EHRM, 14-01-2019, nr. 51111/07, nr. 42757/07

On an unspecified date the GPO severed from the applicants' case a new case concerning Mr Pereverzin, Mr Malakhovskiy and Mr Valdez-Garcia, directors of Yukos trading companies. The charges against Mr Pereverzin included, in particular, embezzlement and money laundering (‘legalizatsiya’) committed in a group which also included the applicants.

In June 2006 the trial of Mr Pereverzin, Mr Malakhovskiy and Mr Valdez-Garcia started at the Basmanniy District Court of Moscow. That trial was held in camera and was presided over by Judge Yarlykova.

On 1 March 2007 Mr Pereverzin and Mr Malakhovskiy were found guilty; Mr Valdez-Garcia fled from Russia and escaped conviction. He alleged that in 2005 he had been ill-treated while in custody. In particular, Mr Valdez-Garcia claimed that he had been beaten by investigator Mr Kz. and received multiple injuries. However, the Russian authorities refused to institute a criminal investigation into those allegations.

On 21 June 2007 the Moscow City Court upheld the conviction on appeal.

Mr Aleksanyan was one of the lawyers acting for the first and second applicants. In 2006 he was arrested and prosecuted in a related but separate case (see Aleksanyan v. Russia, no. 46468/06, 22 December 2008). The accusations against Mr Aleksanyan were brought to trial, but in 2010 they were dropped due to the expiry of the statute of limitations.

From 17 March 2009 the hearings were public. The two applicants were held in a glass dock which, unlike the rest of the room, was not air-conditioned and was poorly ventilated. The applicants were brought to the courtroom each day in handcuffs and were heavily guarded.

The applicants sought the court's permission to sit outside the glass dock near their lawyers, but permission was not granted. According to the applicants, while in the glass dock they were unable either to discuss the case with their lawyers confidentially or to review documents. All their conversations during the hearings were within earshot of the guards. Furthermore, the judge reviewed all the documents which the defence lawyers wished to show their clients.

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. 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.

The defence further complained that the prosecution had failed to submit to the court a list of the defence witnesses who were to be called to the court by a subpoena. The defence contended that they were thus 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 that the witnesses be summoned during the trial if need be.

The defence asked the judge to order discovery of evidence and suppress certain items of evidence contained in the prosecution case file, but all motions to that end were refused.

The defence challenged the territorial jurisdiction of the Khamovnicheskiy District Court, but this objection was dismissed by the judge.

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 the prosecution's legal arguments. Judge Danilkin refused that motion, stating that the law did not require the prosecution to do a better job and to re-write the bill.

At the preliminary hearing the prosecution requested an extension of the applicants' detention on remand and on 17 March 2009 that request was granted. The court 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.

Over the following months the applicants' detention on remand was repeatedly extended. In the opinion of the defence, those extensions were unlawful. The first applicant went on hunger strike in protest against the extensions. In 2011 the Supreme Court acknowledged that the applicants' detention had been unlawful and issued a special ruling in this respect, addressed to the Chair of the Moscow City Court.

Yukos was created in the course of the privatisation of the State oil sector in 1995. The first applicant was a majority shareholder of Group Menatep Limited, which acquired a large block of shares in Yukos plc at one of the privatisation auctions. As a result, Group Menatep Limited became the majority shareholder in Yukos. The second applicant also owned an important block of shares in Group Menatep Limited and was its director. Thus, as majority shareholders in Group Menatep Limited, both applicants could play a decisive role in shaping Yukos's business strategy. In 1997 the first applicant was elected President of the Board of Directors of Yukos.

In addition, in order to secure the loyalty of certain senior executives in Yukos, the applicants created a secret parallel system for distribution of the group's profits. Thus, in 1996 the applicants concluded an oral agreement with Yukos senior executives, under which Group Menatep Limited undertook to pay 15% of Yukos's profits Tempo Finance Limited. Those Yukos senior executives were the beneficiaries of Tempo Finance Limited. Such payments were regularly made between 1996 and 2002, when they amounted to several hundred million United States dollars (USD). In 2002 the agreement between Group Menatep Limited and Tempo Finance Limited was reformulated and concluded in writing. 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.

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. Yukos' biggest oil-extracting subsidiaries were Yuganskneftegaz plc, Samaraneftegaz plc and Tomskneft plc (hereinafter ‘production entities'). Again, the applicants had recourse to various techniques in order to reduce the influence of the minority shareholders in those companies.

The applicants initially controlled the production entities on the basis of ‘management agreements’. Thus, on 19 February 1997 such an agreement was imposed on Yukos plc 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 plc delegated to Rosprom the power to take decisions which would otherwise be within the competence of the executive bodies of Yukos plc. The management agreement was approved by the general meeting of shareholders of Yukos. On 14 April 1998 Rosprom signed an agreement in similar terms with Tomskneft plc.

In 1998 the applicants registered new companies which operated under ‘management agreements’ with the production entities belonging to the Yukos group. Thus, Yukos Explorations and Production Ltd was to operate the group's oil-extracting facilities, whereas Yukos Refining and Marketing Ltd was created to operate the refineries. Both Yukos Explorations and Production Ltd and Yukos Refining and Marketing Ltd were controlled by Yukos Moskva Ltd, 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.

Although from 2000 onwards the first applicant was no longer the head of the board of directors of Yukos Moskva Ltd and became merely one of its directors, he continued to define the group's policy as the major shareholder in Group Menatep Limited and, in this capacity, was able to influence the production entities' operative decisions. The second applicant was the deputy head of the board of directors of Yukos Refining and Marketing Ltd and Yukos Moskva Ltd and was de facto the financial director of those companies and of the group as a whole.

The system of ‘management agreements’ made it possible to protect the mother company (Yukos plc) from civil and other liability for abusive interference in the business of its subsidiaries (page 308 of the judgment). Under those agreements the managing companies — such as Rosprom, Yukos Refining and Marketing Ltd and Yukos Explorations and Production Ltd — were required to act in the best interests of the production entities. However, in reality they acted in the applicants' interests only.

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 production entities. The latter thus lost any independence. This enabled the applicants to redirect sales of the oil extracted by the production entities and prevent the minority shareholders in those entities and in Yukos plc from sharing the profits generated by the sales of crude oil.

In 1996 the applicants used their influence to compel the two production entities — Yuganskneftegaz plc and Samaraneftegaz plc — to conclude ‘general agreements’ with Yukos. Those agreements contained an undertaking by the production 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 production entities concluded contracts for the sale of crude oil on conditions which were unfavourable to the production 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 plc.

Some of the directors representing the minority shareholders in the production entities objected to the practice of concluding contracts under 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 production 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. Those approvals covered all past sales and future sales for the next three years. The prosecution, with some exceptions, did not specify how many votes the applicants had at the general meeting of shareholders, how many votes they needed to approve the sales of oil, and in what way these approvals were in breach of the Public Companies Act.

In order to obtain these approvals the applicants used various techniques. In particular, general meetings of the shareholders in the production entities were always presided by one of the Yukos executives. In addition, although Yukos and other companies affiliated with the production entities 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).

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 plc. In those proceedings a certain Mr V. challenged those persons’ title to the shares in Tomskneft plc. According to the documents, Mr V. owned one share in Tomskneft plc. 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 one share in Tomskneft plc in his name, brought a lawsuit against the ‘dissident shareholders’ and lodged a request for interim measures. Those measures consisted, inter alia, of a temporary prohibition on voting by the ‘dissident shareholders’ 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 the contracts of sales between Tomskneft plc and Yukos were approved. A few days later the injunction was lifted, the applicants having already obtained what they wanted.

At some point in 2000 the production entities started to sell the oil to Yukos and to the trading companies at auctions. 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 a fair price for 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 production entities would have received if they sold the oil independently.

In order to accumulate profits from the sale of oil extracted by the production entities and, at the same time, to minimise tax liability, 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. The judgment cited the limited-liability companies Mitra, Grunt, Business-Oil, Vald-Oil, Erlift, Flander, Muskron, Alebra, Kverkus, Kolrein, Staf, Kvadrat, Fargoil, Ratibor and others as examples.

