Translation from Russian, except for Kahn and Feldbrugge reports, which were originally written in English For

ease of reference, pagination is as close to the Russian original as reasonable Translator’s notes are clearly marked as such

Report of the Presidential Council of the Russian Federation for the Development of Civil Society and Human Rights on the results of the public scholarly analysis of the court materials of the criminal case against M.B. Khodorkovsky and P.L. Lebedev (tried by the Khamovnichesky District Court of the city of Moscow; the verdict issued on 27.12.2010)

Moscow 2011

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Table of Contents
CHAPTER ONE. INTRODUCTION AND THE MAIN RESULTS OF THE PUBLIC SCHOLARLY EXPERT EXAMINATION ............................................................................ 3 The principles of the organisation of the public scholarly expert examination and the engaging of experts .............................................................................................................. 4 The panel of experts ............................................................................................................. 6 The principal problems examined by the experts ................................................................ 7 Chronology of the Events (as reported by J. Kahn): .......................................................... 14 Summary of Final Conclusions by the Experts (as worded by the authors). ..................... 20 Main arguments and conclusions of the experts (as worded by the authors) 1 .................. 28 S.M. Guriyev .................................................................................................................. 29 O.M. Oleynik ................................................................................................................. 32 M.A. Subbotin ................................................................................................................ 40 A.A. Tedeev ................................................................................................................... 45 A.V. Naumov ................................................................................................................. 49 Otto Luchterhandt .......................................................................................................... 55 Ferdinand Feldbrugge .................................................................................................... 62 A.D. Proshlyakov ........................................................................................................... 70 Jeffrey Kahn ................................................................................................................... 76 Legal Norms Regarded by the Experts as Breached in the Course of the Trial..................... 87 CHAPTER TWO. FULL TEXTS OF THE EXPERT REPORTS ........................................ 91 S.M. Guriyev .................................................................................................................. 92 Jeffrey Kahn ................................................................................................................... 99 Otto Luchterhandt ........................................................................................................ 205 A.V. Naumov ............................................................................................................... 228 O.M. Oleynik ............................................................................................................... 241 A.D. Proshlyakov ......................................................................................................... 261 M.A. Subbotin .............................................................................................................. 300 A.A. Tedeev ................................................................................................................. 309 Ferdinand Feldbrugge, ................................................................................................. 316 CHAPTER THREE. ANNEXES ......................................................................................... 330 Curriculum Vitae of the Experts .......................................................................................... 330 Texts of the Norms Used for the Purpose of the Public Scholarly Analisys (extracts) ....... 355

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Given in the order analogous to the sequence in which the questions comprising the subject-matter of the expert examination were set out. 2

CHAPTER ONE. INTRODUCTION AND THE MAIN RESULTS OF THE PUBLIC SCHOLARLY EXPERT EXAMINATION

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In January 2011, a decision was adopted by the Presidential Council of the RF for the Development of Civil Society and Human Rights to conduct a public1 legal expert examination (a scholarly legal analysis) of judicial acts with respect to the criminal case of M.B. Khodorkovsky and P.L. Lebedev (known to the general public as the second case charging the named persons) examined by the Khamovnichesky District Court of the city of Moscow with the issuance of a verdict of 27.12.2010. President of the RF D.A. Medvedev was informed of the intention to conduct the public expert examination, and he, during a regular meeting with the Council on 02.20.2011 in the city of Yekaterinburg, agreed with the potential significance of an analytical report with respect to the given case, drawn up by an independent public expert group.

With the objectives of conducting the named legal analysis, the following were proposed by the Council and published on its website

The principles of the organisation of the public scholarly expert examination and the engaging of experts 1. The subject matter of the expert examination shall be the official texts of the verdict and other judicial decisions with respect to the case, as well as the published stenographic reports of the court hearings in the Khamovnichesky Court of the city of Moscow. 2. The expert examination must bear an exclusively scholarly legal-andeconomic character. The experts engaged by the Presidential Council of the RF shall not have a mandate to come out with a political assessment with respect to the trial that took place. They must likewise refrain from public presentation of their juridical analysis prior to the entry of the verdict with

1

The word obshchestvennaya does not have a direct analogue in English, and can be variously translated as “public”, “civic”, “societal”, etc. As used throughout this document, it means “public”, but not in the sense that it is open as opposed to in camera, or sponsored by the state as opposed to the private sector. Rather, what it means is that this is not an official government institution, but one created by and made up of ordinary representatives of society at large. The term “independent” (as in “independent inquiry”) could serve as a reasonably close substitute for “public”.—Trans. 4

respect to the case into legal force and the official conclusion of the expert examination. 3. With the objectives of ensuring the fullness of the legal analysis on the basis of current national and international-law regulation in the conducing of the expert study, the participation of experts in the field of constitutional law, criminal and criminal-procedure law, tax law, entrepreneurial and corporate law, international public law, including in the field of the jurisdiction of the European Court of Human Rights, as well as microeconomics and management, is planned. 4. The experts must possess recognised high qualification in the field of law or in other questions relevant to their field of knowledge; in this regard, official confirmation of their scholarly specialisation and the presence with respect to its subject matter of published relevant works is imperative. 5. With the objectives of providing for the objectivity of the experts, any conflict of interests shall be barred, including any prior participation of theirs in the trial with respect to the case being analysed. 6. When engaging foreign specialists, it is planned to take into account the necessity of participation in the legal analysis of representatives of countries belonging to the system of both statute and common law, in particular the countries of Europe and the American continent. 7. The expert examination shall be organised as a public one, correspondingly, work with respect to the preparation of analytical reports shall be implemented pro bono - any contractual relations whatsoever with the Council and payment by it for the research being conducted shall be barred. 8. The preparation of the expert reports must be conducted in conditions of confidentiality – right on up to the presentation of the results of the analysis to the Council. 9. The circle of questions with respect to which an expert is prepared to present his scholarly position shall be determined in accordance with his scholarly preferences. An expert shall have the right likewise to express himself with respect to other legal aspects of the expert study being conducted as well. An expert‘s findings shall be formulated by him individually and must reflect his
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personal professional opinion.

The scholarly analysis presented by each

expert shall be regarded as a stand-alone part of the legal expert examination. 10. The results of the legal expert examination shall be presented to the President of the RF. Information about the results of the analysis conducted must be made known to the general public.

The panel of experts In April 2001, the Council, proceeding from the named requirements for the panel of experts, turned with an offer to participate in the conducting of such a scholarly legal analysis to specialists in Russia and abroad. Personal data about those of them who expressed their agreement to work on this project in accordance with the principles set out and who presented their reports in the time frame determined by the Council for their preparation (October 2011) are given below): S.M. Guriev, Rector of the New Economic School, Candidate1 of PhysicoMathematical sciences, Doctor of Economic Sciences, Professor; Jeffrey Kahn, Associate Professor of Law, Southern Methodist University, USA Otto Luchterhandt, Juris Doctor, Professor, University of Hamburg, Germany; A.V. Naumov, head of the Department of Criminal Law Disciplines of the Academy of the Procuracy-General of the Russian Federation, member of the Consultativescholarly council of the Supreme Court of the Russian Federation, Doctor of Juridical Sciences, Professor; O.M. Oleynik, head of the Department of Entrepreneurial Law of the Faculty of Law of the NRU2 ―Higher school of economics‖, Doctor of Juridical Sciences, Professor; A.D. Proshlyakov, head of the Chair of Criminal Process of the Ural State Law Academy, Doctor of Juridical Sciences, Professor; M.A. Subbotin, general director of the ANO3 ―Center for Legal and Economic Studies‖, general director of the scientific-consulting company ―SRP-Expertiza‖,
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A “candidate” degree is equivalent to a Ph.D.; a “doctor” is higher, equivalent to post-doctoral degree.— Trans. 2 NRU – National Research University.—Trans. 3 ANO – Autonomous Non-Commercial Organisation.—Trans. 6

senior research fellow of the Institute of World Economy and International Relations of the RAS,1 candidate of economic sciences; A.A. Tedeev, deputy director of the Scientific and Methodological Center of the ―UNESCO Department on Copyright and Other Intellectual Property Rights‖ at the NRU ―Higher school of economics‖, Deputy Chair of the Council for Legal Questions under the Presidium of the State Academy of Sciences of the Russian Academy of Education, candidate of economic sciences, Doctor of Juridical Sciences; Ferdinand Feldbrugge, Professor of East European law of Leiden University, The Netherlands.

The principal problems examined by the experts The qualification of the experts and the directions of research selected by them within the framework of the given expert study determined the circle of topics, the examination of which presented itself as the necessary grounds for a legal assessment of the verdict and the court procedures with respect to the criminal case of M.B. Khodorkovsky and P.L. Lebedev in the Khamovnichesky District Court of the city of Moscow.

As a result, the experts analysed the following problems: - in the realm of the economic and tax relations of the companies, as well as corporate management – a) the economic and organisational rationale for vertical integration in oil production companies (including under ownership of both production and processing* units by the same shareholders), in particular the significance of vertical integration for creating and regulating stimuli for investments at all stages of the operations cycle, preventing sharp fluctuations in the political and economic situation and providing for the reliability of energy supply (S.M. Guriev, O.M. Oleynik, M.A. Subbotin);
1 *

RAS – Russian Academy of Sciences.—Trans. The Russian text does not use the word “refining”.—Trans. 7

b) the organisation of management relations in YUKOS‘s vertically-integrated companies, including the transfer of the powers of the executive bodies of the companies and their subsidiary units to specially founded management companies, – under the condition of preliminary control by an anti-monopoly agency – as corresponding to current legal regulation (S.M. Guriev, O.M. Oleynik); c) the legitimate structure of management-and-organisational ties in a system of dependent legal entities, based on relations of ownership and management control, its normative-legal and contractual foundation as ruling out its legal assessment as a criminal group (O.M. Oleynik, O. Luchterhandt); d) transfer price formation during the sale of the output of the oil production units of companies within a country (in the conditions of the absence of a liquid domestic oil market); its significance for the accumulation of funds on [sic] investment directions and the development of business; the objective differences between transfer price formation and market price formation on the external market and the impropriety of juxtaposing them with the objectives of control over prices at the national level (S.M. Guriev, J. Kahn, O.M. Oleynik, M.A. Subbotin); e) the legitimacy of transfer price formation and intra-corporate organisational structures, used, respectively, for the purposes of tax optimisation and the specialisation of operational activity, from the point of view of international and national practice (O.M. Oleynik, M.A. Subbotin A.A. Tedeev);

- in the realm of civil-law regulation of the organisational and contractual relations of companies – a) the legal nature of a general agreement between the YUKOS parent company and its subsidiary companies as varieties of an organisational framework agreement, recognised in law and business practice, the significance and use of which

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as a prospective one* is supported, among others, by the Concept of development of civil legislation (O.M. Oleynik); b) the legal nature of oil sale-and-purchase agreements entered into and executed and the fact that they were found to be ―fictitious‖ in the verdict as contradicting the essence and the consequences of the category of invalid transactions applied in civil law (J. Kahn, O. Luchterhandt, O.M. Oleynik, F. Feldbrugge); c) the Res Judicata significance of facts established in the decisions of commercial courts during the review of the legality of civil-law transactions, assuming the obligation to recognise these facts and observance of due preliminary procedures for their refutation by a competent court in connection with the prospect of proceedings with respect to a criminal case based on the examination of those same facts (O. Luchterhandt, A.V. Naumov, O.M. Oleynik, A.D. Proshlyakov); d) the legal nature of contractual prices; the juridico-technical shortcomings of control over price formation implemented with the objectives of taxation, leading to arbitrariness and corruption in the country during the reviewing of the prices of transactions and de-stimulating economic activeness in it (O.M. Oleynik, M.A. Subbotin, A.A. Tedeev). - in the realm of the regulation of criminal liability – a) the axiomatic features of the corpus delicti of theft by way of embezzlement and misappropriation of rightfully entrusted property, the non-correspondence of their interpretation in the verdict with the normative, doctrinal and the judicial definition that has evolved (O. Luchterhandt, A.V. Naumov, A.D. Proshlyakov, F. Feldbrugge); b) the inappropriateness of the factual circumstances of the case established by the verdict relative to such features of the corpus delicti of embezzlement and misappropriation as the wrongful retention (non-return) of another‘s property, transferred on a certain legal basis into possession to the guilty party (without
*

The Russian word perspektivny can mean a) related to perspective, b) showing promise, c) prospective, d) in the future, usually long-term. None of these seem to make sense in the given context.—Trans. 9

transfer of the right of ownership) and the causing thereby of direct (not including foregone benefit) pecuniary damage to the owner (art. 160 paragraphs 3 (a) and (b) CC RF) (J. Kahn, O. Luchterhandt, A.V. Naumov, M.A. Subbotin, A.D. Proshlyakov); c) no exchange for value in the seizure and conversion to one‘s own benefit of another‘s property as a sine qua non feature of theft in any of its forms (J. Kahn, O. Luchterhandt, A.V. Naumov, A.D. Proshlyakov, M.A. Subbotin, F. Feldbrugge1); d) the classification of civil-law sale-and-purchase agreements recognised as rightful as a way of committing theft as violating the constitutional and internationallaw prohibitions on punishment for acts not indicated in the criminal law as being criminal, and application of criminal law by analogy, as well as not conforming with the understanding of a corpus delicti (art. 14 CC RF) (J. Kahn, O. Luchterhandt); e) the broad interpretation of the features of a corpus delicti, including as applies to the corpora delicti of embezzlement and misappropriation, as ruling out the predictability of criminal liability and, correspondingly, leading to arbitrary criminal prosecution (J. Kahn, O. Luchterhandt, A.V. Naumov, M.A. Subbotin); f) the absence of grounds for a charge of theft with classificational features (as having been committed by an organised group with the use of official position - per art. 160 para 3 (a) and (b) CC), as well as for a charge of legalisation of monetary funds acquired in a knowingly illegal way (art. 174 CC), given that the features of the principal (in the given case) corpus delicti of embezzlement and misappropriation were unproven (O. Luchterhandt, A.V. Naumov); g) the presence of features of a violation of the prohibition on double jeopardy for one and the same set of actions, consisting of the acquisition of oil from oil production enterprises and its subsequent resale – at first as a tax crime in connection

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The latter recognises partial lack of exchange for value during the sale-and-purchase of the oil, but considers that the harm, i.e. the ―amount of the lack of exchange for value‖, was determined by the court incorrectly, in a greater volume than is corroborated by the materials examined.- Compiler‘s note. 10

with the minimisation of taxes on those sums that were received as the result of the execution of the named agreements, subsequently as a theft, committed by way of entering into those same agreements with the use of transfer prices (S.M. Guriev, J Kahn, O. Luchterhandt, A.V. Naumov, O.M. Oleynik, A.D. Proshlyakov, A.A. Tedeev, F. Feldbrugge1); h) the incongruence between the requirement of the law concerning the seizure into the income of the state of all that has been stolen (in the given case – the foreignexchange equivalent of all the oil sold) and the levying of taxes on these sums, already carried out under a previous verdict in relation to those same persons (A.V. Naumov, O.M. Oleynik);

- in the realm of compliance with the requirements for judicial proceeding procedures during the investigation, examination and resolution of the case – a) the absence of appropriate explanations by the prosecutorial power - both in relation to the initiation and investigation of the second criminal case (against the very same accuseds and in relation to the very same complex of their actions as YUKOS executives, and, besides that, after they had served nearly half of the term of the sentence set for them under the first verdict, which is recognised according to the law as a prerequisite for conditional early release* from the serving of a sentence), and in relation to the rationality of the duration of the serial criminal prosecution continuing since the year 2003 (with interruptions of several years and in court trials conducted separately) (J Kahn, O. Luchterhandt, A.A. Tedeev, F. Feldbrugge); b) the juridical facts of the refusal to bring charges against the convicts for other - instead of those examined in the case - crimes committed by them, per the court‘s assertion in the verdict, relative to which grounds, however, were had - for terminating proceedings with respect to the case in connection with a previously issued verdict on the very same charge or due to the expiration of the statutes of limitation for criminal prosecution,

1 *

The last of the named experts does not consider this prohibition to have been violated.- Compiler‘s note. “Conditional early release” is the same thing as “parole” in English.—Trans. 11

- for setting a sentence within the framework of other articles of the CC - with a lower upper limit of the sanction – as bearing witness to arbitrary criminal prosecution (J. Kahn, A.D. Proshlyakov, F. Feldbrugge); c) compliance with the requirement for the case to be examined by a judge to whose judicial jurisdiction it has been assigned by the law; the circumstances bearing witness to the arbitrary determination of the competent court, and specifically to the violation of territorial and instance judicial jurisdiction, in particular barring the examination of the case in the first instance by a court of a higher level (the Moscow City Court) and with the participation of a collegium of jurors, and review of the legality and substantiation of the verdict in cassation procedure - by the Supreme Court of the RF (O. Luchterhandt, A.D. Proshlyakov); d) compliance with the principles of independence and objectivity of a court, adversariality and equality of arms in judicial proceedings, presumption of innocence, as well as procedural actions and court decisions in the court hearing in which, from the point of view of the standards of fair justice, digressions from such principles are uncovered (J. Kahn, O. Luchterhandt, A.D. Proshlyakov), among others, - significant-in-volume literal duplication of the text of the bill of indictment in the verdict (J. Kahn, A.D. Proshlyakov), - a substitution of the substantiation of the court‘s findings in the verdict by an enumeration of documents from the case file materials, frequently not having been examined in the court hearing, without revealing their content and connection to the court‘s findings on whether those or the other circumstances of the case and features of the corpus delicti had been proven; assertions in the verdict about facts that were not examined in court or did not find confirmation - in the absence of actual reasoning of the verdict by the court (J. Kahn, A.D. Proshlyakov),

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- court procedures connected with a real digression from the presumption of innocence, the adversarial beginnings and procedural equality of arms of the parties of the prosecution and the defence, including the policies and procedures for holding the defendants in detention in the courtroom, the court‘s going beyond the scope of the lodged charge in the court proceedings and the verdict, including declaring the lawyers of the defendants and other persons to be accomplices (accessories) to the crime - in contradiction with the prohibitions established by the law; recognising the case file materials presented by the prosecution and read out in court as indisputably admissible and reliable evidence, the court‘s unequivocal support of the position of the party of the prosecution with respect to all controversial questions relative to the examination of the evidence and the application of the law, the non-granting to the party of the defence of the right to examine the prosecution‘s evidence in court and to question prosecution witnesses, the rejecting of defence evidence, the court‘s not accepting the abandonment by the state prosecutor of a part of the charge, as is required of it (J. Kahn, A.D. Proshlyakov);

- in the realm of compliance by the investigative agencies and the courts with universally accepted principles and norms of international law and the international treaties of the Russian Federation – a) the incongruence between Russian legislation and practice and international standards of fair justice, in particular, allowing violations of article 14 of the International Covenant on Civil and Political Rights and of a series of articles of the Convention for the Protection of Human Rights and Fundamental Freedoms (the European Convention), and specifically art. 3 (the right not to be subjected to inhuman and degrading treatment), art. 6 (the right to fair justice), art. 7 (the right not to be subjected to unpredictable prosecution, i.e. not to be held criminal liability for an act that is not prohibited by the criminal law) * in the trial with respect to the case under examination (J. Kahn, A.D. Proshlyakov, F. Feldbrugge);

*

The texts in parentheses are descriptive, rather than the actual titles of the relevant Convention articles.— Trans. 13

b) the correlation between the practices used in the course of the investigation and examination of the criminal case of M.B. Khodorkovsky and P.L. Lebedev and European Court of Human Rights precedents in decisions with respect to applications from Russia and other countries that have significance for assessing the verdict being analysed as having violated the obligations of the Russian Federation deriving from its accession to the European Convention on Human Rights and Fundamental Freedoms (J. Kahn). The conclusions of the experts as independent (authors‘) parts of the scholarly analysis of the documents with respect to the case and other official materials connected with the object of the research are presented as part of the given expert study in full volume (in relation to the foreign expert studies - in translation into Russian). Besides that, given below are: - a chronology of the events connected with the trial with respect to the case, as it is set forth in the text of the conclusion of one of the experts – J. Kahn (with some abridgements), taking into account that this variant of the description is the most detailed and least contradicts the other conclusions, as well as - the researchers‘ general concluding findings with respect to the case and the principal argumentation given by them - in their authorial edit (in a volume somewhat reduced in order to facilitate a first reading).

Chronology of the Events (as reported by J. Kahn)1:

―Following various tax inspections that began in November 2002, the Tax Ministry of the Russian Federation concluded that the Yukos oil company had avoided the payment of a variety of taxes. The Ministry found that this tax avoidance had been accomplished by the use of various subsidiary, trading, and holding

1

Eclipses denote the parts of the text of the report not quoted hereto – Compilier‘s note. 14

companies that, although controlled and owned by Yukos, served to obscure Yukos‘s real business activity. The Ministry also found that the trading companies served as intermediaries between oil production companies and oil processing and storage companies, all of which belonged to Yukos. … On 2 July 2003, Platon Leonidovich Lebedev was arrested while in hospital and sent to a pre-trial detention center. The next day, he was remanded to a detention facility by court order made without the participation of Lebedev‘s lawyers. ... On 25 October 2003, Mikhail Borisovich Khodorkovsky was arrested in Novosibirsk and sent to Moscow. … On 15 April 2004, the Tax Ministry served Yukos with a tax assessment. The Ministry found that Yukos had failed to pay certain taxes and ordered payment of over €2.8 billion in tax arrears, default interest, and penalty payments. The order gave Yukos until 16 April 2004 to pay this amount. However, by a decision of the Moscow City Commercial Court rendered on the same day that Yukos was served with a copy of the Tax Ministry‘s decision, judicial proceedings were begun against Yukos to obtain this amount and the company was enjoined from disposing of certain assets in anticipation of a judgment by the court. On 16 July 2004, the defendants‘ trial began in the Meshchanskiy District Court of the City of Moscow. On 16 May 2005, Khodorkovsky and Lebedev were convicted of fraud (Article 147 of the RSFSR Criminal Code and Article 159 of the RF Criminal Code), causing property damage by deceit or breach of trust (Article 165 CC RF), and tax evasion (Article 198 and Article 199 CC RF) by a verdict of the Meshchanskiy District Court [as amended by the court of the cassation instance on 22 September 2005].‖ [The essence of the charges according to the verdict of 16 May 2005: the convicts have been found guilty of the commission of the following crimes as a part of an organised group: - ―theft (taking fraudulent possession)‖ of 44% of the share in OAO NIUIF and 20% of the shares in OAO Apatit during their privatisation in 1994-1995 (in the part

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concerning the share in OAO Apatit, the case was terminated by the court as timebarred); - ―theft of monetary funds‖, namely of the dividends not received by OAO Apatit's shareholders, as a result of selling the output of the enterprise at ―understated prices‖; the court of the cassation instance changed this charge by replacing it with the causing of pecuniary damage by way of deceit without signs of theft; - ―corporate tax evasion‖ in 1999-2000 in relation with the sale of oil produced by Yukos through trading companies under its control (OOO Business-Oil, OOO Mitra, OOO Wald-Oil and OOO Forest-Oil) at the total amount of about RUB 17,5 billion; - ―theft/taking fraudulent possession‖ of monetary funds in 1999 by way of ―illicit reimbursement of overpaid tax related to the sale of oil‖ from the budget of the ZATO of Lesnoye1; - ―personal tax evasion‖ in 1998-1999 by way of including untrue information about the sources of income into the tax returns.] ... ―On 4 August 2006, the commercial court of Moscow declared Yukos to be bankrupt and, with the consent of the leading creditor, Rosneft, a state-owned oil company, appointed a trustee to manage Yukos. This decision was upheld by the 9th Commercial Court of Appeal on 26 September 2006.2 ... On 5 February 2007, a second indictment, alleging embezzlement [of the entire amount of oil produced by Yukos] (Article 160 CC RF) and money-laundering (Articles 174 and 174.1 CC RF) by the defendants, was announced. The final version of the indictment lodged with the court and dated 14 February 2009 comprises fourteen volumes (3460 pages). The crimes alleged in the indictment span roughly the same time period [1998-2003] as the crimes for which the defendants were arrested in 2003 and convicted in 2005. Both sets of charges concern the defendants‘

1

The legal grounds for the provision of the tax benefits in the ZATO were confirmed by a letter from GNS [The RF State Tax Service] No. VP-6-12/263 of 29 April 1998, and, in compliance with the Procedural Guidelines for Tax Authorities circulated in compliance with letter of MNS RF [The Ministry for Taxes and Levies - the successor of the GNS - Trans.] N AP-6-01/505 of 24 June 1999, information confirming the right of the organisation to receive additional tax and levy benefits under the Law on ZATOs was always provided to the tax authority after the end of each fiscal period together with the tax return for the relevant tax or levy in the form approved by the State Tax Inspectorate of the appropriate ZATO. - Compiler's note. 2 The bankruptcy proceedings resulted in the liquidation of Yukos and purchasing of its main assets by stateowned Rosneft. - Compiler's note. 16

conduct as executives of the Yukos oil company [related, in particular, to the sell of the produced oil]. ... The second trial of Khodorkovsky and Lebedev [by the Moscow Khamovnichesky Court] began on 31 March 2009. A verdict was expected on 15 December 2010. Without explanation, the announcement of the verdict was postponed on that date until 27 December 2010. On 16 December 2010, during a nationwide television program, Prime Minister Vladimir Putin responded at length to a question about Khodorkovsky by saying, inter alia, that ―a thief should sit in jail.‖1 On 27 December 2010, the verdict was read out. Khodorkovsky and Lebedev were found guilty of embezzlement [of oil] and money laundering and sentenced to fourteen years imprisonment.‖ [The essence of the charges according to the verdict of 27 December 2010: the convicts have been found guilty of the commission of the following crimes as a part of an organised group: - ―theft (embezzlement) in 1998-2003 of all the oil‖ (in the amount of about 350 million tonnes) produced by the OAO Yukos production subsidiaries by way of selling it at ―understated‖ prices through trading companies under its control (the same ones that are mentioned in the tax charge in the first case) and laundering of the income from the sell of that oil by way of entering into subsequent transactions with the oil, oil products and proceeds; - as concerns the charge related to ―theft (embezzlement) in 1998 of the shares in subsidiaries of OAO Vostochnaya Neftyanaya Kompaniya (VNK)‖ by way of entering into agreements to swap those shares for shares in other companies under control of OAO Yukos, the case has been terminated by the court as time-barred.] ―On 15 April 2011, the judicial collegium for criminal cases of the Supreme Court of the Russian Federation released its supervisory determination («определение суда надзорной инстанции») concerning various rulings about the defendants‘ detention made by the Khamovnichesky District Court and the Moscow City Court in 2010 and 2011.2 The Supreme Court concluded that the defendants‘ custody in a pre-trial detention facility (rather than in the less severe custodial

1 2

For more detail, see Chapter V of the J. Kahn report. See Opredelenie ot 15.04.11. Sudebnaya kollegiya po ugolovnym delam, kassatsiya (Dokladchik: Shamov Aleksei Viktorovich) (№ 5-Д11-29). This determination was the result of a new law, No. 60-FZ from 7 April 2010, which amended Article 108 of the Criminal Procedure Code to exclude those suspected or accused of certain crimes (including those of which the defendants were accused) from the harsher confinement conditions of pre-trial detention in the absence of certain exceptional circumstances - Expert's note. 17

conditions to which they were previously sentenced) from 17 August to 17 November 2010 was unlawful. On 17 May 2011, the Moscow City Court was scheduled to hear the defendants‘ appeal from the verdict of the Khamovnicheskiy court. ... however, the hearing was postponed. On 18 May 2011, President Dmitrii Medvedev responded to a question about Khodorkovsky at a press conference in Skolkovo, saying that there would be ―no danger‖ to society if Khodorkovsky were to be released from prison.1 On 24 May 2011, the defendants‘ appeal was heard and decided. The Khamovnichesky court‘s verdict was upheld with a modest reduction in the original sentence. On 31 May 2011, the European Court of Human Rights released its judgment of an application Khodorkovsky filed concerning his arrest and detention [during] the first trial. The Court found that Khodorkovsky‘s arrest violated Article 5 § 1 (b) of the European Convention on Human Rights; that the conditions of his detention in court and in a remand prison during his first trial violated Article 3 of the Convention; that the length of his continuous detention pending investigation and during that trial violated Article 5 § 3 of the Convention; and that various procedural irregularities concerning his detention resulted in multiple violations of Article 5 § 4 of the Convention. On 13 September 2011, the judicial collegium for criminal cases of the Supreme Court of the Russian Federation released its supervisory determination («надзорное определение») concerning various rulings about the defendants‘ detention made by the Khamovnichesky District Court and the Moscow City Court in 2010 and 2011. The Supreme Court concluded that the defendants‘ custody in a pre-trial detention facility (rather than in the less severe custodial conditions to which they were previously sentenced) from 17 May to 17 August 2010 was unlawful.

1

Press Conference of the President of Russia, 18 May 2011, ―Skolkovo‖ School of Management (http://news.kremlin.ru/transcripts/11259). For more detail, see Chapter V of the J. Kahn report. 18

On 20 September 2011, the European Court of Human Rights released its judgment of an application filed by OAO Neftyanaya Kompaniya Yukos concerning its treatment. ... the Court held by majority votes that Yukos had not been afforded adequate time to prepare for hearings concerning certain tax assessments, in violation of Article 6 §§ 1 and 3(b), and that Article 1 of Protocol No. 1 to the Convention had been violated both by the imposition of certain tax penalties and by the disproportionate nature of the enforcement proceedings. The Court also found that there had been no violation of Article 1 of Protocol No. 1 of the Convention concerning other tax assessments and no violation of Article 14 or Article 18 taken in conjunction with Article 1 of Protocol No. 1. The Court reserved to a later date the issue of just satisfaction for these violations of the Convention.‖

19

Summary of Final Conclusions by the Experts (as worded by the authors).1 *** S.M. Guriev, Rector of the New Economic School, Candidate of PhysicoMathematical sciences, Doctor of Economic Sciences, Professor. ―The process of the construction and functioning of NK Yukos described in the Verdict is not in and of itself evidence of the wrongful actions of its executives. … All of the largest oil companies (both Russian and those abroad) are verticallyintegrated … Unconditionally, functioning in a regime of vertical integration has no relation whatsoever to violating the law… And so, I can assert the following: with the exception of the episode with the violation of the rights of the minority shareholders of OAO Tomskneft VNK2, the text of the Verdict does not contain convincing evidence of the defendants‘ guilt. As to the rest, the actions described in the Verdict are the normal practice of conducting a vertically-integrated company‘s business in a market economy. By the way, in the event of the charge of theft of the property of OAO Tomskneft VNK as well, the defendants deserve release from liability in connection with the expiration of the 10year statute of limitations.‖

*** Jeffrey Kahn, Associate Professor of Law, Southern Methodist University, USA “ … the verdict in this case evidences the violation of the defendants‘ human rights protected under Articles 3, 6, and 7 of the European Convention on Human Rights.

1 2

They are given in accordance with the list of the experts in alphabethical order.- Compiler‘s note. Such a charge was not laid.- Compiler‘s note 20

Other violations of the Convention are possible, including but not limited to violations of Articles 3, 5, 6, 8, 18, 34, and Article 4 of Protocol 7. … The conclusions of this report are as follows: 1) The defendants‘ detention in the courtroom and the conditions of their confinement on remand during the trial court proceedings constituted inhuman or degrading treatment (Article 3). 2) The proceedings exceeded a reasonable time (Article 6) 3) The tribunal lacked independence and impartiality (Article 6) 4) The verdict lacked indicia of a reasoned judgment (Article 6) 5) The defendants were deprived of the presumption of innocence (Article 6). 6) The defendants were deprived of their right to equality of arms (Article 6) 7) The charge of embezzlement lacked foreseeability (Article 7).‖

*** Otto Luchterhandt, Dr Jur, Professor, University of Hamburg, Germany “The Verdict is a Document of Legal Nihilism The verdict is profoundly unjust. First, it contravenes substantially the main legal principles of a rule-of-law state (Art. 1 of the Russian Constitution). Second, it is also profoundly wrongful because it convicts the accused for the crimes they did not commit and features of which, as per the court‘s own determinations now, were clearly absent. Overall, the progress of the trial and the verdict are marked by disregard for almost all the main principles of a fair trial on a daunting scale. …[the]

21

analysis … shows the daunting scope of the gravest violations of the underlying principles of criminal law … the Russian Constitution had solemnly declared. The Verdict is Groundless – the Accused Did Not Embezzle Anything Conviction of Khodorkovsky and Lebedev … was… unacceptable because oil had not been stolen either by them or by any other persons. The crime of embezzlement and misappropriation within the meaning of Art. 160 CC which is a basis for the conviction is totally absent! Final Assessment The Khamovnichesky Court‘s verdict rightly caused scathing criticism around the world, disagreement, and condemnation. Even a brief analysis like this one shows the daunting scope of the gravest violations of the underlying principles of criminal law and of a rule-of-law state the Russian Constitution had solemnly declared. The second verdict against Khodorkovsky and Lebedev largely surpasses the first one in its divergence, arbitrariness, and malicious intent. It is another staggering document of legal nihilism in the Russian justice because it almost does not conceal arbitrary handling of law and intentional distortion of law.‖

*** A.V. Naumov, head of the Department of Criminal Law Disciplines of the Academy of the Procuracy-General of the Russian Federation, member of the Consultativescholarly council of the Supreme Court of the Russian Federation, Doctor of Juridical Sciences, Professor ―The verdict of the Khamovnichesky District Court of the city of Moscow of 27 December 2010 with respect to the case of M.B. Khodorkovsky and P.L. Lebedev is illegal and subject to repeal due to the absence in their actions of the corpora delicti of the crimes inculpated to them. It was issued with gross violation of the Constitution of the Russian Federation (arts. 15,50), the Criminal Code of the Russian Federation (arts. 1,6,8,14,158,160,1741), the Code of Criminal Procedure of

22

the Russian Federation (arts. 24,90,299), universally accepted principles and norms of international law (art. 14 of the International Covenant on Civil and Political Rights), scholarly (doctrinal) and judicial (including the clarifications of the Plenum of the Supreme Court of the Russian Federation) interpretation of the indicated normative acts (domestic and international-law).‖

*** O.M. Oleynik, head of the Department of Entrepreneurial Law of the Faculty of Law of the NRU ―Higher school of economics‖, Doctor of Juridical Sciences, Professor ―… conclusion to be formulated about the organisational relations in YUKOS: а) These relations are in compliance with civil legislation, which permits entering into agreements both provided for and not provided for (art. 421 para 2 CivC RF), to which the norms of the CivC RF may be applied by analogy the laws [sic], in particular norms about the rendering of services with exchange for value (ch. 39 CivC RF); б) a system of dependent legal entities in and of itself can not be regarded as a criminal group, inasmuch as the state of dependency is directly provided for by legislation; в) the structure of legal relations that has evolved in a vertically-integrated company is universally accepted both in the Russian and in the international practice of the production and sale of oil and oil products. … …the master agreements that were entered into likewise can not be regarded as wrongful, inasmuch as they comply with the general principles of civil-law regulation and are aimed at supporting and coordinating lasting business ties. The moment of the transfer of the right of ownership established in them complies with the requirements of the CivC RF. … …transfer pricing is not a mechanism for theft of a good transactions with which are subject to taxation, inasmuch as if the good is stolen, then in what manner the price

23

for it for the purposes of taxation had been formed does not have significance. Not to even mention the fact that theft can not … be regarded as an operation with a good that is subject to taxation. General finding The verdict as issued contains within itself a multitude of legal errors and inaccuracies, violates a series of civil-law norms, completely ignores court decisions issued earlier both by a court of general jurisdiction and by commercial courts, and violates the requirements of the Constitutional Court of the RF.‖

*** A.D. Proshlyakov, head of the Chair of Criminal Process of the Ural State Law Academy, Doctor of Juridical Sciences, Professor ―Contrary to the requirements of art. 15 CCP RF the court, having violated the prescriptions of arts. 90, 240, 246 and 252 CCP RF, simultaneously carried out the function of the prosecution and the function of the resolution of the case. The accusatory slant in the activity of the court is discerned in the fact that the court:  Overstepped the bounds of the court proceedings both with respect to the circle of persons, and with respect to the charge that had been laid;  Did not accept the abandonment by the state prosecutors of part of the charge that had been laid, which it was obligated to do, having agreed only with an obvious fact – an arithmetical error allowed by the party of the prosecution;  One-sidedly and selectively applied the provisions of art. 90 CCP RF, having given this norm of the law a broad interpretation, where this corresponded to the conclusions of the party of the prosecution;  Recognised all evidence presented by the party of the prosecution as relevant, admissible, reliable, based on the law, as they had been obtained in compliance with the requirements of current criminal-procedure legislation, and

24

sufficient for the resolution of the given criminal case, and therefore deemed it possible to lay them at the foundation of the verdict;  Completely rejected all the evidence presented by the party of the defence;  Unequivocally supported the party of the prosecution with respect to all disputable questions and in all dubious situations (about the territorial judicial jurisdiction of the criminal case, about the admissibility of the evidence obtained, about the competition of the norms of the of the CCP RF and the Federal Law ―On the advocacy and the bar in the Russian Federation‖).‖

*** M.A. Subbotin, general director of the ANO ―Center for Legal and Economic Studies‖, general director of the scientific-consulting company ―SRP-Expertiza‖, senior research fellow of the Institute of World Economy and International Relations of the RAS, candidate of economic sciences “Findings: 1. Arrangements with transfer, or intra-corporate[,] pricing not contradicting current legislation are widely and openly used by companies in Russia to this day. For some such companies, even the attempt to change the conditions of state control evokes irritation (and in many ways justified). Therefore, criminal punishment of some companies for the use of transfer pricing1 in conditions of its universal application by others is an obvious situation of selective prosecution. 2. It ought to be asserted that all entrepreneurs convicted so far under cases connected this way or the other with the use of transfer pricing have turned out to be deprived of foundational rights guaranteed by the Constitution, ones, in particular, such as the equality of all before the law and the court, the

1

In the verdict with respect to the case being examined, the selling of oil with the use of transfer prices, which are characterised by the court as ―understatement‖, is found to be criminal. - Compiler‘s note. 25

impermissibility of selective prosecution, presumption of innocence, the right to a defence, both against a criminal charge, and also when justifying a position with respect to questions of taxation that is different than the Minfin‘s. 3. Any irremovable doubt must be interpreted in favour of the accused. A person can be found guilty and convicted only for a concrete crime directly provided for by the criminal law and committed personally by him. If justice is not in a condition to determine a difference that is uniform for all between a crime and a civil injury committed within the framework of customary economic activity, - it should not be bringing [people] to criminal liability. 4. Such ―bringings‖ in and of themselves ought to be considered criminal, if not from the legal, then most certainly from the economic point of view, inasmuch as such actions cause irreparable harm to the economy . 5. Therefore, without an amnesty in relation to those convicted under ―economic articles‖, as a first step towards restoring fairness, it is impossible to stop the flight of brains and capitals that is ruinous for Russia, and, all the more so, to reverse this process, providing for an inflow into the economy of people with initiative and of private investments. The application of an amnesty is all the more justified inasmuch as it is obvious that entrepreneurs could not and can not comply with such tax rules, which are devoid of certainty and are to this day a subject of discussions both in expert circles, and in the bodies of state power.‖

*** A.A. Tedeev, Deputy Chair of the Council for Legal Questions under the Presidium of the State Academy of Sciences of the Russian Academy of Education, candidate of economic sciences, Doctor of Juridical Sciences ―The analysis that has been carried out of the indicated case file materials allows the following conclusion to be reached. It seems imperative to note the absence of any cause-and-effect connection between, on the one hand, the factual circumstances indicated in the case file

26

materials and established by the court, which could have functioned as legally significant circumstances, giving rise to tax consequences; and, on the other, - the factual circumstances that were established in the verdict that has come into legal force and that have served as the basis for classifying the actions performed by Mikhail Borisovich Khodorkovsky and Platon Leonidovich Lebedev as criminal, and equally for finding the indicated persons guilty of the commission of the crimes provided for by article 160 paragraph 3 subparagraphs (a) and (b), and likewise 1 article 174.1 paragraph 3 of the Criminal Code of the Russian Federation.‖

*** Ferdinand Feldbrugge, Professor of East European law of Leiden University, The Netherlands “Conclusions 39. The defence argues that the prosecution in the present case amounted to a repeated prosecution for the same acts. This position is untenable in my view2. There is no answer to the question why the given case was not combined with the earlier one concerning tax offences. 40. The conviction for prisvoenie under art.160 elicits several questions: а. according to the judgment, the property in question was entrusted and misappropriated at a single moment in time and by a single act. It seems most doubtful that article 160 allows for such an expansive reading of the concept of prisvoenie, which makes the conviction under article 160 dubious; b. of the various grounds for finding the defendants‘ behaviour unlawful, only the deception of the minority shareholders survives criticism3; c. the amount of the loss as established by the court cannot be confirmed. The given point is sufficient to regard the judgment as unfounded.

1

The original Russian text reads “in the same way” instead of “likewise”, most likely a typographic error.— Trans. 2 Reports of J Kahn, O. Luchterhandt, A.V. Naumov, O.M. Oleynik, A.D. Proshlyakov and A.A. Tedeev contain the opposite position – Compiler‘s note. 3 Such a charge was not laid and is not in the verdict. – Compiler‘s note. 27

41. It is important to note that the prosecution failed to follow an approach which would seem to be more appropriate if one proceeds from the premise that the causing of a loss by way of abuse of trust would have been proven: a charge under art.165 of the Criminal Code (―The causation of material harm through deception or abuse of confidence‖)1. It is likely that the prosecution felt that the maximum penalty in this case (5 years) was unjustifiably low. As indicated at the beginning of these observations, the present analysis has been limited to just a few aspects of the case. Whether there were any procedural violations has remained outside the scope of the investigation… It is of general knowledge that the actions which were considered criminal in the given conviction and in the earlier conviction of the defendants was wide-spread among entrepreneurs in Russia during the last decade of the 20th century and in following years. One cannot therefore ignore the question of whether the principle of equality before the law was fully observed, in other words whether there was selective prosecution, or not (cf. art.19 of the Constitution of the Russian Federation and art.4 of the Criminal Code). This question indicates that the fields of law and politics can in the last instance not be kept fully separate. ... A political decision is required in order to deem such actions to be normal commercial practice or rather a criminal activity. Finally, this case, in its legal ramifications, was formed in certain political, economic, and moral conditions. The isolated study of this case exclusively from the legal point of view is to some extent unrealistic and sterile.‖

Main arguments and conclusions of the experts (as worded by the authors)2

1

The charge under this article was laid in accordance with the verdict of 16 May 2005 in the first criminal case. – Compiler‘s note. 2 Given in the order analogous to the sequence in which the questions comprising the subject-matter of the expert examination were set out (on pp. 7-15).- Compiler‘s note. 28

S.M. Guriyev 15 August 2011. “… my position as set forth below is based on my knowledge in the realm of economic science and corporate management. I am prepared to confirm the position set forth below under oath. I am confident that every expert with a grasp of modernday economic science will support my point of view …1 1. The process of the construction and functioning of NK Yukos described in the Verdict is not in and of itself evidence of the wrongful actions of its executives. All of the largest oil companies (both Russian and those abroad) are vertically-integrated. This is conditioned by a whole series of factors analysed in contemporary economic research studies – first and foremost the necessity of creating and regulating stimuli for investments at various stages of the process chain. Unconditionally, functioning in a regime of vertical integration has no relation whatsoever to violating the law 2. As was the case at NK Yukos, the majority of vertically-integrated companies have a production unit (Exploration and Production) and a refining/retail one (Refinery [sic] and Marketing). The use of offshore companies for trading in oil and oil products is likewise more likely the norm rather than the exception – both in Russia and abroad. 2. Trading within vertically-integrated companies unavoidably occurs at transfer prices … That being said, if full vertical integration is the case (that is, the very same shareholders own both the production and the processing units), transfer prices are of no consequence … Although the understating of transfer

1 2

Hereinafter, eclipses denote the parts of the texts of the reports omitted in the quotes. – Compiler‘s note. This applies likewise to the creation of management companies (YUKOS-EP, YUKOS-RM, YUKOSMoscow) and to the transfer of the powers of the executive bodies of management of the corresponding subsidiary companies to these management companies on the basis of agreements. - Expert‘s note 29

prices, at first glance, does cause damage to the production unit, it does not cause any harm whatsoever to its shareholders1 – and in this sense the difference between the transfer prices and the market prices is not theft by definition…. 3. …Although the Verdict compares the given transfer prices with market prices on numerous occasions, the given comparison is not entirely proper: market prices are established on the external market, at the same time as transfer prices – this is the prices of sale by the production units within the country. That being said, market prices for oil within Russia are not simply lower than in Rotterdam or on the Mediterranean Sea – intra-Russian market prices are non-existent … … the largest Russian oil companies are vertically-integrated; therefore, a liquid domestic oil market is absent in Russia 2. A substantiation of the assessment of the level of understatement of the transfer prices is absent in the Verdict and other materials. 4. Nevertheless, if we assume that the transfer prices were understated, and that the vertical integration was incomplete – that is, the production units had outside shareholders who were not represented in the refining/retail units – then the understatement of the transfer prices did indeed cause damage to the given shareholders. In this situation, the case should be examined on the basis of a claim by the injured-party outside shareholders – and must be classified as improper transactions with affiliated persons and a violation of the minority shareholders‘ rights, and not as ―theft of the oil‖. … 5. On the other hand …, [a]lthough, as is indicated in the verdict, the NK Yukos production units were selling oil at below-market prices3, this did not in and of itself cause damage to their shareholders, since they were getting the

1 2

This is clarified additionally in para 5 of the conclusion.- Expert‘s note In the absence of a liquid market it is difficult to determine market prices. An imperfect indicator of prices for Russian oil is the REBCO (Russian Export Blend Crude Oil) price according to the quotations of the New York Mercantile Exchange (NYMEX) – according to quotations with deliveries in Novorossiysk. But these quotations began to be determined only since 2006 (Futures contracts for Urals oil on the RTS exchange had likewise begun to be quoted since 2006).- Expert‘s note 3 Convincing evidence of this is absent in the verdict.- Expert‘s note 30

corresponding income as shareholders of the refining and retail units of the vertically-integrated company. Yuganskneftegas and OAO This applies in full measure to OAO Samaraneftegas, which were subsidiary

companies of NK Yukos. 6. It is entirely possible that the use of understated transfer prices was used by the NK Yukos executives for reducing NK Yukos‘s overall tax burden. However, even if such actions were wrongful, the defendants were already convicted on these charges in 2005 and can not be prosecuted by the court for these same offences a second time. 7. All of the offences mentioned in the Verdict in relation to OAO Tomskneft VNK (see para 4) took place before 2000 inclusive. Consequently, the 10year statute of limitations has expired in relation to them. It ought to be noted that the Order to terminate the criminal case of M.B. Khodorkovsky and P.L. Lebedev in the part of VNK takes this fact into account and releases the defendants from liability on the charges of embezzlement of VNK shares. In an analogous manner, the defendants must also be released from liability on the charges of ―theft‖ of the property of the minority shareholders of OAO Tomskneft VNK.

And so, I can assert the following: with the exception of the episode with the violation of the rights of the minority shareholders of OAO Tomskneft VNK 1 (see para 4 above), the text of the Verdict does not contain convincing evidence of the defendants‘ guilt. … the actions described in the Verdict are the normal practice of conducting a vertically-integrated company‘s business in a market economy. By the way, in the event of the charge of theft of the property of OAO Tomskneft VNK as well, the defendants deserve release from liability in connection with the expiration of the 10-year statute of limitations.‖

1

Such a charge was not laid.- Compiler‘s note 31

O.M. Oleynik ―I, the undersigned Oxana Mikhailovna Oleynik, on the basis of my professional knowledge, taking into account the content of the general principles and norms of Russian law, acting responsibly, in good faith, objectively and properly, have prepared the present report. …

1. The structure of relations within YUKOS, which is designated as an organised group in the verdict and bill of indictment. The following definition is given to the subject of the crime in the issued verdict: The administrative personnel of ZAO Rosprom, which belonged to M.B. Khodorkovsky, P.L. Lebedev and the other members of the organised group, was used by them for management of OAO NK Yukos and its subsidiary companies OAO Yuganskneftegas and Samaraneftegas. With this objective contract No. 001 – yu-r [sic] On Management of the Joint-Stock Company was entered into, according to which [contract], ZAO Rosprom became the management company for OAO NK Yukos with the transfer to this closed joint-stock company of all the powers of the executive bodies of OAO NK Yukos under the Charter, including all questions of day-to-day management of the company‘s activity. The court classified the given contract as wrongful and contradicting the fundamental principles of civil law… From legal positions, it ought to be taken into account that according to Russian law, legal entities shall acquire civil rights and shall take civil duties upon themselves through their bodies, acting pursuant to the law, other legal acts and the incorporation documents (art. 53 of the Civil Code of the hereinafter referred to as CivC RF)… Upon the decision of a general meeting of shareholders, the powers of the executive body may be transferred by an agreement to another commercial Russian Federation –

32

organisation or to an individual entrepreneur-manager (art. 103 CivC RF, art. 69 para 1 LoJSC). Such a practice of transferring the powers of the executive body is widespread, especially in situations of the creation and provision for the functioning of vertically integrated companies …. Inasmuch as the possibility of monopolisation of the market arises during the transfer of the powers of the executive body of one legal entity to another legal entity, the preliminary consent of the anti-monopoly agency is required for entering into the indicated agreements (art. 18 of the Law on Competition and Restricting Monopolistic Activity on Commodities Markets). As applies to YUKOS, pursuant to the requirements of Russian legislation, the powers of the executive body, for example [of] OAO Yuganskneftegas, were transferred to ZAO Yukos Exploration and Production under an agreement of 23 September 1998. The conditions of the agreement were confirmed by the OAO Yuganskneftegas board of directors (minutes No. 9 of 23 September 1998). The transfer of the powers of the executive body upon the petition of ZAO Yukos Exploration and Production was approved by the State Anti-Monopoly Committee of the Russian Federation (report No. KP/6518 of 17 September 1998). The right to enter into such agreements is confirmed by the fact that pursuant to art. 421 CivC RF, parties may enter into an agreement, both one that is provided for, and one that is not provided for by laws or other legal acts, from which such an agreement does not become wrongful on the strength of general dispositive legal regulation. Civil legislation is applied to such agreements pursuant to art. 6 CivC RF by the rules of analogy of the law. … in the Fundamental Principles of State Policy for the Reforming of Electric Power Generation, elaborated by a working group of the Presidium of the State Council of the Russian Federation for Questions of the Reforming of Electric Power Generation, vertically-integrated companies are called one of the most important ways of ensuring the reliability of electricity supply. In so doing, it is indicated in para 17 of the Fundamental Principles that the existence of vertically-integrated companies is not an impediment to the establishment of market relations in electric power generation1.
1

See: order N 9-rp of the President of the RF "On the composition of the working group of the Presidium of the State Council of the Russian Federation for Questions of the Reforming of Electric Power Generation" of 07.01.2001 // Sobranie zakonodatel'stva RF. 2001. N 2. Pg. 170 33

A vertically integrated group of companies, based on relations of ownership and management control, is regarded as the basic model, providing for the stabilisation of the reproduction [sic] cycle of the core companies, and equally also the prevention of sharp fluctuations of the political and economic situation, unavoidable given the narrow specialisation of a holding company at producing output of one type… The development of the oil and oil products market in Russia is impossible without the development of organised trade … Supply on the oil products market in the absolute majority of the regions of the RF is formed by several large vertically integrated oil companies (VIOCs) through their marketing units and subsidiary firms. As a rule, in each region, large VIOCs control from 60 to 90% of the market for various commodity groups of oil products … At the present time, the primary owners of approximately 85% of oil products are companies conducting processing at oil refineries, including also the refining of oil in integrated companies. The remaining 15 % belong to producers, but this is for the most part payment for processing*. The oil refining sector is represented by large vertically integrated oil companies Such an architecture of the oil-and-gas and energy market is recognised not only in the system of Russian law, but also at the international level. Thus, EU Directive No. 96/92/EC of 19 December 1996 assumed the possibility of retaining vertically-integrated companies … (art. 15 para 2 of the EU Directive).* Along this path, in particular, went Germany. Vertical integration has likewise been retained in France and Switzerland. Everything that has been set forth above … allows the following conclusion to be formulated about the organisational relations in YUKOS:

*

From the context elsewhere in this text, the Russian word protsessing may signify companies that do not own their own oil fields or refineries, but rather hire the services of a refinery on a tolling basis to refine oil they have purchased on the market, and then sell the finished product at wholesale or retail.—Trans. * Actual text of Art. 14 para 3: “Integrated electricity undertakings shall, in their internal accounting, keep separate accounts for their generation, transmission and distribution activities”; Art. 15 para 2: “Member States shall ensure that there is no flow of information between the single buyer activities of vertically integrated electricity undertakings and their generation and distribution activities, except for the information necessary to conduct the single buyer responsibilities” – Trans. 34

a) These relations are in compliance with civil legislation, which permits entering into agreements both provided for and not provided for (art. 421 para 2 CivC RF), to which the norms of the CivC RF may be applied by analogy the laws [sic], in particular norms about the rendering of services with exchange for value (ch. 39 CivC RF); b) a system of dependent legal entities in and of itself can not be regarded as a criminal group, inasmuch as the state of dependency is directly provided for by legislation; c) the structure of legal relations that has evolved in a vertically-integrated company is universally accepted both in the Russian and in the international practice of the production and sale of oil and oil products.

2. The legal nature of a master agreement, entered into between the parent company YUKOS and its subsidiary companies. Reference is made on numerous occasions in the verdict to master agreements entered into between individual legal entities entering into the YUKOS system. For example, given in the capacity of such is a reference to [―]master agreement No. Yu8- 4-01/1888А of 04 November 1998, paragraph 3.1 of which stipulates that starting from the date of concluding the Agreement and up to the date of its termination, OAO NK Yukos and OAO Tomskneft VNK shall undertake to regularly, at least once a month, sign the agreements under which OAO Tomskneft VNK shall transfer the possession of oil to OAO NK Yukos and render services envisaged by the operating procedure to ensure marketable quality of oil, whereas OAO NK Yukos shall accept and pay for the products and services provided by the seller[‖].*. Such agreements are usually recognised as framework agreements, which bear an organisational character. … the concept of a framework agreement … is given in the Concept of the Development of the Civil Legislation of the RF … Such agreements contain the general contours of the cooperation, which are specified more precisely in the process of the contractual relations, … What unites all

*

The text between the inserted bracketed quotation marks *“+ and *”+ is an unattributed direct citation from page 216 of the verdict in the indicated case.—Trans. 35

these agreements is the objective of entering into them, aimed at the organisation of lasting ties between the parties for enhancing the economic effect from interaction … One of the elements of the master agreements that were entered into [in the case at issue] was an agreement about how the transfer of the right of ownership shall take place at the moment of the production of a certain raw material (oil-well fluid). An assessment of this condition can be carried out taking into account the requirements of art. 223 CivC RF, which is granted [sic] the parties the right to determine the moment of the arising of the right of ownership. The transfer of the right of ownership is implemented at the moment of the transfer of an item only when the parties or the law have not determined otherwise. Therefore, the established condition fully complies with the CivC RF. Consequently, the master agreements that were entered into likewise can not be regarded as wrongful, inasmuch as they comply with the general principles of civil-law regulation and are aimed at supporting and coordinating lasting business ties. The moment of the transfer of the right of ownership established in them complies with the requirements of the CivC RF.

3. The legal nature of sale-and-purchase agreements entered into and executed, which are designated as fictitious in the verdict. A classification of a multitude of oil sale-and-purchase agreements as fictitious is contained in the verdict ... In order to assess the given finding, one needs to look at the categories of civil law, … the court got confused by civil-law concepts and made use of categories that do not have the corresponding legal load factor, … in the given situation, what might have been spoken about is two kinds of civil-law consequences of the transactions being entered into: а) about bogus transactions, effected for appearances, that are provided for by art. 170 CivC RF. Such transactions are considered invalid from the moment they are entered into … in the event that a participant in civil turnover effects a fictitious transaction, which is invalid on the strength of art. 170 CivC RF, …[it] shall not entail civil-law consequences in the form of a transfer of the right of ownership … Tax consequences do not arise either in this situation. Thus, on the strength of art146
36

TC RF, the object of VAT is recognised as being a sale, under which, pursuant to art. 39 TC RF, is understood a transfer of the right of ownership. Correspondingly, if the right of ownership has not been transferred, inasmuch as the transaction turned out to be bogus, then neither does the object of VAT arise. Here there arises one of the main legal contradictions with respect to the YUKOS case: … juridico-technically, the two verdicts contradict one another. …if one is to consider that the first verdict,… convict[ing] for tax evasion, is rightful, then the object of taxation has to be found in legitimate legal turnover, i.e. the right of ownership to it must transfer in the established procedure. .… Otherwise it is imperative to recognise the first verdict as wrongful and to refund all the received taxes collected in connection with the sale of the oil, which, as it turned out, had been stolen … б) … one can speak of entering into an enfettering transaction, provided for by art. 179 CivC RF. …[these are] transactions entered into on conditions extremely disadvantageous for oneself. … the invalidity of such transactions can be recognised by a court only upon a claim by the injured party, i.e. such transactions are considered to be challengeable, … these transactions are considered valid. … prior to applying the consequences of the invalidity of challengeable transactions, it is imperative to recognise them as such in the established procedure. … [otherwise] a juridically literate court can not recognise such transactions as invalid and apply the corresponding consequences. Needed for such a finding is a claim, for example by shareholders who did not receive a certain profit in connection with the effected transactions….

4. The correlation of the issued verdict to previously adopted court decisions … the investigation and the court referred on numerous occasions to various previously adopted court decisions [of commercial courts]. It is known that the correlation of court decisions is a rather complex … problem. For its resolution, it is imperative to first look at RF Constitutional Court ruling No. 193-O-P of 15 January 2008 [concerning violation] of constitutional rights by article 90 CCP RF. … [it] contains an indication that ―the factual circumstances

37

that are examined and established in the judicial acts of a commercial court implementing civil judicial proceedings pursuant to the competence determined by the Constitution of the Russian Federation and the Code of Commercial Litigation Procedure of the Russian Federation must be taken into consideration during the examination of a criminal case, whereas circumstances confirmed by a commercial court bearing witness in favour of the accused may be refuted only after the executable judicial act of the commercial court that has come into legal force has been vacated in the procedures provided for this. Anything else would not

correspond to the Constitution of the Russian Federation and the rules of proof established on its basis by criminal procedure legislation.‖ …in the verdict [at issue] … it is noted that [―]… commercial courts made their decisions proceeding from the assumption that … according to Article 209 of the Civil Code of the Russian Federation, an owner is entitled to perform any actions in respect of his property at his discretion, including to alienate it. However, the commercial courts, having being misled, ‗came‘ to the conclusion that the production companies concluding the master agreements with OAO NK Yukos were independent parties to … oil purchase-and-sale transactions. In view of this, the [commercial] courts did not find grounds to find the agreements concluded between the respondents to be bogus or sham transactions, assuming that the parties were free in their determination of the conditions of the contract concerning the payment for the services. At present, circumstances have been established that were not known to the commercial courts and to the plaintiffs and were distorted by the respondents in those court proceedings, that is by representatives of the legal department of OOO Yukos who acted on behalf of the production enterprises[‖].*. If one proceeds from this, then, being guided by the instructions of the CC RF, both the prosecutor‘s office and the court should have first attained the repeal of the previously adopted court decisions in the established procedure on various grounds, and only after this issued the verdict being analysed.

*

The text between the inserted bracketed quotation marks *“+ and *”+ is an unattributed direct citation from pages 621-622 of the verdict in the indicated case. There are a number of other such direct but unattributed citations from various pages of the verdict in the given document, although not all of these have necessarily been identified in the course of the translation and correspondingly marked.—Trans. 38

But otherwise, it turns out that court decisions recognising the corresponding agreements as lawful and a court decision proceeding from the premise that the given agreements are void retain their legal force concurrently. Such a discord can not exist in a rule-of-law judicial system.

5. The legal nature of transfer pricing. The addressing of this question is connected with the fact that in the verdict of [sic] the court on numerous occasions cites data about how the information about the ―parties‖ having agreed on the oil price was deliberately false in the agreements. The first thing to which it is imperative to bring attention is the fact that at the present time in our country there is no real market price for oil. ... As is known, a market price forms under the conditions that are formed in art. 3 of the Law on Appraising Activity. One such condition is the presence of the object on the open market by means of a public offering, i.e. the presence of exchange trading. As is known, in the scales of our country this does not exist to the present time. Price-formation for oil and oil products is implemented in a rather complex manner taking into account the fact that the right to form prices by agreement is granted to the parties (art. 424 CivC RF). Extremely important for the effective functioning of the Russian oil complex was the creation of an interest on the part of enterprises in combining efforts with respect to the production of oil, its refining and marketing with the objectives of economising on costs of production and introducing new technologies. One of the forms of providing for such a mutual interest was the formation of vertically integrated oil companies in the form of joint-stock companies with the inclusion of transport and oil product provision enterprises. The movement of oil within such … companies is implemented in accordance with so-called transfer pricing, the general rules of which are formed in international trade.

39

… Characteristic of national transfer pricing , in the same way as of the international as well, is the use of its mechanisms in the main for the objectives of minimising tax payments. The principal objective of applying transfer prices is the ―transfer‖ of the tax base to an affiliated person found in a more favourable tax or other administrative regime. What is being spoken of is various tax preferences, in particular of the existence of the status of a resident of an offshore zone, the granting of tax holidays, the application of preferential tax rates, the right to use other tax advantages. In so doing, such a transfer, as a rule, is implemented by way of manipulation of the price of transactions. What has been said allows a conclusion to be formulated about how transfer pricing can be regarded as a basis for advancing a reproach concerning the correctness and substantiation of taxation. In so doing, a decision of the tax agencies to change the price with respect to those or the other agreements is imperative. But transfer pricing is not a mechanism for theft of a good transactions with which are subject to taxation, inasmuch as if the good is stolen, then in what manner the price for it for the purposes of taxation had been formed does not have significance. Not to even mention the fact that theft can not... be regarded as an operation with a good that is subject to taxation.

General finding The verdict as issued contains within itself a multitude of legal errors and inaccuracies, violates a series of civil-law norms, completely ignores court decisions issued earlier both by a court of general jurisdiction and by commercial courts, and violates the requirements of the Constitutional Court of the RF.‖ M.A. Subbotin “Expert commentary on the assessment of certain economic categories (transfer prices1, market prices, world prices) within the framework of the YUKOS case

1

In the verdict with respect to the case being examined, the selling of oil with the use of transfer prices, which are characterised by the court as ―understatement‖, is found to be criminal. - Compiler‘s note. 40

… The question of regulating transfer pricing has a very lengthy history. Already as far back as 2001, the ideologist of tax reform in the fuel-and-energy complex, deputy minister of finance Sergey Shatalov, was admitting: ―Much that is unclear remains: the definitions of controlled transactions, market price, interdependent

persons et al. By the same token, as of yet the tax agencies still do not know their way around very well concerning questions of transit [sic] pricing…». As is known, oil-and-gas companies pay three principal taxes in Russia: an export duty, a tax on the extraction of useful mineral deposits (the NDPI) and a tax on profit. The problem of transfer pricing has direct bearing on the profit tax and on the NDPI, which was introduced as of 1 January 2002, among other reasons, also as a form of counteracting the application of transfer prices for the purposes of tax optimisation. In so doing, for strictly fiscal purposes (for simplicity of administration), they linked the NDPI rate to the export Russian price of URALS and, as a consequence, only from this moment did the formal linking of the tax base to the level of world prices for oil arise… This was not so in the previous period. …according to the assessments of the Minfin**, oilmen used the mechanism of transfer pricing the most actively, of which the wide dispersion of domestic *** prices for oil can serve as proof: from 700 to 3700 rubles per tonne. …optimisation of taxation thanks to transfer pricing played a role in the long term as a means for increasing the taxable base thanks to the high rates of accumulation and growth of production and export of hydrocarbons and of the products of their refining… Also attributable to the introduction of the NDPI – is such a new phenomenon as the linking of prices for the purposes of taxation to world prices, something that had not existed in the tax legislation of Russia until 1 January 2002…

**

Ministry of Finance.—Trans. The word vnutrennikh could also be translated as “internal”, i.e. within a company. Which translation is correct is not clear from the context.—Trans.
***

41

Along with that, transfer pricing has remained of subjects [sic] of discussions after this as well. Thus, in 2007, the RSPP * introduced proposals relative to the principles and formulations of transfer pricing, in December 2010 the FNS** was only just planning to create a special unit in its structure for control over transfer prices, while an analysis of the proposed changes with respect to the draft of a law at the beginning of that same year was sharply critical… … Incidentally, none of this … hindered V. Putin in December 2010, prior to the issuance of the verdict in relation to M.B. Khodorkovsky, from publicly declaring that his guilt is ―proven by a court‖. At the same time as the indicated uncertain terms were laid at the foundation of the charges of theft under which Khodorkovsky and Lebedev, as well as many other entrepreneurs, were convicted… The reorganisation of AO* and the problem of intermediaries, exchange rate** and dividend policy, investments and incomes, a market price that is not designated, but is formed by economic factors and itself consists of deviations – in all this too there is nothing but uncertainty and unsettledness. Consequently, if one is to adhere to the principle that doubt is treated in favour of the accused, then one needs to promptly release all entrepreneurs who have been convicted for the sale of goods with deviation from the ―market‖ price, evidence the absence [sic] of which was the introduction of the NDPI … In Russia, as is known, questions of taxation, including the procedure for collecting taxes, are regulated by the Tax Code, which contains, among other things, also an article 40 about market prices applied for the purposes of taxation. The state can establish a tax base with a link to world prices, as in the situation with the NDPI, and collect taxes, and in the event of their underpayment - fines as well. But this is not at all a ground for classifying trade at prices lower than such a ―market‖ price as a form of evasion from the payment of taxes and all the more so – as theft. One must not forget that business transactions, their material conditions (including the price)

*

Russian Union of Industrialists and Entrepreneurs.—Trans. Federal Tax Service.—Trans. * Probably “joint-stock companies”, but this is not entirely clear from the context.—Trans. ** The Russian word kursovaya can also be translated as “stock price”, which is how it is used later in this text. The meaning in this instance, however, is not entirely clear from the context.—Trans.
**

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are regulated by civil, and not by tax and most certainly not by criminal legislation. In particular: “Article 424 CivC RF. The price. The execution of an agreement shall be paid for at a price established by the agreement of the parties … … Therefore, prices for oil and oil products were established exclusively by agreement of the parties. …What we are seeing here is an absence of elementary economic knowledge by the applier of the law and the classifier, who to this day confuse income and profit, consider the market price ―understated‖, and not made up of deviations from some average, do not realise that thanks to transfer pricing companies accumulate funds on investment directions, providing for the development of the business, while the formation of subsidiary enterprises is not the creation of a system of intermediaries called upon to provide for evasion from taxes, but is implemented with the objectives of specialisation of operational activity and so forth. In so doing, prices for oil in Russia in the 90s and the 2000s were not regulated, and for this reason talk about the "illegality", the «understatedness» of transfer prices for oil does not have any lawbased foundation underneath it. A sine qua non feature of theft is the causing of direct damage to the injured party as the result of the seizure without exchange for value (the taking) of his property by the guilty party. However, if the prices of transactions with respect to the sale of oil by production subsidiary companies (no matter what these prices are called: transfer, ―understated‖ or any other way whatsoever) provided for not only the covering of all their costs of production of the oil, but also the receiving by these ―injured parties‖ of profit, then it is impossible to call the classification of such transactions as theft of the oil anything other than economic-and-legal perversion. Besides that, the speculation about the damage caused to minority shareholders from transfer prices is simply incomplete, and therefore untrue: if a company

optimises its tax payments with the help of transfer prices, then it thereby has the opportunity to put more into the assets of the company, acquiring new property or creating it with the help of investments. As a result, the amount of the assets grows and, all things being equal, the market value of the company grows, and this means
43

the value of the shares of the shareholders as well, including also of the minority shareholders. Much the same way as how much income a production operation gets depends not only on the prices of sales, but also on production costs. Art. 40 TC signifies not that prices deviating from market prices are ―illegal‖ this deviation does not entail the ―repeal‖ or other legitimate discrediting of such prices, but signifies merely that in the event of a deviation in the price of a contract from the so-called market price more than by 20% (until July 1999 – by 30%), the tax inspectorate, defending the interests of the budget, may reassess the amount of taxes, proceeding not from the price of the contract, but from some other calculated value. Furthermore, any company must have the right to sell its output at any price possible in the concrete market conditions (on individual local markets and in conditions of an at times unfavourable situation), otherwise it will not be able to sell the good at all, and this means it will not earn anything at all and will not be able to compensate the costs incurred even partially.

Findings: 1. Arrangements with transfer, or intra-corporate[,] pricing not contradicting current legislation are widely and openly used by companies in Russia to this day. For some such companies, even the attempt to change the conditions of state control evokes irritation (and in many ways justified). Therefore, criminal

punishment of some companies for the use of transfer pricing in conditions of its universal application by others is an obvious situation of selective prosecution… 2. It ought to be asserted that all entrepreneurs convicted so far under cases connected this way or the other with the use of transfer pricing have turned out to be deprived of foundational rights guaranteed by the Constitution, ones, in particular, such as the equality of all before the law and the court, the impermissibility of selective prosecution, presumption of innocence, the right to a

44

defence, both against a criminal charge, and also when justifying a position with respect to questions of taxation that is different than the Minfin‘s. 3. Any irremovable doubt must be interpreted in favour of the accused. A person can be found guilty and convicted only for a concrete crime directly provided for by the criminal law and committed personally by him. If justice is not in a condition to determine a difference that is uniform for all between a crime and a civil injury committed within the framework of customary economic activity, - it should not be bringing [people] to criminal liability. 4. Such ―bringings‖ in and of themselves ought to be considered criminal, if not from the legal, then most certainly from the economic point of view, inasmuch as such actions cause irreparable harm to the economy. 5. Therefore, without an amnesty in relation to those convicted under ―economic articles‖, as a first step towards restoring fairness, it is impossible to stop the flight of brains and capitals that is ruinous for Russia, and, all the more so, to reverse this process, providing for an inflow into the economy of people with initiative and of private investments. The application of an amnesty is all the more justified inasmuch as it is obvious that entrepreneurs could not and can not comply with such tax rules, which are devoid of certainty and are to this day a subject of discussions both in expert circles, and in the bodies of state power."

A.A. Tedeev1 ―1. … The criminal case file materials contain numerous indications at factual circumstances that are … capable of functioning as legally significant circumstances bearing witness to violations of Russian legislation on taxes and levies. 1.1. …[quote from the verdict:] ―The execution and submission for registration to state agencies of the founding documents of the indicated [in the

1

The author submitted Report of the Experts’ Working Group for Examination of the Tax Aspects of Case No. 1-23/1 –

Compiler’s Note.

