Wednesday, September 30, 2009

Georgia and Russia Blamed for War

A European Union-commissioned investigation of the Russia-Georgia war of August 2008 over Georgian breakaway provinces Abkhazia and South Ossetia concluded that Georgia started the war by attacking South Ossetia, but that Russia shares responsibility for causing the war by supporting separatists in the two provinces. The report also faulted Russia for disproportionate military action during the war and recognizing Abkhazian and South Ossetian independence after the war.

Lawyers Vie for Sovereign Debt Work

International law firms Cleary Gottlieb Steen & Hamilton and Baker & McKenzie have submitted bids to advise the Russian government on international financial issues, including sovereign debt. The Ministry of Finance is to announce the tender results the week of October 6.

Chemicals Privatization Thrice Annulled

The third attempted privatization in two years of Odessa Port Factory, one of Ukraine’s largest producers of ammonia and nitrogen fertilizers, was annulled after Prime Minister Yulia Timoshenko accused the bidders of collusion. The State Property Fund proceeded with the tender despite a decree by President Viktor Yushchenko and a Kiev court’s decision that the privatization should not take place. The Fund states that the President’s decree exceeded his jurisdiction, and that the Fund did not receive a required order implementing the court’s decision.

Prix Fixe TV

Russia’s Federal Anti-Monopoly Service (FAS) issued a warning for attempted price-fixing by the Association of Cinema and Television Producers, which controls 80% of the Russian TV serials market. The Association sought to counteract a decrease in the purchase price of TV production, resulting from decreased advertising revenues, by setting uniform pay rates for actors and other participants in the production process. The FAS only issued a warning because the Association did not succeed in imposing the rates.

Tuesday, September 29, 2009

Georgian Mutineers Admit Guilt

Thirteen Georgian military men accused of mutiny and planning a coup d'etat backed by Russia have admitted guilt in exchange for a lighter sentence and cooperation with the prosecution. In May 2009 the commanders of the Mukhrovani military base announced they did not recognize the current Georgian authorities, but after brief negotiations surrendered. Thetrial continues against twelve other defendants.

France Drops Investigation against Russian Tycoon

French prosecutors dropped the investigation against Russian billionaire Mikhail Prokhorov, suspected of running a prostitution ring at a ski resort in Courchevel. French authorities complain that the Russian General Prosecutor's Office failed to cooperate in the investigation. Prokhorov's defense says that the 16 women briefly detained with him in January 2007 were his friends meeting to celebrate the Russian New Year.

Monday, September 28, 2009

London Collection Claims against Obneftegaz

Vneshtorgbank’s Cyprus subsidiary, Russian Commercial Bank, is pursuing London court and arbitration proceedings against Obneftegaz and its surety Fedor Khoroshilov for repayment of $242 million owed by the company. The court ordered Khoroshilov to declare his assets, and meanwhile enjoined him from disposing of villas in France and Italy, a yacht, and a Boeing airplane. Khoroshilov denies having the property attributed to him.

Russian Property Immune from Berlin Seizure

German businessman Franz Sedelmeier continues to seek compensation for the loss of his investment in a joint venture with the St. Petersburg city government to restore a building on Stone Island that was taken over by the Presidential administration in 1995. In his most recent effort to enforce a 1998 Stockholm arbitration award, a Berlin court accepted the Russian government’s defense that the Russian House of Science and Culture is used for sovereign purposes and is therefore immune from seizure.

Abkhazia Gets Russia Country Code

Russia and Abkhazia signed a memorandum under which Abkhazia will use Russia’s country code (+7) in international telephone communications. Abkhazia, a breakaway Georgian province, previously used Georgia’s country code (+995).

HRW: Russia Fails to Remedy Rights Violations

Human Rights Watch (HRW) published a report on Russia’s implementation of European Court of Human Rights (ECHR) judgments on Chechnya. ECHR has issued 115 judgments on human rights violations in Chechnya in 1999-2004. In nearly all of those cases, it has held Russia responsible for disappearances, extrajudicial executions, torture, or failing to properly investigate these crimes. According to the report, Russia normally has timely paid compensation ordered by ECHR, but has failed to carry out the court's orders to ensure effective investigations and hold perpetrators accountable. HRW, inter alia, recommends to the Russian government to immediately initiate criminal investigations against apparent offenders named in ECHR judgments, including three generals: Yakov Nedobitko, Vladimir Shamanov, and Alexander Baranov.