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 (page 503 of the judgment). Thus, Fargoil was registered in the name of Mr S. as the sole owner, whereas Ratibor was created by Ms V. When asked to do so, Mr S. and Ms V. ceded their shares to companies indicated by the applicants' accomplices.

In essence those trading companies were sham entities, which were created for the sole purpose of avoiding payment of 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 production 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).

The Russian trading companies existed only on paper, had the same nominal directors (Mr Pereverzin, Mr Malakhovskiy and several other persons) and held 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. 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.

The prosecution provided data on money flows between the trading companies and the production entities and compared the price paid to the latter with the market price of oil. Thus, for example, in 1998 Yuganskneftegaz plc sold through the trading companies 25,322,612,411 tonnes of crude oil for RUB 6,622,270,514; Samaraneftegaz plc sold 7,450,791,000 tonnes for RUB 2,097,566,309; Tomskneft plc sold 199,506 tonnes for RUB 41,577,050. In total, according to the prosecution, the applicants and their accomplices thus misappropriated 32,972,909,411 tonnes of crude oil in 1998, worth RUB 25,645,695,514.

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 production 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 production entities were paid at a rate of RUB 250.08 per ton.

The judgment contained conflicting information on the price paid by Yukos or the trading companies to the production 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) and 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 plc was selling oil to Yukos in July-September 1998 for RUB 144.5–207.58 per ton, whereas the average market price in that region was RUB 288 per ton.

As follows from the judgment (pages 164 and 354; pages 29 and 30 of the decision of the court of appeal), in order to avoid transactions between the production 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 production entities did not deviate from the average market price by more than 20%.

In order to obscure the modus operandi of the scheme, the applicants regularly re-directed sales and money flows from existing trading companies to new ones. From January 2000 all sales of oil extracted by the production entities went through Yukos-M. As from December of that year, most of the sales of Yukos oil were conducted through Y-Mordoviya. In the spring of 2001 some of the oil sales were re-directed to Ratibor, Sprey and Terren. However, the nature of the sales always remained the same: the production 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 production 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 was on average RUB 5,535.59. In November 2000 the production 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 production entities (Samaraneftegaz plc, Yuganskneftegaz plc and Tomskneft plc) was equal to that amount.

In 2001 sales of crude oil and oil derivatives were channelled essentially through 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 prosecution, in 2001 the applicants misappropriated oil worth RUB 147,394,294,000. Part of that amount was spent to cover the operating costs of production 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.

From January 2002 Fargoil was buying oil from Ratibor, which, in turn, received oil from the production entities by ‘winning’ at the monthly auctions. From September 2002 Ratibor was removed from the scheme and all sales went through Evoil, which started to ‘win’ at the auctions and sell the oil on to Fargoil. By the end of 2002 Evoil acquired from the production entities 24,512,893 tonnes 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 for this 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, Energotrade, also headed by Mr Malakhovskiy as director. Energotrade replaced Fargoil as the main buyer of oil from Evoil, which, in turn, purchased it from the production entities.

Yukos plc was also involved in the sales scheme. At some stage Yukos plc played the role of the initial buyer of oil from the production entities; later Yukos plc was replaced with other trading companies and participated in the sales mostly as a commissioner, while the trading companies, such as Fargoil, remained nominal owners of the oil extracted by the production entities. In 2002, as a commissioner, Yukos plc received 0.2% of the gross product of the sales of oil on the international market. The gross product of sales which Yukos plc, 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 prosecution referred to the amounts misappropriated by the applicants as a result of the operations on the internal market and abroad in 2003.

According to the prosecution, 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.

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.

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).

From 1997 most of Yukos's international oil sales went through a long chain of intermediaries, which usually took the following form: a production entity — Yukos plc 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 included 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 foreign trading companies such 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 in order to have a veneer of respectability. Behles Petroleum was a real trading company, in the sense that it had personnel involved in selling oil to end-customers.

From 2000 the sales scheme was reorganised. Henceforth most of the revenue from foreign sales of Yukos oil went to two Cyprus companies: Routhenhold Holdings Ltd and Pronet Holdings Ltd. Both companies had Mr Pereverzin as director. Mr Pereverzin was the applicants' business partner and worked with them in the Menatep bank in the 1990s. Routhenhold Holdings and Pronet Holdings served as a ‘final point’ in the sales chain for Yukos export operations. Those and other trading companies in Cyprus were registered at the applicants' request by ALM Feldmans, a Moscow-based law firm, which also organised the opening of the necessary bank accounts, submitted the necessary forms and reports, etc.

In order to extract capital accumulated in the accounts of Russian trading companies such as Ratibor and Fargoil, the applicants also employed another method. Thus, at their request in 2000 ALM-Feldmans registered two companies in Cyprus: Nassaubridge Management Ltd and Dansley Ltd. Nassaubridge subsequently became the sole owner of Fargoil, while Dansley became the sole owner of Ratibor. The money ‘earned’ by Fargoil and Ratibor was then transferred to Nassaubridge and Dansley in the guise of dividends.

Throughout the period under examination the applicants created a number of interconnected companies abroad, which were intended to serve as a ‘safety cushion’ in the event of lawsuits brought by shareholders in Yukos or the production entities or by the State.

Thus, in 2001 a minority shareholder in Tomskneft plc started a public campaign against the applicants, accusing them of misappropriation of the oil extracted by Tomskneft plc. In order to protect themselves against possible audits and lawsuits, the applicants created, through their accomplices, several new letter-box companies, also registered in off-shore zones. These included: Wellington Interests Ltd, Arley Ltd, Beserra Ltd, Corden Ltd, Casphrain Ltd, Neptune Human Resources Ltd, Travis Ltd, Worcester Ltd, Zulfa Hodlings Ltd, and others. The off-shore trading companies transferred money to ‘cushion companies' under different agreements. Thus, South Petroleum transferred USD 60,293,115 to Wellington Interests under an agreement, dated 1997, which described that amount as a ‘loan’ from South Petroleum to Wellington Interests. South Petroleum subsequently signed an agreement with Corden, stipulating that the former ceded to the latter the right to reclaim from Wellington Interests money due under the 1997 loan agreement, in exchange for a payment of USD 6,008,200. Thus, South Petroleum sold Wellington Interests’ debt to Corden for about 10% of its price. The remaining 90% was henceforth in new hands and was better protected from possible lawsuits. South Petroleum also transferred USD 15,940,000 to Arley. That money transfer was presented as a payment for promissory notes issued by Arley. However, those promissory notes were not supported by the debtor's assets and their real economic value was close to zero. As a result, the accounts of the trading companies were drained and the money was concentrated in the ‘cushion companies'. South Petroleum and Baltic Petroleum Trading also transferred considerable sums of money to their corporate owners in the guise of payment of dividends. Thus, South Petroleum and Baltic Petroleum Trading transferred USD 32,848,000 as dividends to their founding company — Jurby Lake Ltd, a company registered in the Isle of Man.

In January 2000 the authorities in certain States started investigations in respect of some of the off-shore companies affiliated with the applicants on suspicion of money laundering. The applicants, having decided that it was not safe to work through those companies, changed the structure for distributing and laundering the profits derived from the sale of Yukos oil. For that purpose the applicants again turned to the law firm ALM Feldmans. The latter registered the company Wildlife Resources Corporation on British Virgin Islands. By concluding fake agreements for the exchange of oil sales, the applicants organised the transfer of USD 20,005,000 from Jurby Lake to Wildlife Resources Corporation.

To secure funding of ongoing operations the applicants needed to return part of the capital from the Russian trading companies and foreign firms which were involved in the sales of oil, and which accumulated significant amounts of money in their accounts (such as Ratibor, Fargoil, Energotrade, etc.). To do so, they used the ‘promissory notes scheme’. Under that scheme, promissory notes were used as a vehicle for transferring money from the trading companies to the production entities. The same scheme was used to transfer money to ‘empty’ companies which were later used for investment purposes. As a result of this chain of transactions, promissory notes were exchanged for real money. The money was also redistributed in the form of loans between the different companies making up the Yukos group.

