CEDH · CASELAW;COMMUNICATEDCASES;ENG — 24 mars 2014

.s800EAC49 { font-size:12pt } .sFE10DC93 { margin-top:0pt; margin-bottom:0pt; text-align:center } .sBB9EE52A { font-family:Arial } .sA6BC7FA7 { margin-top:0pt; margin-bottom:0pt; text-indent:14.2pt; text-align:right } .s5E1364CA { margin-top:0pt; margin-bottom:12pt; text-align:center; page-break-inside:avoid; page-break-after:avoid; font-size:14pt } .s8229ABDD { margin-top:0pt; margin-bottom:12pt; text-align:center } .s72EB7DC5 { margin-top:18pt; margin-bottom:0pt; text-align:center } .s2D57E2E { font-family:Arial; font-weight:bold; text-decoration:underline; text-transform:uppercase } .s9793A85B { margin-top:0pt; margin-bottom:0pt; text-indent:14.2pt } .sA8776625 { margin-top:18pt; margin-left:29.2pt; margin-bottom:12pt; text-indent:-17.6pt; page-break-inside:avoid; page-break-after:avoid } .s29100277 { font-family:Arial; font-weight:bold } .sA36B60A1 { font-family:Arial; font-style:italic } .s7ED160F0 { text-decoration:none } .s33165EBA { font-family:Arial; font-size:8pt; vertical-align:super; color:#0069d6 } .s72C8F48C { margin-top:12pt; margin-left:36.6pt; margin-bottom:6pt; text-indent:-15.05pt; page-break-inside:avoid; page-break-after:avoid } .sA20670C4 { margin-top:12pt; margin-left:48.75pt; margin-bottom:6pt; text-indent:-17pt; page-break-inside:avoid; page-break-after:avoid; font-size:10pt } .s59DEA84 { margin-top:12pt; margin-left:59.5pt; margin-bottom:6pt; text-indent:-17.85pt; page-break-inside:avoid; page-break-after:avoid; font-size:10pt } .s37DB63F1 { font-family:Arial; font-size:6.67pt; font-style:italic; vertical-align:super; color:#0069d6 } .sB206C230 { margin-top:12pt; margin-left:68.65pt; margin-bottom:6pt; text-indent:-16.75pt; page-break-inside:avoid; page-break-after:avoid; font-size:10pt } .s3A71F16B { width:17.6pt; text-indent:0pt; display:inline-block } .s2E81CF26 { margin-top:12pt; margin-left:68.65pt; margin-bottom:6pt; text-indent:-16.75pt; font-size:10pt } .sB8987CE9 { margin-top:12pt; margin-bottom:0pt; text-indent:14.2pt } .s6B505E72 { margin:0pt; padding-left:0pt } .s50794FE3 { margin-left:42.72pt; padding-left:7.48pt; font-family:serif } .sF7A86111 { margin-top:6pt; margin-left:21.25pt; margin-bottom:6pt; text-indent:7.1pt; font-size:10pt } .sD3B63DAD { margin-top:36pt; margin-bottom:12pt; page-break-inside:avoid; page-break-after:avoid; font-size:14pt } .s68C46B95 { margin-top:36pt; margin-bottom:12pt; text-align:center } .s3F59B822 { font-family:Arial; font-weight:bold; text-transform:uppercase } .s4B243ECC { margin-top:12pt; margin-bottom:0pt; text-indent:14.2pt; page-break-inside:avoid; page-break-after:avoid } .sDEA336FF { margin-top:18pt; margin-left:29.2pt; margin-bottom:12pt; text-indent:-17.6pt } .s47A007F0 { margin-top:18pt; margin-left:29.2pt; margin-bottom:12pt; text-indent:-17.6pt; text-align:left; page-break-inside:avoid; page-break-after:avoid } .sF6A12959 { width:33%; height:1px; text-align:left } .s2EB42ED2 { margin-top:0pt; margin-bottom:0pt; font-size:10pt } .s653E6C45 { font-family:Arial; font-size:6.67pt; vertical-align:super; color:#0069d6 }     Communicated on 24 March 2014   FIRST SECTION Applications nos. 51111/07 and 42757/07 Mikhail Borisovich KHODORKOVSKIY against Russia and Platon Leonidovich LEBEDEV against Russia lodged on 16 March and 27 September 2007 respectively STATEMENT OF FACTS   1.     Mr Khodorkovskiy (the first applicant) was born in 1963. He was released from prison in December 2013. Mr Lebedev (the second applicant) was born in 1956 and was released from prison in January 2014. A.     The applicants’ background 2.     Before their first arrest in 2003 the applicants were very rich and politically influential businessmen. The first applicant was the former CEO of and a major shareholder in Yukos plc, which at the relevant time was one of the largest oil companies in Russia. The second applicant was the first applicant’s business partner and a close friend. From 1998 the second applicant worked as one of the directors of Yukos-Moskva Ltd. He was also a major shareholder in Yukos plc. In addition, the applicants controlled a large number of other mining enterprises, refineries, banks, financial companies, etc. In 2002-2003 Yukos began to pursue a number of ambitious business projects, which would have made it one of the strongest players on the market and independent of the State. In particular, Yukos was engaged in merger talks with the US-based Exxon Mobil and Chevron Texaco companies. 3.     The applicants were also active as political lobbyists. From at least 2002 the first applicant openly funded opposition political parties, and a number of his close friends and business partners became politicians. 4.     The first applicant asserted that his political and business activities had been perceived by the leadership of the country as a breach of loyalty and a threat to national economic security. As a counter-measure he alleges that the authorities launched a massive attack on the applicant, his company, colleagues and friends. A more detailed description of the applicants’ political and business activities prior to their arrest can be found in Khodorkovskiy and Lebedev v. Russia, nos. 11082/06 and 13772/05, 25 July 2013, §§ 8-41; the latter will hereinafter be referred to as the Khodorkovskiy and Lebedev (no. 1) case. 5.     In order to demonstrate that their criminal prosecution was ordered at the upper echelons of the political system, the applicants referred to circumstantial evidence which showed that Yukos’s business projects ran counter to the official petroleum policy, and that the applicants’ involvement in politics raised discontent within the Government. The applicants also referred to the testimony of a number of witnesses, in particular Mr   Kasyanov, who was Prime Minister in 2003, as well as several other officials who confirmed or implied that the applicants’ arrest and conviction had been “exemplary punishments”, intended to remove the applicants from the political scene, nationalise their companies and prevent other “oligarchs” from participating in political life (see Khodorkovskiy and Lebedev (no. 1) , §§ 370, 371 et seq.). B.     