magnify
Home Articles posted by Conor McCarthy

The ECtHR’s Largest Ever Award for Just Satisfaction Rendered in the Yukos Case

Published on August 15, 2014        Author: 

mccarthy

Dr Conor McCarthy is a barrister at Monckton Chambers, London and formerly fellow of the British Institute of International and Comparative Law.

On 31 July 2014 the European Court of Human Rights issued its decision in the just satisfaction phase of proceedings in Yukos v. Russia. In its judgment the Court made its largest ever award of compensation, ordering Russia to pay in the region of € 1.9 billion to the shareholders of the company at the time of its liquidation. In 2012, the Court had found Russia to be in violation of the rights to a fair hearing and the protection of property under the European Convention on Human Rights and its Protocol 1. The Court’s compensation decision follows on from the recent final awards of three arbitral tribunals, constituted under the Energy Charter Treaty, which found that the Russian Federation had taken measures with the effect equivalent to an expropriation of Claimants’ investments in Yukos, contrary to Article 13 (1) of the treaty. These final awards were issued on 18 July 2014. Russia was ordered to pay almost $ 50 billion in compensation in these proceedings. Claims arising from the circumstances surrounding Yukos liquidation have also been taken before the ICC International Court of Arbitration as well as in national courts in the United Kingdom, the Netherlands as well as, of course, in Russia itself. This post focuses on the ECtHR’s decision, with some reflections on its significance.

Background

The events underlying the Yukos case occurred in the early 2000s, a period of considerable economic and political upheaval in Russia. Between 2002 and 2003 the Russian authorities investigated the tax affairs of Yukos. This culminated, in April 2004, in the company being assessed as having accumulated huge tax liabilities, in part, according to the findings of the Russians authorities, as a result of Yukos having used impermissible sham companies to evade tax. Yukos was ordered to pay approximately € 1.4 billion in tax arrears for the year 2000, € 1 billion in interest and a further € 0.5 billion in enforcement penalties. In the same month proceedings were initiated against Yukos alleging improperly declared tax liability and seeking the attachment of the company’s assets as security for the claim. A hearing was held at the Moscow City Commercial Court in respect of the tax assessment between 21 and 26 May 2004, with much of the evidence in support of the assessment (running to several tens of thousands of pages) being served on 17 May 2004 and in subsequent days immediately prior to the hearing. The assessment was upheld, with Yukos being found liable to pay well over € 1.3 billion in respect of tax in the year 2000, together with almost € 1 billion in interest and € 0.5 billion in penalties. Subsequently, the penalty imposed on Yukos (approximately € 0.5 billion) was doubled when the tax authorities determined that Yukos had used similar tax arrangements in 2001 to those used in 2000.

Yukos sought to appeal the decision of the Commercial Court. The appeal was dismissed by the Appeal Division of the Moscow City Commercial Court on 29 June 2004. On 30 June 2004, the Appeal Court issued a writ for the enforcement of Yukos’s assessed liabilities, compelling compliance within 5 days. Upon Yukos’s failure to pay the sums within the required period, further penalties of 7 % of the debt were levied. Yukos’s requests to extend the very short deadline for payment were unsuccessful. In the next six months there followed further tax re-assessments for each subsequent year to 2003, including in particular huge assessments to VAT as well as profits taxes, penalties and interest, ultimately totalling some € 24billion. The enforcement of these liabilities was immediate and in the absence of immediate payment in full incurred further surcharges.

Yukos were unable to obtain sufficient liquid funds to meet the liability. In December 2004 the majority of the shares in its largest and most profitable subsidiary, Yuganskneftegaz, (“YNG”), were auctioned to meet its tax liability, rendering insolvency inevitable. Yukos was declared insolvent in August 2006.

The treatment of Yukos by the Russian Federation has resulted in considerable litigation at the international level. Read the rest of this entry…

 

Diplomatic Assurances, Torture and Extradition: The Case of Othman (Abu Qatada) v. the United Kingdom

Published on January 18, 2012        Author: 

Conor McCarthy is Visiting Fellow at the British Institute of International and Comparative Law.

The European Court of Human Rights has handed down its long-awaited judgment in the case of Othman (Abu Qatada) v. the United Kingdom which, despite the initial furore that is likely to surround it in the UK, is also a case of substantial legal significance. The judgment sheds light on the circumstances in which it may be permissible under the ECHR (“the Convention”) to expel an individual to a third state where the use of torture is prevalent on the basis of assurances against torture or ill-treatment. Significantly, the Court also lays down, in emphatic terms, principles as to the permissibility of expelling an individual to face trial in a third state where evidence obtained through torture may be used in trying that person.