In 1997–1998 Menatep bank, which owned a large block of Yukos plc shares, borrowed money from two foreign banks — Daiwa Europe and West Merchant Bank. Thus, Menatep borrowed over USD 100,000,000 from Daiwa on a security of 336,551,055 simple shares in Yukos (which represented 13.82% of its shareholding capital), and over USD 125,000,000 from West Merchant Bank on a security of 340,908,790 simple shares in Yukos plc (15.24% of its shareholding capital).

After the financial crisis of August 1998 Menatep defaulted; as a result, Daiwa Europe and West Merchant retained the shares. The applicants decided to return the shares to Yukos by buying them back from the two banks, but not openly. In the official negotiations with the two banks, the applicants persuaded their managers that Menatep was insolvent and that, in view of the financial crisis in Russia, it would be unable to repay the full amount of the two loans. Representatives of Daiwa and West Merchant proposed a restructuring plan, but the applicants artificially protracted the negotiations. At the same time the applicants conducted secret parallel negotiations with Standard Bank of London. As a result, Standard Bank of London agreed, for a commission, to buy the shares from Daiwa Europe and West Merchant and transmit it to DIB bank, controlled by the applicants. In 1999 DIB bank signed an agency agreement with the Standard Bank of London and transferred a pre-payment to it; on the basis of that agreement Standard Bank approached Menatep's two creditors (Daiwa and West Merchant) and acquired their claims against Menatep, together with the shares, at a significant discount. Standard Bank of London paid the two banks about 50–60% of the original amount of the loan, received the shares, and immediately thereafter transferred those shares to DIB bank. DIB bank paid Standard Bank the price of the shares and its commission. Later DIB bank sold Yukos plc shares to several companies controlled by the applicants, including Yukos Universal Ltd and Wilk Enterprises Ltd.

To finance the above operation the applicants decided to use money from Yukos plc itself. However, they did not wish to show who was really purchasing the shares. To give the whole scheme a gloss of legality, the applicants organised the following chain of transactions. The necessary sums of money were accumulated in the accounts of Flander and Alebra, two Russian trading companies involved in the operations with Yukos oil. Yukos issued 35 promissory notes, worth RUB 6,228,253,842, at an interest rate of 30% per annum. The date of issue for those promissory notes was indicated as 1 October 1999; they were due for payment after 28 December 2000. Yukos then transmitted those promissory notes to MQD International Ltd, a company registered in the British Virgin Islands. MQD, acting through a network of intermediary foreign companies (such as Jerez Ltd and Mezview International Ltd), then sold the promissory notes to DIB, which re-sold them to Flander and Alebra. Flander and Alebra paid RUB 7,257,663,538.11 for those notes, an amount which already included the interest accrued. This sum went to Mezview International, which transferred it to Yukos Universal Limited. The latter, in turn, paid it to DIB bank in exchange for the Yukos shares. As a result of that operation, Yukos Universal and Wilk Enterprises received Yukos shares, whereas Flander and Alebra received Yukos plc promissory notes, which Yukos would have to buy back when the time came. In essence, the buyback of the Yukos shares for the benefit of the applicants was funded by Yukos plc itself, with money earned from the oil extracted by its subsidiaries.

In 1999 the Central Bank of Russia withdrew Menatep bank's licence and a liquidation procedure was initiated. In the process of liquidation, the applicants, on behalf of Yukos, proposed to some of Menatep's foreign creditors that the latter's debts could be covered by Yukos's money; at the same time, the applicants sought to extinguish Menatep's financial obligations to Yukos itself. As a result of a chain of transactions, which were economically unfavourable to Yukos, Menatep extinguished its debts whereas Yukos paid some of Menatep's creditors significant amounts of money (page 589 of the judgment). This enabled the applicants to avoid a major conflict with Menatep's foreign creditors.

In the early 2000s the applicants started to prepare the group for the listing of Yukos shares on the international stock market. For that purpose they reorganised the internal structure of the group, made it more transparent for international investors and even started to include some of the Yukos trading companies (such as Ratibor or Fargoil) in the consolidated financial reports that were prepared in accordance with the international rules of accounting (Generally Accepted Accounting Principles, GAAP). At the same time, the applicants did not disclose to the auditors PricewaterhouseCoopers (PwC) their links to some of the companies which participated in the sales chain, such as Behles Petroleum, South Petroleum and Baltic Petroleum (page 567 of the judgment), and did not disclose the true nature of the operation for the secret buyback of Yukos shares from Daiwa and West Merchant banks.

Under the Russian accounting rules, most of the Yukos affiliates were considered as independent actors. The system of subsidiaries was organised in such a way as to conceal some of the affiliation links from the Russian authorities and the public in general (page 606 of the judgment). In the official tax returns for 1999-2004, submitted by Yukos plc to the Russian tax authorities under the then applicable rules of accounting, none of the companies registered in the Lesnoy and Trekhgorniy ZATOs was included in the list of ‘persons affiliated with Yukos plc’ (pages 326 and 328 of the judgment). At the general meetings of Yukos shareholders in 2002 and 2003 the first applicant addressed the shareholders, but did not mention the risks related to transactions with affiliated companies, which required approval by the competent bodies of Yukos. Many Russian minority shareholders were not aware of the existence of ‘consolidated financial reports’ prepared under the GAAP rules (page 611 of the judgment), because these were available only in English and were only published on the company's website. The prosecution concluded that the applicants deliberately misinformed the shareholders about the inner structure of the company and the affiliation links between Yukos and the trading companies.

Finally, even after the reorganisation and inclusion of some of the Yukos subsidiaries in the GAAP reports, those companies remained bound by secret obligations and ‘equity option contracts’ with the companies affiliated with the applicants, which were not mentioned in the consolidated reports. Those secret agreements permitted the applicants to assume control of those companies or their funds at any moment.

According to the prosecution, although the applicants reinvested a large part of the profits from the sale of oil to Yukos and its subsidiaries, and included the financial results of those subsidiaries in the consolidated report under the GAAP system, this served only the interests of the applicants themselves. It raised the capitalisation of Yukos and inflated the price of its shares. Thus, in 1999 under the Russian accounting rules, Yukos's profits amounted to USD 228 million, whereas, according to the consolidated report which included trading companies and was prepared under the international rules (US GAAP), Yukos's profits amounted to USD 1,152 million. In 2000–2002 the applicants, through Yukos Capital, concluded a number of very profitable deals with small blocks of Yukos shares. By attracting foreign investors on the open market and selling them a small part of Yukos's capital, the applicants tried to legalise their own status as lawful owners of the shares. The applicants concealed from the foreign investors the fact that they fully controlled the company and its profits.

After the start of the criminal case against the applicants, many of the documents concerning Yukos's foreign affiliates were physically removed from Yukos's offices and transferred to the companies' foreign offices, out of reach of the Russian authorities. The applicants never provided information about the foreign subsidiaries to the Russian authorities and kept all documents in their offices abroad. As a result, when the applicants lost control over the ‘mother company’, i.e. Yukos plc, they were still able to control some of the ‘daughter companies' abroad, which had accumulated significant assets.

According to the prosecution, after their arrests in July and October 2003 the applicants continued to withdraw capital from the trading companies which were formally affiliated with Yukos and which accumulated proceeds from the sales. Those funds were transferred to companies controlled by the applicants, specifically to Yukos Capital S.à.r.l. In September and October 2003 a large proportion of the funds concentrated in the Yukos affiliates (USD 2.6 billion) was withdrawn from their accounts and transferred for the purchase of a large block of shares in Sibneft plc, another large Russian oil company (pages 562 et seq. of the judgment). Using that block of Sibneft shares as security, Yukos plc borrowed USD 2.6 billion from Société Générale, a French bank. That amount was transferred to the accounts of Yukos and its subsidiaries so that they might continue their usual operations.

