Beginning with the YUKOS affair, the general prosecutor’s office – and subsequently the Investigative Committee – along with TV, have become the primary instruments of domestic policy. Whether we are talking about elections or business affairs or even mutual relations in matters of Faith, the words “a criminal case has been initiated” are key.
The result, to my view, has been catastrophic. It is precisely in the loud, high-profile politically motivated trials such as these that we see the lowering of the standards when it comes to the rules of evidence and burden of proof, and the selective and absurd interpretation of legislative norms.
You know yourselves: it is impossible to convince tens of thousands of judges, prosecutors, investigators not to make their own jobs simpler in ordinary cases, not to apply the methods that have been demonstrated in those cases in which the authorities have a vested interest. Moreover, inasmuch as the objectives in such trials are often mutually exclusive, the entire system of law in the country is gradually falling to pieces.
Ordinary people are talking about an absence of trust in the judiciary – and serious scholars about the breakdown of law.
The second YUKOS case is a good illustration.
When I read the Khamovnichesky Court’s verdict, I was very much astonished. If we just look at the mutually exclusive versions of what exactly I was supposed to have stolen, we count a total of three different ones!
- crude oil (pgs. 3, 6, 8, 11, 14, 15, 17, 26, 133, 140, 647, 650, 654 et al. of the verdict);
- monetary funds (pgs. 20, 21, 22, 24, 72, 74, 75, 93, 97, 99, 101, 105, 107, 124, 269, 271, 461, 466, 531, 547 et al. of the verdict);
- oil products (pgs. 127, 328, 526 of the verdict).
Perhaps in this manner they were trying to explain to us that the law does not mean a thing? That only the goodwill of the authorities matters? If so, they certainly succeeded!
Even though the ECHR did confirm the unfairness of the actual trial itself, the first YUKOS case did raise doubts: perhaps the strange and selective application of the law was some kind of tactical device in order not to punish everybody for some kind of real transgressions?
The second case dispelled these doubts – we are not even talking here of the execution of the law, but of a willingness to destroy law as such, and the reputation of the judicial system, and trust in this state institution – merely for the sake of extending a prison term for opponents of the authorities.
An unheard-of situation! In the second trial, the Khamovnichesky Court actually succeeded in getting the always-cautious Amnesty International, which had responded with no more than a gentle slap on the wrist in the first trial, to declare that big businessmen ostensibly convicted for economic crimes were in fact prisoners of conscience! In other words, that they had been convicted on knowingly false charges because of their civic position!
The ECHR also expressed itself, in the sense that there was insufficient evidence of political motivation in the first trial, but that the question needs to be revisited when examining the second trial.
Can you imagine what a flagrant display of scorn for the law the second verdict must have required?! Even our society, which usually only welcomes harsh sentences, was not all that impressed, judging from surveys.
A couple of examples of the absurdity:
(1) The contradiction that I have called “I embezzled from myself”
As early as pg. 3 of the verdict, the Khamovnichesky Court established the fact that since as far back as 1998 I had been the sole shareholder of the so-called injured parties.
“M.B. Khodorkovsky, … who by 1998 had taken possession … of … 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…” (pg. 3 of the verdict).
This is close to the truth, except that it was actually only since 2001, and it was through YUKOS. But the court knows best. All the more so given that Moscow City Court chairwoman O.A. Yegorova says she checked everything personally.
Given such an established fact, the court’s conclusion that I had approved the transactions of the so-called injured parties to the benefit of YUKOS against their will looks like juridical insanity.
“…at the producing enterprises’ shareholders’ meetings, contrary to the will of non-interested shareholders … producing enterprises’ oil sale transactions were approved to the benefit of OAO NK Yukos…” (pg. 650 of the verdict).
What other will besides mine and that of management bodies appointed by me can companies in which I have amassed 100% of the shares possibly have?
- Until 01.01.2002, art. 83 of the Federal Law “On Joint-Stock Companies” did not establish the moment of time for confirming a non-arms’-length transaction by the Board of Directors or the general meeting of shareholders. A more general norm of the RF Civil Code (art. 183) was in effect, which directly allowed the subsequent approval of a representative’s actions.
- After 100% of the shares in the production subsidiaries had been transferred to YUKOS’s control (2001), a new redaction of art. 81 para 2 of the Federal Law “On Joint-Stock Companies” entered into force, which did not require putting the question of such confirmation to the general meeting of shareholders. The decision of the executive body was sufficient.