The applicants’ first trial 6.     On 20 June 2003 the General Prosecutor’s Office (the GPO [1] ) initiated a criminal investigation into the privatisation of a large mining company, Apatit plc (criminal case no. 18/41-03). In 1994 20% of Apatit shares were acquired by a company allegedly controlled by the applicants. The case was opened with reference to Article 165 of the Criminal Code (“misappropriation of assets” falling short of embezzlement), Article 285 (“abuse of official powers”) and Article 315 (“deliberate non-compliance with a court order”) of the Criminal Code. 7.     The GPO investigative team was led by Mr Karimov. According to the applicants, he was the same person who had participated as lead investigator in the cases of Gusinskiy v. Russia (no.   70276/01, ECHR   2004 ‑ IV) and Garabayev v. Russia (no. 38411/02, 7 June 2007), and who later took part in in the criminal prosecution of Mr Aleksanyan (see Aleksanyan v. Russia , no.   46468/06, 22 December 2008). 8.     In the following years the charges against the applicants within case no.   18/41-03 (hereinafter – the “main case”) were repeatedly supplemented and amended. Thus, within that case the applicants were also charged with corporate tax evasion (Article 199 of the CC). The applicants were suspected of selling Yukos oil through a network of “trading companies” registered in low-tax zones, in particular in the town of Lesnoy, Sverdlovsk region. According to the GPO, tax cuts were obtained by those companies by deceit, since they existed only on paper and never conducted any real business in the low-tax zones that would have resulted in eligibility for a preferential tax regime. The GPO suspected that the applicants registered and controlled those companies through their friends and partners, in particular Mr Moiseyev, Mr Pereverzin and Mr Malakhovskiy. 9.     Case no. 18/41-03 led to the applicants’ conviction in their first trial in 2005.   The facts related to that trial (the “first trial”) were at the heart of several applications lodged with the Court in 2003-2006 ( Lebedev v. Russia , no. 4493/04, 25 October 2007; Khodorkovskiy v. Russia , no. 5829/04, 31   May 2011; Khodorkovskiy and Lebedev (no. 1) case). 10.     In the course of the first trial the applicants repeatedly stated that the GPO was conducting parallel investigations in their respect but that they had not been given access to any information or materials related to those investigations. 11.     In October 2005, after the end of the first trial, both applicants were transferred from Moscow to two remote Russian penal colonies. The first applicant was sent to penal colony FGU IK-10, located in the town of Krasnokamensk, Chita Region. The second applicant was sent to serve his sentence in correctional colony FGU IK-3 in the Kharp township, located on the Yamal peninsula (Yamalo-Nenetskiy region, Northern Urals, north of the Arctic Circle). 12.     The applicants’ prison terms as defined in the 2005 judgment subsequently expired; however, they both remained in prison on account of new accusations brought against them within the related but separate court proceedings which are at the heart of the present case (the “second trial”). C.     Trials of the applicants’ former colleagues and partners 1.     Trial of Mr Pereversin, Mr Malakhovskiy and Mr Valdes-Garcia 13.     On an unspecified date the GPO severed from the applicants’ case a   new case concerning Mr Pereversin, Mr Malakhovskiy and Mr Valdes-Garcia. The charges against Mr Pereversin included, in particular, embezzlement and money laundering (“ legalizatsiya ”) committed in a group which also comprised the applicants. 14.     In June 2006 the trial of Mr Pereversin, Mr Malakhovskiy and Mr   Valdes-Garcia started at the Basmanniy District Court of Moscow. That trial was held in camera. Judge Yarlykova presided over the trial. 15.     On 1 March 2007 Mr Pereversin and Mr Malakhovskiy were found guilty; Mr Valdes-Garcia fled from Russia and escaped conviction. He alleged that in 2005 he had been ill-treated while in custody. In particular, Mr Valdes-Garcia claimed that he had been beaten by investigator Mr Kz. and received multiple injuries. However, the Russian authorities refused to institute criminal proceedings into those allegations [2] . 2.     Trial of Mr Aleksanyan 16.     Mr Aleksanyan was one of the lawyers for the first and second applicants. In 2006 he was arrested and prosecuted in a related but separate case; the accusations against Mr Aleksanyan were brought to trial but in 2010 they were dropped due to the expiry of the statute of limitations. 17.     According to Mr Aleksanyan, on 28 December 2006 Mr   Karimov, the lead investigator in the applicants’ case, met him in the GPO’s premises and offered a deal. He proposed that Mr Aleksanyan give evidence against the applicants; in exchange, he would be released and have the opportunity to receive appropriate medical treatment, which would not be available to him in prison. Mr Aleksanyan was dying from AIDS, but he refused this offer. D.     Opening of case no. 18/325556-04 18.     In 2004, while the applicants’ first trial was underway, the GPO decided that certain episodes related to the applicants’ business operations were to be severed from the main case (no.   18/41-03). 19.     On 2   December 2004 the GPO opened case no.   18/325556-04, which concerned “money laundering” by Mr Moiseyev and other “unidentified persons”. 20.     On 27 December 2004 the GPO informed the applicants of that decision. However, the applicants were not questioned in relation to those new charges and were not given any details or informed about the nature of the investigation. 21.     On 14 January 2005 the first applicant’s defence complained before the Meshchanskiy District Court (which conducted the first trial) that the GPO was conducting a parallel investigation but refusing to give the defence any information about its goals or any charges which might result from it. 22.     