While in remand prison, the first applicant, acting through his lawyer and in consort with the second applicant, ordered his accomplices and business partners to transfer money from the accounts of Nassaubridge and Dansley to the accounts held by the company Brittany Assets Limited in Citibank and Barclays Bank, and onwards to Yukos Capital S.à.r.l. (page 23 of the decision of the court of appeal). Some of those sums were returned to Yukos and its subsidiaries, that is, the production entities and trading companies. However, this money was transferred in the guise of a loan with interest, so that Yukos plc became indebted to Yukos Capital. In total, Yukos Capital provided over USD 2 billion to Yukos and its affiliates in loans. According to the prosecution, those loans were supposed to maintain the process of oil extraction in the expectation that the company would remain in the hands of the applicants.

According to the applicants, the court ultimately rejected all the motions lodged by the defence for the removal of evidence.

The motions which were ruled on in the judgment concerned the following items (pages 628 et seq. of the judgment):

The defence pointed out that the contested evidence was obtained on the basis of search and seizure warrants issued by the prosecution without prior approval by a court. In the opinion of the defence, seizures in the banks, law firms and audit companies could not have been conducted on the sole basis of a decision by the prosecutor. The defence referred, inter alia, to Ruling no. 439-O of the Constitutional Court of 8 November 2005, which indicated that a search in a lawyer's office was possible only with the prior approval of a court. According to the defence, only the seizures of 29 December 2006 and 17 January 2007 had been based on a court warrant (issued on 26 December 2006 and 15 June 2007 respectively). Other seizures (those of 14 March 2005, 8 July 2005, 9, 10, 12, 16 and 19 January 2007 and 8 February 2007) had been conducted without such a court warrant and their results were therefore invalid.

The court refused to remove evidence from the case file. It held that the CCrP required a court warrant only for seizures where a document to be seized contained information about the bank accounts and deposits of private individuals (Article 183 of the CCrP, read in conjunction with Article 29, part 2 point 7). However, all of the documents seized in the Natsionalniy Bank Trust, Investitsionniy Bank Trust (previously known as DIB bank) and Aktiv Bank concerned the bank accounts of legal persons. In addition, the lawfulness of the seizures in those three banks had already been confirmed in the judgment concerning Mr Malakhovskiy and Mr Pereverzin of 1 March 2007. With reference to Article 90 of the CCrP, the court ruled that those court findings in the previous case ‘can be considered established without additional verification’ (page 631 of the judgment).

As to the seizure in the law offices of ALM Feldmans, the court noted that Ruling No. 439-O was adopted by the Constitutional Court on 8 November 2005, whereas the impugned searches had been carried out in 2004. In addition, the documents seized from ALM Feldmans did not concern the ‘provision of legal assistance to persons or organisations’. The documents obtained concerned the operations of one of the partners in ALM Feldmans, Mr Iv., who managed the accounts of several commercial organisations which had been used by the members of the organised group to legalise the assets which they had misappropriated. The court also referred to the rulings of the Basmanniy District Court of 21 September 2007 and 30 October 2007, whereby the defence motion to exclude evidence had been dismissed.

The court refused to suppress documents obtained as a result of the seizures in the office of Mr Drel, the lawyer for the two applicants, during the search at 88a, Zhukovka village, of 9 October 2003. The court found that the documents seized were not from his case files and did not concern the provision of legal assistance to persons and organisations. The documents in question concerned Mr Drel's participation in the financial operations in favour of persons who were part of the organised criminal group. The office of ALM Feldmans was registered at a different address in Moscow. The reference by the applicants' lawyers to section 8 of the Advocacy Act was misplaced. Article 182 of the CCrP did not contain any requirement to obtain a court warrant in the event of a search in a lawyer's office. In addition, the lawfulness of the search in the premises located at 88a Zhukovka village had been confirmed by the judgment of 16 May 2005, in the first case against the applicants.

Seizures in the premises of PwC on 3 March 2005 and 7 June 2005 were found to be lawful, since in the period before 5 June 2007 Articles 29 and 183 of the CCrP did not require a court warrant for a seizure in an office of an audit firm.

The court found that the seizures of documents in the premises of PwC on 10, 12, 16, 19 January and 8 February 2007 had been lawful, having been authorised by the Basmanniy District Court. Given the volume of documents to be seized, one warrant from the Basmanniy District Court sufficed to cover several consecutive days of seizure.

The defence sought to exclude documents obtained during the search of 17 December 2004, conducted in Mr Pereverzin's flat without a court order. However, the court found that those documents were to be admitted: the search was conducted without a court warrant because it was an ‘urgent search’, and immediately afterwards the investigator applied to a court and obtained approval for the search (ruling of the Basmanniy District Court of 17 December 2005). Under Article 165 part 5 and 182 of the CCrP the investigator had a right to examine objects and documents obtained during the search before having obtained a court's approval for the search itself (page 636 of the judgment).

Furthermore, the defence sought exclusion of a number of documents produced by the prosecution: some did not contain either signatures or official stamps, or had been added to the case file without the necessary formalities. Pages were missing from some other documents. Some of the documents had been obtained during searches at which no inventory of objects and documents seized had been made. However, the court dismissed those objections as unfounded, irrelevant or unimportant.

The defence objected to the use of a written record of the questioning of witness Mr A. by the investigators. According to the defence, his oral submissions, audio-recorded by the investigator and also submitted to the court, differed significantly from what was set out in the written record. However, the court ruled that the law did not require word-for-word recording of the oral submissions, and that Mr A. had made no objections to the written record of his questioning and had later confirmed his testimony before the court. Thus, the record accurately reflected the essence of his depositions.

The defence sought the exclusion of allegedly unlawful intercepts of telephone conversations between Ms Bakhmina and Mr Gololobov, two Yukos lawyers, in order to check the veracity of the transcripts. The court initially granted that request and ordered the GPO to produce the relevant audio recordings, made in late 2004. However, on 29 September 2009 the court received a letter from the GPO whereby the latter refused to produce the recordings on the ground that it might jeopardise the interests of investigations in other cases, specifically case no. 18/41-03, which concerned 20 suspects. As a result, on 16 November 2009 the court rejected the motion to listen to the audio records.

The defence sought the exclusion of other allegedly unlawfully obtained evidence. In particular, they argued that the order to sever criminal case no. 18/432766-07 from case no. 18/41-03 had been unlawful, that copies of procedural documents related to other criminal cases could not be admitted in evidence, that there was no inventory of the materials contained in the original (‘old’) case file, and that, as a result, the defence was unable to establish whether the ‘old’ case file contained any potentially important exculpatory material.

The defence also claimed that the prosecution's method of collecting evidence within the ‘new’ case largely consisted of inspecting the materials of the ‘old’ case and regularly adding parts of the ‘old’ case file to the new one. The defence claimed that this was not a proper way to collect evidence and that all the documents so added were inadmissible.

The defence also sought the removal of documents translated from foreign languages, since the translation was sub-standard and contained gross errors. However, the court concluded that the translations were appropriate.

The defence claimed that information from the Yukos website was obtained more than a year after the arrest of the two applicants and was therefore unreliable. The defence sought examination of the disc on which the investigator recorded the content of the website, but the court rejected that motion.

The defence sought the exclusion of expert report no. 2601-12/2000, prepared by experts from the private evaluation agency Kvinto-Konsalting Ltd., which concerned the evaluation of the share price of several corporate entities which were to some extent affiliated with Yukos, with a view to establishing whether certain exchanges of these company's shares for Yukos' shares had occurred on an equivalent basis.

The court concluded that on 2 October 2000 investigator Shum. commissioned an expert examination and explained to the two experts — Mr Koz. and Mr Rus. — their rights and responsibilities. The expert report was prepared in accordance with the law and duly signed by the experts, who had all necessary qualifications. The applicants received a copy of that expert report in 2007, when they became suspects in the second criminal case.

The defence sought the removal of an expert report of 24 June 2004 (‘evaluation report’), prepared on the basis of the investigator's decision of 15 April 2004. It likewise concerned evaluation of the share price of several corporate entities where were to some extent affiliated with Yukos.

The defence stated that they had not been informed about the decision of 15 April 2004 to commission such a report; that the expert report did not contain certain elements which were mandatory under Article 204 of the CCrP; that in essence the examination was ‘repetitive’ (povtornaya); that the experts were invited to answer legal questions falling outside their professional competency; that the experts were not given all necessary materials; and, at the same time, that some of the materials given to them had not been part of the case file in the applicants' case.