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verdict] Russian companies was organised in such a manner that they would be registered for tax purposes in tax havens, that is in the Republic of Mordovia, in the Evenkiysky Autonomous Okrug, in the Republic of Kalmykia and on Cyprus, where the Russian Federation had obligated itself likewise [sic] under the conditions of an inter-governmental agreement with this country to implement taxation of the profit (including dividends) of Cypriot companies from their activity in Russia at reduced rates. As the court established, appointed as directors of these Russian and foreign companies upon the direction of the other person – acting in execution of the orders of M.B. Khodorkovsky and P.L. Lebedev – were the very same especially trusted persons, … factually being subordinates of … other OAO NK Yukos executives through work in the Menatep bank, in the oil company itself or in its subsidiary and other dependent organisations.‖ [end of quote] … The court came to the conclusion that the oil stolen was legalised on the domestic market by M.B. Khodorkovsky, P.L. Lebedev, and other organised group participants through the arrangements using sham enterprises registered in tax havens … Along with that, the application of the ―sham‖ category to the indicated organisations in the case file materials is not based on law. … facts of the registration by OAO NK YUKOS or its employees of any legal entities whatsoever in violation of Russian legislation on taxes and levies in effect at that moment were not established by the court. The degree of legality of such registration was not examined by either the investigation or the court. The analysis that has been carried out allows the conclusion to be reached that concessional taxation regimes with the registration of dependent and subsidiary companies of OAO NK YUKOS … were being used rightfully (with an exception, the ZATO in the settlement of Lesnoy, with respect to the use of which for the purposes of tax planning there exists a court decision that has entered into force). Circumstances indicating at facts not examined in preceding trials of the use by OAO NK YUKOS in its activity of organisations registered in tax havens specifically for tax evasion purposes, i.e. illegal tax optimisation, are not contained
46

in the case file materials. The budget losses that took place in this connection were brought about by the imperfection1 of the Russian legislation on taxes and levies in effect in this period. 1.2. Facts of the use by OAO NK YUKOS of so-called transfer pricing when handling transactions on selling oil were established by the court. However,

questions of the degree of rightfulness of the transfer taxation methodologies used were not examined by the court. On the contrary, as follows from the case file materials, facts of the violation on the part of OAO NK YUKOS of the provisions of article 40 of the Tax Code of the Russian Federation in the formation of pricing were not established by the court. 1.3. Information is contained in the case file materials indicating that [quote] ―dual-entry bookkeeping2 was maintained at OAO NK Yukos for accounting profit received: the first, under Russian Accounting Standards (RAS) – for the

shareholders, the tax and regulatory agencies, in which a minimum amount of profit was accounted; the second – for the auditors and foreign investors, in which the profit received as the result of theft of the oil from production companies was also accounted.‖ [end of quote] In corroboration of this, the case file materials contain a note, from which it follows that according to OAO NK Yukos‘s Profit and Loss Statements from the annual accounting reporting made out pursuant to RAS and from the consolidated financial statements of this company made out pursuant to US GAAP, net profit … [was substantially different] … … the use of international accounting standards is the normal practice for any company that prefers to attract foreign investors, …it is obvious that when converting Russian financial accounting data into an international format, the indicators will not coincide, which does not at all bear witness to the presence of any violations in and of itself. Information on expert corroboration of the court‘s findings about the presence of ―dual-entry bookkeeping‖, and equally about whether the indicated

1

The original Russian text reads ―brought about not by the perfection‖, most likely a typographic error.— Trans. 2 The court erroneously uses the standard accounting term ―dual-entry bookkeeping‖, when from the context it is clear that what it actually means to say is that ―two sets of books were maintained‖.—Trans. 47

circumstances impacted on the execution by OAO NK YUKOS of tax obligations (and how substantially) is not contained in the case file materials. 1.4. Contained in the case file materials [as referred to in the verdict] are pieces of evidence proving that [quote from the verdict] ―the management of OAO NK Yukos since 1996 financial year abstained from publishing its financial statements in mass media and from submitting such to the state controlling bodies and especially to the tax authorities; the financial statements were not disclosed to the OAO NK Yukos auditors, i.e. to PricewaterhouseCoopers, concealing such or producing such in knowingly distorted shape (vol. 131; c.f.s. 24-27, 48-80, 81-109, 110-132, 133-162)‖ [end of quote]. Along with that, it is imperative to note that the question of whether the indicated distortions impacted on the execution by OAO NK YUKOS of tax obligations (and how substantially) was not examined by the court. 2. … the experts‘ working group deemed it possible to indicate that it was somewhat bewildered with respect to the merits of a series of the court‘s findings. … in the verdict with respect to the case, it is indicated that the commercial court judgments (with respect to tax questions) [quote] ―do not refute and do not affect in any way the establishment of the circumstances of commission of crimes in this case or the court‘s conclusions regarding the defendants‘ guilt and classification of their actions‖ [end of quote]. …the court came to the conclusion that the monetary funds M.B. Khodorkovsky and P.L. Lebedev legalised, having carried out financial transactions in them, were generated from embezzlement of oil committed earlier, rather than from tax evasion. It is possible that the court is proceeding from the premise that such embezzlement and improper execution of tax obligations could have appeared as parallel processes. 3. The analysis that has been carried out of the indicated case file materials allows the following conclusion to be reached. It seems imperative to note the absence of any cause-and-effect connection between, on the one hand, the factual circumstances indicated in the case file materials and established by the court, which could have functioned as legally significant circumstances, giving rise to tax consequences; and, on the other, - the
48

factual circumstances that were established in the verdict that has come into legal force and that have served as the basis for classifying the actions performed by Mikhail Borisovich Khodorkovsky and Platon Leonidovich Lebedev as criminal, and equally for finding the indicated persons guilty of the commission of the crimes provided for by article 160 paragraph 3 subparagraphs (a) and (b), and likewise1 article 174.1 paragraph 3 of the Criminal Code of the Russian Federation.‖

A.V. Naumov “…this verdict is illegal, since, first and foremost, it contradicts both the ―letter‖ of the criminal law, which formulates the corpora delicti of the crimes inculpated to the defendants, and its universally accepted doctrinal (scholarly) and judicial interpretation… An error by the court in the classification of the acts inculpated to the defendants as thefts of another‘s property, entrusted to the guilty parties by way of embezzlement. … the corpus delicti of theft provided for by art. 160 CC RF differs in principle from other kinds of theft of another‘s property … by the specifics of the item … - … such property must have been found in the rightful possession of the guilty party, conditioned by the fact that it had been entrusted by the injured party … to the guilty party. This … is universally recognised, both in the theory of criminal law and in judicial practice. … Let us cite the provisions of decree No. 51 of the Plenum of the Supreme Court of the Russian Federation ―On judicial practice in cases of fraud, embezzlement and misappropriation‖ of 27 December 2007. ―The wrongful conversion without exchange for value of property that has been entrusted to a person to his own advantage or the advantage of another person, which has caused damage to the owner or other lawful possessor of this property, should be classified by courts as embezzlement or misappropriation, provided that the stolen property was in the lawful possession or authority of this person, who by virtue of his office or official position, contract or special commission exercised powers of
1

The original Russian text reads ―in the same way‖ instead of ―likewise‖, most likely a typographic error.— Trans. 49

disposition, administration, delivery, use or custody in relation to another‘s property‖… There can be no other interpretation of the corpus delicti of the crime under examination, since this requirement is formulated by the legislator itself in the disposition of art. 160 para 1 CC RF. But in the verdict, there is not even a hint that the oil supposedly stolen by the defendants had been entrusted to the rightful possession of the latter by the ―injured parties‖ - the oil production enterprises. Consequently, neither is there a corpus delicti of embezzlement of another‘s property. …―The basis of criminal liability shall be the commission of an act containing all of the features of a corpus delicti provided for by the present (i.e. the CC RF) Code‖ (art. 8). In the verdict with respect to the given case ,there is not a single fact confirming that the property supposedly stolen by the defendants (oil) had been entrusted by the injured party (recognised as such by the court) to the defendants M.B. Khodorkovsky and P.L. Lebedev as the possessors of a majority of the shares of OAO NK YUKOS. Furthermore, this key point for the resolution of the question of the criminality or non-criminality of the actions of the defendants was not even examined in the verdict and was not resolved in it. And in such a manner, the fact of the transfer to the defendants of powers with respect to the disposition of the oil produced by the oil production enterprises … was not established by the court (…in connection with the absence of this fact in reality). … The verdict confirms that this took place in connection with the entry by M.B. Khodorkovsky and P.L. Lebedev into sale-and-purchase agreements. …[And at the same time] the rightfulness of the indicated agreements is challenged … and their fictitiousness is being argued. The court deemed the main argument in favour of such a finding to be the indicated saleand-purchase, as having been effected ―at prices understated many-fold‖. However, the latter is not capable of transforming such agreements into a conscious wilful decision by the oil production organisations (enterprises) to transfer the oil produced by them into the rightful possession of future thieves of this property. …the acquisition of the oil from the oil production enterprises by way of sale-and-purchase agreements, even though it is the receipt of [this oil] into rightful possession (naturally, for subsequent resale), it is not at all [so] on the strength of the fact that
50

this oil had been entrusted by the injured parties to the defendants. Criminal-law significance here is had only by the last part: the produced oil was not entrusted to the defendants (M.B. Khodorkovsky and P.L. Lebedev) as the possessors of a majority of the shares of OAO NK YUKOS, and this signifies the absence in the actions of the latter of the corpus delicti of embezzlement of another‘s property provided for by art. 160 CC RF. The presence in what was done by the defendants of the classificational features of the act imputed to them provided for by art. 160 para 3 (a) and (b) CC RF – ―the use (in so doing) of [their] official position‖ and the ―large amount‖ of what was stolen – is argued in a sufficiently detailed manner in the verdict. However, none of the evidence accepted by the court in this regard has any criminal-law significance. … Classificational features acquire criminal-law significance only in connection with the presence in the actions of the guilty party of the features of the main (simple) corpus delicti. ...[T]he presence of a classificational feature in and of itself does not transform an act that does not contain the features of the corpus delicti … into a crime. In such a manner, the corpus delicti of the crime of theft of another‘s property, entrusted to the guilty party, by way of embezzlement (art. 160 CC RF) that is inculpated to the defendants is absent in their actions. There may, however, arise a question of the presence in their actions of theft of another‘s property in another form (for example, that of fraud, provided for by art. 159 CC RF). However, only one answer is possible to this question, and it is categorically negative. For any theft (in any form, in any way), the presence of the sine qua non features inherent to theft of another‘s property is required. These features are formulated in Note 1 to art. 158 CC RF. To them, among others, belong ―seizure and (or) conversion of another‘s property without exchange for value to the benefit of the guilty party or other persons, which causes damage to the owner or other possessor of this property‖. Evidence of both the first and the second is absent in the verdict … [T]he prices at which the oil was being acquired, …not only covered the factual cost of the oil, but even exceeded it (for example, pg. 41, 652, 673, 674, 675, 685 of the verdict). So no receipt by the defendants of oil that was without exchange for value for the oil production companies is being spoken of... And in relation to the causing of damage
51

to the owner or other possessor of the property, it ought to be noted that this feature is understood … as the causing of real pecuniary damage … In the court‘s verdict, the causing … of real pecuniary damage as the result of … having entered into agreements [by] the defendants for the sale-and-purchase of the produced oil is not proven. The absence of the indicated sine qua non features of theft of another‘s property allows the assertion to be made that not only is the corpus delicti of embezzlement of another‘s property (art. 160 CC RF) absent in the actions of M.B. Khodorkovsky and P.L. Lebedev, but the corpus delicti of any other theft is as well. What led to the court‘s erroneous finding of criminality in the actions performed by the defendants was the court‘s confusing of transactions permitted by civil law in the sphere of entrepreneurship (civil-law relations) with criminal-law relations (i.e. a crime), which is a violation of art. 14 CC RF, formulating the concept of a crime. The absence of material-law (criminal-law) grounds for issuing a guilty verdict to the defendants signifies both a violation by the court of criminal-procedure legislation, in particular art. 24 para 1 (2) CCP RF (―…[a] criminal case shall be subject to termination‖ in connection with the absence in the act of a corpus delicti) and art. 299 para 1 (1) CCP RF (when issuing a verdict, the court, inter alia, must also resolve the question of whether the inculpated act is a crime). …An error by the court in the classification of the acts inculpated to the defendants as legalisations (launderings) of monetary funds and other property, acquired as the result of the commission by them of a crime (art. 1741 para 3 CC RF. … First (and this is the main thing), the criminal law links the given corpus delicti with the legalisation of property acquired as the result of the commission of a crime. Recognised as such a crime by the verdict with respect to the given case was the embezzlement of the oil produced by the injured-party companies (art. 160 para 3 CC RF). However, … such a criminal-law assessment does not correspond to either the ―letter‖ or the sense of … art. 160 CC RF... And for just this one reason alone, the charge against the defendants of having committed the crime inculpated to them (… laundering of monetary funds or other property) is illegal. Second. The charge of commission of the indicated crime obviously

contradicts the verdict with respect to the first case of M.B. Khodorkovsky and P.L.
52

Lebedev … of 16.03.2005. … under art. 199 CC RF, [by which they were] [c]onvicted for those same actions. … Under the first verdict, in contrast with the second verdict, the court deemed the actions of the defendants with respect to the acquisition of oil from the oil production enterprises and its subsequent sale to be rightful. The crime, in the opinion of the court, consisted pursuant to art. 199 CC RF of evasion from the payment of taxes … And the finding of the guilt of the defendants of this crime rules out their guilt of the commission by them of theft of the oil produced by the oil production enterprises. Thus, in the material ―On some questions of judicial practice with respect to cases of illegal entrepreneurship and legalisation (laundering) of monetary funds or other property acquired in a criminal way‖ (factually being a commentary to decree No. 23 of the Plenum of the Supreme Court of the Russian Federation ―On judicial practice with respect to cases of unlawful entrepreneurship and legalisation (laundering) of monetary funds or other property acquired in a criminal way‖ of 18 November 2004), … it is justly asserted that, first, ―all the income received as the result of criminal activity is subject to conversion to the benefit of the state, in connection with which tax can not be assessed on this income, and, second, by agreeing to the imposition of a tax on income received as the result of a crime, the state is legalising the crime itself, as it were‖ (Byulleten' Verkhovnogo Suda Rossiyskoy Federatsii. 2005, No. 2, p. 30). … Third, the conviction of the defendants for the embezzlement of another‘s property that is being inculpated to them signifies nothing short of their repeat conviction for the very same acts – for the acquisition of oil from the oil production enterprises and its subsequent resale. … [T]he difference is merely in the criminallaw classification of the deed (in the first situation – for a tax crime, and in the second – for a crime against property). This … contradicts art. 50 of the Constitution of the Russian Federation and art. 6 para 2 CC RF based on it … [which]… are based on known principles and norms of international law (for example, art. 14 para 7 of the International Covenant on Civil and Political Rights). Fourth, finding the defendants [in the second case] guilty of embezzlement of another‘s property (that of the very same oil production companies), committed in the form of the very, same actions – sale-and-purchase agreements, also contradicts art. 90 CCP RF. Pursuant to it: ― Circumstances established by a court verdict that
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has come into legal force shall be recognised by a court, prosecutor, investigator or inquiry officer without any additional review, provided these circumstances are not doubted by the court‖.† … [T]he actions with respect to the acquisition by the defendants of oil … were recognised as not criminal by the verdict with respect to the first case. It is precisely for this reason that the defendants were convicted for evasion from the payment of taxes from an organisation (under art. 199 CC RF). …[T]he court deemed the factual circumstances of the case lying at the foundation of the charge (the sale-and-purchase agreements with the oil production companies) to have been proven). … [T]he concept of ―circumstances‖ in the sense of art. 90 CCP RF is concretised in art. 73 CCP RF as [circumstances] subject to proving. Attributable to them are both the factual circumstances of the case …, and the circumstances characterising the criminal-law assessment of the committed act …. The [second verdict] found the first circumstances to have taken place ―without additional review‖. However, it changed the criminal-law assessment … (were not criminal, became criminal). And herein lies the crux of the discrepancy between the verdict and art. 90 CCP RF. … Finding: The verdict of the Khamovnichesky District Court of the city of Moscow of 27 December 2010 with respect to the case of M.B. Khodorkovsky and P.L. Lebedev is illegal and subject to repeal due to the absence in their actions of the corpora delicti of the crimes inculpated to them. It was issued with gross violation of the Constitution of the Russian Federation (arts. 15,50), the Criminal Code of the Russian Federation (arts. 1,6,8,14,158,160,1741), the Code of Criminal Procedure of the Russian Federation (arts. 24,90,299), universally accepted principles and norms of international law (art. 14 of the International Covenant on Civil and Political Rights), scholarly (doctrinal) and judicial (including the clarifications of the Plenum of the Supreme Court of the Russian Federation) interpretation of the indicated normative acts (domestic and international-law). 12 July 2011‖

The given citation is from a previous version of the norm, which was amended by Federal Law No. 383-FZ of 29 December 2009 to read “Circumstances established by a verdict that has come into legal force or by another court decision adopted in civil, commercial or administrative proceedings that has come into legal force shall be recognised by a court, prosecutor, investigator or inquiry officer without any additional review.”—Trans. 54

Otto Luchterhandt “The Verdict is a Document of Legal Nihilism. The verdict is profoundly unjust. First, it contravenes substantially the main legal principles of a rule-of-law state (Art. 1 of the Russian Constitution). Second, it is also profoundly wrongful because it convicts the accused for the crimes they did not commit and features of which, as per the court‘s own determinations now, were clearly absent. Overall, the progress of the trial and the verdict are marked by disregard for almost all the main principles of a fair trial on a daunting scale. … The Khamovnichesky Court lacked jurisdiction Doubtfulness of the verdict starts already with – bogus – jurisdiction for the Khamovnichesky Court, both territory- and instance-wise, and related trial of the criminal case by the judge solely. Pursuant to Art. 32 CCP, a criminal case shall be within the territorial jurisdiction of the court in the district of which the crime was committed. Therefore, it would have been lawful if this case, too, had been tried at the court of the first criminal trial, i.e., at the Meshchansky District Court. .…[The desire] to avoid by all means the need to go again to the court of the Meshchansky District …[was due to the fact that] the second criminal trial refers to the same set of factual circumstances of the case the first one did. The only difference is that the procuracy referred now, through the same facts, to another crime, namely embezzlement and money laundering … … Wrong Instance: The Case Fell within the Jurisdiction of the Moscow City Court

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However, it would have been wrongful to bring charges repeatedly at the court of the Meshchansky District, too, because bringing charges at a lower level of a court of the city district and trial of the case by the judge solely is a substantial offence. The offence is especially serious against the background that the bill of indictment itself provides decisive arguments confirming that the trial had to take place at a higher instance, i.e., at the Collegium for Criminal Cases of the Moscow City Court. Had it been done that way, the case had to be considered by a panel of three judges or by a jury. Then the cassation appeal would have come to the Supreme Criminal Court of Russia, namely, to the Collegium for Criminal Cases of the Supreme Court (Art. 355 para. 3 (2) CCP). Absolutely clearly, the course of the second criminal trial against Khodorkovsky and Lebedev would have been completely different in such circumstances… [T]he bill of indictment in essence classified absolutely unequivocally ―Mikhail Khodorkovsky, Platon Lebedev, and other members of the organised group‖ as a ―criminal community‖ and Art. 210 CCP RF classifies the ―organisation‖ of such a community as an especially grave offence1 and issuance of a verdict in such a case is within the competence of a higher instance (Art. 31 para. 3 CCP)… Absolutely clearly, the borderline between an ―organised group‖ (para. 3) and ―criminal organisation‖ in the form of a ―community‖ (para. 4) is vague and defining a phenomenon as that falling under one or another form depends to a large extent on the subjective assessment of criminal prosecution authorities, i.e., the procuracy and the court… How are those criteria different from the legal qualifiers describing a ―cohesive organised group (organisation),‖ i.e., ―criminal community‖?.. Since answer to the question is decisive as to within the competence of which court instance this criminal trial is, we would be entitled to expect from the bill of indictment and the verdict thorough discussion of the issue, a convincing answer, and

1

The measure of punishment ranges from 7 to 15 years of the deprivation of liberty.
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detailed substantiation as to why the matter in question here is not a grave instance of an organised crime (para. 4) but just its milder version (para. 3). However, the procuracy and the court failed to present any. On the contrary, the bill of indictment and the verdict turned out to be obviously conflicting regarding the legal matter so relevant to the trial and demonstrated arbitrariness in addressing the issue. …[O]n the one hand, they classify the defendants as heads of a usual criminal association in the form of an ―organised group‖ (para. 3) and, on the other hand, they present the defendants, their colleagues, and the enterprise‘s entities under their complete control in such a manner that a downright conclusion suggests itself to the reader that Yukos concern was a criminal organisation (para. 4) to the backbone run by a gang of tough economic criminals… …The criminal community criteria the Plenum of the Supreme Court declared decisive, i.e., criminal purposes and their systematic pursuit by a managing group, hierarchical organisational entities, separation of tasks and functions, conformity to a plan, and obtaining income by crime were established in full by the verdict regarding Yukos concern run by Khodorkovsky and Lebedev. Moreover, the entire verdict and the bill of indictment aim ultimately to present Yukos concern organisation. If this is the case, question arises why the Khamovnichesky Court did not make any legal conclusions from the clear-cut outcomes of the investigation and did not state that it was not competent to try this case?.. The procuracy wanted to avoid by all means a jury trial at the first instance and [the hearing] by the Supreme Court in cassation. as a criminal

Violation of the ne bis in idem Ban Inherent in a Rule-of-Law State … If one compares … the circumstances of the case [that] are a significant basis for the second conviction of Khodorkovsky and Lebedev … to the circumstances of the case contained in the bill of indictment and in the 2005 verdict

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of the Meshchansky District Court, the following coincidence catches the eye: back then, the matter in question was the same accused, the role they played in the sales of oil produced by Yukos‘s subsidiaries, and, furthermore, criminal law assessment of processes in the vertically-structured Yukos concern as a whole. The factual circumstances which were examined by the procuracy investigators now and form the substance of the bill of indictment and serve as grounds for conviction of Khodorkovsky and Lebedev for the crime described in Art. 160 CC, had also been in full the subject of the first trial and verdict of 2005… Art. 50 para. 1 of the Constitution prohibits a repeated conviction of a person who has been already found guilty for a conduct related to such circumstances of a case with the use of another crime. The Constitution seeks to prevent a person from being conviction for any punishable deed again and again. A set of deeds a person has already been found guilty of by a verdict does not make it legitimate for the state to punish further. The investigators, prosecutors, and Judge Danilkin ignored and thereby violated grossly the constitutional principle which is also the main criminal procedural right of the accused … The Verdict is Groundless – the Accused Did Not Embezzle Anything Conviction of Khodorkovsky and Lebedev … was also unacceptable because oil had not been stolen either by them or by any other persons. The crime of embezzlement and misappropriation within the meaning of Art. 160 CC which is a basis for the conviction is totally absent! …. as the court established, charge of theft (Art. 158 CC RF) was completely out of the question). , because Khodorkovsky and Lebedev could not take oil to their own channels which was merely physically, i.e., absolutely impossible for technical reasons because the oil was sold by state monopoly holder, Transneft … Conviction and sentencing for embezzlement was groundless because oilproduction companies OAO Yuganskneftegas, OAO Samaraneftegas, and OAO

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Tomskneft VNK had not ―entrusted‖ the oil to Khodorkovsky and Lebedev. … [T]he production companies sold the oil to Yukos, i.e., they transferred title to it! Transfer of title to oil definitely rules out such features as ―another‘s property‖ and its ―entrustment‖ necessary for the crime within the meaning of Art. 160 CC RF … The court … believes that that hurdle could be overcome by means of the argument that the master agreements and sale-and-purchase agreements were wrongful because they contravened the company and civil law; therefore, they did not take place and, consequently, transfer of title to oil was invalid. [T]he agreements concerned are lawful from the viewpoint of the corporate law. …[T]he sale-and-purchase agreements entered into could only be cancelled through an application to a commercial court. But there was no such application! From the viewpoint of the civil law … the statement in the … verdict that the oil-production subsidiaries of Yukos concern remained the owners of the oil is refuted by the verdict itself because the legal provisions cited by the court to substantiate it state the opposite: the agreements are not void either under the Law On Joint-Stock Companies (Arts. 83 and 84) or under the Civil Code (Art. 179), … they are valid in full until they are cancelled by a commercial court, and since the time limits for challenging them in a court had expired by the time of the first trial already, … [b]y virtue of that legal fact that it also points out, the Khamovnichesky Court could not regard the agreements as invalid. Moreover, declaring more than 60 … decisions of commercial courts (!) of Russia since 2004, which had regarded the sale-and-purchase agreements as valid and, therefore, NK Yukos as the owner of oil, irrelevant in his verdict was the pinnacle of Judge Danilkin‘s … wrongful actions … The Khamovnichesky Court tries to neutralise the positions of the commercial courts … by means of three arguments... … it claims that the commercial courts dealt specifically just with the issue of tax evasion … rather than with the ownership issue … One could retort to that that the commercial courts examined without doubt and had to examine the ownership relations because taxation could only concern oil which OAO NK

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Yukos had obtained legally as an owner. The court‘s objection … [that] [i]t is the difference between income and expenses, rather than the ownership, that is the basis for the calculation of tax … disregards [the fact] that a criminal should not pay tax on that difference either if it arises as a result of sales of what was stolen; rather, it shall be confiscated by the state as a part of the stolen property… … the court claims that the commercial courts … had not yet known about the ―oil theft mechanisms‖… That remark borders on misleading because the court relies on the facts unknown during the first trial and, therefore, new ones. The ―mechanism‖ implies rather none other but entering into the master agreements and the oil sale-and-purchase agreements that the Khamovnichesky Court simply assesses differently now, namely as a means of ―theft by the accused of another‘s property entrusted to them‖… The verdict makes an attempt here to reconcile its claim that OAO NK Yukos was not the owner of oil with the decisions of the commercial courts to the contrary. To do that, it invented the ―factual ownership‖ concept and ascribes it to the commercial courts in order to make thereby an impression that they did not regard OAO NK Yukos as the oil owner either. But, in reality, the commercial courts, invoking Art. 209 of the RF Civil Code, only talk about ―ownership‖ all the time, and that is absolutely correct de jure because the Russian civil law does not know the difference between ―factual‖ and ―de jure‖ ownership … The only point of that ―civil law‖ structure … scrossing over the border of the ridiculous is to present OAO NK Yukos not as the owner of oil because otherwise it would have been impossible to explain the punishment of Khodorkovsky and Lebedev for theft of oil as allegedly another‘s property entrusted to them and the trial would have had to end in an acquittal. … [T]he Khamovnichesky Court goes against not just the commercial courts‘ decisions but also the official position held by Russia during consideration of OAO NK Yukos‘s application at the European Court of Human Rights since 2004. There, Russia has been defending itself against the charges that its officials and justice

60

destroyed Yukos by means of groundless tax claims and bankruptcy proceedings tampering and cold-bloodedly turned it into a state-owned company in order to prove lawfulness of the additional tax claims on the oil Yukos had sold as an owner! Khodorkovsky and Lebedev should not have been convicted for

embezzlement and misappropriation of oil even [in case] of the void and, therefore, invalid nature of the master agreements and sale-and-purchase agreements between OAO NK Yukos and the oil-production subsidiaries merely by virtue of law (Art. 170 of the RF Civil Code), because they had not done anything that would constitute the crime of ―embezzlement‖ or ―misappropriation‖ (Art. 160 CC RF). [T]he parties to the agreements proceeded on the basis that the sale-and-purchase agreements were valid and, thereby, that title to the oil was transferred … Due to the different direction of the agreement partners‘ will, the ―flawed‖ sale-and-purchase agreements cannot be interpreted as a process of entrustment of oil into possession either … … equating the transfer of oil in the conditions of a ―fictitious‖ agreement to an instance where an object of ownership was ―entrusted‖ to a criminal by means of an agreement, the Khamovnichesky Court violated the analogy ban, the underlying criminal law principle in any rule-of-law state. The principle is in place in Russia, too. Art. 3 para. 2 CC RF determines: application of a criminal law provision based on analogy principle is unacceptable. The court violated concurrently another principle of humane justice in a rule-of-law state, namely, the classic nullum crimen sine lege principle contained in Art. 54 para. 2 of the Constitution of Russia as follows: ―No one may be held liable for an action which was not recognised as an offense at the time of its commitment.‖ The analogy ban is a special case of that principle and, therefore, it itself has a constitutional ranking!.. …[T]he circumstances of the case which support the verdict give no opportunity to interpret the ―fictitious‖ sale-and-purchase agreements as the process of theft. There is no time difference and sequence of actions between legal transfer of ownership and illegal embezzlement necessary for the crime. The Khamovnichesky

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Court is wrong to cite, when it substantiates ―theft,‖ the Supreme Court of Russia. It is true that the Decree of the Plenum of 27 December 2007 on judicial practice in cases of fraud, misappropriation and embezzlement establishes that embezzlement of property carried out by means of replacement with less expensive object of property shall be classified as embezzlement in the amount of the seized valuable. But the Supreme Court attributes that provision clearly to the ―establishment of size and amount‖ embezzlement was committed in. It means instances where a criminal embezzles a valuable object by replacing it with a lower-value object. The plenum‘s decision leaves no doubt that higher-value property must first be entrusted to the guilty. Should we apply that provision to the instance under consideration, it would mean that the subsidiaries (only) wanted to entrust oil to OAO NK Yukos by means of a respective transfer agreement …. Decisive prerequisites for embezzlement are clearly missing. It was a plenary decision of the Supreme Court which had to explain to the court how incorrect it was to classify the examined instance as ―embezzlement‖.‖

Final Assessment … The second verdict against Khodorkovsky and Lebedev ... almost does not conceal arbitrary handling of law and intentional distortion of law.‖

Ferdinand Feldbrugge “…The basic materials for the following analysis are the judgment of 27 December 2010 (hereafter ―the judgment‖) of the Khamovnichesky Court in Moscow, as well as a number of legislative acts of the Russian Federation, esp. the Criminal Code of the Russian Federation. … Information concerning earlier convictions of the defendants is limited to the judgment of 27 December 2010…

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This analysis is limited to two important aspects of the case which appear to be open to discussion, namely an analysis of the issue of possible double jeopardy (i.e. of the correlation of an earlier case concerning fiscal offences with the present case) and an analysis of the ownership issue in connection with the main charges of the present case…

The Double Jeopardy Issue

Art.4 of Protocol No.7 of the ECHR is the most explicit in providing that no one can be prosecuted or punished in a criminal procedure (within the jurisdiction of the same state) for a criminal offence of which he has been acquitted or convicted by a final judgment. ...[P]roceeding from the prohibition on double jeopardy contained in art.50 par.1 of the Constitution of the RF, any criminal prosecution which could lead to a violation of this norm would be meaningless. … The … meaning of the ne bis in idem principle, contained in the provisions mentioned … at the present-day stage … reasonably extends to the actual behaviour, the actual actions that a person has committed and are punishable by criminal law. Otherwise, law-enforcement agencies could continue to harass an individual by charging him at intervals with different offences relating to the same actual behaviour. The term ―offence‖ in the acts in question has to be read therefore as ―a concrete action, covered in some way by the criminal law‖. In the present case the defence argues that the 2005 conviction for fiscal offences and the new charges of embezzlement and legalization concern the same ―criminal offence‖ (p.661) in connection with which the new charges would be excluded under the ne bis in idem principle. This view would imply that the entire complex of commercial activities the defendants had been conducting during a

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number of years constituted a single ―action‖. Such an extension of the ne bis in idem principle is unjustified1. The fiscal offences of which the defendants were convicted in 2005 may indeed be viewed as an integral part of the complex of their commercial activities, but the actions embodying these fiscal offences were sufficiently concrete and identifiable to consider them as separate criminal offences. Even if all the taxes were paid, this would not have affected the possibility of the present criminal prosecution under art.160. Art.6 par.1 of the Criminal Code of the RF enunciates the principle of equity (printsip spravedlivosti) which implies a.o. that punishment should correspond with the circumstances of the commission of the crime. On this basis one can argue that criminal prosecutions for separate criminal offences which together constitute a complex of criminal activities should, if at all possible, be united in a single trial. Such a requirement can also be based on general principles of equitable administration of justice (cf. art.6 of the ECHR). … … the considerable interval between the prosecution of the fiscal offences and the second trial was not clearly explained, either by the law-enforcement agencies or by the court. Such explanations were required, in particular, in connection with the start of the second trial upon the defendants‘ having served 4 out of the 8 years of deprivation of liberty under the first judgment, and the lack of explanations could create the impression that the second trial was intended to harass the defendants.

The Ownership Issue

The defendants directly or indirectly owned 90% or more of the stock in the IUKOS company, as well as shares and participatory interest in the charter capital of mutually interdependent companies, the decisions of which the defendants

1

Reports of J Kahn, O. Luchterhandt, A.V. Naumov, O.M. Oleynik, A.D. Proshlyakov and A.A. Tedeev contain the opposite position – Compiler‘s note. 64

determined by virtue of official powers, or by virtue of other circumstances1… In order to understand how the actions of the defendants could be qualified according to art.160, a more detailed analysis of this provision is required … In order to understand how the actions of the defendants could be qualified according to art.160, a more detailed analysis of this provision is required: - a. it must concern property (imushchestvo) of another; - b. this property must have been entrusted to the defendants; - c. it must have been taken by, and/or put to use for the benefit of, the offender or other persons; - d. this must have been done unlawfully and without compensation; - e. it must have been done intentionally2 and for selfish (mercenary, korystnye) purposes; - f. the act must cause loss to the owner or another possessor of the property … The Court notes (p.651) that by virtue of the general agreements and other contracts between the three companies and IUKOS, the former were deprived of the right to dispose of their property from the moment the oil mixture came out of the borehole, transferring this right to IUKOS. The Court accordingly regards this as the time and the place of the commission of the crime. It is at this moment that the ―taking‖ (iz‖iatie), or rather the ―putting to use for the benefit of the offender or of other persons‖ (obrashchenie … v pol’zu vinovnogo ili drugikh lits), took place. On the following page of the judgment (652) it is stated that the purchase-sale contracts provided that the control (vladenie) over the oil was passed from the producing company to IUKOS at the checkpoint (uzel ucheta).3 Although the concept of vladenie is designated more precisely in civil law as possession, from the entire judgment as a whole, obviously, that in this situation the less precise concept of control (―being in a position to determine the legal fate of the object in question‖) is meant. This is in agreement with the character of the offence of art.160. It would be unrealistic to limit the applicability of this provision to persons who were the civil law possessors. Anybody (not being the owner) who has actual control over a thing is

1

In the given analysis, the term ―IUKOS‖ signifies not just the OAO NK IUKOS company itself, but also companies acting on its behalf and completely controlled by it, directly or indirectly. 2 The term ―theft‖ (khishchenie) is considered to imply the intentional [umyshlennyi] character of the act. If the offender did not know that he had unlawfully taken the property of another person, there is no theft. 3 This assumes, in aggregate with the position of the court set forth on pg. 651 (and others), that the checkpoint (uzel ucheta) is the same thing as the exit of the borehole (skvazhina). 65

a potential offender in this case. ―Entrusting‖ in the definition of art.160 means ―putting somebody in a position to determine the legal fate of an object‖. The contracts between IUKOS and the oil-producing companies created the legal framework for IUKOS to determine the legal fate of the oil, which was then realized every time a concrete delivery took place. In this view, the issue of the ownership of the oil is relevant in so far as the offence of art.160 of the Criminal Code can only be committed by somebody who is not the owner. The defence has argued repeatedly that in the earlier tax cases numerous decisions of arbitration courts had established that IUKOS was the owner of the oil (and therefore liable to pay tax) and that therefore there could be no question of prisvoenie. Leaving aside the question whether ownership as defined in civil law can in all cases be equated to ownership as defined in tax law, one can not but admit that the fact that the three oil-producing companies possessed the right of ownership initially is not in doubt, and the prisvoenie can therefore only have occurred until such a moment as they still owned the oil (oil mixture). What has been said means that there were two significant moments in the case being examined: the moment the oil was ―entrusted‖ (without an act of entrusting there could be no act of prisvoenie), and the moment the ownership of the oil changed hands (after this moment there can be no act of prisvoenie). In the view of the court, as I understand it, these two moments coincided. It seems most doubtful that article 160 allows for such an expansive reading of the concept of prisvoenie. As a legal person itself cannot be the subject of trust, only the responsible physical persons who manage the legal person, the defendants can be regarded as being persons to whom the property had been ―entrusted‖ in the meaning of art.160 of the Criminal Code. Abuse of trust on their part should have been proved.

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It is self-evident that the oil was, at some moment, removed from the control of the original owners and utilized by the defendants for other purposes, but was this done unlawfully and without compensation, which could have been considered abuse of trust on their part? If there was partial compensation (as there was in this situation), an uncompensated part remains, and to this extent the receiving was uncompensated. The judgment occupies the same position (p.652), but it is unclear to me how this position agrees with the final amount of the damages inflicted as stated elsewhere in the judgment. As to the unlawfulness of the taking, the judgment, in various places, refers to several legal provisions as having been violated. As the legal basis for transferring control over the oil was supplied by the contracts between IUKOS and the oilproducing companies, it is obvious that the place to look for violations of the law would be in these contracts. Art.1 par.2 of the Civil Code of the RF provides that legal persons (a.o.) realize their civil law rights by their own will and in their own interest. By signing over virtually all powers to another legal person, the three oil-producing companies and their partner IUKOS breached this provision, according to the Court. This entailed the nullity of the deal (art.168 of the Civil Code); the oil ought to have been considered the property of these three companies, and its taking by IUKOS ought to have been considered evidently unlawful. It is undisputed that physical persons cannot transfer all their civil law rights to another person, primarily because certain rights are irrevocably personal. With regard to a legal person, the analogous assertion by the Court is less persuasive. A legal person will have few rights, if any at all, that are strictly personal. So on that particular ground it seems difficult to deny a legal person the right to transfer most of its powers to another [legal person]. More convincing is the court‘s position that the contracts which signed away most powers of the three companies were defective because they had been arrived at in an unlawful manner, specifically by deception of the shareholders (pp.650 and

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663ff.). Such transactions, however, are not null and void, but can be annulled by the courts at the request of the injured party (art.179 of the Civil Code). Such a step was apparently not taken and the contracts ought to have been regarded as lawful. The judgment refers occasionally to the contracts between the parties as ―sham transactions‖ (pritvornye sdelki), defined in art.170 of the Civil Code as ―transactions made for the purpose of concealing another transaction‖. Such transactions are equally null and void. Such a construction, however, is questionable, because the element of deceit was not in the concealment of another transaction (the words of the contract meant exactly what they said), but could have been connected with the status of the contracting parties, who were ultimately emanations of a single will. As a result, it is doubtful whether a conclusion that the actions of the defendants were unlawful can be based on art.170 of the Civil Code. At any rate, the court failed to give such a legal assessment. …

Conclusions The defence argues that the prosecution in the present case amounted to a repeated prosecution for the same acts. This position is untenable in my view. There is no answer to the question why the given case was not combined with the earlier one concerning tax offences. The conviction for prisvoenie under art.160 elicits several questions: a. according to the judgment, the property in question was entrusted and misappropriated at a single moment in time and by a single act. It seems most doubtful that article 160 allows for such an expansive reading of the concept of prisvoenie, which makes the conviction under article 160 dubious; b. of the various grounds for finding the defendants‘ behaviour unlawful, only the deception of the minority shareholders survives criticism1; c. the amount of the loss as established by the court cannot be confirmed. The given point is sufficient to regard the judgment as unfounded.

1

Such a charge has not been brought and is not in the verdict. – Compiler‘s note. 68

It is important to note that the prosecution failed to follow an approach which would seem to be more appropriate if one proceeds from the premise that the causing of a loss by way of abuse of trust would have been proven: a charge under art.165 of the Criminal Code (―The causation of material harm through deception or abuse of confidence‖)1. It is likely that the prosecution felt that the maximum penalty in this case (5 years) was unjustifiably low. the present analysis has been limited to just a few aspects of the case. Whether there were any procedural violations has remained outside the scope of the investigation. However, I would still like to lay out some general considerations. It is of general knowledge that the actions which were considered criminal in the given conviction and in the earlier conviction of the defendants was wide-spread among entrepreneurs in Russia during the last decade of the 20th century and in following years. One cannot therefore ignore the question of whether the principle of equality before the law was fully observed, in other words whether there was selective prosecution, or not (cf. art.19 of the Constitution of the Russian Federation and art.4 of the Criminal Code). This question indicates that the fields of law and politics can in the last instance not be kept fully separate. An analogous assertion is true in relation to the lawfulness of the defendants‘ actions discussed above. A political decision is required in order to deem such actions to be normal commercial practice or rather a criminal activity. Finally, this case, in its legal ramifications, was formed in certain political, economic, and moral conditions. The isolated study of this case exclusively from the legal point of view is to some extent unrealistic and sterile.‖

1

Such a charge took place in the Meshchansky Court verdict of 16 May 2005 that found Khodorkovsky and Lebedev guilty, inter alia, of causing pecuniary damage by way of deceit and abuse of trust (Art. 165 CC RF). – Compiler‘s note. 69

A.D. Proshlyakov ―The court violated the requirements of art. 252 CCP RF on the limits of court proceedings Contained in para 7 of the decree of the Plenum of the Supreme Court of the RF ―On the court verdict‖ of 29 April 1996 is the following clarification: ―Having in mind that proceedings in a case in court are carried out only in relation to defendants, the court should not allow formulations in the verdict bearing witness to the guilt of other persons in the commission of the crime. …in the verdict the court, in essence, formulated a charge both in relation to persons who were neither defendants under the given criminal case nor persons being prosecuted in the procedure of criminal judicial proceedings under this or other criminal cases. …the court factually charged the lawyers (the defenders) with aiding and abetting Khodorkovsky and Lebedev, that is of complicity in acts committed by the defendants, including also in the period of their being found in detention. … [A] special procedure of proceedings with respect to criminal cases is in effect in relation to lawyers (chapter 52 CCP RF), but data that such an investigation in relation to the lawyers was conducted … are not cited in the verdict. … [t]he court … in essence found in the verdict that the defendants had committed commercial bribery (art. 204 CC RF)... although such a charge had not been laid against them. …the court overstepped the bounds of the charge laid against the defendants, having indicated in the verdict that they are the organisers, but not the executors, as this derives from the classification of their actions without reference to art. 33 CC RF by the party of the prosecution. …In violation of the requirements of art. 246 CCP RF, the court did not accept the abandonment of the state prosecutors of part of the charge laid against the defendants, as it was obligated to do, having made reference that ―during the closing submissions, representatives of the state prosecution asked the court to reduce the amount of the oil stolen by the defendants and reduce the amount of the damage accordingly. The court does not regard such position of the state prosecutors as
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withdrawal of those charges as the evidence confirming the volumes and the value of the stolen oil was presented by them at the court hearing with references to specific agreements, contracts, transfer-acceptance reports and other pieces of evidence, the place of the commission of the crime and the time frame of this act.‖ …the court on numerous occasions makes use of the terms ―seizure‖, ―taking possession of the right‖, ―deception‖, ―misleading‖ when characterising the method of theft, by the sole form of theft under which seizure is accomplished by way of deception or breach of trust – this is fraud (art. 159 CC RF). … Inasmuch as the form of theft is described in the verdict in a contradictory manner, then there naturally and rightfully arises the question: so was there theft at all or was some other act committed?.. In the verdict one can uncover indirect confirmations of this … Thus, in the opinion of the court, the objective of the guilty parties consisted of substantially reducing the tax burden (p. 8) … the court finds that the defendants violated the requirements of art. 40 TC RF (p. 609), while the understating of prices is illegal, which is established by the civil and tax legislation of the RF (p. 648)… … In connection with this, the court ended up having to resolve … [the] question… whether or not the charge laid against the defendants is identical to the one under which they were convicted under a verdict of the Meshchansky District Court of the city of Moscow of 16.05.2005. … the time of the commission of the ―first‖ crime (1999-2000) is completely encompassed by the period of the ―second‖ (1998-2003). Both crimes were committed by the one and the same persons, in one and the same place (the town of Lesnoy of Sverdlovsk Oblast), in one and the same way. Nor can one agree with the opinion of the court that these are different crimes, inasmuch as they have different objects, since: 1) Article 14 of the International Covenant on Civil and Political Rights of 1966 proclaims that no one shall be liable to be tried or punished again for an offence for which he has already been finally convicted in accordance with the law and

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criminal-procedure law1 of each country.

This international-law principle is

embodied likewise in art. 50 para 1 of the Constitution of the Russian Federation (―No one may be repeatedly convicted for the same offense‖) and in art. 6 para 2 CC RF (―No one can be held criminally liable twice for the same offense‖). Art. 27 para 1 (4) CCP RF establishes that criminal prosecution in relation to a suspect or an accused shall be terminated in the presence in relation to the suspect or the accused of a verdict that has come into legal force with respect to the same charge or of a court ruling or a judge‘s judgment to terminate a criminal case on the same charge. 2) By a charge current criminal-procedure law understands an assertion about the commission by a certain person of an act prohibited by criminal law (art. 5 para 2 CCP RF). In so doing in the order to bring charges must be contained a description of the crime with an indication of the time, the place of its commission, as well as of other circumstances subject to proof pursuant to art. 73 para 1 (1)-(4) CCP RF (art. 171 para 2 (4) CCP RF). 3) From the content of art. 5 para 22 and art. 171 para 2 (4) CCP RF it derives that by the same charge ought to be understood the same factual circumstances of a committed act (time, place, method, situation and others). Its criminal-law

classification in the given situation does not have significance, since otherwise one would have to recognise that any other assessment of the act (including also as an ideal aggregate of two or more crimes) must lead to factual non-recognition and ignoring of the binding nature of a guilty or not-guilty verdict that has come into legal force, as well as of another court decision (art. 392 para 1 CCP RF). …if … a guilty or not-guilty verdict has been issued with respect to this charge, then its entry into force shall rule out the repeat examination of a criminal case in relation to that same person with respect to those same factual circumstances, even if: a different criminal-law classification has been given to the act; the act was additionally qualified the second time already as an ideal aggregate of two or more crimes; new facts that had not been directly reflected in the verdict are a part of [a] complex crime with respect to which the previous charge had been formulated; the

1

Sic in the official Russian text of the Covenant. The official English text reads ―finally convicted or acquitted‖ [emphasis added], and states ―penal procedure‖ instead of ―criminal-procedure law‖—Trans. 72

action (inaction) being imputed to guilt, which, even though it is characterised by a certain independence, … in essence … supplements the act indicated in the verdict and with it comprises one whole, i.e. a single crime. Criminal prosecution of such a person in all of the enumerated situations must be unconditionally terminated at all stages of criminal judicial proceedings (art. 27 para 1 (5) CCP RF, arts. 212, 239, 254 CCP RF and others), while a new examination of the case will contradict the international-law, constitutional and criminal-law principle of the inadmissibility of repeat convictions for one and the same act. …The court, having found that ―the prosecution has justifiably calculated the damage in accordance with the market prices that existed at that period, namely oil prices at commodity exchanges‖ (p. 686), having precisely established the amount of what had been stolen – RUR 892,426,169,398.02 (p. 687) and the circle of injured parties from the crime - OAO Yuganskneftegas, OAO Samaraneftegas and OAO Tomskneft, at the same time, contrary to the circumstances established, did not satisfy the claim, merely finding that the plaintiffs had ―the right to have their civil suits granted [and forwarding]… the matter of the amount of the damages … for consideration in the procedure of civil court proceedings‖ (p. 687, 689). It is obvious that what led to such a decision with respect to the civil claims, which is groundless and contradicts the previous findings of the court about the quantity and the value of the stolen oil, was the treatment by the court of the withoutexchange-for-value feature of the theft... ... in the given case, the payment for the oil was accepted by the injured parties. In such a situation, full satisfaction of the stated claims would signify that the plaintiffs are getting unjust enrichment, inasmuch as the ―stolen‖ oil is already partially paid for. And so it was that the court … had to adopt a decision for which there are no factual grounds with respect to the claims. The court one-sidedly and selectively applied the provisions of art. 90 CCP RF, having given this norm of the law a broad interpretation, where this corresponded to the findings of the party of the prosecution. The court recognised circumstances established … by the court decisions … and by certain other

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procedural acts … corroborating the charge as having unconditional Res Judicata force. … the court recognised the Res Judicata significance not only of circumstances established by certain previous verdicts, but also, refuting the arguments of the defence, of the assessments by these courts of evidence as admissible (p. 630-631, 632-633). And as concerns the decisions of commercial courts with respect to civil cases to which the party of the defence made reference, the court categorically, unambiguously and unconditionally rejected the circumstances established by them, making reference to the fact that ―the commercial courts, having being misled, ‗came‘ to the conclusion that the production companies concluding the master agreements with OAO NK Yukos were independent parties to the transaction… … the verdict contains just one single reference to art. 90 CCP RF (p. 630631), but the text of this norm is cited by the court in an obviously ―abridged‖ form … Already in the course of the examination of the case of Khodorkovsky and Lebedev, the wordking of art. 90 CCP RF had been amended by a Federal Law of 29.12.2009, and the legislator recognised the Res Judicata force of court decisions adopted within the framework of civil, commercial or administrative judicial proceedings, which must be recognised without additional review. The court … should have been guided by the new wording of the law, that is recognised the Res Judicata significance also of those commercial court decisions that refuted the arguments of the party of the prosecution…. … First-hand nature of court proceedings … Many of the court‘s findings are based on the testimony of the witnesses Miller, Karaseva, Logachev, Vlasova, Yurov, Gulin and others read out in the course of the judicial investigation in the procedure of art. 281 CCP RF, as well as on evidence obtained as the result of the copying of the materials of other criminal case files. . Such a way of gathering evidence is extremely dubious, … The materials of … a case file copied in the course of a inspection (in particular, the record of investigative and other procedural actions, the reports of experts and specialists), … can not be attributable to evidence, including to documents in the sense of arts. 81, 84

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CCP RF,… inasmuch as such a way of gathering evidence is not provided for by the law …copies of the records of investigative and other procedural actions carried out with respect to another case, the reports of experts and specialists – can not be regarded as documents in the sense of arts. 81, 84 CCP RF, that is they can not have evidentiary significance. … the party of the defence defence factually completely loses such an opportunity … during selective copying of materials from another case file without its participation and their attachment to the severed case file. The indicated circumstance in and of itself does not allow such evidence to be recognised as admissible, inasmuch as it has been obtained with gross violation of the rights of the party of the defence provided for by the CCP RF. … Copies of evidence the admissibility of which can not be assessed do not have evidentiary significance from the outset … … General finding Contrary to the requirements of art. 15 CCP RF the court, having violated the prescriptions of arts. 90, 240, 246 and 252 CCP RF, simultaneously carried out the function of the prosecution and the function of the resolution of the case. The accusatory slant in the activity of the court is discerned in the fact that the court:  Overstepped the bounds of the court proceedings both with respect to the circle of persons, and with respect to the charge that had been laid;  Did not accept the abandonment by the state prosecutors of part of the charge that had been laid, which it was obligated to do, having agreed only with an obvious fact – an arithmetical error allowed by the party of the prosecution;  One-sidedly and selectively applied the provisions of art. 90 CCP RF, having given this norm of the law a broad interpretation, where this corresponded to the conclusions of the party of the prosecution;  Recognised all evidence presented by the party of the prosecution as relevant, admissible, reliable, based on the law, as they had been obtained in compliance with the requirements of current criminal-procedure legislation, and

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sufficient for the resolution of the given criminal case, and therefore deemed it possible to lay them at the foundation of the verdict;  Completely rejected all the evidence presented by the party of the defence;  Unequivocally supported the party of the prosecution with respect to all disputable questions and in all dubious situations (about the territorial judicial jurisdiction of the criminal case, about the admissibility of the evidence obtained, about the competition of the norms of the of the CCP RF and the Federal Law ―On the advocacy and the bar in the Russian Federation‖.‖

Jeffrey Kahn “…Summary of Conclusions An evaluation of the verdict in this case reveals violations of the defendants‘ human rights protected under Articles 3, 6, and 7 of the European Convention on Human Rights. In addition, other Convention rights also may have been violated… The conclusions of this report are as follows: 1) The defendants‘ detention in the courtroom and the conditions of their confinement on remand during the trial court proceedings constituted inhuman or degrading treatment (Article 3). 2) The proceedings exceeded a reasonable time (Article 6) 3) The tribunal lacked independence and impartiality (Article 6) 4) The verdict lacked indicia of a reasoned judgment (Article 6) 5) The defendants were deprived of the presumption of innocence (Article 6). 6) The defendants were deprived of their right to equality of arms (Article 6). 7) The charge of embezzlement lacked foreseeability (Article 7). … Conditions of Detention on Remand

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… Given the large number of judgments against Russia regarding violations of Article 3 for conditions of detention … another such judgment regarding the defendants‘ conditions of detention is entirely possible. … Conditions in the Courtroom During the second trial, press reports and photographs indicate that the defendants were confined inside a glass compartment … The European Court will ask whether its use could have been ―reasonably considered necessary‖. Evaluation of the factors that the Court has considered in the past suggests that its answer will be negative … … Right to Proceedings Within a Reasonable Time The determination of the length of proceedings … is likely to be a point of contention between the parties. The Government authorities may view February 2007, the date of the indictment, as the starting point. … The defendants may view July and October 2003 (the dates of their initial arrests) or even shortly earlier (the point in time when they became aware that a criminal investigation had been opened) as the starting point. The defendants may be inclined to argue that the 2007 indictment was artificially separated from the indictment leading to their first convictions, notwithstanding their common facts, parties, and legal issues. … [T]hese considerable common features between the two trials would seem to lend support to the defendants‘ view. …If the Government authorities are unable to adequately explain why the defendants were charged in serial fashion, rather than investigated and charged for all offenses concerning their actions as heads of Yukos, it would be difficult not to conclude that the relevant starting point to determine the reasonableness of the length of proceedings was the initial arrest of the defendants. As noted, ―substantial periods of inactivity, for which the Government have not submitted any satisfactory

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explanation, are attributable to the domestic authorities.‖ … …While the defendants remained in detention since July and October 2003, their activities at Yukos were subject to extensive investigation. Thus, the authorities‘ decision to prosecute the defendants in seriatim proceedings several years apart is hard to explain. … [B]oth the Government authorities and the Khamovnichesky court in its verdict, frequently categorized the defendants as having engaged in illegal but uncharged activities, including fraud, bribery, deceit, and breach of trust. By the time of the trial, however, these crimes (if they were committed) were effectively timebarred… … At the time that the new charges were made,… the defendants were eligible for conditional-early relief from their sentences after having served at least half of the term of their punishment. Aside from this fact, the defendants‘ sentences in the original case would have been satisfied in 2011, just as the new sentences for these new convictions began. Thus the effect of seriatim prosecution was to leave the defendants in a ―state of uncertainty about [their] fate.‖ …

Right to an Independent and Impartial Tribunal …There is sufficient information surrounding a few events close in time to the reading of the verdict … to call into question the existence of suitable safeguards to guarantee the objective component of the impartiality of the Khamovnichesky court. On 15 December 2010, a previously scheduled hearing to announce the verdict of the court was postponed until 27 December 2010. explanation for this delay. The Court provided no

The following day, Prime Minister Vladimir Putin,

responding to a question about Khodorkovsky during a nationally-televised program, said[, that] … ― that a thief should sit in jail. … And in conformity with the decision of the court, Khodorkovsky is charged with theft, a rather large theft … there is also the non-payment of personal taxes. … the charge against him now goes to hundreds

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of billions of rubles. … we should proceed from the fact that the crimes of Mr. Khodorkovsky have been proven in court.‖ … The Prime Minister‘s comments appeared to mix observations about both the first, completed trial, and the second, then unfinished one. Nevertheless, commentators and media in Russia and elsewhere immediately interpreted his words as instructions to the court in the still uncompleted second trial … … it is easy to understand why the European Court has emphasized that ―even appearances may be of a certain importance‖ in setting a high standard for member states to ensure the objective impartiality of the courts with ―sufficient guarantees to exclude any legitimate doubt as to the absence of inappropriate pressure.‖

Right to a Reasoned Judgment … At first glance, it may seem counterintuitive to suggest that a verdict of 689 pages may violate the right to a reasoned judgment. … The verdict‘s volume, however, should not be confused with its mass. … Its concentration of legal reasoning … is slight. Under the European Court‘s standards, its failings violate the right to a reasoned judgment protected by Article 6. With regard to pages 3-130 of the narrative-rationale part of the verdict, these cannot be understood to have ―established‖ anything at all because no evidence is cited from any source … There is no attribution of any particular assertion of fact to any piece of evidence in the record. Nor is there any evaluation (or even acknowledgment of the existence) of conflicting evidence … … the most revealing … is [the] extensive duplication of the indictment. … Astonishingly, the first 130 pages of the verdict (and, quite possibly, much more) is a near exact copy of the indictment. … An annotated copy of those pages, indicating

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all differences and identifying the source of the material in the indictment, is attached to this report as an appendix. …copying is compelling circumstantial evidence that the court has not engaged in its own process of reasoned decisionmaking to reach its judgment. It is also persuasive support for a finding that the court has violated other rights held by the accused under the European Convention, including the right to an independent and impartial tribunal and the right to equality of arms. …Pages 133-615… the manner in which the remainder of the verdict relates the evidence to the charges draws the court‘s reasoning process into serious question. … to page 615, the court provides lists of evidence from … the record. … Nor is any interpretation of these materials – on their faces, ordinary business documents – provided to explain how the court concluded from them that they indicate any form of ―guilt‖ or intent to organize ... entities for the ―management of the process of theft and realization of the stolen oil.‖. … the court asserts to have established facts and legal positions that in fact have not been established …

The Presumption of Innocence One basis for a violation may be the detention of the defendants in the courtroom in a glass and metal cage flanked by guards. A second may be statements made by officials concerning the guilt of the defendants prior to the deliberation on their guilt by the court. … A third basis for a violation of the presumption of innocence is worked by a strange feature of Russian criminal procedure that results from its contradictory merging of inquisitorial and adversarial principles of justice. … This ... results in legal presumptions in favor of the evidence collected by the state [and] is a violation both of the equality of arms … and the presumption of innocence. …[The] ―investigation‖ process … serves an ―early trial‖ function by

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transforming the information compiled in the case file into ―pre-admitted‖ evidence ready for use at trial. …[N]o such legal presumption is accorded to evidence obtained by the defense … The Right to Equality of Arms … In the present case, the use of numerous witness statements found only in the case file, if not subject to confrontation by the defendants, … violates the Convention, even though under Russian law they are considered to be admissible evidence by virtue of the privileged position of the investigator in control of the case file. … The one-sided use of this evidence constitutes a violation of equality of arms under the Convention … Article 7 The protection provided by this article is understood to be ―an essential element of the rule of law … It should … provide effective safeguards against arbitrary prosecution, conviction and punishment.‖ The Court convicted Khodorkovsky and Lebedev, as part of an ―organized criminal group,‖ for the crime of embezzlement under Article 160 CC RF … … The property Khodorkovsky and Lebedev were convicted of embezzling was oil … The victims of this theft were three oil-producing companies, OAO Yuganskneftegas, OAO Samaraneftegas, and OAO Tomskneft VNK. The court‘s description of the defendants‘ modus operandi may be summarized as follows: 1) The defendants, through OAO NK Yukos, became majority shareholders in the three oil companies, which consequently became subsidiaries in Yukos‘s complex corporate structure under the external administration of one of Yukos‘s management companies …

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2) ―Having ―acquired the right to the strategic management of OAO NK Yukos,‖ the defendants then persuaded the relevant boards of directors and shareholders of the three oil companies to enter into contracts for the sale of their oil to Yukos (Verdict, p. 9). The court found that the defendants had paid off various participants in these meetings to ―secure the adoption of the indicated unlawful and groundless decisions‖ (p.11)… 3) The contracts indicated ―that the transfer of the right of ownership to the output, extracted as part of the oil-well fluid, from the oil production companies, appearing in the capacity of the seller, to OAO NK Yukos, appearing in the capacity of the purchaser, shall take place at the head of each concrete well promptly after its extraction from under the ground.‖ (Verdict, p.10) … This theory of the defendants‘ criminal liability under Article 160 was unforeseeable, and thus a violation of Article 7 of the Convention. First, the theory is premised on the omission or admitted non-existence of the traditional elements of the crime: The element of “another’s property.” - the defendants, through Yukos, were alleged to have obtained by a series of contracts ―the transfer of the right of ownership‖ to the oil companies‘ production. A person cannot embezzle from

himself. In order to satisfy this element, i.e. to show that the oil belonged to someone other than the defendants, the verdict concludes that although ―the oil passed on into de facto ownership of OAO NK Yukos; however, it was not the oil owner de jure. In reality, the oil belonged to its producing subsidiaries,‖ i.e. the victims of the embezzlement. … The verdict refers to two legal sources in support of this legal conclusion: the judgment of 26 May 2004 by the Moscow City Commercial Court against Yukos, and a decision of the Russian Federation Constitutional Court, No. 138-O (25 July 2001) mentioned in that judgment. Neither legal source supports this bifurcated concept of simultaneous de facto/de jure ownership. During the 2004 tax proceedings, the Moscow City Commercial Court rejected the defendant‘s argument that the victims and other companies were the true owners of the oil because those organizations ―never

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acquired any rights of ownership, use and disposal in respect of oil and oil products.‖… It could not be said to be foreseeable that a contract for the sale of oil would be interpreted to establish only de facto ownership of the object of these completed transactions in the defendants, but not the de jure ownership that the Khamovnichesky Court asserts to remain with the oil production companies. The element of “entrusted to the perpetrator.” By definition, a person cannot be ―entrusted‖ with a thing over which he is the owner. The verdict … asserts that some contracts were procured in a manner rendering them void ab initio [«ничтожен»] under Russian law … that the defendants are guilty of embezzlement ―by way of execution of numerous wrongful transactions in violation of Art. 179 of the Civil Code.‖ … But Article 179 does not state that such contracts are void, only that they are voidable by a court upon the suit of the victim [«может быть признана судом недействительной по иску потерпевшего»]. If such a suit was not brought (and there is no mention of one in these sections of the verdict), one would now appear to be time-barred. …[T]herefore, ownership of the oil was transferred by these contracts. If indeed ownership was transferred, the defendants could not have been ―entrusted‖ with [it as] the property of another and this element of the crime was lacking. … The relevant conduct, an exchange of oil for money, simply cannot be characterized as an entrustment to one of the property of another. The element of “theft.” The court states that the contracts between Yukos and the three oil companies ―obviously contradicted the interests of the latter‖… and were ―economically disadvantageous for them right from the start‖ ... Even if true, the court notes that each contract established prices that were, in fact, paid for the oil. It thus cannot be claimed that the defendants‘ actions amounted to the ―uncompensated withdrawal and (or) conversion of someone else‘s property to the benefit of the perpetrator or other persons, which causes damage to the owner or

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other possessor of this property.‖. … Because the court‘s theory of liability does not even track the elements of the offense, it cannot be held that it is ―consistent with the essence of the offence and could reasonably be foreseen‖ by the defendants. …[I]t is hard to imagine a crime more unforeseeable than one that depends on a court‘s post hoc conclusions that the agreed contract price was not of quite the right amount. A second indication that this theory of embezzlement was unforeseeable is its sharp inconsistency with the decision of the Supreme Court [―On judicial practice in cases of fraud, embezzlement and misappropriation‖ of 27 December 2007от 27 декабря 2007 г.] The Supreme Court, in paragraph 8, … explained that,―[i]n the case of the creation of a commercial enterprise without the intention to actually conduct business or banking activity, which has the aim of theft of another‘s property or the acquisition of the right to it, its commission is completely covered by fraud [мошенничество].‖ With regard to embezzlement, on the other hand, the Supreme Court reiterated the traditional statutory elements of the crime. Perhaps the Khamovnichesky Court sought guidance (although it does not say so) in the Supreme Court‘s decision interpreting embezzlement, which noted that ―the partial reimbursement of damage to the victim by itself is not evidence of the absence of the person‘s intent for misappropriation or embezzlement of the property entrusted to him.‖ (Para. 20, Supreme Court decision). … It cannot be considered a foreseeable interpretation of either the statute or the Supreme Court‘s interpretation of it to equate poor business judgment about (or even fraudulently induced or illintentioned agreement to) a contract for the sale and purchase of oil with a partial reimbursement of damage due to embezzlement. … The court frequently characterized the defendants‘ conduct in terms suggesting criminal liability under a number of [other] provisions in the Criminal Code: Article 165 (causing damage to property by fraud or breach of trust), Article

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173 (creating a false business organization), Article 201 (abuse of authority), Article 204 (commercial bribery), and Article 327 (forgery). However, the defendants were not indicted for these crimes,… This may well be due to the fact that the statute of limitations for these crimes had passed... A third indication that the application of embezzlement to the defendants‘ business activities could not have been foreseeable may be the array of judgments by Russian courts to the contrary … . According to the verdict, the defendants identified sixty-one judgments of the RF arbitration courts ... Only two judgments are cited [by the court] with particularity, both apparently including statements about oil owned by Yukos. …

Other Potential Violations On the basis of … the verdict, it is possible to identify a number of potential violations of the European Convention on Human Rights. Violations of Articles 3, 6, and 7 of the Convention have been analyzed in detail. … the court‘s decisions concerning the defendants‘ pre-trial detention raise issues under Article 5, which provides an array of procedural protections applicable to that stage of the proceedings … Likewise, the right to respect for private and family life guaranteed by Article 8 may … be implicated by the treatment of the defendants. Similarly, [a violation of] Article 4 of Protocol 7 [non bis in idem] … might be considered to manifest itself in ―attaching [in the second case] a different legal qualification to the same facts…‖… … It is beyond the scope of this report to analyze the facts of the first case in sufficient detail to evaluate the … violation of this provision of the …‖

Compiled by Prof. T.G. Morshchakova, doctor of juridical sciences

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Legal Norms Regarded by the Experts as Breached in the Course of the Trial

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Legal Norms Regarded by the Experts as Breached

J. Kahn

O. Luchterhandt

A.V. Naumov Article 14

O.M. Oleynik

A.D. Proshlyakov Article 14

M.A. Subbotin

A.A. Tedeev

F. Feldbrugge

International Covenant on Civil and Political Rights European Convention for the Protection of Human Rights and Fundamental Freedoms Protocol N 7 to the Convention for the Protection of Human Rights and Fundamental Freedoms Constitution of the Russian Federation

Article 3 Article 6 Article 7 Article 5 Article 8 Article 18 Article 34 Article 4

Article 7

Article 7

Article 4

Criminal Code of the Russian Federation

Article 21 Article 50, para. 1 Article 54, para. 2 Article 120, para.1 Article 123, para.3 Article 158, прим. 1 Article 160 .

Article 1. Article 47 Article 50, para.1. Article 54, para. 2 Article 3, para. 2 Article 158 Article 160 Article 174.1,

Article 15, Article 54, para.2

Article 50, para.1 Article 123, para. 3

Article 19

Article 19 .

Article 1 Article 6 Article 8 Article 14,

Article 160, para. 3. Article 174.1,

Article 4 Article 160., para. 4

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para.3 Article 210.

Code of Criminal Procedure of the Russian Federation

Article 74 Article 79 Article 217 Article 303 Article 307

Article 31, para. 3 Article 32 Article 355, para. 3

Article 158 Article 160 Article 1741, ч 3 Article 24 Article 90 Article 90 Article 299

para. 3

Article 15 Article 27, para. 1 (4) Article 90 Article 240, Article 246 Article 252

J. Kahn

O. Luchterhandt Article 170 Article 179. para. 1

A.V. Naumov

O.M. Oleynik Article 22 Article 53 Article 170 Article 179 Article 223 Article 421, para. 2. Article 424 Articles 779, 781 - 783

A.D. Proshlyakov

M.A. Subbotin Article 424

A.A. Tedeev

F. Feldbrugge

RF Civil Code

Article 10 Article 179

Article 1, para. 2, Article 170, para. 2 Article 179, para. 1

Law on Joint-Stock Companies

Article 83 Article 84

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Law on Appraising Activity Legal Positions of the Supreme Court

Article 3 Decree No. 51 of the Plenum of the Supreme Court ―On judicial practice in cases of fraud, embezzlement and misappropriation‖ of 27 December 2007 Ruling N 138-O of 25 July 2001

Legal Positions of the Constitutional Court of the Russian Federation

Ruling N 193-O-P of 15.01.2008

Ruling N 193-O-P of 15.01.2008

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CHAPTER TWO. FULL TEXTS OF THE EXPERT REPORTS

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Expert: S.M. Guriyev Rector of the New Economic School, Candidate of Physico-Mathematical sciences, Doctor of Economic Sciences, Professor

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15 August 2011

Deeply esteemed Mikhail Alexandrovich and Tamara Georgievna,

Having received your offer to take part in the independent civic expert analysis of documents with respect to the criminal case of M.B. Khodorkovsky and P.L. Lebedev, that ended with the issuance of a guilty verdict, which was read out on 27.12.2010 (hereinafter referred to as ―the Verdict‖), I have carefully studied the official text of the Verdict, as well as other materials relating to the case found in open access. I am not a specialist in the realm of jurisprudence; my position as set forth below is based on my knowledge in the realm of economic science and corporate management. I am prepared to confirm the position set forth below under oath. I am confident that every expert with a grasp of modern-day economic science will support my point of view. I confirm that I have no conflict of interests in relation to NK Yukos, Group Menatep or affiliated companies. Analysing the materials relating to the case, I did not give heed to either political considerations, or questions of the ―selectiveness‖ of justice, or my personal political or other predilections. The results of my analysis of the verdict, as well as of other materials relating to the case found in open access, are such: 8. The process of the construction and functioning of NK Yukos described in the Verdict is not in and of itself evidence of the wrongful actions of its executives. All of the largest oil companies (both Russian and those abroad) are verticallyintegrated. This is conditioned by a whole series of factors analysed in

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contemporary economic research studies – first and foremost the necessity of creating and regulating stimuli for investments at various stages of the process chain. Unconditionally, functioning in a regime of vertical integration has no relation whatsoever to violating the law1. As was the case at NK Yukos, the majority of vertically-integrated companies have a production unit (Exploration and Production) and a refining/retail one (Refinery [sic] and Marketing). The use of offshore companies for trading in oil and oil products is likewise more likely the norm rather than the exception – both in Russia and abroad. 9. Trading within vertically-integrated companies unavoidably occurs at transfer prices. The establishment of understated transfer prices does indeed violate the rights of shareholders. If transfer prices are understated in comparison with market prices (if such can be determined), the shareholders of the production units suffer; if they are overstated – the shareholders of the refining units suffer. That being said, if full vertical integration is the case (that is, the very same shareholders own both the production and the processing units), transfer prices are of no consequence. Although the understating of transfer prices, at first glance, does cause damage to the production unit, it does not cause any harm whatsoever to its shareholders2 – and in this sense the difference between the transfer prices and the market prices is not theft by definition. That being said, there exists a whole series of factors that can condition the setting of transfer

1

This applies likewise to the creation of management companies (YUKOS-EP, YUKOS-RM, YUKOSMoscow) and to the transfer of the powers of the executive bodies of management of the corresponding subsidiary companies to these management companies on the basis of agreements. - Expert‘s note 2 This is clarified additionally in para 5 of the conclusion.- Expert‘s note

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prices both higher and lower than market prices – this is connected with the creation of stimuli for investments in the production and refining units. 10. By the way, the very determination of market prices and, accordingly, of the understatement or overstatement of transfer prices is not always possible. In particular, this is especially problematic in the situation under examination – of vertically-integrated oil companies in Russia. Although the Verdict compares the given transfer prices with market prices on numerous occasions, the given comparison is not entirely proper: market prices are established on the external market, at the same time as transfer prices – this is the prices of sale by the production units within the country. That being said, market prices for oil within Russia are not simply lower than in Rotterdam or on the Mediterranean Sea – intra-Russian market prices are non-existent. The fact of the matter is that the largest Russian oil companies are vertically-integrated; therefore, a liquid domestic oil market is absent in Russia1. A substantiation of the assessment of the level of understatement of the transfer prices is absent in the Verdict and other materials. 11. Nevertheless, if we assume that the transfer prices were understated, and that the vertical integration was incomplete – that is, the production units had outside shareholders who were not represented in the refining/retail units – then the understatement of the transfer prices did indeed cause damage to the given shareholders. In this situation, the case should be examined on the basis of a claim by the injured-party outside shareholders – and must be classified as

1

In the absence of a liquid market it is difficult to determine market prices. An imperfect indicator of prices for Russian oil is the REBCO (Russian Export Blend Crude Oil) price according to the quotations of the New York Mercantile Exchange (NYMEX) – according to quotations with deliveries in Novorossiysk. But these quotations began to be determined only since 2006 (Futures contracts for Urals oil on the RTS exchange had likewise begun to be quoted since 2006).- Expert‘s note

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wrongful transactions with affiliated persons and a violation of the minority shareholders‘ rights1, and not as ―theft of the oil‖. To all appearances (if we accept the assessments of the market prices established in the Verdict), it is precisely such violations that were being implemented in relation to the minority shareholders of OAO Tomskneft VNK (including in relation to Crawford Holding [sic] Limited, Acirota Limited and Carmicom Limited, mentioned in the Verdict). Unconditionally, the given actions of the majority shareholders of OAO Tomskneft VNK (including the Group Menatep Limited executives) caused pecuniary damage to the minority shareholders. 12. On the other hand, in the event of full vertical integration (when the production units belong fully to the head company, or when the same shareholders own both the production and the refining units) the argument set forth above loses force. Although, as is indicated in the verdict, the NK Yukos production units were selling oil at below-market prices2, this did not in and of itself cause damage to their shareholders, since they were getting the corresponding income as shareholders of the refining and retail units of the vertically-integrated company. This applies in full measure to OAO Yuganskneftegas and OAO Samaraneftegas, which were subsidiary companies of NK Yukos. 13. It is entirely possible that the use of understated transfer prices was used by the NK Yukos executives for reducing NK Yukos‘s overall tax burden. However, even if such actions were wrongful, the defendants were already convicted on

1 2

Such a charge was not laid.- Compiler‘s note Convincing evidence of this is absent in the verdict.- Expert‘s note

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these charges in 2005 and can not be prosecuted by the court for these same offences a second time. 14. All of the offences mentioned in the Verdict in relation to OAO Tomskneft VNK (see para 4) took place before 2000 inclusive. Consequently, the 10-year statute of limitations has expired in relation to them. It ought to be noted that the Order to terminate the criminal case of M.B. Khodorkovsky and P.L. Lebedev in the part of VNK takes this fact into account and releases the defendants from liability on the charges of embezzlement of VNK shares. In an analogous manner, the defendants must also be released from liability on the charges of ―theft‖ of the property of the minority shareholders of OAO Tomskneft VNK.

And so, I can assert the following: with the exception of the episode with the violation of the rights of the minority shareholders of OAO Tomskneft VNK1 (see para 4 above), the text of the Verdict does not contain convincing evidence of the defendants‘ guilt. As to the rest, the actions described in the Verdict are the normal practice of conducting a vertically-integrated company‘s business in a market economy. By the way, in the event of the charge of theft of the property of OAO Tomskneft VNK as well, the defendants deserve release from liability in connection with the expiration of the 10-year statute of limitations.

Respectfully,

1

Such a charge was not laid.- Compiler‘s note

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Sergei Guriev

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Expert: Jeffrey Kahn Associate Professor of Law, Southern Methodist University, USA

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REPORT
PREPARED FOR THE

PRESIDENTIAL COUNCIL OF THE RUSSIAN FEDERATION
FOR CIVIL SOCIETY AND HUMAN RIGHTS REGARDING THE VERDICT OF THE

KHAMOVNICHESKY DISTRICT COURT OF THE CITY OF MOSCOW
AGAINST M.B. KHODORKOVSKY AND P. L. LEBEDEV

CRIMINAL CASE N 1-23/10, 27 DECEMBER 2010

JEFFREY KAHN ASSOCIATE PROFESSOR OF LAW SOUTHERN METHODIST UNIVERSITY

SUBMITTED 1 OCTOBER 2011

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TABLE OF CONTENTS

I.

Summary of Conclusions ............................................ 1181

II. Report Background ...................................................... 119 III. Reader‘s Note ............................................................... 120 IV. Factual Background ..................................................... 121 V. Violations ..................................................................... 127 A. Article 3 .................................................................... 127 B. Article 6 § 1 .............................................................. 133 1. Right to Proceedings within a Reasonable Time 133 2. Right to an Independent and Impartial Tribunal . 146 3. Right to a Reasoned Judgment ............................ 152 C. Article 6 § 2 .............................................................. 165 D. Article 6 § 3 .............................................................. 174 E. Article 7 .................................................................... 185 VI. Other Possible Violations ............................................. 198 A. Article 18 .................................................................. 199 B. Article 34 .................................................................. 201 VII. Conclusion .................................................................... 203

Appendix: Comparison between verdict and indictment ..... A1

I. SUMMARY OF CONCLUSIONS An evaluation of the verdict in this case reveals violations of the defendants‘ human rights protected under Articles 3, 6, and 7 of the European Convention on Human Rights. In addition, other Convention rights also may have been violated. The materials provided for use in this report, and the time allotted to complete it, were not sufficient to undertake a thorough analysis of these other issues. Sacrificing breadth for depth, and in keeping with the request of the Presidential Council of the Russian
1

The page numbers in this Table of Contents are the same as in the original Presidential Council Report in Russian – Trans. 101

Federation for Civil Society and Human Rights, this report examines selected violations of the Convention that are most clearly identifiable in the verdict itself and in the conduct of the trial described in it. The conclusions of this report are as follows: 1) The defendants‘ detention in the courtroom and the conditions of their confinement on remand during the trial court proceedings constituted inhuman or degrading treatment (Article 3). 2) The proceedings exceeded a reasonable time (Article 6) 3) The tribunal lacked independence and impartiality (Article 6) 4) The verdict lacked indicia of a reasoned judgment (Article 6) 5) The defendants were deprived of the presumption of innocence (Article 6). 6) The defendants were deprived of their right to equality of arms (Article 6) 7) The charge of embezzlement lacked foreseeability (Article 7) II. REPORT BACKGROUND

On 1 April 2011, an invitation was received via e-mail from the Presidential Council of the Russian Federation for Civil Society and Human Rights ―to participate in an independent public expert analysis of official documents and proceedings in the recent criminal case concerning M.B. Khodorkovsky and P.L. Lebedev, who were convicted by a judgment announced on December 27, 2010.‖ The invitation stated that ―[t]he Council hopes to obtain from you a written opinion with a focus on issues within your area(s) of expertise, although you would also be free to express your opinion on any other legal question which you believe to be pertinent within judicial practice in connection with the case at hand.‖ A response was requested by 30 April 2011. On 30 April 2011, the invitation of the Council was accepted via e-mail reply. In the letter of acceptance, an indication was made that the legal analysis of the report would concern the case law of the European Court of Human Rights.

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On 2 May 2011, the Council acknowledged via e-mail the receipt of this reply. A copy of the verdict was sent as an attachment to that e-mail and the website www.Khodorkovsky.ru was recommended as a useful resource from which to obtain other legal documents necessary for this expert report. A copy of the expert report was requested by September. On 1 October 2011, this report was submitted to the Council. The report was submitted in English. III. READER’S NOTE

The European Court of Human Rights is not a court of appeal in the final instance from the decisions of domestic courts. The Court‘s jurisdiction ―shall extend to all matters concerning the interpretation and application of the Convention and the Protocols thereto which are referred to it[.]‖ See Article 32 ECHR. The Court‘s function is to identify violations of the Convention and, if necessary, to establish just satisfaction for them. The Court has repeatedly observed that ―it is not its function to deal with errors of fact or of law allegedly committed by a national court unless and in so far as they may have infringed rights and freedoms protected by the Convention.‖ Khan v. United Kingdom, App. No. 35394/97 (12 May 2000), at ¶ 34 (internal citations omitted). Given the diversity among member states party to the Convention, the Court has also adopted a doctrine that provides a margin of appreciation to national practices. This report takes no position regarding Russian law other than to assess its conformity to the requirements set forth by the Convention. This report selectively identifies several violations of the Convention. Under each heading, the report first sets forth the relevant provisions of the Constitution and Code of Criminal Procedure of the Russian Federation. Second, the relevant provisions of the European Convention on Human Rights and the case law of the European Court of

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Human Rights are provided. Finally, the report analyzes this law in light of the facts of the defendants‘ case and concludes whether the Convention could be said to have been violated. Not every potential violation has been subject to the same degree of scrutiny or, in some cases, evaluated at all. No judgment as to the merits of such claims is intended to be conveyed by, and none should be ascribed to, these choices.

IV. FACTUAL BACKGROUND2

Following various tax inspections that began in November 2002, the Tax Ministry of the Russian Federation concluded that the Yukos oil company had avoided the payment of a variety of taxes. The Ministry found that this tax avoidance had been accomplished by the use of various subsidiary, trading, and holding companies that, although controlled and owned by Yukos, served to obscure Yukos‘s real business activity. The Ministry also found that the trading companies served as intermediaries between oil production companies and oil processing and storage companies, all of which belonged to Yukos. On 20 June 2003, the first criminal investigation was opened concerning the Yukos oil company and its top management, who were suspected of fraud during the 1994

2

These facts are drawn primarily from the verdict of 27 December 2010 by Judge V.N. Danilkin, presiding judge of the Khamovnichesky District Court of the City of Moscow; the judgments of the European Court of Human Rights arising out of applications by Mikhail Khodorkovsky (App. No. 5829/04 decided 31 May 2011), Platon Lebedev (App. No. 4493/04 decided 25 October 2007), Vasilii Aleksanyan (App. No. 46468/06 decided 8 December 2008), and OAO Neftyanaya Kompaniya Yukos (App. No. 14902/04 decided 20 September 2011); and the admissibility decision of the European Court of Human Rights arising out of the application by Platon Lebedev (App. No. 13772/05 declared partly admissible 27 May 2010). Discrepancies between these sources and the use of any other sources are noted. 104

privatization of Apatit, a mining company. As the European Court summarized the matter: In 2003-2004 the General Prosecutor‘s Office opened an investigation into the activities of several of the company‘s senior executives, including Mr Khodorkovskiy, Mr Lebedev, … and others. Some of them were arrested in 2003-2004 on suspicion of having committed large-scale fraud and embezzlement of the shares of several Siberian oil refineries, including Tomskneft PLC. In particular, Ms S.B., one of the company‘s lawyers, was arrested. According to the Government, in her statement of 8 December 2004, confirmed in March-April 2006, she testified that the applicant, as her manager, had instructed her in relation to the illegal operations with the Tomskneft PLC shares, qualified by the prosecution authorities as embezzlement.

Aleksanyan v. Russia, App. No. 46468/06 (22 Dec. 2008), at ¶ 8. On 2 July 2003, Platon Leonidovich Lebedev was arrested while in hospital and sent to a pre-trial detention center. The next day, he was remanded to a detention facility by court order made without the participation of Lebedev‘s lawyers. On 20 August 2003, the criminal investigation, which had been initiated on 20 June 2003, ended. The case file contained 162 volumes. On 25 October 2003, Mikhail Borisovich Khodorkovsky was arrested in Novosibirsk and sent to Moscow. On 8 January 2004, a separate criminal investigation was opened on suspicion of fraud, embezzlement, and misappropriation by Yukos executives of the shares of several oil companies, including Tomskneft. On 15 April 2004, the Tax Ministry served Yukos with a tax assessment. The Ministry found that Yukos had failed to pay certain taxes and ordered payment of over

105

€2.8 billion in tax arrears, default interest, and penalty payments. The order gave Yukos until 16 April 2004 to pay this amount. However, by a decision of the Moscow City Commercial Court rendered on the same day that Yukos was served with a copy of the Tax Ministry‘s decision, judicial proceedings were begun against Yukos to obtain this amount and the company was enjoined from disposing of certain assets in anticipation of a judgment by the court. On 16 July 2004, the defendants‘ trial began in the Meshchanskiy District Court of the City of Moscow. On 16 May 20053, Khodorkovsky and Lebedev were convicted of fraud (Article 147 of the RSFSR Criminal Code and Article 159 of the RF Criminal Code), causing property damage by deceit or breach of trust (Article 165 CC RF), and tax evasion (Article 198 and Article 199 CC RF) by a verdict of the Meshchanskiy District Court. They were sentenced to nine years in prison. On 22 September 2005, the verdict was upheld on cassational appeal but the sentences were reduced to eight years in prison. On 29 March 2006, prosecutors sought authorization from the Simonovskiy District Court in the City of Moscow to initiate the prosecution of Vasilii Aleksanyan, then head of the legal department of the Yukos oil company. According to the

description found in the judgment of his application by the European Court of Human Rights:

On 29 March 2006 the Deputy Prosecutor General requested the Simonovskiy District Court of Moscow to authorise criminal prosecution of the applicant in connection with his alleged participation in the embezzlement of the property and shares of several oil companies and refineries in 1998-1999 (Tomskneft, Achinsk refinery, Eastern Oil Company, etc). The GPO [General Procurator‘s Office] claimed that in 1998-1999, when the applicant had been the head of the legal department of Yukos, he had advised the company‘s executives and thus participated

3

In Khodorkovskiy v. Russia, App. No. 5829/04 (31 May 2011) at ¶ 69, the European Court of Human Rights dates this conviction as 31 May 2005. 106

in their criminal activities. The shares in these companies had subsequently been ―legalised‖ through a chain of financial operations. In their request the GPO referred to the materials from the criminal case, without, however, identifying them.

Aleksanyan, supra at ¶ 15. On 4 and 5 April 2006, the court authorized searches of Aleksanyan‘s homes in connection with this request. On 6 April 2006, the court authorized the prosecution. On 4 August 2006, the commercial court of Moscow declared Yukos to be bankrupt and, with the consent of the leading creditor, Rosneft, a state-owned oil company, appointed a trustee to manage Yukos. This decision was upheld by the 9th Commercial Court of Appeal on 26 September 2006. On 12 December 2006, the criminal investigation, which had been initiated on 8 January 2004, ended. The case file contained 113 volumes. On 5 February 2007, a second indictment, alleging embezzlement (Article 160 CC RF) and money-laundering (Articles 174 and 174.1 CC RF) by the defendants, was announced.4 The final version of the indictment lodged with the court and dated 14 February 2009 comprises fourteen volumes (3460 pages). The crimes alleged in the indictment span roughly the same time period as the crimes for which the defendants were arrested in 2003 and convicted in 2005. Both sets of crimes concern the defendants‘ conduct as executives of the Yukos oil company. On 25 October 2007, the European Court of Human Rights released its judgment concerning an application Lebedev filed about his detention and access to a lawyer.

4

See e.g. BBC News, New fraud charges in Yukos case, 5 February 2007; RIA-Novosti, Security tightened as ex-Yukos head returns to court, 5 February 2007. The indictment («обвинительное заключение») made available to the author of this report is dated 14 February 2009. The discrepancy in date may reflect the final version of the indictment filed with the court pursuant to Article 215 of the Criminal Procedure Code. 107

The Court found that Lebedev‘s detention, in various ways, violated Article 5 § 1(c), § 3, and § 4 of the European Convention on Human Rights. On 12 November 2007, bankruptcy proceedings concerning Yukos concluded, at which time it ceased to have corporate existence. At a hearing held on 22 January 2008, Aleksanyan, who had been gravely ill with AIDS-related diseases, alleged that, on 28 December 2006, investigator Karimov, who was in charge of the cases against Khodorkovsky and Lebedev, had ―offered him a deal: if he testified against Mr Khodorkovskiy and Mr Lebedev he would be released. Mr Karimov had allegedly told the applicant that the General Prosecutor‘s Office had been aware of his health situation, and that it would be advisable for the applicant to receive appropriate treatment, perhaps in a foreign hospital.‖ Aleksanyan further alleged that, in April 2007 and November 2008, investigators had offered him release in return for his confession and cooperation in these cases. Aleksanyan v. Russia, App. No. 46468/06 (22 December 2008) at ¶ 86.5 On 22 December 2008, the European Court of Human Rights released its unanimous judgment of an application Aleksanyan filed concerning his detention and the search of his premises. The Court held that there had been a violation of Article 3 due to inadequate medical care while in detention, a violation of Article 5 § 3 due to the unreasonable length of his detention, and a violation of Article 8 due to the vagueness of warrants issued for, and overbreadth of investigative searches conducted of, his premises. The Court further held that the Russian Government had failed to comply with interim measures that had been indicated by the Court under Article 39 and held that Aleksanyan should be released from detention.6 Following the Court‘s

5

According to Aleksanyan‘s submissions to the European Court, at a hearing before the Russian Supreme Court on 22 January 2008, ―which was widely covered in the Russian media, the applicant disclosed that the prosecution had made several offers of release on health grounds in exchange for false testimony, confirming that his lawyer had been present and had witnessed those incidents. Immediately thereafter the Federal Penitentiary Service threatened the applicant‘s lawyer with a defamation suit, as the Government had moreover acknowledged in their observations.‖ Id. at ¶ 227. 6 Although the European Court found that Russia had failed to comply with interim measures to protect Aleksanyan‘s health, in violation of Article 34 of the Convention, the Court concluded that Aleksanyan had not presented sufficient evidence to support his allegations about undue pressure ―in connection with the proceedings in Strasbourg,‖ Aleksanyan v. Russia, App. No. 46468/06 (22 December 2008) at ¶ 233, and held that Aleksanyan‘s complaint that his prosecution had been pursued for ulterior purposes (a violation of Article 18 of the Convention) was admissible but unnecessary to examine separately from the Court‘s findings of other violations. Id. at ¶¶ 219-220. 108

judgment, Aleksanyan was released on bail. In June 2010, it was reported that the criminal charges against him were dropped due to the expiry of the relevant statute of limitations.7 The second trial of Khodorkovsky and Lebedev began on 31 March 2009. A verdict was expected on 15 December 2010.8 Without explanation, the

announcement of the verdict was postponed on that date until 27 December 2010. On 16 December 2010, during a nationwide television program, Prime Minister Vladimir Putin responded at length to a question about Khodorkovsky by saying, inter alia, that ―a thief should sit in jail.‖9 On 27 December 2010, the verdict was read out. Khodorkovsky and Lebedev were found guilty of embezzlement and money laundering and sentenced to fourteen years imprisonment. On 15 April 2011, the judicial collegium for criminal cases of the Supreme Court of the Russian Federation released its supervisory determination («определение суда надзорной инстанции») concerning various rulings about the defendants‘ detention made by the Khamovnichesky District Court and the Moscow City Court in 2010 and 2011.10 The Supreme Court concluded that the defendants‘ custody in a pre-trial detention facility (rather than in the less severe custodial conditions to which they were previously sentenced) from 17 August to 17 November 2010 was unlawful.

