UPDATE 2-European court rules against Russia in oil man case

(Adds Russia to appeal)

By Christian Lowe

MOSCOW Oct 25 (Reuters) - The European Court of Human Rights ruled on Thursday that Russia violated the rights of an oil executive jailed along with oil tycoon Mikhail Khodorkovsky, the court's first judgment on the politically charged case.

The judgment dealt with procedural violations only, but the court is expected to issue future rulings on the broader issue of whether the eight-year prison sentences handed out to Khodorkovsky and his associate Platon Lebedev were fair.

Lebedev, a former shareholder in Khodorkovsky's now-dismantled YUKOS oil company, was arrested at the same time as the oil tycoon in 2003. Together they were convicted in a Moscow court of fraud and tax evasion.

Khodorkovsky, once Russia's richest man, alleged the trial was fabricated by enemies inside President Vladimir Putin's team to punish him for challenging the Kremlin.

The Strasbourg-based court found in favour of Lebedev's complaint that his detention in the months after his arrest and before his trial involved violations of his rights.

It awarded Lebedev a payout of 3,000 euros ($4,300) in compensation and 7,000 euros for legal costs.

Russia said it would appeal.

"There is no doubt that Russia will use its right ... to appeal against this decision," Veronika Milinchuk, Russia's representative to the court, told Russian state television.

The court ruled that for a week, Lebedev was kept in custody after the period when he could be legally held had expired and before a judge extended his detention.

It also found that Lebedev's lawyers were excluded from a detention hearing. "(This) adversely affected his ability to present his case and was not justified," said the ruling.

LANDMARK CASE

Observers see the YUKOS case as a landmark in Russian business and politics. It helped Putin stamp his authority over the country's powerful 'oligarchs' but also raised questions about the rule of law in Russia.

In parallel with Khodorkovsky's trial, YUKOS -- once Russia's biggest oil company -- was effectively renationalised after being hit with a series of massive back tax demands.

Putin has said the trial was fair, and that Khodorkovsky was a criminal who made his fortune in the chaos of the 1990s by illegally grabbing state assets and avoiding tax.

Both Khodorkovsky and Lebedev have applied to the European court to rule on whether their trial and conviction were legal.

Robert Amsterdam, a lawyer for Khodorkovsky, said he was unable to comment on the cases pending.

But he referred to a ruling last month by prosecutors in Switzerland. They turned down a Russian request for legal assistance on a new YUKOS-related prosecution, arguing there was a risk Khodorkovsky would face discrimination in Russian courts.

"What the Swiss decision has demonstrated beyond any doubt is that Mikhail Khodorkovsky is a political prisoner," Amsterdam told Reuters.

"I believe there is a limit to how long the world can stand by and watch those who stole YUKOS assets sit in judgment on the former owners," he said.

Yuri Schmidt, another lawyer for Khodorkovsky, said prison officials had reprimanded his client for failing to keep his hands behind his back as he returned from the exercise yard.

The reprimand means Khodorkovsky, at least for a time, loses the eligibility to apply for early release, which he acquired after serving half his sentence. His lawyers say such reprimands are part of an official campaign to keep him in jail.