However, the court ruled that when the investigator had ordered the examination, the applicants had had no status within the criminal proceedings. When they received a copy of the expert report, namely at the time they were given access to the materials of the case file under Article 217 of the CCrP, they had been able to ask the investigator for further examinations, but had failed to do so.

The court heard expert Mr Shk. and concluded that the examination had been conducted with all the necessary diligence and all formalities had been respected. The questions put to the experts were not ‘legal’ but related to the regulations in the sphere of evaluation activity. The materials of the expert examination were severed from the ‘main case’ (case-file no. 18/41-03) in accordance with the law. The law did not require that all the materials which served as a basis for the experts' conclusions be severed at the same time as the expert report (page 645 of the judgment).

The applicants sought the exclusion of an expert report prepared by Mr Yeloyan between 8 February and 28 March 2006 (‘informational and accounting assessment’). The expert had to establish whether there had been any discrepancies in the balance sheets of four Yukos subsidiaries, including Yukos-M and Y-Mordoviya, and the details of oil purchase transactions carried out by these companies in 2000. According to Mr Yeloyan's findings, there were no discrepancies in the balance sheets of the Yukos subsidiaries. He also provided the requested information concerning the oil purchase transactions.

According to the judgment, the expert report had been prepared within case no. 18/325543-04 and was later joined to case no. 18/41-03 in accordance with the law and on the basis of the investigator's decision of 8 February 2006. The court repeated that it had no doubt that Mr Yeloyan was competent to conduct the expert examination entrusted to him. The fact that Mr Yeloyan had participated in other examinations at the investigator's request was not indicative of any bias. The court also observed that the applicants had no procedural status as suspects or accused within case no. 18/325543-04 and therefore had no procedural rights in respect of materials and evidence obtained within that investigation.

The applicants sought the exclusion of an expert report prepared by Mr Yeloyan and Mr Kupriyanov between 22 and 25 January 2007 (‘economic and accounting assessment’). The experts had to establish (i) how Neftetrade 2000, one of Yukos subsidiaries, distributed profit to foreign trading companies in 2001 and how the latter used it; and (ii) from which entities Neftetrade 2000 received funds in order to pay profits to the foreign trading companies. In their report the export stated the amounts that corresponded to the distributed profits. According to their findings, the funds for the payment of profits were received through the sale of promissory notes to Yukos-M and Alta-Trade.

The examination was ordered on 22 January 2007 on the basis of a decision by the investigator in the context of criminal case no. 18/41-03. All materials concerning this expert examination were severed from the ‘main case’ and attached to case file no. 18/432766-07, which was later submitted to the Khamovnicheskiy District Court of Moscow. The experts were given access to the materials of case no. 18/41-03 and to the accounting databases of DIB bank and the Moscow branch of Menatep SPB bank for 2001.

The defence sought to obtain disclosure of the ‘source materials’ which had served as a basis for the expert conclusions, as well as the questioning of Mr Yeloyan and Mr Kupriyanov. However, this was refused. The court concluded that the investigator's decision had been lawful, that the experts had been independent and qualified and had had access to all necessary source materials (without, however, reviewing those materials directly). The applicants had received a copy of their report and were able to ask the prosecution to conduct additional expert examinations.

The defence sought the removal from the file of expert report no. 8/17 of 2 February 2007, prepared by Mr Chernikov and Mr Migal, police experts from the Moscow Region police forensic centre. The experts were requested to establish the quantity of oil purchased by Yukos plc, Yukos-M and Y-Mordoviya from Yuganskneftegaz plc, Tomskneft plc and Samaraneftegaz plc between 1998 and 2000 and to determine the cost of the oil having regard to the world market price for the ‘Urals (Med)’ and ‘Urals (R'dam)’ oil for the relevant period. The experts provided the requested figures in their conclusions. According to their findings, Yukos trading companies invariably purchased oil from oil-extracting Yukos subsidiaries at prices significantly lower than the world market price.

The court established that the applicants had been informed about the expert examination on 6 February 2007 (the first applicant) and 10 February 2007 (the second applicant). On those dates the applicants were handed a copy of the investigator's decision ordering the examination and the expert report itself. Since at that point the pre-trial investigation was still pending, the applicants could have asked the investigator to put additional questions to the experts, to carry out the investigation in a specific expert institution or to appoint specific experts to the expert team. However, the defence did not file such a motion. The court concluded that the defence had failed to use their rights as provided by Article 198 of the CCrP.

The applicants also questioned the experts' qualifications and competency to participate in such examinations, but the court dismissed that argument.

The defence's next argument related to the questions which the investigator put to the experts. The court replied that those questions had been understood by the experts and they had not asked for any clarifications from the investigator.

The defence indicated that the investigator's order did not specify which materials had been submitted by the prosecution to the experts for examination, and that the examination was started on the same day. However, the court held that the CCrP did not require the investigator to specify the materials which were handed to the experts for examination, and that the experts had been free to start working with the case file on the same day as the examination had been commissioned.

169. Finally, the court observed that any possible criticism by the defence as to the quality of the questions put to the experts, and to the quality of the answers received from the experts, would be analysed by the court when it examined the essence of the experts' conclusions.

The Government, relying on Articles 19, 45, 46, 50 and 123 of the Constitution, Article 47 of the CCrP and Ruling no. 576-O-P of the Constitutional Court of 19 May 2009, maintained that criminal judicial proceedings in Russia are adversarial and are based on the principle of equality of parties.

According to the Government, the criminal proceedings against the applicants were fully in compliance with the domestic law. The applicants could participate in all court hearings where they had an opportunity to present their arguments to the court. Their right to question defence and prosecution witnesses and to rebut statements by victims and witnesses that were unfavourable to them was not limited in any way. The court examined all the evidence presented by the parties and assessed it from the point of view of admissibility, relevance, truthfulness and accuracy. Furthermore, the court ruled on all the motions filed by the parties. The lawfulness of the judgment was confirmed by the courts of higher instance.

In particular, as regards expert reports, specialists' reports and the questioning of experts and specialists, the Government referred to Articles 45 § 2, 46 § 1 and 50 § 2 of the Constitution, Articles 47, 53 § 3, 74, 80 § 3, 86 §§ 2 and 3, 195, 205, 206, 207, 217 § 4, 220 § 4, 271 and 283 and Constitutional Court Rulings no. 2-P of 14 February 2000, no. 18-P of 8 December 2003, no. 135-O of 24 March 2005 and no. 525-O-O of 21 October 2008.

According to the Government, the applicants were familiarised with the orders for expert examinations in due time and it was open to them to put additional questions to the experts, to move for particular experts be appointed or to request that the expert examination be conducted in a particular place. However, they did not exercise these procedural rights in the course of the preliminary investigation. At the trial stage the defence requested that certain experts be questioned at the hearing and that specialists' reports be adduced to the materials of the case. The court examined those motions and refused them on valid grounds. As for the defence's arguments concerning the inadmissibility of certain expert reports, these were also examined and dismissed by the court for the reasons stated in the judgment in the applicants' case, upheld by the appellate court.

As regards witnesses living abroad, the Government submitted that an accused's counsel may question witnesses, including persons who do not have the status of ‘witness’ in the criminal proceedings. The counsel may then petition either the investigator or the court, depending on the stage of the proceedings, to adduce the record of the questioning to the case materials. The investigator or the court must then examine the request. However, even if the record of the questioning is adduced to the case materials, this does not replace the questioning of the witness at the court hearing.

447. They further submitted that although domestic legislation provided for the possibility of questioning a witness by means of video- conferencing, this did not apply to witnesses living abroad. However, such a witness might be invited to participate in investigative measures taken on the Russian territory. Accordingly, when refusing the applicants' motion to request foreign authorities to question certain witnesses, the domestic court noted that such witnesses could be questioned at the hearing were they to appear before it.