7 8

Alexandra Odynova, Charges Dropped Against Yukos’ Aleksanyan, Moscow Times (25 June 2010). See, e.g., Alexandra Odynova, Khodorkovsky Verdict is Postponed, Moscow Times (16 Dec. 2010); CNN Wire Staff, Verdict in Khodorkovsky’s 2nd Trial Postponed, CNN (15 Dec. 2010); RIA-Novosti, Announcement of Khodorkovsky Verdict Postponed til Dec. 27 (15 Dec. 2010. 9 See infra at Section(B)(2)(c) of Part V of this report. 10 See Opredelenie ot 15.04.11. Sudebnaya kollegiya po ugolovnym delam, kassatsiya (Dokladchik: Shamov Aleksei Viktorovich) (№ 5-Д11-29). This determination was the result of a new law, No. 60-FZ from 7 April 2010, which amended Article 108 of the Criminal Procedure Code to exclude those suspected or accused of certain crimes (including those of which the defendants were accused) from the harsher confinement conditions of pre-trial detention in the absence of certain exceptional circumstances. 109

On 17 May 2011, the Moscow City Court was scheduled to hear the defendants‘ appeal from the verdict of the Khamovnicheskiy court.11 Without explanation, the hearing was postponed. On 18 May 2011, President Dmitrii Medvedev responded to a question about Khodorkovsky at a press conference in Skolkovo, saying that there would be ―no danger‖ to society if Khodorkovsky were to be released from prison.12 On 24 May 2011, the defendants‘ appeal was heard and decided. The Khamovnichesky court‘s verdict was upheld with a modest reduction in the original sentence. On 31 May 2011, the European Court of Human Rights released its judgment of an application Khodorkovsky filed concerning his arrest, detention, and first trial. The Court found that Khodorkovsky‘s arrest violated Article 5 § 1 (b) of the European Convention on Human Rights; that the conditions of his detention in court and in a remand prison during his first trial violated Article 3 of the Convention; that the length of his continuous detention pending investigation and during that trial violated Article 5 § 3 of the Convention; and that various procedural irregularities concerning his detention resulted in multiple violations of Article 5 § 4 of the Convention. The Court also found that Khodorkovsky‘s initial detention following his arrest did not violate Articles 3 or 5 § 4, nor had there been any violation of Article 5 § 1 (c) of the Convention (which concerned whether his detention pending investigation and trial ―had been imposed and extended in accordance with a procedure prescribed by law‖).13 On 13 September 2011, the judicial collegium for criminal cases of the Supreme Court of the Russian Federation released its supervisory determination («надзорное

11

Thomas Grove, Khodorkovsky appeal set for May 17: Russian court, Reuters (27 Apr. 2011); Tom Balmforth, Moscow Court Upholds Convictions Of Khodorkovsky, Lebedev, Radio Free Europe/Radio Liberty (24 May 2011). 12 Press Conference of the President of Russia, 18 May 2011, ―Skolkovo‖ School of Management, http://news.kremlin.ru/transcripts/11259. See infra at Section(B)(2)(c) of Part V of this report. 13 In addition, the Court also found that the procedure extending his detention on 8 June 2004 did not violate Article 5 § 4 (distinguishing that instance with procedures that did violate that provision of the Convention on two prior occasions and one subsequent occasion). 110

определение») concerning various rulings about the defendants‘ detention made by the Khamovnichesky District Court and the Moscow City Court in 2010 and 2011.14 The Supreme Court concluded that the defendants‘ custody in a pre-trial detention facility (rather than in the less severe custodial conditions to which they were previously sentenced) from 17 May to 17 August 2010 was unlawful. On 20 September 2011, the European Court of Human Rights released its judgment of an application filed by OAO Neftyanaya Kompaniya Yukos concerning its treatment. In a judgment that is not yet final, the Court held by majority votes that Yukos had not been afforded adequate time to prepare for hearings concerning certain tax assessments, in violation of Article 6 §§ 1 and 3(b), and that Article 1 of Protocol No. 1 to the Convention had been violated both by the imposition of certain tax penalties and by the disproportionate nature of the enforcement proceedings. The Court also found that there had been no violation of Article 1 of Protocol No. 1 of the Convention concerning other tax assessments and no violation of Article 14 or Article 18 taken in conjunction with Article 1 of Protocol No. 1.15 The Court reserved to a later date the issue of just satisfaction for these violations of the Convention.

V. VIOLATIONS

A. ARTICLE 3

1. RELEVANT RUSSIAN LAW AND PRACTICE

The Constitution of the Russian Federation states, in relevant part:

14

See Opredelenie ot 13.09.11. Sudebnaya kollegiya po ugolovnym delam, kassatsiya (Dokladchik: Kamenev Nikolai Dmitrievich) (№ 5-Д11-63). 15 The Court also held that examination of the case under Articles 7 and 13 of the Convention was not necessary. 111

Article 21 1. The dignity of the individual shall be protected by the state. Nothing may serve as a justification for its diminution. 2. No one shall be subjected to torture, violence or other cruel or degrading treatment or punishment. No one may be subjected to

medical, scientific or other experiments without his free consent.

The relevant provisions of the Code of Criminal Procedure of the Russian Federation are as follows:

Article 9 1. In the course of criminal proceedings, any action or decision that demeans the honor of any participant in criminal proceedings is prohibited, as is any treatment of such person that lessens his worth as a human being or endangers his life or health. 2. No participant in criminal proceedings may be subjected to violence, torture, or any other treatment that is cruel or demeans human dignity.

2. RELEVANT ECHR PROVISIONS AND CASE LAW

Article 3 of the Convention states:

No one shall be subjected to torture or to inhuman or degrading treatment or punishment. The European Court has frequently characterized treatment ―to be both ‗inhuman‘ because it was premeditated, was applied for hours at a stretch and caused, if not actual bodily injury, at least intense physical and mental suffering, and also ‗degrading‘ because it was such as to arouse in its victims feelings of fear, anguish and

112

inferiority capable of humiliating and debasing them and possibly breaking their physical or moral resistance.‖ Soering v. United Kingdom, App. No. 14038/88 (7 July 1989), at ¶ 100 (internal citation and quotation marks omitted). The Court‘s case law concerning conditions of detention on remand in Russia is extensive and need not be repeated here. It is worth noting, however, that Russian violations of Article 3 have been frequent and egregious.16 See, e.g., Kondratishko and others v. Russia, App. No. 3937/03 (19 July 2011). In the year 2010 alone, the Court found a violation of Article 3‘s right to be free of inhuman or degrading treatment or punishment in 102 judgments, more than any other member state by a factor of three and amounting to half of all violations found against Russia that year. See Registry of the European Court of Human Rights, Annual Report 2010 150-151 (2011).

a. Conditions of Detention on Remand During the defendants‘ first trial, the defendants were held at a remand facility informally known as Matrosskaya Tishina. Lebedev was held in the main section, IZ77/1, while Khodorkovsky was held in IZ-99/1, a special-purpose block. For two days in October 2003, and then again after the trial but before departure to serve his sentence in a penal colony, Khodorkovsky was confined in IZ-77/1. The conditions at IZ-77/1, as well as the particular conditions of confinement in an isolation cell and the deprivation of opportunities for exercise and hot food due to his nearly daily attendance at trial (but available to other detainees) were the subject of

16

The second judgment against Russia concerned, inter alia, conditions of detention. Kalashnikov v. Russia, App. No. 47095/99 (15 July 2002). Russia pled for a margin of appreciation due to economic difficulties alleged to hinder prison reform. The Russian representative before the Court argued that Kalashnikov‘s conditions of confinement could not amount to torture, inhuman, or degrading treatment because they ―did not differ from, or at least were no worse than those of most detainees in Russia.‖ A Russian expert who appeared in Strasbourg on behalf of the Russian Government in that case later summarized this argument as a plea that ―the conditions of confinement were Russian.‖ See William Burnham & Jeffrey Kahn, Russia’s Criminal Procedure Code Five Years Out, 33 Review of Central & E. Eur. Law 24 (2008). The Court routinely rejects such arguments. See, e.g., Mamedova v. Russia, App. No. 7064/05 (1 June 2006) at ¶ 63. 113

Lebedev‘s second application to the European Court of Human Rights. See Lebedev v. Russia (Lebedev No. 2), App. No. 13772/05 (27 May 2010), at ¶¶ 195-201. At the time of the writing of this report, a judgment on the merits of this application, declared admissible by a majority of the Court, had not occurred. The conditions at IZ-99/1 were the subject, inter alia, of Khodorkovsky‘s application to the European Court of Human Rights. On 31 May 2011, the Court held that neither the detention in October 2003 in IZ-77/1 (due to its brevity) nor detention in IZ-99/1 during the trial (due to the ameliorative nature of food and medicine received from relatives, frequent absence from the cells due to courtroom appearances, the use of fee-based extra services such as a fitness facility, and other benefits not accorded the general prison population) constituted a violation of Article 3. However, the Court did find that the detention in IZ-77/1 for two months after his conviction, when Khodorkovsky‘s treatment returned to that provided by the standard prison regime, violated Article 3. Khodorkovskiy v. Russia, App. No. 5829/04 (31 May 2011), at ¶ 117-118. In making this assessment, the Court considered it appropriate to shift the burden of proof to the Russian Government regarding the conditions of Khodorkovsky‘s confinement. Id. at ¶ 108. This decision was based on the consistency of Khodorkovsky‘s submissions with those of a large number of petitioners to the Court regarding these same facilities, the large number of judgments against Russia in this regard, the practical difficulties inherent in a prisoner collecting evidence about the conditions of his detention, and the refusal of the authorities to allow independent observers to visit Khodorkovsky during his detention.17

17

The Court categorized the following judgments as presenting ―very similar complaints‖ as Khodorkovsky, mostly concerning IZ-77/1: Andreyevskiy v. Russia, App. No. 1750/03 (29 Jan. 2009); Gubin v. Russia, App. No. 8217/04 (17 June 2010); Starokadomskiy v. Russia, App. No. 42239/02 (31 July 2008); Popov v. Russia, App. No. 26853/04 (13 July 2006); Denisenko and Bogdanchikov v. Russia, App. No. 3811/02 (12 Feb. 2009); Sudarkov v. Russia, App. No. 3130/03 (10 July 2008); Belashev v. Russia, App. No. 28617/03 (4 Dec. 2008); Trepashkin v. Russia (No. 2), App. No. 14248/05 (Dec.), (22 Jan. 2009); Vlasov v. Russia, App. No. 78146/01, (12 June 2008) (concerning IZ-99/1). 114

b. Conditions in the Courtroom

Ordinarily, the measure of restraint adopted during trial for use in the courtroom has not been considered under the heading of Article 3 if it has been ―imposed in connection with a lawful detention and does not entail a use of force, or public exposure, exceeding that which is reasonably considered necessary.‖ Ramishvili & Kokhreidze v. Georgia, App. No. 1704/06 (27 Jan. 2009), at ¶ 96. ―Even in the absence of publicity, a given treatment may still be degrading if the victim could be humiliated in his or her own eyes.‖ Id. Risk of flight and threat of violence are countervailing factors that have been considered. Id. During their first criminal trial, in the Meshchanskiy District Court from 16 July 2004 to 16 May 2005, the defendants were confined in a metal cage. It is, perhaps, enough to note that the European Court found the conditions of Khodorkovsky‘s confinement in the courtroom during this first trial to violate Article 3 of the Convention. Khodorkovskiy v. Russia, App. No. 5829/04 (31 May 2011), at ¶ 125-126. The Court noted that the applicant‘s non-violent offense, lack of a criminal record, and lack of evidence of any predisposition to violence made the Government authorities‘ claim of security risks a specious one, especially given that the cage appeared to be a permanent court fixture unrelated to any specific concerns about the defendant. The Court found that ―such a harsh appearance of judicial proceedings could lead an average observer to believe that an extremely dangerous criminal was on trial. Furthermore, the Court agrees with the applicant that such a form of public exposure humiliated him in his own eyes, if not in those of the public, and aroused in him feelings of inferiority.‖ Id. at ¶ 125.

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This confinement was also a subject included in Lebedev‘s second application to the European Court of Human Rights. See Lebedev v. Russia (Lebedev No. 2), App. No. 13772/05 (27 May 2010), at ¶¶ 179-183. As in Khodorkovsky‘s application to the Court, the precise conditions were disputed. The Government authorities submitted that the cage was an appropriate restraint necessary to preserve courtroom order and safety and to prevent the intimidation of witnesses. In any event, it did not rise to a level of severity sufficient to implicate the protections of Article 3 of the Convention. Lebedev submitted that he was confined for up to nine hours a day without water or acceptable food, an unnecessary humiliation for a non-violent defendant that also interfered with his access to counsel. The concerns of the court could easily have been alleviated by placing a guard next to him. At the time of the writing of this report, the European Court of Human Rights had not rendered a judgment on the merits of Lebedev‘s application. On 27 May 2010,

however, a majority of the European Court declared the allegation of a violation of Article 3 admissible for a hearing on the merits. Given that the European Court held that the same conditions in the courtroom described in Khodorkovsky‘s application constituted a violation of Article 3, it is likely that Lebedev‘s essentially identical application, concerning the same trial conditions, will also be held to present a violation of Article 3.

3. ANALYSIS

a. Conditions of Detention on Remand

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During the trial, the defendants were again held at Matrosskaya Tishina. Sufficient information about what improvements, if any, have been made to conditions of detention at Matrosskaya Tishina following the defendants‘ detention there during their first trial was not available for the drafting of this report. Given the large number of judgments against Russia regarding violations of Article 3 for conditions of detention – from the second judgment issued against Russia (Kalashnikov v. Russia, App. No. 47095/99 (15 July 2002)) to its most recent judgment (Ilyadi v. Russia, App. No. 6642/05 (5 May 2011) – another such judgment regarding the defendants‘ conditions of detention is entirely possible.

b. Conditions in the Courtroom

During the second trial, press reports and photographs indicate that the defendants were confined inside a glass compartment.18 Guards are seen in these photographs standing alongside the compartment. On 3 March 2009, Khodorkovsky‘s attorneys filed a motion with the Khamovnichesky Court requesting that Khodorkovsky ―be found alongside the lawyers, and not in an aquarium.‖ day.19 It is difficult to say whether, under the factual circumstances of this case, the Court will consider the use of a glass compartment to be as degrading a form of treatment as the use of a metal cage. On the one hand, a glass compartment may be considered to lack the stigma of a cage. On the other hand, it remains a physical barrier between the According to the

Khodorkovsky and Lebedev Communications Center, the motion was denied the same

18

As noted below, the use of glass compartments to detain defendants during trial has sometimes been analyzed by the European Court under the heading of Article 6 of the Convention, concerning the presumption of innocence. 19 Khodorkovsky and Lebedev Communications Center, Defense Files Two Pleas, 3 March 2009, http://www.khodorkovskycenter.com/news-resources/stories/defense-files-two-pleas. 117

defendant and all others. The European Court will ask whether its use could have been ―reasonably considered necessary.‖ Evaluation of the factors that the Court has considered in the past suggests that its answer will be negative. The defendants were not accused of crimes of violence. Although at the time of the trial they had criminal records, these were not for violent offenses. Given their incarcerated status and national media attention, they were unlikely risks of flight. Indeed, Khodorkovsky had made considerable show of his refusal to leave Russia when other individuals suspected of the same crimes had fled.

B. ARTICLE 6 § 1

1. RIGHT TO PROCEEDINGS WITHIN A REASONABLE TIME

a. Relevant Russian Law and Practice

The relevant provisions of the Code of Criminal Procedure of the Russian Federation are as follows: Article 6.120 1. Criminal proceedings are carried out in a reasonable time. 2. Criminal proceedings are carried out in the time periods established by this Code. Extension of these time periods is permitted in cases and in the manner foreseen by this Code, but criminal prosecution, imposition of a sentence and

20

This article was added to the Criminal Procedure Code by Federal Law of 30 April 2010 (No. 69-FZ). With regard to this amendment, as with all other amendments to the Code identified in this report, Article 4 of the Code provides that: ―The law on criminal procedure in effect at the time of the performance of an appropriate procedural action or the making of a procedural decision shall apply in proceedings in a criminal case, unless otherwise provided by this Code.‖ 118

termination of a criminal prosecution should be carried out within a reasonable time. 3. In determining a reasonable time period for criminal proceedings, which includes the period from the start of the criminal prosecution until the termination of the criminal prosecution or pronouncement of a judgment of conviction, such factors as the legal and factual complexity of the criminal case, the conduct of the participants of the criminal proceedings, the sufficiency and effectiveness of the actions of the court, the prosecutor, the head of the investigative body, investigator, head of the inquiry subdivision, the inquiry agency, inquiry officer, which are conducted to the ends of the timely accomplishment of the criminal proceedings or examination of a criminal case, as well as the total length of criminal proceedings are taken into account. 4. The circumstances related to the organization of the work of inquiry agencies, the investigation agencies, the procurator‘s office and court, as well as the examination of the criminal case by different levels of authority may not be taken into account as a basis for exceeding the reasonable time period for the accomplishment of criminal proceedings. 5. If after submission of a criminal case to the court, the case is not tried for a long period of time and the judicial process is delayed, the interested parties have the right to recourse to the court chairman with a motion on acceleration of the examination of the case. 6. The motion on the acceleration of the examination of a criminal case is considered by the court chairman no later than 5 days from the day the motion was filed with the court. As a result of the examination of the motion, the court chairman issues a reasoned decision, in which a period for the conduct of a court‘s session on the case may be established and (or) other procedural actions to accelerate the examination of the case may be accepted.

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Article 121 A motion shall be heard and disposed of as soon as possible after it is made. When a motion made in the course of a preliminary investigation cannot be disposed of immediately, it shall be decided no later than three days after it was made.

Article 129 § 2 A time period may be extended only in situations and in accordance with the procedures specified in this Code.

Article 144 §§ 1 & 3 1. An inquiry officer, inquiry agency, investigator, head of the

investigating body must accept and investigate every report of the commission of a crime or of preparation to commit one, and shall make a decision on such report within the scope of his duties as defined by this Code no later than 3 days after the filing of such a report. … 3. A head of the investigating body, head of an investigative unit or head of an inquiry agency, on the official, reasoned request of an investigator or inquiry officer, may extend the time period specified by part one of this Article up to 10 days. When the production of

documentary verification, audits, research of documents, objects or bodies is necessary, the head of the investigative body at the request of the investigator or prosecutor at the request of the investigator may extend this period to 30 days on concrete, factual circumstances giving rise to such extension with a binding instruction. Article 146 § 421
21

Paragraph 4 of this article was amended during the pendency of this case, see Federal Law from 2 December 2008 (No. 226-FZ), which shifted authority to initiate a criminal case from a prosecutor to the head of the relevant federal investigative committee, a newly created body. The unamended version is provided above because the case was initiated in February 2007, prior to the coming into effect of this amendment. The amended version, in relevant part, is as follows: ―A copy of the order of the head of the investigating body, investigator, or inquiry officer initiating the criminal case shall be forwarded to a procurator without delay. … If a procurator recognizes an order initiating a criminal case as unlawful or unfounded, he has the right within 24 hours from the receipt of the materials serving as the basis for the criminal case to cancel the order initiating the 120

4.

The order initiating the criminal case shall be forwarded to a

procurator without delay. … Upon receiving the order, the procurator shall give his consent, without delay, to the initiation of a criminal case or issue an order withholding consent for the initiation of a criminal case or sending the materials back for an additional verification, which must be conducted within a period of no more than 5 days. The investigator or inquiry officer shall notify the complainant and the person against whom the criminal case was initiated of the procurator‘s decision on the same day. Article 16222 1. A preliminary investigation in a criminal case shall be completed within a time period not exceeding two months after the criminal case is initiated. 2. The preliminary investigation time period runs from the date the criminal case is initiated until the date it is forwarded to the procurator recommending an indictment, the date it is ordered to be forwarded to a court for consideration of whether to order involuntary medical treatment, or the date when an order dismissing proceedings in the criminal case is issued.

criminal case, about which he gives a reasoned decision, a copy of which is provided without delay to the official who initiated the criminal case. The head of the investigative body, the investigator, or the inquiry officer shall without delay notify the complainant and the person against whom a criminal case has been initiated about the decision.‖ 22 Paragraph 7 of this article was amended once and paragraphs 4 and 5 were amended twice during the pendency of this case, see Federal Laws from 5 June 2007 (No. 87-FZ) and 3 December 2007 (No. 323-FZ). With regard to paragraph 4, the amendment reduces the permitted period of extension from six to three months and requires the assent of the corresponding head of the investigative body. With regard to paragraphs 5 and 7, the amendment shifts authority from the procuracy to the (then) new Investigative Committee. 121

3. The preliminary investigation time period shall not include any time during which the preliminary investigation was suspended on the grounds specified by this Code. 4. The procurator of a district, the procurator of a city, and equal-status military procurators and their deputies, may extend the preliminary investigation time limit up to 6 months. 5. In a criminal case in which the investigation is especially complex, the time limit on the preliminary investigation may be extended up to twelve months by the procurator of a subject of the Russian Federation, and equal-status military procurators and their deputies. Any further extension of the preliminary investigation time limit may be made only in exceptional cases and may be effected solely by the Russian Federation Procurator General or his deputies. 6. When a procurator returns a criminal case for a supplementary

investigation and also when a suspended or dismissed criminal case is reopened, the time period for such supplemental investigation, which shall be set by the procurator, may not exceed one month following the date such criminal case was filed with the investigator. Any further extensions of the preliminary investigation time limit may be effected on the general grounds and in accordance with the general procedures established by this Article. 7. Whenever it becomes necessary to extend the time limit on the

preliminary investigation, the investigator shall issue an appropriate order to that effect and submit it to the procurator no later than 5 days before the expiration of the preliminary investigation time limit. 8. The investigator shall notify in writing the accused and his defense counsel, as well as the victim and his representative, of the extension of the preliminary investigation time limit.

Article 217 § 1

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After fulfilling the requirements of Article 216 of this Code the investigator shall present bound and numbered volumes of the criminal case file to the accused and to his defense counsel … Article 221 § 123 A procurator shall review the criminal case file with an indictment that was forwarded by the investigator and within 10 days shall make one of the following decisions: 1) approving the indictment and forwarding the criminal case to court. …

Article 227 §§ 1 & 3 1. When a criminal case is filed in court, the judge shall make one of the following decisions: … 3) setting a trial date. … 3. The decision shall be made within 30 days after the criminal case is filed with the court. …

Article 233 § 1 1. Trial of a criminal case in court shall commence no later than 14 days after the order setting a trial date is issued … .

Article 295 § 2 2. Before the court retires to the deliberation room, trial participants shall be informed of the time when the judgment is to be announced.

b. Relevant ECHR Provisions and Case Law

23

This article was amended during the pendency of this case, see Federal Law from 5 June 2007 (No. 87-FZ), which increased the time period above from 5 days to 10 days. 123

Article 6 § 1 of the Convention states, in relevant part, that: In the determination … of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time… . In judgments dating back decades, ―the Convention institutions have consistently taken the view that Article 6 is, in criminal matters, ‗designed to avoid that a person charged should remain too long in a state of uncertainty about his fate‘[.]‖ Nakhmanovich v. Russia, App. No. 55669/00 (2 March 2006) at ¶ 89 (citing Stögmüller v. Austria, App. No. 1602/62 (10 November 1969) at ¶ 5). The European Court has held that the ―the duty to administer justice expeditiously [is] incumbent in the first place‖ on the member state. Kudla v. Poland, App. No. 30210/96 (26 October 2000) at ¶ 130. It is the responsibility of ―the State authorities to organise the

investigation in such a way so as to comply with time-limits, without prejudicing the rights of defence.‖ Panchenko v. Russia, App. No. 45100/98 (8 February 2005) at ¶ 134. The word ―charge‖ has autonomous substantive meaning within the context of the Convention. Rokhlina v. Russia, App. No. 54071/00 (7 April 2005) at ¶ 81. This is because ―the prominent place held in a democratic society by the right to a fair trial prompts the Court to prefer a ‗substantive‘, rather than a ‗formal‘, conception of the ‗charge‘ contemplated by Article 6 par. 1 (art. 6-1). The Court is compelled to look behind the appearances and investigate the realities of the procedure in question.‖ Deweers v. Belgium, App. No. 6903/75 (27 February 1980) at ¶ 44 (internal citations omitted). The unchanging key to the European Court‘s jurisprudence in this regard appears to be linked to notice given the accused. Thus, while arrest is conventionally accepted as one common indicia of the start of criminal proceedings for purposes of

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determining their length, see e.g. Moiseyev v. Russia, App. No. 62936/00 (6 Apr. 2009) at ¶ 190, the Court explained that the measure of the length of proceedings starts

from an official notification given to an individual by the competent authority of an allegation that he has committed a criminal offence or some from [sic] other act which carries the implication of such an allegation and which likewise substantially affects the situation of the suspect. According to the Court‘s constant case-law, a person has been found to be subject to a ―charge‖, inter alia, when a preliminary investigation has been opened in his case and, although not under arrest, the applicant has officially learned of the investigation or has begun to be affected by it.

Kangasluoma v. Finland, App. No. 48339/99 (20 January 2004) at ¶ 26 (internal citation omitted). Likewise, ―the period to be taken into consideration in determining the length of criminal proceedings normally ends with the day on which a charge is finally determined or the proceedings are discontinued[.]‖ Nakhmanovich, supra, at ¶ 88. Whether the length of criminal proceedings is reasonable ―must be assessed in the light of the circumstances of the case and with reference to the following criteria: the complexity of the case, the conduct of the applicant and the relevant authorities [.]‖ Sutyagin v. Russia, App. No. 30024/02 (3 May 2011) at ¶ 150. In addition, a fourth factor – the importance of the proceedings for the accused – has also been adopted by the Court. In particular, ―where a person is kept in detention pending the

determination of a criminal charge against him, the fact of his detention is a factor to be considered in assessing whether the requirement of a decision on the merits within a reasonable time has been met.‖ Abdoella v. the Netherlands, App. No. 12728/87 (25 November 1992) at ¶ 24. Although ―dilatory conduct‖ and behavior by the defendant intended to ―otherwise upset the proper conduct of the trial‖ will be held against the applicant, Kudla, supra, at ¶ 130, delays attributable to the defendant asserting his rights will not be held
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against him. Moiseyev, supra, at ¶ 192. On the other hand, ―substantial periods of inactivity, for which the Government have not submitted any satisfactory explanation, are attributable to the domestic authorities.‖ 33914/02 (1 December 2005) at ¶ 49. Skorobogatova v. Russia, App. No.

c. Analysis The determination of the length of proceedings – let alone the reasonableness of this period – is likely to be a point of contention between the parties. The Government authorities may view February 2007, the date of the indictment, as the starting point, the first trial proceedings having concluded with the defendants‘ conviction in 2005. The defendants may view July and October 2003 (the dates of their initial arrests) or even shortly earlier (the point in time when they became aware that a criminal investigation had been opened) as the starting point. The defendants may be inclined to argue that the 2007 indictment was artificially separated from the indictment leading to their first convictions, notwithstanding their common facts, parties, and legal issues. Indeed, these considerable common features between the two trials would seem to lend support to the defendants‘ view. The European Court‘s case law is unclear in this respect. The Court has sometimes considered the finality of a criminal conviction to be a reliable marker. Thus, in Löffler v. Austria, App. No. 30546/96 (3 October 2000) at ¶ 19, the applicant was convicted of murder but sought to reopen his criminal case on the basis of DNA evidence, which ultimately led to his acquittal. In measuring the length of the criminal

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proceedings for purposes of evaluating his claim of a violation of Article 6, the European Court held that the relevant start was the reopening of the case, not the date when a criminal investigation was first initiated against the applicant. The Court observed that the first proceedings had become final at the time of the applicant‘s conviction; he could have complained about their length at that time. Id. On the other hand, a different conclusion was reached in Stoianova & Nedelcu v. Romania, App. Nos. 77517/01 and 77722/01 (4 August 2005). In that case, the applicants were charged with robbery and held in custody for eight months in 1993 before being acquitted. The prosecution successfully appealed. The case was

reopened for investigation in 1994, then discontinued in 1997, reopened again in 1999 with the addition of a new charge (inciting witnesses to give false evidence), then discontinued in 2005 as time-barred. The Court measured the length of the

proceedings from the original arrest in 1993 (rather than having begun with the reopening of the case in 1999) because the prosecutor‘s discontinuance of the inquiry ―was not a final decision‖ Id. at ¶ 21. By this was meant the fact that ―it was open to the prosecution to reopen the criminal investigation without having to seek leave from any domestic court that would have been obliged to consider the application according to certain criteria, including the fairness of reopening the case and whether an excessive period had passed since the decision discontinuing the investigation.‖ Id. The present case fits more naturally within the analysis of the Stoianova case. There, as here, the power in question is prosecutorial discretion, which rests in the hands of the Government authorities. As in the Stoianova case, a complaint about the

unreasonableness of the length of proceedings would be based on the decisions of prosecutors concerning the timing of their seriatim investigations and prosecutions for related acts. The Löffler case is thus distinguishable in this respect. In Löffler, the applicant himself sought to undo the finality of the proceedings and was stymied by

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delays attributable both to the prosecuting authorities and to the tribunal. In the Stoianova case, on the other hand, the applicants sought repose from criminal proceedings repeatedly opened and closed by an irresolute prosecuting authority. As the Court noted in that case, ―[t]he applicants were not responsible for those shortcomings on the part of the authorities and should not therefore be put at a disadvantage as a result of them.‖ Stoianova, supra, at ¶ 21. The European Court and scholarly observers of its work have frequently linked the guarantees of Article 6 to the rule of law. If the Government authorities are unable to adequately explain why the defendants were charged in serial fashion, rather than investigated and charged for all offenses concerning their actions as heads of Yukos, it would be difficult not to conclude that the relevant starting point to determine the reasonableness of the length of proceedings was the initial arrest of the defendants. As noted, ―substantial periods of inactivity, for which the Government have not submitted any satisfactory explanation, are attributable to the domestic authorities.‖ Skorobogatova v. Russia, App. No. 33914/02 (1 December 2005) at ¶ 49. The materials provided for use in this report are inadequate to reach a conclusion as to the credibility of an official explanation in this regard. In this respect, however, it is worth noting that pursuant to Article 79(3)(b) of the Criminal Code, the defendants were eligible for conditional-early relief from their sentences after having served at least half of the term of their punishment. The announcement of a new criminal case was made in February 2007, shortly before the defendants were eligible for parole. Although beyond the scope of this analysis to confirm, it is also worth considering the conclusion of the rapporteur of the Parliamentary Assembly of the Council of Europe, who personally observed both the first and second trial of the defendants:

Mr Khodorkovsky and Mr Lebedev complained during their first trial of a parallel investigation taking place by the general prosecutor‘s office. They complained that they should have been notified of all charges

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against them at the very latest at the start of the first trial in 2004 in accordance with Article 6 of the ECHR. Some three years later, just as they were becoming eligible for parole, they were charged as a consequence of that parallel investigation. The parallel investigation concerning related allegations of impropriety should have been concluded, disclosure made and a decision reached as to whether further charges could or should be brought, before the start of the first trial. Mr Khodorkovsky and Mr Lebedev argue that it was an intolerable abuse of process that the prosecution should seek to conduct more than one investigation into essentially the same alleged misconduct.

Document 11993, Report of the Committee on Legal Affairs and Human Rights (Rapporteur Mrs. Sabine Leutheusser-Schnarrenberger) (7 August 2009), at ¶ 101. If the proceedings are judged to have begun with the defendants‘ arrest in 2003, than they have lasted approximately 7½ years; if measured from the date of the second indictment, they have lasted roughly four years. The case law of the European Court is highly variable in its assessment of such time periods, cases appearing on either side of the question of their reasonableness. Thus, the Court has relied on case-by-case evaluations of different factors. These factors are as follows.

(1) Complexity of the Case

There is likely to be a dispute between the parties regarding this factor.

The

authorities will likely note that the case file amounted to 188 volumes of evidence in a highly complex financial scheme of oil embezzlement and money laundering

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involving multiple unindicted co-conspirators and numerous corporate entities and structures in different national jurisdictions. The defendants will likely assert that this complexity has been manufactured by the novel theory of embezzlement proposed by the prosecution in the first place. It should be noted, however, that a finding of complexity – whether real or contrived – is not necessarily determinative. The

European Court found a violation of Article 6 in Yagci & Sargin v. Turkey, App. No. 6/1994/453/533-534 (23 May 1995), notwithstanding the existence in that case of 40 volumes of files concerning 16 defendants represented by 400 lawyers over the course of 48 hearings. Id., at ¶¶ 11 & 60. As Professor Trechsel has observed from the evolution of the Court‘s case law, ―[t]he only decisive element is, in fact, the way in which the authorities dealt with the case. Whether the case is complex or not is in essence entirely irrelevant – a violation will only be found when there have been periods during the proceedings where no action was taken, although something could and should have been done.‖ Stefan Trechsel, Human Rights in Criminal Proceedings 143 (2005). Thus, much depends on the determination of the starting point of the proceedings. If the defendants‘ separate trials are judged to have been artificially bifurcated, the European Court‘s assessment of the state‘s delay in commencing the second prosecution may well be determinative. (2) The Applicant’s Conduct

The defendants maintained a vigorous defense, asserting their rights and filing motions concerning the investigation and trial throughout the course of the proceedings. Any delays that may have resulted from these actions, however, cannot be tolled against the defendants. Moiseyev, supra, at ¶ 192. The Court has made very clear that defendants

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are not to be blamed for delays associated with the good-faith assertion of their rights, as Article 6 ―does not require a person charged with a criminal offence to co-operate actively with the judicial authorities[.]‖ 6/1994/453/533-534 (23 May 1995) at ¶ 66. Yagci & Sargin v. Turkey, App. No.

(3) Conduct of the Authorities

As already noted, this factor is often the determinative issue in evaluating whether the length of the proceedings is unreasonable as understood in the Court‘s Article 6 case law. The failure to respect time limits established by the member state‘s domestic law is often taken by the Court as prima facie evidence that the length of the proceedings was unreasonable. The materials provided for this report, and the time allotted to analyze them, were not sufficient to undertake a complete analysis of the compliance of the parties to the deadlines established by the RF Code of Criminal Procedure. Unexplained delays are often grounds for a finding of a violation of Article 6 under this heading. As noted above, the investigation of the defendants appears to have been conducted in a staccato and serialized fashion. The first criminal investigation The

preceded and immediately followed the arrest of the defendants in 2003.

preliminary investigation continued up to the defendants‘ trial, which commenced in June 2004 (but was immediately adjourned and resumed the next month) and concluded with the defendants‘ conviction in May 2005. It is unclear what, if any, investigation occurred in the roughly two years intervening between the defendants‘ first conviction in May 2005 and the announcement of a new indictment in February 2007. The indictment was not finally submitted to the Khamovnichesky court until 14

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February 2009; the trial began on 31 March 2009. The materials available for the completion of this report do not identify any stated reason for this delay of more than five years between the defendants‘ arrests and the start of their second criminal trial. While the defendants remained in detention since July and October 2003, their activities at Yukos were subject to extensive investigation. Thus, the authorities‘ decision to prosecute the defendants in seriatim proceedings several years apart is hard to explain. Furthermore, as noted below, both the Government authorities and the Khamovnichesky court in its verdict, frequently categorized the defendants as having engaged in illegal but uncharged activities, including fraud, bribery, deceit, and breach of trust. By the time of the trial, however, these crimes (if they were committed) were effectively time-barred. It is unclear whether the more straightforward crimes noted above were left uncharged because of lack of evidence (in which case their assertion without evidence in the verdict may be evidence of violations of other rights protected by the Convention) or because they were time-barred as a result of the delay in issuing the indictment in this delayed fashion. This outcome is reminiscient of Panchenko v. Russia, App. No. 45100/98 (8 February 2005) at ¶¶ 10-73, in which eight years passed between the initiation of a criminal case against the defendant (in custody for most of this time) and the dismissal of charges due to the expiration of the statute of limitations. The European Court had no difficulty finding a violation of Article 6 in the Panchenko case, observing that it is ―incumbent on the State authorities to organise the investigation in such a way so as to comply with time-limits, without prejudicing the rights of defence.‖ Id. at ¶ 134.

(4) Importance of the Proceedings for the Accused

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It cannot be gainsaid that the proceedings, on the outcome of which their liberty depended, were of the utmost importance to the accused. At the time that the new charges were made, as noted above, the defendants were eligible for conditional-early relief from their sentences after having served at least half of the term of their punishment. Aside from this fact, the defendants‘ sentences in the original case would have been satisfied in 2011, just as the new sentences for these new convictions began. Thus the effect of seriatim prosecution was to leave the defendants in a ―state of uncertainty about [their] fate.‖ Nakhmanovich v. Russia, App. No. 55669/00 (2 March 2006) at ¶ 89.

2. RIGHT TO AN INDEPENDENT AND IMPARTIAL TRIBUNAL

a. Relevant Russian Law and Practice

The Constitution of the Russian Federation states, in relevant part:

Article 118 § 1 Justice in the Russian Federation shall be administered only by courts of law.

Article 120 § 1 Judges shall be independent and shall obey only the Constitution of the Russian Federation and federal law.

The relevant provisions of the Code of Criminal Procedure of the Russian Federation are as follows:

Article 8 § 1 Justice in a criminal case in the Russian Federation shall be administered solely by courts. Article 15 § 3
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3. A court is not an organ of criminal prosecution and shall not take the prosecution or defense side in a case. The court shall create the conditions necessary for the parties to perform their procedural duties and to exercise the rights granted to them.

b. Relevant ECHR Provisions and Case Law

Article 6 § 1 of the Convention states, in relevant part, that: In the determination … of any criminal charge against him, everyone is entitled to a fair and public hearing … by an independent and impartial tribunal …. It has long been established in the European Court‘s case law that the word ―impartial‖ carries both a subjective and objective component. Under the heading of subjective impartiality is understood the requirement that ―no member of the tribunal should hold any personal prejudice or bias‖ against the accused. Daktaras v. Lithuania, App. No. 42095/98 (10 October 2000) at ¶ 30. subjective impartiality. Under the heading of objective impartiality is understood the requirement that the tribunal ―must offer sufficient guarantees to exclude any legitimate doubt in this respect.‖ Id. (internal citation omitted). As to the objective component, ―quite apart from the judge‘s personal conduct,‖ the issue is: There exists a rebuttable presumption of

whether, there are ascertainable facts which may raise doubts as to his impartiality. In this respect even appearances may be of a certain importance. What is at stake is the confidence which the courts in a democratic society must inspire in the public. Accordingly, any judge in

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respect of whom there is a legitimate reason to fear a lack of impartiality must withdraw. This implies that in deciding whether in a given case there is a legitimate reason to fear that a particular judge lacks impartiality, the standpoint of the party concerned is important but not decisive. What is decisive is whether this fear can be held to be objectively justified.

Sigurdsson v. Iceland, App. No. 39731/98 (10 April 2003) at ¶ 37. In the Sigurdsson case, for example, the European Court considered whether a supreme court justice should have recused herself from a case involving a bank in which her husband was simultaneously involved in certain financial negotiations. The Court unanimously found a violation of the right to an impartial tribunal notwithstanding its refusal to speculate ―as to whether [the justice] derived any personal benefit from the operation and finds no reason to believe that either she or her husband had any direct interest in the outcome in the case between the applicant and the National Bank.‖ Sigurdsson, supra, at ¶ 45. The standard of objective impartiality is therefore a high one: there must be ―sufficient guarantees to exclude any legitimate doubt as to the absence of inappropriate pressure.‖ Daktaras, supra, at ¶ 36.

c. Analysis

As to the evaluation of the subjective impartiality of the Khamovnichesky court, the resources available to prepare this report were insufficient to determine the existence, or assess the merits, of allegations of bias held personally by Judge Danilkin against the defendants. Likewise, the time allotted to complete this report was not adequate to examine all of the relevant sources by which to evaluate the objective component of the court‘s impartiality.24 There is sufficient information surrounding a few events close in time to the reading of the verdict, however, to call into question the existence
24

For example, a defense motion dated 20 September 2010 referenced accusations made by witness Pereverzin at the August 31, 2010 hearing that he was offered a suspended sentence if he would testify against Khodorkovsky. This motion makes other assertions of pressure concerning lawyer Aleksanyan, witness Valdes Garcia, and others. It is simply not possible to evaluate these claims with the materials and time available for this report. 135

of suitable safeguards to guarantee the objective component of the impartiality of the Khamovnichesky court. On 15 December 2010, a previously scheduled hearing to announce the verdict of the court was postponed until 27 December 2010. The Court provided no explanation for this delay. The following day, Prime Minister Vladimir Putin, responding to a

question about Khodorkovsky during a nationally-televised program, said:

As to Khodorkovsky, I have already spoken out many times on this account. If you consider that I should say something else on this I, as well as the well-known character of And in

question, I may do so.

Vladimir Vysotsky, consider that a thief should sit in jail.

conformity with the decision of the court, Khodorkovsky is charged with theft, a rather large theft. It‘s about the non-payment of taxes and fraud, and the account there goes to billions of rubles. True, there is also the non-payment of personal taxes, that is very important. But the charge against him now goes to hundreds of billions of rubles: 900 in one case, in a second case - 800 billion rubles, also theft. If we look at the practice in other countries, Mr. Madoff in the U.S.A. received for an analogous crime, yes and the money is roughly also the same, 150 years imprisonment. In my opinion, it looks like everything we have is much more liberal. Nevertheless, we should proceed from the fact that the crimes of Mr. Khodorkovsky have been proven in court. Yes, and in addition, you well know, I want to repeat once more, I am not speaking about him personally, I would like to remind that the head of the security service of Yukos sits in prison for murder. They didn‘t like the mayor of Nefteyugansk, Petukhov – they murdered him. A

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woman here in Moscow did not give them her small room, which they wanted to take – they murdered her. A killer whom they hired, they murdered him. Only the brains were found in a garage. Did the head of the security service himself, on his own initiative, carry out all of these crimes? So, there is a court, we have, as is well-known, one of the most humane in the world, this is its job. I proceed from what was proven by the court.25 The Prime Minister‘s comments appeared to mix observations about both the first, completed trial, and the second, then unfinished one. Nevertheless, commentators and media in Russia and elsewhere immediately interpreted his words as instructions to the court in the still uncompleted second trial.26 The Prime Minister first spoke about the first conviction, and then about the second one. Then he said: ―Nevertheless, we should proceed from the fact that the crimes of Mr. Khodorkovsky have been proven in court.‖ At this point it wasn't clear whether he was talking about the first conviction or the second one. One might plausibly argue that the reference to crimes that ―have been proven in court‖ unequivocally meant only the first conviction. On the other hand, one can read the sentence as an expression of Putin's opinion: ―the crimes of Mr. Khodorkovsky‖ – both cases having been referenced – ―have been proven in the court.‖ By simple clarification, the Prime Minister could have avoided this effect. That the Prime Minister was aware of the effect his words could have is suggested by his qualification of Khodorkovsky‘s connection to underworld figures and various murders: the Premier noted that he was not speaking about Khodorkovsky ―personally.‖ This caveat, of course, would have been unnecessary had the Prime Minister not insinuated that Khodorkovsky, well-known as the head of Yukos and

25

Transcript of program ―A Conversation with Vladimir Putin. Continuation.‖ The program aired on television channels ―Rossiya‖ and ―Rossiya 24,‖ and radio stations ―Mayak,‖ ―Vesti FM,‖ and ―Radio Rossiya.‖ 16 December 2010, available at: http://premier.gov.ru/events/news/13427/. 26 See, e.g., Catherine Belton, Putin Remarks Dash Hopes for Khodorkovsky, Financial Times (16 Dec. 2010). 137

whose relationships to other Yukos executives was the basis for the charge that he was part of an ―organized criminal group,‖ was in that way connected to murders that ―they‖ committed. Lest the point be lost, the Prime Minister asked, ―Did the head of the security service himself, on his own initiative, carry out all of these crimes?‖ The question, in context, clearly implied a negative answer. The Premier mixed into his remarks several references to popular culture. The first reference, that ―a thief should sit in jail,‖ is to the well-known 1979 Soviet mini-series, The Meeting Place Cannot be Changed (―Mesto vstrechi izmenit‘ nel‘zya‖).27 The quotation is from the tough detective played by Vladimir Vysotsky and was clearly chosen because of its familiarity. The continuation of that quote would be equally familiar to listeners: ―… and people don‘t care how I put him away.‖28 In the context of the Yukos case, these comments take on a sinister tone, especially given that the Premier had been President at the time of the defendants‘ arrest and first conviction. The timing of these remarks, after the defendants‘ last word in the case sent the matter to the court‘s deliberation chamber but before the announcement of an inexplicably postponed verdict, was particularly chilling. Although they were far less disturbing in content, President Medvedev likewise made remarks about the Khodorkovsky case the day after the scheduled hearing on the defendants‘ appeal of their conviction was postponed, again without any explanation. In response to a questioner at a press conference at the Moscow School of Management ―Skolkovo,‖ the following exchange occurred: Y.Matsarskii: I represent radio station ―Kommersant‖-FM,‖ my name is Yuri Matsarskii. Dmitri Anatol‘evich, tell me, please, whether Khodorkovsky‘s release would be a danger for society?

27 28

Ellen Barry, Putin Speaks his Mind, and Then Some, on Television, N.Y. Times (16 Dec. 2010). The second reference, that the court is ―one of the most humane in the world,‖ is a quote from a 1967 Soviet comedy film, The Prisoner of the Caucasus, or the New Adventures of Shurik (―Kavkazskaya plennitsa, ili Novye prikliucheniya Shurika‖). 138

D. Medvedev: The question is short and the answer is also short: there would be absolutely no danger.29

Although this statement would appear to cast the defendant in a favorable light, it remains an extrajudicial comment on a pending case. Indeed, the surprise

postponement of yet another scheduled hearing, followed by the widely disseminated comment of the President, naturally led to speculation about the signals sent by this protracted, public exchange about the defendants‘ fate between the head of state and the head of the government.30 In light of these facts, it is easy to understand why the European Court has emphasized that ―even appearances may be of a certain importance‖ in setting a high standard for member states to ensure the objective impartiality of the courts with ―sufficient guarantees to exclude any legitimate doubt as to the absence of inappropriate pressure.‖ Daktaras v. Lithuania, supra, at ¶¶ 32, 36. What is at stake is the

confidence which the courts in a democratic society must inspire in the public and above all in the parties to the proceedings.‖ Id. at ¶ 32 (internal citation omitted).31

29

Press Conference of the President of Russia, 18 May 2011, ―Skolkovo‖ School of Management (http://news.kremlin.ru/transcripts/11259). 30 Interfax, Russian Activists Welcome President's Comments About Khodorkovskiy (18 May 2011) (http://www.cdi.org/russia/johnson/russia-activists-welcome-medvedev-comments-about-khodorkovsky935.cfm). 31 Shortly after the defendants‘ conviction, several court officials alleged that government officials had interfered in the drafting of the Khamovnichesky Court‘s verdict. Most prominently, Natal‘ya Vasil‘eva, the Court‘s press secretary, alleged that Judge Danilkin frequently received instructions with regard to his supervision of the trial, including his verdict, from superiors in the Moscow City Court. See Roman Badanin & Svetlana Bocharova, Prigovor byl privezen iz Mosgorsuda, ya tochno znaiu, Gazeta.ru, 14 Feb. 2011. Igor‘ Kravchenko, a co-worker at the Khamovnichesky Court, subsequently gave interviews in which he endorsed Vasil‘yeva‘s claims. See Svetlana Bocharova, Interv’iu Vasil’evoi – Pravda, Gazeta.ru, 15 Apr. 2011. On 20 June 2011, the Investigative Committee declined to open an investigation, rejecting the credibility of these witnesses and the authenticity of their evidence. See Svetlana Bocharova, Danilkinu ne nashli sostava, Gazeta.ru, 20 June 2011. It is unlikely that the European Court of Human Rights would disturb this finding absent an allegation of serious procedural irregularities in the Investigative Committee‘s decision-making process: Article 13 of the Convention protects the right to an effective remedy. Another fruitful area of inquiry from the perspective of Article 6 § 1 concerns the legal authority of the Chairwoman of the Moscow City Court over a particular judge. A lack of ―structural independence‖ could establish a violation of the Convention. See, e.g., Whitfield and others v. United Kingdom, App. No. 46387/99 (12 Apr. 2005) at ¶¶ 42-46. The Parliamentary Assembly, at the behest of two of its committees, expressed its concern in this regard with particular attention to the informal practice of ―telephone justice‖ and the power of court chairpersons. See Resolution 1685 (2009), adopted by the Parliamentary Assembly of the Council of Europe on 30 September 2009 (32nd sitting); see also Document 12038, Opinion of the Committee on Economic Affairs and Development (29 September 2009); and Document 11993, Report of the Committee on Legal Affairs and Human Rights (7 August 2009). It is beyond the resources available for the writing of this report to investigate the facts necessary to establish such violations. 139

3. RIGHT TO A REASONED JUDGMENT

a. Relevant Russian Law and Practice

The relevant provisions of the Constitution of the Russian Federation are as follows:

Article 47 § 1 No one may be deprived of the right to have his case examined by the court and judge to whose jurisdiction it is assigned by law.

Article 49 § 1 Everyone accused of committing a crime shall be presumed innocent until his guilt has been proved in accordance with the procedure specified by federal law and established by final judgment of a court.

The relevant provisions of the Code of Criminal Procedure of the Russian Federation are as follows:

Article 7 § 4 Rulings by a court and orders by a judge, procurator, investigator, or inquiry officer must be legally correct, well-founded, and well-reasoned.

Article 297 1. The judgment of the court must be lawful, well-founded and fair.

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2. A judgment is deemed to be lawful, well-founded and fair, if it is determined in compliance with the requirements of this Code and is based on the proper application of the criminal law. Article 299 1. When determining a judgment in the deliberation room, the court shall decide the following issues: 1) whether it has been proven that the act the defendant is charged with occurred; 2) whether it has been proven that the act was committed by the

defendant; 3) whether the act constitutes a crime and by what Point, Paragraph and Article of the Criminal Code of the Russian Federation it is punishable; 4) whether the defendant is guilty of committing the crime; 5) whether the defendant should be punished for committing the crime; 6) whether there are circumstances that mitigate or aggravate the punishment; 7) what sentence should be imposed on the defendant; 8) whether there are grounds for a judgment of guilty without sentence or for granting an exemption from punishment; ***

Article 302 § 4 A judgment of conviction may not rest upon speculation and such a judgment shall be rendered only if the guilt of the defendant in committing the crime is confirmed by the totality of the evidence examined by the court.

Article 303 § 1 Upon deciding the issues referred to in Article 299 of this Code, the court shall proceed to write the judgment. It shall be written in the

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language in which the trial was conducted and consist of an introductory part, a narrative-rationale part, and an operative part.

Article 307 The narrative-rationale part of a judgment of conviction must contain: 1) a description of the criminal act which the court determined was proven, with reference to the place, time and mode of its commission, the nature of the guilt involved in and the motives, objectives and consequences of the crime; 2) the evidence on which the court‘s findings regarding the defendant are based and the reasons the court rejected other evidence; 3) references to any circumstances mitigating or aggravating

punishment, and reference to the grounds and reasons for modifying the charge if some part of the charge was found not to be well-founded or there was an erroneous classification of the crime; 4) the reasons for the court‘s decision on all the issues relevant to the sentence, any exemption from imposition of a sentence or from serving it, and for the application of other measures; 5) the grounds for any decisions made with respect to other issues referred to in Article 299 of this Code.

b. Relevant ECHR Provisions and Case Law

Article 6 § 1 of the Convention states, in relevant part, that: In the determination … of any criminal charge against him, everyone is entitled to a fair and public hearing … by an independent and impartial tribunal ….

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This provision has been interpreted to require that courts give reasons for their judgments. See Van de Hurk v. The Netherlands, App. No. 16034/90 (19 Apr. 1994) at ¶ 61. In particular, courts must ―indicate with sufficient clarity the grounds on which they based their decision.‖ Hadjianastassiou v. Greece, App. No. 12945/87 (16 Dec. 1992) at ¶ 33. The court is ―under a duty to conduct a proper examination of the submissions, arguments and evidence adduced by the parties, without prejudice to its assessment of whether they are relevant to its decision[.]‖ Kraska v. Switzerland, App. No. 13942/88 (19 Apr. 1993) at ¶ 30. On the other hand, the European Court has held that Article 6 ―cannot be understood as requiring a detailed answer to every argument.‖ Van de Hurk, supra, at ¶ 61. ―Nor is the European Court called upon to examine whether arguments are adequately met.‖ Id. It is not the task of the European Court, but for the national courts, to determine whether a submission by a party is well-founded. Hiro Balani v. Spain, App. No. 18064/91 (9 Dec. 1994) at ¶ 28; Ruiz Torija v. Spain, App. No. 18390/91 (9 Dec. 1994) at ¶¶ 29-30. The determination of a violation of the right to a reasoned judgment can only be made on a case-by-case basis ―in the light of the circumstances of the case.‖ Helle v. Finland, App. No. 157/1996/776/977 (19 Dec. 1997) at ¶ 55. This is because ―the extent to which the duty to give reasons applies may vary according to the nature of the decision at issue. It is moreover necessary to take into account, inter alia, the diversity of the submissions that a litigant may bring before the courts and the differences existing in the Contracting States with regard to statutory provisions, customary rules, legal opinion and the presentation and drafting of judgments.‖ Id. A margin of appreciation is accorded to national law and practice. Hadjianastassiou v. Greece, App. No. 12945/87 (16 Dec. 1992) at ¶ 33. Professor Trechsel has elaborated on the importance of this requirement from the perspective of legal theory:

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The only possibility to verify a hypothesis in law lies in the reasons given. They must be complete and logical. Without reasons, a decision cannot claim to have legal character, let alone to be correct. Thus, without reasoning it would not be possible to distinguish a correct judgment from an arbitrary one. In other words, a judgment which does not give reasons may not be, but certainly appears to be arbitrary.

Stefan Trechsel, Human Rights in Criminal Proceedings 103-4 (2005). In addition, the requirement of reasoned judgments has numerous ―instrumental and intrinsic virtues‖ for the pursuit of justice in a democratic society that have been widely recognized, including the value that inheres in the guarantee that a person is ―being treated with dignity as a person, a sovereign agent, and not merely as an object who can be manipulated at the will of the authorities.‖ Paul Roberts, Does Article 6 of the

European Convention on Human Rights Require Reasoned Verdicts in Criminal Trials? 11 Human Rights Law Review 213, 215 (2011).

c. Analysis of the Verdict

At first glance, it may seem counterintuitive to suggest that a verdict of 689 pages may violate the right to a reasoned judgment guaranteed under Article 6 of the Convention. The verdict‘s volume, however, should not be confused with its mass. The verdict is indeed voluminous. Its concentration of legal reasoning, however, is slight. Under the European Court‘s standards, its failings violate the right to a reasoned judgment protected by Article 6.

(1) Pages 3-130

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The narrative-rationale part of the verdict, required by Article 303 of the Code of Criminal Procedure, begins on page 3 under the heading ―Established‖ («Установил»). The court appears to have complied with the Code‘s requirements in the most hyper-literal fashion. On pages 3-130, the court presents its ―description of the criminal act which the court determined was proven,‖ as required by Art. 307(1). On pages 130-132, the court summarizes the defendants‘ separate arguments and testimony in their defense. On pages 133-615, the court presents ―the evidence on which the court‘s findings regarding the defendant[s] are based and the reasons the court rejected other evidence‖ as required by Art. 307(2). With regard to pages 3-130 of the narrative-rationale part of the verdict, these cannot be understood to have ―established‖ anything at all because no evidence is cited from any source. The assertions and conclusions in this section might be described as a summary of the court‘s findings were this section not so long (especially as compared to the summary of the defendants‘ responses to these charges on pages 130-132, which is less than 2% of this amount). There is no attribution of any particular assertion of fact to any piece of evidence in the record. Nor is there any evaluation (or even acknowledgment of the existence) of conflicting evidence. Nor is there legal analysis that would apply evidence to law. Thus, this section reads more like a prosecutor‘s indictment than a court‘s reasoned judgment. Indeed, as noted below, that appears to be its provenance. It cannot be described as a reasoned evaluation of the evidence. The artificial division of the court‘s conclusions from the evidentiary basis for them obscures instances where the court fails to provide any reason, in law or evidence, for its verdict. Thus, on page 4, the court concludes: ―The given contract was wrongful and contradicted the fundamental principles of civil law under Art. 1 of the RF Civil Code, since OAO NK Yukos as a legal entity was placed from the outset in such conditions under which it exercised its civil rights not by its own will, but by the will of a group of its core shareholders – which by this time had become M.B.

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Khodorkovsky, P.L. Lebedev and the members of the organised group acting jointly with them – and not in its own interests, but in the interests of the given organised group.‖32 However, neither in this section nor later in the verdict are the ―fundamental principles of civil law‖ identified or an explanation given as to how the contract was ―wrongful‖ or ―contradicted‖ them. Additional evidence of the lack of reasoning in this section of the verdict manifests itself in its drafting. Multiple pages and paragraphs of text are duplicated, as if cutand-pasted from one part of this section to another. Thus, the seventy-six lines of text on pages 7 through 9 are identical to the text on pages 75 through 77 with the exception of seven lines of text added to page 8 and a few other very minor differences.33 Likewise, the last two paragraphs on page 12 are, with the exception of the last ten words, identical to the last two paragraphs on page 13. Twenty-two lines on pages 18 and 19 are virtually identical (save for one new sentence, one name, and assorted typographical errors) to lines found on pages 104 and 105.34 One hundred fourteen lines on pages 20 through 22 are virtually identical to lines found on pages 105 through 107.35 The last two paragraphs on page 30, amounting to seventeen lines of text, are identical to the first two paragraph on page 31. The 56 lines on pages 74 and 75 are virtually identical to lines found on pages 105 and 106.36

32 33

On page 89, the court makes a similar assertion. The differences are that Khordokovsky‘s name appears twice and the names of two companies are added on pages 75-77, which references do not appear on pages 7-9. In addition, one preposition («В» on page 7 becomes «Причем» on page 75) and one noun («сущности» on page 7 becomes «сути» on page 76) are changed and the phrase «иных/е лиц(а)» is added in three places on page 76. 34 The differences are that Lebedev‘s name appears on page 19 but is omitted from the same text on page 104; the word «указанным» on page 19 becomes «этим» on page 104. 35 The differences are that in the latter version, Khodorkovsky‘s name and the name of an additional company are added to text on page 105, the order of two paragraphs is inverted, the characterization «находящиеся в розыске» has been added to the paragraphs describing five individuals, the words «успешной преступной» on page 20 have been deleted from their corresponding place on page 105, the words «распоряжались» and «вопреки их интересам» on page 21 have been deleted from their corresponding places on page 106, and the words «иное» and «указанного иное» on page 22 have been changed to «указанное» and «данного» on page 107. There are also a number of minor typographical and punctuation errors found in these pages. 36 The differences are that the word «Через» on page 74 becomes «по» and the name of a company is added on page 105, and ten lines of text are inserted on page 106 along with the word «затем». A comma is also omitted on page 105 from the text that appears on page 74. 146

Perhaps the most revealing aspect of the verdict‘s composition in this regard is its extensive duplication of the indictment («Обвинительное заключение по уголовному делу №18/432766-07»). The indictment, of course, is composed by a criminal investigator pursuant to Article 220 and approved and forwarded to the court by the prosecutor pursuant to Article 221(1)(1) of the Criminal Procedure Code, both of whom are participants in the criminal proceedings on the prosecution side, as indicated in Articles 37 and 38 of the Criminal Procedure Code. By law, the indictment must indicate, inter alia, ―the nature of the charges, the place and the time of the commission of the crime, how it was committed, the motives, goals and consequences involved and other circumstances that are relevant to the criminal case; a statement of the charges brought, citing the Point, Paragraph and Article of the Criminal Code of the Russian Federation that specifies liability for the crime; a list of the evidence supporting the charges made; [and] a list of the evidence relied on by the defense‖.37 In this case, the indictment consists of fourteen-volumes containing 3460 pages. Astonishingly, the first 130 pages of the verdict (and, quite possibly, much more) is a near exact copy of the indictment. An annotated copy of those pages, indicating all differences and identifying the source of the material in the indictment, is attached to this report as an appendix. The vast majority of differences between the two

documents are not substantive differences. Thus, the indictment frequently identifies by name individuals to whom the verdict refers in general terms as ―members of the organized group‖ or ―other persons.‖ Similarly, the verdict tends to include the initials of Khodorkovsky‘s first name and patronymic (omitted from the indictment) and often adds Lebedev‘s name alongside that of Khodorkovsky. Abbreviations may be spelled out, spaces added, or symbols changed into words (as, for example, ―%‖ to ―per cent‖). Occasionally, the name of a company listed alongside many others in the

37

Article 220(1)(3)-(6) RF Code of Criminal Procedure. 147

indictment is omitted from the verdict, although this is rare. Otherwise, the texts are identical. This perhaps explains the odd duplications identified in the text

accompanying footnotes 22 through 25 of this report: they were simply carried over from the same duplication in the indictment. Such brazen copying is compelling circumstantial evidence that the court has not engaged in its own process of reasoned decisionmaking to reach its judgment. It is also persuasive support for a finding that the court has violated other rights held by the accused under the European Convention, including the right to an independent and impartial tribunal and the right to equality of arms.

(2) Pages 133-615

Even if this cutting-and-pasting between indictment and verdict

were to be

disregarded as insufficient proof, eo ipso, that the court failed to engage in reasoned decisionmaking, the manner in which the remainder of the verdict relates the evidence to the charges draws the court‘s reasoning process into serious question. In short, the court frequently identifies evidence but rarely reasons from it to a legal conclusion. In this way, the verdict mimics what was observed at trial by a rapporteur of the Parliamentary Assembly of the Council of Europe:

The trial itself, so far, consists in reading out, apparently at random, short passages of corporate and other documents without any discussion of their significance, even from the point of view of the accusation. The demand of Mr. Lebedev ―that the prosecutors explain which evidence corresponded to which episode and charge‖ seems reasonable to me, as does the insistence of the defence lawyers that ―the documents should be

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not only read out but also examined.‖ To me, this should go without saying in any trial.

Document 11993, Report of the Committee on Legal Affairs and Human Rights (Rapporteur Mrs. Sabine Leutheusser-Schnarrenberger) (7 August 2009) at ¶ 99. The verdict makes its first citation to any piece of evidence in the record on page 133. From that page to page 615, the court provides lists of evidence from identified portions of the record. Each list is headed by a paragraph (sometimes) set in boldface type. The boldface paragraph is written in a standard form that states a conclusion and then provides a list of evidence (with citation to the case file or trial record) as support for that conclusion. This section appears to be organized to conform with the literal requirement of Article 307(2) of the Criminal Procedure Code to ―contain … the evidence on which the court‘s findings regarding the defendant are based … .‖ However, the listing of documents under a conclusory heading is not equivalent to reasoning from this evidence to conclude that the elements of the charged offenses have been proven. For example, the court‘s first boldface heading appears at page 140:

The court links building of a vertically-integrated structure of management of OAO NK Yukos with the [criminal] intent of the defendants aimed at creating conditions for oil theft. Creation with the involvement of M.B. Khodorkovsky and P.L. Lebedev of the executive bodies for the oil producing companies represented by ZAO Yukos EP turned out to be one of such conditions. The verdict then states that ―This circumstance is corroborated by:‖ and follows this phrase with a list of nine pieces of evidence from the case file, including five sets of minutes of shareholders meetings, three contracts, and a corporate order, all of which

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are described as concerning the transfer of powers between different companies. No part of any document is quoted to support its conclusory description by the court. No analysis of this evidence is provided nor an explanation offered to support the conclusion asserted in the boldface heading. Nor is the concept of establishing a ―link‖ between the Yukos corporate structure and the defendants‘ criminal intent explicated in terms of Russian law. As another example, the boldface heading on page 143 states:

The guilt of the defendants in building of the vertically-integrated structure of management as a mechanism of management of the process of theft and realization of the stolen oil by means of establishing ZAO Yukos RM and transfer to it of the required powers is corroborated by:

Twenty-four items of evidence are then listed with brief summaries of their contents: the testimony of two witnesses, eight sets or extracts of corporate minutes, a corporate charter, seven contracts, three corporate orders, a power of attorney, an extract from a share registry, and an ―information statement.‖ No analysis is conducted. Nor is any interpretation of these materials – on their faces, ordinary business documents – provided to explain how the court concluded from them that they indicate any form of ―guilt‖ or intent to organize these entities for the ―management of the process of theft and realization of the stolen oil.‖ Indeed, Khodorkovsky is mentioned in only two of these documents, in both cases extracts of minutes from general shareholders meetings at which he appeared as chairman of the board of ZAO Yukos RM. Sometimes the court asserts to have established facts and legal positions that in fact have not been established. On page 147, the court asserts that ―[i]t has been established‖ that the corporate structure it has described in the preceding pages ―was an abuse of right.‖ But no such legal analysis was attempted in the preceding section

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of the verdict, nor was the particular right the court states to have been abused even identified in Russian law. The court continues that these structures ―entailed violation of equality of its participants since, as legal entities, the oil producing companies were intentionally put at a disadvantage when they were unable to exercise their rights at their own will and to achieve the major goal of their activity – generating profit.‖ But no evidence appears in the preceding section concerning any profit at all. Finally, the court continues that ―The management of the oil producing enterprises was performed exclusively in the interests of the group of the main shareholders which, by that time, already included M.B. Khodorkovsky and P.L. Lebedev, as well as other members of the organized group acting together with them.‖ On the contrary, no evidence concerning the ―interests‖ of anyone is presented. The minutes, charters, and other corporate documents merely describe the basic organizational structures of these companies, and their relationships with other companies. Another example of a conclusory heading unsubstantiated by the evidence listed in support of it is found on pages 155-157. In this section, the court states that ―the following pieces of evidence‖ established the defendants‘ ―purpose of facilitating and concealment of the commitment of the theft of oil from the oil producing companies[.]‖ The documents that follow are the 1996 charters for Yuganskneftegas, Samaraneftegas and Tomskneft VNK, contracts establishing terms for the future conclusion of oil purchase and sale contracts, an amendment to one of those contracts, and an undated document that the court asserts was approved by Khodorkovsky and that states ―… responsibility of officers and Board members to shareholders for decisions that should have definitely lead to losses for the entity (trading transactions are unequivocally such since they formally lead to understatement of the plant‘s profit) provided for by the law is also a factor that would be desirable to be avoided.‖ Other than the bare description of these items, nothing more is said. There is no legal

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analysis applying the relevant Russian law to these documents or explaining how they demonstrate the intent of anyone to steal oil, which on their face they do not. This technique continues through page 615 of the verdict. A heading (usually in boldface type) asserts the establishment of some fact or legal conclusion. Documents from the case file or testimony from the trial record are then listed. But the conclusion or fact is not apparent on the face of the listed evidence and no attempt is made by the court to explain how it reached such a conclusion. In other parts of the verdict, the court reaches conclusions about the defendants‘ intent that are not only unsupported by the evidence it references, but contradicted by it. On page 157, the verdict presents one of its boldface conclusions:

The guilt of the defendants in the arrangement of conditions for stealing of the oil under the guise of concluding of the economically unfounded general agreements is also corroborated by the pieces of evidence examined by the court in the course of the trial: There then follows one piece of evidence entitled ―Draft decisions of the Board of Directors of OAO Tomskneft VNK of 22 January 1999, including the following records‖. On the basis of this document, the verdict states:

The court presumes that this document corroborates the intent of the defendants to embezzle the oil produced at the price of RUB 250 per tonne, while they were aware of the fact that its market price was RUB 1,665.61 [per tonne] which also corroborates their intent to embezzle someone else‘s property by means of clearly nonequivalent payment of its value.

On the contrary, the document as described in the verdict does nothing more than indicate that two different markets were in operation, a domestic market and a foreign

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market for oil. The document indicates the relative values at which the oil traded in both markets. But the verdict, while identifying two prices, refers to only one market. By eliding this fact of two separate markets, the court creates the false impression that only one market was in operation with only one price set for the sale of oil. The very next piece of evidence cited in the verdict, at page 159-160, in fact confirms the very opposite of this assertion. The court cites the minutes of a shareholders meeting for OAO Tomskneft of 16-29 March 1999 at which the oil purchases referenced in the previous document are approved. This document, as described in the verdict, makes clear that sales will occur at the different prices determined by the relevant markets:

As a result of the voting, the majority made the following decision: since the production and the sale of oil produced has for a long time been regular business activities of OAO Tomskneft VNK, to declare the production and the sale of oil to be the core activities of OAO Tomskneft VNK in future as well, and, to this end, to conduct transactions on purchase and sale of the oil and/or oil-well fluid on behalf of OAO Tomskneft VNK in compliance with the following set conditions: sale of the oil produced by OAO Tomskneft VNK, to the following companies: OAO NK Yukos, OAO VNK, Total International Limited, Behles Petroleum S.A., ROSCO S.A. in the amount of 50 million tonnes over the period of 3 years at the current market price of RUB 250.08 per tonne in the domestic market and RUB 1,665.61 per tonne in the foreign market of the RF;

Although the verdict states that this document corroborates its statement that the defendants intended to embezzle oil by using a lower price than ―its market price,‖ the

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evidence that the court cites in fact reveals two markets, not one, and for sales to both domestic and foreign companies.

(3) Responsiveness of the Verdict to Defense Arguments The above analysis of the verdict‘s composition and substance suggests a lack of reasoning that would violate Article 6. However, the European Court typically gives a margin of appreciation to the practices of member states. Unless the critiques made of this verdict were particularly unusual or egregious compared to other Russian verdicts – an analysis in which the European Court may decline to engage – an application to the Court alleging a violation of Article 6 on these grounds may meet with a cool reception. On the other hand, the Court may find a violation that would require systemic change in judicial practice. Predicting either course is very difficult. More commonly, individual applications complaining of a violation of this section of the Convention allege failures of the court to respond to particular evidence or arguments by a party, rather than to a critique of the quality of the reasoning process within the judgment itself. In this regard, the record may well reveal lacunae where responses to motions and arguments by the defendants should appear. Regretfully, this report cannot engage in that analysis with any certainty. It has not been possible to verify whether the record of materials to which the author of this report was directed, www.khodorkovsky.ru, contains a complete collection of defense motions and judicial responses to them. Thus, in a summarizing statement delivered toward the end of the defendants‘ presentation of their case, defense attorney Elena Liptser and others stated that ―in the course of the pre-trial proceedings there were numerous occasions when the investigators refused to admit exculpatory evidence in relation to our clients, concealed documents substantial for the case, falsified circumstances and arguments set out to substantiate procedural decisions, and ignored

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provisions of law.‖38 Although some of the issues to which Liptser alluded concerning the admission of exculpatory evidence will be discussed under the heading of Article 6 § 3, infra, it has simply not been possible to isolate and examine discrete instances of the actions she describes. Nor has there been a sufficient opportunity to peruse with care the transcript of the trial proceedings. The issue can only be flagged for the potential violation that may sit within it. C. ARTICLE 6 § 2 – THE PRESUMPTION OF INNOCENCE

1. RELEVANT RUSSIAN LAW AND PRACTICE

The Constitution of the Russian Federation states, in relevant part: Article 49 1. Everyone accused of committing a crime shall be presumed innocent until his guilt has been proved in accordance with the procedure specified by federal law and established by final judgment of a court. 2. The defendant shall not be obliged to prove his innocence. 3. Any remaining doubts about guilt shall be resolved in favor of the defendant.

The relevant provisions of the Code of Criminal Procedure of the Russian Federation are as follows:

Article 14 1. An accused is presumed innocent until proven guilty of a crime in accordance with the procedures specified in this Code and determined by

38

http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/20%20September%202010%20Lipts er%20Statement.pdf. 155

a final court judgment. 2. A suspect or accused is not required to prove his innocence. The burden of proof of the charges and negation of defense arguments rests on the prosecution. 3. All doubts as to the guilt of an accused that cannot be dispelled by means of the procedures established by this Code shall be resolved in favor of the accused. 4. A judgment of conviction may not be based on supposition.

Article 74 1. The evidence in a criminal case is any information that provides a basis for a court, procurator, investigator, or inquiry officer to determine, in accordance with the procedures established by this Code, whether circumstances that are subject to proof in proceedings in a criminal case, or other circumstances relevant to the case, exist. 2. The following are admissible as evidence: 1) testimony given by a suspect or accused; 2) testimony given by a victim or witness; 3) report and testimony of an expert; 3.1) report and testimony of a specialist; 4) physical evidence; 5) official records of investigative and judicial actions; 6) other documents.

Article 79 1. Witness testimony consists of information communicated by a

witness during questioning conducted in the course of pre-trial

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proceedings or in court in accordance with the requirements of Articles 187-191 and 278 of this Code. 2. A witness may be questioned about any circumstances relevant to the criminal case, including the character of the accused or the victim, and about the relationship between them and other witnesses.

Article 87 Verification of evidence shall be undertaken by an inquiry officer, investigator, procurator, or court by means of comparing it to other evidence available in the criminal case file and also by identifying its source and obtaining other evidence that corroborates or contradicts the evidence being reviewed.

Article 217 § 1 After fulfilling the requirements of Article 216 of this Code the investigator shall present bound and numbered volumes of the criminal case file to the accused and to his defense counsel, except in the situations specified by Article 166(9) of this Code. …

2. RELEVANT ECHR PROVISIONS AND CASE LAW

Article 6 § 2 of the Convention states, in relevant part, that:

Everyone charged with a criminal offence shall be presumed innocent until proven guilty according to law. Professor Trechsel has distinguished the ―outcome-related aspect‖ of the presumption of innocence from its ―reputation-related‖ aspect. The former regards

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the psychological climate in which proceedings ought to unfold and it requires that the prosecutor and the judge adopt a particular attitude. Even though, deep down in their hearts, they may be convinced of the accused‘s guilt, they must remain open to a change of opinion in view of the result of the evidence. They are prohibited from doing or saying anything, before the judgment has been delivered, which implies that the defendant has already been convicted.

Stefan Trechsel, Human Rights in Criminal Proceedings 163 (2005).

The latter

regards the treatment of the accused by state officials other than the prosecutor and judge. The accused ―who has not been convicted in criminal proceedings must not be treated or referred to by persons acting for the state as guilty of an offence.‖ Id. at 164. As the European Court has frequently stated, the presumption of innocence is ―violated if a statement of a public official concerning a person charged with a criminal offence reflects an opinion that he is guilty before he has been proved so according to law. It suffices, even in the absence of any formal finding, that there is some reasoning to suggest that the official regards the accused as guilty. In this regard the Court emphasises the importance of the choice of words by public officials in their statements before a person has been tried and found guilty of an offence. ‖ Daktaras v. Lithuania, App. No. 42095/98 (10 October 2000), at ¶ 41 (internal citation omitted). It should be noted that ―the presumption of innocence may be infringed not only by a judge or court but also by other public authorities.‖ Allenet de Ribemont v. France, App. No. (15175/89), at ¶ 36. In that foundational case, the European Court found that remarks by high-ranking officials at a press conference two weeks prior to the formal charging of the accused violated his right to be presumed innocent: ―some of the

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highest-ranking officers in the French police referred to [the applicant], without any qualification or reservation, as one of the instigators of a murder and thus an accomplice in that murder … . This was clearly a declaration of the applicant‘s guilt which, firstly, encouraged the public to believe him guilty and, secondly, prejudged the assessment of the facts by the competent judicial authority.‖ Id. at ¶ 41. Conditions of detention during judicial proceedings have also been considered under the heading of the principle of the presumption of innocence. This may represent a transition in the Court‘s interpretation of the Convention, as the case law is mixed. In a Commission Report that does not reveal the factual circumstances of the application beyond the complaint that the applicant had been held in a ―glass cage‖ during his trial, a majority of the Commission found no violation of Article 6 § 2. Auguste v. France, App. No. 11837/85 (13 February 1991). More recently, the Court held that the use of a metal cage in an appellate courtroom did not violate the applicant‘s presumption of innocence (although it did work a violation of Article 3) because it was ―a permanent security measure used for all criminal cases‖ and therefore ―the imposition of this measure does not suggest that the Court of Appeal regarded the applicant as guilty.‖ Harutyunyan v. Armenia, App. No. 34334/04 (15 June 2010), at ¶ 138. The Court did not address concerns it has expressed about what Judge Trechsel has termed the ―reputation-related‖ aspect of the presumption of innocence. However, in another case concerning a metal cage, the Court expressed concern that ―a harsh and hostile appearance of judicial proceedings could lead an average observer to believe that extremely dangerous criminals were on trial‖ when in fact the defendants could not be so characterized. Ramishvili & Kokhreidze v. Georgia, App. No. 1704/06 (27 January 2009), at ¶ 100. The Court observed that this could be seen as ―undermining the principle of the presumption of innocence.‖ Id. In this context, the Court has noted that ―[s]uch harsh treatment could easily have had an impact on the applicants‘ powers of concentration and mental alertness during the proceedings

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bearing on such an important issue as their physical liberty, thus calling for very close scrutiny by the Court.‖ Id.

3. ANALYSIS

Many different bases may be suggested for a violation of the presumption of innocence, but three are identified with particularity here. One basis for a violation may be the detention of the defendants in the courtroom in a glass and metal cage flanked by guards. A second may be statements made by officials concerning the guilt of the defendants prior to the deliberation on their guilt by the court. These officials may be associated with the trial (e.g. statements by prosecutors at press conferences) or not (e.g. high government officials). A third basis for a violation of the presumption of innocence is worked by a strange feature of Russian criminal procedure that results from its contradictory merging of inquisitorial and adversarial principles of justice.

(a) Conditions of Detention in the Courtroom

The national and international media frequently reported that the defendants were detained in glass and metal containers during all courtroom proceedings. The defense filed an (unsuccessful) motion to allow Khodorkovsky to sit with his lawyers, rather than in the ―aquarium.‖ This container was also guarded by several police. It has been reported that these police were armed, but the author of this report lacks any official records by which to corroborate these journalistic descriptions. Based on the finding of a violation of Article 3 in regard to Khodorkovsky‘s detention in the courtroom during his first trial, however, such reports seem prima facie credible.

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As noted above, the case law of the European Court is mixed on this question and may be in a state of transition. In at least one case, the Court has declined to find a violation of Article 6 § 2 even when it has found a violation of Article 3 under the same facts. Harutyunyan v. Armenia, App. No. 34334/04 (15 June 2010), at ¶ 139.

(b) Extra-judicial statements of guilt In this regard, the analysis, supra, of the Prime Minister‘s remarks during a nationally broadcast television program immediately following the unexplained cancellation of the hearing at which the verdict was expected to be announced, is also relevant to the issue of their perceived impact on the court‘s independence and impartiality. As noted above, the European Court has been categorical in finding that the presumption of innocence ―will be violated if a statement of a public official concerning a person charged with a criminal offence reflects an opinion that he is guilty before he has been proved so according to law.‖ Butkevicius v. Lithuania, App. No. 48297/99 (26 March 2002), at ¶ 49. The facts of that case are instructive. The Lithuanian Minister of Defense was caught in flagrante delicto receiving an envelope full of money alleged to be a bribe. A few days after his arrest, the national press quoted the Prosecutor General as saying that he had ―sound evidence of the guilt‖ of the minister and the Chairman of the Seimas called the minister a ―bribetaker,‖ saying he ―entertain[ed] no doubt‖ that the minister took a bribe. The parliament stripped the minister of his parliamentary immunity and he was subsequently charged with obtaining property by deception, a crime different than accepting a bribe. The European Court was unpersuaded by the Government authorities‘ argument to consider the evidentiary context (the minister was caught red-handed), the purpose of

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the impugned statements (explaining the need to deny parliamentary immunity), and the fact that the officials‘ statements concerned a crime with which the minister had not been charged. The Court noted that the statements were made to the national press and ―amounted to declarations by a public official of the applicant‘s guilt, which served to encourage the public to believe him guilty and prejudged the assessment of the facts by the competent judicial authority.‖ Id. at ¶ 53. In the present case, the circumstances are even more extreme. On the very day announced for the rendering of its verdict, the court postponed the proceedings with a perfunctory note on the door of the court. No reason was provided. The Prime Minister‘s strong words, implying not just guilt of theft but also implicating the defendants in uncharged violent crimes, carried exceptional force. This is especially the case given the controlled environment – a nationally broadcast call-in program – in which the Prime Minister elected to make them. It is because of the power of such statements, magnified by national news media, that the Court has emphasized ―the importance of the choice of words by public officials in their statements before a person has been tried and found guilty of an offence.‖ Daktaras v. Lithuania, App. No. 42095/98 (10 October 2000), at ¶ 41 (internal citation omitted).