- The redaction of art. 84 para 1 of the Federal Law “On Joint-Stock Companies’ of 19.07.2009 explicitly established – transactions approved before a trial can not be recognised as invalid. The will of a sole shareholder approving a decision of an executive body before a trial is the will of the company. A legal entity has not other will not can it (art. 53 RF Civil Code). The subsequent reversal of such a decision by a new shareholder is not prescribed by law (art. 183 RF Civil Code).
There is no logic here. The law does not know of such a will, and this means that neither is there any theft.
(2) The contradiction that I have called “underpayment of taxes or theft?”
It is impossible to simultaneously preserve the appearance of the lawfulness of the plundering of YUKOS by charging it trebled additional taxes as the owner of the oil, and the appearance of the lawfulness of a verdict that finds that the same oil had been embezzled by me – and belonged to the so-called injured parties!
The RF Tax Code is unambiguous on this: taxes shall be paid by the owner of the good being sold.
- art. 39 para 1 RF Tax Code: “1. Recognised as the sale of goods, work or services by an organisation or an individual entrepreneur shall be, respectively, the transfer on with exchange for value (including exchange of goods, work or services) of the right of ownership to goods, the results of fulfilled work by one person for another person…”
- art. 146 para 1 RF Tax Code: 1. The following operations shall be recognised as the object of taxation [VAT]:
sale of goods (work, services) on the territory of the Russian Federation…
- art. 248 para 1 RF Tax Code: “1. For the purposes of the present chapter, to incomes shall be attributed:
- incomes from the sale of goods (work, services) and property rights (hereinafter – incomes from sale).”
- art. 249 para 1 RF Tax Code: “1. For the purposes of the present chapter, recognised as income from sale [the profit tax] shall be proceeds from the sale of goods (work, services) both of one’s own manufacture and previously acquired, proceeds from the sale of property rights.”
The owner had been established by the commercial courts – it was YUKOS.
Decision of the Commercial Court of the city of Moscow of 26.05.2004 (vol. 265, c.f.s. 106-127):
“It has been established by the court that the owner of the crude oil and oil products was OAO NK YUKOS. Acquisition and transfer for refining of the crude oil and the sale of the oil products was indeed done by OAO NK YUKOS as the owner…” (pg. 12 of the decision).
“It has been established by the court that the owner of the crude oil … was OAO YUKOS.” (pg. 13 of the decision).
Decision of the Commercial Court of the city of Moscow of 15.10.2004 (vol. 86, c.f.s. 170-182):
“… in the course of a check it was established that the owner of the crude oil and oil products sold through the specially created organisations is OAO NK YUKOS…” (pg. 2 of the decision).
“It has been established by the court and corroborated by the case file materials that the owner of the crude oil and of the oil products was OAO NK YUKOS….” (pg. 19 of the decision).
“For OAO NK YUKOS, being the owner of the crude oil and oil products, during their sale there arose an obligation with respect to the payment of the value-added tax…” (pg. 23 of the decision).
“Inasmuch as the owner of the crude oil and oil products sold in the year 2001 was OAO NK YUKOS….” (pg. 24 of the decision).
Decision of the Commercial Court of the city of Moscow of 23.12.2004 (vol. 86, c.f.s. 185-222)
“It is corroborated by the case file materials that the owner of the crude oil and oil products sold through the specially created organisations, … is OAO NK YUKOS” (pg. 3 of the decision)
“…it has been established by the court that the dependent organisations appeared in the role of possessors of the crude oil and oil products according to documents, OAO NK YUKOS, being the owner of the good…” (pg. 17 of the decision).
“It has been established by the court and corroborated by the case file materials that the owner of the crude oil and oil products was OAO NK YUKOS.” (pg. 21 of the decision).
“… for OAO NK YUKOS, being the owner of the crude oil and oil products…” (pgs. 23-24 of the decision).
Decision of the Commercial Court of the city of Moscow of 28.04.2005 (vol. 86, c.f.s. 223-287)
“It is corroborated by the case file materials that the owner of the crude oil and oil products was OAO NK YUKOS…” (pg. 52 of the decision).
“… for OAO NK YUKOS, being the owner of the crude oil and oil products…” (pgs. 56-57 of the decision).
“Inasmuch as the owner of the oil and oil products sold in the year 2003 was OAO NK YUKOS…” (pg. 58 of the decision).