The Government further noted that the statements made at the pre-trial investigation by 34 witnesses, questioned at the hearing, were subsequently read out to the court, because of significant contradictions between their pre-trial statements and those made before the court (in 17 instances) or because of the incompleteness of the statements made in court, attributed to the time that had elapsed since the events in question (in another 17 instances). Accordingly, those statements were read out in order to ensure a complete and comprehensive examination of the case by the court.

As regards the applicants' requests to obtain certain written evidence that was in the possession of third parties and obtained by the GPO in the course of the searches conducted in 2003, the Government submitted that they had been refused by the court as irrelevant or unfounded.

The Government pointed out that, according to the Court's case-law, the admissibility of evidence is primarily a matter for regulation by national law (see Van Mechelen and Others v. the Netherlands, 23 April 1997, § 50, Reports 1997-III) and that, as a general rule, it is for the national courts to assess the evidence before them as well as the relevance of the evidence which defendants seek to adduce (see Vidal v. Belgium, 22 April 1992, § 33, Series A no. 235-B). They argued, with reference to Engel and Others v. the Netherlands (8 June 1976, § 91, Series A no. 22) and Perna v. Italy [GC] (no. 48898/99, § 29, ECHR 2003-V) that it is for the accused seeking to question witnesses or to adduce a piece of evidence to corroborate the relevance thereof.

The Government averred that in the case at hand all the motions filed by the defence to exclude or adduce certain evidence had been duly examined by the domestic courts with regard to the admissibility and relevance of the evidence in question. Some of the motions were granted. At the same time, the fact that many motions were refused did not as such affect the fairness of the proceedings. Firstly, the domestic courts enjoy wide discretion with respect to assessment of evidence. Secondly, the defence could exercise all its procedural rights. Thirdly, the applicants failed to demonstrate, either to the domestic court or to the Court, that the evidence they thought to adduce was absolutely necessary for the adjudication of the case.

With regard to the applicants' complaint concerning the trial court's reliance on judgments in other criminal cases in which the applicants had not been defendants, the Government referred to the Constitutional Court's Ruling no. 30-P of 21 December 2011. They argued that the trial court duly applied the res judicata effect of the earlier judicial decisions, since the facts established therein were not rebutted in the criminal proceedings against the applicants. Furthermore, such facts, taken alone, were not sufficient to prove the applicants' guilt, whereas the trial court reached its decision on the basis of the entire body of evidence in the case.

The applicants maintained their complaint that the way in which the evidence had been taken in the trial had been unfair and incompatible with Article 6 § 1. They claimed that there had been a significant disparity between the defence and the prosecution, attaining the level of a breach of the principle of equality of arms. In particular, the trial court: (i) refused to call most of the prosecution witnesses to be cross-examined at the trial; (ii) refused to allow the defence to rely on evidence provided by the specialists solicited by the defence; (iii) refused to adduce to the case material a significant body of exculpatory evidence; (iv) refused defence motions for disclosure; and (v) refused to exclude inadmissible evidence.

With regard to the Government's references to the provisions of domestic law guaranteeing equality of arms in criminal proceedings, the applicants contended that the Government had failed to show that these had been applied in the case at hand. They pointed out, in particular, that the defence was able to question only one witness for the prosecution, Mr Shk. (see paragraph 158 above), who, according to the applicants, confirmed the falsified nature of the charges against them. In their view, this obliged the prosecution, who enjoyed the support of the court, to avoid a situation whereby the defence could examine any other experts at the hearing. Furthermore, the trial court refused to adduce all of the specialist reports submitted by the defence and only allowed them to question one specialist, Mr Haun.

The applicants further contested the Government's assertion that they had been familiarised with the orders for expert examinations in due time and could have put additional questions to the experts or request that particular experts be appointed but had not exercised these procedural rights. They pointed out that they had only been made aware of the orders for expert examinations in 2006, whereas a number of expert reports had already been prepared since 2000 in a different criminal case against them. Therefore, they had had no real possibility either to participate in the preparation of the reports or to challenge them, as had been the situation in Khodorkovskiy and Lebedev v. Russia (cited above, §§ 680 and 711-16). At the same time, the trial court refused the defence's motion to examine the underlying source materials at the hearing and to declare the reports inadmissible evidence. Furthermore, it refused the defence's motion to examine the prosecution's experts at the hearing (see paragraphs 170-178 above).

In the applicants' view, the trial court refused, under contrived pretexts, their motions to have certain evidence adduced, and only allowed one defence specialist to be examined at the hearing, although he was later found ‘incompetent’ by the same court and his report had not been adduced to the materials of the case (see paragraph 199 above). The applicants believed that the only reason why Mr Haun had been questioned at the hearing at all was because he had been the first specialist called by the defence, and the prosecution had not yet been ready to object. However, after Mr Haun's statement in support of the defence, the prosecution strongly objected to the questioning of each specialist called by the defence, with the trial court invariably supporting the prosecution.

The applicants further pointed out that, whereas they had asked the trial court to obtain witness statements from a number of important witnesses living abroad, the court had refused such requests, merely stating that there were ‘no legal grounds’ for granting them. They further argued that the court arbitrarily refused to adduce to the materials of the case affidavits pertaining to questioning of certain witnesses by the applicants' counsel, as adducing them would be compatible with the domestic law (see paragraphs 241–251 above). They also contested the Government's submission that the possibility to question a witness by means of a video-conference did not apply to witnesses living abroad. In their view, there was no such prohibition in the domestic law.

As regards the reading out of pre-trial statement by the witnesses questioned at the hearing (see paragraphs 200-201 above), the applicants argued that this had been in breach of the domestic law, which only allowed for such statements to be read out in the event of significant inconsistencies between previously given testimony and the testimony given in court, which had not been the case. In their view, this served to demonstrate the trial court's bias.

As for the applicants' requests to obtain certain written evidence that was in the possession of third parties and had been obtained by the GPO in the course of the searches conducted in 2003, the applicants argued that the documents they had sought to obtain included an inventory of the assets and liabilities of Yukos subsidiaries for the period 1998–2006, as well as copies of all stock sheets, collation statements and stocktaking reports. When filing the motions for disclosure the defence made it clear that these documents demonstrated that the entities allegedly ‘injured by the theft of the oil’ had in fact suffered no damage during the relevant period and that there had been no theft of any of their property. The documents thus went to the heart of the case, but the trial court refused the motions for disclosure as ‘ill-founded’.

Finally, as regards the trial court's reliance on a number of judgments in other related cases in which the applicants had not been defendants, they insisted that this constituted a breach of their rights guaranteed by Article 6.

The Court reiterates that the right of everyone charged with a criminal offence to be effectively defended by a lawyer, assigned officially if need be, as guaranteed by Article 6 § 3 (c), is one of the fundamental features of a fair trial (see Salduz v. Turkey [GC], no. 36391/02, § 51, ECHR 2008, and Dvorski v. Croatia [GC], no. 25703/11, § 76, ECHR 2015).

The Court reiterates that an accused's right to communicate with his lawyer without the risk of being overheard by a third party is one of the basic requirements of a fair trial in a democratic society; otherwise legal assistance would lose much of its usefulness (see Sakhnovskiy v. Russia [GC], no. 21272/03, § 97, 2 November 2010, with further references). It further stresses that a measure of confinement in the courtroom may affect the fairness of a hearing guaranteed by Article 6 of the Convention; in particular it may have an impact on the exercise of an accused's rights to participate effectively in the proceedings and to receive practical and effective legal assistance (see Svinarenko and Slyadnev v. Russia [GC], nos. 32541/08 and 43441/08, § 134, ECHR 2014 (extracts), and the cases cited therein).

The Court notes that all the documents which the defence lawyers wished to show to their clients had first to be reviewed by the judge (see paragraph 76 above) who, according to the Government, would establish their relevance to the case (see paragraph 438 above).

The Court observes that, in similar circumstances, it has found a violation of Article 6 §§ 1 and 3 (c) on account of interference with the secrecy of the applicants' communications with their lawyers by virtue of a rule, set by the trial court's judge, whereby all written materials had to be checked by a judge before being passed to the applicants (see Khodorkovskiy and Lebedev v. Russia, cited above, §§ 642-49).