(c) Evidentiary Presumptions favoring the Prosecution Side39

Legal presumptions affect several aspects of the right to a fair trial, implicating as they do the guarantee of an impartial tribunal and their effect on the fundamental presumption of innocence. Article 6 § 2 ―does not therefore regard presumptions of fact or of law provided for in the criminal law with indifference. It requires States to

39

This section draws on Jeffrey Kahn, Adversarial Principles and the Case File in Russian Criminal Procedure, in Russia and the Council of Europe: Ten Years After (Katlijn Malfliet & Stephen Parmentier, eds. 2010), and William Burnham and Jeffrey Kahn, Russia’s Criminal Procedure Code Five Years Out, 33 Review of Central & East European Law (2008). 162

confine them within reasonable limits which take into account the importance of what is at stake and maintain the rights of the defence.‖ Salabiaku v. France, App. No. 10519/83 (7 October 1988), at ¶ 28. Although Russian law has embraced the concept of adversarial proceedings, and purports to place the defence on an equal footing with the prosecution, the law retains certain provisions from its past, decidedly non-adversarial approach to criminal justice. This hybrid of inquisitorial and adversarial principles results in legal presumptions in favor of the evidence collected by the state. This is a violation both of the equality of arms protected by Article 6 § 3 (discussed below) and the presumption of innocence. The Russian Code of Criminal Procedure departs from the previous (Soviet) criminal procedure codes by identifying the investigator as a participant on the prosecution side and by granting the defense the right to gather and present evidence. In other words, the Code departs from the civil-law tradition that the investigator is a neutral state official who conducts a ―complete and objective investigation,‖ a phrase used in the previous code of criminal procedure that was almost completely eliminated from the current one.40 This would seem to be in keeping with adversarial principles, established in the Code, that provide for the right of the defense ―to gather and present evidence as is necessary to provide legal representation.‖ Such a right would appear to establish the requisite equality of arms with the prosecution side. However, although Russian criminal procedure foresees the possibility of dual pre-trial investigations by partisan parties to the case in search of evidence, it still primarily relies on the case file. And although that case file has ostensibly been stripped of the imprimatur of officialdom, it remains the dynamo that drives non-jury criminal cases.

40

Article 152(4) of the Code, for example, a venue provision, states that: ―The preliminary investigation may be conducted where the accused or the majority of witnesses are located, in order to secure its completeness, objectivity and compliance with procedural time limits.‖ 163

Indeed, under Article 217 of the Code, the case file is not to be presented to the accused and to his defense counsel until its volumes have been ―bound and numbered.‖ Although this would seem to be a reasonable precaution against post hoc additions to the case file, it also has the effect of preventing evidence obtained by the accused from being accorded an equal place in the records on which the court relies so heavily during the proceedings. Furthermore, the Code gives the contents of the case file a presumptively special status as evidence. Article 74 defines evidence and then lists all the items that are considered to be ―admissible evidence,‖ among them ―testimony‖ given by a victim, witness, or expert. But testimony of a witness is itself defined in a specific way by Article 79 as ―information communicated by a witness during questioning conducted in the course of the pretrial process in the criminal case or in court in accordance with the requirements of Articles 187-191.‖ These cited articles govern procedures for

questioning of witnesses by the criminal investigator during the preliminary investigation. None of them foresee the participation of the defense.41 The quasi-judicial screening and verification functions the investigator performs are emphasized in the Code‘s provisions on ―verification of evidence.‖ These provisions require the investigator not only to collect but also to verify whatever information is obtained. This presumably is what turns the information into ―admissible evidence.‖ According to Article 87, verification is performed ―by comparing it to other evidence available in the criminal case file and also by identifying its source and obtaining other evidence that corroborates or contradicts the evidence being reviewed.‖ Based on the foregoing, witness statements – having been ―verified‖ and converted into ―evidence‖ by the criminal investigator during the preliminary investigation – would seem to be sufficient alone to convict the defendant at trial.

Art. 190(2) provides that the official record must indicate questions that ―were excluded by the investigator,‖ presumably questions submitted by defense counsel. However, as noted, infra, defense counsel may not be present or otherwise participate in the interrogation absent the investigator‘s consent. Stefan Trechsel, Human Rights in Criminal Proceedings 295 (2005). 164
41

At least under circumstances in which such evidence is the main basis for a conviction, such a practice would seem to violate Art. 6 § 3(d) because this testimony may be used to convict the defendant without the opportunity for the defendant to confront the witness. This violation is discussed in more detail below. Such a presumption also violates Article 6 § 2. When the products of the nonadversarial investigation – by reason of their having been processed by the investigator – can be used at trial as evidence of guilt, that ―investigation‖ process becomes more than just a vehicle for finding out information. It serves an ―early trial‖ function by transforming the information compiled in the case file into ―pre-admitted‖ evidence ready for use at trial. In other words, because of the continuing privileges accorded by law to the investigator (remnants of the presumption of objectivity and neutrality accorded the investigator under inquisitorial principles now ostensibly foresworn by the Russian Constitution and Code of Criminal Procedure, as noted below), the evidence is presumed to be authenticated (―verified‖), a judicial function assumed by a party in the proceedings. No such legal presumption is accorded to evidence obtained by the defense, rendering its evidence, in Bulgakov‘s famous words, ―of the second freshness.‖42 D. ARTICLE 6 § 3 – THE RIGHT TO EQUALITY OF ARMS

1. Relevant Russian Law and Practice

The Constitution of the Russian Federation states, in relevant part:

42

MIKHAIL BULGAKOV, THE MASTER AND MARGARITA 222 (Mirra Ginsburg, Trans. 1967) (―‗They sent us sturgeon of the second freshness,‘ said the bar manager. 'My good man, that‘s nonsense!' 'What‘s nonsense?' 'Second freshness – that's nonsense! There is only one kind of freshness – first. And that‘s the last, too. And if the sturgeon is of the second freshness, that means it is rancid.'‖)? 165

Article 123 § 3 Judicial proceedings shall be conducted based on adversarial principles and equality of the parties.

The relevant provisions of the Code of Criminal Procedure of the Russian Federation are as follows:

Article 15 1. Judicial proceedings in criminal cases shall be conducted in

accordance with adversarial principles. 2. The functions of prosecution, defense, and adjudication of a criminal case shall be separate from each other and those functions may not be allocated to any single agency or official. 3. A court is not an organ of criminal prosecution and shall not take the prosecution or defense side in a case. The court shall create the

conditions necessary for the parties to perform their procedural duties and to exercise the rights granted to them. 4. The prosecution and the defense shall have equal rights before the court.

Article 53 § 1(2) From the time when defense counsel is permitted to participate in a criminal case, he has the right … to gather and present such evidence as is necessary to provide legal representation, in accordance with the procedures specified in Article 86(3) of this Code; Article 24043 1. All evidence in the trial of a criminal case shall be subjected to firsthand examination, except as specified in Section X of this Code. The
43

A fourth section to this article was introduced by Federal Law № 39-FZ of 20 March 2011 (after the conclusion of the defendants‘ trial). 166

court must hear the testimony of the defendant, the victim and witnesses, and opinions of any expert, must inspect the physical evidence, must read aloud official records and other documents, and must conduct other judicial actions to examine the evidence. 2. Testimony given during the preliminary investigation may be read aloud only in the situations specified in Articles 276 and 281 of this Code. 3. A court judgment may be based solely on the evidence examined at the trial.

Article 281 1. Reading testimony aloud that was previously given by a victim or witness during the preliminary investigation or at trial, showing photographic negatives and prints or slides made in the course of the questioning or playing back audio and/or video recordings or showing film of the questioning is allowed, with the consent of the parties, in the event of the victim‘s or witness‘ failure to appear in court, with the exception of the situations specified in part two of this Article. 2. In the event of the victim‘s or witness‘s failure to appear for trial and on motion of a party or on its own initiative, the court makes a decision to read their previous testimony aloud in cases when there is a: 1) death of the victim or witness; 2) severe illness precluding appearance in court; 3) refusal of the foreign national victim or witness to appear pursuant to a court subpoena; 4) natural disaster or other exceptional circumstances precluding the appearance in court. 3. On motion of a party, the court may make a decision to read

testimony aloud that was previously given by a victim or witness during

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the preliminary investigation or at trial, if there are substantial contradictions between the testimony given previously and the one given in court. 4. The refusal of a witness or victim to testify in court shall not preclude the reading of his preliminary investigation testimony aloud, if the testimony was obtained in accord with the requirements of Article 11(2) of this Code. 5. Showing negatives and photographs, or slides made in the course of questioning, playing back audio and/or video recordings or showing film of the questioning shall not be permitted without first reading aloud the testimony included in the appropriate official record of the questioning or the official record of the trial.

Article 285 1. Official records of investigative actions, an expert‘s opinion given in the course of a preliminary investigation, as well as other documents included in the criminal case file or presented at a trial may be read aloud in full or in part, pursuant to a ruling or order of the court, if they set forth or certify circumstances that are relevant to the criminal case. 2. Official records of investigative actions, an expert‘s opinion, and other documents shall be read aloud by the party who requested such reading or by the court.

2. Relevant ECHR Provisions and Case Law

Article 6 § 3 of the Convention states, in relevant part, that:

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Everyone charged with a criminal offence has the following minimum rights: … (d) to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him; ―While Article 6 guarantees the right to a fair hearing, it does not lay down any rules on the admissibility of evidence as such, which is therefore primarily a matter for regulation under national law.‖ Khan v. United Kingdom, App. No. 35394/97 (12 May 2000), at ¶ 34 (internal citations omitted). The Court has emphasized its distinct role, which is not ―to determine, as a matter of principle, whether particular types of evidence – for example, unlawfully obtained evidence – may be admissible or, indeed, whether the applicant was guilty or not,‖ but rather ―whether the proceedings as a whole, including the way in which the evidence was obtained, were fair.‖ Id. By this is meant the observance of the obligation to ensure the right to a fair trial undertaken by the member states to the Convention. In light of that distinction, ―[t]he Court may overlook minor infringements provided that overall the proceedings were fair and, conversely, unfairness may still arise even though the relevant formal requirements may have been complied with.‖ Philip Leach, Taking a Case to the European Court of Human Rights 253 (2d ed. 2005). Although neither of the phrases ―adversarial principles‖ nor ―equality of arms‖ appears in the Convention, both terms have been held to be incorporated into the right to a fair hearing protected by Article 6. See Nuala Mole & Catharina Harby, The Right to a Fair Trial: A Guide to the Implementation of Article 6 of the European Convention on Human Rights 46 (2006); Clare Ovey & Robin C. A. White, The European Convention on Human Rights 176 (2006). The language of Article 6 § 3 reflects the

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fact that, although civil-law and common-law countries are both represented in the member states party to the Convention, their approaches to criminal justice are not the same. Russian criminal procedure has drawn from both approaches, although it has been more heavily influenced by the former, civil-law tradition. Whether to adopt common law or continental approaches to the admissibility of evidence has repeatedly been held to be a matter of discretion of national law. See, e.g., Schenk v. Switzerland, App. No. 10862/84 (12 July 1988), at ¶ 46; Windisch v. Austria, App. No. 12489/86 (27 September 1990), at ¶ 25. The European Court has interpreted the right to adversarial proceedings primarily as ―the opportunity to have knowledge of and comment on the observations filed and the evidence adduced by the other party.‖ Rowe & Davis v. United Kingdom, App. No. 28901/95 (16 Feb. 2000) at ¶ 60. This does not necessarily translate into a right to confront live witnesses at trial. Indeed, were it otherwise, such a conclusion would render a court‘s reliance on the case file (delo) a per se violation. Delta v. France, App. No. 11444/85 (19 Dec. 1990), at ¶ 36. The use at trial of witness statements obtained during the preliminary investigation will not contravene either § 1 or § 3(d) of Article 6 of the Convention ―provided the rights of the defence have been respected.‖ Id. In the Court‘s words, ―[a]s a rule, these rights require that an accused should be given an adequate and proper opportunity to challenge and question a witness against him, either at the time the witness makes his statement or at some later stage of the proceedings.‖ Id. Similarly, the Strasbourg Court has interpreted equality of arms to require that ―each party must be afforded a reasonable opportunity to present his case under conditions that do not place him at a disadvantage vis-à-vis his opponent.‖ Bulut v. Austria, App. No. 59/1994/506/588 (22 Feb. 1996), at ¶ 47. Among the first cases before the European Court on this right to confrontation in adversarial proceedings was Unterpertinger v. Austria, App. No. 9120/80 (24 Nov.

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1986) at ¶ 33.44 The applicant was convicted of assaulting two family members who gave statements to the police but refused to testify. Under the relevant domestic law, the applicant had no opportunity to confront them, although their statements were read out in court. The Court unanimously found a violation of Article 6. The rule

established by the Court is:

If the defendant has been given an adequate and proper opportunity to challenge the depositions, either when made or at a later stage, their admission in evidence will not in itself contravene Article 6 §§ 1 and 3 (d). The corollary of that, however, is that where a conviction is based solely or to a decisive degree on depositions that have been made by a person whom the accused has had no opportunity to examine or to have examined, whether during the investigation or at the trial, the rights of the defence are restricted to an extent that is incompatible with the guarantees provided by Article 6.

Luca v. Italy, App. No. 33354/96 (27 Feb. 2001), at ¶ 40 (citations omitted). In short, a conviction based ―either solely or to a decisive extent‖ on testimony that the defense is not given the opportunity to confront violates the Convention, a conclusion that the Court has reiterated many times. See, e.g., A.M. v. Italy, App. No. 37019/97 (14 Dec. 1999) at ¶ 25; P.S. v. Germany, App. No. 33900/96 (20 Dec. 2001), at ¶ 24; AlKhawaja & Tahery v. United Kingdom, App. Nos. 26766/05 & 22228/06 (20 Jan.

44

A contemporaneous case, Asch v. Austria, reached the conclusion on similar facts that no violation occurred. Professor Trechsel has described this judgment as ―an exceptionally weak point in the Court‘s jurisprudence‖ that ―must be regarded as an unfortunate mistake.‖ Stefan Trechsel, Human Rights in Criminal Proceedings 295 (2005). 171

2009), at ¶¶ 34-36.45 As Judge Trechsel has observed, ―For the domestic courts, the lesson is simple enough: the judgment should not refer to the untested statement. … If the remaining evidence is insufficient, it will have to acquit.‖ Stefan Trechsel, Human Rights in Criminal Proceedings 298 (2005).46 One of the Court‘s most recent judgments against Russia, the Ilyadi case, highlights this problem. Yuriy Ilyadi was convicted of selling a forged promissory note. The primary evidence against him was the testimony of a Captain P., who testified that he was a Russian law enforcement officer who posed as the purchaser of the note. Captain P.‘s testimony took the form of a written record of an interview given to an investigator during the pre-trial investigation. Captain P. did not appear at trial; rather, the pre-trial statement was read out in his absence. The defense did not object to the reading of this record, although Ilyadi later grew suspicious enough of P.‘s absence to engage in independent efforts to obtain information about Captain P.‘s whereabouts or even his existence, which were rebuffed. The failure of P. to testify in person was the basis for Ilyadi‘s appeal, which the court summarily rejected. The European Court found a violation of the general requirement of fairness found in Article 6 § 1 of the Convention. The Court specifically noted that ―the applicant did not have an opportunity to examine or to have examined Captain P. at any stage of the proceedings. During the investigation, the investigator took down Captain P.‘s statement but did not arrange for a confrontation between him and the applicant.‖ Ilyadi v. Russia, App. No. 6642/05 (5 May 2011), at ¶ 41. Because the evidence leading to concrete suspicions about Captain P.‘s existence was not finally obtained by

45

This judgment has been referred to the Grand Chamber, before which a hearing was held on 19 May 2010. Its judgment remained pending at the time this report was submitted. 46 Judge Trechsel notes, as a general matter, that there is ―a tendency of increasingly allowing courts to rely on the file rather than live evidence. It is my view that this is not compatible with the spirit of the various international human-rights instruments and, more particularly, with the case-law of the Court.‖ Id. at 306. 172

the defense until after Ilyadi‘s conviction, the Court found a violation of Article 6 in the appellate court‘s failure to give ―a sufficiently specific and explicit reply‖ to Ilyadi‘s appeal on this point. This case illustrates the potential for a confrontation issue to present both a violation of the general fairness guarantees of Article 6 § 1 and the right to equality of arms guaranteed by Article 6 § 3. It should be noted that in at least one Russian case before the Strasbourg Court, defense counsel‘s willingness to begin a judicial proceeding in the absence of a witness whose testimony was then read from the case file, and subsequent failure to object to concluding the proceeding despite the witness‘s continued absence, was deemed to constitute waiver of the defendant‘s right to confront a live witness. Andandonskiy v. Russia, App. No. 24015/02 (Eur. Ct. H.R. 28 Sept. 2006), at ¶ 54. The Court concluded that there was no violation of Article 6 of the Convention. It is not possible to determine from the materials provided and in the time allotted whether such a waiver would apply to this case.

3. Analysis

In the present case, the use of numerous witness statements found only in the case file, if not subject to confrontation by the defendants, likely violates the Convention, even though under Russian law they are considered to be admissible evidence by virtue of the privileged position of the investigator in control of the case file. Khamovnichesky Court relies in its verdict on the following: Thus, the

(a) Testimony of Douglas Miller

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Douglas Miller, an employee of PriceWaterhouseCoopers, was described by the court as ―the main auditor‖ of the company for the consolidated financial reporting of OAO NK Yukos. His testimony is described as ―read out in the course of the court hearing pursuant to Article 281‖ on pages 136, 184, 185, 345, 347, 464, 545-572, 563, 565, 573, 580-582, and 601 of the verdict.47 This testimony was also used by the court to reject the testimony of another PriceWaterhouseCoopers witness, Stephen Wilson (see Verdict, p. 624-25) and the testimony of the defendants (see p. 668 & 669). Documentary evidence was also obtained during Miller‘s examination (see p. 599). In its objections to a motion filed by the prosecution on 11 December 2009, the defense averred that Miller was a ―principal prosecution witness,‖ as evidenced by his frequent mention (56 times according to the defense) in the indictment. According to the same defense document, the investigator denied a request by the defense to conduct a confrontation between Khodorkovsky and Miller. This document further asserted that four interrogations of this witness were omitted from the case file in the defendants‘ case, notwithstanding their relevance.48 According to a press release by the defendants, ―Before Miller left Russia, he was interrogated no less than four times by prosecution investigators between May 2007 and January 2008 without Khodorkovsky, Lebedev or their defense lawyers being informed and without any opportunity to question Miller or to attend the interrogations. Subsequently, the prosecution unjustifiably rejected Khodorkovsky's

47

On page 441, the court refers to the ―testimony of the auditor Douglas Miller,‖ and, on page 597, the court refers to ―testimony by witness D.R. Miller,‖ suggesting that Miller appeared in open court to give evidence. Likewise, at page 614, the court refers to ―the evidence produced during court hearing (vol. 132 c.f.s. 20-24) by witness D.R. Miller.‖ As noted in the text accompanying footnote 38, infra, this does not appear to have been the case. 48 It is difficult to assess this document, obtained on the website recommended by the Council, because it is not linked to any response by the Khamovnichesky court. According to a press release by the defendants, the court denied the prosecution‘s motion. See Courtroom update: December 11, 2009, Khodorkovsky and Lebedev Communications Center, 14 December 2009, http://www.khodorkovskycenter.com/content/courtroom-reportdecember-11-2009. The verdict of the Khamovnichesky court does not appear to distinguish any transcripts obtained through the defense team‘s efforts. 174

request to confront Miller through a Russian procedure whereby a defendant agrees to answer questions put to both the defendant and the witness.‖49

(b) Testimony of Alla Karaseva Alla Karaseva was described by the court variously as an employee of JV RTT, OOO Yukos Invest, OOO YuFK, Director General of OOO Forest oil, OOO Virtus, and OOO Grace. Her testimony is referenced as ―given by her in the course of the pre-trial investigation and read out in the court hearing pursuant to Article 281‖ on pages 173175, 321-323 of the verdict. In addition, the court references inculpatory statements about the defendants made in the verdict of the Basmanny District Court of the City of Moscow, which found Ms. Karaseva guilty of fraud and tax evasion (see p. 323).50 According to a press release by the defendants, the court indicated receipt of a letter from Ms. Karaseva stating that she could not attend the trial due to medical reasons. The court then admitted the transcripts of her pre-trial examination over the objections of the defense, who averred no opportunity to confront the witness, whose interrogation occurred as part of a different case after the conclusion of the preliminary investigation in the defendants‘ case.51

(c) Testimony of N. N. Logachev N.N. Logachev is described by the court as the Director General and Manager of OAO Tomskneft VNK. This testimony is referenced as ―given during preliminary investigation … and read out in court session in accordance with Article 281‖ on pages 288-289, and 621 of the verdict. This testimony was also used by the court to reject the testimony given by defence witnesses T.R. Gilmanov and P.A. Anisimov, who are

49

See Mikhail Khodorkovsky and Platon Lebedev Defense Team Seeks Testimony, Khodorkovsky and Lebedev Communications Center, 14 December 2009, http://www.khodorkovskycenter.com/newsresources/stories/mikhail-khodorkovsky-and-platon-lebedev-defense-team-seeks-testimony. 50 Similarly, although V.G. Malakhovsky, whom the court found to be a member of the organized criminal group, was examined in court (see p. 261), the verdict references a wide variety of court records of Malakhovsky‘s criminal case before the the Basmanny District Court of the city of Moscow for various inculpatory statements (see p. 269, 270, 277, 298, 317, 433, 505, 506, 507, 510, 512, 517), and to reject arguments made by the defence (see p. 630). 51 See Courtroom Report: February 4, 2010, Khodorkovsky and Lebedev Communications Center, 5 February 2010, http://www.khodorkovskycenter.com/news-resources/stories/courtroom-report-february-4-2010. 175

described as former executives of OAO Yuganskneftegas and OAO Samaraneftegas (see p. 620). This testimony was also used to reject arguments made by the defendants (see p. 651, 674, 675 (where it is described only as ―testimony‖)). This testimony is also used to conclude that the defendants committed the crimes alleged in the indictment as part of an organized group, which under the Criminal Code augmented the punishment (see p. 679).

(d) Testimony of N. I. Vlasova N.I. Vlasova was described by the court as ―working in the tax department of OOO Yukos-Moscow‖. Her testimony is referenced as ―made public in the court session in line with Article 281 of the CCP of the RF, which she gave during the preliminary investigation,‖ on pages 355-356 of the verdict. According to a press release by the defendants, the prosecution indicated receipt of a letter from Ms. Vlasova in which she declined to attend the court hearing due to health reasons. The defense did not object to the transcript of her interrogation, but did note that the transcript came from a different case, obtained after the preliminary investigation of the defendants had ended. The prosecution‘s motion to add the material to the case file was granted.52

(e) Testimony of Antonio Valdes Garcia Antonio Valdes Garcia is described by the court as a defendant ―in regard to whom the proceedings on the criminal case have been suspended‖. His testimony was relied upon by the court on pages 229-230, 257-258, 317-318, 433-434, 505, and 512 of the verdict. Valdes Garcia was subsequently found guilty in absentia by the Basmanny District Court of the City of Moscow on 18 July 2011.53 The court omits mention of

52

See Courtroom Report: February 17, 2010, Khodorkovsky and Lebedev Communications Center, 18 February 2010, http://www.khodorkovskycenter.com/news-resources/stories/courtroom-report-february-17-2010. 53 See Spanish citizen pronounced a new guilty party in YUKOS case, ITAR-TASS, 19 July 2011, http://www.itar-tass.com/en/c142/188420_print.html. 176

the fact that Valdes Garcia suffered serious physical injuries while in the custody of Russian authorities in 2005 and fled Russia during his trial in 2007.54 (f) Other Witness Testimony In addition to these witnesses, the Khamovnichesky court read out from the case file the written testimony of a number of other important witnesses. For example, the testimony of A.A. Shavrin and O.K. Yegorova, lawyers with the firm ALM Feldmans, was read from the 2006 court records of the Basmanny District Court in the criminal case against Valdes Garcia, Malakhovsky, and Pereverzin. See Verdict, pages 270 and 510-511. Similarly, the court refers to ―the evidence produced by witness S.I. Vorobyeva, given during court hearing at the Basmanny District Court‖ in the same case. See Verdict, page 506. The court refers to ―evidence produced by witness E.V. Agranovskaya‖ in the same way. See Verdict, page 507-508. The Khamovnichesky court‘s verdict records that ―[r]ead out during court hearing was the testimony produced by the P.P. Ivlev, a Deputy Managing Partner of ALM Feldmans,‖ but does not refer to any source from which this testimony was obtained. See Verdict, page 508. Citing Article 281, the Khamovnichesky court also ―read out at the court session‖ the testimony given during the pre-trial investigation by witness N. M. Petrosian. See Verdict, pages 466-467, 508-509, 512-513.

***

In its many references to Article 281, the verdict never identifies which of the four relevant circumstances envisioned by that article the court intends to support its use of testimony from persons who did not appear at trial. In the case of Antonio Valdes Garcia, for example, it may be that the court concluded that § 2(3) of Article 281

54

See Ekaterina Zapodinskaya, Khodorkovsky Accomplice Makes a Break, Kommersant‖, 16 January 2007, www.kommersant.com/p734216/r_1/Antonio?Valdez-Garcia_YUKOS/. 177

applied: Valdes Garcia is a foreign national who was called as a witness, or perhaps ordered to appear pursuant to a court subpoena. On the other hand, § 2(4) of that article may have been applied. Under an interpretation of the Russian Supreme Court, the need of a witness to travel a long distance was accepted as an ―exceptional circumstance[] precluding the appearance in court‖ of the witness and therefore permitting the use of his previously obtained written testimony under § 2(4) of Article 281. See Opredelenie ot 10.11.06. Sudebnaya kollegiya po ugolovnym delam, kassatsiya (Dokladchik: Yakovlev Vyacheslav Ksenofontovich) (―With account for the remoteness of the location of the witnesses and the adoption of all possible means to transport them, the court found exceptional circumstances prevented their appearance in court, which in accordance with paragraph 4 of part 2 of Article 281 UPK RF is the foundation for the reading out of their testimony by motion of the prosecution.‖). The Khamovnichesky court does not indicate – neither for Valdes Garcia nor for any other witness – the specific reason it invokes that article. Sometimes, the verdict references testimony read out pursuant to Article 281, when the only possible basis could be found in § 3 of that article: by the motion of a party on the grounds of substantial contradictions between the testimony given previously and the one given in court. Thus, the verdict references ―the testimony of witness A.D. Golubovich examined at the court session, as well as from the records of 09.04.2008 and 05.05.2008 of him being examined as a witness during the pre-trial investigation read out at the court session under Article 281 of the RF Code of Criminal Procedure‖ (see p. 402).55 No indication is made as to the ―substantial contradictions‖ that would permit this reading under Russian law. It is difficult for this report to make categorical conclusions as to these potential violations on the basis of the verdict alone. It would appear, however, that the

testimony read out from the case file alone comprises a substantial portion of the evidence used to convict the defendants. This is especially so given the key nature of

55

Sections 2 and 4 would not seem to apply since the verdict indicates that Golubovich appeared at the court session as a witness. 178

the positions held by the individuals on whose testimony the verdict relies to establish the defendants‘ guilt. The one-sided use of this evidence constitutes a violation of equality of arms under the Convention.

E. ARTICLE 7

1. RELEVANT RUSSIAN LAW AND PRACTICE

The Defendants were convicted, inter alia, of violating Article 160(3)(a) & (b) of the Criminal Code of the Russian Federation, as amended by Federal Law No. 63-FZ of 13.06.1996, which provides: Article 160 1. Misappropriation or Embezzlement is the theft of another‘s property that has been entrusted to the perpetrator – * * * 3. Acts, foreseen in the first or second parts of this article, if they are committed: (a) by an organized group; (b) on a large scale;

Theft is defined in the Criminal Code as follows:

Article 158, Note 1 By theft [хищение] in the articles of the present Code is understood the self-interested, unlawful, uncompensated withdrawal and (or) conversion of someone else‘s property to the benefit of the perpetrator or other persons, which causes damage to the owner or other possessor of this property.

The elements of embezzlement were the subject of a decision of the Plenum of the Supreme Court*, ―On judicial practice in cases of fraud, misappropriation and embezzlement,‖ No. 51 (27 December 2007), the relevant portions of which provide:
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1. Courts should pay attention to the fact that, unlike other forms of theft foreseen in chapter 21 of the Criminal Code of the Russian Federation, fraud [мошенничество – the crime defined in Article 159 of the Criminal Code] is accomplished by way of deception or breach of trust, under the influence of which the owner of the property or another person or authority conveys the property or the right to it to other persons or does not impede the withdrawal of this property or acquisition of rights to it by other persons. * * * 6. Theft of another‘s property or the acquisition of the right to it by way of deception or breach of trust, which is accomplished with the use by this person of forged official documents that concede a right or free from responsibility qualifies as an aggregate crime, as foreseen by part one of Article 327 CC RF and the corresponding part of Article 159 CC RF. * * * 8. In the case of the creation of a commercial enterprise without the intention to actually conduct business or banking activity, which has the aim of theft of another‘s property or the acquisition of the right to it, its commission is completely covered by fraud [мошенничество]. The given act should

additionally be qualified under Article 173 CC RF as a false private enterprise only in the case of the real aggregate of the named crime, when the person receives something else, which is not connected with the theft of the property benefit (e.g. when the false private enterprise is created by the person not only for the completion of the theft of another‘s property, but also with the aim of a tax shelter or cover for prohibited activity, if as a result of the given activity, which is not connected to the theft of another‘s property, there was caused a large-scale damage to citizens, organizations or the state, as foreseen in Article 173 CC RF). * * *

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18. The wrongful free conversion of property that has been entrusted to a person to his own advantage or the advantage of another person, which has caused damage to the owner or other lawful possessor of this property, should be qualified by judges as misappropriation or embezzlement [under Article 160 of the Criminal Code], provided that the stolen property was in the lawful possession or authority of this person, who by virtue of his office or official position, contract or special commission exercised power by order, administration, delivery, use or custody in relation to someone‘s property. Deciding a question about the outer boundaries of the make-up of misappropriation or embezzlement from theft, courts should establish the presence of a person with the above named powers. The accomplishment of a secret theft of another person‘s property by a person who does not possess such powers, but who has access to the stolen property by virtue of the carrying out of his work or other circumstances, should be qualified under Article 158 CC RF. 19. In the examination of cases about crimes foreseen in Article 160 CC RF, courts should bear in mind that misappropriation consists in the

uncompensated, self-interested completion of the wrongful conversion by a person of property entrusted to him to his benefit against the will of the owner. The crime of misappropriation is considered to be completed from the moment when the lawful possession of the property entrusted to the person becomes wrongful and the person begins to carry out acts that are directed toward conversion of the given property to his benefit (e.g., from the moment when the person by way of forgery hides the presence with him of the entrusted property, or from the moment of the non-performance of the person‘s duty to place monetary resources of this person in the owner‘s bank account).

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As embezzlement should be qualified wrongful acts of a person who out of selfinterest expends property entrusted to him against the will of the owner by use of this property, its expenditure, or transfer to another person. * * * 20. Deciding the question about the presence in actions composing a theft in the form of misappropriation or embezzlement, the court should establish the circumstances that confirm that the intent of the person enveloped the wrongful, uncompensated character of the actions that were accomplished with the aim to turn the property entrusted to him to his own benefit or that of another. The purposefulness of the intent in each such case must be determined by a court out of concrete circumstances of the case, for example, the presence for a person of the real possibility to return property to its owner, the completion by him of attempts by way of forgery, or other ways to hide his actions. In this, courts must take into account that the partial reimbursement of damage to the victim by itself is not evidence of the absence of the person‘s intent for misappropriation or embezzlement of the property entrusted to him.

2. RELEVANT ECHR PROVISIONS AND CASE LAW

Article 7 § 1 of the Convention states, in relevant part, that:

No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time when it was committed. The protection provided by this article is understood to be ―an essential element of the rule of law, … as is underlined by the fact that no derogation from it is permissible under Article 15 (art. 15) in time of war or other public emergency. It should be

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construed and applied, as follows from its object and purpose, in such a way as to provide effective safeguards against arbitrary prosecution, conviction and punishment.‖ S.W. v. United Kingdom, App. No. 47/1994/494/576 (27 Oct. 1995), at ¶ 34. Article 7 embodies the principle ―that the criminal law must not be extensively construed to an accused‘s detriment, for instance by analogy‖. Kokkinakis v. Greece, App. No. 14307/88 (25 May 1993), at ¶ 52. The European Court also understands this right to include the principle that the offence ―must be clearly defined in law.‖ Id.; see also Moiseyev v. Russia, App. No. 62936/00 (6 Apr. 2009), at ¶ 233. An offence is clearly defined in law under circumstances ―where the individual can know from the wording of the relevant provision and, if need be, with the assistance of the courts‘ interpretation of it, what acts and omissions will make him criminally liable.‖ Id. It follows from these principles that the criminal law must possess the quality of foreseeability. This means that although the judicial authority might engage in the case-by-case clarification of an offence in response to changing social circumstances, the resulting interpretation must be ―consistent with the essence of the offence and could reasonably be foreseen.‖ Moiseyev v. Russia, App. No. 62936/00 (6 Apr. 2009), at ¶ 234. The European Court will ask ―whether the applicant‘s acts, at the time when they were committed, constituted criminal offences defined with sufficient accessibility and foreseeability by Russian or international law.‖ Id. at ¶ 235. The evolution of judicial interpretation of the criminal law has been found to be reasonably foreseeable when ―consistent with the very essence of the offence‖ and the conduct in question is generally ―within the scope of the offence.‖ S.W. v. United Kingdom, App. No. 47/1994/494/576 (27 Oct. 1995), at ¶ 43. This exception,

however, was made in a case in which only the existence of an affirmative defense, not the essential elements of the crime, were in doubt. In that case, the European Court

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found no violation of Article 7 in the denial to the applicant of the marital immunity defense to the charge of raping his wife because the ―essentially debasing character of rape is so manifest‖ regardless of the marital relationship and, thus, the conviction of the applicant could not ―be said to be at variance with the object and purpose of Article 7 (art. 7) of the Convention, namely to ensure that no one should be subjected to arbitrary prosecution, conviction or punishment‖. Id., at ¶ 43-44. The European Court has found that a criminal law ―may still satisfy the requirement of foreseeability even if the person concerned has to take appropriate legal advice to assess, to a degree that is reasonable in the circumstances, the consequences which a given action may entail.‖ Cantoni v. France, App. No. 45/1995/551/637 (22 Oct. 1996), at ¶ 35. The European Court noted, in particular, that ―persons carrying on a professional activity‖ may ―be expected to take special care in assessing the risks that such activity entails.‖ Id. In that case, however, the Court noted ―one decisive consideration‖: the fact that for almost thirty years the relevant domestic cassational court ―had adopted a clear position on this matter, which with the passing of time became even more firmly established.‖ Id. at ¶ 34.

3. ANALYSIS The Court convicted Khodorkovsky and Lebedev, as part of an ―organized criminal group,‖ for the crime of embezzlement under Article 160 CC RF. Embezzlement is defined in that article as ―the theft of another‘s property that has been entrusted to the perpetrator.‖ Theft, in turn, is defined to be ―the self-interested, unlawful, uncompensated withdrawal and (or) conversion of someone else‘s property to the benefit of the perpetrator or other persons, which causes damage to the owner or other

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possessor of this property.‖ According to the RF Supreme Court, a conviction for embezzlement under Article 160 requires the ―uncompensated, self-interested completion of the wrongful conversion by a person of property entrusted to him to his benefit against the will of the owner.‖ The property Khodorkovsky and Lebedev were convicted of embezzling was oil. (Verdict, p. 3) The victims of this theft were three oil-producing companies, OAO Yuganskneftegas, OAO Samaraneftegas, and OAO Tomskneft VNK. (Verdict, p. 6) The court‘s description of the defendants‘ modus operandi may be summarized as follows: 1) The defendants, through OAO NK Yukos, became majority shareholders in the three oil companies, which consequently became subsidiaries in Yukos‘s complex corporate structure under the external administration of one of Yukos‘s management companies (Verdict, p. 6, 10); 2) Having ―acquired the right to the strategic management of OAO NK Yukos,‖ the defendants then persuaded the relevant boards of directors and shareholders of the three oil companies to enter into contracts for the sale of their oil to Yukos (Verdict, p. 9). The court found that the defendants had paid off various participants in these meetings to ―secure the adoption of the indicated unlawful and groundless decisions‖ (p. 11); 3) The contracts indicated ―that the transfer of the right of ownership to the output, extracted as part of the oil-well fluid, from the oil production companies, appearing in the capacity of the seller, to OAO NK Yukos, appearing in the capacity of the purchaser, shall take place at the head of each concrete well promptly after its extraction from under the ground.‖ (Verdict, p. 10) This theory of the defendants‘ criminal liability under Article 160 was unforeseeable, and thus a violation of Article 7 of the Convention. First, the theory is premised on the omission or admitted non-existence of the traditional elements of the crime:

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1)

The element of “another’s property.” As noted, the defendants, through Yukos, were alleged to have obtained by a series of contracts ―the transfer of the right of ownership‖ to the oil companies‘ production. A person cannot embezzle from himself. In order to satisfy this element, i.e. to show that the oil belonged to someone other than the defendants, the verdict concludes that although ―the oil passed on into de facto ownership of OAO NK Yukos; however, it was not the oil owner de jure. In reality, the oil belonged to its producing subsidiaries,‖ i.e. the victims of the embezzlement. See Verdict, p. 660. The verdict refers to two legal sources in support of this legal conclusion: the judgment of 26 May 2004 by the Moscow City Commercial Court against Yukos, and a decision of the Russian Federation Constitutional Court, No. 138-O (25 July 2001) mentioned in that judgment. Neither legal source supports this bifurcated concept of simultaneous de facto/de jure ownership. During the 2004 tax proceedings, the Moscow City Commercial Court rejected the defendant‘s argument that the victims and other companies were the true owners of the oil because those organizations ―never acquired any rights of ownership, use and disposal in respect of oil and oil products.‖56 These are the rights that define ownership under Article 209 of the Civil Code. Likewise, the Constitutional Court determination [«определение»] nowhere references this distinction. Rather, that determination concerned whether a

previously rendered ruling [«постановление»] about tax charges against the checking accounts of bona fide taxpayers could be applied to nonbona fide taxpayers. It could not be said to be foreseeable that a contract for the sale of oil would be interpreted to establish only de facto ownership of the object of these completed transactions in the defendants, but not the de jure
* Please note that in this translation of the Decree of the Plenum in the Kahn Report the Russian term ―prisvoyeniye‖ is translated as ―misappropriation‖, and the Russian term ―rastrata‖ is translated as ―embezzlement‖, while usually it is the other way around – Trans. 56 This quotation is taken from the extensive citation to that judgment found in OAO Neftyanaya Kompaniya Yukos v. Russia, App. No. 14902/04 (20 Sept. 2011), at ¶ 48. 186

ownership that the Khamovnichesky Court asserts to remain with the oil production companies. 2) The element of “entrusted to the perpetrator.” By definition, a person cannot be ―entrusted‖ with a thing over which he is the owner. The verdict twice asserts that some contracts were procured in a manner rendering them void ab initio [«ничтожен»] under Russian law. See verdict, pp. 90, 648. The court‘s theory seems to be that the void

contracts did not transfer ownership; thus, the defendants were entrusted with oil that actually belonged to the victims. Neither of these two assertions in the verdict is sound. The first reference is to contracts implicated in the money-laundering charges, not the embezzlement charges, and thus is not relevant.57 The second reference could refer to embezzlement, although the verdict is unclear. The verdict states on the preceding page that the defendants are guilty of embezzlement ―by way of execution of numerous wrongful transactions in violation of Art. 179 of the Civil Code.‖58 See verdict, p. 647. But Article 179 does not state that such contracts are void, only that they are voidable by a court upon the suit of the victim [«может быть признана судом недействительной по иску потерпевшего»]. If such a suit was not brought (and there is no mention of one in these sections of the verdict), one would now appear to be time-barred.59 The verdict makes several references to Article 10 of the Civil

57

The Court cites Article 170 of the Civil Code, under which ―a fictitious transaction, that is, a transaction concluded only for form, without the intention to create legal consequences corresponding to it, shall be void.‖ 58 A similar conclusion is also stated on page 12, also citing Art. 179. Article 179 of the Criminal Code establishes the crime of coercing a transaction through violence or blackmail, but the defendants were not charged with that offense. 59 Article 181(2) provides that ―A suit to deem a contested transaction to be invalid and concerning the application of the consequences of its invalidity may be brought within a year from the date of the termination of the coercion or threat under whose influence the transaction was concluded (Article 179[1]), or from the date when the plaintiff knew or should have known about other circumstances which are the grounds for deeming the transaction to be invalid.‖ 187

Code, but these are equally unavailing.60 By the court‘s own conclusion, therefore, ownership of the oil was transferred by these contracts. If indeed ownership was transferred, the defendants could not have been ―entrusted‖ with the property of another and this element of the crime was lacking. If ownership did not transfer because of the Khamovnichesky Court‘s conclusion, years after the fact, that the contracts were void under Article 179, that conclusion would appear to be a misreading of that provision of the Code, under which contracts are voidable upon the successful suit of the victim, but not void by order of the court sua sponte. But even were the court to have concluded that it did have the power to declare these contracts void under Article 10, a power in no way specified there, it can hardly be claimed to have been foreseeable that the oil would then be deemed to have been entrusted to the defendants, especially given that the payment rendered under the contracts does not appear to have been returned.61

60

The verdict frequently asserts that Article 10 of the Civil Code has been contravened by the defendants‘ actions. See Verdict, pp. 12, 35, 543, 659, 665. Article 10 states in relevant part that ―The actions of citizens and juridical persons effectuated exclusively with the intention to cause harm to another person, and also abuse of right in other forms, shall not be permitted.‖ The court‘s legal analysis, when conducted at all, is perfunctory and inconsistent with the requirements of the Code. Although Article 10 of the Code states that actions ―effectuated exclusively with the intent to cause harm‖ [in Russian: « осуществляемые исключительно с намерением причинить вред другому лицу»] are prohibited, the verdict concludes only that the defendants ―were simultaneously acting with intent to cause harm to another person‖ (p. 12) and ―acted concurrently with the intent to cause harm to another person in violation of Article 10‖ (p. 665) [in both cases «одновременно действовали»] (the italicization of these adverbs has been added for emphasis). The verdict‘s conclusion that any intent to cause harm was not exclusive acknowledges that this limitation has not been met. This limitation would appear to serve a very important purpose. Without it, virtually any contract would be susceptible to allegations of improper motive. 61 Indeed, Article 10(2) states only that a court ―may refuse to defend the right belonging to the person‖ who acted exclusively with the intention to cause harm to another, not that such conduct may serve as an element of the crime of misappropriation. To the contrary, Article 10(3) establishes a legal presumption of reasonableness and good faith of all participants in civil law relations. 188

The relevant conduct, an exchange of oil for money, simply cannot be characterized as an entrustment to one of the property of another. 3) The element of “theft.” The court states that the contracts between Yukos and the three oil companies ―obviously contradicted the interests of the latter‖ (p. 9), were procured by the defendants‘ misleading statements to the companies‘ shareholders and boards of directors (p. 9), and were ―economically disadvantageous for them right from the start‖ (p. 10). Even if true, the court notes that each contract established prices that were, in fact, paid for the oil. It thus cannot be claimed that the defendants‘ actions amounted to the ―uncompensated withdrawal and (or) conversion of someone else‘s property to the benefit of the perpetrator or other persons, which causes damage to the owner or other possessor of this property.‖ The court‘s theory appears to be that, using a variety of sham companies, the theft was accomplished ―by means of the deliberate underestimation of the prices of oil‖ owned by the oil companies (p. 242). value.‖ (p. 159) The Court describes the defendants‘ ―intent to embezzle someone else‘s property by means of clearly nonequivalent payment of its The court makes frequent reference to its conclusion that the contracts ―did not involve exchange for value‖ (e.g. p. 164, 167). Because the court‘s theory of liability does not even track the elements of the offense, it cannot be held that it is ―consistent with the essence of the offence and could reasonably be foreseen‖ by the defendants. Moiseyev v. Russia, App. No. 62936/00 (6 Apr. 2009), at ¶ 234. Indeed, it is hard to imagine a crime more unforeseeable than one that depends on a court‘s post hoc conclusions that the agreed contract price was not of quite the right amount.

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A second indication that this theory of embezzlement was unforeseeable is its sharp inconsistency with the decision of the Supreme Court interpreting these provisions of the Criminal Code. That decision not only upheld the importance of the elements that the court disregards but noted that an alternative provision of the Code was better suited to the court‘s conclusions of fraud. As the Supreme Court noted in paragraph 6 of its decision, ―[t]heft of another‘s property or the acquisition of the right to it by way of deception or breach of trust, which is accomplished with the use by this person of forged official documents that concede a right or free from responsibility qualifies as an aggregate crime, as foreseen by part one of Article 327 CC RF and the corresponding part of Article 159 CC RF.‖ The Supreme Court, in paragraph 8, further explained that,―[i]n the case of the creation of a commercial enterprise without the intention to actually conduct business or banking activity, which has the aim of theft of another‘s property or the acquisition of the right to it, its commission is completely covered by fraud [мошенничество].‖ With regard to embezzlement, on the other hand, the Supreme Court reiterated the traditional statutory elements of the crime. See paragraphs 18-20, Supreme Court decision, supra. Perhaps the Khamovnichesky Court sought guidance (although it does not say so) in the Supreme Court‘s decision interpreting embezzlement, which noted that ―the partial reimbursement of damage to the victim by itself is not evidence of the absence of the person‘s intent for misappropriation or embezzlement of the property entrusted to him.‖ (Para. 20, Supreme Court decision.) This, however, would be more weight than this short reference could bear. It cannot be considered a foreseeable interpretation of either the statute or the Supreme Court‘s interpretation of it to equate poor business judgment about (or even fraudulently induced or ill-intentioned agreement to) a contract for the sale and purchase of oil with a partial reimbursement of damage due to embezzlement. In this regard, it is interesting to note that while the Khamovnichesky court sought such a novel theory under which to convict the defendants for embezzlement, it

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eschewed more straightforward applications of the Criminal Code.

The court

frequently characterized the defendants‘ conduct in terms suggesting criminal liability under a number of provisions in the Criminal Code: Article 165 (causing damage to property by fraud or breach of trust), Article 173 (creating a false business organization), Article 201 (abuse of authority), Article 204 (commercial bribery), and Article 327 (forgery).62 However, the defendants were not indicted for these crimes and the court neither references these articles nor makes any concerted effort to show that their elements have been satisfied. This may well be due to the fact that the statute of limitations for these crimes had passed.63 The indictment also did not charge crimes for which the statute of limitations had not completely passed, e.g. the crimes of theft by an organized group [кража] under Article 158(3)(a) and fraud [мошенничество] by an organized group under Article 159(3)(a). Indeed, the Supreme Court made clear that ―[i]n the case of the creation of a commercial enterprise without the intention to actually conduct business or banking activity, which has the aim of theft of another‘s property or the acquisition of the right to it, its commission is completely covered by fraud.‖ Nevertheless, no such charge was made against the defendants and the court makes no attempt to establish its elements other than to assert, in conclusory language, that the defendants indeed committed both theft and fraud.64

62

For example, the Khamovnichesky court states that the contracts with the oil producing companies ―bore a fictitious character, inasmuch as they included within themselves knowingly false information‖ about both the price and the purchaser of the oil (p. 12). The court concludes, ―[i]n such a manner, by way of organizing the signing of the general agreements, M.B. Khodorkovsky, acting in coordination with P.L. Lebedev, did factually deprive the management of OAO Samaraneftegas, OAO Yuganskneftegas and OAO Tomskneft VNK of the opportunity to dispose of the oil produced by these companies on their own.‖ (p. 13). 63 Under Article 78 CC RF, the statute of limitations for these crimes is six years, calculated from the date of the offense to the entry into legal force of the judgment. If, as the court states, the defendants committed a ―continuous crime‖ (see verdict, pp. 72, 678), this period would be calculated from 2003, the last alleged act of embezzlement. It should be noted, however, that although an earlier version of the Criminal Code included ―repeatedly‖ («неоднократно») as a possible element of the offense of embezzlement, see Article 160(2)(b) of the Criminal Code in its 7 July 2003 edition, the current Code omits any mention of this quality of the offense, and the Code itself does not provide for the concept of a continuing violation. Article 16 of the Criminal Code, which governed the repeatedness of crimes («неоднократность преступлений»), was removed from the Criminal Code on 8 December 2003 by Federal Law 162-FZ. 64 The court similarly asserts that the defendants‘ actions variously violated Article 1 of the RF Civil Code (p. 4), Article 10 of the RF Civil Code (p. 12), Article 83 para 3 of Federal Law No. 308-FZ On Joint-Stock Companies of 26 December 1995 (as amended by Federal Law No. 65-FZ of 13 June 1996) (p. 10), and Article 6 paragraphs 2 and 4 of the Law of the RSFSR No. 948-1, ―On Competition and the Restriction of Monopolistic Activity on Commodities Markets‖ of 22.03.91 (as amended by Federal Law No. 83-FZ of 25 May 1995) (p. 11). The language of these statutes is not quoted, and no legal analysis is provided that applies facts proven in court to the relevant law. 191

A third indication that the application of embezzlement to the defendants‘ business activities could not have been foreseeable may be the array of judgments by Russian courts to the contrary. This section of the verdict is difficult to assess. According to the verdict, the defendants identified sixty-one judgments of the RF arbitration courts (p. 660). Only two judgments are cited with particularity, both apparently including statements about oil owned by Yukos. In addition to typographical errors in the Khamovnichesky court‘s references to them,65 it is impossible to know from the court‘s description whether the ownership in question refers to the contracts that are the basis of the charges against the defendants. In any event, the Khamovnichesky court‘s verdict summarily dismisses the bulk of these unspecified judgments with the following conclusion:

Thus, it follows from those commercial court judgments that the oil passed on into de facto ownership of OAO NK Yukos; however, it was not the oil owner de jure. In reality, the oil belonged to its producing subsidiaries. In such circumstances, the court concludes that the

commercial court judgments do not refute and do not affect in any way the establishment of the circumstances of commission of crimes in this case or the court‘s conclusions regarding the defendants‘ guilt and classification of their actions. (p. 660) The Khamovnichesky court also distinguishes these judgments by asserting that ―As of the moment of issuance of the judgments mentioned by M.B. Khodorkovsky, the courts did not know the mechanism of theft of oil of OAO NK Yukos‘s oil-producing enterprises developed by M.B. Khodorkovsky, P.L. Lebedev, and other organized group participants.‖ (p. 660-61) It is impossible to assess the validity of this assertion,

65

The quotations made in the verdict from these commercial court judgments, as well as the quotation from the Constitutional Court judgment that appears on page 660 of the verdict, do not use complete quotation marks, making evaluation of the material referenced difficult. 192

however, without evaluating the arbitration court judgments in question. Such an evaluation, if completed, might further bolster the evidence of a violation of Article 7 in these proceedings.

VI. OTHER POTENTIAL VIOLATIONS

Per the instructions communicated by the Council, this report focused its analysis on the verdict of the Khamovnichesky District Court and the official trial documents available via the website that the Council recommended. On the basis of these

documents, and primarily among these the verdict, it is possible to identify a number of potential violations of the European Convention on Human Rights. Violations of Articles 3, 6, and 7 of the Convention have been analyzed in detail. Nevertheless, it must be emphasized that this report cannot be taken to provide an exhaustive list of violations arising out of the proceedings. Because a proper

examination of those other potential violations would require access to additional materials that have not been made accessible, and/or would require additional time that was not available, it is beyond the scope of this report to do more than note their existence in summary form. To do so should not be taken as a sign of their lesser importance. Rather, this approach simply reflects the limitations identified above. Were resources available to conduct a thorough examination of the trial proceedings that are not accessible through an analysis of the verdict, several other articles would raise potential areas of inquiry. For example, the court‘s decisions concerning the defendants‘ pre-trial detention raise issues under Article 5, which provides an array of procedural protections applicable to that stage of the proceedings but which are not susceptible to evaluation on the basis of the materials available. Likewise, the right to respect for private and family life guaranteed by Article 8 may also be implicated by the treatment of the defendants.

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Similarly, Article 4 of Protocol 7 provides that ―[n]o one shall be liable to be tried or punished again in criminal proceedings under the jurisdiction of the same State for an offence for which he has already been finally acquitted or convicted in accordance with the law and penal procedure of that State.‖ It is beyond the scope of this report to analyze the facts of the first case in sufficient detail to evaluate the possibility of a violation of this provision of the Convention.66 In addition, several articles of the Convention contain multiple sub-parts. Thus,

Article 6 § 3 (b) guarantees the right to adequate time and facilities for a defence. Evaluation of a claim that this right was violated in the defendants‘ trial would require access to substantially more materials than were available for the completion of this report. In addition to these core rights and freedoms guaranteed by the Convention, other articles of the Convention raise issues that are worth noting in conclusion.

A. ARTICLE 18

Article 18 of the Convention provides:

The restrictions permitted under this Convention to the said rights and freedoms shall not be applied for any purpose other than those for which they have been prescribed. The European Court has noted more than once that Article 18 ―does not have an autonomous role. It can only be applied in conjunction with other Articles of the Convention.‖ Gusinskiy v. Russia, App. No. 70276/01, at ¶ 73. That case concerned the detention of the owner of ZAO Media Most (the holding company for the Russian television channel NTV) at least in part to compel the transfer of his company to a

66

Such a violation might be considered to manifest itself in ―attaching a different legal qualification to the same facts rather than prosecuting the accused for a different set of facts.‖ Rapporteur Mrs. Sabine LeutheusserSchnarrenberger, Allegations of politically motivated abuses of the criminal justice system in Council of Europe member states, Report to the Committee on Legal Affairs and Human Rights, Parliamentary Assembly of the Council of Europe, Doc. 11993 (7 Aug. 2009), at ¶ 105. 194

state-controlled company. Id. at ¶¶ 75-76. Perhaps because the violation in that case was so blatant, and because the Russian Government did not dispute the central facts around which the violation centered (the detention of the applicant in order to coerce the sale of his company to the state),67 the Court‘s description of the elements of a successful complaint under Article 18 were spare: ―when considering the allegation under Article 18 of the Convention the Court must ascertain whether the detention was also, and hence contrary to Article 18, applied for any other purpose than that provided for in Article 5 § 1 (c).‖ Id. at ¶ 74. This bare description deceptively suggests a low threshold to find a violation. In prior applications to the European Court, the defendants and other parties associated with the defendants have asserted claims under Article 18. See Aleksanyan v. Russia, App. No. 46468/06 (22 Dec. 2008) at ¶¶ 219-220; Khodorkovskiy v. Russia, App. No. 5829/04 (31 May 2011) at ¶¶ 249-261; OAO Neftyanaya Kompaniya Yukos v.

Russia, App. No. 14902/04 (20 Sept. 2011) at ¶¶ 663-666. These claims all failed to attract the support of a majority on the Court. In the first judgment, the Court

concluded that although the complaint under Article 18 should be declared admissible, the disposition of the claims to which it was connected rendered its separate examination unnecessary. See Aleksanyan v. Russia, App. No. 46468/06 (22 Dec. 2008) at ¶ 220. In Khodorkovskiy v. Russia, on the other hand, the Court made a determination on the merits. The Court noted widespread suspicion of the motives of the Russian

Government in prosecuting the defendants found in the resolutions of a variety of public and private institutions. Included among these, and described as ―probably the

67

See id. at ¶ 75 (―The Government did not dispute that the July agreement, in particular Annex 6 to it, linked the termination of the Russian Video investigation with the sale of the applicant's media to Gazprom, a company controlled by the State. The Government did not dispute either that Annex 6 was signed by the Acting Minister for Press and Mass Communications. Lastly, the Government did not deny that one of the reasons for which Mr Nikolayev closed the proceedings against the applicant on 26 July 2000 was that the applicant had compensated for the harm caused by the alleged fraud by transferring Media Most shares to a company controlled by the State.‖). 195

strongest argument in favour of the applicant‘s complaint under Article 18,‖ were the findings of a number of European Courts in cases concerning the Yukos oil company and its leadership. Khodorkovskiy v. Russia, App. No. 5829/04 (31 May 2011) at ¶ 260. Nevertheless, the Court found no breach of Article 18. In so doing, the Court set a high bar for complaints under Article 18. First, the Court articulated a rebuttable presumption of good faith for all government action. This translated into a requirement that the applicant ―must convincingly show that the real aim of the authorities was not the same as that proclaimed (or as can be reasonably inferred from the context).‖ Id. at ¶ 255. Second, the Court stated that it would apply ―a very exacting standard of proof‖ and that the burden of proof would remain with the applicant, notwithstanding the establishment of a prima facie case of improper motive. Id. at ¶ 256. Third, the Court characterized the applicant‘s claim to be that ―the whole legal machinery of the respondent State in the present case was ab initio misused, that from the beginning to the end the authorities were acting with bad faith and in blatant disregard of the Convention.‖ Id. at ¶ 260. Such a claim, the Court stated, ―requires an incontrovertible and direct proof.‖ Id. This last requirement, of ―incontrovertible and direct proof,‖ was reiterated in the most recent judgment, Neftyanaya Kompaniya Yukos v. Russia, App. No. 14902/04 (20 Sept. 2011) at ¶ 663. The Court acknowledged in a generic fashion the ―massive public attention‖ and comments by ―various bodies and individuals‖ concerning the proceedings against Yukos. These, however, the Court found to be of ―little evidentiary value.‖ Id. at ¶ 665. The Court stated that it could not find (apart from its previous findings of violations of the Convention earlier in the judgment) ―any further issues or defects in the proceedings … [that] would enable it [to] conclude that there has been a breach of Article 18 of the Convention on account of the applicant company‘s claim that the State had misused those proceedings with a view to

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destroying the company and taking control of its assets.‖

Id.

This part of the

judgment was unanimous, perhaps reflecting the Court‘s holding (also unanimous) that at least some of the tax assessments did not violate Article 1 of Protocol No. 1 of the Convention. In the past, the Court has noted that a violation of Article 18 was theoretically possible even in the absence of a finding of a free-standing violation of a right protected by the Convention (a statement omitted from the Court‘s judgment, but found elsewhere, e.g. Gusinskiy v. Russia, App. No. 70276/01 (19 May 2004) at ¶ 73 (―There may, however, be a violation of Article 18 in connection with another Article, although there is no violation of that Article taken alone.‖)). These judgments concerning the defendants and Yukos, however, suggest that the Court is not inclined to find a violation of Article 18 in association with complaints made under other articles of the Convention.

B. ARTICLE 34

Article 34 of the Convention states:

The Court may receive applications from any person, non-governmental organization or group of individuals claiming to be the victim of a violation by one of the High Contracting Parties of the rights set forth in the Convention or the protocols thereto. The High Contracting Parties undertake not to hinder in any way the effective exercise of this right.

A number of circumstances could give rise to a violation of Article 34. With regard to his first conviction, Khodorkovsky has filed two separate applications with the European Court. In his first application, Khodorkovsky alleged that prison officials had interfered with his attorney‘s attempt to pass him a blank application form and

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other papers for use in perfecting his application to the Court. See the admissibility decision in Khodorkovsky v. Russia, App. No. 5829/04 (7 May 2009), at ¶ 9. The Court, while holding the application partly admissible, unanimously held this part of the application inadmissible. Id. Khodorkovsky appears to have alleged a violation of Article 34 in his second application to the Court, lodged on 16 March 2006, concerning the first trial. The decision to communicate this application to the Russian Government was made on 15 November 2007. No decision has yet been announced regarding its admissibility in whole or in part. The application alleged:

access to the applicant's lawyers was especially restricted in the period leading up to the expiry of the six-month deadline for submitting his claim with regard to violation of his right to a fair trial; the authorities had refused to implement a Supreme Court decision allowing the applicant access to lawyers during working hours; it had not been possible to provide a copy of the present application in draft to the applicant to consider in his own time; four of the five lawyers instructed by the applicant to advise him in relation to his ECHR claim had been hindered in obtaining access to the applicant; and the applicant's two Russian lawyers, Mr Drel and Ms Moskalenko, had been subject to intimidatory actions by the State. Both had been threatened with disbarment and the International Protection Centre, which Ms Moskalenko founded, had been subjected to a tax audit of the entirety of its work.

See Statement of Facts and Questions for the Parties compiled by the Registry of the Court in Khodorkovskiy v. Russia (No. 2) (App. No. 11082/06 communicated 3 December 2007) at § G.

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Additional information would be needed to determine whether such an allegation could be made with regard to the second trial.

VII. CONCLUSION

It is the conclusion of this report that the verdict in this case evidences the violation of the defendants‘ human rights protected under Articles 3, 6, and 7 of the European Convention on Human Rights. Other violations of the Convention are possible,

including but not limited to violations of Articles 3, 5, 6, 8, 18, 34, and Article 4 of Protocol 7. However, evaluation of complaints raised under these parts of the

Convention would require access to additional resources that were not available for this report.

Respectfully submitted,

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APPENDIX TO THE REPORT PREPARED FOR THE PRESIDENTIAL COUNCIL OF THE RUSSIAN FEDERATION FOR CIVIL SOCIETY AND HUMAN RIGHTS REGARDING THE VERDICT OF THE KHAMOVNICHESKY DISTRICT COURT OF THE CITY OF MOSCOW AGAINST M.B. KHODORKOVSKY AND P.L. LEBEDEV

JEFFREY KAHN

This appendix compares the first 130 pages of the verdict to volume 1 of the indictment («Обвинительное заключение по уголовному делу №18/432766-07»). Both documents may be found on the website recommended by the Council for use in this report: www.Khodorkovsky.ru. Open and closed brackets followed by footnotes indicate where sections of the indictment have been incorporated essentially verbatim into the verdict. These sections have also been highlighted in yellow. The following system is used to identify all differences, however slight, between these two texts: 1) Bold underlined text in italics indicates text that appears only in the verdict (i.e. the text does not appear in the indictment). 2) (Bold underlined text in italics and in parentheses) indicates text that appears only in the indictment (i.e. the text does not appear in the verdict). 3) Bold underlined text in italics (followed by the same type of text in parentheses) indicates variance between the verdict and the indictment regarding a particular phrase or sentence.

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Additional footnotes occasionally indicate idiosyncrasies or other discrepancies between the texts that could not be noted clearly with this system. For example, on page 3 of the verdict, where the copying from the indictment begins, the following text is found: [1Ходорковский М.Б., Лебедев П.Л. и другие члены организованной группы (Невзлин Л.Б., Брудно М.Б. и Шахновский B.C.), к 1998 г. (году) завладев, в том числе и посредством преступных действий, … A1 The open bracket and footnote at the beginning of the sentence (―[1‖) indicate that this text corresponds to the same text beginning on page 32 of the indictment. The boldface, italicized text followed by similarly styled text in parentheses (―и другие члены организованной группы (Невзлин Л.Б., Брудно М.Б. и Шахновский B.C.)‖) indicates that there is a difference between the text that appears in the verdict (the boldface, italicized text) and that that appears in the indictment (the similarly styled text in parentheses that follows it). The bold, underlined word in parentheses (―(году)‖) indicates that this word appears only in the indictment (the verdict used the abbreviation ―г.‖). The yellow highlighted text continues for three pages before a closed bracket and footnote (―]2‖) is found on page 6 of the verdict. This closed bracket indicates the end of the corresponding section of the indictment (in this case, on page 34 of the indictment). All of the text between these brackets, subject to the minor differences identified by the system described above, is found verbatim in both the verdict and the indictment.

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In order to facilitate comparison, the original pagination of the verdict is indicated by the use of a bold, italicized asterisk followed by the page number (e.g. *7) at the point in the text where that new page begins in the verdict. References in footnotes to pages in the verdict refer to these boldfaced and italicized numbers embedded in the text, not to the page numbers at the bottom of each page (which are provided for the convenience of the reader). A2 1 The text between the square brackets on pages 3-6 of the verdict correspond to pages 32-34 of volume I of the indictment. 2 The text between the square brackets on pages 3-6 of the verdict correspond to pages 32-34 of volume I of the indictment. 3 The text between the square brackets on pages 7-9 of the verdict correspond to pages 96-97 of volume I of the indictment. 4 The text between the square brackets on pages 7-9 of the verdict correspond to pages 96-97 of volume I of the indictment. 5 The text between the square brackets on page 9 of the verdict correspond to pages 95-96 of volume I of the indictment. 6 Inexplicably, the word «заводам» is italicized in the indictment. 7 The text between the square brackets on page 9 of the verdict correspond to pages 95-96 of volume I of the indictment. 8 The text between the square brackets on pages 9-73 of the verdict correspond to pages 35-93 of volume I of the indictment.

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9 This marking is not italicized in order to show the difference in the two documents. 10 The text between the square brackets on pages 9-73 of the verdict correspond to pages 35-93 of volume I of the indictment. 11 The text between the square brackets on pages 73-130 of the verdict correspond to pages 93-146 of volume I of the indictment. 12 This sentence is in bold typeface in the verdict while the corresponding sentence of the prosecution report is in regular typeface. 13 This paragraph is almost identical to the one about Shakhnovsky from page 74 which is identified as appearing in the prosecution report. The changes marked in this paragraph reflect comparison to the mentioned paragraph about Shakhnovsky from page 74. It appears that the court just changed the order of the paragraphs about Shakhnovsky and Lebedev in the verdict from their sequence in the indictment. 14 The indictment‘s version in parentheses is in italics in the original. 15 This paragraph is almost identical to the one about Shakhnovsky from page 105 which is identified as appearing in the prosecution report. The changes marked in this paragraph reflect comparison to the mentioned paragraph about Shakhnovsky from page 105. It appears that the court just changed the order of the paragraphs about Shakhnovsky and Lebedev in the verdict from the sequence that appears in the indictment. 16 For some reason a part of the number is highlighted in red in the available online version of the prosecution report.

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17 No underlining is used in this marking in order to show the exact version of the word in the prosecution report. 18 This marking is not italicized in order to show the exact version of the word in the indictment. 19 This marking is not italicized in order to show the exact version of the word in the indictment.
20

The text between the square brackets on pages 73-130 of the verdict correspond to

pages 93-146 of volume I of the indictment.

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Expert: Otto Luchterhandt Dr Jur, Professor, University of Hamburg, Germany

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Hamburg, 10.5.2011
Professor, Dr Jur, Otto Luchterhandt, University of Hamburg

Report regarding the Second Criminal Trial in the Case against Mikhail Khodorkovsky and Platon Lebedev Prepared in the Capacity of the International Public Expert at the Invitation of the Presidential Council of the Russian Federation for the Development of Civil Society and Human Rights by Letter from Its Chair of 1 April 2011

I. The Verdict The second criminal trial against Mikhail Khodorkovsky and Platon Lebedev ended with reading out in full the verdict at the Khamovnichesky District Court of the city of Moscow located not far from the Kievsky railway station on 30 December 2010 (1). Judge Victor Nikolayevich Danilkin started reading out the verdict on 27 December with the bill of indictment. Reading out the 689-page verdict ended on 30 December with issuance of a verdict. The defendants were sentenced to 14-year imprisonment each (taking into account the terms not yet served under the 2005 verdict (2) in a general-regime correctional colony (3). Both men were found guilty of commission of the following crimes:

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1. The defendants committed embezzlement and misappropriation under aggravating circumstances, namely, using their official position and as part of an organised group, stole and embezzled the property entrusted to them, namely, ―oil,‖ on a large scale (Art. 160 para. 4 (a) and (b), as re-worded on 13.6.1996 CC RF). 2. ―legalised‖ the oil obtained by crime by means of various financial transactions and other legal transactions and thereby fulfilled the crime of ―money laundering‖ with aggravating circumstances, too (Art. 174-1 para. 4 CC RF as re-worded on 7.4.2010). The court, thereby, in essence, followed the procuracy‘s demands (4). Clearly, punishment for money laundering depends on whether the defendants really obtained the oil by embezzlement (Art. 160 CC). If those charges are groundless, then the money laundering charges (Art. 1741 [sic] CC) fall apart, too. Therefore, the following analysis of the verdict focuses on the issue of whether the defendants stole indeed the oil entrusted to them. But first it is necessary to set forth at least briefly what the second trial referred to. II. Circumstances of the Case The verdict is supported by the facts and events dating back to the 1990s. They are set forth here largely from the viewpoint of the court but, of course, unlike in the verdict, without the a priori convicting intonation. In 1995/1996, Mikhail Khodorkovsky, Platon Lebedev, and ―other members of the organised group‖ (5) bought up, with the assistance of the Menatep Bank subordinate to them and companies under their control, 33% of shares in Russia-owned Yukos oil company and soon acquired about 90% of Yukos shares following a number of commercial transactions. Taking advantage of their leadership position, they purposefully transformed the company into a hierarchically structured concern composed of open joint-stock company (OAO) NK Yukos (6) as a parent joint-stock company and various covert subsidiaries. The oil concern was run by Khodorkovsky with the assistance, first and foremost, of Lebedev through Group MENATEP Ltd holding registered in Gibraltar and other offshore companies. Furthermore, Khodorkovsky and Lebedev held main posts at the concern‘s management bodies and, as a consequence, performed key management functions not just as major shareholders. Yukos‘s subsidiaries also included oil-production OAO Yuganskneftegas, OAO Samaraneftegas, and OAO Tomskneft VNK. Originally, Tomskeft had been one of many subsidiaries of state-owned Vostochno-Sibirskaya Neftyanaya Kompaniya [Eastern Siberian Oil Company] (VNK) but Yukos purchased VNK, too, during privatization in 1997/1998 (7).

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In the bill of indictment, Khodorkovsky and Lebedev were charged with having embezzled wrongfully most of the shares in VNK. The prosecutors could not retort to their objection that the exchange of VNK shares for shares in Yukos carried out then had been allowed by Goskomimushchestvo [the State Committee for Managing State Property] and, furthermore, had been carried out (only temporarily) as a safeguard against the truly real threat of raider takeover and that the VNK shares had been transferred back later (in 2001) under a contract and that no damage had been caused to the state due to higher share value. The defendants‘ statements were corroborated in full by the testimony of German Gref who had held the post of the minister of economic development and trade at that time and now is the head of the Savings Bank of Russia. The court sidestepped tacitly that item in the charges – clearly not least because witness Gref was well-known – and used Art. 160 CC with regard to the theft of oil only. In late July 1996, OAO NK Yukos entered into identical master agreements with NK OAO Yuganskneftegas and OAO Samaraneftegas; and in October, with OAO Tomskneft VNK. Thereunder, the parties undertake to create necessary organisational conditions so that oil could be ―sold‖ by means of sale-and-purchase agreements between parties. Further, it was determined that title to the output produced at that time passed on to OAO NK Yukos with regard to each specific well immediately following the appearance of the output described as ―oil-well fluid‖ in the agreement. It is not yet oil but a mixture where water, salt, and other substances account for up to 70% and oil, only approximately 30% (8). Therefore, it is necessary to distinguish oil-well fluid from ―commercial oil‖ which must comply with the standards (GOSTs) determined back during the USSR times (9) and, therefore, is the outcome of refining which requires that significant technical equipment be used. Production companies were engaged in the refining. The master agreements were framework contracts between parent concern OAO Yukos and three oil-production subsidiaries. They [the agreements] pursued the aim and created prerequisites for the sales of oil from its production to sale to domestic and foreign buyers could be carried out with maximum rationality and cost-efficiency and help maximise profit. Therefore, legal and administrative processes were organised in the vertically-organised Yukos concern : sale-and-purchase agreements on supply of a certain amount of oil were entered into regularly between parties (the parent company and each subsidiary) within the framework of a master agreement. The parent company determined the purchase price, it was one of the master agreement items. It [the purchase price] varied on average from 20% to 33% of the world market price (10) during the time considered in the trial, i.e., between 1998 and 2003. Pursuant to the GOST requirements, the companies pumped commercial oil into the pipeline network of Transneft, an enterprise owned by of the Russian Federation and which holds a monopoly on the country‘s system of oil and gas pipelines and is subordinate to

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the federal government and the Ministry of Energy. The oil was (and is) pumped at the metering stations in Transneft‘s network. Thorough accounting for the supplying enterprise and supplied volumes was in place there. The Central Dispatching Department for Distribution of the Heat and Power Complex of the Ministry of Energy maintained (maintains) accounting in exactly the same manner. (11) The oil‘s further ―fate‖ in the de jure sense within the concern was determined by Khodorkovsky‘s and Lebedev‘s tax minimisation strategy: the oil was sold to various subsidiaries located in closed territorial-administrative formations (ZATOs). Those were towns which had classified status due to military experiments and research during Soviet times and were not marked on the map of the country and now they lost that status and became available for entry. Law-makers conferred significant tax benefits to the ZATOs in order to facilitate their integration into market relations and promote business development on those territories (12). OAO NK Yukos took advantage of the chance the ―tax heavens‖ provided and set up a number of oil-trading subsidiaries which were registered in ZATOs with approval of the Federal Ministry of Finance. Legal status of the ZATOs advantageous for Yukos was only changed in late 2003, i.e., after Lebedev and Khodorkovsky had been arrested. Within the concern, the oil was purchased and then sold originally by the parent company and effective 2000, by a subsidiary, ZAO Yukos RM set up specifically to manage the oil-production companies. They also entered into oil sale-and-purchase agreements with the oilproduction companies. As the verdict established, in 1998 -2000, the three oil-production companies supplied 147,189,184.248 tonnes of oil and in 2001-2003, approximately 200,385,116 tonnes, a total of about 347.5 million tonnes (14). That is the entire output of oil Yukos concern sold, and, as per the bill of indictment, Khodorkovsky and Lebedev ―stole‖ oil from subsidiaries in exactly that amount!

III. The Verdict is a Document of Legal Nihilism The verdict is profoundly unjust. First, it contravenes substantially the main legal principles of a rule-of-law state (Art. 1 of the Russian Constitution). Second, it is also profoundly wrongful because it convicts the accused for the crimes they did not commit and features of which, as per the court‘s own determinations now, were clearly absent. Overall, the progress of the trial and the verdict are marked by disregard for almost all the main principles of a fair trial on a daunting scale. 1. The Khamovnichesky Court lacked jurisdiction

(a) Absence of Territorial Jurisdiction

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Doubtfulness of the verdict starts already with – bogus – jurisdiction for the Khamovnichesky Court, both territory- and instance-wise, and related trial of the criminal case by the judge solely.1 Pursuant to Art. 32 CCP, a criminal case shall be within the territorial jurisdiction of the court in the district of which the crime was committed. Therefore, it would have been lawful if this case, too, had been tried at the court of the first criminal trial, i.e., at the Meshchansky District Court. The circumstance that ALM Feldman [sic] law bureau which carried out Yukos‘s financial transactions with offshore companies was located in that district played a decisive role in favour of the Khamovnichesky Court as per the verdict.2 That substantiation is clearly brought in by head and shoulders because that law office played just a secondary role in the affairs of the concern and the defendants. Obviously, the orchestrators of the trials against Yukos wanted to avoid by all means the need to go again to the court of the Meshchansky District, specifically because – it will be shown below during analysis of the verdict – the second criminal trial refers to the same set of factual circumstances of the case the first one did. The only difference is that the procuracy referred now, through the same facts, to another crime, namely embezzlement and money laundering. Therefore, it would have been extremely difficult for the court of the Meshchansky District to find arguments for not just different but completely the opposite legal classification for the crime which supported the 2005 verdict! (b) Wrong Instance: The Case Fell within the Jurisdiction of the Moscow City Court However, it would have been wrongful to bring charges repeatedly at the court of the Meshchansky District, too, because bringing charges at a lower level of a court of the city district and trial of the case by the judge solely is a substantial offence. The offence is especially serious against the background that the bill of indictment itself provides decisive arguments confirming that the trial had to take place at a higher instance, i.e., at the Collegium for Criminal Cases of the Moscow City Court. Had it been done that way, the case had to be considered by a panel of three judges or by a judge with participation of jurors.3 Then the cassation appeal would have come to the Supreme Criminal Court of Russia, namely, to the Collegium for Criminal Cases of the Supreme Court (Art. 355 para. 3 (2) CCP). Absolutely clearly, the outcome of the second criminal trial against Khodorkovsky and Lebedev would have been completely different in such circumstances.