On 2 March 2005 the first applicant complained that the very same witnesses who appeared at the first trial at the GPO’s request had been summoned to the GPO’s office in Moscow and questioned there again, allegedly in connection with the new investigation. The defence claimed that, in so doing, the GPO tried to put pressure on those witnesses and influence their oral testimony at the first trial. 23.     On 16 May 2005 the first trial ended with the applicants’ conviction. 24.     On 5 July 2005 the GPO informed the applicants’ lawyers that the applicants were to be charged under Articles 160 (“Embezzlement”) and 174 (“legalisation or money laundering”) of the Criminal Code. The applicants’ lawyers attended the GPO office but they were told that the applicants were not going to be charged. No explanation was given for that decision [3] . E.     The applicants’ second trial 1.     Opening of case no. 18/432766-07 (a)     The applicants’ transfer to Chita and their attempts to change the venue of the investigation 25.     On 14 December 2006 both applicants were transferred to a pre-trial detention facility (SIZO) of the Chita town (FGU IZ-75/1), where they were detained until their transferral to Moscow in 2009. According to the applicants, the second applicant was transported from Kharp to Chita via Moscow. The trip took four days and was about 10,000 km in length. 26.     On 3 February 2007 investigator Mr Karimov from the GPO decided to sever several episodes from criminal case no. 18/41-03 and open a new case. The new case was assigned case number 18/432766-07. The Deputy General Prosecutor Mr   Grin ordered that the investigation in that case was to be conducted in the Chita region. 27.     On 5 February 2007 the applicants were charged in case no.   18/41 ‑ 03 with the crimes set out in two provisions of the Criminal Code: Article   160 (“embezzlement”) and Article 174 (1) (“Money laundering”). According to the bill of indictment, those crimes had been committed by the applicants in Moscow in their capacity as former senior managers of Yukos plc and affiliated companies. 28.     On 7 February 2007 a group of lawyers for the applicants travelled from Moscow to Chita. At Domodedovo airport (Moscow) the applicants’ lawyers were stopped and detained for one hour by the police working at the airport security. Their papers were verified and their belongings were additionally checked using special equipment and X-ray apparatus. In the course of the searches confidential papers which were being carried by the lawyers were examined and video-recorded. 29.     On the same day, in the pre-flight security zone of Chita airport, the GPO investigators approached Ms   Moskalenko, one of the lawyers for the first applicant, and ordered her to sign a formal undertaking not to disclose information from the case materials in file no. 18/43266-07. She made a handwritten note on the form, stating that she had been coerced into signing the form and that she had not been given access to the documents in case file no. 18/43266-07. On 8 and 15 February 2007 Ms Moskalenko filed a formal complaint with the GPO, stating that the two episodes in the airports amount to harassment of the applicants’ lawyers and breach of their professional privilege. 30.     In February 2007 the applicants lodged a complaint under Article   125 of the CCrP about the decision to investigate the new cases in Chita. They claimed that since the acts imputed to them had been committed in Moscow, they ought to be investigated in Moscow, and that the applicants should be transferred to a remand prison there. 31.     On 6 March 2007 the GPO initiated disbarment proceedings in respect of Ms Moskalenko, referring to her absence from Chita when the first applicant was familiarising himself with the materials of the case. The first applicant had to issue a statement confirming that he was fully satisfied with Ms Moskalenko’s work. On 8 June 2007 the Qualifications Commission of the Bar refused to disbar Ms Moskalenko. 32.     On 20 March 2007 the Basmanniy District Court found that the GPO’s decision to conduct the investigation in Chita had been arbitrary and that the investigation should be conducted in Moscow. That ruling was upheld on 16 April 2007 by the Moscow City Court. However, the applicants remained in the Chita remand prison [4] . 33.     In July 2007 the defence filed an application with the Prosecutor General, asking that a criminal case be opened in respect of the GPO officials who had failed to follow the order in the Basmanniy District Court’s decision of 20 March 2007 concerning the proper place of the investigation. However, this was refused. 34.     On 25 December 2007 the Supreme Court of Russia, at the GPO’s request, examined the case by way of supervisory review and ordered the lower court to reconsider whether Moscow was the proper place for the investigation in the applicants’ case. 35.     On 30 January 2008 the Basmanniy District Court held that the GPO’s decision to designate Chita as the place of investigation did not breach the applicants’ constitutional rights and did not hinder their access to justice. Consequently, the court confirmed the validity of that decision. On 7 April 2008 the Moscow City Court upheld the lower court’s ruling. (b)     The applicants’ attempts to have the proceedings discontinued 36.     On 28 March 2007 the first applicant lodged a motion under Article   125 of the CCrP before a judge. He complained about actions by the GPO investigators, namely that he had not been given any details about parallel investigations; that conducting the investigation in Chita was unlawful, since all of the operations incriminated to the applicants had taken place in Moscow; that the courts which authorised his detention in the Chita remand prison lacked jurisdiction, and that the GPO had harassed his lawyers by subjecting them to unlawful searches, threatening them with criminal prosecution and trying to disbar Ms   Moskalenko, one of his lawyers. The applicant claimed that all of that, taken in aggregate, amounted to an abuse of process. He sought a court order directing the GPO to stay the proceedings. The applicant insisted on his personal attendance at the examination of that motion by the court, but the court decided that it was impossible to transport him from Chita to Moscow. 