Judgment of the appellate instance of the Commercial Court of Tomsk Oblast of 29.09.1999 (vol. 200, c.f.s. 284-288)
“…since the right of ownership transfers to OAO NK YUKOS from the moment of the extraction of the crude oil from the subsoil….” (pg. 5 of the judgment).
Decision of the Commercial Court of Khanty-Mansiysky Autonomous Okrug of 10.12.1998 (vol. 192, c.f.s. 32-38)
“…What is more, by a judgment of the appellate instance of the commercial court of the okrug of 04.02.98 with respect to case No. 2234-G, OOO NK YUKOS’s right of ownership to the crude oil is recognised…” (pg. 4 of the decision).
Judgment of the cassation instance of the Federal Commercial Court of the West-Siberian District of 31.03.1999 (vol. 192, c.f.s. 43-46)
“…since the right of ownership transfers to OAO NK YUKOS from the moment of the extraction of the crude oil from the subsoil…” (pg. 1 of the judgment).
“…the crude oil transferred to NK YUKOS becomes the property of the latter with certain rights and consequences of acquisition….” (pg. 2 of the judgment).
Decision of the Commercial Court of Khanty-Mansiysky Autonomous Okrug of 27.05.1999 (vol. 192, c.f.s. 47-51)
“… the indicated crude oil is the property of OAO NK YUKOS…”; “…the crude oil that was intended to be produced in the future and which was the property of OAO NK YUKOS from the moment of extraction…” (pg. 2 of the decision).
“…OAO Yuganskneftegas obligated itself to transfer the crude oil into the ownership of OAO NK YUKOS … In such a manner, the entire volume of crude oil produced in September 1998 belongs by right of ownership to the plaintiff – OAO NK YUKOS…” (pg. 3 of the decision).
Judgment of the cassation instance of the Federal Commercial Court of the West-Siberian District of 06.10.1999 (vol. 192, c.f.s. 52-54)
“…prescribed is the transfer of the right of ownership to the entire volume of the crude oil produced by OAO Yuganskneftegas to OAO NK YUKOS…” (pg. 2 of the judgment).
“…on the strength of what has been set forth above, the crude oil is the property of OAO NK YUKOS…” (pg. 3 of the judgment).
The Khamovnichesky Court agreed: YUKOS had obtained the right of ownership and the so-called injured parties had lost it as the result of sale-and-purchase transactions.
“…the producing enterprises stopped being the oil owners, both physically and de jure, the moment the oil crossed the metering station…” (pg. 652 of the verdict).
“…according to the documents the volumes of oil did not disappear, … but moved from production companies to the ownership of Yukos and its operating companies…” (pg. 617 of the verdict).
“…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… and that OAO NK Yukos had been the beneficiary of economic benefits…” (pg. 660 of the verdict).
Furthermore, on pg. 650 it agreed with the verdict of the Basmanny Court in relation to Malakhovsky and Pereverzin, which found: the transactions were done exclusively in the interests of YUKOS.
“…producing enterprises’ oil sale transactions were approved to the benefit of OAO NK Yukos …” (pg. 650 of the verdict).
“all the companies …, such as «Nassaubridge Management Limited», as well as Russian companies, such as OOO «Fargoil», were controlled by OAO NK «YUKOS» and their assets were accounted for in the holding’s consolidated budget…” (pg. 47 of the Basmanny Court’s verdict)
“…the court concludes that … the Cypriot companies … were created and operated exclusively for the benefit of OAO «NK «YUKOS»” (pg. 100 of the Basmanny Court’s verdict).
But the Criminal Code is no less unambiguous: if the new possessor has the right of ownership, there is no embezzlement.
How did the Khamovnichesky Court contrive to simultaneously recognise two mutually exclusive facts – both that YUKOS had purchased the oil and become its owner, and that it had not purchased it and the owner remained the so-called injured parties?
“… according to the documents the volumes of oil … moved from production companies to the ownership of Yukos and its operating companies”» (pg. 617 of the verdict).
“On every occasion, the court also established that the oil… actually belonged to OAO NK Yukos…” (pg. 593 of the verdict)
“…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” (pg. 660 of the verdict).
That YUKOS had the right of disposition and disposed of the oil at its discretion, and that it did not have the right and did not dispose of the oil?
“…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…” (pg. 660 of the verdict).
