"If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party."
"... [a] factor which seriously affected the company's situation in the enforcement proceedings. The applicant company was subjected to a 7% enforcement fee in connection with the entire amount of its tax-related liability, which constituted an additional hefty sum of over RUB 43 billion (EUR 1.16 billion), the payment of which could not be suspended or rescheduled (see paragraphs 484-486). This was a flat-rate fee which the authorities apparently refused to reduce, and these sums had to be paid even before the company could begin repaying the main body of the debt (see paragraph 484). The fee was by its nature unrelated to the actual amount of the enforcement expenses borne by the bailiffs. Whilst the Court may accept that there is nothing wrong as a matter of principle with requiring a debtor to pay for the expenses relating to the enforcement of a debt or to threaten a debtor with a sanction to incite his or her voluntary compliance with enforcement writs, in the circumstances of the case the resulting sum was completely out of proportion to the amount of the enforcement expenses which could have possibly been expected to be borne or had actually been borne by the bailiffs. Because of its rigid application, instead of inciting voluntary compliance, it contributed very seriously to the applicant company's demise."
- RUB 6,848,291,175 (approximately EUR 190,481,640) for the year 2000;
- RUB 12,652,063,176 (approximately EUR 345,770,570) for the year 2001;
- RUB 13,477,590,451 (approximately EUR 360,688,386) for the year 2002;
- RUB 11,926,766,600 (approximately EUR 355,784,986) for the year 2003.
The enforcement fee for the tax liability for the years 2000, 2001, 2002 and 2003 totalled RUB 44,904,711,402.82 (approximately EUR 1,252,725,582). As indicated above, this lead the Court to conclude that in the circumstances of the case the resulting sum was "completely out of proportion to the amount of the enforcement expenses which could have possibly been expected to be borne or had actually been borne by the bailiffs" (see paragraph 655 in the principal judgment).
2. Holds, by five votes to two,
(a) that the respondent State is to pay the applicant company's shareholders as they stood at the time of the company's liquidation and, as the case may be, their legal successors and heirs EUR 1,866,104,634 (one billion, eight hundred sixty six million, hundred and four thousand, six hundred thirty four euros), plus any tax that may be chargeable, in respect of pecuniary damage, to be converted into the currency of the respondent State at the rate applicable at the date of settlement;
(b) that the respondent State must produce, in co-operation with the Committee of Ministers, within six months from the date on which this judgment becomes final, a comprehensive plan, including a binding time frame, for distribution of this award of just satisfaction;
3. Holds, by six votes to one,
(a) that the respondent State is to pay within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, EUR 300,000 (three hundred thousand euros), plus any tax that may be chargeable, in respect of costs and expenses, which sum is to be paid to the Yukos International Foundation, at the request of the applicant company;
(b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amount at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;
4. Dismisses, unanimously, the remainder of the applicant company's claim for just satisfaction.
Done in English, and notified in writing on 31 July 2014, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Søren Nielsen Christos Rozakis Registrar President
In accordance with Article 45 § 2 of the Convention and Rule 74 § 2 of the Rules of Court, the following separate opinions are annexed to this judgment:
(a) concurring opinion of Judge Jebens;
(b) partly dissenting opinion of Judge Bushev, joined in part by Judge Hajiyev.
"The act or omission in issue must directly affect the applicant" (§ 25). The victim must have suffered direct damage. It is further specified in § 30 that the Court may accept an individual application from a person considered an indirect victim where there is a personal and specific link between the direct victim and the applicant. However, shareholders in a company cannot claim to be victims of a violation of the company's rights under Article 1 of Protocol No. 1 (see Agrotexim and Others v. Greece, 24 October 1995, §§ 62 and 64, Series A no. 330-A), save in exceptional circumstances (see Camberrow MM5 AD v. Bulgaria (dec.), 1 April 2004)".
• As a general rule, a shareholder accepts a risk of devaluation of the relevant shares on account of mismanagement and other reasons. Besides, there is a well-established case-law under which the State, as a general rule, is not liable for misconduct by a private person (in this case, for the applicant company as a legal entity, separate from the shareholders' legal personality, the company's management and the majority shareholder). This case does not fall under the exceptions where the State may be held liable for misconduct by its agents or for breach of its positive obligations.
• The shareholders tolerated the management's misconduct for a relatively long period. They had clear indications of mismanagement through the mass media, as well as in PwC's1 reports. None of the shareholders exercised their statutory right to sue the management team for mismanagement, or to challenge before the courts the sham and fraudulent transactions which led to the mounting of massive tax evasion schemes. The shareholders were entitled to elect and disqualify the applicant company's management, under whose leadership the company, as found by the Court in the principal judgment, had been engaged in illegal activities. In the meantime, the shareholders, while tolerating the management's illegal actions, were enjoying the dividends, despite the fact that the company was engaged in illegal business and did not have the right to distribute those dividends, given the huge and hidden debt towards the public authorities and to other creditors. The majority shareholders, who, if the majority's logic is followed, will be entitled to a large part of the satisfaction payment, are precisely those persons who involved the company in illegal practices.
• Some of the shareholders obtained compensation through the Arbitration awards. There is, indeed, no evidence of payment of those awards by the State, as indicated in the just satisfaction judgment (see paragraphs 43-44). However, non-payment does not seem to be important for defining whether compensation was already (or, under the pending litigation, will be) granted. Under the Court's well-established case-law, such an award itself, like domestic judicial decisions, constitutes "a property" or "possession" which can be sold, used as collateral and be disposed of for value otherwise. Thus, having been granted the awards by the Arbitration tribunals, some shareholders obtained the property value, protected by Article 1 of Protocol No. 1. Russia is a Contracting State to the New York Convention of 1958 and has an effective mechanism for the enforcement of arbitration awards, which potentially increases the value of such property.