1 2

Novaya Gazeta [New Newspaper] Issue 27/2009, p. 10. Text of the verdict: http://khodorkovsky.ru/khamovnichesky_court/ prosecution/2011/01/16/ 15808.html., p. 676 et seq. 3 The first trial already had to take place at a higher instance, i.e., at the Moscow City Court. The thing is the arguments regarding the second criminal trial concern the first criminal trial in exactly the same manner.
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The circumstance that the bill of indictment ―in essence classified absolutely unequivocally‖ Mikhail Khodorkovsky, Platon Lebedev, and other members of the organised group as a ―criminal community‖ and Art. 210 CCP RF classifies the ―organisation‖ of such a community as an especially grave offence4 and issuance of a verdict in such a case is within the competence of a higher instance (Art. 31 para. 3 CCP) was in favour of the jurisdiction of the Moscow City Court. Art. 35 para. 4 CCP gives the following definition regarding the application of Art. 210: ―4. A crime shall be found committed by a criminal community if it was committed by a cohesive organised group (organisation) set up to commit grave or especially grave crimes or by an association of organised groups set up for the same purposes.‖5 However, the bill of indictment and the verdict insist that the defendants acted not as a ―criminal community‖ bust just as its weaker form, namely as an ―organised group.‖ Art. 35 para. 3 CC defines the latter as follows: ―3. A crime shall be found committed by an organised group if it was committed by a sustainable group of persons who had gotten together in advance to commit one or several crimes.‖ Absolutely clearly, the borderline between an ―organised group‖ (para. 3) and ―criminal organisation‖ in the form of a ―community‖ (para. 4) is vague and defining a phenomenon as that falling under one or another form depends to a large extent on the subjective assessment of criminal prosecution authorities, i.e., the procuracy and the court. There is no more cogent evidence of that than the following passage from the verdict where the case against Mikhail Khodorkovsky, Platon Lebedev, and other members of the organised group‖ is presented as an instance falling under Art. 35 para. 3 CC: ―The stability of this organised group, which had joined together in advance for the commission of the crimes, was conditioned by the lengthy acquaintance and constant connection between its participants, the commonality of the mercenary objective, the clear-cut distribution of roles and functions, and the thorough working through and periodic updating of the plans for theft and the legalisation of what had been stolen.‖6 How are those criteria different from the legal qualifiers describing a ―cohesive organised group (organisation),‖ i.e., ―criminal community‖? Since the answer to the question is decisive as to within the competence of which court instance this criminal trial is, we would be entitled to expect from the bill of indictment and the verdict thorough discussion of the issue, a convincing answer, and detailed substantiation as to why the matter in question here is not a grave

4 5

The measure of punishment ranges from 7 to 15 years of the deprivation of liberty. Art. 35 para. 5 determines (within the meaning of an organised crime) liability of an organisation and head of the ―criminal community‖ and its other members. 6 Text of the verdict: http://khodorkovsky.ru/khamovnichesky_court/prosecution/2011/01/16/ 15808.html., p. 75.
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instance of an organised crime (para. 4) but just its milder version (para. 3). However, the procuracy and the court failed to present any. On the contrary, the bill of indictment and the verdict turned out to be obviously conflicting regarding the legal matter so relevant to the trial and demonstrated arbitrariness in addressing the issue. The thing is, on the one hand, they classify the defendants as heads of a usual criminal association in the form of an ―organised group‖ (para. 3) and, on the other hand, they present the defendants, their colleagues, and the enterprise‘s entities under their complete control in such a manner that a downright conclusion suggests itself to the reader that Yukos concern was a criminal organisation (para. 4) to the backbone run by a gang of tough economic criminals. Such a critical statement needs to be substantiated. It can rely on the authority of the Supreme Court of Russia and, ironically, on the Khamovnichesky Court‘s verdict itself. ―Criminal community‖ features prevail in dual respect over those of a ―criminal group.‖7 First, because its actors want a grave or especially grave crime to be committed and, second, due to the feature of ―cohesion‖ as an ―organisation.‖ Both prerequisites are present here. The thing is, imprisonment of up to 10 years is envisaged for the crimes of embezzlement and money laundering in grave instances which are the subject of these charges and this verdict (Art. 160 para. 4; Art. 174 para. 4; and Art. 1741 para. 4 CCP) and that is why they are considered ―grave crimes‖ (Art. 15 para. 4 CCP RF). Cohesion feature of the crime means high degree of integration, sustainability and cohesion of a criminal association which [high degree] is typical for an organisation.8 The Supreme Court of Russia provided the following explanation regarding it in 2008: ―3. ... This form of organised crime is described by a conjunction of various combinations of such features as presence of organisational management entities, common material and financial base formed, inter alia, out of contributions from criminal and other activities, hierarchy, discipline, rules for relations and conduct of the criminal community participants established by them, etc. Cohesion can also be described by special structure of a community (for instance, head, board of heads, performers of specific tasks), presence of management, and distribution of functions among its participants. Planning of criminal activity for a

7

A.E. Zhalinsky (publication). Commentary to the Criminal Code of the Russian Federation. Moscow 2010, pp. 122–123 (Art. 35 is commented on by A.E. Zhalinsky); V.T. Tomin, V.V. Sverchkov (publication). Commentary to the Criminal Code of the Russian Federation. Moscow 2010, p. 8 (Art. 35 is commented on by V.V. Sverchkov). 8 It is manifest additionally in the concept of ―community.‖
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long period, bribery, and other corrupt actions aimed to neutralise representatives of law enforcement or other state authorities attest to cohesion of a community.‖9 As per not just the bill of indictment, but also the verdict, those criteria are fully present in this instance because the verdict describes at length how the defendants established the concern, structured it with a view to concealing income from taxation, took all the executive posts, and instrumentalised it fully for their criminal purposes. 10 The way it is presented by the court, ―Mikhail Khodorkovsky, Platon Lebedev, and other members of the organised group‖ acted, as a matter of fact, not as a specific, isolated group of persons but in an organised form and in the organised entities of an economic enterprise, namely, of Yukos concern . The verdict describes the concern in essence as an organisation criminal to the backbone, namely, since the very establishment of the concern: ―The guilt (sic!) of the defendants in building of the vertically-integrated structure of management as of mechanism of management (sic!) of the process of theft and realization of the stolen oil (sic!) by means of establishing ZAO Yukos RM and transfer to it of the required powers is corroborated by …‖11 We read the following in another place in the verdict: ―The following effective court decisions serve as an additional proof corroborating the use by M.B. Khodorkovsky and P.L. Lebedev an intricate scheme of sham companies for stealing (sic!) the property owned by OAO NK Yukos and its subsidiaries, joint stock companies OAO Yuganskneftegas, OAO Samaraneftegas and OAO Tomskneft VNK done with the scope of rendering impossible to follow up the flow of the stolen oil and subsequent flow of funds obtained from selling such:‖12 The verdict says the following with regard to the (bogus) key criminal role of Khodorkovsky: ―M.B. Khodorkovsky, being the core shareholder of OAO NK Yukos and chairman of the board of directors of the management organisations of the given joint-stock company, directed the creation of the organised group for the commission of theft and legalisation (sic!). Having created and refined a clearcut system (sic!), to ensure the commission of the crimes, he did implement,

9

Para. 3 of Decree of the Plenum of the Supreme Court of the Russian Federation of 10.6.2008 On Court Practice for Consideration of Criminal Cases Regarding Establishment of Criminal Community (Criminal Organisation), text of the Decree of the Plenum: http://www.supcourt.ru/second.php. 10 Text of the verdict: http://khodorkovsky.ru/khamovnichesky_court/ prosecution/2011/01/16/ 15808.html, p. 3 et seq. 11 The verdict, p. 143. 12 The verdict, p. 592.
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both directly and indirectly – through the other participants in the organised group – general management (sic!) of the actions of all of the participants in the organised group during the commission of the crimes.‖13 The following is said regarding Lebedev‘s function: ―Pursuant to the distribution of roles (sic!) in the organised group, with the objective of direct management (sic!) of the actions of the executors during the commission of theft of the oil of the subsidiary oil production enterprises and the legalisation of the monetary funds gained as the result of the sale of the stolen oil and the oil products manufactured from the stolen oil, P.L. Lebedev … occupied [missing text sic] in the administrative structure (sic!) created for these objectives (sic!) …‖14 The criminal community criteria the Plenum of the Supreme Court declared decisive, i.e., criminal purposes and their systematic pursuit by a managing group, hierarchical organisational entities, separation of tasks and functions, conformity to a plan, and obtaining income by crime were established in full by the verdict regarding Yukos concern run by Khodorkovsky and Lebedev. Moreover, the entire verdict and the bill of indictment aim ultimately to present Yukos concern as a criminal organisation. 15 If this is the case, question arises why the Khamovnichesky Court did not make any legal conclusions from the clear-cut outcomes of the investigation and did not state that it was not competent to try this case? Given the following analysis of the guilty verdict, just one answer could be given to that. The procuracy wanted to avoid by all means a criminal trial at a first instance by jury16 and at a cassation instance by the Supreme Court. The trial had to end at the Moscow City Court.17

13

The verdict, p. 20. The verdict, p. 6. The verdict classifies on p. 151 both defendants, persons linked to them, and entrepreneurial entities of concern Yukos indirectly as a ―criminal organisation.‖ The thing is, in addition to sustainability, the decisive feature of such, namely, cohesion, applies to it. ―The leading role of M.B. Khodorkovsky in the organized group, its cohesion, sustainability, clear planning of its actions, as well as the special role of P.L. Lebedev as Khodorkovsky’s authorized representative responsible for addressing complex financial issues is corroborated by the documents seized during the search at OAO Russkie Investory:” (emphasis added in the original) 15 Novaya Gazeta Issue 10/2007, pp. 6–7, lists in the biography index about 40 criminal trials against former managers of Yukos and Menatep due to which the concern Khodorkovsky and Lebedev ran is presented as a criminal association retrospectively. 16 Leonid Nikitinsky, Novaya Gazeta commentator on matters of law, also sees in it the main political motive for the decision to have the case investigated at a lower instance within the competence of which it clearly is not: Prosecutor Shokhin: Take Two, Novaya Gazeta, Issue 25/2009, p. 5. 17 The statement by the Khamovnichesky Court spokesperson of 14.2.2011 that Judge Danilkin just signed the verdict and it was de facto prepared by the Moscow City Court judges with decisive participation of its omnipotent Chair Olga Yegorova becomes twice as credible against that background.
14

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2. Violation of the ne bis in idem Ban Inherent in a Rule-of-Law State The described circumstances of the case are a significant basis for the second conviction of Khodorkovsky and Lebedev. If one compares them to the circumstances of the case contained in the bill of indictment and in the 2005 verdict of the Meshchansky District Court, the following coincidence catches the eye: back then, the matter in question was the same accused, the role they played in the sales of oil produced by Yukos‘s subsidiaries, and, furthermore, criminal law assessment of processes in the vertically-structured Yukos concern as a whole. The factual circumstances which were examined by the procuracy investigators now and form the substance of the bill of indictment and serve as grounds for conviction of Khodorkovsky and Lebedev for the crime described in Art. 160 CC, had also been in full the subject of the first trial and verdict of 2005. That makes one remember right away classic principle of a rule-of-law state – no one may be convicted twice for the same deed (ne bis in idem)! The principle is present both in the Constitution of Russia (Art. 50 para. 1) and in Art. 6 para. 2 of the Criminal Code. Art. 14 para. 1 CC RF implies by a crime a ―socially dangerous deed‖ for which CC envisages a punishment. Therefore, the circumstances of the case which condition criminal liability which [the circumstances of the case] the (state) court has already examined once and exactly based on which it issued the verdict are important. Art. 50 para. 1 of the Constitution prohibits a repeated conviction of a person who has been already found guilty for a conduct related to such circumstances of a case with the use of another crime. The Constitution seeks to prevent a person from being conviction for any punishable deed again and again. Once punishment has been executed, his/her guilt has been redeemed and demand of the state that the criminal be punished has been fulfilled. A set of deeds a person has already been found guilty of by a verdict does not make it legitimate for the state to punish further. The investigators, prosecutors, and Judge Danilkin ignored and thereby violated grossly the constitutional principle which is also the main criminal procedural right of the accused. The charges could not be brought, the court hearing could not be opened, and the guilty verdict for embezzlement and money laundering – based on the facts considered in the first case – could not be issued! 3. The Verdict is Groundless – the Accused Did Not Embezzle Anything

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Conviction of Khodorkovsky and Lebedev ran counter not just to ne bis in idem principle but was also unacceptable because oil had not been stolen either by them or by any other persons. The crime of embezzlement and misappropriation within the meaning of Art. 160 CC which is a basis for the conviction is totally absent! (a) First, it should be noted that, as the court established, charge of theft (Art. 158 CC RF) was completely out of the question, because Khodorkovsky and Lebedev could not take oil to their own channels which was merely physically, i.e., absolutely impossible for technical reasons because the oil was sold by state monopoly holder, Transneft. Furthermore, the court would have had to classify the take-away of the oil as a ―theft.‖ But it convicted the defendants for embezzlement and misappropriation (Art. 160).

(b) Conviction and sentencing for embezzlement was groundless because oilproduction companies OAO Yuganskneftegas, OAO Samaraneftegas, and OAO Tomskneft VNK had not ―entrusted‖ the oil to Khodorkovsky and Lebedev. If oil were entrusted to them, then just the right of possession would have been transferred to them. However, the production companies sold the oil to Yukos, i.e., they transferred title to it! Transfer of title to oil definitely rules out such features as ―entrustment of another‘s property‖ necessary for the crime within the meaning of Art. 160 CC RF – only possession but not (complete) ownership is possible! (c) Furthermore, pursuant to the ―master agreement‖ and sale-and-purchase agreements, not ―Khodorkovsky and Lebedev and other members of the organised group‖ as individuals but legal entities, namely, initially, OAO NK Yukos, and since 2000, subsidiaries (ZAO NK Yukos RM, etc.) in charge of purchase of oil for Yukos concern became the owners of the oil. The court recognized that, too, at least in a trend [sic]. But it believes that that hurdle could be overcome by means of the argument that the master agreements and sale-and-purchase agreements were wrongful because they contravened the company and civil law; therefore, they did not take place and, consequently, transfer of title to oil was invalid. (d) Yet the agreements concerned are lawful from the viewpoint of the corporate law. But the legal constellation is a challenge because Khodorkovsky and Lebedev as principal shareholders in the sellers, i.e., oil-production companies OAO Yuganskneftegas, OAO Samaraneftegas, and OAO Tomskneft VNK, also controlled the oil buyer, OAO NK Yukos, and, therefore, were strongly interested in the completion of the transaction. Therefore, in order to ensure the protection of minority shareholders, the agreements needed the approval not just of general shareholders‘ meetings of the production companies (Art. 83 para. 3 of the Law On

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Joint-Stock Companies) but also that of most of their ―arm‘s-length‖ shareholders (para. 4). The – qualified – approvals had been given, as the court established. Its opinion that Yukos‘s managers obtained them by deception and, consequently, the approvals are invalid (15) finds no basis in law because a procedural error does not invalidate automatically approval of a general meeting and, therefore, an agreement. Rather, the sale-and-purchase agreements entered into could only be cancelled through an application to a commercial court (Art. 84 para. 1 of the RF Law On Joint-Stock Companies). But there was no such application! (16) (e) The master agreements and sale-and-purchase agreements regarding oil could be ―void‖ from the viewpoint of the civil law for two reasons: first, if they contravened deliberately the principles of public order and morality (Art. 169 of the RF Civil Code) or, second, if they were entered into by partners to create a semblance, i.e., without an honest desire to be bound by law (Art. 170 of the Civil Code). The verdict describes the master agreements and sale-and-purchase agreements not just as wrongful but also ―fictitious‖ on repeated occasions and seems to seek to at least hint that they were void. But it does not invoke anywhere specifically (17) Art. 170 and it does not put forward any cogent legal substantiation that they were (allegedly) fictitious. The following stereotype judgment (18) which repeats in the verdict can illustrate that: [beginning of quote]: ―The given contracts bore a fictitious character, inasmuch as they included within themselves knowingly false information about how appearing as the purchaser of the oil is OAO NK Yukos. In the meantime, it was reliably known to M.B. Khodorkovsky, P.L. Lebedev and their accomplices that OAO NK Yukos is factually not the purchaser of the oil, while the output is shipped by the oil production enterprises on their own directly to consumers in Russia and abroad. Besides that, the information about how the parties had attained understandings about the price of the oil was knowingly false in the contracts. Factually, there was no such agreement, while the price for the oil was premeditatedly understated by several times in comparison with the real market price by the participants in the organised group headed by M.B. Khodorkovsky, P.L. Lebedev and other members [sic], without any economic necessity whatsoever. The agreements entered into on behalf of OAO Tomskneft VNK, OAO Samaraneftegas and OAO Yuganskneftegas were thereby entered into under the influence of the ill-intentioned agreement of a representative of one party with another party, with violation of Art. 179 of the RF Civil Code, that is wrongfully.‖[end of quote] That part of the verdict refutes the ―fiction‖ claim because it confirms that parent company NK Yukos was a contract partner for the production companies and thereby buyer of oil within the meaning of Art. 459 and subsequent articles of the RF Civil Code and that the price was contract one and was significantly lower than the market price for oil. Nor were the agreements merely a semblance but they expressed a real wish of the parties because the company‘s cost reduction and profit

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maximization strategy Khodorkovsky, Lebedev, and others had developed hinged on their [the agreements‘] implementation decisively. The strategy describes in many places that legal strategy of the ―vertically-integrated structure‖ of Yukos concern which [strategy] is based on legal provisions regarding partnerships and tax rights which [strategy] neither the prosecutors nor the court, of course, accept but regard as criminal (19). Finally, the court avoids describing the agreements as definitely ―bogus.‖ On the contrary, it says that they contravene Art. 179 of the RF Civil Code (20). That provision gives a right to a party to challenge an agreement in a judicial procedure if it was forced by deception to agree to very loss-making terms and conditions of the agreement. But even such an ―enfettering transaction‖ is not invalid by virtue of law alone, it need to be cancelled by a court decision (Art. 179 para. 1). Since no respective court decisions exist, the master agreements and sale-and-purchase agreements are valid. Therefore, the statement in the Khamovnichesky Court‘s verdict that the oilproduction subsidiaries of Yukos concern remained the owners of the oil (21) is refuted by the verdict itself because the legal provisions cited by the court to substantiate it state the opposite – the agreements are not void either under the Law On Joint-Stock Companies (Arts. 83 and 84) or under the Civil Code (Art. 179) even if they were wrongful, they are valid in full until they are cancelled by a commercial court, and since the time limits for challenging them in a court had expired by the time of the first trial already, they continued in force. By virtue of that legal fact that it also points out, the Khamovnichesky Court could not regard the agreements as invalid. (g) Moreover, declaring in his [Judge Danilkin‘s] verdict irrelevant more than 60 (!!) decisions of commercial courts (!) of Russia since 2004 which had regarded the saleand-purchase agreements as valid (22) and, therefore, NK Yukos as the owner of oil was the pinnacle of Judge Danilkin‘s egregiously wrongful actions. The arguments are so untenable that they are not even be worth of considering. But since decision about whether the accused embezzled ―another‘s‖ property within the meaning of Art. 160 CC RF depends on the issue of who the oil owner was – parent Yukos concern or its subsidiaries – it is necessary to consider the issue at least briefly. The Khamovnichesky Court tries to neutralise the positions of the commercial courts, which differ drastically from its position regarding the ownership issue, by means of three arguments: (1) First, it claims that the commercial courts dealt specifically just with the issue of tax evasion during transaction manipulations by Yukos concern, rather than with the ownership issue (23). One could retort to that that the commercial courts

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examined without doubt and had to examine the ownership relations because taxation could only concern oil which OAO NK Yukos had obtained legally as an owner. The court‘s objection to that argument by Khodorkovsky aims to conceal that circumstance the goes without saying by means of technical tax definitions and digression from the circumstances of the case (24). As per the verdict, relations where taxes are paid to the budget are the object of a tax crime. It is the difference between income and expenses, rather than the ownership, that is the basis for the calculation of tax. The verdict disregards [the fact] that a criminal should not pay tax on that difference either if it arises as a result of sales of what was stolen; rather, it shall be confiscated by the state as a part of the stolen property. Worse still, it suggests by its line of reasoning that it would be fair to punish Khodorkovsky and Lebedev for theft of all the oil Yukos concern sold in 1998-2003, at the same time obligating Yukos to pay tax in the entire amount of profit made over that period from sales of the same allegedly stolen oil! (2) Second, the court claims that the commercial courts assessed the sale-and-purchase agreements as valid because they [the commercial courts] fell into a trap of respective claims by Yukos managers and, furthermore, had not yet known about the ―oil theft mechanisms‖ the Khamovnichesky Court is now aware about already (25). That remark borders on misleading because the court relies on the facts unknown during the first trial and, therefore, new ones. The ―mechanism‖ implies rather none other but entering into the master agreements and the oil sale-and-purchase agreements that the Khamovnichesky Court simply assesses differently now, namely as a means of ―theft by the accused of another‘s property entrusted to them‖. This happens, as will be shown in greater detail below, with complete, grotesque distortion of the crime of ―embezzlement‖ (Art. 160 CC). (h) The court claims that the commercial courts regarded concerning the tax issues they examined (30) that the oil was just ―de facto owned‖ by OAO NK Yukos. The verdict (26) says the following about it verbatim: ―The aforementioned court judgment affirmed that OAO NK Yukos had de facto had right, title, and interest in oil and oil products and had carried out with regard to them at its discretion any actions, including alienation, transfer for refining through a number of entities dependent on OAO NK Yukos and that OAO NK Yukos had been the beneficiary of economic benefits through specifically established entities dependent on the company. Thus, it follows from those commercial court judgments that the oil was transferred into the factual ownership of OAO NK Yukos; however, it was not the oil owner de jure. In reality, the oil belonged to its producing subsidiaries.‖

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The verdict makes an attempt here to reconcile its claim that OAO NK Yukos was not the owner of oil with the decisions of the commercial courts to the contrary. To do that, it invented the ―factual ownership‖ concept (27) and ascribes it to the commercial courts in order to make thereby an impression that they did not regard OAO NK Yukos as the oil owner either. But, in reality, the commercial courts, invoking Art. 209 of the RF Civil Code, only talk about ―ownership‖ all the time, and that is absolutely correct de jure because the Russian civil law does not know the difference between ―factual‖ and ―de jure‖ ownership (28). Ownership right in the Civil Code is, like everywhere, the quintessence of rights, a legal institution where right, title, and interest and right to sell are its nucleus. The Khamovnichesky Court makes ―factual ownership‖ out of one comment by the Moscow Commercial Court, made most likely in passing, by the way, that the one who ―de facto‖ has right, title, and interest, etc. and ―de facto‖ exercises its rights is the owner in the de jure sense pursuant to Art. 290 of the Civil Code and it [the Khamovnichesky Court] tries to impress it by means of a verbal trick that the matter in question in this event is a special, stand-alone form of manifestation of ownership along with ―de jure ownership.‖ The only point of that ―civil law‖ structure in the verdict brought forth by the malicious intent and crossing over the border of the ridiculous is to present OAO NK Yukos not as the owner of oil because otherwise it would have been impossible to explain the punishment of Khodorkovsky and Lebedev for theft of oil as allegedly another‘s property entrusted to them and the trial would have had to end in an acquittal. (i) Judge Danilkin enriched Russia through its verdict without another sample of belated witticism (translator’s note: Leo Tolstoy, translating verbatim from German, speaks about ―staircase humour.‖). The thing is that the Khamovnichesky Court goes against not just the commercial courts‘ decisions but also the official position held by Russia during consideration of OAO NK Yukos‘s application at the European Court of Human Rights since 2004 (29). There, Russia has been defending itself against the charges that its officials and justice destroyed Yukos by means of groundless tax claims and bankruptcy proceedings tampering and cold-bloodedly turned it into a state-owned company in order to prove lawfulness of the additional tax claims on the oil Yukos had sold as an owner (30)! (j) Khodorkovsky and Lebedev should not have been convicted for embezzlement and misappropriation of oil even if they could have been accused of the void and, therefore, invalid nature of the master agreements and sale-and-purchase agreements between OAO NK Yukos and the oil-production subsidiaries merely by virtue of law (Art. 170 of the RF Civil Code), because they had not done anything that would constitute the crime of ―embezzlement‖ or ―misappropriation‖ (Art. 160 CC RF). The truth is the oil would have continued to remain the oil-production companies‘ ownership (31) and, therefore, would have been ―another‘s property‖

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for the accused, but in such an event there are no other features of the crime under Art. 160. The oil was not entrusted to Khodorkovsky and Lebedev and they did not steal it from the oil-production companies. (k) The oil would have only been entrusted to them if they, by virtue of their official position, had taken possession of the oil under an agreement or based on a special order (32). A typical case would be transfer of possession by means of an agreement, be it hire, lease of housing, transportation, storage, use on a free-of-charge basis, or other (38). Embezzlement is described by taking possession at the will of an owner and in a soundly legal manner (39). Furthermore, it precedes the process of theft. None of those usual instances of transfer of possession took place here. There are just void sale-and-purchase agreements and de facto pumping of oil to Transneft‘s network. Although the sale-and-purchase agreements were void, they, in principle, aim to ensure transfer of title but, at any rate, not entrustment. Due to the different direction of the agreement partners‘ will, the ―flawed‖ sale-and-purchase agreements cannot be interpreted as a process of entrustment of oil into possession either. Of course, the oil got into sphere of disposal by OAO NK Yukos at the oil-production companies‘ will but crime as per Art. 160 does not protect true possession but implies instances where ownership is ―entrusted‖ to a criminal by its owner. It is absolutely clearly not the case here, namely not least because the parties to the agreements proceeded on the basis that the sale-and-purchase agreements were valid and, thereby, that title to the oil was transferred. An owner‘s faith that the person it transferred an object of property to into possession or in custody will not embezzle it is a legal good protected by law-makers in Art. 160. That meaning is expressed clearly in the second official name of the article, Misappropriation. Abuse of trust shall have consequences not just in civil law but also in criminal law. But equating the transfer of oil in the conditions of a ―fictitious‖ agreement to an instance where an object of ownership was ―entrusted‖ to a criminal by means of an agreement, the Khamovnichesky Court violated the analogy ban, the underlying criminal law principle in any rule-of-law state. The principle is in place in Russia, too. Art. 3 para. 2 CC RF determines: application of a criminal law provision based on analogy principle is unacceptable. The court violated concurrently another principle of humane justice in a rule-of-law state, namely, the classic nullum crimen sine lege principle contained in Art. 54 para. 2 of the Constitution of Russia as

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follows: ―No one may be held liable for a deed not regarded as an offence at the moment of its commission.‖ The analogy ban is a special case of that principle and, therefore, it itself has a constitutional ranking (40)! Kh.B. Sheynin describes its substance as follows: (41) ―The constitutional provision under consideration is of major importance. It rules out completely the possibility of application of criminal law by analogy, i.e., for a deed not mentioned in law but similar to a crime which [application] had been allowed by criminal law in force before the 1960 RSFSR CC was adopted.‖ But this is exactly what happened here: at the same time, treatment by Judge Danilin [sic] of definitive (!!) transfer of title to oil by means of ―fictitious sale-and-purchase agreements‖ similarly to the crime described in Art. 160 CC, namely to the entrustment of oil under valid agreements on temporary (!!) transfer of ownership into possession can no longer be justified by the similarity between the two instances. The situations are substantially different. Therefore, violation of the analogy ban principle is obvious. ―The provision commented on,‖ writes Sheynin with hope, ―creates a barrier to the possibility of violation of human and civil rights and freedoms and sets a clear legal basis for law-enforcement authorities and courts, allowing them to avoid mistakes in addressing the liability for offences issues.‖ Judge Danilkin disappointed fundamentally the author‘s hopes that it is impossible to get back to the Soviet criminal law principles. If it is politically desirable or if there is an order from above, the court, as this case shows, is ready to violate the analogy ban principle without scruple. (l) Finally, Khodorkovsky and Lebedev did not ―steal‖ oil. A feature of the crime of embezzlement is that the guilty used starting from a certain moment for his/her/its own purposes the object entrusted to him/her/it by its owner and disposed of it as ownership. Clearly, the circumstances of the case which support the verdict give no opportunity to interpret the ―fictitious‖ sale-and-purchase agreements as the process of theft. There is no time difference and sequence of actions between legal transfer of ownership and illegal embezzlement necessary for the crime. The Khamovnichesky Court is wrong to cite, when it substantiates ―theft,‖ the Supreme Court of Russia (42). It is true that the Decree of the Plenum of 27 December 2007 on judicial practice in cases of fraud, misappropriation and embezzlement establishes that embezzlement of property carried out by means of replacement with less expensive object of property shall be classified as embezzlement in the amount of the seized valuable (43). But the Supreme Court attributes that provision clearly to the ―establishment of size and amount‖ embezzlement was committed in. It means instances where a criminal embezzles a valuable object by replacing it with a lower-value object. The plenum‘s decision leaves no doubt that higher-value property must first be entrusted to the guilty. Should we apply that provision to the instance

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under consideration, it would mean that the subsidiaries (only) wanted to entrust oil to OAO NK Yukos by means of a respective transfer agreement and were really forced to do so. But that is out of the question, as has been set forth at length already. Decisive prerequisites for embezzlement are clearly missing. It was a plenary decision of the Supreme Court which had to explain to the court how incorrect it was to classify the examined instance as ―embezzlement.‖ IV. Final Assessment The Khamovnichesky Court‘s verdict rightly caused scathing criticism around the world, disagreement, and condemnation. Even a brief analysis like this one shows the daunting scope of the gravest violations of the underlying principles of criminal law and of a rule-of-law state the Russian Constitution had solemnly declared. The second verdict against Khodorkovsky and Lebedev largely surpasses the first one in its divergence, arbitrariness, and malicious intent. It is another staggering document of legal nihilism in the Russian justice because it almost does not conceal arbitrary handling of law and intentional distortion of law. ----------------------------------------------(1) For details see: NG [Nezavisimaya Gazeta], 28.12.2010, S. 1/3; Kommersant [Businessman], 28.12.2010, S. 1; Heimann, Doris: Chodorkowski erneut verurteilt, in: Neue Zürcher Zeitung (NZZ) vom 28.12.2010, S. 1(Heimann, Doris. Khodorkovsky Sentenced Again); same: Erwartetes Ende eines politischen Prozesses, in: NZZ vom 29.12.2010, S. 4 (Expected End of Politically Motivated Trial); Ackeret, Markus: Die Anklage triumphiert im Fall Chodorkowski, in: NZZ vom 31.12.2010, S. 3 (Ackeret, Markus. Prosecutors Triumph in the Khodorkovsky Case); further, see messages from Mikhail Ludwig in Frankfurter Allgemeinen Zeitung (FAZ) vom 28.12.2010, S. 2 (Urteil nach Plan), 29. and 30.12.2010, also S. 1/2. (2) See details in: Luchterhandt, Otto: Rechtsnihilismus in Aktion. Der JukosChodorkovskij-Prozess in Moskau, in: Osteuropa 54. Jg. (2005), Nr. 7, S. 7-37 (17 ff.) (Luchterhandt, Otto. Legal Nihilism in Action. The Khodorkovsky and Yukos Trial in Moscow); see regarding the beginning of the new trial: Luchterhandt, Otto: Der zweite Strafprozess gegen die Jukos-Chefs Michail Chodorkovskij und Platon Lebedev. Zwischenstand, in: WGO. Monatshefte für Osteuropäisches Recht 49. Jg. (2007), Heft 4, S. 242-248. (Luchterhandt, Otto. The Second Criminal Trial against Yukos Executives Mikhail Khodorkovsky and Platon Lebedev). (3) Professor, Dr Hans-Henning Schroeder (Economics and Policy Foundation) kindly made the text of the verdict available to the author. The text is already available now at: http://khodorkovsky.ru/. (4) The verdict in criminal case No. 18/432766-07. The text: the charges were prepared by Deputy Prosecutor General Victor Ya. Green on 14.2. 2007. It is composed of 14 casefile volumes on 3,460 pages: http://khodorkovsky.ru/khamovnichesky_court/court_orders/2009/03/31/12333.
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See also the Investigative Committee‘s order to bring charges against Khodorkovsky of 28.6.2008. The text: http://khodorkovsky.ru/media/2008.06.29.pdf. (5) Both the charges and the verdict use the formula as a feature of proof of ―organised group‖ within the meaning of Arts. 160 and 174 and 174.1 CC and, therefore, of severity and tightening of punishment. Other group members are named in different ways. This refers to owners of shares and key managers of Yukos. (6) Oil Company (NK). (7) Khodorkovsky and Lebedev are charged with having taken possession wrongfully of most of the shares in VNK. The state prosecutors could not retort to their objection that the exchange of VNK shares for shares in Yukos had been allowed then by 26 privatisation agencies of the state privatization agency Goskomimushchestvo and, furthermore, safeguarded (temporarily) the enterprise against the real threat of raider takeover and that the shares in VNK had been transferred back subsequently (2001) under an agreement and that the state had incurred no losses due to share price increase. The statements of the accused were corroborated in full by German Gref as a witness who had been the minister of economy at that time and is the head of the Savings Bank of Russia now. See regarding it report in Novaya Gazeta, 2010, Issue 66 (23.6.), pp. 1-3 (Gref); NoG [Novaya Gazeta] 2009, Issue 133 [30.11.], P. 12/13 (witness Alexander Tikhonov). The court did not make a decision regarding the issue in its verdict but it terminated the criminal prosecution of VNK complex due to expiry of 10-year statute of limitations (see regarding it the verdict on pp. 3 and 73) (May 2010) by decision of 27.12. 2010. Text of the judgment: http://khodorkovsky.ru/ khamovnichesky_ court/prosecution /2011/01/16/15808.html. (8) See the report about 267 days of the trial. NoG, 2010, Issue 101 (13.9.), p. 14. (9) See regarding the GOST quality standards: http://testrussia.ru/gost/neft/gost11508-74-bitumy-neftyanye.-metody-opredeleniya-stsepleniya-bituma-s-mramorom-ipeskom.html. TU (technical specifications) standards have replaced the GOSTs now. See: http://elarum.com/info/standards/. (10) See in that regard reviews which concern partly even summing up monthly results in the text of the charges: pp. 40 et seq.; 58 et seq.; 66 et seq.; 76 et seq.; 85 et seq. The verdict also considers agreements up to 2003. See pp. 14 et seq.; 26 et seq.; 47 et seq.; 55 et seq.; 63 et seq. (11) NoG 2010, Issue 57 (31.5.), P. 3 (Prosecution witness Tatyana Lysova, editor-inchief of Vedomosti newspaper). (12) For details: Luchterhandt, Rechtsnihilismus in Aktion. Der Jukos-ChodorkovskijProzess in Moskau (footnote 2) , S. 17 ff. (Luchterhandt, Legal Nihilism…)

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(13) ―JUKOS Refining and Marketing‖ in the legal form of a closed joint-stock company (ZAO) (14) The verdict, pp. 72 and 73. See regarding legal errors of the prosecution representatives: NoG 2010, Issue 116 (18.10), p. 14. (15) The verdict, pp. 164; 681 et seq. 27 (16) They had to be brought within one year after grounds became known for the challenge by the minority shareholders who turned out to be a minority during voting, that is, in those circumstances (Art. 179 para. 2 of the RF Civil Code). A.A. Kyrov, Commentary to the Federal Law On Joint-Stock Companies. M., 2007, p. 252. (17) The verdict, pp. 12; 13; 14 et seq. and more frequently. The passages match the bill of indictment word-for-word in most cases. See there (footnote 4), for example, p. 39. The level of conformity of the verdict with the bill of indictment, just like the style of the verdict and a number of other indicators which cannot be analysed here due to limited scope confirm the inference that Judge Danilkin just signed the draft verdict a group of investigators guided by Salavat Karimov had prepared. (18) The verdict, pp.. 12 and 27. (19) For example, pp. 6 and 31. (20) The verdict, p. 12. (21) The verdict, p. 660. (22) That conflict dominated from the outset in the investigation of the Yukos case by a group of the Procuracy General investigators guided by Salavat Karimov. It used the juridical schizophrenia to achieve the verdict against Khodorkovsky and Lebedev desired by the political party. For details see: Luchterhandt, Der zweite Strafprozess gegen die Jukos-Chefs Michail Chodorkovskij und Platon Lebedev (footnote 2), p. 246 et seq. (Luchterhandt. The Second Trial…) (23) One could expect the appeal could be lodged with a second instance, as consideration of the merits of the case, but CCP of Russia only provides for a possibility to file a cassation appeal against a verdict of 1st-instance criminal court (Art. 354 para. 3 CCP RF). An appeal is only possible against a decision of a lowerinstance ―magistrate‖ court (Art. 356 para. 2 CCP). (24) Vadim Klyuvgant. We Will Sure Go to the Moscow City Court As It Is. NoG. 2011, Issue 1 (12.1.), p. 14; Anton Denisov. Lawyers Ready to Pronounce the Verdict. 14.1.2011, p. 3.
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(25) The ―Council‖ meeting was held under the chairmanship of Medvedev on 1.2.2011. See in that regard the minutes: http://www.kremlin.ru/transcripts/10194 28 (especially the speech by Tamara Georgievna Morshchakova regarding the mechanisms for exerting influence on judges and their verdicts within courts and within court instances‘ vertical); http://www.n-tv.de/politik/Chodorkowski-darfhoffen-article2506476.html. (26) Khodorkovsky mentioned in his final statement 61 economic decisions confirming his position. See NoG 2010, Issue 107 (27.9.), p. 14. The verdict regards the figure as a fact: p. 660; also pp. 621 and 622. (27) The verdict, p. 658. (28) The verdict, p. 659. (29) The verdict, pp. 621/622 and 660/661. (30) The verdict cites directly the decision of the Commercial Court of the city of Moscow of 28.4.2005. See p. 659 et seq. (31) The verdict, p. 660. (32) See the amazing structure of the verdict. (p. 659 et seq.). (33) See in that regard Chapters 13-18 of the RF Civil Code. (34) In March 2001, following the ECHR‘s judgment, the trial reached a decisive phase. See in that regard: OAO Yukos Oil Company v. Russia. http://cmiskp.echr.coe.int/tkp197/view.asp. (35) See in that regard NG 5/6.3.2010, pp. 1/2 (Genri Reznik, President of the Moscow City Bar Association: ―If the state recognises that the matter in question is commercial activity, trade in oil, that taxes were paid, then theft (of oil) is out of the question. See also: NoG 2010, Issue 23 (5.3.), p. 4; 2010, Issue 24 (10.3.), p. 9; also regarding JUKOS Capital S.a.r.l. v. Rosneft in Amsterdam: NoG 2009, Issue 98 (7.9.), p. 13. (36) In the Russian civil law, unlike that in Germany, not ―the abstractness principle‖ is in place, i.e., there is separate legal consideration of a debt agreement on sale and substantive law (in rem) agreement on transfer of ownership. In the Russian civil law, voidness of a sale-and-purchase agreement means automatically voidness of a transfer agreement. The 29 services the partners exchanged are interpreted in principle pursuant to the principles as wrongful enrichment (see Art. 1102 of the RF Civil Code). (37) G.A. Krieger, Commentaries to Art. 160 CC in A.V. Naumov (ed.), Commentary to the Criminal Code of the Russian Federation, M. 1996, pp. 410-413 (411).
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(38) Para. 24 (2) of decision of the Plenum of the Supreme Court of Russia of 27.12. 2007, Text: Newsletter of the RF Supreme Court, 2008, Issue 2; http://www.supcourt.ru/vscourt_detale.php?id=5215. (39) V.V. Verin (Vice-President of the Supreme Court of Russia): Commentaries to Art. 160 CC, in: V.M. Lebedev (ed.): Commentaries to the Criminal Code of the Russian Federation, M., 2001, pp. 346/347. (40) T.G. Morshchakova. Commentaries to Art. 54, in: V.D. Zorkin/L.V. Lazarev (ed.): Commentaries to the Constitution of the Russian Federation. M., 2009, pp. 487490 (488). (41) Commentaries to Art. 54 in: L.V. Lazarev (ed.): Commentaries to the Constitution of the Russian Federation. 3rd edition, M., 2009, pp. 316-321 (319). (42) The verdict, p.. 685: para. 25 of the decision of the Plenum. (43) Text: Newsletter of the RF Supreme Court, 2008, Issue 2; http://www.supco18urt.ru/vs court_detale.php?id=5215

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Эксперт: A.V. Naumov head of the Department of Criminal Law Disciplines of the Academy of the Procuracy-General of the Russian Federation, member of the Consultative-scholarly council of the Supreme Court of the Russian Federation, Doctor of Juridical Sciences, Professor

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Specialist’s legal-scholarly report (on the verdict of the Khamovnichesky Court of the city of Moscow with respect to the case of M.B. Khodorkovsky and P.L. Lebedev)

A careful study of the verdict of the Khamovnichesky District Court of the city of Moscow of 27 December 2010 with respect to the case of M.B. Khodorkovsky and P.L. Lebedev (case No. 1-23/10), convicted under art. 160 para 3 (a) and (b) CC RF (as amended by Federal Law No. 63-FZ of 13 June 1996); art. 1741 para 3 CC RF (as amended by Federal Law No. 60-FZ of 07 April 2010), allows the assertion to be made that this verdict is illegal, since, first and foremost, it contradicts both the ―letter‖ of the criminal law, which formulates the corpora delicti of the crimes inculpated to the defendants, and its universally accepted doctrinal (scholarly) and judicial interpretation. The following arguments are given in confirmation of such a finding. 1. An error by the court in the classification of the acts inculpated to the defendants as thefts of another‘s property, entrusted to the guilty parties by way of embezzlement. The fact of the matter is that the corpus delicti of theft provided for by art. 160 CC RF differs in principle from other kinds of theft of another‘s property (robbery, fraud and others) by the specifics of the item of stolen property. And its main distinction consists of the fact that such property must have been found in the rightful possession of the guilty party, conditioned by the fact that it had been entrusted by the injured party (or parties) to the guilty party. This condition of criminal liability for such a kind of theft of another‘s property is universally recognised, both in the theory of criminal law and in judicial practice. In confirmation of this, we shall cite but three illustrations of the well-established understanding of the question under examination in the scholarship of criminal law (one – on the level of an authoritative commentary to the Criminal Code; another – a no less authoritative textbook on the Particular part of criminal law; the third – likewise an authoritative interpretation in the special monographic literature dedicated to the classification of crimes against property).

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The first illustration: ―As embezzlement ought to be regarded the wrongful retention (non-return) of another‘s property, entrusted to the guilty party with the objective of converting it to his own benefit…† The property can be entrusted to the guilty party in connection with his work (for storage, carriage, temporary use etc.). The guilty party can be endowed on the strength of official position with the right to dispose of the property of another entrusted to him or found in his possession‖ (Kommentariy k Ugolovnomu kodeksu Rossiyskoy Federatsii.9 ed. Resp. editor – Chairman of the Supreme Court of the RF V.M. Lebedev. M., Yurayt, 2010, p. 399). The second illustration – an interpretation of the indicated feature of the corpus delicti in a textbook on criminal law, prepared by authors‘ collectives of the most authoritative departments of criminal law in the scholarly world - those of the M.V. Lomonosov Moscow State University and the O.E. Kutafin Moscow State Law Academy. ―Embezzlement consists of the wrongful retention (non-return) of another‘s property, entrusted to the guilty party for a certain objective… The distinction

between embezzlement and misappropriation [on the one hand] and robbery and other forms of theft [on the other] consists of the fact that the criminal takes property that has been entrusted to him for storage, sale, repair, processing, conveyance, temporary use etc., and this means, is found in his rightful possession, or the guilty party on the strength of official position is endowed with the right to give instructions on account of the use of the given property, which, in such a manner, is found in his authority. The transition from rightful possession to wrongful is exactly what characterises the moment of the commission of the crime. In simple retention – this is the moment when the criminal was supposed to have returned the property, but did not do so. It goes without saying, in so doing all the other objective and subjective features of theft must be present‖. (Rossiyskoye ugolovnoye pravo. Osobennaya chast'. Uchebnik. Volume 2. Under the editorship of prof. L.V. Inogamova-Khegay, prof. V.S.

Komissarov and prof. A.I. Rarog. M., Prospekt. 2006, p. 195). Finally, the third illustration, being a concretisation of the indicated provisions in the special monographic literature with respect to criminal law. ―Property shall be considered

to

have

been

entrusted

if

the

person

is:

a)

its

factual

sic. There should probably be a comma after “guilty party”: …wrongful retention (non-return) of another’s property, entrusted to the guilty party, with the objective of converting it to his own benefit…—Trans. 230

possessor, b) on a certain legal ground and c) is exercising legal powers in relation to it with respect to disposition, management, delivery or storage (in so doing it is not required that the subject have the entire set of these powers, any one of them alone is sufficient‖) (A.I. Boytsov. Prestupleniya protiv sobstvennosti. SPb., 2002, p. 417). Thus are the questions under examination resolved in the doctrine (scholarship) of criminal law. Perhaps another, on this account, interpretation is given by judicial practice, first and foremost in the person of the Supreme Court of the RF? But no. The latter completely shares the position taken with respect to this question by the scholarship of criminal law and published in textbooks, monographs, scholarly articles and commentaries to the Criminal Code. Let us cite the provisions of decree No. 51 of the Plenum of the Supreme Court of the Russian Federation ―On judicial practice in cases of fraud, embezzlement and misappropriation‖ of 27 December 2007. ―The wrongful conversion without exchange for value of property that has been entrusted to a person to his own advantage or the advantage of another person, which has caused damage to the owner or other lawful possessor of this property, should be classified by courts as embezzlement or misappropriation, provided that the stolen property was in the lawful possession or authority of this person, who by virtue of his office or official position, contract or special commission exercised powers of disposition, administration, delivery, use or custody in relation to another‘s property… … The crime of embezzlement is considered to be completed from the moment when the lawful possession of the property entrusted to the person becomes wrongful and the person begins to carry out acts that are directed toward conversion of the given property to his benefit (e.g., from the moment when the person by way of forgery hides the presence with him of the entrusted property, or from the moment of the nonperformance of the person‘s duty to place monetary funds entrusted to this person in the owner‘s bank account… The executor of embezzlement or misappropriation can only be a person to whom another‘s property had been entrusted by a legal entity on lawful grounds

The author of the monograph as of the moment of its publication was a professor of the department of criminal law of the Saint Petersburg State University, at the present time – a judge of the Constitutional Court of the Russian Federation. 231

with a specific objective or for certain activity‖ (Byulleten' Verkhovnogo Suda Rossiyskoy Federatsii [Bulletin of the Supreme Court of the Russian Federation]. 2008, No. 2, p. 6-7). It could not be any clearer. The Supreme Court links the presence of the corpus delicti of embezzlement of another‘s property only with an imperative, in its opinion, condition: the embezzled property must be entrusted to the lawful possession of the thief. There can be no other interpretation of the corpus delicti of the crime under examination, since this requirement is formulated by the legislator itself in the disposition of art. 160 para 1 CC RF. But in the verdict, there is not even a hint that the oil supposedly stolen by the defendants had been entrusted to the rightful possession of the latter by the ―injured parties‖ - the oil production enterprises. Consequently, neither is there a corpus delicti of embezzlement of another‘s property. In such a manner, both the scholarship of criminal law, and judicial practice, unambiguously link the presence of the corpus delicti provided for by art. 160 CC RF with the premise that the theft of another‘s property will be such (i.e. criminal precisely in the form of embezzlement) only in the event that the stolen property had been entrusted to the person who was found to be the thief of this property (and it is a great pity that judges can be found who do not bother to ―look things up‖ either in textbooks on criminal law, or in practical-and-scholarly commentaries to the Criminal Code, or in decrees of the Plenum of the Supreme Court of the RF, but content themselves with their own conceptualisations, which are quite far indeed from the truth). If such a circumstance is established by the court, a basis for criminal liability arises in relation to the defendant, and if not, then such a basis is absent. And such a finding – this is already not the ―fruit‖ of somebody‘s interpretation (including a scholarly one), but a no-alternatives requirement of the criminal law: ―The basis of criminal liability shall be the commission of an act containing all of the features of a corpus delicti provided for by the present (i.e. the CC RF) Code‖ (art. 8). In the verdict with respect to the given case ,there is not a single fact confirming that the property supposedly stolen by the defendants (oil) had been entrusted by the injured party (recognised as such by the court) to the defendants M.B. Khodorkovsky and P.L. Lebedev as the possessors of a majority of the shares of OAO NK YUKOS. Furthermore, this key point for the resolution of the question of the criminality or non232

criminality of the actions of the defendants.was not even examined in the verdict and was not resolved in it. And in such a manner, the fact of the transfer to the defendants of powers with respect to the disposition of the [noun missing in original—Trans.] produced by the oil production enterprises (as recognised injured parties with respect to the case) was not established by the court (nor indeed could it have been, in connection with the absence of this fact in reality). So in what manner was the indicated oil received into the possession of the defendants? The verdict confirms that this took place in connection with the entry by M.B. Khodorkovsky and P.L. Lebedev into sale-and-purchase agreements, entered into by OAO NK YUKOS with the oil production enterprises OAO Yuganskneftegas, OAO Samaraneftegas, OAO

Tomskneft. True, the rightfulness of the indicated agreements is challenged in the verdict and their fictitiousness is being argued. The court deemed the main argument in favour of such a finding to be the indicated sale-and-purchase, as having been effected ―at prices understated many-fold‖. However, the latter is not capable of transforming such agreements into a conscious wilful decision by the oil production organisations (enterprises) to transfer the oil produced by them into the rightful possession of future thieves of this property. Neither real nor fictitious agreements can ―give rise‖ to something that did not take place in reality. Neither a fictitious sale-andpurchase agreement nor one that has been rightfully entered into signifies (nor can it signify) that the corresponding property had been entrusted by the injured parties into the rightful disposition of future ―thieves‖. And the ―mountains‖ of evidence that the sale-and-purchase price was understated cited in the verdict can not change anything in this regard. On the contrary. The absence of such a fact is recorded in the verdict itself: ―The given contracts bore a fictitious character, inasmuch as they included within themselves knowingly false information about how appearing as the purchaser of the oil is OAO NK Yukos. In the meantime, it was reliably known to M.B. Khodorkovsky and P.L. Lebedev and their accomplices that OAO NK Yukos is factually not the purchaser of the oil, while the output is shipped by the oil production enterprises on their own directly to consumers in Russia and abroad.‖ (sheet 13 of the verdict). In such a manner, no matter how you slice it, the acquisition of the oil from the oil production enterprises by way of sale-and-purchase agreements, even though it is the receipt of [this oil] into rightful possession (naturally, for subsequent resale), it is
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not at all [so] on the strength of the fact that this oil had been entrusted by the injured parties to the defendants. Criminal-law significance here is had only by the last part: the produced oil was not entrusted to the defendants (M.B. Khodorkovsky and P.L. Lebedev) as the possessors of a majority of the shares of OAO NK YUKOS, and this signifies the absence in the actions of the latter of the corpus delicti of embezzlement of another‘s property provided for by art. 160 CC RF. The presence in what was done by the defendants of the classificational features of the act imputed to them provided for by art. 160 para 3 (a) and (b) CC RF – ―the use (in so doing) of [their] official position‖ and the ―large amount‖ of what was stolen – is argued in a sufficiently detailed manner in the verdict. However, none of the evidence accepted by the court in this regard has any criminal-law significance. There exists a copybook maxim of the theory of classification. Classificational features acquire criminal-law significance only in connection with the presence in the actions of the guilty party of the features of the main (simple) corpus delicti, i.e. without aggravating (classificational) features. And in connection with the fact that, as has been noted, features of embezzlement of another‘s property as such are absent in the actions of the defendants, the presence of supposedly classificational features of any corpus delicti does not have significance for classification. In this situation, the court allowed an error that is widespread in practice. The prosecution argues, for example, the presence of an ―organised group‖ and transforms, as an example, robbery, fraud etc. (that same embezzlement) into a classified corpus delicti. In so doing, the main thing gets forgotten – the presence of a classificational feature in and of itself does not transform an act that does not contain the features of the corpus delicti of a specific crime within itself into a crime. That is, that same organised group in and of itself is not capable of transforming an act into robbery, fraud, embezzlement, brigandage. In such a manner, the corpus delicti of the crime of theft of another‘s property, entrusted to the guilty party, by way of embezzlement (art. 160 CC RF) that is inculpated to the defendants is absent in their actions. There may, however, arise a question of the presence in their actions of theft of another‘s property in another form (for example, that of fraud, provided for by art. 159 CC RF). However, only one answer is possible to this question, and it is categorically negative. For any theft (in any form, in any way), the presence of the sine qua non features inherent to theft of
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another‘s property is required. These features are formulated in Note 1 to art. 158 CC RF. To them, among others, belong ―seizure and (or) conversion of another‘s property without exchange for value to the benefit of the guilty party or other persons, which causes damage to the owner or other possessor of this property‖. Evidence of both the first and the second is absent in the verdict. Thus, in the verdict it is indicated that the prices at which the oil was being acquired from the injured parties (injured parties in the opinion of the court) under the sale-and-purchase (supply) agreements not only covered the factual cost of the oil, but even exceeded it (for example, pg. 41, 652, 673, 674, 675, 685 of the verdict). So no receipt by the defendants of oil that was without exchange for value for the oil production companies is being spoken of. And in relation to the causing of damage to the owner or other possessor of the property, it ought to be noted that this feature is understood both in the doctrine (scholarship) of criminal law and in court practice as the causing of real pecuniary damage, and not in the form of foregone benefit. This is indicated at in any textbook on the Particular part of criminal law. For example, ―An indispensable feature of the objective side of theft is that it causes direct pecuniary damage to the owner or other possessor of the stolen property. It consists of a reduction in the quantity (the volume) of the property found in the ownership of the injured party, i.e. in the final reckoning, the damage is determined by the cost of the things seized from the guilty party [sic] (monetary funds, securities, etc.). Other negative consequences arising in connection with the seizure of property from the ownership of the injured party, of both a pecuniary (for example, foregone benefit) and a non-pecuniary character (for example, severe emotional trauma), must not be regarded as damage caused by theft‖ (Ugolovnoye pravo. Obshchaya i Osobennaya chast'. Uchebnik. Under the editorship of M.P. Zhuravlev and S.I. Nikulin. 2nd ed. M., Norma, 2008, p. 447). ―A sine qua non feature of the objective side of theft – the emergence of socially dangerous consequences in the form of the causing of direct, real pecuniary damage to the owner or other lawful possessor of the property. Benefit not obtained is not taken into consideration when determining the amount of the damage caused‖ (Ugolovnoye pravo Rossiyskoy Federatsii. Osobennaya chast'. Under the editorship of B.T. Razgil'diyev and A.N. Krasikov.

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Saratov. 1999, p. 151). The position of judicial practice on this account is expressed in a clear-cut manner in decree No. 51 of the Plenum of the Supreme Court of the Russian Federation ―On judicial practice in cases of fraud, embezzlement and misappropriation‖ of 27 December 2007: ―it is imperative for the court to establish whether real pecuniary damage has been caused to the owner or other possessor of the property or damage in the form of foregone benefit, that is un-received incomes, which this person would have received under usual conditions of civil turnover‖ (Byulleten' Verkhovnogo Suda Rossiyskoy Federatsii. 2008, No. 2, p. 6). In the court‘s verdict, the causing to the injured parties (injured parties in the opinion of the court) of real pecuniary damage as the result of their having entered into agreements with the defendants for the sale-and-purchase of the produced oil is not proven. The absence of the indicated sine qua non features of theft of another‘s property allows the assertion to be made that not only is the corpus delicti of embezzlement of another‘s property (art. 160 CC RF) absent in the actions of M.B. Khodorkovsky and P.L. Lebedev, but the corpus delicti of any other theft is as well. What led to the court‘s erroneous finding of criminality in the actions performed by the defendants was the court‘s confusing of transactions permitted by civil law in the sphere of entrepreneurship (civil-law relations) with criminal-law relations (i.e. a crime), which is a violation of art. 14 CC RF, formulating the concept of a crime. The absence of material-law (criminal-law) grounds for issuing a guilty verdict to the defendants signifies both a violation by the court of criminal-procedure legislation, in particular art. 24 para 1 (2) CCP RF (―…[a] criminal case shall be subject to termination‖ in connection with the absence in the act of a corpus delicti) and art. 299 para 1 (1) CCP RF (when issuing a verdict, the court, inter alia, must also resolve the question of whether the inculpated act is a crime). 2. An error by the court in the classification of the acts inculpated to the defendants as legalisations (launderings) of monetary funds and other property, acquired as the result of the commission by them of a crime (art. 1741 para 3 CC RF.

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Also absent in the actions of the defendants is the corpus delicti of legalisation (laundering) of monetary funds or other property, acquired by a person as the result of the commission by him of a crime, provided for by art. 1741 para 3 CC RF. First (and this is the main thing), the criminal law links the given corpus delicti with the legalisation of property acquired as the result of the commission of a crime. Recognised as such a crime by the verdict with respect to the given case was the embezzlement of the oil produced by the injured-party companies (art. 160 para 3 CC RF). However, as has already been analysed, such a criminal-law assessment does not correspond to either the ―letter‖ or the sense of the text of the disposition of art. 160 CC RF, nor to their scholarly and judicial interpretation, but rather is a contrivance, an invention of the court. And for just this one reason alone, the charge against the defendants of having committed the crime inculpated to them (legalisation – laundering of monetary funds or other property) is illegal. Second. The charge of commission of the indicated crime obviously contradicts the verdict with respect to the first case of M.B. Khodorkovsky and P.L. Lebedev of the Meshchansky District Court of the city of Moscow of 16.03.2005. M.B.

Khodorkovsky and P.L. Lebedev were convicted under art. 199 CC RF. Convicted for those same actions. The difference, however, in so doing – is one of principle. Under the first verdict, in contrast with the second verdict, the court deemed the actions of the defendants with respect to the acquisition of oil from the oil production enterprises and its subsequent sale to be rightful. The crime, in the opinion of the court, consisted pursuant to art. 199 CC RF of evasion from the payment of taxes and/or levies from an organisation. And the finding of the guilt of the defendants of this crime rules out their guilt of the commission by them of theft of the oil produced by the oil production enterprises. Thus, in the material ―On some questions of judicial practice with respect to cases of illegal entrepreneurship and legalisation (laundering) of monetary funds or other property acquired in a criminal way‖ (factually being a commentary to decree No. 23 of the Plenum of the Supreme Court of the Russian Federation ―On judicial practice with respect to cases of unlawful entrepreneurship and legalisation (laundering) of monetary funds or other property acquired in a criminal way‖ of 18 November 2004) published in the Byulleten' Verkhovnogo Suda Rossiyskoy
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Federatsii, it is justly asserted that, first,

―all the income received as the result of criminal activity is subject to conversion to the benefit of the state, in connection with which tax can not be assessed on this income, and, second, by agreeing to the imposition of a tax on income received as the result of a crime, the state is legalising the crime itself, as it were‖ (Byulleten' Verkhovnogo Suda Rossiyskoy Federatsii. 2005, No. 2, p. 30). Absolutely correct, as they say, ―every hair in place‖, but it‘s just that the judges, at least those who issued the verdict, do not read the Supreme Court of the Russian Federation‘s monthly. Third, the conviction of the defendants for the embezzlement of another‘s property that is being inculpated to them signifies nothing short of their repeat conviction for the very same acts – for the acquisition of oil from the oil production enterprises and its subsequent resale. As has already been noted, the difference is merely in the criminal-law classification of the deed (in the first situation – for a tax crime, and in the second – for a crime against property). This, first, contradicts art. 50 of the Constitution of the Russian Federation and art. 6 para 2 CC RF based on it It is appropriate to recall that both art. 50 of the Constitution of the RF and art. 6 para 2 CC RF are based on known principles and norms of international law (for example, art. 14 para 7 of the International Covenant on Civil and Political Rights). Fourth, finding the defendants guilty of embezzlement of another‘s property (that of the very same oil production companies), committed in the form of the very, same actions – sale-and-purchase agreements, also contradicts art. 90 CCP RF. Pursuant to it: ―Circumstances established by a court verdict that has come into legal force shall be recognised by a court, prosecutor, investigator or inquiry officer without any additional review, provided these circumstances are not doubted by the court‖.† As has already been noted, the actions with respect to the acquisition by the defendants of oil from the oil production enterprises were recognised as not criminal by the verdict with respect to the first case. It is precisely for this reason that the defendants were convicted for evasion from the payment of taxes from an organisation (under art. 199 CC RF). That is, under the first verdict, the court deemed the factual

circumstances of the case lying at the foundation of the charge (the sale-and-purchase

The given citation is from a previous version of the norm, which was amended by Federal Law No. 383-FZ of 29 December 2009 to read “Circumstances established by a verdict that has come into legal force or by another court decision adopted in civil, commercial or administrative proceedings that has come into legal force shall be recognised by a court, prosecutor, investigator or inquiry officer without any additional review.”—Trans. 238

agreements with the oil production companies) to have been proven. Besides that, these agreements were found to be rightful by the decisions of commercial courts as well. The second verdict, having assessed those same actions as criminal, as embezzlement of another‘s property, and having laid those same factual circumstances of the case (the sale-and-purchase agreements with the oil production companies) at the foundation of the charge, had in essence, contrary to its own assertion, deemed them to have been proven. It ought to be borne in mind that the concept of ―circumstances‖ in the sense of art. 90 CCP RF are [sic] concretised in art. 73 CCP RF as circumstances subject to proving. Attributable to them are both the factual

circumstances of the case (for example, para 1, para 4), and the circumstances characterising the criminal-law assessment of the committed act (for example, para2,para5,para6, para 7). The court found the first circumstances to have taken place ―without additional review‖. However, it changed the criminal-law assessment lying at the foundation of these factual circumstances (were not criminal, became criminal). And herein lies the crux of the discrepancy between the verdict and art. 90 CCP RF. Fifth, by the verdict of the court, the defendants were convicted for the commission of the crime under examination (that of legalisation – the laundering of monetary funds or other property obtained in a criminal way), under particularly aggravating circumstances (the commission of a crime by an organised group). However, as has already been noted during the characterisation of the charge against the defendants under art. 160 para 3 (a) and (b), evidence of the supposed presence of an ―organised group‖ does not have stand-alone criminal-law significance in and of itself and, separate from a connection to the principal corpus delicti of the crime (without aggravating circumstances), does not have any criminal-law significance whatsoever. Therefore, in connection with the fact that, in our opinion, the corpus delicti of legalisation (laundering) of monetary funds or other property acquired in a criminal way as such is absent in the actions of the defendants, the classificational corpus delicti of this crime, supposedly committed by an organised group (art. 1741 para 3 CC RF), is absent as well. Finding: The verdict of the Khamovnichesky District Court of the city of Moscow of 27 December 2010 with respect to the case of M.B. Khodorkovsky and P.L. Lebedev is illegal and subject to repeal due to the absence in their actions of the
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corpora delicti of the crimes inculpated to them. It was issued with gross violation of the Constitution of the Russian Federation (arts. 15,50), the Criminal Code of the Russian Federation (arts. 1,6,8,14,158,160,1741), the Code of Criminal Procedure of the Russian Federation (arts. 24,90,299), universally accepted principles and norms of international law (art. 14 of the International Covenant on Civil and Political Rights), scholarly (doctrinal) and judicial (including the clarifications of the Plenum of the Supreme Court of the Russian Federation) interpretation of the indicated normative acts (domestic and international-law).

A.V. Naumov Professor, doctor of juridical sciences, head of the department of criminal-law disciplines of the Academy of the Procuracy-General of the Russian Federation, member of the Consultative-scholarly council of the Supreme Court of the Russian Federation

12 July 2011

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Expert: O.M. Oleynik head of the Department of Entrepreneurial Law of the Faculty of Law of the NRU1 ―Higher school of economics‖, Doctor of Juridical Sciences, Professor

1

NRU – National Research University.—Trans. 241

Report

On the civil-law assessment of the circumstances of the criminal case charging M.B. Khodorkovsky and P.L. Lebedev with the theft of another’s property entrusted to the guilty party, with the use of one’s official position, group in a large amount. by an organised

I, the undersigned Oxana Mikhailovna Oleynik, on the basis of my professional knowledge, taking into account the content of the general principles and norms of Russian law, acting responsibly, in good faith, objectively and properly, have prepared the present report. I am a professor, a doctor of juridical sciences in civil, entrepreneurial and banking law. At the present time I occupy the post of head of the department of entrepreneurial law of the faculty of law of the National Research University – Higher School of Economics, and also as professor in ordinary of this university. A series of books and articles on problems of civil, entrepreneurial and banking law have been written by me, From my point of view, the following circumstances are subject to civil-law assessment:

1.

The structure of relations within YUKOS, which is designated

as an organised group in the verdict and bill of indictment.

The following definition is given to the subject of the crime in the issued verdict: The administrative personnel of ZAO Rosprom, which belonged to M.B. Khodorkovsky, P.L. Lebedev and the other members of the organised group, was used by them for management of OAO NK Yukos and its subsidiary companies OAO Yuganskneftegas and Samaraneftegas. With this objective contract No. 001 – yu-r
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[sic] On Management of the Joint-Stock Company was entered into, according to which [contract], ZAO Rosprom became the management company for OAO NK Yukos with the transfer to this closed joint-stock company of all the powers of the executive bodies of OAO NK Yukos under the Charter, including all questions of dayto-day management of the company‘s activity. The court classified the given contract as wrongful and contradicting the fundamental principles of civil law. In order to assess the legal nature of the organisational legal relations that were evolving, one needs to bear in mind certain general information of both a legal and management character. From legal positions, it ought to be taken into account that according to Russian law, legal entities shall acquire civil rights and shall take civil duties upon themselves through their bodies, acting pursuant to the law, other legal acts and the incorporation documents (art. 53 of the Civil Code of the Russian Federation –

hereinafter referred to as CivC RF). The procedure for the appointment or election of the bodies of a legal entity shall be determined by the law and the incorporation documents, in the given situation the charter of Yuganskneftegas as an open jointstock company. Pursuant to art. 103 CivC RF, as well as in accordance with special Federal Law No. 208-FZ ―On joint-stock companies‖ of 26 December 1995, the bodies of an open joint-stock company shall be: a) b) c) a general meeting of its shareholders. a board of directors (a supervisory board). the executive body of the company, which may be collegial (a

management board, a directorate) and/or one-man (a director, a general director). The exclusive competence of a general meeting of shareholders is established by the law, as are the powers of the other management bodies. The executive body shall implement the day-to-day leadership of the activity of the company and shall be accountable to the board of directors (the supervisory board), if it exists, and to the general meeting of shareholders.

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Upon the decision of a general meeting of shareholders, the powers of the executive body may be transferred by an agreement to another commercial organisation or to an individual entrepreneur-manager (art. 103 CivC RF, art. 69 para 1 LoJSC). Such a practice of transferring the powers of the executive body is

widespread, especially in situations of the creation and provision for the functioning of vertically integrated companies. For example, management companies function in unit investment funds, bank holding companies, pension funds and so forth. Inasmuch as the possibility of monopolisation of the market arises during the transfer of the powers of the executive body of one legal entity to another legal entity, the preliminary consent of the anti-monopoly agency is required for entering into the indicated agreements (art. 18 of the Law on Competition and Restricting Monopolistic Activity on Commodities Markets). As applies to YUKOS, pursuant to the requirements of Russian legislation, the powers of the executive body, for example [of] OAO Yuganskneftegas, were transferred to ZAO Yukos Exploration and Production under an agreement of 23 September 1998. The conditions of the agreement were confirmed by the OAO Yuganskneftegas board of directors (minutes No. 9 of 23 September 1998). The transfer of the powers of the executive body upon the petition of ZAO Yukos Exploration and Production was approved by the State Anti-Monopoly Committee of the Russian Federation (report No. KP/6518 of 17 September 1998). The right to enter into such agreements is confirmed by the fact that pursuant to art. 421 CivC RF, parties may enter into an agreement, both one that is provided for, and one that is not provided for by laws or other legal acts, from which such an agreement does not become wrongful on the strength of general dispositive legal regulation. Civil legislation is applied to such agreements pursuant to art. 6 CivC RF by the rules of analogy of the law. From the point of view of the organisation of management, it is imperative to take into account that in the Fundamental Principles of State Policy for the Reforming of Electric Power Generation, elaborated by a working group of the Presidium of the

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State Council of the Russian Federation for Questions of the Reforming of Electric Power Generation, vertically-integrated companies are called one of the most important ways of ensuring the reliability of electricity supply. In so doing, it is indicated in para 17 of the Fundamental Principles that the existence of verticallyintegrated companies is not an impediment to the establishment of market relations in electric power generation1. A vertically integrated group of companies, based on relations of ownership and management control, is regarded as the basic model, providing for the stabilisation of the reproduction [sic] cycle of the core companies, and equally also the prevention of sharp fluctuations of the political and economic situation, unavoidable given the narrow specialisation of a holding company at producing output of one type. It is worth noting that many large domestic holding companies represent something of a combination of the sectoral and vertically integrated types of amalgamation. Thus, a situation when a certain oil hyper-company tries to have enterprises along the entire chain of the reproduction cycle in the composition of the holding company - from geological exploration to the sale of the products of the final refining of primary energy carriers to retail consumers at its own automotive filling stations - is typical. In so doing the core fragment of the holding company (in the given situation this is oil production proper) is represented not by one company, but by a group of companies in different regions of the country2. The development of the oil and oil products market in Russia is impossible without the development of organised trade. The oil market at the modern-day stage is a typical oligopoly, is characterised by a preponderance of vertically integrated structures and an absence of transparent price-formation mechanisms. Supply on the oil products market in the absolute majority of the regions of the RF is formed by several large vertically integrated oil companies (VIOCs) through their marketing units

1

See: order N 9-rp of the President of the RF "On the composition of the working group of the Presidium of the State Council of the Russian Federation for Questions of the Reforming of Electric Power Generation" of 07.01.2001 // Sobranie zakonodatel'stva RF. 2001. N 2. Pg. 170 2 Osipenko, O.V. Rossiyskiye kholdingi. Ekspertnye problem formirovaniya i obespecheniya razvitiya. M.: Statut, 2008. 368 p. 245

and subsidiary firms. As a rule, in each region, large VIOCs control from 60 to 90% of the market for various commodity groups of oil products3. Appearing at the Kennan Institute, Washington, on 29 May 2009, chairman of the board* of the Union of Oil & Gas Producers of Russia, chairman of the board of directors of the Institute of Energy Strategy, doctor of economic sciences Yu.K. Shafranik said: ―that we are found on the threshold of a substantial transformation of the oil-and-gas business. Therefore, this business is insistently expanding the sphere of its application, and rightly so, is aspiring to use raw material (and not only the hydrocarbon kind) more comprehensively, is integrating itself with machine-building enterprises and those producing other output (both the raw-materials and the deeply processed kind). Serving as an example of that are such giants of the world energy market as BP and Shell, as well as a series of vertically-integrated oil companies of Russia. Oil and gas companies thereby first become vertically integrated oil-and-gas companies, and subsequently will become global energy structures, encompassing all the spheres connected with energy provision on practically the entire planet with their activity 4. Besides that, it ought to be taken into consideration that factually, at the present time there are three categories of participants in the oil products market: producers, wholesale traders and end users. Attributable to producers are oil refineries and gas processing plants, petrochemical combines, petroleum oils plants. To this category can also be attributed enterprises engaged in processing. * At the present time, the primary owners of approximately 85% of oil products are companies conducting processing at oil refineries, including also the refining of oil in integrated companies. The remaining 15 % belong to producers, but this is for the most part payment for processing.

3

Pravo i biznes v usloviyakh ekonomicheskogo krizisa: opyt Rossii I Germanii / resp. ed. Ye.P. Gubin, Ye.B. Latus. M.: Yurist, 2010, 264 p. * The term “chairman of the board” does not necessarily mean “chairman of the board of directors” in Russian; unusually, just what kind of board is being referred to is not specified in the text.—Trans. 4 "Global Energy and Russia: Key Issues" in the Kennan Institute, Washington, 29.05.2009 // http:// www.energystrategy.ru/ present/ present.htm; see likewise: "Energetika i ustoychivoye razvitiye". Speech, published 19 April 2010 by the UNO Development Program // OON v Rossii. 2010. N 2(69). * From the context elsewhere in this text, the Russian word protsessing may signify companies that do not own their own oil fields or refineries, but rather hire the services of a refinery on a tolling basis to refine oil they have purchased on the market, and then sell the finished product at wholesale or retail.—Trans. 246

The oil refining sector is represented by large vertically integrated oil companies. Correspondingly, oil products markets, characterised by large purchases and a limited number of purchasers were categorised based on the results of economic research as markets with a medium level of concentration, characterised by Herfindahl-Hirschman index values in the range of 1400-2000. As is noted in the literature, an analysis of the domestic markets for petrochemical products reveals a headlong capture of the markets by enterprises under the control of OAO Gazprom. The aggregate share of enterprises on the domestic SKI-3 market under the control of OAO Gazprom: ZAO Kauchuk and Togliattikauchuk – over four years it has increased from 51.6 % to 61 %. Such headlong growth is explained by the fact that as of the present moment, Sibur controls 41 % of the tyre market in Russia; correspondingly, provision of its own tyre plants with isoprene rubber is implemented from ZAO Kauchuk and Togliattikauchuk. An analogous arrangement of squeezing out independent enterprises from the domestic market by Gazprom enterprises can be observed as well on the markets for styrene and other organic products. Such an architecture of the oil-and-gas and energy market is recognised not only in the system of Russian law, but also at the international level. Thus, EU Directive No. 96/92/EC of 19 December 1996 assumed the possibility of retaining vertically-integrated companies under the condition of mandatory separate conducting of financial accounting (art. 14 para 3 of the EU Directive) and provision for an absence of exchange of information within a vertically-integrated company during the implementation by it of activity in the capacity of a centralised seller and activity with respect to generation and distribution, with the exception of the information imperative for fulfilling the functions of a centralised seller (art. 15 para 2 of the EU Directive).* Along this path, in particular, went Germany. Vertical integration has likewise been retained in France and Switzerland5.
*

Actual text of Art. 14 para 3: “Integrated electricity undertakings shall, in their internal accounting, keep separate accounts for their generation, transmission and distribution activities”; Art. 15 para 2: “Member States shall ensure that there is no flow of information between the single buyer activities of vertically integrated electricity undertakings and their generation and distribution activities, except for the information necessary to conduct the single buyer responsibilities” – Trans. 5 See: Svirkov, S.A. Dogovornye obyazatel'stva v elektroenergetike. M.: Statut, 2006. 253 p.; Kudryavy, V. ―Germaniya reformiruyet energetiku po umu‖ // Promyshlennye vedomosti. 2001. N 7 - 8 (18 - 19). 247

Everything that has been set forth above and is confirmed by the opinions of specialists allows the following conclusion to be formulated about the organisational relations in YUKOS: a) These relations are in compliance with civil legislation, which permits entering into agreements both provided for and not provided for (art. 421 para 2 CivC RF), to which the norms of the CivC RF may be applied by analogy the laws [sic], in particular norms about the rendering of services with exchange for value (ch. 39 CivC RF); b) a system of dependent legal entities in and of itself can not be regarded as a criminal group, inasmuch as the state of dependency is directly provided for by legislation; b [sic]) the structure of legal relations that has evolved in a vertically-integrated company is universally accepted both in the Russian and in the international practice of the production and sale of oil and oil products.

2.

The legal nature of a master agreement, entered into between

the parent company YUKOS and its subsidiary companies.

Reference is made on numerous occasions in the verdict to master agreements entered into between individual legal entities entering into the YUKOS system. For example, given in the capacity of such is a reference to [―]master agreement No. Yu84-01/1888А of 04 November 1998, paragraph 3.1 of which stipulates that starting from the date of concluding the Agreement and up to the date of its termination, OAO NK Yukos and OAO Tomskneft VNK shall undertake to regularly, at least once a month, sign the agreements under which OAO Tomskneft VNK shall transfer the possession of oil to OAO NK Yukos and render services envisaged by the operating procedure to ensure marketable quality of oil, whereas OAO NK Yukos shall accept and pay for the products and services provided by the seller[‖].* Such agreements are known to modern-day Russian business practice and have been discussed on numerous occasions in the legal literature. Such agreements are
*

The text between the inserted bracketed quotation marks *“+ and *”+ is an unattributed direct citation from page 216 of the verdict in the indicated case.—Trans. 248

usually recognised as framework agreements, which bear an organisational character. At the present time, the concept of a framework agreement is absent in the CivC RF, but it is given in the Concept of the Development of the Civil Legislation of the RF, in which a separate article is set aside for framework agreements. It is indicated here that alongside the preliminary agreement construction, perhaps the so-called framework agreement ought to be codified in the form of a stand-alone agreement construction, not giving rise to a obligation to enter into an agreement in the future (which is typical for a preliminary agreement), but rather representing an agreement that is already entered into, but the conditions of which are subject to application and detailing in the future (an agreement with conditions that are ―open‖, that is subject to coordination in the future). It is underscored in the legal literature that the framework agreement has been applied in practice for a long time, in particular when entering into agreements for legal services, for the delivery of goods and others; however, there has not been uniformity in understanding the essence of such an agreement and in correlating it with an organisational agreement6. Thus, by a framework agreement L.G. Yefimova understands one the objective of which is the organisation of lasting business ties in the form of a flow of diverse business relations, for the attainment of which it is required to enter into (as a rule, between those same parties) agreements - attachments, the individual conditions of which are coordinated in the base agreement7 . Other scholars, in their turn, regard the framework agreement [soglasheniye] (framework agreement [dogovor]) as one of the kinds of organisational agreements 8 The legal nature of such relations is also spoken of in those situations when organisations determine the general provisions of joint activity for a specific interval of time and in a specific field. Such agreements contain the general contours of the cooperation, which are specified more precisely in the process of the contractual relations, and have various names: framework agreements, organisational contracts,
6

Kozlova, Ye.B. ―Organizatsionnye dogovory: ponyatiye i klassifikatsiya‖ // Zakony Rossii: opyt, analiz, praktika. 2011. N 5. P. 3 - 9. 7 See: Yefimova, L.G. Ramochnye (organizatsionnye) dogovory. M.: Wolters Kluwer, 2006. P. 3. 8 See: Morozov, S.Yu. ―Vzaimosvyaz' grazhdansko-pravovykh organizatsionnykh i imushchestvennykh dogovorov‖ // Pravo i gosudarstvo: teoriya i praktika. 2010. N 8. P. 54; Raynikov, A.S. Dogovor kommercheskoy kontsessii. M.: Statut, 2009. P. 57. 249

master agreements and others. What unites all these agreements is the objective of entering into them, aimed at the organisation of lasting ties between the parties for enhancing the economic effect from interaction. An organisational agreement is used when the parties want to specify actions well in advance for a previously agreed upon period, for example for a year, with respect to a series of their mutual relations. In so doing, the question of coordinating the real volume is pushed off into the future. It is assumed that for a concrete batch, for that or the other stage, the parties are going to separately coordinate certain volumes and characteristics of goods and work each time around. Correspondingly, an agreement is entered into that contains standardised boilerplate conditions, and then so-called attachments, specifications or other additional agreements are drawn up, specifying individual conditions more precisely (concrete terms of execution, volume and quantity, the list of executors, stages of execution etc.)9. One of the elements of the master agreements that were entered into was an agreement about how the transfer of the right of ownership shall take place at the moment of the production of a certain raw material (oil-well fluid). An assessment of this condition can be carried out taking into account the requirements of art. 223 CivC RF, which is granted [sic] the parties the right to determine the moment of the arising of the right of ownership. The transfer of the right of ownership is implemented at the moment of the transfer of an item only when the parties or the law have not determined otherwise. Therefore, the established condition fully complies with the CivC RF. Consequently, the master agreements that were entered into likewise can not be regarded as wrongful, inasmuch as they comply with the general principles of civillaw regulation and are aimed at supporting and coordinating lasting business ties. The moment of the transfer of the right of ownership established in them complies with the requirements of the CivC RF.

3.

The legal nature of sale-and-purchase agreements entered into

and executed, which are designated as fictitious in the verdict.
9

Duginov, D. ―Oformleniye dolgosrochnykh dogovornykh otnosheniy s pomoshch'yu ramochnogo dogovora‖ // Korporativny yurist. 2010. N 5. P. 35 250

A classification of a multitude of oil sale-and-purchase agreements as fictitious is contained in the verdict, which requires a special assessment. For example, it is noted in the verdict that [―]in January 2000, the principal organisation the fictitious sale-andpurchase transactions and the right of ownership to all of the oil production of OAO Yuganskneftegas, OAO Tomskneft VNK and OAO Samaraneftegas were made out to continued to remain OAO NK Yukos, which in its turn did transfer the entire volume of the stolen oil to OOO Alta-Trade, which was under the control of the members of the organised group[‖].* In other situations, what is being spoken of is that the price of the oil was established groundlessly in such fictitious agreements. In order to assess the given finding, one needs to look at the categories of civil law, inasmuch as what is being spoken of is a civil-law agreement. It is easy to notice that the court got confused by civil-law concepts and made use of categories that do not have the corresponding legal load factor. This is possibly both in view of a low legal skill level and a subjective unwillingness to take existing positive regulation into consideration. It can be assumed that in the given situation, what might have been spoken about is two kinds of civil-law consequences of the transactions being entered into: a) about bogus transactions, effected for appearances, that are provided for by art. 170 CivC RF. Such transactions are considered invalid from the moment they are entered into and only a demand to apply the consequences of the voidness of such transactions is raised in court procedure. Moreover, a court has the right to apply such consequences at its own initiative (art. 166 CivC RF). About what consequences can one speak? It is noted in the legal literature that in the event that a participant in civil turnover effects a fictitious transaction, which is invalid on the strength of art. 170 CivC RF, such a transaction shall not entail civil-law consequences in the form of a transfer of the right of ownership (a transaction-abuse of a taxpayer)10. Tax consequences do not arise either in this situation. Thus, on the strength of art146 TC RF, the object of VAT is recognised as being a sale, under

*

The text between the inserted bracketed quotation marks *“+ and *”+ is an unattributed direct citation from page 17 of the verdict in the indicated case.—Trans. 10 Shelkunov, A.D. ―Kategoriya zloupotrebleniya nalogoplatel'shchika v rossiyskoy arbitrazhnoy praktike I praktike Suda YeS‖ // Pravo i ekonomika. 2010. N 11. P. 70 - 74. 251

which, pursuant to art. 39 TC RF, is understood a transfer of the right of ownership. Correspondingly, if the right of ownership has not been transferred, inasmuch as the transaction turned out to be bogus, then neither does the object of VAT arise. Here there arises one of the main legal contradictions with respect to the YUKOS case. It consists of the fact that juridico-technically, the two verdicts

contradict one another. If one proceeds from the given verdict and recognises that all of the oil produced and sold under bogus transactions effected for appearances without a transfer of the right of ownership to the corresponding organisations and persons was in actuality stolen, then tax obligations can not arise for the persons who stole this oil. It is unlikely in principle that one can substantiate an assertion about the right of a state to establish a tax on what has been stolen, in any legal regime. But if one is to consider that the first verdict issued in relation to the corresponding persons, convicted for tax evasion, is rightful, then the object of taxation has to be found in legitimate legal turnover, i.e. the right of ownership to it must transfer in the established procedure; the fact of a proper sale, giving rise to tax obligations, must be recorded. Otherwise it is imperative to recognise the first verdict as wrongful and to refund all the received taxes collected in connection with the sale of the oil, which, as it turned out, had been stolen. In other words, in the one situation the court said that the oil had been sold, and convicted for non-payment of taxes, but in the other indicated that the oil had been stolen, and convicted for theft. As a result, it turned out that the state had collected a tax for theft. B) As applies to the given circumstances of the case, one can speak of entering into an enfettering transaction, provided for by art. 179 CivC RF. As is known, transactions entered into on conditions extremely disadvantageous for oneself are regarded as such. Close to them are also transactions effected under the influence of the ill-intentioned agreement of representatives of one side with the other side as well. The problem with applying these consequences to the agreements under examination consists of the fact that the invalidity of such transactions can be recognised by a court only upon a claim by the injured party, i.e. such transactions are considered to be challengeable, and until the injured party raises the corresponding demands in court, these transactions are considered valid.
252

Consequently, prior to applying the consequences of the invalidity of challengeable transactions, it is imperative to recognise them as such in the established procedure. Neither in the verdict, nor in the case file materials presented for

assessment, is there such information. And this signifies that a juridically literate court can not recognise such transactions as invalid and apply the corresponding consequences. Needed for such a finding is a claim, for example by shareholders who did not receive a certain profit in connection with the effected transactions, or other injured parties.

4.

The correlation of the issued verdict to previously adopted

court decisions

The raising of the given question is connected with the fact that in the process of investigating and examining the criminal case, in the verdict itself the investigation and the court referred on numerous occasions to various previously adopted court decisions. It is known that the correlation of court decisions is a rather complex and not unambiguously resolvable problem in modern-day Russian law. For its resolution, it is imperative to first look at RF Constitutional Court ruling No. 193-O-P of 15 January 2008, adopted "With respect to the appeal of citizen Tatevos Romanovich Surinov against a violation of his constitutional rights by article 90 of the Code of Criminal Procedure of the Russian Federation". This act of the CC RF contains an indication that ―the factual circumstances that are examined and established in the judicial acts of a commercial court implementing civil judicial proceedings pursuant to the competence determined by the Constitution of the Russian Federation and the Code of Commercial Litigation Procedure of the Russian Federation must be taken into consideration during the examination of a criminal case, whereas circumstances confirmed by a commercial court bearing witness in favour of the accused may be refuted only after the executable judicial act of the commercial court that has come into legal force has been vacated in the procedures provided for

253

this.