The Court notes that the Government have not put forward any fact or argument capable of persuading it to reach a different conclusion in the present case.

The Court further notes that during the trial the applicants were held in a glass dock (see paragraphs 75-76 above). The Court is mindful of the security issues a criminal court hearing may involve, especially in a large-scale or sensitive case. It has previously emphasised the importance of courtroom order for a sober judicial examination, a prerequisite of a fair hearing (see Ramishvili and Kokhreidze v. Georgia, no. 1704/06, § 131, 27 January 2009). However, given the importance attached to the rights of the defence, any measures restricting the defendant's participation in the proceedings or imposing limitations on his or her relations with lawyers should only be imposed in so far as is necessary, and should be proportionate to the risks in a specific case (see Van Mechelen and Others, cited above, § 58; Sakhnovskiy, cited above, § 102; and Yaroslav Belousov v. Russia, nos. 2653/13 and 60980/14, § 150, 4 October 2016).

In the present case, the applicants were separated from the rest of the hearing room by glass, a physical barrier which to some extent reduced their direct involvement in the hearing. Moreover, that arrangement made it impossible for the applicants to have confidential exchanges with their legal counsel, as they were physically removed from them, and any conversations between the applicants and their lawyers would be overheard by the guards in the courtroom.

The Court considers that it is incumbent on the domestic courts to choose the most appropriate security arrangement for a given case, taking into account the interests of the administration of justice, the appearance of the proceedings as fair, and the presumption of innocence; they must at the same time secure the rights of the accused to participate effectively in the proceedings and to receive practical and effective legal assistance (see Yaroslav Belousov, cited above, § 152, and Maria Alekhina and Others v. Russia, no. 38004/12, § 171, 17 July 2018). In the present case, the use of the security installation was not warranted by any specific security risks or courtroom order issues but was a matter of routine. The trial court did not seem to recognise the impact of the courtroom arrangements on the applicants' defence rights and did not take any measures to compensate for those limitations. Such circumstances prevailed for the duration of the first-instance hearing, which lasted over one year and ten months, and must have adversely affected the fairness of the proceedings as a whole.

It follows that the applicants' rights to participate effectively in the trial court proceedings and to receive practical and effective legal assistance were restricted and that those restrictions were neither necessary nor proportionate, in breach of Article 6 §§ 1 and 3 (c) of the Convention.

In view of that finding, the Court does not consider it necessary to address the other aspects of the applicants' complaint under Article 6 §§ 1 and 3 (c) of the Convention.

The Court reiterates that the key principle governing the application of Article 6 is fairness. The right to a fair trial holds so prominent a place in a democratic society that there can be no justification for interpreting the guarantees of Article 6 § 1 of the Convention restrictively (see Moreira de Azevedo v. Portugal, 23 October 1990, § 66, Series A no. 189, and Gregačević v. Croatia, no. 58331/09, § 49, 10 July 2012).

The Court reiterates that the presumption of innocence enshrined in Article 6 § 2 of the Convention and the guarantees relating to the examination of witnesses set out in Article 6 § 3 (d) of the Convention are elements of the right to a fair hearing set forth in Article 6 § 1 of the Convention and must be taken into account in any assessment of the fairness of proceedings as a whole (see Doorson v. the Netherlands, 26 March 1996, § 70, Reports 1996-II; Gäfgen v. Germany [GC], no. 22978/05, §§ 162 and 175, ECHR 2010; Al-Khawaja and Tahery v. the United Kingdom [GC], nos. 26766/05 and 22228/06, § 118, ECHR 2011; Khodorkovskiy and Lebedev, cited above, § 743; and Karaman v. Germany, no. 17103/10, §§ 42–43, 27 February 2014).

The Court further reiterates that as a general rule, Article 6 §§ 1 and 3 (d) requires that the defendant be given an adequate and proper opportunity to challenge and question a witness against him, either when he makes his statements or at a later stage (see Al-Khawaja and Tahery, cited above, § 118; and Poletan and Azirovik v. the former Yugoslav Republic of Macedonia, nos. 26711/07, 32786/10 and 34278/10, § 81, 12 May 2016).

The term ‘witnesses' under Article 6 § 3 (d) of the Convention has an autonomous meaning which also includes expert witnesses (see Gregačević, cited above, § 67, and Constantinides v. Greece, no. 76438/12, §§ 37–38, 6 October 2016). However, the role of expert witnesses can be distinguished from that of an eye-witness who must give to the court his personal recollection of a particular event (see Khodorkovskiy and Lebedev, cited above, § 711). In analysing whether the personal appearance of an expert at the trial was necessary, the Court will therefore be primarily guided by the principles enshrined in the concept of a ‘fair trial’ under Article 6 § 1 of the Convention, and in particular by the guarantees of ‘adversarial proceedings’ and ‘equality of arms’. That being said, some of the Court's approaches to the personal examination of ‘witnesses' under Article 6 § 3 (d) are no doubt relevant in the context of examination of expert evidence and may be applied, mutatis mutandis, with due regard to the difference in their status and role (see Bönisch v. Austria, 6 May 1985, § 29, Series A no. 92, with further references, and Matytsina v. Russia, no. 58428/10, § 168, 27 March 2014).

The Court reiterates that the principle of equality of arms implies than the applicant 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’ (see Bulut v. Austria, judgment of 22 February 1996, Reports of Judgments and Decisions 1996‑II, § 47). The concept of ‘equality of arms’ does not, however, exhaust the content of paragraph 3 (d) of Article 6, nor that of paragraph 1, of which this phrase represents one application among many others. The Court's task under the Convention is not to give a ruling as to whether witness statements were properly admitted as evidence, but rather to ascertain whether the proceedings as a whole, including the way in which evidence was taken, were fair (see, among many other authorities, Vidal, cited above, § 33, and Van Mechelen and Others, cited above, § 50).

The admissibility of evidence is primarily a matter for regulation by national law (see Perna, cited above, § 29). Furthermore, as a general rule, it is for the national courts to assess the evidence before them as well as the relevance of the evidence which defendants seek to adduce. Article 6 § 3 (d) leaves it to them, again as a general rule, to assess whether it is appropriate to call witnesses (see Vidal, cited above, § 33, Series A no. 235-B); it does not require the attendance and examination of every witness on the accused's behalf: its essential aim, as is indicated by the words ‘under the same conditions’, is a full ‘equality of arms’ in the matter (see, among other authorities, Murtazaliyeva v. Russia [GC], no. 36658/05, § 139, 18 December 2018, Engel and Others, cited above, § 91, and Bricmont v. Belgium, judgment of 7 July 1989, Series A no. 158, p. 31, § 89).

It is accordingly not sufficient for a defendant to complain that he has not been allowed to question certain witnesses; he must, in addition, support his request by explaining why it is important for the witnesses concerned to be heard and their evidence must be necessary for the establishment of the truth (see Murtazaliyeva, cited above, § 158, Engel and Others, cited above, § 91, and Perna, cited above, § 29). In respect of witnesses on behalf of the accused, only exceptional circumstances could lead the Court to conclude that a refusal to hear such witnesses violated Article 6 of the Convention (see Bricmont, cited above, § 89, and Dorokhov v. Russia, no. 66802/01, § 65, 14 February 2008).

The Court notes that the applicants' complaints concerning the taking and examination of evidence and breach of the principles of equality of arms and presumption of innocence in the proceedings may be divided into six groups. First, the applicants maintained that they had been unable to cross-examine most of the expert witnesses for the prosecution. Second, they complained that the court had permitted the prosecution to rely on their expert evidence but dismissed all but one request by the defence to allow their experts to testify or present their written opinions. Third, they argued that the court had failed to summon witnesses for the defence, to secure forced attendance of a number of witnesses or to obtain their questioning by video-conference or through letters rogatory. Fourth, the applicants complained that the court had refused to add exculpatory material to the case file or to order disclosure of exculpatory material or ‘source materials’ in general. Fifth, they complained about the trial court having relied on judgments in other criminal cases. Sixth, the applicants claimed that the court had refused to exclude inadmissible evidence for the prosecution, including evidence obtained in breach of lawyer-client confidentiality. The Court will address the applicants' complaints in the above order.

