mass-scale tax evasion in favor of the company, the ministry stressed. The tax evasion scheme, which involved the creation of numerous bogus companies, was not properly considered in the court.

Former Russian oil tycoon Mikhail Khodorkovsky (C) arrives at the Wall Museum in Berlin on December 22, 2013 to give a press conference few days after he was released after 10 years of jail. (AFP Photo / Clemens Bilan)

The arbitration court went as far as to judge “what Russian tax legislation should be like” as opposed to what it required in reality, the ministry said. The court refused to pass several controversial issues on taxes for review by Russian, UK or Cyprus competent authorities despite relying on the Energy Charter Treaty that outlines a need for such reviews, it added.

While in effect saying The Hague court decision was not legally binging for Moscow, the ministry added that “the Russian Federation will challenge the arbitration court’s decisions in the courts of the Netherlands.”

According to the ministry, “the arbitration court failed to approach the adjudication with common sense, which is required from the judges in such situations,” which resulted in an unobjective and biased decision.

“Such an approach undermines the authority of the Arbitration court and the Energy Charter Treaty, which are being applied in increasingly politicized manner and, as in this case, have become the objects of abuse on behalf of domestic investors trying to evade taxes,” the ministry said.

ECHR is expected to announce a fresh decision on Yukos’ multi-billion dollar claim against Russia on Thursday, as the defunct company’s shareholders have filed a separate application with the Strasbourg court, Reuters reported.

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