“… M.B. Khodorkovsky, … did … 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…” (pg. 72 of the verdict).
“…OAO NK Yukos is factually not the purchaser of the oil…” (pg. 13 of the Khamovnichesky Court’s verdict of 27.12.2010).
“Unlawful actions of M.B. Khodorkovsky and P.L. Lebedev resulted in oil of OAO NK Yukos production units turned to their [Khodorkovsky's and Lebedev's] benefit…” (pg. 686 of the verdict).
By the way, if the Supreme Court is prepared to subscribe to an admission that the ECHR was deceived, that the tax demands and the YUKOS bankruptcy had a false premise, that YUKOS was not the owner and not the recipient of lawful benefit, I am not going to argue.
After all, the existence of a “kernel of reason” in the tax claims is the only thing in which the ECHR has so far upheld the government. Having particularly noted that it is relying on its (the government’s) and the national courts’ good faith and is not rechecking anything in this part.
In such a situation, the usual mantra that everything was lawful and substantiated simply will not do. For normal people, if YUKOS has the right then it has it, and if it does not it does not. But mutually exclusive decisions signify deception. What good faith can there be here then?
Is it worth it to strike such a heavy blow to the Russian court system’s reputation yet again? And for what? For the sake of the irrational fears of government officials at seeing me and Platon Lebedev at liberty even after 10 years of confinement?
In my opinion, to treat the law and the reputation of the court like this is barbaric.
I know that after the information about the ECHR’s upcoming judgment, which casts doubt even on the first trial, and understanding all the absurdity of the second one, there are still officials out there who are dreaming of undertaking a third one. Ten years is too little for them…
Unseemly, that is what this fuss is. People are not stupid. Bewilderment at what can hardly be called particularly clever trials against opponents of the authorities is beginning to build up. All the more so given that in today’s Russia there is aught to compare them with both in the sense of the court’s humanism and in the sense of the attentiveness of the prosecutor’s office to the prosecution evidence, the procedural rights of the accuseds, and the uniformity of interpretation of legislative norms.
Unjust court decisions have already become one of the main detonators of protests. The demands of an ever greater part of society can be boiled down to Solzhenitsyn’s simple formula: “Live not by lies”. Or, in the words of the street: “don’t tell lies and don’t be afraid”. I do not know about the bureaucracy, but for the country this would be useful indeed.
And in this also I see a way to atone for my own mistakes: by trying not to live by lies. And after that, come what may.
And in conclusion:
I ask that the Supreme Court overturn this juridically illiterate verdict. I think it would be a disgrace if it were to be legitimised by a decision of the Supreme Court.
The ECHR has found that I had been deprived of the right to a fair trial even in the first trial. In some ways I was satisfied by this judgment, and in some ways not. Some of it was my own fault. I had not worked things through all the way. I was inexperienced.
But we all know – the second trial and the second verdict are being criticised far more harshly, both here in Russia and all over the world. On the surface the first one looked neater and more precise. The conclusion to make from this is clear: it is going to be difficult to convince an international court that such a trial was fair, and that the existence of mutually exclusive court decisions is justified.
But for me, it has always been – and it remains – important to attain fairness in the Motherland. And this is why we all await your decision.
“You can’t make this stuff up”
“…the decisions of commercial courts of the city of Moscow do not contain assertions about how the oil had become owned by OAO NK Yukos… it follows from the decision of the commercial court of the city of Moscow of 26.05.2004 that “OAO NK Yukos was the owner of the oil sold under the agreements entered into with the entities registered in tax havens by their orders…” (pg. 659 of the verdict).
“The expenditures with respect to the acquisition of operational assets, field development, and modernisation of operational facilities were imperative to M.B. Khodorkovsky and P.L. Lebedev to ensure the production and refining of oil being stolen by them. The above circumstances do not run counter to the charges brought against M.B. Khodorkovsky and P.L. Lebedev, but corroborate them because increasing the production volumes of the companies being used by them for personal gain corresponded to their mercenary aspirations to receive ever greater profit…” (pg. 669 of the verdict).
 See vol. 131, c.f.s. 255 rev. – Yukos Consolidated Financial Statements for 2001 and 2000, as well as vol. 12, c.f.s. 102-129 -Report on the Results of a Check of OAO VNK in the Part of the Effectiveness of Management of the 36% Block of Shares Found in Federal Ownership: Conversion of OAO Tomskneft Shares in 2001 – para 8 of the report.