37.     On 27 June 2007 Judge Yarlykova examined the motion. The applicant’s lawyer challenged the judge on the ground that she had earlier presided in the trial of Mr Pereversin, Mr Malakhovskiy and Mr Valdes-Garcia, and could have therefore preconceived ideas about the first applicant’s guilt. However, Judge Yarlykova refused the recusal application, and dismissed the motion on the merits. 38.     On 19 September 2007 the Moscow City Court upheld the ruling by Judge Yarlykova. In particular, the Moscow City Court agreed with Judge   Yarlykova from the District Court that under Russian law the judge was not competent to supervise procedural decisions taken by the prosecution bodies in the performance of their functions, and that the judge’s only role in this respect was to monitor observance of the constitutional rights of the participants in criminal proceedings. 39.     On 16 April 2008 the first applicant renewed his motion of 28 March 2007 seeking discontinuation of the criminal proceedings against him and Mr Lebedev. He also referred to various breaches of the domestic procedure, to bad faith on the part of the authorities and to infringements of the rights of the defendants and professional privilege of the applicants’ lawyers. The applicant introduced this complaint before the Basmanniy District Court in Moscow, but the judge transmitted the motion to a court in Chita, referring to the fact that the investigation was taking place there. 40.     On 29 September 2008 Judge Ivanoshchuk of the Ingondinskiy District Court of Chita rejected the motion, on the ground that the investigator’s actions were not subject to judicial review. On 26 December 2008 that decision was confirmed by the Chita Regional Court. 41.     On an unspecified date in 2008 the second applicant introduced another complaint under Article 125 in which he indicated, inter alia , that he had not been given any information about the essence of the new case opened in 2004. On 29 December 2008 the Ingondinskiy District Court found that the GPO had failed to inform the second applicant about the opening of case no.   18/325556-04, had not served him with a copy of the investigator’s decision, had failed to notify him about his rights, question him and inform him of the composition of the investigative team and extensions to the investigation. The District Court, however, found that it could not quash the order opening case no. 18/325556-04 and exonerate the applicants. On 30 April 2009 that decision was confirmed on appeal. (c)     The applicants’ preparation for the trial 42.     According to the applicants, the bill of indictment and the appended written materials ran to 188 volumes [5] . 43.     When the materials of the case file were given to the defence for examination [6] , the applicants and their lawyer had access to only one copy of those materials, which they were allowed to study only in the presence of an investigator. When they wished to discuss materials or legal issues in private, the investigator removed the case file. 44.     According to the applicants,   it was not possible to keep copies of the case file in their cells. 45.     Having received the bill of indictment with the case file, the defence asked the prosecution to clarify the charges. In their view, the prosecution had failed to demonstrate which facts it intended to prove with which evidence. They also submitted that the amounts of oil allegedly misappropriated by the applicants were defined in a random manner, and that the bill of indictment was badly written. However, that motion was rejected and the prosecution decided that the bill of indictment was acceptable as it was and ready to be submitted to the court. 2.     Second trial (a)     Preliminary hearing 46.     On 14 February 2009 case no. 18/432766-07 was referred by the GPO to the Khamovnicheskiy District Court of Moscow for trial. In the Khamovnicheskiy District Court the case was assigned no. 1/23-10.       47.     On 3 March 2009 the trial began with a preliminary hearing, held in camera. The case was heard by a single judge, Mr Danilkin. The judge was assisted by four secretaries [7] . 48.     The prosecution team was composed of five prosecutors.   The defence team was composed of over a dozen lawyers. (i)     Conditions in the courtroom 49.     From 17 March 2009 the hearings were public. The two applicants were held in a glass dock, pejoratively referred to as the “aquarium”. The dock was not air-conditioned, unlike the rest of the room, and was poorly ventilated. The applicants were brought to the courtroom each day in handcuffs and were heavily guarded. 50.     The applicants sought the court’s permission to sit outside the “aquarium” near their lawyers, but permission was not granted. In the applicants’ words, while in the “aquarium” the applicants were unable to discuss the case with their lawyers confidentially and to review documents. All their conversations during the hearings were within earshot of the guards. The only possibility to discuss the case with their lawyers was in the remand prison, but even there the meeting room had a CCTV camera. (ii)     Motions by the defence at the preliminary hearing 51.     At the preliminary hearing the defence filed several motions, all of which were rejected. Thus, the defence sought the discontinuation of the proceedings for abuse of process. However, Judge Danilkin ruled that it was premature to terminate the case without assessing the entire body of evidence and hearing the parties’ positions on this matter. The applicants appealed but to no avail: on 1 June 2009 the Moscow City Court ruled that Judge Danilkin’s ruling was not amenable to appeal by the defence. 