Anything else would not correspond to the Constitution of the Russian

Federation and the rules of proof established on its basis by criminal procedure legislation‖. But in the verdict with respect to the given case, it is noted that [―]as has been established in the course of the court hearing, commercial courts made their decisions proceeding from the assumption that concluding a master agreement the parties acted within the framework of Law since, according to Article 209 of the Civil Code of the Russian Federation, an owner is entitled to perform any actions in respect of his property at his discretion, including to alienate it. However, the commercial courts, having being misled, ‗came‘ to the conclusion that the production companies concluding the master agreements with OAO NK Yukos were independent parties to the transaction, and therefore the reasons of the courts when they were making their decision were that the parties had carried out oil purchase-and-sale transactions. In view of this, the courts did not find grounds to find the agreements concluded between the respondents to be bogus or sham transactions, assuming that the parties were free in their determination of the conditions of the contract concerning the payment for the services. At present, circumstances have been established that were not known to the commercial courts and to the plaintiffs and were distorted by the respondents in those court proceedings, that is by representatives of the legal department of OOO Yukos who acted on behalf of the production enterprises[‖].* If one proceeds from this, then, being guided by the instructions of the CC RF, both the prosecutor‘s office and the court should have first attained the repeal of the previously adopted court decisions in the established procedure on various grounds, and only after this issued the verdict being analysed. But otherwise, it turns out that court decisions recognising the corresponding agreements as lawful and a court decision proceeding from the premise that the given agreements are void retain their legal force concurrently. Such a discord can not exist in a rule-of-law judicial system. 5.
*

The legal nature of transfer pricing.

The text between the inserted bracketed quotation marks *“+ and *”+ is an unattributed direct citation from pages 621-622 of the verdict in the indicated case. There are a number of other such direct but unattributed citations from various pages of the verdict in the given document, although not all of these have necessarily been identified in the course of the translation and correspondingly marked.—Trans. 254

The addressing of this question is connected with the fact that in the verdict of [sic] the court on numerous occasions cites data about how the information about the ―parties‖ having agreed on the oil price was deliberately false in the agreements. Thus, the court underscores that here was no such agreement de facto and participants of the organised group led by M.B. Khodorkovsky, P.L. Lebedev and other members deliberately understated the oil price several-fold versus the real market price without any economic necessity whatsoever. The transactions entered into were thereby

consummated wrongfully. This allowed the members of the organised group, acting on behalf of the management organisations, but contrary to the interests of OAO Yuganskneftegas, OAO Tomskneft VNK and OAO Samaraneftegas, to wrongfully – not involving exchange for value and without provision of the corresponding payment – convert the oil entrusted to them to their benefit, having secured the transfer of the output onto the balance sheet of sham companies under their control.* The first thing to which it is imperative to bring attention is the fact that at the present time in our country there is no real market price for oil, inasmuch as prices for it are formed not in those conditions that are required. As is known, a market price forms under the conditions that are formed in art. 3 of the Law on Appraising Activity. One such condition is the presence of the object on the open market by means of a public offering, i.e. the presence of exchange trading. As is known, in the scales of our country this does not exist to the present time. Price-formation for oil and oil products is implemented in a rather complex manner taking into account the fact that the right to form prices by agreement is granted to the parties (art. 424 CivC RF). Sticking out of the general mass of prices are the prices that oil refineries themselves set for their own oil products and which, as a rule, are higher than the prices of companies conducting processing. Somewhat lower are the prices for oil products released by the marketing units of integrated companies. Medium and small specialised companies conducting processing at oil refineries have the lowest prices of all. Appearing in the capacity of wholesale traders are the tank farms of oil product provision enterprises, traders, banks, financial
*

The given paragraph includes unattributed direct citations from pages 655, 12, and 35 of the verdict in the indicated case.—Trans. 255

companies. They either work in the composition of integrated companies, or conduct processing, or resell oil products acquired from the primary owners. The end users of oil goods - this is industry, agriculture and transport, as well as the retail chain of oil product provision enterprises, both those split up by companies and the quite numerous independent enterprises. Each category of participants in the oil market is united by common interests and aspires to occupy a certain position on the market. Thus, the owners of oil goods, especially the traditional producers, aspire to dictate their price to the market, which they justify by production costs. Wholesale traders provide for commodity turnover between regions and import of oil products, which promotes competition, the reduction and levelling off of prices. End users are interested in a reduction of the wholesale price and an increase in the retail price with the objective of increasing their profit [sic]. Extremely important for the effective functioning of the Russian oil complex was the creation of an interest on the part of enterprises in combining efforts with respect to the production of oil, its refining and marketing with the objectives of economising on costs of production and introducing new technologies. One of the forms of providing for such a mutual interest was the formation of vertically integrated oil companies in the form of joint-stock companies with the inclusion of transport and oil product provision enterprises. The movement of oil within such above-mentioned companies is implemented in accordance with so-called transfer pricing, the general rules of which are formed in international trade. Thus, in the context of international trade, a transfer price is determined as the price established during trade in goods and services in intra-firm relations, i.e. during trade between the structural units of a single enterprise and its affiliated persons found in various countries11 . In a more expanded view, a transfer price is regarded as the price established between associated organisations, at which one organisation realises (transfer) goods, material assets (intangible property) and provides services to another associated
11

Nepesov, K.A. Nalogovye aspekty transfertnogo tsenoobrazovaniya: sravnitel'ny analiz opyta Rossii i zarubezhnykh stran. M.: Wolters Kluwer, 2007. 304 p. See likewise: McCarten, William J. International Transfer Pricing and Taxation. Tax Policy Handbook. Tax Policy Division FAD IMF Washington, D.C., 1995. P. 221.; Raymonds-Moller P. ―Transfer pricing rules and Competing Governments‖. Oxford econ. papers. N.S., Oxford, 2002. Vol. 54. N 2. P. 230. 256

organisation (para 11 of the introduction to the OECD Guidelines of 1995). * However, the following presents itself as the most successful definition: ―Transfer pricing consists in the manipulation of expenditures, incomes and costs in transactions between ‗connected‘ (related) persons in a way that differs from those that would have been used in operations performed on normal market conditions, with the objective of obtaining a tax advantage (tax benefit)‖12* Transfer pricing exists not only in foreign-economic legal relations. Transfer prices are applied in relations between economic agents of one and the same tax jurisdiction that are ―connected‖ with one another on one way or another, and sometimes even in relations between formally independent counterparties.

Characteristic of national transfer pricing , in the same way as of the international as well, is the use of its mechanisms in the main for the objectives of minimising tax payments. The principal objective of applying transfer prices is the ―transfer‖ of the tax base to an affiliated person found in a more favourable tax or other administrative regime. What is being spoken of is various tax preferences, in particular of the existence of the status of a resident of an offshore zone, the granting of tax holidays, the application of preferential tax rates, the right to use other tax advantages. In so doing, such a transfer, as a rule, is implemented by way of manipulation of the price of transactions. It is underscored in the legal literature that transfer prices are used everywhere by transnational companies and vertically integrated corporations not only with the objectives of tax optimisation, but also as a tool for managing financial resources. In connection with this, it is imperative for the state not to uproot the given legal-andeconomic phenomenon, but to regulate its processes. The objective of legal regulation

*

Actual text from paragraph 11 of the Preface to the 2010 revision of the 1995 OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations: “Transfer prices are the prices at which an enterprise transfers physical goods and intangible property or provides services to associated enterprises” – Trans. 12 Velloso F.C., Muller Brigagao G.A. Volume LXXVII Cahiers de Droit Fiscal International, International Fiscal Association, 1992. P. 313. * Actual text from IFA Cahiers 1992 - Vol. 77a. Transfer pricing in the absence of comparable market prices: “Transfer Pricing consists in the manipulation of costs, income and expenses in transactions carried out between related companies, in a way that differs from the one that would be adopted in normal market operations, with the aim of gaining a tax benefit” – Trans. 257

of transfer pricing must be to retain a proper taxable base, as well as to create equal conditions for doing business for good-faith taxpayers and persons abusing the right to freely establish the price of transactions, on account of eliminating the tax advantages obtained by bad-faith taxpayers. In such a manner, both the fiscal and the regulatory functions of tax are accomplished when the given principles are being complied with. In Russia at the present time this function is accomplished by arts. 20 and 40 TC RF, as well as those of [sic] other norms connected with the procedure of taxation in conditions of the application of transfer prices. But these norms, as the majority of specialists in the given field note, does [sic] not create the conditions for effective tax administration, aimed at reducing budget losses from the avoidance (minimisation) of taxes collected at ad valorem rates. Besides the conceptual differences between the Russian institution of tax review of the prices of transactions and international practice, the complexities of its application are conditioned by flaws in the legal engineering of the corresponding norms. Besides doubts [and] ambiguities, art. 40 TC RF contains norms that contradict one another. Such a situation violates the principle of certainty and stable conditions for doing business in tax legal relations, as well as creating favourable soil for the arbitrary interpretation of tax norms and, as a consequence, stimulating administrative-and-judicial arbitrariness and corruption. As a result, the activity of the application of the law becomes unpredictable and nontransparent, which de-stimulates the economic activeness of subjects of turnover and lowers the investment attractiveness of the country. Control is implemented by the tax agencies only for tax objectives and does not impose the prices at which partners must effect transactions. The concrete conditions of agreements - a matter for the seller and the buyer. Along with that, such rules can not by be taken into account in business practice when transactions are being entered into. After all, as is noted in the literature, in the absence of clear-cut legislative rules, such control can substantially affect the investment climate in the country, since not a single organisation conducting entrepreneurial activity can state with confidence that

258

its prices are not going to be challenged by the tax agencies13. As is known, the principal reason for introducing control over the prices of transactions has been the establishment of understated prices in transactions between interdependent persons. Pursuant to art. 20 para 1 TC RF, relations of interdependence arise in situations of: a) the participation of one organisation in another, when the share of such participation exceeds 20%; b) the subordination of one person to another through a long-term situation; c) the estate of persons in marital relations, in relations of kinship and in-law, adopter and adoptee, as well as guardian and ward. Along with that, pursuant to art. 20 para 2 TC, a court may find persons to be interdependent on other grounds as well, if their relations could affect the results of transactions with respect to the sale of goods. Such a formulation gives the opportunity for the tax agencies to treat the concept of ―interdependent persons‖ very broadly. And indeed, in trials the courts have often agreed with very many grounds advanced by the tax agencies as a factor in the interdependence of persons which, in their opinion, could have affected the results of transactions with respect to the sale of goods. This has led to a destabilisation of civil turnover. In its ruling No. 441-O of 4 December 2003, the Constitutional Court of the RF gave clear-cut criteria for interdependence: first, this is the presence of an objective danger of the relations of the parties affecting the results of the transaction; and second, a concrete substantiation for the interdependence being imputed to the parties to the transaction must be indicated in any legal act. But the problems of control over transfer pricing have not become fewer in principle. The fundamental problem – this is, as has already been noted, determining the market price. Pursuant to art. 40 para 11 TC, when determining the market price of a good it shall be imperative to make use of official sources of information and exchange quotations. In so doing, the legislator did not specify more precisely just what are considered to be official sources. This has given rise to a large quantity of court disputes. As concerns exchange quotations, a very small number of goods

13

Meteleva, Yu.A. Tovarny oborot. Pravo. Praktika. Tendentsii regulirovaniya. M.: Yurisprudentsiya, 2008. 296 p. Khamenushko, I.V. ―Finansovy kontrol' nad transfertnymi tsunami // Finansovoye pravo. 2005. N 6. 259

circulates on exchanges, first and foremost this is equity instruments and certain raw material goods. insignificant. What has been said allows a conclusion to be formulated about how transfer pricing can be regarded as a basis for advancing a reproach concerning the correctness and substantiation of taxation. In so doing, a decision of the tax agencies to change the price with respect to those or the other agreements is imperative. But transfer pricing is not a mechanism for theft of a good transactions with which are subject to taxation, inasmuch as if the good is stolen, then in what manner the price for it for the purposes of taxation had been formed does not have significance. Not to even mention the fact that theft can not, we shall underscore one more time, be regarded as an operation with a good that is subject to taxation. Moreover, the volume of exchange trade itself in Russia is

General finding

The verdict as issued contains within itself a multitude of legal errors and inaccuracies, violates a series of civil-law norms, completely ignores court decisions issued earlier both by a court of general jurisdiction and by commercial courts, and violates the requirements of the Constitutional Court of the RF.

Doctor of juridical sciences, professor O.M. Oleynik

260

Эксперт A.D. Proshlyakov head of the Chair of Criminal Process of the Ural State Law Academy, Doctor of Juridical Sciences, Professor

261

To the Presidential Council of the Russian Federation for the Development of Civil Society and Human Rights

Expert report of the chair of criminal process of the Ural State Law Academy with respect to the criminal-procedure aspects of the verdict of the Khamovnichesky District Court of the city of Moscow of 27 December 2010 in relation to Mikhail Borisovich Khodorkovsky and Platon Leonidovich Lebedev and other criminal case file materials

262

1. The court violated the requirements of art. 252 CCP RF on the limits of court proceedings

Article 252 CCP RF establishes that:  Court proceedings shall be conducted only in relation of an accused and only with respect to a charge that has been laid against him;  The changing of the charge in court proceedings shall be allowed, if the situation of the defendant is not worsened and his right to a defence not violated thereby. In such a manner, the current criminal-procedure law indicates two kinds of limits of a court proceeding – with respect to the circle of persons and with respect to the charge that is laid.

1.1.

The limits of court proceedings with respect to the circle of persons

Contained in para 7 of the decree of the Plenum of the Supreme Court of the RF ―On the court verdict‖ of 29 April 1996 is the following clarification: ―Having in mind that proceedings in a case in court are carried out only in relation to defendants, the court should not allow formulations in the verdict bearing witness to the guilt of other persons in the commission of the crime. ―In those situations when individual participants in a criminal act with the commission of which the defendant is charged are released from criminal liability on the grounds provided for in the law, the court, if this has significance for the establishment of the role, the degree and the character of the participation of the defendant in the crime, the classification of his actions or the establishment of other material circumstances of the case, may make reference in the verdict to the role of these persons in the act with an obligatory indication of the grounds for the termination of the case. ―If a case in relation to several accuseds has been severed into separate

proceedings, it shall be indicated in the verdict that the crime was committed by the defendant jointly with other persons, without mentioning their surnames‖.
263

The verdict makes mention of the participation in the commission of the crime of another person, in relation to whom a criminal case has been initiated, and he has been put on a wanted list (p. 32), another person, in relation to whom a guilty verdict has been issued (p. 32), another person on a wanted list (p. 33-35,36,39,42,44-54,5660,62-64,67,68,70,71,89-92,98,102-104, 112, 114, 115, 117, 118,120 and others), another person, proceedings with respect to a criminal case in relation to whom have been suspended (p. 48-50,52,54,58-63,67-70,112-118), another person, proceedings with respect to a criminal case in relation to whom have been suspended in connection with [his being on] a wanted list (p. 34-38,40-41,44,53). In other situations in the verdict, diverse variants of formulations are used relative to persons who took, in the opinion of the court, part in the commission of the crime:  Other [drugie] (other [inye], the rest of the) members (participants, persons) of the organised group;  Other organised group heads;  Other persons (a person);  Other participants in the crime;1  Persons acting jointly with them;  Other persons – the core shareholders and upper managers of OAO NK Yukos;  The Chairman of the ZAO Rosprom Board of Directors;  The Chairman of the ZAO Rosprom management board;  The administrative personnel of ZAO Rosprom in full composition;  The head of the OOO Yukos-Moscow directorate of tax planning;  Another person – a worker of this company;  Another person, residing on the isle of Man;  Another person who was in his office on the Isle of Man;  the president of OAO NK Yukos;  the CEO of ZAO Yukos EP;

1

The Russian wording in this and the next five bullet points (through ―…in full composition‖) does not exist in the text of the verdict.—Trans. 264

 Persons under their control – members of the Board of Directors;2  The former upper management of OAO NK Yukos;  Khodorkovsky‘s assistant;  Their (his) accomplices;  ZAO Yukos EP executives under their control;  Another person – the general director of OAO Yuganskneftegas;3  Another person – the general director of OAO Samaraneftegas;  A citizen of Great Britain;  Other persons not established by the investigation;  Other persons identified by the investigators;  Another person, running the tender committee;  Head of the ZAO Yukos EP administrative department;  Another person – a trustee;  Another person, subordinate to Lebedev;  A made-up individual other person;  Another person, who had provided his passport data;  Another person – the chief accountant of OOO Fargoil;4  Another person – head of OOO Fargoil;  Another person – a ZAO Yukos EP employee;  Another person under the control of the organised group;5  Another person, loyal to Lebedev personally – the assistant to the Menatep Bank President;  Another person – head of the Treasury Department of OOO YukosMoscow;  Another person – deputy managing partner of Law Bureau ALM MGKA;6  Other persons – lawyers of the ALM law bureau;  Another person – deputy chairman of the management board of ACB DIB;

2 3

The Russian wording in this bullet point does not exist in the text of the verdict.—Trans. The Russian wording in this bullet point and the next does not exist in the text of the verdict.—Trans. 4 The Russian wording in this bullet point and the next does not exist in the text of the verdict.—Trans. 5 The Russian wording in this bullet point does not exist in the text of the verdict.—Trans. 6 The Russian wording in this bullet point and the next does not exist in the text of the verdict.—Trans. 265

 Another person – the first deputy chairman of ACB DIB management board;  An employee of the treasury;  Another person – the owner of the Bermudy holding and secretarial company,7 but without any indications that a case was severed into separate proceedings or criminal prosecution was implemented at all in relation to these persons. The verdict also mentions the concrete surnames of persons who had participated, in the opinion of the court, in the composition of the organised group – Yelfimov (p. 46), Shakhnovsky (p. 59), Brudno (p. 59), Stepanov (p. 291-292), Malakhovsky, Pereverzin, Bakhmina, but only in relation to Malakhovsky and Pereverzin, who had been examined by the court as witnesses, are references contained to judgments in relation to them and a verdict of the Basmanny District Court of the city of Moscow of 1 March 2007 that has come into legal force (p. 269, 277, 297-299, 517, 630-631). Relative to Bakhmina, the court limited itself to an indication that a guilty verdict has been issued in relation to her without specifying more precisely by what court, when this verdict was issued and whether it entered into force (p. 663). And as concerns Yelfimov, Shakhnovsky, Brudno and Stepanov, there are no references in the verdict that any procedural decision whatsoever had been adopted in relation to these persons. In violation of the requirements of art. 252 CCP RF, in the verdict the court, in essence, formulated a charge both in relation to persons who were neither defendants under the given criminal case nor persons being prosecuted in the procedure of criminal judicial proceedings under this or other criminal cases.
―Then, carrying on his actions to conceal the crimes committed, M.B.

Khodorkovsky, being held in detention in the conditions of investigative isolator FGU IZ-99/1 of the city of Moscow, guiding the actions of the organised group participants through his defence counsel, had given a direction to another person who planned, through the treasury employees under his control, to carry out financial
7

The actual name of the holding and secretarial company in the text of the verdict is not ―Bermudy‖, but ―Valmet Group Limited (Bermuda)‖—Trans. 266

transactions which were to result in the credit of funds to the accounts of YUKOS Capital S.a.r.l. under the control of the organised group. Those directions by M.B. Khodorkovsky were agreed through common defence counsel with the organised group member P.L. Lebedev who was also held in detention in FGU IZ-77/1 of the city of Moscow during that period of time‖ (p. 127). ―Another person carried out the actions with respect to delivery to OOO Yukos-Moscow employees of M.B. Khodorkovsky‘s and P.L. Lebedev‘s directions regarding the procedure for carrying out financial transactions not just as their defence counsel, but also as a lawyer of the ALM Feldmans law bureau, deputy managing partner of which – another person who is on a wanted list – and, furthermore, the bureau’s lawyers were directly involved in those financial transactions. Those directions by M.B. Khodorkovsky were also agreed with P.L. Lebedev through their other defence counsel who had an opportunity to talk to both. Thereafter, another person ensured, upon the direction of M.B. Khodorkovsky, transfer from 20 November 2003 through 26 May 2004 from the accounts of Brittany Assets Limited in Barclays Bank (London) and Citibank (London) of the monetary funds in the amount of USD 2,478,000,000 obtained by way of crime as a result of sales of the stolen oil‖ (p. 127-128). ―Notably, M.B. Khodorkovsky‘s directions agreed with P.L. Lebedev were passed on through another person who is not just defence counsel for the above persons, but also head of section of the Legal Department of OOO Yukos-Moscow, i.e., the person under control of them both ex officio. Thereafter, in pursuance of the directions of P.L. Lebedev and M.B. Khodorkovsky, subordinates of another person who is on a wanted list, employees of the treasury, ordered director of YUKOS Capital S.a.r.l, another person, to sign on behalf of that company agreements on the provision of a loan to OAO NK Yukos and its subsidiaries and to the companies under the control of the organised group members, and another person who is on a wanted list ordered a lawyer subordinate to him, another person who managed the company‘s accounts in the city of Moscow, to ensure the transfer of the monetary funds from the accounts opened in banks Trust and Menatep SPb. Thus, borrowing agreements were executed on behalf of YUKOS Capital S.a.r.l with OOO
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Energotrade,

OOO

Yukos

Vostok

Trade,

OAO

Samaraneftegas,

OAO

Yuganskneftegas, OAO Tomskneft, and OAO NK Yukos‖ (p. 129). ―Whilst examining the pieces of evidence, the court established that the contracts on rendering legal assistance concluded on 01.01.2003 between the ALM Feldmans Law Bureau and leaders of organized group M.B. Khodorkovsky (vol. 70 c.f.s. 165-171), P.L. Lebedev (vol. 70 c.f.s. 155-161) and other persons (vol. 70 c.f.s. 172-178), and individuals state that at the beginning of 2003 at the request of the leaders of the organized group, another person who is wanted, through subordinate lawyers of the ALM Feldmans bureau transferred billions of stolen monetary resources from the account of OOO Ratibor in the form of dividends to the account of the Cyprus company Dunsley Limited being under the control of organized group members‖ (p.271). ―In 2003, following criminal charges brought against M.B. Khodorkovsky and P.L. Lebedev, they provided for the transfer to OAO NK Yukos of large sums from the consolidated profit accumulated prior to that on the accounts of foreign companies claimed by the latter as part of the consolidated structure of Yukos, which, inter alia, was used for paying out large amounts of dividends to the shareholders and to themselves. ―However, thereat M.B. Khodorkovsky and P.L. Lebedev while placed in detention, continued to guide the actions of subordinated to them members of an organized group through their defence lawyers and managed to arrange for disbursement by company Yukos Capital S.a.r.l. interest-bearing loans to OAO NK Yukos and its oil producing subsidiaries. Hence, these amounts that were actually monetary means owned by OAO NK Yukos were offered by M.B. Khodorkovsky and P.L. Lebedev to the oil company as borrowed rather than own means‖ (p. 528). ―Although the aforementioned telephone conversations were held in OctoberNovember 2004, when M.B. Khodorkovsky and P.L. Lebedev were under detention, substantial conversations stipulated in such confirm that, even in custody, M.B. Khodorkovsky was guiding the activities of the organized group, that all the financial projects were coordinated with him, and that his decisions were subsequently diverted to them by the lawyers for further execution‖ (p. 530).
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―The court believes that the evidence examined during the court proceedings corroborates that, having launched actions targeted towards legalisation of unlawfully acquired property prior to arrest, M.B. Khodorkovsky and P.L. Lebedev, following their arrest as well, in October and July 2003 accordingly, while in custody in the conditions of preliminary investigative detention facilities IZ-99/1 and IZ-77/1 of the city of Moscow, acting through their defence lawyers continued to coordinate activity conducted by the members of an organized group headed by them in view of carrying out new financial operations and other transactions with unlawfully acquired monetary means and other estate. Thereat, one of the defence lawyers, serving as counsel for both defendants, was arranging between them coordination of actions conducted by the members of an organized group, their roles and same as other lawyers was communicating defendants‘ instructions in regard to entering into legally important agreements and carrying out financial operations through the manager of treasury of OAO NK Yukos as well as through a partner of the ALM Feldmans law bureau who was then passing the errands to the employees of ALM Feldmans in regard to registration of companies with Russian authorities; said companies created with the scope of legalisation of stolen means were fully controlled by the criminal group of companies Yukos Finance B.V. and Yukos Capital S.a.r.l.. Also, under his instructions, opened were bank accounts for said companies and certain funds were transferred onto such; the substance of operations was not known to other representatives of the companies appointed to act as nominal directors‖ (p. 531). ―The court arrives to a conclusion that the aforementioned pieces of evidence serve to corroborate the fact that when concluding loan agreement with Yukos Capital S.a.r.l. on behalf of the managing company OAO Yukos EP the representatives of oil production companies were given enforcement instruction in regard to signing such. The latter were not dealing with the feasibility or the procedure of handling the loans; quite the contrary, they pointed out onto the negative consequences of concluding such deals leading to creation of artificial indebtedness before Yukos Capital S.a.r.l. and the need to repay, besides the principle, interest on the borrowed means. After M.B. Khodorkovsky and P.L. Lebedev have lost control over Yukos group of companies in Russia and following bankruptcy procedure they proceeded to channel through their defence lawyers instructions to the foreign
269

companies Yukos Capital S.a.r.l. and TMF Corporate Services S.A. on bringing actions against OAO Yuganskneftegas and OAO NK Yukos and on premature termination of loan agreements, paying interest on loan, and the late charge‖ (p. 541). In such a manner, the court factually charged the lawyers (the defenders) with aiding and abetting Khodorkovsky and Lebedev, that is of complicity in acts committed by the defendants, including also in the period of their being found in detention. The court, it is true, did not name one concrete surname, but to establish and identify these persons does not represent any difficulty, inasmuch as the circle of lawyers-defenders is strictly delineated, while their visits to clients in the investigative isolator are recorded in the corresponding documents. It is worth bringing attention also to the circumstance that a special procedure of proceedings with respect to criminal cases is in effect in relation to lawyers (chapter 52 CCP RF), but data that such an investigation in relation to the lawyers was conducted at all are not cited in the verdict. Contained on p. 663-664 of the verdict is the following opinion and assessment by the court: ―The evidence read out in the court hearing established that the ‗independent valuator‘‘s opinion had been, in essence, a deliberately false document prepared specifically at the instruction of one of the heads of P.L. Lebedev’s organized group by another person, the organized group member, in order to deceive the shareholders with a view to inducing them to make a groundless decision. The chair of the meeting, another person, unlawfully allowed the shareholders – MenatepRosprom-Yukos entities‘ representatives who owned a total of more than 50% of shares in OAO Samaraneftegas and who, thus, were the persons interested in the transaction – to participate in voting on the issue‖. But such an act can be apprised as the manufacture and use of a forged document (art. 327 CC RF). Besides that, ―the case file materials examined by the court also include proofs of bribery by the defendants of some managers of OAO NK Yukos in order to

270

ensure taking unlawful and unjustified decisions on the approval of all the transactions on purchase and sale of the oil of the producing companies OAO Yuganskneftegas, OAO Samaraneftegas, OAO Tomskneft VNK‖ (p. 182). ―The fact of bribing the heads of OAO NK Yukos for ensuring the unlawful and unfounded decision-making by the boards of directors of OAO NK Yukos, OAO VNK, OAO Samaraneftegas, and OAO Yuganskneftegas, which included S.V. Muravlenko and V.A. Kazakov, and approval of all the decisions M.B. Khodorkovsky needed by the general shareholders' meetings is also corroborated by the written materials of the criminal case‖ (p. 188) The court thereby in essence found in the verdict that the defendants had committed commercial bribery (art. 204 CC RF). In such a manner, the court overstepped the bounds of court proceedings with respect to the circle of persons:  Having indicated the surnames of concrete persons – participants in the crime [–] without references to the adoption in relation to them of procedural decisions that were final and had entered into force;  Having factually charged the lawyers-defenders of the defendants with aiding and abetting those acts that were committed already in the period of Khodorkovsky‘s and Lebedev‘s being found in detention, that is the court determined the place of the commission of the crime and the time frame of this act (art. 75 CCP RF), which on the strength of art. 90 CCP RF must hereafter be recognised by bodies of criminal judicial proceedings without additional review;  Having found that the defendant Lebedev had factually committed the act provided for by art. 325 CC RF, and both defendants – commercial bribery as well (art. 204 CC RF), although such a charge had not been laid against them.

1.2.

The limits of court proceedings with respect to the charge

Khodorkovsky and Lebedev are charged with the commission of the crimes provided for by art. 160 CC RF without reference to art. 33 CC RF, that is they are co-executors of the given crime. However the court, in assessing the testimony of the
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witness Dobrodeyeva, came to the conclusion that ―the testimony of defence witness I.V. Dobrodeyeva does not refute the circumstances, established by the investigators and confirmed in court, that the role imputed to P.L. Lebedev is not that of a perpetrator but that of an organiser of the crimes, and therefore it is irrelevant where P.L. Lebedev was at the time when the crime was committed by its perpetrators. At the same time, I.V. Dobrodeyeva confirmed the veracity of the entries in the diaries from which it follows that P.L. Lebedev regularly invited managers from Yukos and subsidiary and related companies to his MFO Menatep office, and thus confirmed the accusation against him that he managed the commission of theft and legalisation‖ (p. 623). The court made an analogous finding also in assessing the testimony of the defendant Khodorkovsky: ―Furthermore, M.B. Khodorkovsky‘s argument that theft of oil implies its physical seizure to the benefit of thieves; however, the process of surrender of the oil to Transneft‘s pipe rules out its seizure is also unsustainable because M.B. Khodorkovsky is charged with having organized theft, i.e., with having organized seizure of oil from producing enterprises by way of drawing up of sale-and-purchase agreements under which oil was seized from the producing enterprises‘ possession at the metering station and passed on into possession of the companies controlled by the defendant, due to which the producing enterprises stopped being the oil owners, both physically and de jure, the moment the oil crossed the metering station. Therefore, the above argument is refuted by the evidence presented by the prosecution and examined in court‖ (p. 652). Consequently, the court overstepped the bounds of the charge laid against the defendants, having indicated in the verdict that they are the organisers, but not the executors, as this derives from the classification of their actions without reference to art. 33 CC RF by the party of the prosecution. In violation of the requirements of art. 246 CCP RF, the court did not accept the abandonment of the state prosecutors of part of the charge laid against the

272

defendants, as it was obligated to do, having made reference that ―during the closing submissions, representatives of the state prosecution asked the court to reduce the amount of the oil stolen by the defendants and reduce the amount of the damage accordingly. The court does not regard such position of the state prosecutors as withdrawal of those charges as the evidence confirming the volumes and the value of the stolen oil was presented by them at the court hearing with references to specific agreements, contracts, transfer-acceptance reports and other pieces of evidence. The court agrees with the used methods of calculation of the volumes and the value of the stolen oil indicated in the charges brought, and the state prosecution did not present any other methods of the calculation to the court. ―However, the court agrees with the opinion of the state prosecution about the need to reduce the amount of the oil stolen from the oil production enterprises in 2003 from 79,502,753 tonnes to 77,673,475 due to an arithmetical error made during the calculation of the total amount of the oil stolen in that period. ―In addition, due to an arithmetical error made during the calculation of the sums transferred by OOO Ratibor to an account of Dunsley Limited and by OOO Fargoil to an account of Nassaubridge Management Limited, the court reduces the sum of the above transactions from RUB 139,000,000,000 to RUB 132,810,000,000 (p. 677). Khodorkovsky and Lebedev were being charged with and were found guilty by the court of theft of oil by way of its embezzlement. The criminal law determines theft as the self-interested, unlawful seizure and (or) conversion of another‘s property without exchange for value to the benefit of the guilty party or other persons, which causes damage to the owner or other possessor of this property (note 1 to art. 158 CC RF). The peculiarity of embezzlement (and misappropriation) consists of the fact that in contrast with other forms of theft, during embezzlement the property is not seized, as it is found in the rightful possession of the guilty party, but rather is converted by him to his own benefit or to the benefit of other persons. But the court‘s findings about the form of the theft set forth in the verdict are contradictory.

273

―M.B. Khodorkovsky and P.L. Lebedev did commit embezzlement, that is theft of another‘s property, entrusted to the guilty party, with the use of one‘s official position, by an organised group, on a large scale‖ (p. 3). ―M.B. Khodorkovsky, P.L. Lebedev and other members of an organised group, who by 1998 had taken possession – including by way of criminal actions committed by an organised group on account of theft by way of embezzlement of property entrusted to them and legalisation of property obtained by way of crime into entrepreneurial and economic activity – of most of the shares in OAO NK Yukos and 100 % blocks of shares in subsidiary joint-stock companies of the given company producing and refining oil, did obtain the right to strategic and operational management of these joint-stock companies‖ (p. 3). ―With the objective of ensuring the commission of a crime by way of taking possession of the right to the operational management of the given joint-stock companies on account of the actions of management personnel directly subordinate to them, M.B. Khodorkovsky jointly with P.L. Lebedev and the other members of the organised group did form commercial organisations under their control in the capacity of management companies for the joint-stock companies NK Yukos, Yuganskneftegas, Samaraneftegas and Tomskneft VNK‖ (p. 4-5). ―Thus, on the basis of a contract of 23 September 1998, entered into in execution of a decision adopted on 31 August 1998 by the sole shareholder – OAO NK Yukos [–] the powers of the executive body of OAO Yuganskneftegas were transferred to ZAO Yukos EP. Analogous decisions were adopted by OAO NK Yukos in relation to the other oil production subsidiary organisations as well - OAO Samaraneftegas and OAO Tomskneft VNK, for which ZAO Yukos EP likewise became the management organisation on the basis of contracts of 23 and 29 September 1998. By means of such a vertically-integrated structure, M.B.

Khodorkovsky, P.L. Lebedev and the other members of the organised group deprived the executives of the oil production joint-stock companies of their powers for the operational management of the commercial organisations

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entrusted to them, including the right entrusted under the Charters of the jointstock companies to the disposition of the oil produced. ―According to the management structure built up by M.B. Khodorkovsky and the other members of the organised group, the right to the disposition of the property of the joint-stock companies, including the right to the disposition of the oil produced, was transferred to the executives of OOO Yukos-Moscow, ZAO Yukos EP and ZAO Yukos RM‖ (p. 5). ―For which P.L. Lebedev, acting upon the direction of M.B. Khodorkovsky, did in May 1997 invite workers of JV RTT, which was under his control, and workers of the ZAO Yukos EP department for the marketing of oil products, to himself in an MFO Menatep work office at: city of Moscow, Kolpachny pereulok 5/4, and gave them a direction to organise the wrongful seizure, not involving exchange for value, of all the oil produced from the joint-stock companies Yuganskneftegas, Samaraneftegas and Tomskneft VNK, executing in so doing spurious contracts (master agreements) for the sale-and-purchase of oil by OAO NK Yukos or a company under control for the organised group registered in a ZATO under the guise of oil-well fluid at understated prices‖ (p. 8). ―Organising the execution of the sale of the oil or oil products from the Swiss company to a foreign company registered in an off-shore zone, P.L. Lebedev, M.B. Khodorkovsky and the other members of the organised group, [by] including such a company in the marketing arrangement being executed, were pursuing the objective of accumulating part of the monetary funds obtained from the sale of the stolen oil and being legalised on its accounts, in order to substantially reduce the tax burden‖ (p. 8). ―In so doing, with their speeches the persons under the control of M.B. Khodorkovsky, P.L. Lebedev and the other participants in the organised group did mislead the shareholders of the named joint-stock companies as to the essence of the transactions, in particular about how supposedly the price of the oil sold is determined by independent appraisers and in each concrete situation will be adjusted proceeding from market prices‖ (p. 9).

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―Besides that, the persons under the control of M.B. Khodorkovsky, P.L. Lebedev and the other members of the organised group speaking at the shareholders‘ meetings upon their mandate did deliberately conceal from the shareholders that the transfer of the oil of the OAO NK Yukos production enterprises by means of the execution of contracts (agreements) on the sale of oil-well fluid is in essence a wrongful transfer of this oil to another‘s benefit, not involving exchange for value, and likewise concealed that in so doing, pecuniary damage is caused to the oil production enterprises‖ (p. 9-10). ―The deliberate deceit of the participants in the shareholders’ meetings, presiding at which were persons under the control of M.B. Khodorkovsky, P.L. Lebedev and the other members of the organised group, as well as the participation in the voting of shareholders with an interest in the transactions, possessing voting shares on behalf of organisations under the control of the organised group, entailed the unlawfulness of the voting conducted at such meetings for the reason of the violation – as the result of the commission by M.B. Khodorkovsky and the members of the organised group headed by him of the indicated deliberate actions – of Art. 83 para 3 of Federal Law No. 308-FZ On Joint-Stock Companies of 26 December 1995 (as amended by Federal Law No. 65-FZ of 13 June 1996), which establishes requirements for the order for a joint-stock company to enter into a non-arm‘s-length transaction. ―As a result of such deceit of the participants in the shareholders‘ meetings, all of the transactions with respect to the sale-and-purchase of oil and oil-well fluid that had been effected and ‗will be effected in future‘ were approved by a majority of votes‖ (p. 10). ―Besides that, the information about how the parties had attained understandings about the price of the oil was knowingly false in the contracts. Factually, there was no such agreement, while the price for the oil was premeditatedly understated by several times in comparison with the real market price by the participants in the organised group headed by M.B. Khodorkovsky, P.L. Lebedev and other members [sic], without any economic necessity whatsoever. The agreements entered into on behalf of OAO Tomskneft VNK, OAO Samaraneftegas
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and OAO Yuganskneftegas were thereby entered into under the influence of the illintentioned agreement of a representative of one party with another party, with violation of Art. 179 of the RF Civil Code, that is wrongfully. ―In such a manner, by way of organising the signing of the master agreements, M.B. Khodorkovsky, acting in coordination with P.L. Lebedev, did factually deprive the management of OAO Samaraneftegas, OAO Yuganskneftegas and OAO Tomskneft VNK of the opportunity to dispose of the oil produced by these companies on their own‖ (p. 12-13). ―Thus, in 1998, the acquisition of oil by OAO NK Yukos at prices understated many-fold was executed by M.B. Khodorkovsky, P.L. Lebedev and the other members of the organised criminal group headed by them‖ (p. 13). ―Having an intent to legalise and following the directions of the organised group member, another person who is on a wanted list, who acted as per the role M.B. Khodorkovsky, P.L. Lebedev, and other organised group members had allocated, another person proceedings in the criminal case against whom were suspended, had ensured making of decisions on behalf of Nassaubridge Management Limited on 05.08.2002 and 18.04.2003 regarding the distribution of dividends in the amount of RUB 32.8 bln and RUB 80 bln, respectively, and another organised group participant, another person, on behalf of Dunsley Limited on 24.01.2003, making of decision regarding the distribution of dividends in the amount of RUB 27 bln.‖ (p. 35).8 ―The other person, who is on a wanted list, acting in coordination with another person, proceedings with respect to a criminal case in relation to whom have been suspended in connection with [his being on] a wanted list, as well as with the rest of the participants in the organised group, with the objective of embezzlement of the oil by the members of the organised group and their enrichment on account of the difference between the real market (world) price of the raw material and the sums of money factually paid out to the production enterprises to create the appearance of civil law relations, in execution of the unlawful directions of M.B. Khodorkovsky, P.L. Lebedev and the other members of the organised group, did thereby deliberately violate para 3.3.1. of the contracts on the transfer by the oil production organisations
8

This citation actually appears on p. 122 of the verdict—Trans. 277

of the powers of their executive bodies to the company Yukos EP, obligating this management organisation and its representatives to concern themselves about the affairs of the corresponding subsidiary companies to the very same extent to which they would concern themselves about the conducting of their very own affairs taking into account a presumption of the knowledge and experience of a good-faith merchant, to exercise their rights and execute duties in relation to OAO Yuganskneftegas, OAO Samaraneftegas and OAO Tomskneft VNK in good faith and reasonably, as a person participating in relations of especial trust‖ (p. 35-36). ―Besides that, having documentally executed the refining of the stolen oil at enterprises under their control in the capacity of tolling raw material, the participants in the organised group did retain the nominal right of ownership to the output of refining for the sham companies as well. Thanks to this, the subsequent sale of the oil products represented one of the forms of marketing the stolen oil and of the extraction, in so doing, by the members of the organised group of groundless income on account of the difference between the market price, at which the raw material had been sold to consumers, and the sum of the money factually paid out to the production organisations under the guise of payment for the oil to create the appearance of civil law relations‖ (p. 38). ―Thus, in the period from 01.01.2002 through 31.08.2002, out of the 43.3 mln. tonnes of oil seized from the production enterprises under the guise of the purchase thereof by the company Ratibor, 42,829,698.014 tonnes promptly went over to the balance sheet of OOO Fargoil at an average price of RUB 1,312 per tonne, in connection with which RUB 56,212,152,860 were transferred to the accounts of the company Ratibor‖ (p. 57). ―In such a manner, by 31 December 2002 with the active participation of another person, who is on a wanted list, who reliably knew that he is acting to the detriment of the interests of the oil production organisations of OAO NK Yukos, 24,512,893 tonnes of oil were seized from their ownership and fictitiously credited to the ownership of OOO Evoil, including belonging to OAO Yuganskneftegas 15,405,080 tonnes, OAO Samaraneftegas - 3,853,234 tonnes and OAO Tomskneft VNK - 5,254,579 tonnes. Upon the seizure of the oil, RUB 48,636,878,082 were
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transferred to the producers on behalf of OOO Evoil, which [amount], as before, did not exceed 20-25 % of the real prices for the corresponding months.‖ (p. 58). ―In such a manner, M.B. Khodorkovsky, in 2001-2003 in the city of Moscow, committing a continuous crime, jointly with P.L. Lebedev and other persons, being alongside them the core shareholders and top managers of OAO NK Yukos and its subsidiary management organisations, directing the other members of the organised group, with the use of their official position, did deliberately, out of mercenary motives, secure the wrongful seizure, not involving exchange for value, and the taking into possession by the participants in the organised group of the oil of subsidiary organisations of OAO NK Yukos - OAO Yuganskneftegas, OAO Samaraneftegas and OAO Tomskneft VNK [-] entrusted to them on an especially large scale and the sale of the stolen oil, as well as of the oil products manufactured from this oil[,] at market prices for export and on the domestic market. ―In all over the 2001-2003 period, M.B. Khodorkovsky, P.L. Lebedev and the other members of the organised group did commit theft from OAO Samaraneftegas, OAO Yuganskneftegas and OAO Tomskneft VNK of 200,385,116 tonnes of oil with an overall cost of RUB 811,549,054,000. ―Out of this sum, as the result of directing a part of the stolen monetary funds for financing the functioning of enterprises and organisations ensuring the further production of oil, i.e. to ensure conditions for further theft, RUB 399,939,564,505.10 was received into the disposition of the members of the organised group. ―In all over the 1998-2000 period[,] M.B. Khodorkovsky, P.L. Lebedev and the other members of the organised group did commit theft from OAO Samaraneftegas, OAO Yuganskneftegas and OAO Tomskneft VNK of

147,189,184.248 tonnes of oil with an overall value of RUB 492,486,694,892.92, and specifically 23,176,480,000 tonnes of oil with an overall value of RUB 72,268,583,127.516 [sic] from OAO Samaraneftegas, 81,541,965,685 tonnes of oil with an overall value of RUB 261,725,865,764.815 from OAO Yuganskneftegas and 42,470,738.563 tonnes of oil with an overall value of RUB 158,492,156,000.589 from OAO Tomskneft VNK, having caused [all of] the latter damage in the indicated amount.
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―In all over the 1998-2003 period, M.B. Khodorkovsky, P.L. Lebedev and the other members of the organised group did commit theft of the property of OAO Samaraneftegas, OAO Yuganskneftegas and OAO Tomskneft VNK in an overall sum of RUB 892,426,169,398.02, having caused [all of] the latter damage in the indicated amount‖ (p. 72-73). ―It has been established by the court that transfer of powers of the executive bodies from the oil producing companies first to ZAO Rosprom and then - to ZAO Yukos EP and ZAO Yukos RM, as well as the procedure of further management of the producing companies by the management companies represented by the defendants was an abuse of right. This circumstance entailed violation of equality of its participants since, as legal entities, the oil producing companies were intentionally put at a disadvantage when they were unable to exercise their rights at their own will and to achieve the major goal of their activity – generating profit. The management of the oil producing enterprises was performed exclusively in the interests of the group of the main shareholders which, by that time, already included M.B. Khodorkovsky and P.L. Lebedev, as well as other members of the organized group acting together with them‖ (p. 147-148). ―It has been established by the pieces of evidence examined in the court that for the purpose of facilitating and concealment of the commitment of theft of oil from the oil producing companies, the defendants represented by OAO NK Yukos elaborated and drafted the Master agreements. Concluding of such Agreements on 31 July 1996 with OAO Yuganskneftegas and OAO Samaraneftegas, and on 4 November 1998 – with OAO Tomskneft VNK, was obviously in conflict with the interests of the producing companies; it deprived them of the opportunity to dispose independently of the oil produced which was only aimed at the defendants‘ unimpeded taking possession of the oil, that is, stealing the oil already at the stage of its extraction from the subsoil‖ (p. 155). ―The fact that the persons under control of M.B. Khodorkovsky and other participants of the organized group misled the shareholders of the aforementioned joint-stock companies by their presentations at those meetings about the essence of the transactions, particularly, on the fact that the price of the oil sold had been allegedly determined by an independent evaluator and that it would be adjusted based
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on the market prices on a case-by-case basis; in addition to that, they intentionally concealed from the shareholders that the transfer of oil of the oil-producing enterprises to OAO NK Yukos by drawing up of the contracts on sale of the oil-well fluid was, essentially, a wrongful transfer of that oil, not involving exchange for value, to someone else’s benefit and that at the same time, it caused pecuniary damage to the oil-producing enterprises is corroborated by‖ (p. 164-165). ―M.B. Khodorkovsky and the members of organized group acting together with him definitely knew that by their indicated actions with respect to the seizure of all the oil produced at transfer prices, they were creating losses for the oil production enterprises, which entails to [sic] understatement of their profits.‖ (p. 308-309). ―The pieces of evidence mentioned above confirm as well the fact that ООО Muskron, ООО Mitra, ООО Quercus, ООО Alebra, ООО Coleraine, ООО Flander, ООО Grace, ООО Virtus, ООО Nortex, ООО Business-Oil, ООО Forest Oil, ООО Yukos-Invest, ООО Wald-Oil were used to give the appearance of legality to transactions with stolen oil and oil products as well as for obtaining enrichment at the expense of illicitly obtaining benefits on taxes and levies on the ZATO territory. The companies were merely a tool with which to commit ―laundering‖, at the disposal of P.L. Lebedev, M.B. Khodorkovsky and other members of organized group under their leadership‖ (p. 328-329). ―The court has a critical attitude toward the testimony of witnesses T.R. Gilmanov and P.A. Anisimov that they do not know about facts of theft of oil from the OAO NK Yukos oil production enterprises in the volumes specified in the charges and that such volumes of oil are impossible to steal because they gave their evidence without taking into account circumstances surrounding legal execution of the seizure and alienation of oil from the oil production enterprises and without taking into account that the defendants are charged not with theft of oil but with embezzlement of oil by way of substantially understating its price‖ (p. 620).

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―The testimony of witness A.B. Garanov that master agreements between OAO NK Yukos and oil production enterprises were concluded in compliance with law requirements, that the conclusion of those master agreements did not result in any damage to the oil production enterprises, and that the lawfulness of the conclusion of those agreements was confirmed by decisions of commercial courts, is found by the court to be untenable because the unlawfulness of the master agreements concluded by the oil production enterprises with OAO NK Yukos as a result of which all the oil belonging to the oil production enterprises moved to the ownership of M.B. Khodorkovsky, P.L. Lebedev and other members of the organised group has been proved in the court hearing by the evidence examined‖ (p. 621). ―While de facto master agreements and contracts on the transfer of the powers deprived the producing companies – OAO Yuganskneftegas, OAO Samaraneftegas, and OAO Tomskneft – of the right to disposition of their property – output produced in the form of oil-well fluid from the moment it was extracted from the well at the production venue, which was transferred to OAO NK Yukos in 1998-1999 and then to ZAO Yukos EP in 2000-2003‖ (p. 651). ―Thus, the evidence examined during the judicial proceedings corroborated the circumstance that all the oil of the oil-producing enterprises had been entrusted to M.B. Khodorkovsky, P.L. Lebedev, and other organized group members who had converted the oil to their benefit with concurrent execution of fictitious oil sale-andpurchase agreements from which it followed that the oil had been sold to outside buyers at a market price‖ (p. 654). ―It was established in the court hearing that oil theft had been committed by the organized group members by way of taking possession of the right to run the oil-producing enterprises and the right to dispose of the property they owned they disposed of at their discretion.

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―The defendants seized oil from the producing entities under fictitious agreements and transfer-acceptance reports; in this connection, no shortfall would be detected in accounting (an entity‘s balance sheets) and information on balances at storage facilities would be consistent with the data on balances of goods as per accounting records (p. 655)‖ ―Evidence available in the case file corroborates the well-groundedness of the charges that deliberate deception of participants of the shareholders’ meetings chaired by the persons controlled by P.L. Lebedev, M.B. Khodorkovsky, and the organized group members and participation in voting of the shareholders interested in the transactions who owned voting shares on behalf of the entities controlled by the organized group entailed unlawfulness of the voting held at such meetings due to violation as a result of deliberate actions of P.L. Lebedev, M.B. Khodorkovsky, and the organized group members they guided of Art. 83 para. 3 of Federal Law No. 208FZ of 26 December 1995 on Joint-Stock Companies (as amended by Federal Law No. 65-FZ of 13 June 1996) which sets requirements to the procedure for carrying out of a non-arm‘s-length transaction by a joint-stock company. ―Another person who also held the position of chairman of the board of directors of the above companies and was controlled by P.L. Lebedev and M.B. Khodorkovsky was the chair of the shareholders‘ meeting of OAO Samaraneftegas and OAO Yuganskneftegas. With regard to the issues of approval of the transactions, S.P. Bakhmina had spoken regarding whom a guilty verdict was issued – Head of section of the Legal Department of ZAO Yukos-Moscow, who misled the shareholders as to the essence of the transactions, that the price for the oil sold was allegedly determined by an independent valuator and that it would be adjusted on a case-by-case basis based on market prices. ―The evidence read out in the court hearing established that the ‗independent valuator‘‘s opinion had been, in essence, a deliberately false document prepared specifically at the instruction of one of the heads of P.L. Lebedev‘s organized group

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by another person, the organized group member, in order to deceive the shareholders with a view to inducing them to make a groundless decision‖ (p. 663664). ―Proceeding from the foregoing, the court believes that the criminal case file has fully proven defendants P.L. Lebedev‘s and M.B. Khodorkovsky‘s guilt of the following: they and other organized group members, acting with the mercenary objective of unlawful enrichment, having induced persons to sign master agreements on behalf of OAO NK Yukos with OAO Yuganskneftegas, OAO Samaraneftegas, and OAO Tomskneft VNK, acted concurrently with the intent to cause harm to another person in violation of Art.10 of the Civil Code of the Russian Federation, i.e., wrongfully, which allowed them to take possession of the oil-producing enterprises‘ property and to dispose of it at their discretion‖ (p. 665). In such a manner, the court on numerous occasions makes use of the terms ―seizure‖, ―taking possession of the right‖, ―deception‖, ―misleading‖ when characterising the method of theft, by the sole form of theft under which seizure is accomplished by way of deception or breach of trust – this is fraud (art. 159 CC RF). What is more, only through fraud can one acquire not only property, but also the right to it. Inasmuch as the form of theft is described in the verdict in a contradictory manner, then there naturally and rightfully arises the question: so was there theft at all or was some other act committed? In the verdict one can uncover indirect confirmations of this voiced thesis:  Thus, in the opinion of the court, the objective of the guilty parties consisted of substantially reducing the tax burden (p. 8). Grounds were had for such a finding. In particular, the witness Dergunov, examined in court, testified that ―the sale of the oil-well fluid was invented in order to reduce taxes by lowering income and to convert profit to their own benefit. And that impaired the shareholders‘ right to profit‖ (p. 169). From the testimony of the witness Avalishvili can be discerned that ―the tax base was reduced as a result of the application of the internal corporate prices (the oil price was now RUB 250), and the payments to the budget were reduced too‖ (p. 196) and ―all the shareholders turned out to be without any
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profit now; they had no right or opportunity to distribute this profit or participate in it‖ (p. 197). The witness Khristenko clarified to the court that ―there can be

mentioned three categories of those who suffered due to unfair internal corporate transfer pricing: the federal budget, regional budget and minority shareholders‖ (p. 285,610,649-650). The witness Gref added to this that ―when the transfer pricing was used, the subsidiaries that sold oil or gas represented the centre of expenses. The profit was withdrawn somewhere. The state was injured by not collecting the taxes. The second component – violation of the rights of minority shareholders. If the subsidiary is the centre of expenses, than the minority shareholders are harmed because they do not participate in the profit distribution, which has to be distributed proportionally‖ (p. 285,610,649-650). All of this testimony, equally as all the other evidence of the party of the prosecution as well, was found by the court to be ―relevant, admissible, reliable, based on law since it has been obtained in compliance with requirements of the criminal procedural law in force, and sufficient for resolution of this criminal case, and therefore believes that it is possible to base the verdict on it‖ (p. 628). What is more, the court finds that the defendants violated the requirements of art. 40 TC RF (p. 609), while the understating of prices is illegal, which is established by the civil and tax legislation of the RF (p. 648). In connection with this, the court ended up having to resolve yet one more question, namely, whether or not the charge laid against the defendants is identical to the one under which they were convicted under a verdict of the Meshchansky District Court of the city of Moscow of 16.05.2005. Rejecting the arguments of the defence about the identicalness of the new charge to the previously laid one, the court gave the following arguments: ―Arguments of the defence that the charges of embezzlement of oil and tax evasion are the same crimes because taxes, as per their theory, were paid on the stolen oil, are unsustainable. Taxes were paid on profit, and the organized group

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participants stole property in the form of oil. Profit is not property because it is a calculated accounting value which is a difference between income and expenses. It is impossible to steal figures which exist in accounting records, but it is possible to commit theft of oil which is a material value, which is property. Relations concerning the making of tax payments (taxes) to the budget are the object of a tax offence (crime). Calculated value between income and expenses, rather than property, is a base for assessment of a tax rate. While relations concerning right, title, and interest in certain property are the object of embezzlement (theft). In this connection, assertions by the defendants and the defence that it is impossible to claim payment of taxes if all the oil was stolen are not grounded9 because the objects of crimes differ‖ (p. 658-659). ―During the judicial proceedings in this case, the defence put forward on repeated occasions the argument that the deed imputed to the defendants within the framework of the so-called theft of entrusted oil and legalisation had already been the subject of the judicial proceedings based on the results of which the Meshchansky District Court of the City of Moscow had issued a guilty verdict regarding M.B. Khodorkovsky and P.L. Lebedev on 16.05.2005 which had become final. ―The court has a critical attitude toward those arguments on the following grounds: ―M.B. Khodorkovsky and P.L. Lebedev were sentenced by the verdict of the Meshchansky District Court of the City of Moscow of 16 May 2005 under Art. 33 para. 3 and Art. 199 para 2 (a), (c), and (d) CC RF for tax evasion in the total amount of RUB 17,395,449,282 of benefits in the tax haven of the Town of Lesnoy, Sverdlovsk Oblast, in 1999-2000 and failure to pay taxes with monetary funds by way of transfer of OAO NK Yukos promissory notes, using legal entities – OOO BUSINESS-OIL, OOO Mitra, OOO Wald-Oil, and OOO Forest-Oil. ―In this criminal case, they are charged with having committed in 1998-2003 theft by way of embezzlement from OAO Samaraneftegas, OAO Yuganskneftegas, and OAO Tomskneft VNK over the period of 1998-2003.

9

The actual text of the verdict in Russian reads ―groundless‖, not ―not grounded‖—Trans. 286

―However, one can perceive from the above data that M.B. Khodorkovsky and P.L. Lebedev are charged in this case with having committed other crimes which do not match those for having committed which they were convicted by the Meshchansky District Court of the City of Moscow verdict, i.e., the crime commission periods and the objects of criminal encroachment do not match. ―Thus, the same objects of criminal encroachment, in one event as tax evasion and in another as theft by way of embezzlement, were not imputed to the defendants twice‖ (p. 661-662). But the time of the commission of the ―first‖ crime (1999-2000) is completely encompassed by the period of the ―second‖ (1998-2003). Both crimes were

committed by the one and the same persons, in one and the same place (the town of Lesnoy of Sverdlovsk Oblast), in one and the same way. Nor can one agree with the opinion of the court that these are different crimes, inasmuch as they have different objects, since: 1) Article 14 of the International Covenant on Civil and Political Rights of 1966 proclaims that no one shall be liable to be tried or punished again for an offence for which he has already been finally convicted in accordance with the law and criminal-procedure law10 of each country. This international-law principle is

embodied likewise in art. 50 para 1 of the Constitution of the Russian Federation (―No one may be repeatedly convicted for the same offense‖) and in art. 6 para 2 CC RF (―No one can be held criminally liable twice for the same offense‖). Art. 27 para 1 (4) CCP RF establishes that criminal prosecution in relation to a suspect or an accused shall be terminated in the presence in relation to the suspect or the accused of a verdict that has come into legal force with respect to the same charge or of a court ruling or a judge‘s judgment to terminate a criminal case on the same charge. 2) By a charge current criminal-procedure law understands an assertion about the commission by a certain person of an act prohibited by criminal law (art. 5 para 2 CCP RF). In so doing in the order to bring charges must be contained a description of the crime with an indication of the time, the place of its commission, as well as of

10

Sic in the official Russian text of the Covenant. The official English text reads ―finally convicted or acquitted‖ [emphasis added], and states ―penal procedure‖ instead of ―criminal-procedure law‖—Trans. 287

other circumstances subject to proof pursuant to art. 73 para 1 (1)-(4) CCP RF (art. 171 para 2 (4) CCP RF). 3) From the content of art. 5 para 22 and art. 171 para 2 (4) CCP RF it derives that by the same charge ought to be understood the same factual circumstances of a committed act (time, place, method, situation and others). Its criminal-law

classification in the given situation does not have significance, since otherwise one would have to recognise that any other assessment of the act (including also as an ideal aggregate of two or more crimes) must lead to factual non-recognition and ignoring of the binding nature of a guilty or not-guilty verdict that has come into legal force, as well as of another court decision (art. 392 para 1 CCP RF). In such a manner, if what has been done was classified by an investigator, an inquiry officer or a prosecutor with one or several articles of the Particular part of the CC RF, and a guilty or not-guilty verdict has been issued with respect to this charge, then its entry into force shall rule out the repeat examination of a criminal case in relation to that same person with respect to those same factual circumstances, even if:  A different criminal-law classification has been given to the act;  The act was additionally qualified the second time already as an ideal aggregate of two or more crimes;  New facts that had not been directly reflected in the verdict are a part of that complex crime with respect to which the previous charge had been formulated;  The action (inaction) being imputed to guilt, which, even though it is characterised by a certain independence, in essence nevertheless supplements the act indicated in the verdict and with it comprises one whole, i.e. a single crime. Criminal prosecution of such a person in all of the enumerated situations must be unconditionally terminated at all stages of criminal judicial proceedings (art. 27 para 1 (5) CCP RF, arts. 212, 239, 254 CCP RF and others), while a new examination of the case will contradict the international-law, constitutional and criminal-law

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principle of the inadmissibility of repeat convictions for one and the same act.  The court, having found that ―the prosecution has justifiably calculated the damage in accordance with the market prices that existed at that period, namely oil prices at commodity exchanges‖ (p. 686), having precisely established the amount of what had been stolen – RUR 892,426,169,398.02 (p. 687) and the circle of injured parties from the crime - OAO Yuganskneftegas, OAO Samaraneftegas and OAO Tomskneft, at the same time, contrary to the circumstances established, did not satisfy the claim, merely finding that the plaintiffs had ―the right to have their civil suits granted, and to forward the matter of the amount of the damages under the civil suits for consideration in the procedure of civil court proceedings‖ (p. 687,689). The same kind of decision was adopted too relative to restitution of damage from the legalisation (laundering) of monetary funds, although the crime provided for by art. 174-1 CC RF – is a secondary act, to be injured by which is rather complicated, inasmuch as all of the ―injured parties‖ become owners of property that has been stolen already and of the monetary funds received from its sale, that is secondary owners. Not at all by chance did the court not enumerate the concrete injured parties from this act in the narrative part of the verdict, having precisely indicated that ―M.B. Khodorkovsky, P.L. Lebedev, and the organised group members legalised in 1998-2004 monetary funds totaling RUB 487,402,487,523.59 and USD 7,576,216,501.76‖ (p. 130), at the same time. These sums on p. 687 of the verdict are already called pecuniary damage from legalisation, but from the text of the verdict it has remained unclear what kind and amount of harm was caused by the legalisation to the injured parties and to the civil plaintiffs, all the more so given that the injured party Belokrylov was not examined in the course of the court proceedings. It is obvious that what led to such a decision with respect to the civil claims, which is groundless and contradicts the previous findings of the court about the quantity and the value of the stolen oil, was the treatment by the court of the withoutexchange-for-value feature of the theft. From the point of view of the court, ―Defendant M.B. Khodorkovsky‘s arguments that the producing enterprises‘ statements have no information about any disappearance of oil and receipt of

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proceeds for it rules out the qualifier of oil seizure not involving exchange for value are also unsustainable because, as per the case file, seizure of oil from producing enterprises took place with documents prepared concurrently regarding its retirement under the guise of sale-and-purchase transactions due to which the producing enterprises‘ statements did not have to reflect any information about the disappearance of oil. Receipt of proceeds for oil stolen under the sale-and-purchase guise does not rule out the lack-of-exchange-for-value qualifier either because provision of unequivalent replacement for stolen property is also regarded as taking possession not involving exchange for value. The case file has also proven that monetary funds came under the guise of payment for oil to the producing enterprises to ensure further production of oil and its subsequent theft, price for the oil sold was set for the producing enterprises by ZAO Yukos EP and OOO Yukos-Moscow services based on their production costs‖ (p. 652). Theft in the form of embezzlement is indeed committed also by the method of substituting property for other, less valuable [property]. But in so doing the injured party does not know about such a substitution. Yet in the given case, the payment for the oil was accepted by the injured parties. In such a situation, full satisfaction of the stated claims would signify that the plaintiffs are getting unjust enrichment, inasmuch as the ―stolen‖ oil is already partially paid for. And so it was that the court, it would seem, had to adopt a decision for which there are no factual grounds with respect to the claims.  Highly indeterminate and unconcrete assertions are encountered in the verdict: ―application by M.B. Khodorkovsky and P.L. Lebedev of understated prices when setting grounds for seizing oil from OAO Yuganskneftegas, OAO Tomskneft and OAO Samaraneftegas and its subsequent sales, making provisions for flowing thus obtained funds to the accounts of foreign companies found under their immediate control, concealment of information on such transactions and points of profit accumulation from the shareholders, state tax and other regulatory bodies, was in contradiction not only with the Russian legislation but also to all the international standards to which the defendants referred‖ (p. 609). ―The actions of the defendants

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on managing the subsidiary companies are not consistent with law of the Russian Federation‖ (p. 648)‖. ―Evidence examined in the court hearing established that the prices had been understated unlawfully, rather than had been transfer ones, and their application practices at OAO NK Yukos had failed to comply with foreign or Russian standards‖ (с.673-674). In so doing, no international or foreign standards whatsoever that had been violated by the defendants are ever named in the verdict.

2. The court one-sidedly and selectively applied the provisions of art. 90 CCP RF, having given this norm of the law a broad interpretation, where this corresponded to the findings of the party of the prosecution

References are contained in the verdict to the verdicts and decisions of courts that have come into legal force with respect to civil cases:  The verdict of the Meshchansky District Court of the city of Moscow of 16 May 2005 in relation to Khodorkovsky, Lebedev and Kraynov (p. 137-138, 231, 254, 257, 319-320, 592, 632-633, 666);  The verdict of the Simonovsky District Court of 19.04.2006 (p. 180-181);  The verdict of the Basmanny District Court of the city of Moscow of 13 March 2006 in relation to Velichko (p. 254-255, 324);  The verdict of the Basmanny District Court of the city of Moscow of 1 March 2007 in relation to Malakhovsky and Pereverzin (p. 269, 277, 297-299, 517, 630-631);  The decisions of the Commercial Court of the city of Moscow of 23.12.2004 (p. 319, 592-593), of 28.04.2005 (p. 319, 327, 592-593), of 29.09.1999 (p. 379);  The verdict of the Kushva Town Court of Sverdlovsk Oblast of 07.02.2007 in relation to Ivannikov (p. 320-321);  The verdict of the Miass City Court of Chelyabinsk Oblast of 16.07.2007 in relation to Lubenin (p. 321);  The verdict of the Basmanny District Court of the city of Moscow of 04.04.2008 in relation to Karaseva (p. 323).
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Besides that, the court recognised the evidentiary (Res Judicata) significance of other judicial acts and other procedural decisions:  The judgment of the Basmanny District Court of the city of Moscow of 26.03.2008 to terminate the criminal case in relation to Karaseva under an amnesty (p. 323-324);  The order of the UFSIN for Sverdlovsk Oblast to terminate a criminal case of 03.09.2001 based on the fact of evasion from the payment of taxes (p. 422-423);  A police report from Spain (p. 541);  Decisions of the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the RF (p. 542);  Decisions of courts of The Netherlands (p. 542). The court recognised circumstances established both by the court decisions enumerated in art. 90 CCP RF and by certain other procedural acts and corroborating the charge as having unconditional Res Judicata force. Besides that, the court recognised the Res Judicata significance not only of circumstances established by certain previous verdicts, but also, refuting the arguments of the defence, of the assessments by these courts of evidence as admissible (p. 630-631, 632-633). And as concerns the decisions of commercial courts with respect to civil cases to which the party of the defence made reference, the court categorically, unambiguously and unconditionally rejected the circumstances established by them, making reference to the fact that ―the commercial courts, having being misled, ‗came‘ to the conclusion that the production companies concluding the master agreements with OAO NK Yukos were independent parties to the transaction, and therefore the reasons of the courts when they were making their decision were that the parties had carried out oil purchase-and-sale transactions. In view of this, the courts did not find grounds to find the agreements concluded between the respondents to be bogus or sham transactions, assuming that the parties were free in their determination of the conditions of the contract concerning the payment for the services. ―At present, circumstances have been established that were not known to the commercial courts and to the plaintiffs and were distorted by the respondents in those
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court proceedings, that is by representatives of the legal department of OOO Yukos who acted on behalf of the production enterprises. Thus, the court regards the testimony of witness A.B. Garanov concerning the lawfulness of the master agreements concluded between the oil production enterprises and OAO NK Yukos to be unreliable and contrary to the factual circumstances established by the aggregate of the evidence gathered‖ (p. 622). ―The court regards as unsustainable the arguments of the defendants and the defence that the commercial courts‘ judgments which became final regarding OAO NK Yukos determined that the oil sales arrangement using numerous intermediary entities had been a way of tax evasion by OAO NK Yukos and that those courts‘ judgments established that OAO NK Yukos had been the owner of the oil produced by OAO Samaraneftegas, OAO Yuganskneftegas, and OAO Tomskneft VNK, which is prejudicial and attests that the actions of the accused cannot be classified as theft of oil. ―Assessing the above commercial courts‘ judgments, the court believes they do not affect the circumstances established during these judicial proceedings concerning theft of the oil-producing enterprises‘ oil and subsequent legalisation of the monetary funds because the commercial courts did not consider those issues. Issues related to the economic entities‘ activities and their compliance with tax legislation were the subject of judicial consideration in the commercial court‖ (p. 658). ―In such circumstances, the court concludes that the commercial court judgments do not refute and do not affect in any way the establishment of the circumstances of commission of crimes in this case or the court‘s conclusions regarding the defendants‘ guilt and classification of their actions. ―In the court hearing, M.B. Khodorkovsky made a statement that his innocence had been affirmed by 61 court judgments which had become final. The court cannot agree with the above argument because issues related to the activities of economic

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entities and their compliance with tax legislation were the subject of judicial consideration in commercial courts. As of the moment of issuance of the judgments mentioned by M.B. Khodorkovsky, the courts did not know the mechanism of theft of oil of OAO NK Yukos‘s oil-producing enterprises developed by M.B. Khodorkovsky, P.L. Lebedev, and other organized group participants‖ (p. 660-661). It ought to be noted that the verdict contains just one single reference to art. 90 CCP RF (p. 630-631), but the text of this norm is cited by the court in an obviously ―abridged‖ form: ―As per provision of Art. 90 CCP RF, circumstances established in a verdict which became final shall be recognized by the court without additional review‖. Already in the course of the examination of the case of Khodorkovsky and Lebedev, the wordking of art. 90 CCP RF had been amended by a Federal Law of 29.12.2009, and the legislator recognised the Res Judicata force of court decisions adopted within the framework of civil, commercial or administrative judicial proceedings, which must be recognised without additional review. The court,

pursuant to art. 4 CCP RF (to which, by the way, the court makes reference several times in the verdict when refuting the arguments of the defence: p. 631632, 636), should have been guided by the new wording of the law, that is recognised the Res Judicata significance also of those commercial court decisions that refuted the arguments of the party of the prosecution.

3. First-hand nature of court proceedings (art. 240 CCP RF) Many of the court‘s findings are based on the testimony of the witnesses Miller, Karaseva, Logachev, Vlasova, Yurov, Gulin and others read out in the course of the judicial investigation in the procedure of art. 281 CCP RF, as well as on evidence obtained as the result of the copying of the materials of other criminal case files. Such a way of gathering evidence is extremely dubious, inasmuch as:

3.1.

The current criminal-procedure law allows the inspection of

documents with the objective of uncovering traces of a crime, clarifying other circumstances having significance for a criminal case (art. 176 para 1 CCP RF)
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Along with that, in the situation under examination, appearing as the object of the inspection is a criminal case in which an investigator is carrying out proceedings. The materials of such a case file copied in the course of a inspection (in particular, the record of investigative and other procedural actions, the reports of experts and specialists), attached to a severed case file, can not be attributable to evidence, including to documents in the sense of arts. 81, 84 CCP RF, with respect to the severed case, inasmuch as such a way of gathering evidence is not provided for by the law (section III CCP RF). In so doing, it is imperative to bear in mind that the procedural independence and freedom of discretion of an investigator, including also in questions of the gathering of evidence, are not unconditional: they are limited to only those investigative and other procedural actions and decisions that are directly provided for by the procedural law (art. 38 para 2 (6), art. 86 para 1 CCP RF). Besides that, the file of a criminal case in which an investigator is carrying out proceedings that has become an object of inspection is not bound and not numbered as of the moment of the conducting of such a inspection, unless the opposite is directly indicated in the record of the inspection. This conclusion is determined by the circumstance that the obligation to present case file materials in bound and numbered form arises for an investigator only at the moment provided for by art. 215 CCP RF. Therefore, to establish the true volume and content of an inspected case file does not present itself as possible, which allows only those materials that the party of the prosecution considers necessary for itself to be copied completely arbitrarily and selectively.

3.2.

The inspection of the materials of another criminal case file by

its essence signifies its seizure, even if temporary, from the proceedings being carried out by the investigator, which belongs to the exclusive competence of the head of an investigative agency (art. 39 para 1 (1) CCP RF) And if the inspection of materials is being carried out from the file of a case in which a court is carrying out proceedings, then this can be regarded as obstructing the effectuation of justice.
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3.3.

The attesting witnesses participating in the inspection of

criminal case file materials become possessors of the data of a preliminary investigation with respect to another criminal case

Consequently, pursuant to the requirements of art. 161 para 2 CCP RF, they must be warned of the impermissibility of disclosure of the data of the preliminary investigation that have become known to them without the corresponding permission and about liability under art. 310 CP RF.

3.4.

Art. 170 paragraph 1 CCP RF obligates attesting witnesses to

attest not only to the fact of the carrying out of an investigative action, but likewise to its course and results

Therefore, each copy of a procedural document from a criminal case file must be attested to with their signatures. A simple indication in the inspection record at a lis of copied documents is obviously insufficient and does not eliminate the need for the presence of the signatures of the attesting witnesses on each copy made.

3.5.

Pursuant to art. 74 para 2 (6) CCP RF the records of

investigative and judicial actions shall be allowed as evidence, but not their copies

Even during the restoration of a criminal case file that has been lost, the remaining copies of its materials can only be recognised as evidence (art. 158-1 para 2 CCP RF). In connection with this, copies of the materials of another case file, and first and foremost – copies of the records of investigative and other procedural actions carried out with respect to another case, the reports of experts and specialists

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– can not be regarded as documents in the sense of arts. 81, 84 CCP RF, that is they can not have evidentiary significance.11 The records of investigative actions, the reports of experts and specialists are assessed from the point of view of their admissibility only within the framework of that criminal case during proceedings with respect to which each investigative action was performed, expert examination was commissioned or report of a specialist was requested. During such an assessment it is imperative to review, in particular,

whether a criminal case has been initiated, whether the terms of its investigation have not expired, whether it has not been suspended and not been terminated, whether any evidence whatsoever has not been recognised as inadmissible and other circumstances. Consequently, the party of the defence factually completely loses such an opportunity with respect to a severed case during selective copying of materials from another case file without its participation and their attachment to the severed case file. The indicated circumstance in and of itself does not allow such evidence to be recognised as admissible, inasmuch as it has been obtained with gross violation of the rights of the party of the defence provided for by the CCP RF. Besides that, it can not be ruled out that a copy of a piece of evidence that has already been recognised as inadmissible with respect to the main case will become or will be deemed admissible evidence with respect to the severed one, which is likewise impermissible. If the main and the severed case will be joindered anew, then all of the copies of the records of investigative actions, reports of experts and specialists found in the severed case will promptly lose any ―evidentiary significance‖, all the more so given that they had not acquired it in the first place. Copies of evidence the admissibility of which can not be assessed do not have evidentiary significance from the outset. The copying by an investigator of the records of investigative and other procedural actions, the reports of experts and specialists obtained with respect to another case, in the course of the inspection of the materials of this criminal case file
11

In Russian criminal procedure, a distinction is made between ―evidence‖ and ―documents‖ in a case file. In the situation described in this paragraph, ―evidence‖ is merely the physical pieces of paper on which there happen to be words printed, whereas a ―document‖ is the actual content of these words, which has ―evidentiary significance‖—Trans. 297

is not provided for by the law as a way of gathering evidence. evidence obtained in such a way is inadmissible.

Consequently,

Besides that, if during the carrying out of an inspection of the materials of a criminal case file:  The precise object of this investigative action is not established;  The requirements of art. 39 para 1 (1), art. 161 para 2, art. 170 para 1 CCP RF are violated, this means, copies of the records of investigative and other procedural actions, the reports of experts and specialists obtained in such a way do not have evidentiary significance (are inadmissible evidence) both with respect to the main criminal case, and with respect to the severed one too. The fact that the majority of the court‘s findings are based on copies of the materials of other criminal case files is indirectly, but most graphically confirmed by the complete absence of court costs for the very voluminous, complex, multipleepisodic case of Khodorkovsky and Lebedev, the investigation and examination of which continued for the course of several years. In the operative part of the verdict (p. 687-689), nothing is said about their presence. It is obvious that all court costs are connected with proceedings with respect to other criminal cases.

4. General finding

Contrary to the requirements of art. 15 CCP RF the court, having violated the prescriptions of arts. 90, 240, 246 and 252 CCP RF, simultaneously carried out the function of the prosecution and the function of the resolution of the case. The accusatory slant in the activity of the court is discerned in the fact that the court:  Overstepped the bounds of the court proceedings both with respect to the circle of persons, and with respect to the charge that had been laid;  Did not accept the abandonment by the state prosecutors of part of the charge that had been laid, which it was obligated to do, having agreed only with an obvious fact – an arithmetical error allowed by the party of the prosecution;

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 One-sidedly and selectively applied the provisions of art. 90 CCP RF, having given this norm of the law a broad interpretation, where this corresponded to the conclusions of the party of the prosecution;  Recognised all evidence presented by the party of the prosecution as relevant, admissible, reliable, based on the law, as they had been obtained in compliance with the requirements of current criminal-procedure legislation, and sufficient for the resolution of the given criminal case, and therefore deemed it possible to lay them at the foundation of the verdict;  Completely rejected all the evidence presented by the party of the defence;  Unequivocally supported the party of the prosecution with respect to all disputable questions and in all dubious situations (about the territorial judicial jurisdiction of the criminal case, about the admissibility of the evidence obtained, about the competition of the norms of the of the CCP RF and the Federal Law ―On the advocacy and the bar in the Russian Federation‖).

The report has been prepared by doctor of juridical sciences, professor A.D. Proshlyakov, discussed and approved at a session of the chair of criminal process of the Ural State Law Academy (minutes No. 6 of 27 June 2011). Head of the chair of criminal process of the Ural State Law Academy d.j.s., professor A.D. Proshlyakov

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Expert M.A. Subbotin general director of the ANO ―Center for Legal and Economic Studies‖, general director of the scientific-consulting company ―SRP-Expertiza‖, senior research fellow of the Institute of World Economy and International Relations of the RAS, candidate of economic sciences

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Brief expert commentary to the assessment of certain economic categories (transfer prices, market prices, world prices) within the framework of the YUKOS case

The recent headline-grabbing story about how the Gazprom company had attempted to arrange so that the control over transfer (or intra-corporate) pricing provided for by a recent draft law would not apply to it1 once again raises questions: is the use of transfer pricing thievery and/or a form of evasion from the payment of taxes? If no, then for what have Mikhail Khodorkovsky and Platon Lebedev have been sitting behind bars for 8 years already, equally as a multitude of other entrepreneurs locked up on analogous charges? If yes, then why, for example, are Gazprom head Alexey Miller and others, continuing as before to openly use those same or analogous transfer pricing arrangements that had been found to be criminal in the YUKOS case? The question of regulating transfer pricing has a very lengthy history. Already as far back as 2001, the ideologist of tax reform in the fuel-and-energy complex, deputy minister of finance Sergey Shatalov, was admitting: ―Much that is unclear remains: the definitions of controlled transactions, market price, interdependent persons et al. By the same token, as of yet the tax agencies still do not know their way around very well concerning questions of transit [sic] pricing. We still have plenty of really big work ahead of us with respect to updating the entire tax system‖.2 As is known, oil-and-gas companies pay three principal taxes in Russia: an export duty, a tax on the extraction of useful mineral deposits (the NDPI) and a tax on profit. The problem of transfer pricing has direct bearing on the profit tax and on the NDPI, which was introduced as of 1 January 2002, among other reasons, also as a form of counteracting the application of transfer prices for the purposes of tax optimisation. In so doing, for strictly fiscal purposes (for simplicity of administration), they linked the NDPI rate to the export Russian price of URALS and, as a consequence,
1

In the verdict with respect to the case being examined, the selling of oil with the use of transfer prices, which are characterised by the court as ―understatement‖, is found to be criminal. - Compiler‘s note. 2 http://expert.ru/expert/2001/33/33ex-tend_26427/ 301

only from this moment did the formal linking of the tax base to the level of world prices for oil arise. At the same time, only from this moment did the payment of taxes become a purely technical process, when it stopped being necessary to ask oneself the question of just what price is the market price. As a result, it was

established how much companies have to pay in taxes irrespective of the real prices of sales. This was not so in the previous period. In other words, the very fact of the replacement of the royalty (as well as of the excise and the tax for VMSB*) with the NDPI is witness to the universal use prior to that of transfer prices and to complete uncertainty relative to the amount of the socalled market prices. If certainty had existed [as to] what specific prices of sales should be regarded as market prices and used for the purposes of taxation, then there would not have been the need to switch over to the NDPI. Therefore, according to the assessments of the Minfin**, oilmen used the mechanism of transfer pricing the most actively, of which the wide dispersion of domestic*** prices for oil can serve as proof: from 700 to 3700 rubles per tonne. ―The norms of current legislation are practically not working today‖, - admitted Sergey Shatalov3. On the other hand, optimisation of taxation thanks to transfer pricing played a role in the long term as a means for increasing the taxable base thanks to the high rates of accumulation and growth of production and export of hydrocarbons and of the products of their refining. Only as the result of the introduction of a specific rate of the NDPI (i.e. in rubles per tonne of produced oil with an adjustment for world prices for oil and the exchange rate of the national currency to the US dollar) and, as a consequence, [consequence missing in original—Trans.] were clear-cut rules for the assessment of this tax established. Also attributable to this same event – the introduction of the NDPI – is such a new phenomenon as the linking of prices for the purposes of taxation to world prices,

*

VMSB – Restoration or Reproduction of the Mineral–Raw-Material Base.—Trans. Ministry of Finance.—Trans. *** The word vnutrennikh could also be translated as “internal”, i.e. within a company. Which translation is correct is not clear from the context.—Trans. 3 Ibid.
**

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something that had not existed in the tax legislation of Russia until 1 January 2002. By the way, this situation is being subjected to the critique of specialists and the Minfin has more than once declared the abandonment of such a linkage to be its task, which needs to be resolved within the framework of a tax reform. Along with that, transfer pricing has remained of subjects [sic] of discussions after this as well. Thus, in 2007, the RSPP* introduced proposals relative to the principles and formulations of transfer pricing, in December 2010 the FNS** was only just planning to create a special unit in its structure for control over transfer prices, while an analysis of the proposed changes with respect to the draft of a law at the beginning of that same year was sharply critical. On 18 May 2011, prime minister of the RF V. Putin conducted a meeting with respect to the question of transfer pricing, where he underscored that legislation regulates the corresponding procedure, however such terms as “market price”, “affiliated structures” etc. are insufficiently clear. "And this, of course, needs to be sorted out " – declared Putin. Besides that, according to the words of the premier, such amendments relative to transfer pricing must be uniformly applied in relation to all participants. Putin likewise pointed out that changes need to be introduced “carefully and neatly”, in order “not to do harm”, and that they use such an arrangement as transfer pricing in the whole world. "And there is nothing

reprehensible here. Every business thinks how to minimise its expenses, including taxes", - justly noted the premier. Incidentally, none of this in any way hindered V. Putin in December 2010, prior to the issuance of the verdict in relation to M.B. Khodorkovsky, from publicly declaring that his guilt is ―proven by a court‖. At the same time as the indicated uncertain terms were laid at the foundation of the charges of theft under which Khodorkovsky and Lebedev, as well as many other entrepreneurs, were convicted. It is obvious that nobody should be put on trial on the basis of unclear criteria. Inasmuch as what is being spoken of is not even a fine, but freedom and the possibility of conducting a

*

**

Russian Union of Industrialists and Entrepreneurs.—Trans. Federal Tax Service.—Trans. 303

reasoned dispute with the fiscal agencies, standing up for one‘s rightness in court and counting on an objective resolution of the dispute by the court. The reorganisation of AO* and the problem of intermediaries, exchange rate** and dividend policy, investments and incomes, a market price that is not designated, but is formed by economic factors and itself consists of deviations – in all this too there is nothing but uncertainty and unsettledness. Consequently, if one is to adhere to the principle that doubt is treated in favour of the accused, then one needs to promptly release all entrepreneurs who have been convicted for the sale of goods with deviation from the ―market‖ price, evidence the absence [sic] of which was the introduction of the NDPI (otherwise there would not have been problems with 100% collection of the royalty or the tax on profit): there is no certainty in this question, furthermore - it is still unknown when it will appear, yet people are locked up. And furthermore they are continuing to lock them up…. In Russia, as is known, questions of taxation, including the procedure for collecting taxes, are regulated by the Tax Code, which contains, among other things, also an article 40 about market prices applied for the purposes of taxation. The state can establish a tax base with a link to world prices, as in the situation with the NDPI, and collect taxes, and in the event of their underpayment - fines as well. But this is not at all a ground for classifying trade at prices lower than such a ―market‖ price as a form of evasion from the payment of taxes and all the more so – as theft. One must not forget that business transactions, their material conditions (including the price) are regulated by civil, and not by tax and most certainly not by criminal legislation. In particular: “Article 424 CivC RF. The price. The execution of an agreement shall be paid for at a price established by the agreement of the parties. In situations provided for by the law, prices (tariffs, pricing schedules, rates, etc.) established or regulated by the state agencies and/or bodies of local self-administration empowered for this shall be applied”.