The Applicant’s Background

Abu Qatada is a high-profile radical Islamic cleric considered by the United Kingdom to be a threat to its national security and who is sought by Jordanian authorities (and indeed authorities in a number of other countries) in connection with a series of terrorist offences. He arrived in the United Kingdom in 1993 when he was granted asylum, having fled from Jordan where he had been tortured in detention in 1988 and 1990-1991. However, as he is regarded as a threat to national security, the UK has sought to extradite him to Jordan.

Bilateral Assurances on Torture or Ill-Treatment

As regards the question of MOUs or diplomatic assurances, some background is helpful. Following the September 11 attacks in the United States the question of the deportation of terrorist suspects, considered a threat to UK national security, to countries where they may face a risk of torture moved high on the political agenda. In 2001 the UK Foreign and Commonwealth Office advised the government that Article 3 of the Convention precluded the deportation of terrorist suspects to Jordan. However, in 2003 a Government review of the possibility of removing such barriers to removal was conducted and it was proposed that certain key countries, including Jordan, could be approached to determine whether they would be willing and able to provide assurances to guarantee that potential deportees would not be subjected to torture or inhuman and degrading treatment. Following this, the United Kingdom’s Foreign Secretary agreed that seeking specific and credible assurances from foreign governments, in the form of Memoranda of Understanding (“MOU”), could be used to enable the deportation of certain individuals from the United Kingdom and in 2003 the British Embassy in Oman were instructed to seek such assurances from the Jordanian government.

Various negotiations ensued and a MOU was agreed between the United Kingdom and Jordan in 2005. On its face, the MOU provided that a receiving state would respect its obligations under international human rights law with regard to the treatment of persons returned under the MOU. In addition, it was specified that if a returned person was detained within three years of his date of return “he will be entitled to contact, and then have prompt and regular visits from the representative of an independent body nominated jointly by the UK and Jordanian authorities”. The MOU also specified that the receiving state will not impede consular access to the sending state by a person deported under the MOU.

Read the rest of this entry…

 

What Happens to the Gaddafis’ Fortune? Could Frozen Assets be used to Satisfy Claims for Reparation?

Published on March 11, 2011        Author: 

Dr Conor McCarthy is a visiting fellow, from April of this year, at the British Institute of International and Comparative Law. He is author of Reparations and Victim Support in the International Criminal Court, a monograph to be published by Cambridge University Press in early 2012.

The imposition of an assets freeze is now well established in the practice of the Security Council as part of the range of measures at its disposal to maintain or restore international peace and security. It was not surprising therefore that as part of the range of measures taken by the Security Council to address the current situation in Libya, an asset freeze was imposed on various individuals occupying senior positions in the Libyan government and in its security forces as well as on persons closely connected with the ruling regime. In line with previous resolutions in which an asset freeze has been imposed the range of assets frozen by Resolution 1970 (2011) is enormously broad. Paragraph 19 of the resolution requires member states of the United Nations to freeze “all financial assets and economic resources … owned or controlled, directly or indirectly…” by the individuals identified in Annex II of the resolution.

Given the seniority of the individuals in question and the power and influence which they appear to wield within Libya, many states have interpreted the scope of assets “owned or controlled” for the purposes of Resolution 1970 to include a vast swathe of the Libyan state’s assets held abroad. The UK government, for instance, is reported to have frozen around $2bn of assets held in the UK by the Libyan Investment Fund (see here and here). For its part, the United States has frozen around $30bn of assets, including those held by Libya’s sovereign wealth fund and the Central Bank of Libya. Assets owned or controlled by numerous other individuals and entities have also been frozen in the member states of the European Union pursuant to Council Regulation (EU) No 204/2011 adopted on 2 March 2011 (see here and here). Billions more are thought to have been frozen in other jurisdictions throughout the world.

With such an enormous body of wealth frozen in Europe, the United States and elsewhere, what is the position of individuals who have been injured in the violence, past and present, for which the Libyan state or individuals within its senior leadership are alleged to bear responsibility? Is it possible that any of the funds now frozen could be used to satisfy a claim for reparation in respect of such responsibility, assuming it could be established?

Read the rest of this entry…