52.     The defence further complained that the prosecution had failed to submit to the court a list of defence witnesses to be called to the court by a subpoena. The defence contended that they were unable to secure the presence of those witnesses at the trial. The defence referred to Article   220   (4) of the CCrP in this respect. Judge Danilkin replied that the absence of a list of defence witnesses to be summoned did not invalidate the bill of indictment, and that the defence would be free to request summoning of the witnesses during the trial, if needed. 53.     The defence asked the judge to order discovery of evidence and supress certain items of evidence contained in the prosecution case file, but all motions to that end were refused. 54.     The defence challenged the territorial jurisdiction of the Khamovnicheskiy District Court over the case, but this objection was dismissed by the judge [8] . 55.     The defence repeated their request to have the bill of indictment reformulated in order to connect the evidence and factual assertions on which the prosecution case relied and to clarify legal arguments by the prosecution. Judge Danilkin refused that motion, stating that the law did not require the prosecution to do a better job and re-write the bill. (iii)     Detention of the two applicants during the second trial 56.     At the preliminary hearing the prosecution requested and extension of the applicants’ “detention on remand” and on 17 March 2009 that request was granted by the court. The court, in breach of the law, did not set a time-limit for the extension in its order. The applicants argued that in the subsequent months detention orders were extended with delays; as a result, some periods were not covered by any valid detention order. In addition, in the applicants’ opinion, the review of the detention order of 17 March 2009 was unnecessarily delayed. 57.     Over the following months the applicants’ “detention on remand” has been repeatedly extended. In the opinion of the defence, those extensions were contrary to the law. The first applicant went on hunger strike protesting against the extensions. In 2011 the Supreme Court acknowledged that the applicants’ detention had been unlawful and even issued a special ruling in this respect, addressed to the Chair of the Moscow City Court. (b)     The case for the prosecution 58.     The preliminary hearing was concluded on 17 March 2009 and the court passed to the presentation of the case by the prosecution. 59.     The prosecution presented their case between 21 April 2009 and 29   March 2010.   According to the prosecution, between 1998 and 2003 the applicants, as owners and/or managers of the companies which had a controlling stake in Yukos plc, misappropriated 350 metric tonnes of crude oil produced by Yukos’s subsidiaries and subsequently laundered the profits by selling the oil through a chain of affiliated trading companies. The money accumulated in this way was transferred to the accounts of hundreds of foreign and Russian companies, controlled by the applicants. The prosecution claimed that those acts amounted to embezzlement (Article 160 of the Criminal Code) and money laundering (Article 174.1 of the Criminal Code). 60.     The facts and the legal arguments on which the prosecution case relied are described in more detail below. The following summary is based on the text of the judgment with which the second trial ended; it reflects only those elements of the prosecution case which were retained by the court as the basis for its conclusions. (i)     Obtaining de facto control over the Yukos group 61.     Yukos was created in the course of privatisation of the State oil sector in 1995. The first applicant was a majority shareholder of Group Menatep Limited (GML) which acquired a large block of shares in Yukos [9] plc at one of the privatisation auctions. As a result, GML became the majority ( osnovnoy ) shareholder in Yukos. The second applicant also owned an important block of shares in GML and was its director. Thus, as majority shareholders in GML, both applicants could play a decisive role in shaping Yukos’s business strategy. In 1997 the first applicant was elected as the President of the Board of Directors of Yukos. 62.     In addition, in order to secure the loyalty of certain senior executives in Yukos, the applicants created a secret parallel system of distribution of the group’s profits. Thus, in 1996 the applicants concluded an oral agreement with Yukos senior executives, under which GML undertook to pay Tempo Finance Limited (TFL) 15% of Yukos’s profits. Those Yukos senior executives were the beneficiaries of TFL. Such payments were regularly made between 1996 and 2002, when they reached several hundred million USD. In 2002 the agreement between GML and TFL was reformulated and signed on paper. As a result, the applicants secured the loyalty of several leading Yukos senior executives and obtained not only strategic but also operative control over the group (pages 569 et seq. of the judgment). The influence of the minority shareholders within Yukos was thus reduced to a minimum. 63.     Through Yukos the applicants gained partial control over Yukos’ main subsidiaries, in which Yukos owned 50% or more of the shares: oil ‑ extracting companies, refineries, crude-oil storage terminals, etc. Amongst the biggest oil-extracting subsidiaries of Yukos were Yuganskneftegaz plc, Samaraneftegaz plc, and Tomskneft plc (hereinafter - “producing entities”). Again, the applicants made recourse to various techniques in order to reduce the influence of minority shareholders in those companies. 64.     Initially the applicants controlled the producing entities on the basis of “administrative agreements”. Thus, on 19 February 1997 such an agreement was imposed on Yukos by Rosprom Ltd., another company which belonged to the applicants and in which the second applicant was a deputy president of the executive board ( pravleniye ) in 1997-1998. Under that agreement Yukos delegated to Rosprom the power to take decisions which would otherwise be within the competence of the executive bodies of Yukos. That “administrative agreement” was confirmed by the general meeting of shareholders of Yukos. On 14 April 1998 Rosprom signed an agreement in similar terms with Tomskneft. 