Friday, September 25, 2009

Chechen President Names Successor

Ramzan Kadyrov, the Kremlin-backed president of Chechnya, said in an interview with the extreme Russian nationalist newspaper Zavtra (
that he has chosen his successor: Adam Delimkhanov, who has been accused of killing Kadyrov’s rival Ruslan Yamadayev in Dubai.

Rэs Ipsa Loquitur

Since 2006, Russia’s Federal Anti-Monopoly Service (FAS) has discovered over 2,000 government procurement tender announcements with Latin letters, which hinder uninformed potential bidders from finding the announcements by computer search, and has annulled over 300 such tender results. On September 1, a Moscow court rejected the first challenge of such an annulment, which was brought by the State Property Fund.

Alfa Moves on Basic Element Debt

Alfa Bank filed bankruptcy petitions against two subsidiaries of Russian aluminum giant Rusal: Sual and Rusal-Krasnoyarsk, which owe the bank $73.8 million. (Rusal’s total bank debt is $14 billion, over half of which is owed to foreign banks.) The filing took place amid negotiations to restructure Rusal parent Basic Element’s $800 million debt to Alfa. Rusal called the bankruptcy proceedings “raiding aimed at destabilizing the company’s operations,” while Alfa contends that its move was prompted by Basic Element’s demand to restructure its entire debt to Alfa as a condition for an agreement on Rusal. Alfa also threatened to file bankruptcy petitions against other unnamed Basic Element companies. A temporary solution for Rusal is reported to be in the making: repayment of all Rusal loan arrears to Alfa ($85.9 million), which Rusal’s other creditors have approved.

Lukashenko Admits He Determined Election Results

In an interview with Russian newspaper Izvestia, Belarus President Alexander Lukashenko admitted manipulating the 2006 presidential elections: “For your information, 93% voted for me on the last elections. . . . . I ordered to make it not 93% but rather some 80%, I do not remember now how much. Because more than 90% is psychologically unacceptable.” Belarus opposition leaders have asked the General Prosecutor's Office to investigate fraud in the elections.

Thursday, September 24, 2009

TNK-BP Fights Customs Retaliation

British Petroleum’s Russian joint venture, TNK-BP, has protested to Russia’s Anti-Monopoly Service (FAS) against the Customs Service’s revocation of TNK-BP's right to pay export duties through a single bank account, which other oil companies continue to enjoy. TNK-BP asserts that the arrangement costs almost $2 million less a month than the alternative of paying through dozens of separate accounts, and that its privileges were revoked in retaliation for its successful litigation against Customs for the return of hundreds of millions of dollars in excess export duties paid.

Wednesday, September 23, 2009

Russia Weighs Rights Procedures

Russia’s Duma (lower parliamentary chamber) is expected to adopt a declaration that neither ratifies nor rejects European Court of Human Rights procedural amendments that have been ratified by all other Council of Europe members. The declaration states that reform of the Court is important, but should not threaten Russia’s national interests. Controversial amendments include those that would accelerate the disposition of cases (the number of cases against Russia would be expected to increase) and permit cases to be decided by three-judge panels that do not include a judge from the member-country being sued. President Dmitri Medvedev stated that negotiations on ratification continue.

General Shields Son-in-Law from Investigators

According to a police wiretap of a telephone conversation of Russia’s Airborne Troops Commander-in-Chief General Vladimir Shamanov’s telephone conversation, which was leaked to the press and published by Novaya Gazeta, Shamanov ordered his subordinate to send two special-purpose military groups to detain a prosecution investigator conducting a search at a business owned by Shamanov’s son-in-law, who is wanted for attempted murder. The troops began but did not complete their mission, because other circumstances intervened. The Defence Ministry and prosecutors are investigating.