As regards the charge of misappropriation, the first-instance and the appeal courts found that the applicants, as leaders of an organised criminal group, had organised and implemented the scheme to misappropriate the oil produced by the Yukos production entities, through its purchase by Yukos trading companies at ‘artificially low prices’. The courts held that, although the oil had been sold by the Yukos production entities to Yukos trading companies under sale agreements approved by the general meetings of shareholders, such approvals had been secured by deceit and manipulation by way of obtaining a majority at the general meeting of shareholders through shareholders under the applicants' control, so that the production entities' will had been distorted and they had been effectively forced to sell the oil on disadvantageous terms (see paragraphs 301–303 and 335–336 above).

Initially the applicants were charged and convicted under Article 160 § 3 (a) and (b) of the Criminal Code (large-scale misappropriation or embezzlement with abuse of position, committed by group acting in concert). This charge was requalified on appeal as falling under Article 160 § 4 (large-scale misappropriation or embezzlement with abuse of position, committed by an organised group).

The Court notes that the issue under Article 7 in the present case is substantially different from that it had to examine in the previous case brought by the applicants, Khodorkovskiy and Lebedev, cited above, §§ 745–821, which concerned the charge of tax evasion in the first set of criminal proceedings against them. In that case the Court observed that while ‘tax evasion’ was defined in the domestic criminal law in very general terms, this did not in itself raise any issues under Article 7. It further noted that given that the forms of economic activity and, consequently, the methods of tax evasion were in constant development, the domestic courts might invoke legal concepts from other areas of law, in particular the tax law, so as to decide whether a particular conduct amounted to ‘tax evasion’ in the criminal-law sense (see Khodorkovskiy and Lebedev, cited above, § 791). The Court subsequently held that, having found the applicants' business practices to constitute tax evasion, the domestic courts had given a novel interpretation to ‘tax evasion’ which, however, was consistent with the relevant provisions of the Criminal Code and ‘consistent with the essence of the offence’ (see Khodorkovskiy and Lebedev, cited above, § 821).

The Court further notes that in the case of OAO Neftyanaya Kompaniya Yukos, cited above, §§ 597-98, which concerned the tax-assessment proceedings in respect of Yukos plc, it stated, albeit in the context of Article 1 of Protocol No. 1, that the relevant provisions of the Tax Code enabled the domestic courts to change the legal characterisation of transactions and also the legal characterisation of the status and activity of taxpayers and that, should a tax fraud be uncovered, a taxpayer faced the risk of tax reassessment of its actual economic activity in the light of the relevant findings of the competent authorities.

The Court observes that none of the above considerations apply to the case at hand. The proceedings at issue did not concern tax matters. Here the applicants were convicted of ‘misappropriation or embezzlement’ defined in Article 160 of the Criminal Code, as in force of the material time, as ‘stealing of other people's property entrusted to the culprit’. Footnote 1 to Article 158, as in force at the material time, provided that ‘stealing’ meant ‘the unlawful and uncompensated taking and/or appropriation of another's property to the benefit of the culprit or of other parties, thereby causing damage to the owner or to any other possessor of the property’. The Court notes that ‘stealing’ is an offence long known to the criminal law and that, unlike the offence of tax evasion, a precise definition of it was given in the Criminal Code. Also unlike tax evasion, determination of this charge did not involve reassessment of the applicants' entire economic activity, but was limited to particular transactions, namely those involving sale of oil from the Yukos production entities to the Yukos trading companies.

Having regard to the specific criminal acts described in paragraph 574 above, the Court notes that the applicants' criminal conduct, as defined by the domestic courts, included purchasing, via Yukos trading companies, oil at ‘artificially low prices’ from Yukos production entities after having coerced the latter into contracts on disadvantageous terms by distorting their will through manipulation. The Court therefore has to examine whether the conclusions reached by the domestic courts concerning the applicants' conduct were based on an analysis which could be considered as arguably reasonable and, consequently, whether it was foreseeable that the applicants' acts could constitute misappropriation or embezzlement.

The Court observes that it is neither contested by the parties, nor was it called into question by the domestic courts, that the Yukos production entities had received payment for the oil they had sold to the Yukos trading companies under the contracts concluded to that effect. The contracts in question were valid under civil law at the relevant time and so remain to date, having never been invalidated within civil proceedings. The Court notes that under Article 160 of the Criminal Code ‘misappropriation or embezzlement’ is a type of ‘stealing’. The definition of the latter offence, as provided at the relevant time in footnote 1 to Article 158, contained among its essential elements ‘the unlawful and uncompensated taking and/or appropriation of another's property’.

581. The Court finds itself unable to conceive how a reciprocal transaction that is valid under civil law can amount to ‘the unlawful and uncompensated taking… of another's property’. It notes in this regard that the Constitutional Court in its Ruling no. 1037-O-O of 2 July 2009 on the first applicant's complaint expressly ruled out the possibility of bringing criminal charges under Article 160 of the Criminal Code in respect of lawful civil-law transactions (see paragraph 403 above).

The Court takes note of the Government's reference to Resolution no. 51 of the Plenum of the Supreme Court of 27 December 2007 (see paragraph and 408 above). In so far as the Government refer to the Plenum's finding in § 20 of the Resolution to the effect that ‘partial compensation of the damage caused to the victim does not in itself constitute proof of the lack of the intent to misappropriate or embezzle the entrusted property’, the Court is of the opinion that it cannot be applicable to consideration under valid civil-law transactions (see also the separate opinion of Judge Kononov of the Constitutional Court in paragraph 404 above). To hold otherwise would mean that any contract of sale that is lawful under civil law would be open to being recognised as a criminal offence of stealing should a dispute arise as to the prices set out in the contract. This would amount to an untenable position capable of leading to arbitrary consequences, let alone the fact that it contravenes the Constitutional Court's Ruling no. 1037-O-O of 2 July 2009 cited in the preceding paragraph.

The Court notes that the applicants disputed the domestic courts' factual findings concerning the acts imputed to them of manipulating and distorting the will of the Yukos production entities. However, the Court considers that it is not called upon to reassess the domestic courts' findings in this respect. Accepting for the purposes of the present analysis the domestic courts' establishment of the facts, and without prejudice to the possibility of the acts imputed to the applicants being punishable under a different provision of the Criminal Code, the Court cannot but establish that ‘deceit’ did not feature as a qualifying element in either the offence of ‘misappropriation or embezzlement’ in Article 160, or the offence of ‘stealing’ defined in footnote 1 to Article 158 of the Criminal Code. Therefore, in the Court's view, the acts imputed to the applicants could not in any event be punishable under the provisions of the Criminal Code applied by the domestic courts in the criminal proceedings against them.

The Court further notes the applicants' argument that their conviction for misappropriation was not consistent with other constituent elements of the offence. In particular, in their view, the property in question had not been ‘entrusted to them’, and no ‘damage’ had been caused to Yukos production entities. However, in the light of its findings in paragraphs 581–582 above, the Court does not consider it necessary to examine these aspects of the applicants' complaint.

In the light of the foregoing the Court concludes that in the determination of the criminal charges against the applicants the offence set out in Article 160 § 4 of the Criminal Code, as in force at the time of their conviction, was extensively and unforeseeably construed, to their detriment. It considers that such an interpretation could not be said to have constituted a development consistent with the essence of the offence (see Liivik, cited above, §§ 100-01; Huhtamäki, cited above, § 51; and Navalnyye v. Russia, no. 101/15, § 68, 17 October 2017). In view of the above, it was not possible to foresee that the applicants' conduct in entering into the transactions on the sale of oil from the Yukos production entities to the Yukos trading companies would constitute misappropriation or embezzlement.

In the light of its findings above, the Court considers that it was equally unforeseeable that the profits from the sale of the oil from the Yukos production entities to the Yukos trading companies would be found to constitute the proceeds of a crime, the use of which could amount to laundering of money or of other assets under Article 174.1 of the Criminal Code (see Navalnyye, cited above, § 68, 17 October 2017).

It follows that there has been a violation of Article 7 of the Convention.