• Under any jurisdiction, heirs and successors acquire not only rights, but also obligations. Should, in the Court's view, the shareholders retain rights (to obtain compensation) after the respective company ceased to exist, the latter's unmet obligations should be deemed transferred to the shareholders as well.
"The Court finds that no causal link has been established between the violations of Article 6 § 1 of the Convention and of Article 1 of Protocol No. 1 found in the present case and the revocation of the applicant bank's licence, its liquidation, and the alleged resulting mismanagement of its property. While the withdrawal of its licence and the order for its winding-up might well have had adverse financial consequences for the bank, the Court cannot speculate as to what the eventual result might have been if it had been able to challenge the imposition of those measures in administrative or judicial proceedings (see, mutatis mutandis, Tre Traktörer AB, p. 25, § 66, Fredin (no. 1), p. 20, § 65; and Credit and Industrial Bank, § 88, all cited above). No award can therefore be made under this head".
"7. A clear causal link must be established between the damage claimed and the violation alleged. The Court will not be satisfied by a merely tenuous connection between the alleged violation and the damage, nor by mere speculation as to what might have been".
• The applicant company was displaying the characteristic features of a bankruptcy situation before the enforcement procedure started, i.e. before the State committed the enforcement violation.
• The applicant company applied for bankruptcy in the USA (December 2004, see § 249 of the principal judgment) long before the process started in Russia (September 2005, see § 269 of the principal judgment);
• The applicant company's management repeatedly reported its intention to apply for bankruptcy in the press;
• The bankruptcy procedure was initiated by a group of international banks, but not by the State (see § 269 of the principal judgment).
• The Court did not find the choice to sell off Yuganskneftegaz ("YNG") entirely unreasonable (see § 654 of the principal judgment). After the sale of the shares in YNG (December 2004, see § 259 of the principal judgment), and before the start of the bankruptcy procedure, there were no enforcement actions for almost a year; the applicant company could have continued its operations, but it did not (see §§ 268 and 302 of the principal judgment). Instead, the management was actively moving the company's assets outside Russia. Loss of the YNG shares (i.e. limited shareholder's control) was not a ground for termination of business (contractual) obligations between the applicant company and YNG. Nothing in the principal judgment or in the case files supports the idea that "loss of the shareholder's control resulted in (or even negatively affected) YNG's ability to continue business in favour of the applicant company (no evidence of failure to respect business obligations, termination of contracts or the like)". YNG continued to provide business support to the applicant company for almost a year, whereas, in the meantime, the applicant company was actively hiding its assets and decreasing its ability to meet the diverse creditors' claims.
• As mentioned above, at the date of liquidation, the applicant company owed its creditors (not only the State) over USD 9 billion (approximately 8 billion euros). This amount was defined by the audit and confirmed by the national court. Even if the "wrong amount" (including the 7% fee for all years) is deducted, a substantial and justified debt (not only to the State) remained unpaid. This unpaid debt in itself constituted, under Russian law, sufficient grounds for liquidation, etc.
• The applicant company has never admitted a breach of the tax laws, but self-confidently insisted on the schemes' legality and on no extra grounds for paying those taxes to the State budget.
" ... [The Court] may also find reasons of equity to award less than the value of the actual damage sustained or the costs and expenses actually incurred, or even not to make any award at all. This may be the case, for example, if the situation complained of, the amount of damage or the level of the costs is due to the applicant's own fault. In setting the amount of an award, the Court may also consider the respective positions of the applicant as the party injured by a violation and the Contracting State as responsible for the public interest. Finally, the Court will normally take into account the local economic circumstances" (emphasis added).
"The victim has to bear his loss to the extent corresponding to the likelihood that it may have been caused by an activity, occurrence or other circumstance within his own sphere" (Art. 3:106). The Principles also provide that "In the case of multiple activities, when it is certain that none of them has caused the entire damage or any determinable part thereof, those that are likely to have [minimally] contributed to the damage are presumed to have caused equal shares thereof" (Art. 3:105).
• The applicant company raised certain funds in the course of exercising business models (sham companies and transactions; see, for instance, PwC's report, admissibility decision, §§ 186-188), which, as confirmed by the Court in the principal judgment, were illegal. Substantial "income" was obtained through a business culture of tax evasion, and then used for the applicant company's further expansion.
• Part of the applicant company's assets was initially created through fraudulent schemes (sham tenders during the privatization process). We refer also to the judgment in Khodorkovskiy and Lebedev v. Russia (nos. 11082/06 and 13772/05, 25 July 2013.
• The applicant company's value increased significantly due to an unprecedented and unpredictable jump in the price of oil, as well as an increase of the FX (foreign exchange rate), that is, as a gift (luck) and not due to efficiency on the part of the applicant company's governance.
• The management did not include (consolidate) numerous foreign affiliates (see the PwC report), thus decreasing its ability to pay off the debts to the creditors and to pay the liquidation quota to the shareholders. Those assets remained under the control of the majority shareholders.
• Part of the applicant company's assets was misappropriated by its management (majority shareholders). We refer to the Khodorkovskiy and Lebedev judgment, cited above.
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