Tuesday, September 22, 2009

Daewoo Claims Russian Automaker Stole Secrets

General Motors' Korean subsidiary Daewoo sued a Korean subsidiary of Russian automaker TagAZ to prevent it from copying Daewoo Chevrolet Lacetti. Korean prosecutors recently arrested two former Daewoo engineers, now at TagAZ-Korea, for stealing Daewoo technology. A TagAZ-Korea executive committed suicide, leaving a note saying he was innocent.

Monday, September 21, 2009

Prosecutors: Protect Business

The General Prosecutor’s Office has issued recommendations on protecting the rights of business in areas such as government inspections, procurement, and registration and licensing procedures. The document calls the level of corruption in Russian government “unacceptably high,” and states that it often takes the form of inspections that exceed lawful authority. One example cited was a regional government’s incentive to employees of 50% of above-quota fines collected for administrative violations. The recommendations are on the web site of the General Prosecutor’s Office ( and have been issued in 1000 printed copies.

Debt-Equity Swap Draft Law

The Duma (Russia's lower parliament chamber) approved on first reading a government bill allowing debt of joint stock companies to be converted into equity, which the drafters intend as a help to companies seeking to avoid bankruptcy. Currently the Civil Code restricts such conversion by requiring charter capital to be paid with money or other property. The proposed amendments are being examined for risks to unsophisticated investors and minority shareholders.

Interior Ministry Loses Libel Suit

A Russian court dismissed a libel suit by the Interior Ministry against the General Prosecutor Office’s Investigation Department over its TV report of rape charges against a police lieutenant colonel. The Ministry claimed that the suspect was a former police officer and, therefore, the Department defamed the Ministry. The court held that even a retired officer may be called a police lieutenant colonel, and dismissed the claim.

Friday, September 18, 2009

Russian President: No Governor Elections within Next 100 Years

Russian President Dmitry Medvedev declared that Russia would not return to the system of regional governors’ direct elections, abolished in 2004. Since then governors are appointed by the President with some involvment of regional legislatures and political parties. “I do not see conditions under which we could renounce this decision – neither now, nor in 100 years,” stated Medvedev.

Thursday, September 17, 2009

Yukos Sues Rosneft in U.S.

Yukos Capital S.a.r.l. (Luxembourg), controlled by the former management of defunct Russian oil giant Yukos, has filed an application in U.S. federal court (Southern District of New York, No. 09-7905-AKH) to enforce an arbitral award for 13 billion rubles ($419 m.) and a confirming Dutch court judgment against the Russian state oil company Rosneft. The case arose from Rosneft's failure to repay a loan to a Yukos subsidiary that Rosneft acquired in the Yukos bankruptcy. Before confirmation by the Dutch court, a Russian court had refused to confirm the award, which was rendered by the International Commercial Arbitration Court at the Russian Chamber of Commerce and Industry. Yukos Capital is represented in the New York action by Gibson Dunn & Crutcher LLP.

Wednesday, September 16, 2009

Russian Customs to Settle with Bank of New York

Russian Finance Minister Alexei Kudrin announced that the Russian Federal Customs Service will settle its $22.5 billion money laundering claim against the Bank of New York (BNY), brought in a Russian court under the U.S. civil RICO statute. According to Kudrin, the settlement amount will be not less than BNY's $14 million payment in 2005 to settle related claims by the U.S. government. Kudrin called the Customs Service's evidence "very insufficient."

For background on the 2005 settlement, see

Tuesday, September 15, 2009

Defense Ministry Adopts Humanitarian Manual

The Russian Defense Ministry adopted a manual for Russian military on compliance with international laws of war. The 100-page document requires soldiers to protect civilians, refrain from torturing prisoners, use armed force proportionally, etc.

Prosecutors Investigate Bolshoi Embezzlement

Russian prosecutors opened a criminal investigation into the suspected embezzlement of millions of dollars in the long-delayed restoration of Moscow’s Bolshoi Theater. According to the investigators, from 2003 to 2009 the federal agency responsible for the project paid a contractor three times for the same design work and documents.