*

Probably “joint-stock companies”, but this is not entirely clear from the context.—Trans. The Russian word kursovaya can also be translated as “stock price”, which is how it is used later in this text. The meaning in this instance, however, is not entirely clear from the context.—Trans. 304
**

It is obvious that what are had in mind by the legislator are [noun missing in original—Trans.] regulated by the Federal Service for Tariffs of the RF or the prices of natural monopolies (for example, those of transport companies or of purveyors of gas to the population and enterprises), or the regulation of prices in extraordinary conditions (during the time of war or natural disasters). There has been nothing of the kind in relation to oil companies over the past two decades4. Therefore, prices for oil and oil products were established exclusively by agreement of the parties. I.Ya. Foynitsky, whom lawyers often cite, used to say: ―It is in fashion in our country not to pay attention to the rudiments of civil law when analyzing criminaljuridical [sic] questions having the closest connection with them; these rudiments are called ‗subtleties‘ from on high, which loses sight of the fact that civil and criminal enactments are written by one and the same legislator and can have as their task only the protection of one and the same set of interests… Ignoring the rudiments of civil law impacts harmfully to the highest degree on the soundness of the criminal-juridical activity of the state; losing the ground of law and legal relations under the feet, it can only grasp at considerations of the morality or immorality of an act, which in isolated form are going to lead to no good‖5. What we are seeing here is an absence of elementary economic knowledge by the applier of the law and the classifier, who to this day confuse income and profit, consider the market price ―understated‖, and not made up of deviations from some average, do not realise that thanks to transfer pricing companies accumulate funds on investment directions, providing for the development of the business, while the formation of subsidiary enterprises is not the creation of a system of intermediaries called upon to provide for evasion from taxes, but is implemented with the objectives of specialisation of operational activity and so forth. In so doing, prices for oil in Russia in the 90s and the 2000s were not regulated, and for this reason talk about the

4

In April of 2011, the Minenergo [Ministry of Energy—Trans.] had only just unveiled the draft law "On the production, refining and transportation along trunk oil pipelines of oil and the products of its refining", the fate of which remains unclear and which endows the government with the right to direct state regulation of the prices for oil products (but not of oil) in the event of their increase by more than 30% in the course of a month. http://www.newsru.com/finance/01apr2011/minenergo.html
5

I.Ya. Foynitsky. Moshennichestvo po deystvuyushchemu russkomu pravu. Sravnitel'noye issledovanie. In 2 parts.-M.: Izdatel'stvo SGU, 2006. Part 2. Page 23. 305

"illegality", the «understatedness» of transfer prices for oil does not have any lawbased foundation underneath it. A sine qua non feature of theft is the causing of direct damage to the injured party as the result of the seizure without exchange for value (the taking) of his property by the guilty party. However, if the prices of transactions with respect to the sale of oil by production subsidiary companies (no matter what these prices are called: transfer, ―understated‖ or any other way whatsoever) provided for not only the covering of all their costs of production of the oil, but also the receiving by these ―injured parties‖ of profit, then it is impossible to call the classification of such transactions as theft of the oil anything other than economic-and-legal perversion. Besides that, the speculation about the damage caused to minority shareholders from transfer prices is simply incomplete, and therefore untrue: if a company

optimises its tax payments with the help of transfer prices, then it thereby has the opportunity to put more into the assets of the company, acquiring new property or creating it with the help of investments. As a result, the amount of the assets grows and, all things being equal, the market value of the company grows, and this means the value of the shares of the shareholders as well, including also of the minority shareholders. Much the same way as how much income a production operation gets depends not only on the prices of sales, but also on production costs. Therefore there can be a drop in the payouts of dividends (an understating of the profit as a consequence of the use of transfer prices), but at the same time the capital of the minority shareholders grows, which can more than cover the losses in dividends: shareholders play not only on dividends, but also on the market value. Their correlation can change for different reasons, but in any case one needs to see both of these factors of income generation. It is strange that some economists and jurists sometimes forget about this. Art. 40 TC signifies not that prices deviating from market prices are ―illegal‖ - this deviation does not entail the ―repeal‖ or other legitimate discrediting of such prices, but signifies merely that in the event of a deviation in the price of a contract from the so-called market price more than by 20% (until July 1999 – by 30%), the tax inspectorate, defending the interests of the budget, may reassess the amount of taxes,
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proceeding not from the price of the contract, but from some other calculated value. Furthermore, any company must have the right to sell its output at any price possible in the concrete market conditions (on individual local markets and in conditions of an at times unfavourable situation), otherwise it will not be able to sell the good at all, and this means it will not earn anything at all and will not be able to compensate the costs incurred even partially.

Findings: 6. Arrangements with transfer, or intra-corporate[,] pricing not contradicting current legislation are widely and openly used by companies in Russia to this day. For some such companies, even the attempt to change the conditions of state control evokes irritation (and in many ways justified). Therefore, criminal punishment of some companies for the use of transfer pricing6 in conditions of its universal application by others is an obvious situation of selective prosecution. 7. It ought to be asserted that all entrepreneurs convicted so far under cases connected this way or the other with the use of transfer pricing have turned out to be deprived of foundational rights guaranteed by the Constitution, ones, in particular, such as the equality of all before the law and the court, the impermissibility of selective prosecution, presumption of innocence, the right to a defence, both against a criminal charge, and also when justifying a position with respect to questions of taxation that is different than the Minfin‘s. 8. Any irremovable doubt must be interpreted in favour of the accused. A person can be found guilty and convicted only for a concrete crime directly provided for by the criminal law and committed personally by him. If justice is not in a condition to determine a difference that is uniform for all between a crime and a civil injury committed within the framework of customary economic activity, - it should not be bringing [people] to criminal liability.

6

In the verdict with respect to the case being examined, the selling of oil with the use of transfer prices, which are characterised by the court as ―understatement‖, is found to be criminal. - Compiler‘s note. 307

9. Such ―bringings‖ in and of themselves ought to be considered criminal, if not from the legal, then most certainly from the economic point of view, inasmuch as such actions cause irreparable harm to the economy . 10. Therefore, without an amnesty in relation to those convicted under ―economic articles‖, as a first step towards restoring fairness, it is impossible to stop the flight of brains and capitals that is ruinous for Russia, and, all the more so, to reverse this process, providing for an inflow into the economy of people with initiative and of private investments. The application of an amnesty is all the more justified

inasmuch as it is obvious that entrepreneurs could not and can not comply with such tax rules, which are devoid of certainty and are to this day a subject of discussions both in expert circles, and in the bodies of state power.

Mikhail Subbotin7

One of the authors of the laws ―On production sharing agreements‖ and ―On concession agreements‖. 17 years of expert work in the State Duma and the Federation Council of the Federal Assembly of the RF, in ministries and departments of Russia: in Expert Councils of the Committees of the SD RF on economic policy and on natural resources, as well as on the budget and taxes, member of the expert council of the Commission of the SD on the legal questions of PSAs, expert of a working group of the Federation Council on studying the situation around the Sakhalin-2 project, head of the Expert Council on questions of PSAs of the Mintopenergo [Ministry of Fuel and Energy—Trans.]; expert of the MERT [Ministry of Economic Development and Trade— Trans.] and the MPR [Ministry of Natural Resources—Trans.], advisor to the FAS [Federal Anti-Monopoly Service—Trans.]. 34-year experience of scholarly work in the RAS [Russian Academy of Sciences—Trans.] Institute of World Economy and International Relations (IMEMO); since 2001 – general director of the scientific-consulting company ―SRP-Expertiza‖, since 2010 – general director of the ANO [Autonomous NonCommercial Organisation—Trans.] ―Center for legal and economic studies‖. Author of over 300 articles and several books on questions of the activity of the leading oil companies of the USA, concessions and PSAs, natural resource rent, the investment climate. Constant participant in international and Russian conferences. Details about professional activity - see on the website www.concession.ru. 308

7

Эксперт A.A. Tedeev deputy director of the Scientific and Methodological Center of the ―UNESCO Department on Copyright and Other Intellectual Property Rights‖ at the NRU ―Higher school of economics‖, Assistant to a Member of the State Duma of the Federal Assembly of the Russian Federation, Deputy Chair of the Council for Legal Questions under the Presidium of the State Academy of Sciences of the Russian Academy of Education, candidate of economic sciences, Doctor of Juridical Sciences

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REPORT OF THE EXPERTS‘ WORKING GROUP FOR EXAMINATION OF THE TAX ASPECTS OF CASE No. 1-23/10 (―THE CASE OF M.B. KHODORKOVSKY AND P.L. LEBEDEV‖)

1. The materials of criminal case No. 1-23/10 (―the case of M.B. Khodorkovsky and P.L. Lebedev‖), and all the judicial acts issued in the course of the trial by all instances (hereinafter referred to as the case file materials) were analysed by the experts‘ working group for the purposes of a tax-law assessment. The work of the group was built on the basis of an analysis of materials available in the public domain. The criminal case file materials contain numerous indications at factual circumstances that are individually or in their aggregate capable of functioning as legally significant circumstances bearing witness to violations of Russian legislation on taxes and levies. 1.1. As follows from the criminal case file materials, the fact of the use by OAO NK YUKOS of ―sham companies, registered inter alia, in tax havens‖ (OOO Mitra, OOO Muskron, OOO Colerainе, OOO Business-Oil, OOO Quadrate, OOO Grace, OOO Nortex, OOO Staff, OOO Wald-Oil, OOO Quercus and many others) was established by the court. In particular, it is asserted that in execution of the directions of P.L. Lebedev, M.B. Khodorkovsky, the head of the OOO Yukos-Moscow directorate of tax planning and another person – a worker of this company [–] did in 1997-1998 register through employees of JV RTT, which was under the control of the members of the organised group, the commercial organisations OOO Mitra, OOO Forest-Oil, OOO Wald-Oil and OOO Business-Oil in the ZATO of the town of Lesnoy and OOO Muskron, OOO Nortex, OOO Quercus, OOO Coleraine, OOO Grace and OOO Virtus – in the ZATO of the town of Trekhgorny. The given organisations were sham legal entities by their essence and were used for recording the flows of oil, oil products, securities and monetary funds through them, with the objective of ensuring the opportunity for the unimpeded disposition of the stolen property. Besides that, with these objectives, upon the direction of M.B. Khodorkovsky, participant in the organised group P.L.
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Lebedev secured the acquisition of sham companies abroad into ownership in 1997 through JV RTT employees under his control and organisations under their control. In so doing, аt the next stage of the realisation of the common intent, aimed at the theft of another‘s property entrusted to them and the further legalisation of what had been stolen, with the objective of transferring the functions of the marketing of the output of the joint-stock companies - Yuganskneftegas, Tomskneft VNK and Samaraneftegas [-] another person, acting upon the direction of M.B. Khodorkovsky, P.L. Lebedev and another person[,] did secure the founding of a series of intermediaries – sham Russian limited-liability companies, including Sibirskaya Transportnaya Kompaniya, ZAO Yukos-M, OOO Yu-Mordovia, OOO Alta-Trade, OOO Mega-Alliance, OOO Ratmir, OOO Mars XXII and others. The execution and submission for registration to state agencies of the founding documents of the indicated Russian companies was organised in such a manner that they would be registered for tax purposes in tax havens, that is in the Republic of Mordovia, in the Evenkiysky Autonomous Okrug, in the Republic of Kalmykia and on Cyprus, where the Russian Federation had obligated itself likewise [sic] under the conditions of an inter-governmental agreement with this country to implement taxation of the profit (including dividends) of Cypriot companies from their activity in Russia at reduced rates. As the court established, appointed as directors of these Russian and foreign companies upon the direction of the other person – acting in execution of the orders of M.B. Khodorkovsky and P.L. Lebedev – were the very same especially trusted persons - V.G. Malakhovsky, V.I. Pereverzin and other persons, factually being subordinates of the other person and other OAO NK Yukos executives through work in the Menatep bank, in the oil company itself or in its subsidiary and other dependent organisations. Along with that, the application of the ―sham‖ category to the indicated organisations in the case file materials is not based on law. Contained in the case file materials are assertions about how with the objective of concealing the sham character of the indicated companies from tax and other regulatory agencies, the plan for theft of another‘s property entrusted to them that was elaborated by M.B. Khodorkovsky, P.L. Lebedev and the other participants in the organised group envisioned a periodic updating of the artificial arrangements for the marketing of the oil and oil products,
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that is the regular replacement in such arrangements of one group of sham organisations - oil traders, engaged in executing the resale of the oil and the oil products [-] with others, including newly founded ones. The court came to the

conclusion that the oil stolen was legalised on the domestic market by M.B. Khodorkovsky, P.L. Lebedev, and other organised group participants through the arrangements using sham enterprises registered in tax havens (OOO Grunt, OOO Mitra, OOO Business-Oil, OOO Wald-Oil, OOO Airlift, OOO Flander, OOO Muskron, OOO Alebra, OOO Quercus, OOO Coleraine, OOO Staff, and OOO Quadrate). Besides that, contained in the case file materials are assertions about how in 2000, employees of OOO Yukos-Moscow treasury developed, upon the direction of M.B. Khodorkovsky and P.L. Lebedev, an arrangement to siphon off monetary funds from the accounts of OOO Flander and OOO Alebra registered in tax haven – ZATO of the town of Trekhgorny, Chelyabinsk Oblast. Along with that, facts of the registration by OAO NK YUKOS or its employees of any legal entities whatsoever in violation of Russian legislation on taxes and levies in effect at that moment were not established by the court. The degree of legality of such registration was not examined by either the investigation or the court. The analysis that has been carried out allows the conclusion to be reached that concessional taxation regimes with the registration of dependent and subsidiary companies of OAO NK YUKOS (in the Republic of Kalmykia, the Republic of Mordovia, the Evenkiysky Autonomous Okrug, other low-tax zones in Russia or countries abroad) were being used rightfully (with an exception, the ZATO in the settlement of Lesnoy, with respect to the use of which for the purposes of tax planning there exists a court decision that has entered into force). Circumstances indicating at facts not examined in preceding trials of the use by OAO NK YUKOS in its activity of organisations registered in tax havens specifically for tax evasion purposes, i.e. illegal tax optimisation, are not contained in the case file

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materials. The budget losses that took place in this connection were brought about by the imperfection1 of the Russian legislation on taxes and levies in effect in this period. 1.2. Facts of the use by OAO NK YUKOS of so-called transfer pricing when handling transactions on selling oil were established by the court. However, questions of the degree of rightfulness of the transfer taxation methodologies used were not examined by the court. On the contrary, as follows from the case file materials, facts of the violation on the part of OAO NK YUKOS of the provisions of article 40 of the Tax Code of the Russian Federation in the formation of pricing were not established by the court. 1.3. Information is contained in the case file materials indicating that ―dualentry bookkeeping2 was maintained at OAO NK Yukos for accounting profit received: the first, under Russian Accounting Standards (RAS) – for the shareholders, the tax and regulatory agencies, in which a minimum amount of profit was accounted; the second – for the auditors and foreign investors, in which the profit received as the result of theft of the oil from production companies was also accounted‖. In corroboration of this, the case file materials contain a note, from which it follows that according to OAO NK Yukos‘s Profit and Loss Statements from the annual accounting reporting made out pursuant to RAS and from the consolidated financial statements of this company made out pursuant to US GAAP, net profit amounted to: in 1999 under the RAS – USD 228 mln (RUB 6,157 mln), under the US GAAP – USD 1,152 mln (RUB 31,115 mln); in 2000 under the RAS – USD 255 mln (RUB 7,191 mln), under the US GAAP – USD 3,724 mln (RUB 104,868 mln); in 2001 under the RAS – USD 985 mln (RUB 29,687 mln), under the US GAAP – USD 3,156 mln (RUB 95,122 mln); in 2002 under the RAS – USD 1,281 mln (RUB 40,701 mln), under the US GAAP – USD 3,058 mln (RUB 97,183 mln)‖ (vol. 131; c.f.s. 34, 57, 89, 116, 169, 194, 214, 243, 264). Along with that, on the one hand, the use of international accounting standards is the normal practice for any company that prefers to attract foreign investors; on the

1 2

The original Russian text reads ―brought about not by the perfection‖, most likely a typographic error.—Trans. The court erroneously uses the standard accounting term ―dual-entry bookkeeping‖, when from the context it is clear that what it actually means to say is that ―two sets of books were maintained‖.—Trans. 313

other, it is obvious that when converting Russian financial accounting data into an international format, the indicators will not coincide, which does not at all bear witness to the presence of any violations in and of itself. Information on expert corroboration of the court‘s findings about the presence of ―dual-entry bookkeeping‖, and equally about whether the indicated circumstances impacted on the execution by OAO NK YUKOS of tax obligations (and how substantially) is not contained in the case file materials. 1.4. Contained in the case file materials are pieces of evidence proving that ―the management of OAO NK Yukos since 1996 financial year abstained from publishing its financial statements in mass media and from submitting such to the state controlling bodies and especially to the tax authorities; the financial statements were not

disclosed to the OAO NK Yukos auditors, i.e. to PricewaterhouseCoopers, concealing such or producing such in knowingly distorted shape‖ (vol. 131; c.f.s. 24-27, 48-80, 81-109, 110-132, 133-162). Along with that, it is imperative to note that the question of whether the indicated distortions impacted on the execution by OAO NK YUKOS of tax obligations (and how substantially) was not examined by the court. 2. We shall note that the experts‘ working group deemed it possible to indicate that it was somewhat bewildered with respect to the merits of a series of the court‘s findings. Thus, in the verdict with respect to the case, it is indicated that the commercial court judgments (with respect to tax questions) ―do not refute and do not affect in any way the establishment of the circumstances of commission of crimes in this case or the court‘s conclusions regarding the defendants‘ guilt and classification of their actions‖. Second, the court came to the conclusion that the monetary funds M.B. Khodorkovsky and P.L. Lebedev legalised, having carried out financial transactions in them, were generated from embezzlement of oil committed earlier, rather than from tax evasion. It is possible that the court is proceeding from the premise that such embezzlement and improper execution of tax obligations could have appeared as parallel processes. 3. The analysis that has been carried out of the indicated case file materials allows the following conclusion to be reached.
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It seems imperative to note the absence of any cause-and-effect connection between, on the one hand, the factual circumstances indicated in the case file materials and established by the court, which could have functioned as legally significant circumstances, giving rise to tax consequences; and, on the other, - the factual circumstances that were established in the verdict that has come into legal force and that have served as the basis for classifying the actions performed by Mikhail Borisovich Khodorkovsky and Platon Leonidovich Lebedev as criminal, and equally for finding the indicated persons guilty of the commission of the crimes provided for by article 160 paragraph 3 subparagraphs (a) and (b), and likewise1 article 174.1 paragraph 3 of the Criminal Code of the Russian Federation.

1

The original Russian text reads ―in the same way‖ instead of ―likewise‖, most likely a typographic error.— Trans. 315

Expert: Ferdinand Feldbrugge, Professor of East European law of Leiden University, The Netherlands

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The Khodorkovsky/Lebedev Case An Analysis of Certain Legal Aspects

Ferdinand Feldbrugge

Introductory Remarks

1. The following analysis has been prepared at the invitation of the Presidential Council of the Russian Federation for Civil Society and Human Rights to take part in an independent public expert analysis of official documents and proceedings in the recent criminal case against M.B. Khodorkovsky and P.L. Lebedev (hereafter ―the defendants‖), resulting in their conviction on 27 December 2010.

2. The basic materials for the following analysis are the judgment of 27 December 2010 (hereafter ―the judgment‖) of the Khamovnichesky Court in Moscow, as well as a number of legislative acts of the Russian Federation, esp. the Criminal Code of the Russian Federation. Provisions of the Code of Criminal Procedure of the Russian Federation, as well as possible procedural violations, were not analyzed. Information concerning earlier convictions of the defendants is limited to the judgment of 27 December 2010. Other relevant materials (such as other case documents, legal literature, published jurisprudence from Russian courts) have not been consulted in any systematic manner.

3. For these and other reasons the following analysis does not pretend to be a more or less full, albeit brief, analysis of the case. This analysis is limited to two important aspects of the case which appear to be open to discussion, namely an analysis of the issue of possible double jeopardy (i.e. of the correlation of an earlier case concerning fiscal offences with the present case) and an analysis of the ownership issue in

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connection with the main charges of the present case. The charge of legalization (laundering) of property and money, which in most respects depends from the main charge of property offences, is outside the purview of this analysis.

Background of the Case

4. The general background of the story, as related in the judgment, is that the defendants (together with others) had built up over the years an extensive network of interdependent corporations, engaged in and covering the entire production process of oil, from exploration to sale abroad. The defendants were in control of this network through a complicated structure of legal instruments. The apparent purpose of this network was the maximization of profit, especially, by making use of fiscal advantages.

5. The activities of the defendants became the target of fiscal investigations, which ultimately resulted in their conviction in connection with certain tax crimes in 2005, for which each of them received a prison sentence of 8 years.

6. Prior to release from places of deprivation of liberty, the investigative bodies instigated new criminal proceedings against the defendants, charging them this time with property offences (embezzlement) and legalization (laundering) of property and money.

The Double Jeopardy Issue

7. This new prosecution raised the question of how much it conforms with the prohibitions contained in art.4 of Protocol No.7 of the European Convention on the Protection of Human Rights and Fundamental Freedoms (ECHR), art.50 par.1 of the

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Constitution of the Russian Federation, and art.6 par.2 of the Criminal Code of the Russian Federation.

8. Of the acts named, art.50 par.1 of the Constitution of the RF evidently has the narrowest scope of application. It forbids a repeated conviction for the same criminal offence, but does not forbid a second prosecution directly. Art.6 par.2 of the Criminal Code of the RF directs that no one can bear criminal responsibility twice for the same criminal offence and this would seem to imply prosecution also. Art.4 of Protocol No.7 of the ECHR is the most explicit in providing that no one can be prosecuted or punished in a criminal procedure (within the jurisdiction of the same state) for a criminal offence of which he has been acquitted or convicted by a final judgment. Ultimately, the differences between the cited provisions are smaller than they may seem, because proceeding from the prohibition on double jeopardy contained in art.50 par.1 of the Constitution of the RF, any criminal prosecution which could lead to a violation of this norm would be meaningless.

9. The original meaning of the ne bis in idem principle, contained in the provisions mentioned, may have been narrow, forbidding repeated prosecution for a specific offence as defined by criminal law. But at the present-day stage it is interpreted differently, and the effect of this principle reasonably extends to the actual behaviour, the actual actions that a person has committed and are punishable by criminal law. Otherwise, law-enforcement agencies could continue to harass an individual by charging him at intervals with different offences relating to the same actual behaviour. The term ―offence‖ in the acts in question has to be read therefore as ―a concrete action, covered in some way by the criminal law‖.1

1

Art.8 of the Criminal Code of the RF speaks of ―an action containing all the elements of a criminal offence [prestuplenie], provided by this Code‖. 319

10. In the present case the defence argues that the 2005 conviction for fiscal offences and the new charges of embezzlement and legalization concern the same ―criminal offence‖ (p.661) in connection with which the new charges would be excluded under the ne bis in idem principle. This view would imply that the entire complex of commercial activities the defendants had been conducting during a number of years constituted a single ―action‖. Such an extension of the ne bis in idem principle is unjustified2.

11. The fiscal offences of which the defendants were convicted in 2005 may indeed be viewed as an integral part of the complex of their commercial activities, but the actions embodying these fiscal offences were sufficiently concrete and identifiable to consider them as separate criminal offences. Even if all the taxes were paid, this would not have affected the possibility of the present criminal prosecution under art.160.

12. Art.6 par.1 of the Criminal Code of the RF enunciates the principle of equity (printsip spravedlivosti) which implies a.o. that punishment should correspond with the circumstances of the commission of the crime. On this basis one can argue that criminal prosecutions for separate criminal offences which together constitute a complex of criminal activities should, if at all possible, be united in a single trial. Such a requirement can also be based on general principles of equitable administration of justice (cf. art.6 of the ECHR). Art.69 p.3 of the Criminal Code sets a general maximum of 25 years of deprivation of liberty in the case of cumulation of punishments. That being said, the final punishment in the form of deprivation of liberty cannot exceed by more than half the maximum term prescribed by law for the most serious of the aggregate of the inculpated crimes. With respect to the case being examined, the final term of punishment, taking into account the sanctions of the crimes inculpated to the convicts, could not have exceeded 15 years. If there is no danger that

2

Reports of J Kahn, O. Luchterhandt, A.V. Naumov, O.M. Oleynik, A.D. Proshlyakov and A.A. Tedeev contain the opposite position – Compiler‘s note. 320

the punishment will exceed an overall limit of 15 years, then the question of separate criminal prosecutions is less urgent. But in such situations it would still be possible to use separate criminal prosecution in bad faith as a tool to harass defendants and this would be contrary to the requirement of equitable administration of justice.

13. In the present case, separate criminal prosecution and separate trials resulted in aggregate sentences which did not exceed the 15-year limit, but the considerable interval between the prosecution of the fiscal offences and the second trial was not clearly explained, either by the law-enforcement agencies or by the court. Such explanations were required, in particular, in connection with the start of the second trial upon the defendants‘ having served 4 out of the 8 years of deprivation of liberty under the first judgment, and the lack of explanations could create the impression that the second trial was intended to harass the defendants.

The Ownership Issue

14. The defendants directly or indirectly owned 90% or more of the stock in the IUKOS company, as well as shares and participatory interest in the charter capital of mutually interdependent companies, the decisions of which the defendants determined by virtue of official powers, or by virtue of other circumstances 3. Among the numerous subsidiary companies of IUKOS were three oil-producing companies (Iuganskneftegaz, Samaraneftegaz and Tomskneft’), of which most of the stock was controlled by IUKOS. IUKOS had concluded general agreements concerning the delivery of oil in the composition of oil mixture (hereafter ―oil‖) with these three companies. Within the framework of these general agreements concrete purchase-sale contracts were concluded between the same parties. It had been agreed that the price was to be set by IUKOS. These prices were generally 20% less than the statistical average sale price (tsena realizatsii) in the region and less than the price determined by the minimum and maximum quotes for Ural‘s (Med) and Ural‘s (R‘dam) oil.

3

In the given analysis, the term ―IUKOS‖ signifies not just the OAO NK IUKOS company itself, but also companies acting on its behalf and completely controlled by it, directly or indirectly. 321

15. The main charge brought against the defendants was that of art.160 of the Criminal Code of the RF, one of the forms of theft, committed through the appropriation or spending of the property of somebody else. The general concept of theft (khishchenie) is defined in the Appendix to art.158 of the Criminal Code and art.160 refers to theft of property of another, entrusted to the offender. The conviction of the defendants was under art.160 par.3 and the judgment contained the qualifying elements of ―large scale‖, ―by an organized group‖, and ―through the use of an official [sluzhebnyi] position‖.

16. In order to understand how the actions of the defendants could be qualified according to art.160, a more detailed analysis of this provision is required. The qualifying circumstances of art.160 par.3 can be left aside, as they are of secondary importance in the context of the present analysis.

17. The text of art.160, combined with the definition of theft (khishchenie) of art.158, produces the following elements to be established in the actions of the defendants, if they are to be found guilty under art.160: - a. it must concern property (imushchestvo) of another; - b. this property must have been entrusted to the defendants; - c. it must have been taken by, and/or put to use for the benefit of, the offender or other persons; - d. this must have been done unlawfully and without compensation; - e. it must have been done intentionally4 and for selfish (mercenary, korystnye) purposes; - f. the act must cause loss to the owner or another possessor of the property.

18. While in the case of ordinary theft the offence is considered to have been committed from the moment when the property is taken out of the control of the owner against his will, the situation is more complex in the case of theft by way of embezzlement ; the person who acquires control of the property may or may not have
4

The term ―theft‖ (khishchenie) is considered to imply the intentional [umyshlennyi] character of the act. If the offender did not know that he had unlawfully taken the property of another person, there is no theft. 322

the intention of appropriating it at the moment of acquiring control, and the offence is considered to have been committed from the moment when the person began to unlawfully use it for the benefit of himself or other persons (by using it himself, refusing to return it to the owner, alienating the property, etc.). Only from that moment does the owner or legal possessor of the property begin to suffer a loss.

19. There is no dispute about the fact that the three oil-producing companies mentioned above were the owners of the oil in the composition of the oil mixture (skvazhinnaia zhidkost’) as it exited the borehole.

20. The Court notes (p.651) that by virtue of the general agreements and other contracts between the three companies and IUKOS, the former were deprived of the right to dispose of their property from the moment the oil mixture came out of the borehole, transferring this right to IUKOS. The Court accordingly regards this as the time and the place of the commission of the crime. It is at this moment that the ―taking‖ (iz‖iatie), or rather the ―putting to use for the benefit of the offender or of other persons‖ (obrashchenie … v pol’zu vinovnogo ili drugikh lits), took place.

22. On the following page of the judgment (652) it is stated that the purchase-sale contracts provided that the control (vladenie) over the oil was passed from the producing company to IUKOS at the checkpoint (uzel ucheta).5 Although the concept of vladenie is designated more precisely in civil law as possession, from the entire judgment as a whole, obviously, that in this situation the less precise concept of control (―being in a position to determine the legal fate of the object in question‖) is meant. This is in agreement with the character of the offence of art.160. It would be unrealistic to limit the applicability of this provision to persons who were the civil law possessors. Anybody (not being the owner) who has actual control over a thing is a potential offender in this case. ―Entrusting‖ in the definition of art.160 means ―putting

5

This assumes, in aggregate with the position of the court set forth on pg. 651 (and others), that the checkpoint (uzel ucheta) is the same thing as the exit of the borehole (skvazhina). 323

somebody in a position to determine the legal fate of an object‖. The contracts between IUKOS and the oil-producing companies created the legal framework for IUKOS to determine the legal fate of the oil, which was then realized every time a concrete delivery took place.

23. In this view, the issue of the ownership of the oil is relevant in so far as the offence of art.160 of the Criminal Code can only be committed by somebody who is not the owner. The defence has argued repeatedly that in the earlier tax cases numerous decisions of arbitration courts had established that IUKOS was the owner of the oil (and therefore liable to pay tax) and that therefore there could be no question of prisvoenie. Leaving aside the question whether ownership as defined in civil law can in all cases be equated to ownership as defined in tax law, one can not but admit that the fact that the three oil-producing companies possessed the right of ownership initially is not in doubt, and the prisvoenie can therefore only have occurred until such a moment as they still owned the oil (oil mixture).

24. What has been said means that there were two significant moments in the case being examined: the moment the oil was ―entrusted‖ (without an act of entrusting there could be no act of prisvoenie), and the moment the ownership of the oil changed hands (after this moment there can be no act of prisvoenie). In the view of the court, as I understand it, these two moments coincided. It seems most doubtful that article 160 allows for such an expansive reading of the concept of prisvoenie.

25. As a legal person itself cannot be the subject of trust, only the responsible physical persons who manage the legal person, the defendants can be regarded as being persons to whom the property had been ―entrusted‖ in the meaning of art.160 of the Criminal Code. Abuse of trust on their part should have been proved.

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26. It is self-evident that the oil was, at some moment, removed from the control of the original owners and utilized by the defendants for other purposes, but was this done unlawfully and without compensation, which could have been considered abuse of trust on their part?

27. If there was partial compensation (as there was in this situation), an uncompensated part remains, and to this extent the receiving was uncompensated. The judgment occupies the same position (p.652), but it is unclear to me how this position agrees with the final amount of the damages inflicted as stated elsewhere in the judgment.

28. As to the unlawfulness of the taking, the judgment, in various places, refers to several legal provisions as having been violated. As the legal basis for transferring control over the oil was supplied by the contracts between IUKOS and the oilproducing companies, it is obvious that the place to look for violations of the law would be in these contracts.

29. Art.1 par.2 of the Civil Code of the RF provides that legal persons (a.o.) realize their civil law rights by their own will and in their own interest. By signing over virtually all powers to another legal person, the three oil-producing companies and their partner IUKOS breached this provision, according to the Court. This entailed the nullity of the deal (art.168 of the Civil Code); the oil ought to have been considered the property of these three companies, and its taking by IUKOS ought to have been considered evidently unlawful.

30. It is undisputed that physical persons cannot transfer all their civil law rights to another person, primarily because certain rights are irrevocably personal. With regard to a legal person, the analogous assertion by the Court is less persuasive. A legal person will have few rights, if any at all, that are strictly personal. So on that particular ground it seems difficult to deny a legal person the right to transfer most of its powers to another [legal person].
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31. More convincing is the court‘s position that the contracts which signed away most powers of the three companies were defective because they had been arrived at in an unlawful manner, specifically by deception of the shareholders (pp.650 and 663ff.). Such transactions, however, are not null and void, but can be annulled by the courts at the request of the injured party (art.179 of the Civil Code). Such a step was apparently not taken and the contracts ought to have been regarded as lawful. 32. The judgment refers occasionally to the contracts between the parties as ―sham transactions‖ (pritvornye sdelki), defined in art.170 of the Civil Code as ―transactions made for the purpose of concealing another transaction‖. Such transactions are equally null and void. Such a construction, however, is questionable, because the element of deceit was not in the concealment of another transaction (the words of the contract meant exactly what they said), but could have been connected with the status of the contracting parties, who were ultimately emanations of a single will. As a result, it is doubtful whether a conclusion that the actions of the defendants were unlawful can be based on art.170 of the Civil Code. At any rate, the court failed to give such a legal assessment.

33. As far as I could ascertain, the Court did not refer to another provision which could have supplied the foundation for considering the defendants‘ actions unlawful, viz. art.169 of the Civil Code, which provides that transactions entered into with a purpose knowingly contrary to the foundations of the legal order or morality are null and void. As there was already a conviction of tax evasion in connection with the commercial activities of the defendants, such an approach would not have looked implausible. It could be argued that the sole purpose of the oil delivery contracts between IUKOS and the three production companies was to maximize the profits of IUKOS and the defendants by depriving the three companies and, in particular, their minority shareholders of any income whatsoever.

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34. In the end, the unlawfulness of the appropriation of the oil will have to be reasoned primarily on the deception of the shareholders and other violations of company law, which, in the opinion of the court, allowed the three companies to be stripped on the basis of the contractual provisions which gave the defendants a free hand. The court refers to these aspects in its judgment (see pp.650, 663 and 664) with further reference to the ―materials presented at the trial‖.

35. The actions (modus operandi) of the defendants, especially, the combination of the deception of the minority shareholders and the accumulation of all incomes in the hands of the defendants, are sufficient to prove the presence of a korystnaia tsel’.

36. The infliction of losses to the owner or another possessor [vladelets] is more problematic, on account of the complexity of establishing the identity of the victim [poterpevshii]. The three oil-producing companies were the original owners, but insofar as they were themselves controlled and indirectly owned by the defendants, no loss was caused to anybody. The only victims were the minority shareholders.

37. This aspect was disregarded by the court when it established the total amount of losses in the judgment. The court noted that there is no legal equality between a legal person and the person who has full control over it. Although this is generally correct and the transfer of property or money between the two may be considered unlawful under certain circumstances, it is not at all mandatory that such a transfer can always be regarded as theft or embezzlement. As the court had concluded that the minority shareholders had been deceived, and regards their deception as a requisite element of the crime, the losses inflicted by the offence ought to have been determined on the basis of the loss borne specifically by the minority shareholders, and not by the overall negative profits of the three named companies.

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38. The intentional [umyshlennyi] character of the defendants‘ actions is not in doubt.

Conclusions

39. The defence argues that the prosecution in the present case amounted to a repeated prosecution for the same acts. This position is untenable in my view6. There is no answer to the question why the given case was not combined with the earlier one concerning tax offences.

40. The conviction for prisvoenie under art.160 elicits several questions: a. according to the judgment, the property in question was entrusted and misappropriated at a single moment in time and by a single act. It seems most doubtful that article 160 allows for such an expansive reading of the concept of prisvoenie, which makes the conviction under article 160 dubious; b. of the various grounds for finding the defendants‘ behaviour unlawful, only the deception of the minority shareholders survives criticism7; c. the amount of the loss as established by the court cannot be confirmed. The given point is sufficient to regard the judgment as unfounded.

41. It is important to note that the prosecution failed to follow an approach which would seem to be more appropriate if one proceeds from the premise that the causing of a loss by way of abuse of trust would have been proven: a charge under art.165 of the Criminal Code (―The causation of material harm through deception or abuse of confidence‖)8. It is likely that the prosecution felt that the maximum penalty in this case (5 years) was unjustifiably low.

6

In the verdict with respect to the case being examined, the selling of oil with the use of transfer prices, which are characterised by the court as ―understatement‖, is found to be criminal. - Compiler‘s note. 7 Such a charge has not been brought and is not in the verdict. – Compiler‘s note. 8 The charge under this article was brought according to the verdict of 16 May 2005 in the first criminal case. – Compiler‘s note. 328

Final Observations

42. As indicated at the beginning of these observations, the present analysis has been limited to just a few aspects of the case. Whether there were any procedural violations has remained outside the scope of the investigation. However, I would still like to lay out some general considerations.

43. It is of general knowledge that the actions which were considered criminal in the given conviction and in the earlier conviction of the defendants was wide-spread among entrepreneurs in Russia during the last decade of the 20th century and in following years. One cannot therefore ignore the question of whether the principle of equality before the law was fully observed, in other words whether there was selective prosecution, or not (cf. art.19 of the Constitution of the Russian Federation and art.4 of the Criminal Code).

44. This question indicates that the fields of law and politics can in the last instance not be kept fully separate. An analogous assertion is true in relation to the lawfulness of the defendants‘ actions discussed above. A political decision is required in order to deem such actions to be normal commercial practice or rather a criminal activity.

45. Finally, this case, in its legal ramifications, was formed in certain political, economic, and moral conditions. The isolated study of this case exclusively from the legal point of view is to some extent unrealistic and sterile.

August 2011

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CHAPTER THREE. ANNEXES Curriculum Vitae of the Experts

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Sergei Maratovich Guriev Candidate of physico-mathematical sciences, doctor of economic sciences Rector of the New Economic School Sergei Guriev has been working in the New Economic School since 1998, as director of the Outreach Center (1998-2002), vice-rector for development (2002-2004) and rector (since 2004). In 1999 he became the first staff instructor at the NES. Since 2005, Sergei Guriev likewise heads the Center for Economic and Financial Research at the New Economic School (CEFIR). Sergei Guriev completed the Moscow Institute of Physics and Technology Summa Cum Laude в 1993, received the degree of candidate of physico-mathematical sciences in 1994, that of doctor of economic sciences in 2002. In 1997-98, Sergei Guriev was a Visiting Scholar at the Massachusetts Institute of Technology, in the 2003-2004 academic year he taught at the Department of Economics of Princeton University. Professor Guriev teaches such courses as microeconomic theory, development economics, contract theory, economics of strategy at the NES. Sergei Guriev‘s works have been published in Russian and international scholarly publications, including American Economic Review, American Political Science Review, Journal of European Economic Association, Journal of Economic Perspectives, Voprosy ekonomiki, Ekonomika i matematicheskiye metody, Ekonomicheskaya nauka

sovremennoy Rossii, Matematicheskoye modelirovaniye and have been presented at leading international economics conferences. In 2000, Sergei Guriev received the Gold Medal of the Global Development Network for the best work of research on institutional economics, in 2005 - for the best work on security and migration. In 2001, Sergei Guriev was awarded the ―Best manager of the Russian Academy of Sciences‖ prize. In 2006, the World Economic Forum (Davos) included him in the number of Young Global Leaders. In 2009, he was included in the top hundred of the President of the RF‘s Reserve of Cadre. He is on the boards of

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directors of Sberbank of Russia, Russian Venture Company, AIZhK, Alfa-Strakhovanie and the Dynasty Foundation. Sergei Guriev is likewise a member of the Scientific Council of the BRUEGEL research institute (Brussels, Belgium), a research affiliate of the CEPR Centre for Economic Policy Research (London) and the co-editor of the journal Economics of Transition (London). Sergei Guriev is running the regular columns «Ratio economica‖ in the Vedomosti newspaper and ―Stranitsa ekonomista‖ in Forbes (Russia) magazine. Since March 2010, Sergei Guriev has been running the broadcast ―Poslezavtra‖ on the Ekho Moskvy radio station. His articles have likewise been published in the newspapers New York Times, Moscow Times, the Project Syndicate project, the magazines Expert, Ogoniok, Russky Fokus. In 2010 he received a Certificate in Company Direction (Institute of Directors, London).

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Kahn, Jeffrey D. 3315 Daniel Avenue Rm. 262 Storey Hall Dallas, Texas 75205

(214) 768-2792 (tel.) (214) 768-4330 (fax) jkahn@smu.edu

Education University of Michigan Law School, Juris Doctor 2002 Oxford University, Master of Philology1 1996 (Distinction), Doctor of Philology2 1999 Yale University, Bachelor of Arts 1994 (Distinction) Work experience Southern Methodist University Dedman School of Law Assistant Professor of Law, with sojourn3 (autumn 2011 – through the present time) Assistant Professor of Law (autumn 2006 – summer 2011) Courses: Constitutional Law I Constitutional Law II Administrative Law Prospects for Counterterrorism Activity4 (seminar) Doctor Don M. Smart prize for teaching5 (chosen by 3rd year students) 2010-11 Four consecutive selections by student-graduates as ―Hooder‖ 2008-11 6 ―Golden Mustang‖ departmental prize for achievements (university-wide prize) 2008-09 Partner of Colin Powell,7 John Goodwin Tower Center for Political Studies 2008-09 Partner-instructor, Maguire Center for Ethical and Professional Responsibility8 2007-08 Georgetown University, School of Foreign Service spring 2006 Adjunct Professor Course: Russian Law and Legal Reform in Comparative Perspective (seminar) USA Department of Justice, Administrative9 Division 2003-2006 10 Lawyer with right to appear in court (Attorney General‘s award program) The Hon. Thomas P. Griesa 2002-03 Court clerk, United States District Court, Southern District New York Centre Consulting on questions of individual rights in Europe11
1 2

sic. M.Phil.—Trans. sic. D.Phil.—Trans. 3 sic. tenure.—Trans. 4 sic. Perspectives on Counterterrorism.—Trans. 5 sic. Dr. Don M. Smart Award for Excellence in Teaching.—Trans. 6 sic. Golden Mustang Outstanding Faculty Award.—Trans. 7 sic. Colin Powell Fellow.—Trans. 8 sic. Teaching Fellow, Cary M. Maguire Center for Ethics & Professional Responsibility.—Trans. 9 sic. Civil.—Trans. 10 sic. Trial Attorney (Honors Program).—Trans. 11 sic. AIRE [Advice on Individual Rights in Europe] Centre.—Trans.

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summer 2000-02 Intern (London) and lecturer (Moscow) The Washington Post Researcher for David Hoffman, Moscow bureau chief Work in process MRS. SHIPLEY‘S GHOST: THE RIGHT TO TRAVEL AND TERRORIST WATCHLISTS1 Publication contract with University of Michigan Press. Publication expected in the spring of 2012. Today, when a single person can turn an airplane into a guided missile, nobody is against rigorous security before flying. But can the state simply declare some people too dangerous to travel anytime and anywhere? What is protected by the fundamental right of Americans to travel? Should the mode of travel (car, plane, or boat) or itinerary (domestic or international) create a constitutional difference? This book explores the legal and policy questions raised by government travel restrictions, from passports and rubber stamps to computerized terrorist watchlists. Publications Book: FEDERALISM, DEMOCRATIZATION AND THE RULE OF LAW IN RUSSIA. Oxford University Press, 2002. Selected reviews: William E. Butler, Federalism or Federationism, 100 MICH. L. REV. 1444-52 (2002) (―... I have not seen a better account, or a more perceptive one. ... Kahn‘s study is the best and the most thoughtful account available now.‖); Pamela Jordan, Survey, 63 THE RUSSIAN REVIEW 359-60 (2004) (―It is indispensable for students of Russian political institutsions and a valuable addition to the literature on comparative federalism.‖); Donald Hancock, Survey, 64 SLAVIC REVIEW 208-09 (2005) (―Gives an exemplary combination of academic expertise to this meticulous research and comprehensive analysis...‖). Academic journals: Legal questions of Russia The Unification of Law in the Russian Federation (with A. Trochev & N. Balayan), 25 POST- SOVIET AFFAIRS 310-46 (Oct.-Dec. 2009) (to be published in REPORT FOR THE INTERMEDIARY CONGRESS OF THE INTERNATIONAL ACADEMY OF COMPARATIVE LAW (UNAM, forthcoming)). Vladimir Putin & the Rule of Law in Russia, 36 GA. J. INT‘L & COMP. L. 511-58 (2008) (lead article) (quoted in New York Times editorial, Russia’s Dictatorship of Law, Nov. 21, 2010, Week in Review Section, p. 7). Russia’s Criminal Procedure Code Five Years Out (with W. Burnham) 33 REV. OF CENTRAL & E. EUR. LAW 1-93 (2008) (lead article) (excerpts translated into Mandarin
1

1995-1999

sic. The Right to Travel and the Challenge of Terrorism.—Trans.

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Chinese for COMPARATIVE STUDY ON COMPULSORY MEASURES IN CRIMINAL PROCEDURE (Song Yinghui ed., forthcoming)). The Search for the Rule of Law in Russia, 37 GEO. J. INT‘L L. 353-409 (2006). Russia’s ―Dictatorship of Law‖ and the European Court of Human Rights, 29 REV. OF CENTRAL & E. EUR. LAW 1-14 (2004) (lead article). Russian Compliance with Articles Five & Six of the European Convention of Human Rights as a Barometer of Legal Reform & Human Rights in Russia, 35 MICH. J. L. REFORM 641-94 (2002) (translated into Russian and published as Кан Джеффри. Исполнение Россией ст. 5 и 6 ЕКПЧ как показатель соблюдения прав человека // Российский бюллетень по правам человека. № 17 (2003), available at: http://www.hrights.ru/text/b17/bul17.htm). The Parade of Sovereignties: Establishing the Vocabulary of the New Russian Federalism, 16 POST-SOVIET AFFAIRS 58-89 (2000).

Chapters in publications: The Rule-of-Law Factor, in INSTITUTIONS, IDEAS AND LEADERSHIP IN RUSSIAN POLITICS 159-83 (J. Newton & Wm. Tompson eds., Palgrave Macmillan, 2010). Adversarial Principles and the Case File in Russian Criminal Procedure, in RUSSIA AND THE COUNCIL OF EUROPE: TEN YEARS AFTER 107-33 (K. Malfliet & S. Parmentier eds., Palgrave Macmillan, 2010). Presentation of Jeffrey Kahn, OCCASIONAL PAPER #304: THE RUSSIAN CONSTITUTION AT FIFTEEN: ASSESSMENTS & CURRENT CHALLENGES TO RUSSIA‘S LEGAL DEVELOPMENT 54-59 (F. Joseph Dresen & Wm. E. Pomeranz eds., Washington, D.C.: Woodrow Wilson International Center for Scholars, 2010). Комментарий, ВЕРХОВЕНСТВО ПРАВА И ПРОБЛЕМЫ ЕГО ОБЕСПЕЧЕНИЯ В ПРАВОПРИМЕНИТЕЛЬНОЙ ПРАКТИКЕ (Москва: Издательство «Статут», 2009) [Commentary, RULE OF LAW AND PROBLEMS OF PROVIDING FOR IT IN THE PRACTICE OF THE APPLICATION OF THE LAW (Moscow: Izdatel'stvo «Statut», 2009)]. Putin’s Federal Reforms: A Legal-Institutional Perspective, in BEYOND THE GARDEN RING: DIMENSIONS OF RUSSIAN REGIONALISM 73-109 (M. Kivinen & K. Pynnöniemi eds., Helsinki: Kikimora, 2002). What Is The New Russian Federalism?, in CONTEMPORARY RUSSIAN POLITICS: A READER 374-83 (Archie Brown ed., Oxford: Oxford University Press, 2001). Федерализм и федерация, и Федерализм и демократия, в ОСНОВЫ ТЕОРИИ И ПРАКТИКИ ФЕДЕРАЛИЗМА: ПОСОБИЕ ДЛЯ СТУДЕНТОВ ВЫСШИХ УЧЕБНЫХ ЗАВЕДЕНИЙ 9-22 [Federalism and federation, and Federalism and democracy, in FUNDAMENTAL PRINCIPLES OF THE THEORY AND PRACTICE OF FEDERALISM: A MANUAL FOR STUDENTS OF HIGHER EDUCATIONAL ESTABLISHMENTS 9-22] (K. Malfliet & L. Nasyrova eds., Garant, 1999). Federalism, Democracy and Asymmetry: Issues in Comparative Perspective, in FEDERALISM: CHOICES IN LAW, INSTITUTIONS AND POLICY. A COMPARATIVE APPROACH WITH FOCUS ON THE RUSSIAN FEDERATION 23-39 (K. Malfliet & L. Nasyrova eds., Garant, 1998). Government publications:
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Report Prepared for the Council of the President of the Russian Federation for Civil Society and Human Rights regarding the Verdict of the Khamovnichesky District Court of the City of Moscow against М.B. Khodorkovsky and P.L. Lebedev, Criminal Case No. 1-23/10 (Oct. 1, 2011). ―Sensitive but Unclassified‖ cable from American Embassy Yerevan to the Secretary of State, Department of Justice, and Department of Commerce, Yerevan 01419 (Oct. 10, 2006). ―An Assessment of the Russian Federation Criminal Procedure Code in Moscow & Krasnoyarsk, Oct. 15 – Nov. 5, 2005,‖ Final Report for OPDAT, Criminal Division, U.S. Department of Justice (Feb. 7, 2006). ―Unclassified‖ cable from American Embassy Moscow to the Secretary of State, Department of Justice, and Department of Commerce, Moscow (Nov. 14, 2005). Professional and scholarly organizations State Bar of Michigan (active status) Association for Slavic, East European, and Eurasian Studies Dallas Committee on Foreign Relations University and public service Founder, Advisory Board, Southern Methodist University, Embrey Human Rights Education Program. University Research Committee for professor of presidential studies / director of Presidential History division.1 Law School committee: curriculum (2007-08); judicial clerk; conferred professor2; reputation. Languages Russian Interests sailing, Chinese chess (Xiang Qi), tennis

1 2

sic. University Search Committee for Professor of Presidential Studies/Director of Presidential History.—Trans. sic. endowed lecturer.—Trans.

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Otto Luchterhandt

Otto Luchterhandt was born in 1943 in Celle below Hanover (Lower Saxony). From 1965 through 1970, he studied law and political science, Slavonic studies and the history of Eastern Europe in Freiburg and Bonn. He passed the First and Second (university) state Exams in law (1970, 1975, receiving the rank of Assessor). In 1975 he defended a doctoral dissertation (Dr. juris) at the law department of the city of Cologne1 under the supervision of Professor Dr. Boris Maisner2 (Soviet State and the Russian Orthodox Church. A Legal-Historical and Legal-Systemic Analysis). 1986 – Habilitation and receipt of the rank of Privat-Dozent [University lecturer] of Public, Eastern and Canon Law (Basic Duties and Obligations as a Constitutional Problem in Germany. 1987-88 – work as academic secretary and membership in a scholarly Independent Commission for the preparation of a report on the Human Rights Situation in the Warsaw Treaty Member States, created by the federal ministry of justice. 1975-1989 – work as a Research Assistant at the Institute for Eastern European Law in Cologne. From 1990 through retirement in 2008 – Professor for Public and Eastern European Law and director of the Research Department for Eastern European Law of the Law Faculty of the University of Hamburg. Since 1992 an advisor to the German government, participation in constitutional and law programmes in Russia, Armenia, Uzbekistan, Kazakhstan, Kirgizia, Moldova and the Ukraine. Author of more than 250 publications on legal problems in the states of Eastern and Southeastern Europe.

Anatoly Valentinovich Naumov Anatoly Valentinovich Naumov – well-known Russian criminalist, doctor of juridical sciences, professor, head of the department of criminal law disciplines of the Law Institute of the Academy of the General Prosecutor‘s Office of the Russian Federation, member of the Consultative-scholarly council of the Supreme Court of the Russian Federation, member of the Union of Writers of Moscow. Author of more than 300 works, including «Российское уголовное право. Курс лекций в 3-х томах (5-е издание, 2011) - т.1 «Общая часть» [Russian criminal law. A course of lectures in 3 volumes (5th edition, 2011) - vol. 1 General part] translated and published in Azerbaijan and Kazakhstan (twice); «Основные концепции
1 2

sic, should be Cologne University, not city of Cologne.—Trans. sic, should be Meissner.—Trans.

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современного уголовного права»

(в соавторстве с профессором Колумбийского

университета США Дж.Флетчером – 1998 г.) [Basic Concepts of Contemporary Criminal Law (in co-authorship with professor of the Columbia University of the USA G. Fletcher – 1998)]; «Комментарий судебной практики и доктринальное толкование» (2005) [A commentary on judicial practice and a doctrinal interpretation (2005)]; «Посмертно подсудимый» (изд. 1992, 2004, 2011) [Posthumously on trial (1992, 2004, 2011 ed.)].  A.V. Naumov was born on 17 March 1939 in the Azerbaijan SSR. In 1956, he completed secondary school. In 1957 he was admitted to the faculty of law of the Kazan State University, which he completed cum laude in 1962. From September 1962 through September 1964 – instructor at the Yelabuga police secondary special school of the MOOP RSFSR. In 1964-1967 a graduate student of the faculty of law of the Kazan State University, in February 1968 he defended a candidate‘s dissertation on the topic «Мотивы убийств (уголовно-правовое и криминологическое исследование)» [Motives of homicides (a criminal-law and criminological study)]. From December 1967 through April 1978 – an employee of the Investigators‘ Training College of the MVD USSR in the city of Volgograd (senior instructor, assistant professor, deputy chief of department, professor of the department of criminal law. In 1975, he defended a doctoral dissertation on the topic «Теоретические вопросы применения уголовно-правовых норм» [Theoretical questions of the application of criminal-law norms] (in the T.H. Shevchenko Kiev State University). In 1978 the academic rank of professor was conferred. From May 1978 through December 1989 – an employee of the Moscow Police Training College of the MVD USSR (professor, chief of the department of criminal law). From January 1990 through September 2005 – an employee of the Institute of State and Law of the AS USSR/RAS (leading research fellow, head of the sector of criminal law and criminology, deputy director of the Institute, head research fellow). From September 2005 through May 2007 - professor of the department of criminal law and criminology of the Russian Law Academy of the Russian Federation Ministry of Justice. From May 2007 to the present time, an employee of the Academy of the General Prosecutor‘s Office of the Russian Federation (head research fellow, head of the department of criminal law disciplines). Anatoly Valentinovich Naumov is a well-known jurist-scholar. Over 300 scholarly works have been published by him, among these, numerous textbooks, monographs, scholarly commentaries to the Criminal Code, articles in scholarly journals and other publications. Among them: - Российское уголовное право. Курс лекций. [Russian criminal law. A course of lectures.] In 3 volumes, having sustained 5 editions – 1996, 1999, 2004, 2007 and 2011 (overall volume –
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2,024 pgs.). The course received a high evaluation in reviews of it in domestic and foreign publications. The first volume of this Курс [Course] (Общая часть) [ (General part)] has been translated and published in Azerbaijan and twice – in Kazakhstan and students of these CIS countries are taught from it. - Практика применения Уголовного кодекса Российской Федерации: комментарий судебной практики и доктринальное толкование. М., 2005 (1024 стр.) [The practice of the application of the Criminal Code of the Russian Federation: a commentary on judicial practice and a doctrinal interpretation. Moscow, 2005 (1024 pgs.)]. A.V. Naumov is the author (jointly with I.I. Lukashuk) of the first (and for now the only) «Международное уголовное право» (M., 1999) [International criminal law (Moscow, 1999)] textbook in the history of Russian legal science, foreign analogues of which are published in the USA and in France. The textbook is dedicated to a characterisation of the evolving branch of international public law, the principles and norms of which regulate the cooperation of states and international organisations in the fight against crime. A.V. Naumov is the author of many monographs dedicated to theoretical problems of the criminal law and its application, including a fundamental monograph, written by him in coauthorship with a well-known American jurist – professor of Columbia University (New York) G. Fletcher, – «Основные концепции современного уголовного права» (M., 1998; 32,0 п.л.) [Basic Concepts of Contemporary Criminal Law (Moscow, 1998, 32.0 quires)]. The authors of the given monograph attempted to prove that in spite of the existing differences between the systems of common law and European continental law, their convergence is the result of the development of criminal law in the 20th century, and its prospect in the 21st century. The conclusion, without a doubt, has great significance for the fight against crime, in particular with its most dangerous manifestations (terrorism, illegal trafficking of narcotics, the arms trade, money ―laundering‖, corruption and others), which are acquiring a trans-national character. Prepared and published under the academic supervision of A.V. Naumov is a series of large works, accomplished by a collective of authors: monographs (for example, «Насильственная преступность», М., 1998 [Violent crime, Moscow, 1998]), several textbooks on the General and Particular parts of Russian criminal law, which have sustained several editions, the academic two-volume Курс российского уголовного права (Общая и Особенная части, М., 2001 и 2002) [Course of Russian criminal law (General and Particular parts, Moscow, 2001 and 2002). A.V. Naumov has raised and nurtured an entire school of scholarship. Under his supervision 48 people – have prepared and defended candidate‘s dissertations and 10 people – doctoral

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dissertations. At the present time, he is continuing the academic supervision of graduate students and degree candidates, as well as being an academic consultant on several doctoral dissertations. A.V. Naumov takes active part in the preparation of draft-law works. He was a member of the working commissions for the preparation of the Fundamental Provisions of the Criminal Legislation of the Union of SSR and the Republics of 1991, the Criminal Code of the Russian Federation of 1996, the Model Criminal Code for the countries of the CIS. A.V. Naumov has participated in many international scholarly congresses, conferences, symposia (England, Germany, Italy, Hungary, Sweden, Egypt, Bulgaria and other countries). Recognition of the international prestige of A.V. Naumov is the fact that he was elected a member of the Executive Committee of the International Consultative-and-Scholarly Council of the UNO for Crime Prevention and Criminal Justice (headquarters – Italy, Milan)1 and a member of the Leadership Council of the International Society for Criminology (France – Paris).2 A.V. Naumov actively engages in Pushkin studies (he has published two books: «Следствие и суд по делу о дуэли А.С.Пушкина». Хабаровск, 1989 [The investigation and trial with respect to the case of the duel of A.S. Pushkin. Khabarovsk, 1989]; «Посмертно подсудимый» М., 1992, 2004, 2011 (20,5 п.л.) [Posthumously on trial Moscow, 1992, 2004, 2011 (20.5 quires)]; he is a co-author of the fundamental two-volume «Онегинской энциклопедии», М., 2000 [Onegin encyclopedia, Moscow, 2000]; has published a series of articles on this topic, including in the works of the Institute of World Literature of the RAS). He is a member of the Union of Writers of Moscow. Laureate of the Oktyabr' magazine prize for 1999. For many years, A.V. Naumov was a member of the Council under the President of the Russian Federation for the Perfecting of Justice,3 he is a member of the Scientific and Consulting Council under the Supreme Court of the Russian Federation (was a member of the Scientific and Consulting Council under the Supreme Court of the Union of SSR). Oxana Mikhailovna Oleynik

Date of birth: 07 January 1955. Place of birth: town of Vyhoda, Ivano-Frankivsk obl., Ukraine. Education: 1977 — Lvov National University, faculty of law, specialty — law

1

There does not appear to be such a council. There is, however, a Commission on Crime Prevention and Criminal Justice under the United Nations Office on Drugs and Crime (headquarters – Austria, Vienna).—Trans. 2 The Society is actually headquartered in Leuven – Belgium.—Trans. 3 There is no mention of this council on the Kremlin website, so the translation may not be the official one.—Trans.

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1981 — graduate studies at the All-Soviet Union Institute of Research and Development of Crime Prevention Academic rank, scholarly degree — 1981 — candidate of juridical sciences; 1994 — assistant professor with the department of economic-management [khoziaystvennogo] law; 1998 — doctor of juridical sciences 2001 – professor with the department of entrepreneurial (economic-management) law Principal scholarly works Комментарий к Гражданскому кодексу Российской Федерации. Части второй. М., 2003; Предпринимательское (хозяйственное) право. В 2 томах. Общая редакция и отдельные главы. М. 2000-01. Юристъ [Commentary to the Civil Code of the Russian Federation. Of Part Two. Moscow, 2003; Entrepreneurial (economic-management) law. In 2 volumes. General editorship and individual chapters. Moscow 2000-01. Yurist"; Правовое регулирование добычи и реализации полезных ископаемых, 2010 (общая редакция и отдельные главы) [Legal regulating of the extraction and sale of useful mineral resources, 2010 (general editorship and individual chapters)]; Риски правовой квалификации решения общего собрания акционеров // Вестник Высшего Арбитражного Суда, 2010. № 10. C. 64—75 [―Risks of the legal classification of a decision of a general meeting of shareholders‖ // Vestnik Vysshego Arbitrazhnogo Suda, 2010. No. 10. P. 64—75]; ―Свобода договора и публично-правовое регулирование‖ // Вестник юридического факультета ГОУ ВПО МГОУ, 2010. № 5. С. 59—69 [―Freedom of agreement and public-law regulation‖ // Vestnik yuridicheskogo fakul'teta GOU VPO MGOU, 2010. No. 5. P. 59—69] Систематизация законодательства как способ его развития, 2010 (отдельная глава). C. 148—206 [Systematisation of legislation as a way of its development, 2010 (individual chapter). P. 148—206]; ―Соотношение договорных условий и публично-правовых требований к деятельности контрагента‖ // Вестник ФАС СКО, 2010. № 1. C. 73—74 [―The correlation of contractual conditions and public-law requirements for the activity of a counterparty‖ // Vestnik VAS SKO, 2010. No. 1. P. 73—74]; Предпринимательское право: вызовы времени. Научные труды кафедры предпринимательского права. / Выпуск 1 Правовые проблемы энергоснабжения. –
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Хозяйство и право. 2000. № 5.; Основы банковского права. М, Юристъ. 1997. [―Entrepreneurial law: the challenges of the time. The scholarly labours of the chair of entrepreneurial law. / Issue 1 The legal problems of electric power delivery‖. – Khozyaystvo i pravo. 2000. Fundamentals of banking law. Moscow, Yurist". 1997]. Правовое обеспечение научно-технического прогресса и информатизации. в кн. Хозяйственное право, т.2. М., 1994 [―Legal provision for scientific-and-technical progress and informatisation‖. in the book Khozyaystvennoye pravo, vol. 2. Moscow., 1994]. Лицензирование хозяйственной деятельности. - Закон, 1994, № 6 [―The licensing of business activity‖. - Zakon, 1994, No. 6]. Комментарий к главе 4 ( ст.117- 120 и гл. 23 (ст.329-381) Гражданского кодекса Российской Федерации. М. 1995 [Commentary to chapter 4 ( art. 117- 120 and ch. 23 (art. 329-381) of the Civil Code of the Russian Federation. Moscow. 1995]. Основания бесспорного списания денежных средств. - Закон. 1995, № 1. Межбанковские расчеты [―The fundamentals of the indisputable writing off of monetary funds‖. - Zakon. 1995, No. 1. Interbank settlements]. Запреты, пределы и санкции в антимонопольном законодательстве. - Закон, 1995, № 4 [―Prohibitions, limits and sanctions in anti-monopoly legislation‖. Zakon, 1995, No. 4]. Антимонопольное законодательство. Банковская гарантия и проблемы ее применения. "Хозяйство и право", 1996, № 1 [―Anti-monopoly legislation. The bank guarantee and problems of its application‖. "Khozyaystvo i pravo", 1996, No. 1].

Authorial courses on entrepreneurial, banking law, corporate norm-creation, right of ownership.

Professional activity: 1982-1988 — editor of a section of the journal Sotsialisticheskaya zakonnost' 1988- 1992 — senior instructor of the chair of economic-management law; 1992- 1998 — assistant professor of the chair of economic-management law 1998 – 2002 — head of the department of business (economic-management) law of the Moscow State Law Academy 2002 –2008 dean of the faculty of law of the SU-HSE, head of the department of civil and entrepreneurial law of the SU-HSE, 2008 по н/в – head of the department of entrepreneurial law of the NRU-HSE 1993-1997 – consultant to the Association of Russian Banks 2009 to present time – supervisor of the ―Corporate lawyer‖ master‘s programme;
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Scholarly and civic activity: 1. Member of Arbitration Court for the resolution of economic disputes, formed by decision of the management board of the Rosatom State Corporation (minutes No. 60 of 16.03.2010). 2. Member of the editorial collegium of the journal Pravo NRU-HSE. 3. Three doctoral dissertations and around 30 candidate‘s dissertations successfully defended under academic supervision. 4. Took part in and supervised scholarly collectives with respect to a series of scholarly directions, in particular: - "The legal status, procedure for the exercise of powers and liability of the State Corporation "Agentstvo po strakhovaniyu vkladov" whilst exercising the functions of a bankruptcy receiver ", customer - the State Corporation "Agentstvo po strakhovaniyu vkladov"; - "The principles, stimuli and methodology of systematising legislation in modern-day conditions", CFS SU-HSE; - "Rights-exercising in the economy: principles, risks and effectiveness", CFS SU-HSE; - "The effectiveness and fairness of legal liability in the economy", CFS SU-HSE; - "Economic interests in the structure of the exercise of right: the theory of balancing and proportional limitation", CFS SU-HSE; - "A law-based mechanism for ensuring a balance between the fairness and effectiveness of legal liability in conditions of the modernisation of the economy", CFS SU-HSE. - «The forming of the public economic law of Russia» and others.

Expert activity    expert in the International Arbitration Court of Stockholm1 with respect to the case of Karl Saks2 versus the administration of Saint Petersburg; expert in the London International Commercial Arbitration3 with respect to the case of Moravel Investment Limited in a case against OAO Yuganskneftegas; expert of the Constitutional Court of the Russian Federation with respect to a case of the review of the constitutionality of a series of provisions of the Federal Law ―On the restructuring of lending organisations‖, article 120 paragraphs 5 and 6 of the Federal Law

1 2

The Arbitration Institute of the Stockholm Chamber of Commerce.—Trans. Could also be Carl Sax/Saxe/Sacks/Sachs or any variant thereof.—Trans. 3 There is no such institution; most likely the London Court of International Arbitration.—Trans.

343

―On failure (bankruptcy) in connection with the complaints of citizens, the complaint of the regional civic organisation ―Assotsiatsiya zashchity prav aktsionyerov i vkladchikov‖ and the complaint of OAO ―Voronezhskoye konstruktorskoye byuro antenna-fidernykh ustroystvo‖ (decree N 14-P of the Constitutional Court of the RF of 22.07.2002);  expert of the Constitutional Court of the Russian Federation with respect to a case of the review of the constitutionality of individual provisions of article 13 paragraph 2 subparagraph 3 of the Federal Law "On the restructuring of lending organisations" and article 26 paragraphs 1 and 2 of the Federal Law "On the failure (bankruptcy) of lending organisations" (decree of the constitutional court of the Russian Federation of 10 July 2001);  expert of the Constitutional Court of the Russian Federation with respect to a case of the review of the constitutionality of article 11 paragraph one subparagraphs 2 and 3 of the Law of the Russian Federation "On the federal agencies of the tax police‖ of 27 June of 1993 (decree No. 20-P of 17 December 1996).

Took part in the elaboration of the Law on Banks and Banking Activity, the draft of the Law on Nationalisation, the draft of the concept of the Law on Internal Waterways and others. Participation on numerous occasions in international, all-Russian, inter–higher-educationalestablishment and other scholarly and practical-and-scholarly conferences. Gave expert reports with respect to economic disputes on numerous occasions in the Constitutional Court of the RF, the Supreme Commercial Court of the RF.

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Alexey Dmitrievich Proshlyakov Born 23 July 1958 in the city of Sverdlovsk. 1975 – completed secondary school with a gold medal 1975-1979 – Sverdlovsk Law Institute, cum laude diploma 1979-1981 – service in the Armed Forces of the USSR 1979-1981 – intern of the Sverdlovsk Oblast Bar Association 1981-1983 – lawyer of the Sverdlovsk Oblast Bar Association 1983-1986 – graduate student of the Sverdlovsk Law Institute 1986 – candidate of juridical sciences, dissertation «Спорные вопросы уголовной ответственности за нарушение правил о валютных операциях» [Disputable questions of criminal liability for violation of the rules on currency operations] 1986-1987 – work in the scientific-research sector of the Sverdlovsk Law Institute, September 1987 – present time – chair of criminal process of the Law Institute: instructor, senior instructor, assistant professor, professor. 1994-1997 – doctoral student of the Sverdlovsk Law Institute March 1998 – doctor of juridical sciences, doctoral dissertation «Взаимосвязь материального и процессуального уголовного права» [The interaction between substantive and procedural criminal law] February 2000 – professor. 24 December 2001 – elected head of the chair of criminal process of the Ural State Law Academy 18 December 2006 – re-elected head of the chair of criminal process of the Ural State Law Academy. Principal scholarly works: Судебная адвокатура/ У.Бернам, И.В.Решетникова, А.Д.Прошляков. - СПб. : Санкт-Петербургский гос. ун-т, 1996. - 196 c. [Trial advocacy/ W. Burnham, I.V. Reshetnikova, A.D. Proshlyakov. – St. Petersburg : Saint Petersburg State Univ., 1996. - 196 p.] Взаимосвязь материального и процессуального уголовного права/ А.Д.Прошляков; Рец.: М.И.Ковалев, П.М.Давыдов. -Екатеринбург: Гуманитарный ун-т, 1997. - 208 c. [The interaction between substantive and procedural criminal law / A.D. Proshlyakov; Rev.: М.I. Kovalev, P.M. Davydov. -Yekaterinburg: Liberal Arts Univ. / Univ. for Humanities, 1997. - 208 p.] Уголовный процесс : Учебно-методический комплекс/ А.Д.Прошляков, А.П.Евсютина и др.; Отв. ред. Л.Н.Решетников. - Екатеринбург : УрГЮА, 1999. - 164 c. [Criminal process: A methodology-and-training complex/ A.D. Proshlyakov, A.P. Yevsyutina et al.; Resp. ed. L.N. Reshetnikov. - Yekaterinburg : UrGYuA, 1999. - 164 p.] Обвинение по делам о преступлениях против личности : Учебное пособие/ П.М.Давыдов, А.Д.Прошляков и др.; Отв. ред. В.М.Кобяков; Рец. Н.В.Финковский. - Свердловск : СЮИ, 1990. - 64 c. [The prosecution1 with respect to cases of crimes against the person : A training manual P.M. Davydov, A.D. Proshlyakov et al.; Resp. Ed. V.M. Kobyakov; Rev. N.V. Finkovsky. - Sverdlovsk : SYuI, 1990. - 64 p.]
1

The same Russian word can also be translated as “The charge”—Trans.

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Уголовный процесс : учебно-методический комплекс/ авт.-сост.: А.Д.Прошляков, В.М.Бозров, А.И.Казаков и др.. - Екатеринбург : УрГЮА, 2004. - 160 c. [Criminal process : A methodology-andtraining complex/ auth.-compiler: A.D. Proshlyakov, V.M. Borzov, A.I. Kazakov et al.. - Yekaterinburg : UrGYuA, 2004. - 160 p.] Пятьдесят лет кафедре уголовного процесса УрГЮА (СЮИ) : материалы Международной научнопрактической конференции (Екатеринбург, 27-28 января 2005 г.)/ сост. Л.А.Зашляпин; отв. ред. А.Д.Прошляков. -Екатеринбург : УрГУ : УрГЮА, ч.1. -2005. - 511 c. [Fifty years for the department of criminal process of UrGYuA (SYuI) : the materials of an International practical-and-scholarly conference (Yekaterinburg, 27-28 January 2005)/ compiler L.A. Zashlyapin; resp. ed. A.D. Proshlyakov. -Yekaterinburg : UrGU : UrGYuA, part 1. -2005. - 511 p.] Пятьдесят лет кафедре уголовного процесса УрГЮА (СЮИ) : материалы Международной научнопрактической конференции (Екатеринбург, 27-28 января 2005 г.) / сост. Л.А.Зашляпин; отв. ред. А.Д.Прошляков. -Екатеринбург : УрГУ: УрГЮА, ч.2. -2005. - 462 c. [Fifty years for the department of criminal process of UrGYuA (SYuI) : the materials of an International practical-and-scholarly conference (Yekaterinburg, 27-28 January 2005) / compiler L.A. Zashlyapin; resp. ed. A.D. Proshlyakov. -Yekaterinburg : UrGU: UrGYuA, part 2. -2005. - 462 p.] Взаимосвязь материального и процессуального уголовного права : дис. д-ра юрид. наук : 12.00.09 уголовный процесс; криминалистика; теория оперативно-розыскной деятельности/ А. Д. Прошляков ; науч. конс. М. И. Ковалев; УрГЮА. -Екатеринбург, 1997.-259 c. [The interaction between substantive and procedural criminal law : diss. dr. jurid. sciences : 12.00.09 - criminal process; criminalistics; theory of search-and-operative1 activity/ A. D. Proshlyakov ; academic consultant М. I. Kovalev; UrGYuA. Yekaterinburg, 1997.-259 p.] Спорные вопросы уголовной ответственности за нарушение правил о валютных операциях : дис. ... канд. юрид. наук : 12.00.08 - уголовное право и криминология; исправительно-трудовое право/ А. Д. Прошляков; науч. рук. Ю. А. Воронин; СЮИ. - Свердловск, 1986.-191 c. [Disputable questions of criminal liability for violation of the rules on currency operations : diss. … cand. jurid. sciences : / A. D. Proshlyakov; academic supervisor Yu. A. Voronin; SYuI. - Sverdlovsk, 1986.-191 p.] О некоторых вопросах действия уголовного закона во времени/ А. Д. Прошляков // Конституционные основы организации и функционирования институтов публичной власти в Российской Федерации : Материалы Всероссийской научно-практической конференции (20-21 апреля 2000 года). Екатеринбург: УрГЮА. -2001. - C. 270-274. [―On some questions of the operation of the criminal law in time‖/ A. D. Proshlyakov // The constitutional foundations of the organisation and functioning of institutions of public power in the Russian Federation : The materials of an All-Russian practical-and-scholarly conference (20-21 April 2000). -Yekaterinburg: UrGYuA. -2001. - P. 270-274.] Парадоксальные позиции защитника по уголовному делу/ А. Д. Прошляков // Профессиональная деятельность адвоката как объект криминалистического исследования. -Екатеринбург: Чароид. -2002. C. 106-108. [―The paradoxical positions of a defender with respect to a criminal case‖ / A. D. Proshlyakov //

1

criminal investigation.—Trans.