65.     In 1998 the applicants registered new companies which operated under “administrative agreements” with the producing entities belonging to the Yukos group. Thus, Yukos Explorations and Production Ltd (YEP) was supposed to operate the group’s oil-extracting facilities, whereas Yukos Refining and Marketing Ltd (YRM) was created to operate the refineries. Both YEP and YRM were controlled by Yukos Moskva Ltd (YM), in which the first applicant was head of the board of directors (from 3 July 1998 until 31 March 2000). From 2000 Yukos plc was administered by Yukos Moskva Ltd. 66.     Although from 2000 onwards the first applicant was no longer the head of the board of directors of YM and became merely one of its directors, he continued to define the group’s policy as the major shareholder in GML and, in this capacity, was able to influence the producing entities’ operative decisions. The second applicant was the deputy head of the board of directors of YRM and YM and was de facto the financial director of those companies and of the group as a whole. 67.     The system of “administrative agreements” made it possible to protect the mother company (Yukos) from civil and other liability for abusive interference in the business of its subsidiaries (see page 308 of the judgment). Under those agreements the managing companies – such as Rosprom, YRM and YEP – were required to act in the best interests of the producing companies. However, in reality they acted in the applicants’ interest only. 68.     The applicants thus created a vertically-integrated group of companies where all important decisions were taken by them and their accomplices and then imposed on the “producing entities”. The latter thus lost any independence. This enabled the applicants to redirect sales of the oil extracted by the producing entities and prevent the minority shareholders in those entities and in Yukos plc from sharing the profits generated by the sales of crude oil. (ii)     Manipulating the price of oil within the group 69.     In 1996, the applicants used their influence to compel the two producing entities – Yuganskneftegaz and Samaraneftegaz – to conclude “general agreements” with Yukos [10] . Those agreements contained an undertaking by the producing entities not to sell their produce independently in the future but only through Yukos. The agreements defined the principles for calculating the price of oil, which was based on the price of “oil well fluid” and provided for an independent evaluation of market prices for this “oil well fluid”. On the basis of those general agreements Yukos and its producing entities concluded contracts for the sale of crude oil on conditions which were unfavourable to the producing entities. Those deals were concluded “on the basis of malicious collusion with the representative of another party” and were thus contrary to Article 179 of the Civil Code (page 647 of the judgment; page 9 of the decision of the court of appeal). In 1998 a “general agreement” in similar terms was signed with Tomskneft. 70.     Some of the directors representing minority shareholders in the producing entities objected to the practice of concluding contracts on such conditions, and even threatened Yukos with lawsuits. They claimed that the prices indicated in those contracts were much lower than the market price and that the producing entities were thus deprived of their profits. However, the applicants overcame their resistance. To do so, they requested and obtained approval for the existing schemes of oil sales from the general meetings of shareholders [11] . Those approvals covered all past sales and sales over the next three years. 71.     In order to obtain those approvals the applicant used various techniques. In particular, general meetings of the shareholders in the producing entities were always presided by one of the Yukos executives. In addition, although Yukos and other companies affiliated with the producing companies and owning shares in them ought to have been regarded as “interested parties” under the Public Companies Act of 1995 and, as such, should have been excluded from the voting, they did not acknowledge a   conflict of interests and voted at those meetings along with other shareholders (page 9 of the decision of the court of appeal). 72.     In some cases, where the applicants did not have the necessary number of votes, they succeeded in neutralising the resistance of “dissident shareholders” by having their shares seized by a court. Thus, in 1999 a Kaluga court opened proceedings against a group of “dissident shareholders” in Tomskneft. In those proceedings a certain Mr V. challenged the title of those persons to the shares of Tomskneft. According to the documents, Mr V. owned one share in Tomskneft. However, in reality he was not even aware of those proceedings or of the fact that he owned any shares. The lawyers working for the applicants had obtained from him, by deceit, a power of attorney. They then purchased in his name one share in Tomskneft, brought a lawsuit against the “dissident shareholders” and lodged a request for interim measures. Those measures consisted, inter alia , of a temporary prohibition for the “dissident shareholders” to vote at the general meetings. On 16 March 1999 a judge in a district court in the Kaluga Region issued an injunction against the “dissident shareholders”, as requested by the “plaintiff”. The applicants’ lawyers brought with them a   court bailiff to the next general meeting of shareholders of 23   March 1999; referring to the injunction of the Kaluga court, he prevented “dissident shareholders” from voting. As a result, the applicants obtained a qualified majority at the general meeting and all contracts of sales between Tomskneft and Yukos were successfully approved. A few days later the injunction was lifted, the applicants having already obtained what they wanted. 