Russia's move "threatens the very integrity and legitimacy" of the European Convention on Human Rights, council official Nils Muiznieks said.

The Russian state seized control of Yukos in 2007, alleging tax fraud.

European judges ordered Russia to pay 1.9bn euros (£1.6bn; $2bn) in damages.

The Council of Europe (CoE) monitors compliance with the rulings of the European Court of Human Rights (ECHR) in Strasbourg. Russia is among the council's 47 members.

Russia's Constitutional Court argued that the ECHR's 2014 ruling, which called for shareholder compensation, violated the Russian constitution.

"Russia has a right not to fulfil its obligations, if that is the only way to avoid violating the constitution," the Russian court's chief judge Valery Zorkin said.

He said it would be wrong to pay the Yukos plaintiffs compensation out of the Russian state budget, because Yukos had failed to pay Russian taxes.

Compensation could be paid from Yukos bank accounts abroad, he said, but not from the Russian state purse. He said Russia and the ECHR should seek a "compromise" in the dispute.

A Russian law adopted in December 2015 gives Moscow the power to overrule ECHR judgements.
Human rights concerns

In 2015 there were 109 ECHR judgements against Russia for human rights violations - more than any other CoE member state. Turkey was in second place (79) and Romania third (72).

And in 2015 Russia paid out 4.9m euros in compensation for human rights violations, the CoE's Committee of Ministers 2015 report says.

Mr Muiznieks, the CoE Commissioner for Human Rights, said Russia's non-compliance "bears far-reaching consequences for human rights protection in Russia and elsewhere in Europe".

It "weakens the safeguards for individuals and companies against possible state abuses," he complained. He urged the Russian authorities to change the law that grants the Russian Constitutional Court supremacy over the ECHR.

Yukos shareholders are also pursuing the Russian state for compensation through the Dutch courts.

The Hague's Permanent Court of Arbitration (PCA) ruled that $50bn should be paid to them, but last April that ruling was overturned by The Hague's District Court - a decision the shareholders are now appealing.

Yukos was at one point Russia's largest oil producer, and its former CEO, Mikhail Khodorkovsky, was the nation's richest man. He used his vast wealth to fund parties opposed to President Vladimir Putin.

He was arrested in 2003 and spent 10 years in jail after being convicted of fraud and tax evasion - charges he says were politically motivated.