346

The professional activity of a lawyer as an object of criminalistic research. -Yekaterinburg: Charoid. -2002. P. 106-108.] Пределы свидетельского иммунитета защитника/ А. Д. Прошляков // Адвокатура и адвокатская деятельность в свете современного конституционного права (К 10-летию принятия Конституции России) : Материалы Международной научно-практической конференции (Екатеринбург, 29-30 декабря 2003 г.). -Екатеринбург: Чароид. -2004. - C. 156-159. [―The limits of a defender‘s witness immunity‖/ A. D. Proshlyakov // The advocacy and the bar in light of modern-day constitutional law (Towards the 10th anniversary of the adoption of the Constitution of Russia) : The materials of an International practical-and-scholarly conference (Yekaterinburg, 29-30 December 2003). -Yekaterinburg: Charoid. -2004. P. 156-159.] Об альтернативной позиции защитника по делам о вторичных преступлениях/ А. Д. Прошляков, Ю. Г. Хорищенко // Эволюция права и закона как фактор изменения криминалистики: генезис профессиональной защиты и представительства. -Екатеринбург: Чароид. -2003. - C. 156-161. [―About a defender‘s alternative position with respect to cases of secondary crimes‖/ A. D. Proshlyakov, Yu. G. Khorishchenko // The evolution of law and the law as a factor in the changing of criminalistics: the genesis of professional defence and representation. -Yekaterinburg: Charoid. -2003. - P. 156-161.] Особенности возбуждения уголовного дела в отношении адвоката/ А. Д. Прошляков // Федеральное законодательство об адвокатуре: Практика применения и проблемы совершенствования : Материалы Международной научно-практической конференции (Екатеринбург, 13 июля 2004 г.). -Екатеринбург: УрГУ. -2004. - C. 254-257. [―The peculiarities of initiation of a criminal case in relation to a lawyer‖ / A. D. Proshlyakov // Federal legislation about the advocacy: The practice of application and problems of perfecting : The materials of an International practical-and-scholarly conference (Yekaterinburg, 13 July 2004). Yekaterinburg: UrGU. -2004. - P. 254-257.] Особенности производства по уголовному делу при возникновении процессуальных иммунитетов у подозреваемого или обвиняемого/ А. Д. Прошляков // Пятьдесят лет кафедре уголовного процесса УРГЮА (СЮИ) : Материалы Международной научно-практической конференции (Екатеринбург, 2728 января 2005 г.). -Екатеринбург: УрГУ : УрГЮА. -2005, Ч. 2. - C. 196-198. [―The peculiarities of proceedings with respect to a criminal case upon the emergence of procedural immunities for a suspect or an accused‖/ A. D. Proshlyakov // Fifty years for the department of criminal process of URGYuA (SYuI) : The materials of an International practical-and-scholarly conference (Yekaterinburg, 27-28 January 2005). Yekaterinburg: UrGU : UrGYuA. -2005, Part 2. – P. 196-198.] Промежуточные и временные уголовные законы/ А. Д. Прошляков // Дни науки УрГИ. Гуманитарное знание и образование на рубеже тысячелетий : Материалы научной конференции (Екатеринбург, 15-17 мая 2000 г.). -Екатеринбург: УрГИ. -2000. - C. 140-142. [―Transitional and temporary criminal laws‖/ A. D. Proshlyakov // Days of science of UrGI. Humanitarian knowledge and education at the turn of the millennia : The materials of a scholarly conference (Yekaterinburg, 15-17 May 2000). -Yekaterinburg: UrGI. -2000. - P. 140-142.] Признание уголовного закона неконституционным и его процессуальные последствия/ А. Д. Прошляков // Правовая реформа в России: проблемы теории и практики : Материалы Всероссийской

347

научно-практической конференции (18-19 апреля 1996 г.). -Екатеринбург: УрГЮА. -1996. - C. 387-388. [―The finding of a criminal law as unconstitutional and its procedural consequences‖/ A. D. Proshlyakov // Legal reform in Russia: problems of theory and practice : The materials of an All-Russian practical-andscholarly conference (18-19 April 1996). -Yekaterinburg: UrGYuA. -1996. - P. 387-388.] Уголовно-правовая квалификация операций с поддельными драгоценными металлами и драгоценными камнями/ А. Д. Прошляков, О. Р. Старикова // Российский юридический журнал. -2002. -№1. - C. 69-72. [―The criminal-law classification of operations with imitation precious metals and precious stones‖/ A. D. Proshlyakov, O. R. Starikova // Rossiysky yuridichesky zhurnal. -2002. -No. 1. - P. 69-72.] Проблемы применения норм главы 52 УПК РФ/ А. Д. Прошляков // Российский юридический журнал. 2007. -№1. - C. 127-130. [―Problems of the application of the norms of chapter 52 CCP RF‖/ A. D. Proshlyakov // Rossiysky yuridichesky zhurnal. -2007. No. 1. - P. 127-130.] Заочное судебное разбирательство и обратная сила уголовного закона/ А. Прошляков, А. Пушкарев // Уголовное право. -2007. -№3. - C. 126-128. [―In absentia court proceedings and the retroactive force of the criminal law‖/ A. Proshlyakov, A. Pushkarev // Ugolovnoye pravo. -2007. -No. 3. - P. 126-128.] Появление у лица права на реабилитацию/ А. Д. Прошляков // Российский юридический журнал. -2008. -№3. - C. 169-170. [―The appearance for a person of the right to rehabilitation‖/ A. D. Proshlyakov // Rossiysky yuridichesky zhurnal. -2008. -No. 3. - P. 169-170.] О значении вступившего в законную силу решения арбитражного суда по гражданскому делу для органов уголовного судопроизводства/ А. Д. Прошляков // Российский юридический журнал. -ISSN 2071-3797. -2009. -№2. - C. 173-174. [―On the significance for criminal judicial proceedings bodies of a decision of a commercial court with respect to a civil case that has come into legal force‖/ A. D. Proshlyakov // Rossiysky yuridichesky zhurnal. -ISSN 2071-3797. -2009. -No. 2. - P. 173-174.] Обжалование частных определений или постановлений/ А. Д. Прошляков // Российский юридический журнал. -ISSN 2071-3797. -2009. -№4. - C. 190-191. [―Appealing special rulings or judgments‖/ A. D. Proshlyakov // Rossiysky yuridichesky zhurnal. -ISSN 2071-3797. -2009. -No. 4. - P. 190-191.] О неотчуждаемости статуса юридического лица - потерпевшего по уголовному делу/ А. Д. Прошляков // Российский юридический журнал. -ISSN 2071-3797. -2009. -№5. - C. 206-208. [―On the inalienability of the status of a legal entity - an injured party with respect to a criminal case‖/ A. D. Proshlyakov // Rossiysky yuridichesky zhurnal. -ISSN 2071-3797. -2009. -No. 5. - P. 206-208.] 27 dissertations in candidacy for the academic degree of candidate of juridical sciences defended under academic supervision. Was academic consultant of two defended dissertations in candidacy for the academic degree of doctor of juridical sciences. Is a member of dissertation councils with respect to the awarding of the academic degree of doctor of juridical sciences in UrGYuA and the Omsk academy of the MVD of Russia, as well as a member of the editorial collegiums and editorial boards of the journals Rossiyskoye pravo and Rossiysky yuridichesky zhurnal. Awarded the ―Honored lawyer of Russia‖ badge.

348

Mikhail Alexandrovich Subbotin One of the authors of the laws ―On production sharing agreements‖ and ―On concession agreements‖. 17 years of expert work in the State Duma and the Federation Council of the Federal Assembly of the RF, in ministries and departments of Russia: in Expert Councils of the Committees of the SD RF on economic policy and on natural resources, as well as on the budget and taxes, member of the expert council of the Commission of the SD on the legal questions of PSAs, expert of a working group of the Federation Council on studying the situation around the Sakhalin-2 project, head of the Expert Council on questions of PSAs of the Mintopenergo; expert of the MERT and the MPR, advisor to the FAS. 34-year experience of scholarly work in the RAS Institute of World Economy and International Relations (IMEMO). Since 2001 – general director of the scientific-consulting company ―SRP-Expertiza. Since 2010 – general director of the ANO1 ―Center for legal and economic studies‖. Author of over 300 articles and several books on questions of the activity of the leading oil companies of the USA, concessions and PSAs, natural resource rent, the investment climate. Constant participant in international and Russian conferences. Details about professional activity - see on the website www.concession.ru. Author of over 300 articles and several books on questions of the activity of the leading oil companies of the USA, concessions and PSAs, natural resource rent, the investment climate.

1

Autonomous Non-Commercial Organisation.—Trans.

349

Astamur Anatolievich Tedeev Doctor of juridical sciences, deputy director of the UNESCO Department at the NRU ―Higher school of economics‖. Born 13 January 1978 in the city of Tskhinval (South Ossetia). In 1999, completed cum laude the law faculty of the Academic Law University (Institute) under the Institute of State and Law of the Russian Academy of Sciences (specialisation - tax-law). From September 1999 through February 2000 - instructor of the law faculty of the Anapa branch of the Moscow State Social University. Subsequently worked as an instructor of the department of financial-law disciplines, and as a concurrent second job - as deputy director, acting director of the Anapa branch of the Academic Law University (Institute) under the Institute of State and Law of the Russian Academy of Sciences, a consultant on tax law of the InformAuditAktiv auditing company (city of Moscow), a tax consultant of the Yustina-Yug law bureau, and an expert of the of the Ministry of the Russian Federation for Taxes and Levies. Since August 2002 – scholarly editor of the Rossiysky nalogovy kur'yer journal. Candidate of juridical sciences - in May 2003, he defended a dissertation on the topic: "Правовые проблемы налогообложения субъектов электронной экономической (хозяйственной) деятельности" [Legal problems of the taxation of subjects of electronic economic (economic-management) activity]. Instructor of the department of state-and-law disciplines Moscow Academy for Humanities and Social Studies. Author of 11 books and more than 20 articles with respect to problems of informational and financial law, legal regulation of electronic economic activity (electronic commerce), electronic bank settlements.

Among principal works: Налоговое право Российской Федерации: Учебник (в соавт. с В.А.Парыгиной). - Ростовна-Дону: Изд-во Феникс, 2002. [Tax law of the Russian Federation: A Textbook (in coauth. with V.A. Parygina). - Rostov-on-Don: Izd-vo Feniks, 2002.]

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Бюджетное право: Учебное пособие (в соавт. с В.А.Парыгиной, С.И.Мельниковым). - М.: Прио-издат, 2003. [Budget law: A training manual (in co-auth. with V.A. Parygina, S.I. Mel'nikov). - Мoscow: Prio-izdat, 2003.] Налоговое право: Учебное пособие (конспект лекций) (в соавт. с В.А.Парыгиной, А.В.Чуркиным). - М.: Приор-издат, 2003. [Tax law: A training manual (lecture notes) (in coauth. with V.A. Parygina, A.V. Churkin). - Мoscow: Prior-izdat, 2003.] Банковское право России: Учебное пособие (конспект лекций) (в соавт. с В.А.Парыгиной). - М.: Приор-издат, 2003. [Bank law of Russia: A training manual (lecture notes) (in co-auth. with V.A. Parygina). - М.: Prior-izdat, 2003.] Единый налог на вмененный доход. Постатейный научно-практический комментарий к главе 23.3 части второй Налогового кодекса Российской Федерации (с нормативными схемами). (в соавт. с В.А.Парыгиной). - Ростов-на-Дону: Изд-во Феникс, 2003. [The single tax on imputed earnings An article-by-article practical-and-scholarly commentary to part two chapter 23.3 of the Tax Code of the Russian Federation (with normative schemes). (in co-auth. with V.A. Parygina). - Rostov-on-Don: Izd-vo Feniks, 2003.] Электронная коммерция (электронная экономическая деятельность): правовое

регулирование и налогообложение: Монография. - М.: ПРИОР, 2002. [Electronic commerce (electronic economic activity): PRIOR, 2002.] Комментарий к упрощенной системе налогообложения. Постатейный научноlegal regulation and taxation: A monograph. - Мoscow:

практический комментарий к главе 23.2 части второй Налогового кодекса Российской Федерации (в соавт. с В.А.Парыгиной). - Ростов-на-Дону: Изд-во Феникс, 2002. [Commentary to the simplified system of taxation. An article-by-article practical-and-scholarly commentary to part two chapter 23.2 of the Tax Code of the Russian Federation (in co-auth. with V.A. Parygina). - Rostov-on-Don: Izd-vo Feniks, 2002.] Налог на прибыль организаций после 1 июня 2002 года. Постатейный научнопрактический комментарий к главе 25 части второй Налогового кодекса Российской Федерации (в соавт. с В.А.Парыгиной). - Ростов-на-Дону: Изд-во Феникс, 2002. [The tax on the profit of organisations after 1 June of 2002. An article-by-article practical commentary to part two chapter 25 of the Tax Code of the Russian Federation (in co-auth. with V.A. Parygina). - Rostov-on-Don: Izd-vo Fenkis, 2002.]

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Электронные банковские услуги и Интернет-банкинг: правовое регулирование и налогообложение. Монография. - М.: Новый Индекс, 2002. [Electronic banking services and Internet-banking: legal regulation and taxation. A monograph. - Moscow: Novy Indeks, 2002.] Налог с продаж после 1 января 2002 года. Постатейный комментарий к гл. 27 части второй НК РФ (в соавт. с К.Брауном, В.А.Парыгиной). - М.: Новый Индекс, 2002. [The sales tax after 1 January of 2002. An article-by-article commentary to part two of ch. 27 of the TC RF (in co-auth. with K. Brown,1 V.A. Parygina). - Moscow: Novy Indeks, 2002.] Deputy chair of the Council for Legal Questions under the Presidium of the state academy of sciences of the Russian Academy of Education.

1

Could also be C. Braun or any variation thereof.—Trans.

352

Ferdinand Joseph Maria Feldbrugge

Born 10 May 1933, The Hague, The Netherlands 1950-1955 1955-1957 1957-1959 1959 1959-1967 Autumn 1964 Utrecht University (Law and Russian Philology) Military service (Russian language programme) Assistant, Faculty of Law, Utrecht University Doctorate in Law (cum laude), Utrecht University Lecturer in Law, Leiden University consultant, Russian Institute, Columbia University

1965 Research fellow, Russian Research Center, Harvard University 1967-1973 1970-1972 1972-1973 1973-1998 Professor of Dutch Law, Leiden University Dean, Faculty of Law, Leiden University Fellow, Netherlands Institute for Advanced Study, Wassenaar Professor of East European law, Leiden University 1987-1989 Special Advisor, Committee for Soviet Union and Eastern European Affairs, NATO headquarters,1 Brussels ('Sovietologist-in-Residence') 1998-2006 Professor Emeritus of East European law, Leiden University 2006 2003 Distinguished retired professor Knight of the Order of the Netherlands Lion

Activity connected with this: President,International Council for Central and East European Studies (1995-2000) Member, Adviesraad Internationale Aangelegenheden (Advisory Council on International Affairs of the Government of Holland) (1989-2008) Initiator and Head Project Manager, Dutch Bilateral Project for Cooperation in the Field of the Civil Code with the CIS, Russia, Ukraine, Kazakhstan, Kirgizstan [sic], Belarus, Armenia

1

Possibly “Special Advisor Soviet and East European Affairs to the Secretary-General of NATO”.—Trans.

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Consultant in a large quantity of multilateral (USA/ Germany/ Italy/ Belgium/ Holland) technical assistance programmes in the field of law in various countries of the former Soviet Union. Election observer from the OSCE (Russia, Ukraine, Georgia, Azerbaijan, Chechnya, Bulgaria) Editor, Law in Eastern Europe (1973-1998) Editor-founder, Review of Central and East European Law (1975-1998)

Principal publications: Soviet Criminal Law, 1964 Encyclopedia of Soviet Law (editor), 1973 (2 edition. 1985) Samizdat and political dissent in the Soviet Union, , 1975 Consultations on the USSR and the Soviet republics,1 1979 Russian Law, 1993 The Law’s Beginnings (editor), 2003 Law in Medieval Russia, 2009

1

An online search has not revealed a publication with the indicated title. However, there is a 1979 book by the given author entitled The Constitutions of the U.S.S.R. and the Union Republics.—Trans.

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Texts of the Norms Used for the Purpose of the Public Scholarly Analisys (extracts)

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The International Covenant on Civil and Political Rights Adopted by Resolution 2200 А (XXI) of the General Assembly of 16 December 1966 Article 14 1. All persons shall be equal before the courts and tribunals. In the determination of any criminal charge against him, or of his rights and obligations in a suit at law, everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law. The Press and the public may be excluded from all or part of a trial for reasons of morals, public order (ordre public) or national security in a democratic society, or when the interest of the private lives of the parties so requires, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice; but any judgment rendered in a criminal case or in a suit at law shall be made public except where the interest of juvenile persons otherwise requires or the proceedings concern matrimonial disputes or the guardianship of children. 2. Everyone charged with a criminal offence shall have the right to be presumed innocent until proved guilty according to law. 3. In the determination of any criminal charge against him, everyone shall be entitled to the following minimum guarantees, in full equality: a) To be informed promptly and in detail in a language which he understands of the nature and cause of the charge against him; b) To have adequate time and facilities for the preparation of his defence and to communicate with counsel of his own choosing; c) To be tried without undue delay; d) To be tried in his presence, and to defend himself in person or through legal assistance of his own choosing; to be informed, if he does not have legal assistance, of this right; and to have legal assistance assigned to him, in any case where the interests of justice so require, and without payment by him in any such case if he does not have sufficient means to pay for it; e) To examine, or have examined, the witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him;
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f) To have the free assistance of an interpreter if he cannot understand or speak the language used in court; g) Not to be compelled to testify against himself or to confess guilt. 4. In the case of juvenile persons, the procedure shall be such as will take account of their age and the desirability of promoting their rehabilitation. 5. Everyone convicted of a crime shall have the right to his conviction and sentence being reviewed by a higher tribunal according to law. 6. When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such conviction shall be compensated according to law, unless it is proved that the non-disclosure of the unknown fact in time is wholly or partly attributable to him. 7. No one shall be liable to be tried or punished again for an offence for which he has already been finally convicted or acquitted in accordance with the law and penal procedure of each country.

The European Convention for the Protection of Human Rights and Fundamental Freedoms

Article 3 No one shall be subjected to torture or to inhuman or degrading treatment or punishment.

Article 5

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1. Everyone has the right to liberty and security of person. No one shall be deprived of his liberty save in the following cases and in accordance with a procedure prescribed by law: а) the lawful detention of a person after conviction by a competent court; b) the lawful arrest or detention of a person for non-compliance with the lawful order of a court or in order to secure the fulfilment of any obligation prescribed by law; с) the lawful arrest or detention of a person effected for the purpose of bringing him before the competent legal authority on reasonable suspicion of having committed an offence or when it is reasonably considered necessary to prevent his committing an offence or fleeing after having done so; d) the detention of a minor by lawful order for the purpose of educational supervision or his lawful detention for the purpose of bringing him before the competent legal authority; е) the lawful detention of persons for the prevention of the spreading of infectious diseases, of persons of unsound mind, alcoholics or drug addicts or vagrants; f) the lawful arrest or detention of a person to prevent his effecting an unauthorised entry into the country or of a person against whom action is being taken with a view to deportation or extradition. 2. Everyone who is arrested shall be informed promptly, in a language which he understands, of the reasons for his arrest and of any charge against him. 3. Everyone arrested or detained in accordance with the provisions of paragraph 1.c of this article shall be brought promptly before a judge or other officer authorised by law to exercise judicial power and shall be entitled to trial within a reasonable time or to release pending trial. Release may be conditioned by guarantees to appear for trial. 4. Everyone who is deprived of his liberty by arrest or detention shall be entitled to take proceedings by which the lawfulness of his detention shall be decided speedily by a court

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and his release ordered if the detention is not lawful. 5. Everyone who has been the victim of arrest or detention in contravention of the provisions of this article shall have an enforceable right to compensation.

Article 6 1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interests of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice. 2. Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law. 3. Everyone charged with a criminal offence has the following minimum rights: а) to be informed promptly, in a language which he understands and in detail, of the nature and cause of the accusation against him; b) to have adequate time and facilities for the preparation of his defence; с) to defend himself in person or through legal assistance of his own choosing or, if he has not sufficient means to pay for legal assistance, to be given it free when the interests of justice so require; d) to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him;

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е) to have the free assistance of an interpreter if he cannot understand or speak the language used in court.

Article 7 1. No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time when it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time the criminal offence was committed. 2. This article shall not prejudice the trial and punishment of any person forany act or omission which, at the time when it was committed, was criminal according to the general principles of law recognised by civilised nations.

Article 8 1. Everyone has the right to respect for his private and family life, his home and his correspondence. 2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.

Article 18 The restrictions permitted under this Convention to the said rights and freedoms shall not be applied for any purpose other than those for which they have been prescribed.

Article 34

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The Court may receive applications from any person, non-governmental organisation or group of individuals claiming to be the victim of a violation by one of the High Contracting Parties of the rights set forth in the Convention or the protocols thereto. The High Contracting Parties undertake not to hinder in any way the effective exercise of this right.

Protocol No. 7 to the Convention for the Protection of Human Rights and Fundamental Freedoms (Strasbourg, 22.XI.1984) (as amended on 11 May 1994) ETS N 117 Article 4. Right not to be tried or punished twice 1. No one shall be liable to be tried or punished again in criminal proceedings under the jurisdiction of the same State for an offence for which he has already been finally acquitted or convicted in accordance with the law and penal procedure of that State. 2. The provisions of the preceding paragraph shall not prevent the reopening of the case in accordance with the law and penal procedure of the State concerned, if there is evidence of new or newly discovered facts, or if there has been a fundamental defect in the previous proceedings, which could affect the outcome of the case. 3. No derogation from this Article shall be made under Article 15 of the Convention.

The RF Constitution. Article 1 1. The Russian Federation – Russia – shall be a democratic federal rule-of-law state with the republican form of government.

The RF Constitution. Article 15 1. The Constitution of the Russian Federation shall have supreme legal force and direct effect, and shall be applicable throughout the entire territory of the Russian Federation. Laws and other legal acts adopted by the Russian Federation may not contravene the Constitution of the Russian Federation.
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2. Organs of state power and local self-government, officials, citizens and their associations must comply with the laws and the Constitution of the Russian Federation. 4. The commonly recognised principles and norms of the international law and the international treaties of the Russian Federation shall be a component part of its legal system. If an international treaty of the Russian Federation stipulates other rules than those stipulated by the law, the rules of the international treaty shall apply.

The RF Constitution. Article 19 1. All people shall be equal before the law and in the court of law. 2. The state shall guarantee the equality of rights and liberties regardless of sex, race, nationality, language, origin, property or employment status, residence, attitude to religion, convictions, membership of public associations or any other circumstance. Any restrictions of the rights of citizens on social, racial, national, linguistic or religious grounds shall be forbidden.

The RF Constitution. Article 21 1. The dignity of the person shall be protected by the state. No circumstance may be used as a pretext for belittling it. 2. No one may be subjected to torture, violence or any other harsh or humiliating treatment or punishment. No one may be subjected to medical, scientific or other experiments without his or her free consent.

The RF Constitution. Article 47 1. No one may be denied the right to having his or her case reviewed by the court and the judge under whose jurisdiction the given case falls under the law.

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2. Anyone charged with a crime has the right to have his or her case reviewed by a court of law with the participation of jurors in cases stipulated by the federal law.

The RF Constitution. Article 50 1. No one may be repeatedly convicted for the same offense. The RF Constitution. Article 54 1. The law instituting or aggravating the liability of a person shall have no retroactive force. 2. No one may be held liable for an action which was not recognised as an offense at the time of its commitment. If liability for an offense has been lifted or mitigated after its perpetration, the new law shall apply.

The RF Constitution. Article 120 1. Judges shall be independent and shall obey only the Constitution of the Russian Federation and the federal law.

The RF Constitution. Article 123 3. The trial shall be conducted on an adversarial and equal basis.

The RF Criminal Code. Article 1. 1. The criminal legislation of the Russian Federation shall consist of the present Code. New laws providing for criminal liability shall be subject to inclusion in the present Code. 2. The present Code shall be based on the Constitution of the Russian Federation and universally recognised principles and norms of international law.

The

RF

Criminal

Code.

Article

3.

The

principle

of

legality

2. The application of the criminal law by analogy shall not be allowed.

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The RF Criminal Code. Article 4. The principle of the equality of citizens before the law Persons who have committed crimes shall be equal before the law and subject to criminal liability regardless of sex, race, nationality, language, origin, property and employment status, residence, attitude to religion, convictions, membership of public associations or any other circumstance.

The RF Criminal Code. Article 6. The principle of fairness 1. Punishment and other measures of a criminal-law character applied towards a person who has committed a crime must be fair, that is correspond to the character and degree of public danger of the crime, the circumstances of its commission and the personality of the guilty party. 2. No one can be held criminally liable twice for the same offense.

The RF Criminal Code. Article 8. The basis of criminal liability The basis of criminal liability shall be the commission of an act containing all of the features of a corpus delicti provided for by the present Code.

The RF Criminal Code. Article 14. The concept of a crime 1. A culpably committed publicly dangerous act prohibited by the present Code under threat of punishment shall be recognised as a crime.

The RF Criminal Code. Article 158. Theft 3. Theft committed: a) with unlawful invasion into a dwelling; b) from an oil pipeline, an oil product pipeline, a gas pipeline; c) in a large amount, - shall be punishable by a fine in an amount from a hundred thousand to five hundred thousand rubles or in the amount of the occupational earnings or other income of the convict for a period from one year to three years or by deprivation of liberty for a term from two to six years with a fine in an amount up to eighty thousand rubles or in the amount of the occupational earnings or other income of the convict for a
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period up to six months or without such and with a restriction of liberty for a term up to one and a half years or without such. 4. Theft committed: a) by an organised group; b) in a particularly large amount, - shall be punishable by deprivation of liberty for a term from five to ten years with a fine in an amount of up to one million rubles or in the amount of the occupational earnings or other income of the convict for a period up to five years or without such and with a restriction of liberty for a term up to two years or without such. 4. A large amount in the articles of the present chapter shall be recognised as value of property that exceeds two hundred and fifty thousand rubles, and particularly large - one million rubles. Note 1. By theft in the articles of the present Code is understood the self-interested, unlawful seizure and (or) conversion of another‘s property without exchange for value to the benefit of the guilty party or other persons, which causes damage to the owner or other possessor of this property.

The

RF

Criminal

Code.

Article

159.

Fraud

3. Fraud committed by a person with the use of his official position, and equally in a large amount, - shall be punishable by a fine in an amount from a hundred thousand to five hundred thousand rubles or in the amount of the occupational earnings or other income of the convict for a period from one year to three years or by deprivation of liberty for a term from two to six years with a fine in an amount up to ten thousand rubles or in the amount of the occupational earnings or other income of the convict for a period up to one month or without such and with a restriction of liberty for a term up to one and a half years or without such. 4. Fraud committed by an organised group or in a particularly large amount, - shall be punishable by deprivation of liberty for a term from five to ten years with a fine in an amount up to one million rubles or in the amount of the occupational earnings of other income of the convict for a period up to three years or without such. The RF Criminal Code. Article 160. Embezzlement or misappropriation
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1. Embezzlement or Misappropriation is the theft of another‘s property that has been entrusted to the guilty party, - shall be punishable by a fine in an amount up to a hundred and twenty thousand rubles or in the amount of the occupational earnings or other income of the convict for a period up to one year, or by compulsory work for a term up to a hundred and twenty hours, or by correctional work for a term up to six months, or by deprivation of liberty for a term up to two years. 2. Those same acts, committed by a group of persons by prior collusion, and equally with the causing of significant damage to a citizen, - shall be punishable by a fine in an amount up to three hundred thousand rubles or in the amount of the occupational earnings or other income of the convict for a period up to two years, or by compulsory work for a term up to a hundred and eighty hours, or by correctional work for a term up to one year, or by deprivation of liberty for a term up to five years. 3. Those same acts, committed by a person with the use of his official position, and equally in a large amount, - shall be punishable by a fine in an amount from a hundred thousand to five hundred thousand rubles or in the amount of the occupational earnings or other income of the convict for a period from one year to three years, or by deprivation of the right to occupy certain positions or engage in certain activity for a term up to five years, or by deprivation of liberty for a term from two to six years with a fine in an amount up to ten thousand rubles or in the amount of the occupational earnings or other income of the convict for a period up to one month or without such. 4. The acts provided for by paragraphs one, two or three of the present article, committed by an organised group or in a particularly large amount, - shall be punishable by deprivation of liberty for a term from five to ten years with a fine in an amount up to one million rubles or in the amount of the occupational earnings or other income of the convict for a period up to three years or without such.

The RF Criminal Code. Article 165. The causing of property damage by way of deceit or abuse of trust 1. The causing of property damage to the owner or other possessor of property by way of deceit or abuse of trust in the absence of the features of theft - shall be punished by a fine in an amount up to eighty thousand rubles or in the amount of the occupational earnings
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or other income of the convict for a period up to two months, or by compulsory work for a term from a hundred and twenty to a hundred and eighty hours, or by correctional work for a term up to one year, or by arrest for a term up to four months, or by deprivation of liberty for a term up to two years. 2. That same act, committed by a group of persons by prior collusion or in a large amount, - shall be punishable by a fine in an amount from a hundred thousand to three hundred thousand rubles or in the amount of the occupational earnings or other income of the convict for a period from one year to two years or by deprivation of liberty for a term up to three years with a fine in an amount up to eighty thousand rubles or in the amount of the occupational earnings of other income of the convict for a period up to six months or without such. 3. The acts provided for by paragraphs one and two of the present article: a) committed by an organised group; b) causing particularly large damage, shall be punishable by deprivation of liberty for a term up to five years with a fine in an amount up to eighty thousand rubles or in the amount of the occupational earnings or other income of the convict for a period up to six months or without such.

The RF Criminal Code. Article 173. False entrepreneurship False entrepreneurship, that is the creation of a commercial organisation without the intention to implement entrepreneurial or banking activity, having as an objective obtaining loans, being released from taxes, extracting other property benefit or covering up prohibited activity causing large damage to citizens, organisations or the state, shall be punishable by a fine in an amount up to two hundred thousand rubles or in the amount of the occupational earnings or other income of the convict for a period up to eighteen months or by deprivation of liberty for a term up to four years with a fine in an amount up to eighty thousand rubles or in the amount of the occupational earnings or other income of the convict for a period up to six months or without such.

The RF Criminal Code. Article 174.1. Legalisation (laundering) of monetary funds or other property acquired by a person as the result of the commission by him [sic]
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3. The acts provided for by paragraph two of the present article, committed: a) by a group of persons by prior collusion; b) by a person with the use of his official position, - shall be punishable by deprivation of liberty for a term from four to eight years with a fine in an amount up to one million rubles or in the amount of the occupational earnings or other income of the convict for a period up to five years or without such and with a restriction of liberty for a term up to two years or without such.

The RF Criminal Code. Article 201. Abuse of authority 1. The use by a person fulfilling management functions in a commercial or other organisation of his authority contrary to the lawful interests of this organisation and with the objectives of extracting income and advantages for himself or other persons or causing harm to other persons, if this act has entailed the causing of substantial harm to the rights and lawful interests of citizens or organisations or to interests of society or the state protected by law, - shall be punishable by a fine in an amount up to two hundred thousand rubles or in the amount of the occupational earnings or other income of the convict for a period up to eighteen months, or by compulsory work for a term from a hundred and eighty to two hundred and forty hours, or by correctional work for a term from one year to two years, or by arrest for a term from three to six months, or by deprivation of liberty for a term up to four years. 2. The same act, entailing grave consequences, - shall be punishable by a fine in an amount up to one million rubles or in the amount of the occupational earnings or other income of the convict for a period up to five years or without such or by deprivation of liberty for a term up to ten years with deprivation of the right to occupy certain positions or to engage in certain activity for a term up to five years.

The RF Criminal Code. Article 204. Commercial bribery 1. The unlawful transfer to a person fulfilling management functions in a commercial or other organisation of money, securities, other property, and equally the unlawful rendering to him of services of a property character for the performance of actions (inaction) in the interests of the giver in connection with the official position occupied by
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this person – shall be punishable by a fine in an amount up to two hundred thousand rubles or in the amount of the occupational earnings or other income of the convict for a period up to eighteen months, or by deprivation of the right to occupy certain positions or to engage in certain activity for a term up to two years, or by restriction of liberty for a term up to two years, or by deprivation of liberty for a term up to three years. 2. Those same acts, committed by a group of persons by prior collusion or by an organised group, - shall be punishable by a fine in an amount from a hundred thousand to three hundred thousand rubles or in the amount of the occupational earnings or other income of the convict for a period from one year to two years, or by restriction of liberty for a term up to three years, or by arrest for a term from three to six months, or by deprivation of liberty for a term up to four years. 3. The unlawful receipt by a person fulfilling management functions in a commercial or other organisation of money, securities, other property, and equally the unlawful use of services of a property character for the performance of actions (inaction) in the interests of the giver in connection with the official position occupied by this person - shall be punishable by a fine in an amount from a hundred thousand to five hundred thousand rubles or in the amount of the occupational earnings or other income of the convict for a period from one year to three years or by deprivation of liberty for a term up to seven years with deprivation of the right to occupy certain positions or to engage in certain activity for a term up to three years. 4. The acts provided for by paragraph three of the present article, if they: a) are committed by a group of persons by prior collusion or by an organised group; b) are coupled with the extortion of the object of the bribery, - shall be punishable by deprivation of liberty for a term from seven to twelve years with a fine in an amount up to one million rubles or in the amount of the occupational earnings or other income of the convict for a period up to five years or without such with deprivation of the right to occupy certain positions or to engage in certain activity for a term up to three years.

The RF Criminal Code. Article 210. Organisation of a criminal community (a criminal organisation) or participation in it

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1. The creation of a criminal community (a criminal organisation) with the objectives of joint commission of one or several grave or particularly grave crimes, or the heading of such a community (an organisation) or of the structural units entering into it, as well as the coordination of criminal actions, the creation of firm and stable ties between various independently acting organised groups, the elaboration of plans and the creation of conditions for the commission of crimes by such groups or the division of spheres of criminal influence and criminal incomes between them, committed by a person with the use of his influence on the participants in the organised groups, and equally participation in a meeting of the organisers, heads (leaders) or other representatives of the organised groups with the objectives of committing even just one of the indicated crimes - shall be punishable by deprivation of liberty for a term from twelve to twenty years with a fine in an amount up to one million rubles or in the amount of the occupational earnings or other income of the convict for a period up to five years or without such and with a restriction of liberty for a term from one year to two years. 2. Participation in a criminal community (a criminal organisation) -

shall be punishable by deprivation of liberty for a term from five to ten years with a fine in an amount up to five hundred thousand rubles or in the amount of the occupational earnings or other income of the convict for a period up to three years or without such and with a restriction of liberty for a term up to one year. 3. The acts provided for by paragraphs one or two of the present article, committed by a person with the use of his official position, - shall be punishable by deprivation of liberty for a term from fifteen to twenty years with a fine in an amount up to one million rubles or in the amount of the occupational earnings or other income of the convict for a period up to five years or without such and with a restriction of liberty for a term from one year to two years. 4. The acts provided for by paragraph one of the present article, committed by a person occupying the top position in a criminal hierarchy, - shall be punishable by deprivation of liberty for a term from fifteen to twenty years or by lifetime deprivation of liberty.

The RF Criminal Code. Article 327. Forgery, manufacturing or marketing of forged documents, state awards, stamps, seals, letterheads
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1. Forgery of a certificate or other official document granting rights or releasing from duties with the objectives of using it, or the marketing of such a document, and equally the manufacture with these same objectives or the marketing of forged state awards of the Russian Federation, the RSFSR, the USSR, stamps, seals, letterheads – shall be punishable by restriction of liberty for a term up to three years, or by arrest for a term from four to six months, or by deprivation of liberty for a term up to two years. 2. Those same acts, committed with the objective of concealing another crime or facilitating its commission, - shall be punishable by deprivation of liberty for a term up to four years. 3. The use of a knowingly counterfeit document - shall be punishable by a fine in an amount up to eighty thousand rubles or in the amount of the occupational earnings or other income of the convict for a period up to six months, or by compulsory work for a term from a hundred and eighty to two hundred and forty hours, or by correctional work for a term up to two years, or by arrest for a term from three to six months.

The RF Criminal Code. Article 327.1. The manufacture, marketing of forged excise duty stamps, special stamps or compliance marks or their use 1. The manufacture with the objectives of marketing or the marketing of forged excise duty stamps, special stamps or compliance marks containing security features to prevent counterfeiting - shall be punished by a fine from a hundred thousand to three hundred thousand rubles or in the amount of the occupational earnings or other income of the convict for a period from one year to two years or by deprivation of liberty for a term up to three years.

The RF Code of Criminal Procedure. Article 15. Adversariality of the parties 1. Judicial proceedings in criminal cases shall be conducted in accordance with adversarial principles. 2. The functions of prosecution, defence, and adjudication of a criminal case shall be

separate from each other and those functions may not be allocated to any single agency or official.

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3. A court is not an organ of criminal prosecution and shall not take the prosecution or defence side in a case. The court shall create the conditions necessary for the parties to perform their procedural duties and to exercise the rights granted to them. 4. The prosecution and the defence shall have equal rights before the court.

The RF Code of Criminal Procedure. Article 24. Grounds for refusal to initiate a criminal case or for termination of a criminal case 1. A criminal case can not be initiated, while an initiated criminal case shall be subject to termination, on the following grounds: 1) absence of the event of the crime; 2) absence in the act of a corpus delicti; 3) expiration of the statute of limitations for criminal prosecution

The RF Code of Criminal Procedure. Article 27. Grounds for termination of criminal prosecution 4) the presence in relation to the suspect or the accused of a verdict that has entered into legal force with respect to the same charge or of a court ruling or a judge‘s judgment to terminate a criminal case on the same charge;

The RF Code of Criminal Procedure. Article 31. The judicial jurisdiction of criminal cases 3. In the judicial jurisdiction of the supreme court of a republic, a kray or oblast court, the court of a city of federal significance, the court of the autonomous oblast and the court of an autonomous okrug shall be: 1) criminal cases of the crimes provided for by articles 105 paragraph two, 126 paragraph three, 131 paragraphs three and four, 205, 206 paragraphs two - four, 208 paragraph one, 209 - 211, 212 paragraph one, 227, 263 paragraph three, 263.1 paragraph three, 267 paragraph three, 269 paragraph three, 275 - 279, 281, 290 paragraphs three and four, 294 - 302, 303 paragraphs two and three, 304, 305, 317, 321 paragraph three, 322 paragraph two, 353 - 358, 359 paragraphs one and two and 360 of the Criminal Code of the Russian Federation;
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2) criminal cases transferred to the given courts pursuant to articles 34 and 35 of the present Code; 3) criminal cases in the materials of which is contained information comprising a state secret.

The RF Code of Criminal Procedure. Article 32. The territorial judicial jurisdiction of a criminal case 1. A criminal case shall be subject to examination in the court at the place of the commission of the crime, with the exception of the situations provided for by article 35 of the present Code. 2. If a crime was begun in a place to which the jurisdiction of one court extends, and ended in a place to which the jurisdiction of another court extends, then the given criminal case shall be under the judicial jurisdiction of the court at the place of the ending of the crime. 3. If crimes are committed in different places, then the criminal case shall be examined by a court the jurisdiction of which extends to that place where the majority of the crimes investigated with respect to the given criminal case were committed or the gravest of them was committed.

The RF Code of Criminal Procedure. Article 74. Evidence 1. The evidence in a criminal case is any information that provides a basis for a court, prosecutor, investigator, or inquiry officer to determine, in accordance with the procedures established by this Code, whether circumstances that are subject to proof in proceedings in a criminal case, or other circumstances relevant to the case, exist. 2. The following are admissible as evidence: 1) testimony given by a suspect or accused; 2) testimony given by a victim or witness; 3) report and testimony of an expert; 3.1) report and testimony of a specialist; (para 3.1 was introduced by Federal Law N 92-FZ of 04.07.2003) 4) physical evidence;
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5) official records of investigative and judicial actions; 6) other documents.

The RF Code of Criminal Procedure. Article 79. Witness testimony 1. Witness testimony consists of information communicated by a witness during questioning conducted in the course of pre-trial proceedings or in court in accordance with the requirements of Articles 187-191 and 278 of this Code.

The RF Code of Criminal Procedure. Article 90. Res judicata Circumstances established by a verdict that has come into legal force or by another court decision adopted in civil, commercial or administrative proceedings that has come into legal force shall be recognised by a court, prosecutor, investigator or inquiry officer without any additional review. Such a verdict or decision may not prejudge the guilt of persons who did not previously participate in the criminal case under consideration.

The RF Code of Criminal Procedure. Article 217. Familiarisation of an accused and his defender with the materials of a criminal case file 1. After fulfilling the requirements of Article 216 of this Code the investigator shall present bound and numbered volumes of the criminal case file to the accused and to his defender, except in the situations specified by Article 166(9) of this Code. Likewise produced for familiarisation shall be physical evidence and, at the request of the accused or his defender, photographs, audio and/or video recording materials, movie film and other attachments to the record of investigative actions. In the event of the impossibility of producing physical evidence, the investigator shall issue an order about this. Upon the petition of the accused and his defender, the investigator shall grant them the opportunity to familiarise themselves with the materials of the criminal case file individually. If several accuseds are participating in the proceedings with respect to the criminal case, then the sequence in which the case file materials are produced for them and their defenders shall be established by the investigator.

The RF Code of Criminal Procedure. Article 240. First-hand and oral nature
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1. All evidence in the trial of a criminal case shall be subjected to first-hand examination, except as specified in Section X of this Code. The court must hear the testimony of the defendant, the victim and witnesses, and opinions of any expert, must inspect the physical evidence, must read aloud official records and other documents, and must conduct other judicial actions to examine the evidence. 3. A court verdict may be based solely on the evidence examined at the trial.

The RF Code of Criminal Procedure. Article 246. Participation of the prosecutor 1. The participation in court proceedings of a prosecutor shall be mandatory. 2. The participation of a state prosecutor shall be mandatory in the court proceedings of criminal cases of public and private-public prosecution, as well as during the examination of a criminal case of private prosecution, if the criminal case was initiated by an investigator or an inquiry officer with the approval of a prosecutor. 3. With respect to criminal cases of private prosecution, the charge shall be supported in the court proceedings by the injured party. 4. The state prosecution may be supported by several prosecutors. If the impossibility of the further participation of a prosecutor is uncovered in the course of the court proceedings, then he may be replaced. The court shall grant a prosecutor who has newly entered into the court proceedings time for familiarisation with the criminal case file materials and preparation for participation in the court proceedings. Replacement of a prosecutor shall not entail a repetition of the actions that were performed to that time in the course of the court proceedings. Upon the petition of the prosecutor, the court may repeat examinations of witnesses, injured parties, experts or other judicial actions. 5. The state prosecutor shall present evidence and participate in its examination, set forth to the court his opinion with respect to the merits of the charge, as well as with respect to other questions arising in the course of the court proceedings, express to the court suggestions on the application of the criminal law and the setting of a sentence for the defendant. 6. The prosecutor shall bring a civil claim or support one that has been brought with respect to a criminal case, if the protection of the rights of citizens, societal or state interests demands this.
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7. If the state prosecutor comes to the conviction in the course of court proceedings that the evidence presented does not confirm the charge laid against the defendant, he shall abandon the charge and set forth to the court the reasoning for the abandonment. The full or partial abandonment by the state prosecutor of a charge in the course of court proceedings shall entail the termination of the criminal case or of the criminal prosecution in full or in the corresponding part thereof on the grounds prescribed by article 24 paragraph one (1) and (2) and article 27 paragraph one (1) and (2) of the present Code. 8. Prior to the retirement of the court to the deliberation room for the issuance of a verdict, the state prosecutor may likewise change the charge in the direction of mitigation by way of: 1) exclusion from the juridical classification of the act of features of the crime that aggravate the punishment; 2) exclusion from the charge of a reference to any norm whatsoever of the Criminal Code of the Russian Federation, if the defendant‘s act is provided for by another norm of the Criminal Code of the Russian Federation, the violation of which was imputed to him in the bill of indictment or the act of indictment; 3) reclassification of the act in accordance with a norm of the Criminal Code of the Russian Federation that prescribes a milder punishment. 9. Has lost force. - Federal Law N 244-FZ of 30.10.2009. 10. Termination of a criminal case in view of the abandonment by the state prosecutor of a charge, equally as the changing of the charge by him, shall not impede the subsequent lodging and examination of a civil claim in the procedure of civil judicial proceedings.

The RF Code of Criminal Procedure. Article 252. The limits of court proceedings 1. Court proceedings shall be conducted only in relation of an accused and only with respect to a charge that has been laid against him. 2. The changing of the charge in court proceedings shall be allowed, if the situation of the defendant is not worsened and his right to a defence not violated thereby. .

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The RF Code of Criminal Procedure. Article 299. Questions to be resolved by a court during the issuance of a verdict 1. When issuing a verdict, the court shall decide the following issues in the deliberation room: 1) whether it has been proven that the act the defendant is charged with occurred; 2) whether it has been proven that the act was committed by the defendant; 3) whether the act constitutes a crime and by what subparagraph, paragraph and article of the Criminal Code of the Russian Federation it is punishable; 4) whether the defendant is guilty of committing the crime; 5) whether the defendant should be punished for committing the crime; 6) whether there are circumstances that mitigate or aggravate the punishment; 7) what sentence should be imposed on the defendant; 8) whether there are grounds for a verdict of guilty without sentence or for granting an exemption from punishment; 9) what kind of correctional institution or regime must be determined for the defendant during the setting of punishment for him in the form of deprivation of liberty; 10) is the civil suit subject to satisfaction, to whose benefit and in what amount; 10.1) has it been proven that the property subject to confiscation was obtained as the result of the commission of a crime or is incomes from this property or was used or was designated for use in the capacity of an instrument of crime or for the financing of terrorism, an organised group, an unlawful armed formation, a criminal community (a criminal organisation); 11) what to do with the property on which arrest has been imposed to secure a civil suit or a possible confiscation; 12) what to do with the physical evidence; 13) onto whom and in what amount must the trial costs be imposed;…

The RF Code of Criminal Procedure. Article 303. The writing of a verdict 1. Upon deciding the issues referred to in Article 299 of this Code, the court shall proceed to write the verdict. It shall be written in the language in which the trial was

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conducted and consist of an introductory part, a narrative-rationale part, and an operative part.

The RF Code of Criminal Procedure. Article 307. The narrative-rationale part of a guilty verdict The narrative-rationale part of a guilty verdict must contain: 2) the evidence on which the court‘s findings regarding the defendant are based and the reasons the court rejected other evidence;

The RF Code of Criminal Procedure. Article 355. The procedure for filing an appeal and a submission 3. Cassation appeals and submissions shall be submitted: 2) against a verdict or other decision of the supreme court of a republic, a kray or oblast court, the court of a city of federal significance, the court of the autonomous oblast and the court of an autonomous okrug - to the Judicial Collegium for Criminal Cases of the Supreme Court of the Russian Federation.

The RF Civil Code. Article 1. The fundamental principles of civil legislation 2. Citizens (individuals) and legal entities shall acquire and exercise their civil rights by their will and in their interest. They shall be free in the establishment of their rights and duties on the basis of an agreement and in the determination of any conditions of an agreement that do not contradict legislation.

The RF Civil Code. Article 10. The limits of the exercise of civil rights 1. The actions of citizens and legal entities effectuated exclusively with the intention to cause harm to another person, and also abuse of right in other forms, shall not be permitted. The use of civil rights with the objectives of restricting competition, as well as abuse of a dominant position in the marketplace shall not be permitted.

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2. In the event of non-compliance with the requirements provided for by paragraph 1 of the present article, a court, a commercial court or a court of arbitration may deny a person in the defence of a right belonging to him.

3. In situations when the law puts the defence of civil rights in dependence on whether these rights were exercised reasonably and in good faith, the reasonableness of the actions and the good faith of the participants in the civil legal relations shall be assumed.

The RF Civil Code. Article 53. The bodies of a legal entity 1. A legal entity shall acquire civil rights and take civil duties upon itself through its bodies, acting pursuant to the law, other legal acts and the founding documents. The procedure for the appointment or election of the bodies of a legal entity shall be determined by the law and the founding documents. 2. In the situations provided for by the law, a legal entity may acquire civil rights and take civil duties upon itself through its participants. 3. A person who appears on behalf of a legal entity on the strength of the law or its founding documents must act in the interests of the legal entity being represented by him in good faith and reasonably. If not otherwise prescribed by the law or an agreement, he shall be obligated to reimburse losses caused by him to the legal entity upon the demand of the founders of (the participants in) the legal entity.

The RF Civil Code. Article 165. The consequences of non-observance of the notarial form of a transaction and of a requirement for its registration 1. Non-observance of the notarial form, and in the instances established by the law, - of a requirement for the state registration of a transaction shall entail its invalidity. Such a transaction shall be considered void.

2. If one of the parties has fully or partially executed a transaction requiring notarial certification, while the other party is evading such certification of the transaction, the court shall have the right to find the transaction valid at the request of the party that has executed the transaction. In this situation, subsequent notarial certification of the

transaction shall not be required.

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3. If a transaction requiring state registration has been effected in the proper form, but one of the parties is evading its registration, the court shall have the right to issue a decision to register the transaction at the request of the other party. In this situation, the transaction shall be registered pursuant to the decision of the court. 4. In the situations provided for by paragraphs 2 and 3 of the present article, a party that is groundlessly evading the notarial certification or state registration of a transaction must reimburse the other party the losses caused by the delay in the effecting or registration of the transaction.

The RF Civil Code. Article 168. The invalidity of a transaction that does not correspond to the law or other legal acts A transaction that does not correspond to the requirements of the law or other legal acts shall be void, if the law does not establish that such a transaction is challengeable, or does not provide for other consequences of violation.

The RF Civil Code. Article 170. The invalidity of bogus and sham transactions 2. A sham transaction, that is a transaction that has been effected with the objective of covering up another transaction, shall be void. The rules that relate to the transaction that the parties actually had in mind, taking into account the essence of the transaction, shall apply to it.

The RF Civil Code. Article 179. The invalidity of a transaction effected under the influence of deceit, force, threat, the ill-intentioned agreement of a representative of one party with the other party or a concurrence of difficult circumstances 1. A transaction effected under the influence of deceit, force, threat, the ill-intentioned agreement of a representative of one side with the other side, as well as a transaction that a person was compelled to effect in consequence of a concurrence of difficult circumstances at conditions extremely disadvantageous to himself, which the other party took advantage of (an enfettering transaction), may be found by the court to be invalid upon a claim by the injured party.

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The RF Civil Code. Article 223. The moment of the arising of the right of ownership for an acquirer under an agreement 1. The right of ownership for an acquirer of an item under an agreement shall arise from the moment of its transfer, unless otherwise provided for by the law or the agreement. 2. In situations when the alienation of property is subject to state registration, the right of ownership for the acquirer shall arise from the moment of such registration, unless otherwise established by the law. Real estate shall be recognised as belonging to a good-faith acquirer (article 302 paragraph 1) through the right of ownership from the moment of such registration, with the exception of the situations provided for by article 302 of the present Code, when the owner shall have the right to demand and obtain such property from the good-faith acquirer.

The RF Civil Code. Article 421. Freedom of agreement 2. The parties may enter into an agreement, both one that is provided for by the law or other legal acts, and one that is not provided for.

The RF Civil Code. Article 424. The price 1. The execution of an agreement shall be paid for at a price established by the agreement of the parties. In situations provided for by the law, prices (tariffs, pricing schedules, rates, etc.) established or regulated by the state agencies and/or bodies of local self-administration empowered for this shall be applied. 2. A change in the price after an agreement has been entered into shall be allowed in the situations and on the conditions provided for by the agreement, the law, or in the procedure established by the law. 3. In situations when a price is not provided for in an agreement with exchange for value and can not be determined proceeding from the conditions of the agreement, the execution of the agreement must be paid for at the price that is customarily levied for analogous goods, work or services under comparable circumstances.

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The RF Civil Code. Article 779. The agreement for the rendering of services with exchange for value 1. Under an agreement for the rendering of services with exchange for value, the executor shall obligate himself to render services (to perform certain actions or to implement certain activity) upon the assignment of the ordering party, while the ordering party shall obligate himself to pay for these services. 2. The rules of the present chapter shall be applied to agreements for the rendering of communications services, medical, veterinary, auditor, consulting, informational services, services with respect to training, tourist services and others, with the exception of services rendered under the agreements provided for by chapters 37, 38, 40, 41, 44, 45, 46, 47, 49, 51, 53 of the present Code.

The RF Civil Code. Article 781. Payment for services 1. The ordering party shall be obligated to pay for the services rendered to him in the time periods and in the procedure that are indicated in the agreement for the rendering of services with exchange for value. 2. In the event of an impossibility of execution arising through the fault of the ordering party, the services shall be subject to being paid for in full volume, unless otherwise provided for by the law or the agreement for the rendering of services with exchange for value. 3. In the event when the impossibility of execution arose through circumstances for which neither one of the sides is responsible, the ordering party shall reimburse the executor the expenses factually borne by him, unless otherwise provided for by the law or by the agreement for the rendering of services with exchange for value.

The RF Civil Code. Article 782. A unilateral refusal to execute an agreement for the rendering of services with exchange for value 1. The ordering party shall have the right to refuse to execute an agreement for the rendering of services with exchange for value under the condition of payment to the executor for the expenses factually borne by him.

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2. The executor shall have the right to refuse to execute obligations under an agreement for the rendering of services with exchange for value only under the condition of full reimbursement to the ordering party of losses.

The RF Civil Code. Article 783. The legal regulation of an agreement for the rendering of services with exchange for value The general provisions on contractorship (articles 702 - 729) and the provisions on household services contractorship (articles 730 - 739) shall be applied to an agreement for the rendering of services with exchange for value, if this does not contradict articles 779 - 782 of the present Code, as well as the peculiarities of the object of the agreement for the rendering of services with exchange for value.

The RF Tax Code. Article 40. The principles of determining the price of goods, work or services for the purposes of taxation 1. Unless otherwise provided for by the present article, the price of goods, work or services indicated by the parties to the transaction shall be applied for the purposes of taxation. As long as the opposite has not been proven, it shall be assumed that this price corresponds to the level of market prices. 2. When implementing control over the fullness of the computation of taxes, tax agencies shall have the right to review the correctness of the application of prices with respect to transactions only in the following situations: 1) between mutually-interdependent persons; 2) with respect to commodity-exchange (barter) operations; 3) upon the effecting of external-trade transactions; 4) upon a deviation by more than 20 percent in the direction of raising or in the direction of lowering from the level of prices being applied by the taxpayer with respect to identical (homogeneous) goods (work, services) within the confines of a non-protracted period of time. 3. In the situations provided for by paragraph 2 of the present article, when the prices of goods, work or services applied by the parties to a transaction deviate in the direction of raising or in the direction of lowering by more than 20 percent from the market price of
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identical (homogeneous) goods (work or services), the tax agency shall have the right to issue a reasoned decision to assess additional taxes and a fine, calculated in such a manner as if though the results of this transaction had been assessed proceeding from the application of market prices for the corresponding goods, work or services. The market price shall be determined taking into account the provisions provided for by paragraphs 4 - 11 of the present article. In so doing, the mark-ups to the price or discounts customary when entering into transactions between non-mutually-interdependent persons shall be taken into account. In particular, taken into account shall be discounts brought about by: seasonal and other fluctuations in consumer demand for the goods (work, services); the loss by the goods of quality or other consumer properties; the expiration of the use-by or sell-by dates of the goods; marketing policy, including during the market promotion of new goods not having analogues, as well as during the promotion of goods (work, services) into new markets; the sale of experimental models and samples of goods with the objectives of the familiarising of consumers with them. 4. The market price of a good (a work, a service) shall be recognised as the price that has evolved during the interaction of demand and supply on the market for identical (and in their absence - homogeneous) goods (work, services) in comparable economic (commercial) conditions. 5. The market for goods (work, services) shall be recognised as the sphere of circulation of these goods (work, services), determined proceeding from the ability of a purchaser to acquire (to sell) the good (the work, the service) in a real way and without significant additional expenses on the territory of the Russian Federation closest in relation to the purchaser or beyond the confines of the Russian Federation. … 6. Goods having the same principal features characteristic of them shall be recognised as identical. During the determination of the identicalness of goods, taken into account shall be, in particular, their physical characteristics, quality and reputation on the market, country of origin and producer. During the determination of the identicalness of goods, insignificant differences in their external appearance may be ignored.

7. Goods which, while not being identical, have similar characteristics and consist of similar components, which allows them to fulfil one and the same set of functions and/or to be commercially interchangeable, shall be recognised as homogeneous. During the
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determination of the homogeneity of goods, taken into account shall be, in particular, their quality, the presence of a trademark, reputation on the market, country of origin. Paragraph excluded. - Federal law N 154-FZ of 09.07.1999. 8. During the determination of the market price of goods, work or services, transactions between persons who are not mutually interdependent shall be taken into consideration. Transactions between mutually interdependent persons may be taken into consideration only in those situations when the mutual interdependence of these persons has not influenced the results of such transactions. 9. During the determination of the market prices of a good, a work or a service, information on transactions with identical (homogeneous) goods, work or services in comparable conditions that have been entered into as of the moment of the sale of this good, work or service shall be taken into account. In particular, taken into account shall be such conditions of the transactions as the quantity (the volume) of the goods being delivered (for example, the volume of the commercial batch), the time periods for the execution of obligations, the conditions for payments customarily applied in transactions of the given kind, as well as other reasonable conditions that may have an effect on prices. In so doing, the conditions of transactions on the market for identical (and in their absence - homogeneous) goods, work or services shall be recognised as comparable if the difference between such conditions either does not have a significant effect on the price of such goods, work or services, or can be taken into account with the aid of correction factors. 11. During the determination and recognition of the market price of a good, a work or a service, official sources of information on the market prices for the goods, work or services and on exchange quotations shall be used.

12. During the examination of a case, the court shall have the right to take into account any circumstances having significance for the determination of the results of a transaction, not limiting itself to the circumstances enumerated in paragraphs 4 - 11 of the present article. 13. During the sale of goods (work, services) at regulated state prices (tariffs) established pursuant to the legislation of the Russian Federation, the indicated prices (tariffs) shall be applied for the purposes of taxation.
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14. During the determination of the market prices of financial instruments of term transactions and the market prices of securities, the provisions provided for by paragraphs 3 and 10 of the present article shall be applied taking into account the peculiarities provided for by the "Tax on the profit (income) of organisations" chapter of the present Code.

The Law on Joint-Stock Companies. Article 83. The procedure for approving a transaction effected not at arm’s length 1. A transaction that is being effected not at arm‘s length must be approved prior to its effecting by the company‘s board of directors (supervisory board) or a general meeting of shareholders pursuant to the present article. 2. In a company with a number of shareholders - owners of voting shares of 1000 and less, a decision to approve a transaction effected not at arm‘s length shall be adopted by the company‘s board of directors (supervisory board) by a majority of the votes of the directors who are at arm‘s length from its effecting. If the quantity of non-arm‘s-length directors comprises less than the quorum determined by the charter for the conducting of a session of the company‘s board of directors (supervisory board), the decision with respect to the given question must be adopted by a general meeting of shareholders in the procedure provided for by paragraph 4 of the present article. 3. In a company with a number of shareholders - owners of voting shares of more than 1000 a decision to approve a transaction effected not at arm‘s length shall be adopted by the company‘s board of directors (supervisory board) by a majority of the votes of the independent directors who are at arm‘s length from its effecting. In the event that all of the members of the company‘s board of directors (supervisory board) are recognised as nonarm‘s-length persons and/or are not independent directors, the transaction may be approved by a decision of a general meeting of shareholders, adopted in the procedure provided for by section 4 of the present article. An independent director shall be recognised as being a member of the company‘s board of directors (supervisory board) who is not and who has not in the course of one year preceding the adoption of the decision been:

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a person implementing the functions of a one-man executive body of the company, including its manager, a member of a collegial executive body, a person occupying positions in the management bodies of a management organisation; a person whose spouse, parents, children, full and half brothers and sisters, adopters and adoptees are persons occupying positions in the indicated management bodies of the company, the company‘s management organisation or are managers of the company; an affiliated person of the company, with the exception of a member of the company‘s board of directors (supervisory board). 4. A decision to approve a transaction effected not at arm‘s length shall be adopted by a general meeting of shareholders by a majority of the votes of all shareholders - owners of voting shares who are at arm‘s length from the transaction in the following situations: if the object of the transaction or of several mutually connected transactions is property, the value of which according to the data of the company‘s financial accounting (the asking price of the property being acquired) comprises 2 and more percent of the balance-sheet value of the company‘s assets according to the data of its financial accounting as of the most recent reporting date, with the exception of the transactions prescribed by paragraphs three and four of the present section; if a transaction or several mutually connected transactions are the placement by means of subscription or the sale of shares comprising more than 2 percent of the ordinary shares previously placed by the company, and of ordinary shares into which previously placed issue securities convertible into shares may be converted; if a transaction or several mutually connected transactions are the placement by means of subscription of issue securities convertible into shares that can be converted into ordinary shares comprising more than 2 percent of the ordinary shares previously placed by the company, and of ordinary shares into which previously placed issue securities convertible into shares may be converted. 5. A transaction effected not at arm‘s length shall not require the approval of a general meeting of shareholders provided for by section 4 of the present article in situations when the conditions of such a transaction do not differ substantially from the conditions of analogous transactions that had been effected between the company and the non-arm‘s-length person in the process of the implementation of the company‘s ordinary business activity that have taken place prior to the moment when the non-arm‘s-length person is recognised as such. The indicated exclusion shall extend only to transactions effected not at arm‘s length that
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have been effected in the period from the moment when the non-arm‘s-length person is recognised as such, and until the moment of the conducting of the next annual general meeting of shareholders. 6. The person (persons) who are its party (parties), beneficiary (beneficiaries), the price, the object of the transaction and others of its material conditions must be indicated in a decision to approve a transaction effected not at arm‘s length. A general meeting of shareholders may adopt a decision to approve a transaction (transactions) between the company and a non-arm‘s-length party that may be effected in the future in the process of the implementation by the company of its ordinary business activity. In so doing, the maximum sum for which such a transaction (transactions) can be effected must likewise be indicated in the decision of the general meeting of shareholders. Such a decision shall remain in force until the next annual general meeting of shareholders. 7. For the adoption by the company‘s board of directors (supervisory board) and general meeting of shareholders of a decision to approve a transaction effected not at arm‘s length, the price of the property or services being alienated or acquired shall be determined by the company‘s board of directors (supervisory board) in accordance with article 77 of the present Federal Law. 8. Additional requirements of the procedure for entering into a transaction effected not at arm‘s length may be established by the federal body of executive power for the securities market.

The Law on Joint-Stock Companies. Article 84. The consequences of non-compliance with the requirements for a transaction effected not at arm’s length 1. A transaction effected not at arm‘s length and which is effected with a violation of the requirements for it provided for by the present Federal Law may be recognised as invalid upon a claim by the company or its shareholder. The statute of limitations for a claim with respect to a request to find a transaction effected not at arm‘s length to be invalid shall not be subject to reinstatement in the event of its having passed. A court shall deny satisfaction of a request to recognise as invalid a transaction effected not at arm‘s length and which has been effected with violation of the requirements for it provided for by the present Federal Law in the presence of one of the following circumstances:
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the voting of a shareholder who is at arm‘s length from the effecting of the given transaction and who has turned [to the court] with a claim to recognise as invalid the given transaction, a decision to approve which is adopted by a general meeting of shareholders, could not have had an effect on the results of the voting, even had he taken part in the voting with respect to this question; it has not been proven that the effecting of the given transaction entailed or may entail the causing of losses to the company or to the shareholder who has turned [to the court] with the corresponding claim, or the arising of other unfavourable consequences for them; by the moment of the examination of the case in court, evidence has been presented of the ensuing approval of the given transaction according to the rules provided for by the present Federal Law, taking into account the non-arm‘s length status of the parties indicated in article 81 paragraph 1 of the present Federal Law had at the moment of the effecting of the transaction and at the moment of its approval; during the examination of the case in court it is proven that the other party with respect to the given transaction did not know and should not have known about its effecting with violation of the requirements of it provided for by the present Federal Law. 2. The non-arm‘s-length party shall be held liable to the company in the amount of the losses caused by him to the company. In the event that the liability is borne by several persons, their liability to the company shall be solidary [joint and several—Trans.].

The Law on Appraising Activity. Article 3. The concept of appraising activity For the purposes of the present Federal Law, by appraising activity shall be understood the activity of subjects of appraising activity, aimed at the establishment in relation to objects of the appraisal of a market or other value. For the purposes of the present Federal Law, by the market value of an object of appraisal shall be understood the most probable price at which the given object of appraisal may be alienated on the open market in conditions of competition, when the parties to the transaction are acting reasonably, having all of the necessary information at their disposal, and no extraordinary circumstances whatsoever are reflecting on the size of the price of the transaction, that is when:  one of the parties to the transaction is not obligated to alienate the object of appraisal, while the other party is not obligated to accept execution;
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 the parties to the transaction are well informed about the object of the transaction and are acting in their own interests;  the object of appraisal is presented on the open market by means of a public offering typical for analogous objects of appraisal;  the price of the transaction represents a reasonable recompense for the object of appraisal and there was no coercion towards the effecting of the transaction in relation to the parties to the transaction on the part of anyone whomsoever;  the payment for the object of appraisal is expressed in monetary form.

Decree No. 51 of the Plenum of the Supreme Court “On judicial practice in cases of fraud, embezzlement and misappropriation” of 27 December 2007: 1. Courts should pay attention to the fact that, unlike other forms of theft foreseen in chapter 21 of the Criminal Code of the Russian Federation, fraud [мошенничество – the crime defined in Article 159 of the Criminal Code] is accomplished by way of deception or breach of trust, under the influence of which the owner of the property or another person or authorised body of power conveys the property or the right to it to other persons or does not impede the seizure of this property or acquisition of rights to it by other persons. 6. Theft of another‘s property or the acquisition of the right to it by way of deception or breach of trust, which is accomplished with the use by this person of forged official documents that concede a right or release from duties, is classified as an aggregate crime, as foreseen by part one of Article 327 CC RF and the corresponding part of Article 159 CC RF. 8. In the case of the creation of a commercial organisation without the intention to actually conduct entrepreneurial or banking activity, which has the aim of theft of another‘s property or the acquisition of the right to it, the deed is completely covered by the corpus delicti of fraud [мошенничество]. The given act should additionally be classified under Article 173 CC RF as false entrepreneurship only in the case of the real aggregate of the named crimes, when the person also receives another property benefit not connected with the theft (e.g. when the false enterprise is created by the person not
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only for the completion of the theft of another‘s property, but also with the aim of release from taxes or cover for prohibited activity, if as a result of the given actions, which are not connected to the theft of another‘s property, there was caused a large-scale damage to citizens, organisations or the state, as foreseen in Article 173 CC RF). 18. The wrongful conversion without exchange for value of property that has been entrusted to a person to his own advantage or the advantage of another person, which has caused damage to the owner or other lawful possessor of this property, should be classified by courts as embezzlement or misappropriation [under Article 160 of the Criminal Code], provided that the stolen property was in the lawful possession or authority of this person, who by virtue of his office or official position, contract or special commission exercised powers of disposition, administration, delivery, use or custody in relation to another‘s property. Deciding the question about delineating the corpus delicti of embezzlement or misappropriation from theft, courts should establish that the person has the above named powers. The commission of a secret theft of another‘s property by a person who does not possess such powers, but who has access to the stolen property by virtue of the carrying out of his work or other circumstances, should be classified under Article 158 CC RF. 19. In the examination of cases about crimes foreseen in Article 160 CC RF, courts should bear in mind that embezzlement consists in the self-interested commission by a person of the wrongful conversion to his benefit without exchange for value of property entrusted to him, against the will of the owner. The crime of embezzlement is considered to be completed from the moment when the lawful possession of the property entrusted to the person becomes wrongful and the person begins to carry out acts that are directed toward conversion of the given property to his benefit (e.g., from the moment when the person by way of forgery hides that he has the entrusted property, or from the moment of the non-performance of the person‘s duty to place monetary funds entrusted to this person in the owner‘s bank account). As misappropriation should be classified wrongful acts of a person who out of selfinterest expends property entrusted to him against the will of the owner by use of this property, its expenditure, or transfer to another person.

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20. Deciding the question about the presence in an act of the corpus delicti of theft in the form of embezzlement or misappropriation, the court should establish the circumstances that confirm that the intent of the person encompassed the wrongful, no-exchange-forvalue character of the actions that were accomplished with the aim to convert the property entrusted to him to his own benefit or that of other persons. The directionality of the intent in each such case must be determined by a court out of concrete circumstances of the case, for example, whether a person had a real opportunity to return property to its owner, the making by him of attempts by way of forgery, or other ways to hide his actions. In this, courts must take into account that the partial reimbursement of damage to the injured party by itself can not serve as evidence of the absence of the person‘s intent for embezzlement or misappropriation of the property entrusted to him.

The Constitutional Court of the Russian Federation. Ruling N 138-O of 25 July 2001 with respect to a petition by the Ministry of the Russian Federation for Taxes and Levies on clarification of the Decree of the Constitutional Court of the Russian Federation of 12 October 1998 with respect to a case of the review of the constitutionality of article 11 paragraph 3 of the Law of the Russian Federation “On the foundations of the tax system in the Russian Federation” The Constitutional Court of the Russian Federation … has established: 2. It is noted in the named Decree that relations arising between taxpayers and lending institutions during the execution by the latter of payment orders for the writing off of tax payments are tax legal relations. As to the relations of the bank and its client deriving from the bank account agreement and based on the principle of the reasonableness and good faith of its participants‘ actions, they are civil legal relations, within the framework of which the execution by the bank of obligations with respect to the crediting of monetary funds arriving on the client‘s account and their transfer from the account, as well as the disposition by the client of the monetary funds found on his account, credited by the bank among others during the execution by it of its own obligations to the client,
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can be implemented only in the presence on the bank‘s correspondent account of the necessary monetary funds. According to the sense of the provision contained in article 3 paragraph 7 of the Tax Code of the Russian Federation, the presumption of the good faith of taxpayers shall be in effect in the sphere of tax relations. Proceeding from this presumption, in paragraph 3 of the rationale part of the Decree it is specially underscored that the constitutional guarantees of private property ownership are violated by a second writing off of taxes into the budget from the settlement account of only a good-faith taxpayer. Consequently, those findings that are contained in its rationale and operative part do not extend to badfaith taxpayers, and the compulsory recovery in the procedure established by the law from bad-faith taxpayers, of taxes that have not been received into the budget, does not violate the constitutional guarantees of the right of private property ownership. 3. …That said, the approach embodied in the Decree, allowing the extending of its legal position only to good-faith taxpayers, assumes the obligation of the tax agencies to prove bad faith of taxpayers and banks that has been uncovered in the procedure established by the Tax Code of the Russian Federation. It derives from the recognition of such banks and taxpayers as bad-faith that the legal position of the Constitutional Court of the Russian Federation, pursuant to which the constitutional duty of each taxpayers is considered to be executed in the moment of the writing off of funds from the taxpayer‘s settlement account by the bank in payment of the tax does not extend to them, inasmuch as, in essence, they had evaded execution of the given duty. It is indicated in the Decree that the state in the person of its tax and other agencies must implement control over the procedure of the execution by banks of the public - law function with respect to the transfer of tax payments into the budget. In connection with this, in the event of the non-receipt into the budget of the corresponding monetary funds, for establishing the bad faith of the taxpayers the tax agencies shall have the right - with the objectives of ensuring a balance of state and private interests - to implement the

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necessary review and to raise demands in commercial courts to ensure the receipt of taxes into the budget, including claims to find transactions invalid and to recover into the income of the state all that has been received under such transactions, as this is provided for in article 7 paragraph 11 of the Law of the Russian Federation "On the tax agencies of the Russian Federation". …Proceeding from what has been set forth and being guided by article 83 and article 79 paragraph one of the Federal Constitutional Law "On the Constitutional Court of the Russian Federation", the Constitutional Court of the Russian Federation has ruled: 1. Pursuant to paragraph 3 of the rationale part of the Decree of the Constitutional Court of 12 October 1998 with respect to the case of the review of the constitutionality of article 11 paragraph 3 of the Law of the Russian Federation "On the foundations of the tax system in the Russian Federation", the findings contained in the operative part of the given Decree concern only good-faith taxpayers, which assumes the duty of the tax agencies and other agencies of the state to implement control over the execution of tax duties in the established procedure, to conduct a review of the good faith of taxpayers and banks and in situations of the uncovering of their bad faith to ensure the guarding of the interests of the state, including with the use of mechanisms of judicial protection. The resolution of the question raised by the Ministry of the Russian Federation for Taxes and Levies does not require an examination of its petition in an open court session in the procedure provided for by article 83 of the Federal Constitutional Law "On the Constitutional Court of the Russian Federation". During the resolution of such a kind of problems in concrete cases, subject to application shall be the norms of the Tax Code of the Russian Federation, which is subject to the jurisdiction of the courts and other lawapplication bodies and is not attributable to the competence of the Constitutional Court of the Russian Federation.

The Constitutional Court of the Russian Federation.

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Ruling N 193-O-P of 15.01.2008 "With respect to the appeal of citizen Tatevos Romanovich Surinov against a violation of his constitutional rights by article 90 of the code of criminal procedure of the Russian Federation " The Constitutional Court of the Russian Federation composed of the Presiding Judge, V.D. Zorkin, and judges N.S. Bondar, G.A. Gadzhiyev, Yu.M. Danilov, L.M. Zharkova, G.A. Zhilin, S.M. Kazantsev, M.I. Kleandrov, A.L. Kononov, L.O. Krasavchikova, S.P. Mavrin, N.V. Melnikov, Yu.D. Rudkin, N.V. Seleznev, A.Ya. Sliva, V.G. Strekozov, O.S. Khokhryakova, B.S. Ebzeyev, V.G. Yaroslavtsev … 1. By a verdict of the Basmanny District Court of the city of Moscow of 5 February 2007, citizen T.R. Surinov was found guilty of having jointly with other persons committed theft of state property - aeronavigational equipment of the "Thomson" firm, set up in the international airport "Kazan", as a result of which damage was caused to the budget to the Republic of Tatarstan, as was convicted for the commission of the crimes prescribed by article 159 paragraph three (a) and (b) "Fraud", article 174.1 paragraph three "Legalisation of monetary finds acquired as the result of the commission of a crime" and article 330 paragraph two "Forcible assertion of private right" of the CC of the Russian Federation. T.R. Surinov‘s cassation appeal against the given verdict, substantiated by references that the transactions performed with his participation with the aeronavigational equipment had been found to be in accordance with the law by decisions of commercial courts, was denied by the judicial collegium for criminal cases of the Moscow City Court, which indicated in a ruling of 11 May 2007 that it does not find a violation by the court that had issued the verdict of the Res Judicata force of previously adopted judicial acts. As follows from the documents presented, the ownership of the disputed equipment, with the theft of which the appellant is charged, and the legality of its alienation under a civillaw transaction were the subject of numerous examinations in commercial courts. By a decision of the Commercial Court of the Republic of Tatarstan of 14 January 2005, the alienation of this equipment at trading sessions [at auction—Trans.] and its subsequent resale were found to be lawful, the open joint-stock company that T.R. Surinov headed was found to be the rightful owner, while the arguments of the plaintiff about the ownership of the disputed equipment by the Russian Federation and the Republic of
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Tatarstan were dismissed. The findings of the Commercial Court of the Republic of Tatarstan that had refused to find the agreements for the sale-and-purchase of the aeronavigational equipment of the "Thomson" firm set up in the international airport "Kazan" invalid (void) were confirmed by the appellate instance of that same court in a Decree of 20 April 2005 and by the cassation instance - the Federal Commercial Court of the Volga District in a Decree of 29 June 2005. The Supreme Commercial Court of the Russian Federation did not find grounds for the transfer of the case to the Presidium of the Supreme Commercial Court of the Russian Federation (ruling of 11 November 2005). In his appeal to the Constitutional Court of the Russian Federation, T.R. Surinov challenges the constitutionality of article 90 of the CCP of the Russian Federation. In the opinion of the appellant, the given norm, on the basis of which only those circumstances that are established by a verdict that has entered into legal force shall be recognised by a court, a prosecutor, an investigator, an inquiry officer without additional review allowed decisions of commercial courts that had entered into legal force to be ignored during proceedings with respect to his criminal case as not having Res Judicata significance, as a result of which his rights to liberty and to a judicial defence (article 22, paragraph 1; article 46, paragraph 1, of the Constitution of the Russian Federation) were violated, as well as the principles of the judicial power proclaiming the independence of courts and the binding nature of court decisions (articles 118 and 120 of the Constitution of the Russian Federation), which is an imperative guarantee of the right to fair justice. 2. According to article 90 of the CCP of the Russian Federation, being regarded as Res Judicata is the obligation of a court, as well as a prosecutor, an investigator or an inquiry officer carrying out a criminal case to recognise circumstances established by a verdict that has previously entered into legal force without their additional review, if these circumstances do not raise doubts for the court; in so doing, such a verdict can not prejudge the guilt of persons who were not participants in the criminal case with respect to which the given verdict had been issued.

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Article 90 of the CCP of the Russian Federation indicates at the Res Judicata significance only of such factual circumstances that do not raise a doubt which had previously been subject to proof with respect to a criminal case and have been confirmed by a verdict that has entered into legal force, in connection with which they shall be recognised as having been established and not in need of additional review, i.e. the given article examines the question of the Res Judicata significance of only one judicial act - a verdict with respect to a criminal case and does not touch upon the possibility of the recognition in a criminal trial of facts having juridical significance, established in the procedure of civil or commercial judicial proceedings. Neither the recognition nor the repudiation of the Res Judicata significance of factual circumstances established by a final court decision in these kinds of judicial proceedings can be based on article 90 of the CCP of the Russian Federation and is conditioned by mutually connected provisions of procedural legislation regulating the execution and review of judicial acts that have entered into legal force, as well as legal norms of a higher level, which determine the place and the role of the court in the legal system of the Russian Federation, the juridical force and significance of its decisions (articles 10 and 118 of the Constitution of the Russian Federation, article 6 of the Federal Constitutional Law "On the judicial system of the Russian Federation"). Proceeding from this, a finding is made in Decrees of the Constitutional Court of the Russian Federation N5-Pi of 11 May 2005 N2-P of 5 February 20071 about how the exclusive-in-its-essence opportunity to overcome the finality of judicial acts that have entered into legal force assumes the establishment of such special procedural conditions for their review that would meet, first and foremost, the requirements of legal certainty, provided for by the recognition of the legal force of judicial decisions, their irrefutability; which in routine judicial procedures may be shaken, solely, if any new or newly discovered circumstance or uncovered fundamental violations bear irrefutable witness to a judicial error without the remedying of which by a competent court remuneration of the damage caused by it is impossible.

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Probably should be ―N5-P of 11 May 2005 and N2-P of 5 February 2007‖—Trans. 397

The determination of the named exclusive conditions that must be in place if the nullification of the legal force of a judicial act is to be allowed belongs to the discretion of the legislator. A change of the legal status of people whose rights and duties have already been determined by a court decision adopted in lawful procedures meeting the requirements of fair justice, - in the absence of the corresponding legislative regulation could lead to arbitrariness during the exercise of the judicial power, which would contradict its constitutional designation, as this derives from the indicated legal positions of the Constitutional Court of the Russian Federation that retain their force. According to the legislator‘s direct instruction, contained in article 90 of the CCP of the Russian Federation, an inquiry officer, an investigator, a prosecutor and a court shall be released from the duty to examine those circumstances of a criminal case that have already been established earlier in the course of criminal judicial proceedings with respect to another case and confirmed by a verdict that has been issued. In all other situations, findings about the circumstances of the case contained in other judicial decisions shall be subject to examination and assessment in the course of the criminal judicial proceedings pursuant to the general procedures of proof. On the strength of article 17 of the CCP of the Russian Federation, the assessment of evidence shall be implemented by a judge, jurors, as well as by a prosecutor, an investigator, an inquiry officer on the basis of their internal conviction, based on the aggregate of the evidence had in the criminal case, proceeding from the premise that no evidence has force established in advance. In so doing, all doubts about the guilt of the accused that can not be eliminated in the procedure established by the Code of Criminal Procedure of the Russian Federation shall be interpreted in his favour, inasmuch as the accused continues to be considered innocent until the full refutation of his innocence (article 14 paragraphs one and three of the CCP of the Russian Federation). The given rules repeat the principles embodied in the Constitution of the Russian Federation, in accordance with which every accused shall be considered innocent until his guilt has been proven in the procedure provided for by a federal law and established by a court verdict that has entered into legal force; irremovable doubts of a person‘s guilt

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shall be interpreted in favour of the accused (article 49, paragraphs 1 and 3). Following these prescriptions, the Code of Criminal Procedure of the Russian Federation establishes stricter requirements specifically for proving a person‘s guilt, inasmuch as the presumption of innocence dictates the recognition by a court of all facts bearing witness in favour of an accused - until they have been refuted by the party of the prosecution in proper procedural form. As concerns the factual circumstances that are examined and established in the judicial acts of a commercial court implementing civil judicial proceedings pursuant to the competence determined by the Constitution of the Russian Federation and the Code of Commercial Litigation Procedure of the Russian Federation, then its findings relative to these circumstances, if the question of the guilt or innocence of a person in the course of criminal judicial proceedings is being predetermined, in essence, by them, are subject to examination and assessment pursuant to the general principles of proof embodied in article 49 of the Constitution of the Russian Federation, whereas circumstances confirmed by a commercial court bearing witness in favour of the accused may be refuted only after the executable judicial act of the commercial court that has entered into legal force has been vacated in the procedures provided for this. Anything else would not correspond to the Constitution of the Russian Federation and the rules of proof established on its basis by criminal procedure legislation. In such a manner, article 90 of the CCP of the Russian Federation does not assume the possibility of not taking heed of circumstances established by not-repealed decisions of a commercial court with respect to a civil case that have entered into legal force during the resolution of a criminal case until they have been refuted by the party of the prosecution, and therefore can not be appraised as violating the constitutional rights of T.R. Surinov. As to the review of the legality and substantiation of decisions adopted with respect to the criminal case of the appellant, it is the prerogative of the higher-standing courts of general jurisdiction and does not enter into the competence of the Constitutional Court of the Russian Federation, as it is determined in article 125 of the Constitution of the Russian Federation and article 3 of the Federal Constitutional Law "On the Constitutional Court of the Russian Federation".

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Together with that, the further perfecting by the federal legislator of procedural regulating aimed at overcoming conflicts connected with findings about facts that fall under those that are subject to proof concurrently with respect to criminal and civil cases and are established respectively by courts of general jurisdiction and commercial courts is not being ruled out. Proceeding from what has been set forth and being guided by article 43 paragraph one (2) and article 79 paragraph one of the Federal Constitutional Law "On the Constitutional Court of the Russian Federation", the Constitutional Court of the Russian Federation 1. To recognise the appeal of the citizen Tatevos Romanovich Surinov as not subject to further examination in session of the Constitutional Court of the Russian Federation, inasmuch as the issuance of a final decision in the form of a decree pursuant to the Federal Constitutional Law "On the Constitutional Court of the Russian Federation‖ is not required for the resolution of the question raised by the appellant. 2. The ruling of the Constitutional Court of the Russian Federation with respect to the given appeal is final and not subject to appeal.

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