73.     At some point in 2000 the producing entities started to sell the oil to Yukos and to the trading companies at auctions [12] . However, the auctions were manipulated by its organiser, who was a senior Yukos executive and loyal to the applicants. Thus, the conditions for prospective buyers were formulated in such a way as to exclude any external competitor. Only the companies affiliated with the applicants, and controlled by them, participated in those “auctions”. The lead appraising expert who was supposed to define the fair price of the crude oil had previously worked with the applicants in the Menatep bank, and therefore acted in their interests. As a result, the price of crude oil in the sales contracts was much lower than the real market price which the producing entities would have received if they sold the oil independently. (iii)     Redirecting sales in order to accumulate profits in the Russian “trading companies” 74.     To accumulate profits from the sales of oil extracted by the producing entities and, at the same time, to minimise taxes, the applicants registered over a dozen different trading companies on the territory of several low-tax zones in Russia. Thus, such trading companies were registered in Mordoviya, Kalmykia, the Chelyabinsk Region and the Evenk Autonomous Region, and in the districts known as ZATOs, in particular, in Lesnoy ZATO and Trekhgorniy ZATO. Amongst those companies the judgment mentioned the limited companies (OOOs) Mitra, Grunt, Business ‑ Oil, Vald-Oil, Erlift, Flander, Muskron, Alebra, Kverkus, Kolrein, Staf, Kvadrat, Fargoil, Ratibor and others [13] . 75.     Some of those companies were created by private individuals who agreed to be nominal owners of those companies but who had never participated in their business activities and had only signed documents (see page 503 of the judgment). Thus, OOO Fargoil was registered in the name of Mr S. as the sole owner, whereas OOO Ratibor was created by Ms V. When requested, Mr S. and Ms V. ceded their shares to companies indicated by the applicants’ accomplices. 76.     In essence those trading companies were sham entities, which were created for the sole purpose of not paying the full amount of taxes for which the Yukos group would otherwise have been liable had it sold oil directly from Moscow. The difference between the very low price paid to the producing entities and the high price paid by the final buyer of the oil was concentrated partly in the Russian trading companies and partly in foreign trading companies (see below). 77.     The Russian trading companies existed only on paper, had the same nominal directors (Mr Pereversin, Mr Malakhovskiy and several other persons) and kept their money in accounts in two Moscow-based banks affiliated with the applicants: DIB bank and Trust bank. All their business operations – preparing contracts, signing shipment orders, submitting tax returns, making bank transfers, etc. – were conducted in Moscow, by a group of employees working for Yukos and its affiliates. Physically the oil and its derivatives did not change hands: the crude oil was transported directly from the wells to the refineries and then, after processing, to end ‑ customers. All of the intermediate companies were necessary only for concentrating profits and avoiding taxes. Although de facto the applicants controlled the trading companies, de jure the companies were presented as independent traders. 78.     The prosecution provided data on money flows between the trading companies and the producing entities and compared the price paid to the latter with the market price of oil. Thus, for example, in 1998 Yuganskneftegaz sold through the trading companies 25,322,612,411 tons of crude oil for RUB 6,622,270,514; Samaraneftegaz sold 7,450,791,000   tons for RUB 2,097,566,309; Tomskneftegaz sold 199,506   tons for RUB   41,577,050.   In toto in 1998 the applicants and their accomplices thus misappropriated 32,972,909,411 tons of crude oil, worth RUB   25,645,695,514. 79.     It appears that the value of the “misappropriated” oil was calculated on the basis of the “world market price” indicated in the judgment. Thus, for example, in January 1998 the market price of crude oil at the world market varied between RUB 667.7 per ton and RUB 673.77 per ton, while the producing entities received RUB 435.96 per ton. In December 1998 the world market price of crude oil varied between RUB 1229.68 and RUB   1340.84 per ton, whereas the producing entities were paid at a rate of RUB 250.08 per ton. 80.     The judgment contained conflicting information on the price paid by Yukos or trading companies to the producing entities. Thus, on page 14 of the judgment it is indicated that in July and September 1998 they were paid RUB 250.08 per ton, while the market price varied between RUB 369.40 (in July) to RUB 638.99 (in September). At the same time, according to a report by the Khanty-Mansyisk branch of the Antitrust Committee, quoted by the court on page 177 of the judgment, Yuganskneftegaz was selling oil to Yukos in July-September 1998 for RUB 144.5 – RUB 207.58 per ton, whereas the average market price in that region was RUB 288 per ton. 81.     As follows from the judgment (pages 164 and 354; see also pages 29 and 30 of the judgment by the court of appeal), in order to avoid transactions between the producing entities and trading companies being subjected to tax audits, the applicants tried to ensure that the price at which the trading companies purchased oil from the producing entities did not deviate from the average market price by more than 20% [14] . 82.     In order to obscure the modus operandi of the scheme, the applicants regularly re-directed sales and money flows from old trading companies to the new ones. From January 2000 all sales of oil extracted by the producing entities went through OOO Yukos-M. As from December 2000 most of the sales of Yukos oil were conducted through OOO Y-Mordoviya. In the spring of 2001 some of the oil sales were re-directed to OOO Ratibor (whose director was Mr Malakhovskiy), OOO Sprey and OOO Terren. However, the nature of the sales always remained the same: the producing entities were selling oil to the trading companies at a very low price. That price was defined at farcical “auctions”, staged every month by the applicants’ accomplices. Thus, in February 2000 the oil was sold by the producing entities to Yukos-M at RUB 750 per ton, whereas on 31 January 2000 the world market price for the “Urals (Med)” and “Urals (R’dam)” oil amounted to RUB 5,535.59 on average. In November 2000 the producing entities were receiving RUB 1,200 per ton of oil from the trading companies, whereas the world market price was RUB 6,040.77 per ton on average. The overall price of oil sold in 1998-2000 through that scheme amounted to RUB 158,492,156,000. The judgment concluded that the pecuniary damage caused by the applicants to the producing entities (Samaraneftegaz, Yuganskneftegaz and Tomskneft) was equal to that amount. 83.     In 2001 sales of crude oil and oil derivatives were channelled essentially through OOO Fargoil, another trading company controlled by the applicants. All profits were concentrated in Fargoil’s accounts, in two banks controlled by the applicants: Menatep Spb and DIB. For example, according to the judgment in 2001 the applicants misappropriated oil worth RUB 147,394,294,000. Part of that amount was spent to cover the operating costs of producing entities; the remaining part remained in the hands of the applicants and their accomplices. Their net profit from the operations conducted through Fargoil in 2001 amounted to RUB 65,837,005,000. 84.     From January 2002 Fargoil was buying oil from Ratibor which, in turn, received oil from the producing entities by “winning” at the monthly auctions. From September 2002 Ratibor was removed from the scheme and all sales went through OOO Evoil, which started to “win” at the auctions and sell the oil on to Fargoil. By the end of 2002 Evoil acquired from the producing entities 24,512,893 tons of oil, for which it paid only RUB   48,636,878,082. According to the judgment, this represented 20-25% of the real market price of that oil on the world market. In July-August 2003 the applicants decided again to redirect money flows by including in the sales scheme a new trading company – OOO Energotreid, also headed by Mr Malakhovskiy as director. Energotreid replaced Fargoil as the main buyer of oil from Evoil, which, in turn, purchased it from the producing entities. 85.     Yukos was also involved in the sales scheme. At some stage Yukos played the role of the first buyer of oil from the producing entities; later Yukos was replaced with other trading companies and participated in the sales mostly as a commissioner, whereas the trading companies, such as Fargoil, remained nominal owners of the oil extracted by the producing entities. In 2002, as a commissioner, Yukos received 0.2% of the gross product of the sales of oil on the international market. The gross product of sales which Yukos, as a commissioner, transferred to the accounts of Fargoil, as the nominal owner of the oil, amounted in 2002 to RUB   144,546,628,965. Thus, given the world price of oil, and the costs of production and logistics, in 2002 the net profit to the applicants and their accomplices amounted, for the sales conducted through Fargoil, to RUB   104,852,978,164. As regards the sales of oil and its derivatives on the internal market, in 2002 Fargoil received RUB 75,627,685,010.33 (gross money inflow). The net profit to the applicants and their accomplices, after deduction of the production costs of the oil and its derivatives, amounted to RUB 25,164,128,293 for that period. The judgments referred to the amounts misappropriated by the applicants as a result of the operations on the internal market and abroad in 2003. 86.     According to the judgment, between 1998 and 2000 the applicants misappropriated oil worth RUB 492,486,604,892. In 2001-2003 the applicants misappropriated oil worth RUB 811,549,054,000, while their net profits from operations with oil amounted to RUB 399,939,564,505. (iv)     Exporting oil profits from Russia 87.     In addition to setting up many Russian trading companies, the applicants created a network of foreign firms registered in various off-shore zones, such as Cyprus, Lichtenstein, Gibraltar, the British Virgin Islands, the Isle of Man, etc. 88.     Since the price of crude oil at the border (i.e. in a contract between a Russian trading company and a foreign trading company) was well known, the applicants ensured that the price of Yukos oil would be on average 1   rouble more than the price of oil exported by other big oil companies (page   336 of the judgment) [15] . 89.     From 1997 most of Yukos’s international sales of oil went through a   long chain of intermediaries, which usually took the following form: a   producing entity – Yukos itself or one of the Russian trading companies – an off-shore trading company, controlled by the applicants – a Swiss trading company controlled by the applicants – the real foreign buyer of the oil. The applicants introduced so many intermediaries in the scheme in order to make it deliberately opaque. Only at the last stage of the chain was the oil sold for the market price. The international sales went through such foreign trading companies as South Petroleum Ltd (Gibraltar), PFH Atlantic Petroleum Ltd (Cyprus), Baltic Petroleum Trading Ltd (Isle of Man), and then to Behles Petroleum SA (Switzerland). Behles Petroleum played a   central role in the international sales scheme, since the applicants needed a   Swiss counterpart to have a show of respectability. Behles Petroleum had been a real trading company, in the sense that it had personnel involved in selling oil to end-customers. 90.     From 2000 the sales scheme was reorganised [16] . Most of the foreign sales of Yukos oil went henceforth to two Cypru