Taxi Driver Admits Spying

The Supreme Court of Russia's North Ossetia sentenced Russian taxi driver Alexander Khachirov to seven years of prison for treason. Khachirov pleaded guilty to using his taxi to film Russian military units in North Ossetia and the breakaway Georgian province South Ossetia, and selling the footage to Georgian intelligence. Other espionage cases are expected to follow soon.

Friday, September 11, 2009

Supreme Court Upholds Mail Inspection Regulations

Russia's Supreme Court rejected a journalist's claim, supported by the General Prosecutor's Office, that recent Ministry of Communications regulations illegally permit law-enforcement bodies to inspect mail without a court order. The Ministry argued, with the support of the Federal Security Service, that the regulations assume the need for a court order, but that if necessary the court's approval can be obtained after the fact. The reasons for the Supreme Court's rejection of the journalist's challenge will be set forth in a subsequent opinion.

Thursday, September 10, 2009

UN Adopts Resolution on Abkhazia and South Ossetia

The UN General Assembly adopted a Georgia-sponsored resolution calling for the return of refugees and displaced persons to Abkhazia and South Ossetia, Georgian breakaway provinces (by a vote of 48-19, with 78 abstaining). Russia condemned the resolution as “politicized and confrontational.” General Assembly resolutions are not binding on UN members.

Gulag Archipelago Made Compulsory

Russia's Minister of Education and Science ordered that Alexander Solzhenitsyn’s Gulag Archipelago be compulsory high school reading. The book was published abroad in 1973 and was banned in the Soviet Union until 1989.

Wednesday, September 9, 2009

Energy Tycoon Liable for $210 Million for Self-Dealing

London's High Court has awarded Sibir Energy a partial award of $130 million (after a prior $80 million award) in its $400 claim against insider Chalva Tchigirinski for misappropriating the company's money. He has not appeared in the litigation.

Yukos Judge Fired

The Moscow Judges Qualification Board dismissed judge Elena Yarlykova from her position for gross negligence in releasing from prison, because of a mistake in identity, a fraud defendant who faced a possible 15-year sentence. Yarlykova presided in trials that resulted in the convictions of several Yukos-related defendants.

Ukrainian President: Russia Shelters Poisoners

Ukrainian President Viktor Yushchenko accused Russian authorities of hiding several people who attempted to poison him during his 2004 election campaign, including the former deputy head of the Ukrainian Security Council. “The persons who directly organized my poisoning have been in Moscow for four years. I have addressed the Russian president three times and requested that Ukrainian investigators question them,” Yushchenko stated.

Georgia Releases Turkish Skipper

A court of appeals in Georgia reconsidered the case of Turkish sea captain Mehmet Öztürk, who was sentenced to 24 years of imprisonment for delivering oil products to the Georgian breakaway province Abkhazia. The sentence was reduced to a $18,000 fine and a suspended prison term of three years. Georgia's Foreign Minister stated that the decision was made by President Mikheil Saakashvili at his meeting with the Turkish Foreign Minister, which took place hours before the court decision.

Moldovan Constitutional Court Dismisses Communists’ Complaint

By a 3-3 split decision the Moldovan Constitutional Court dismissed a complaint by the Communist Party challenging the hasty election of the parliament speaker before the Communists could form their parliamentary faction. The decision effectively allows the newly formed anti-communist parliamentary majority to proceed with elections for President of Moldova.

Tuesday, September 8, 2009

Federal Anti-Monopoly Service Drops Case Against Microsoft

The Russian Federal Anti-Monopoly Service, which announced in June two investigations in the IT sector, stated on September 7 that it is dropping the investigation into whether Microsoft had illegally limited supplies or engaged in abusive pricing.

(in Russian)

Monday, September 7, 2009

Russian Journalists Disallowed from Entering Georgia

Russian journalists Vladimir Mamontov and Maxim Shevchenko, having arrived to Georgia to participate in a round table conference on Russian-Georgian relations, were disallowed from crossing the passport control line in the Tbilisi airport. Georgian border control officers explained that the entry ban is based on “Article 14,” but did not say of which law.

Friday, September 4, 2009

Forged Statute Officially Published

The City Charter of Miass, Russia, officially published in the local gazette, was discovered to materially differ from the version adopted by the City Duma (municipal assembly). Somebody introduced numerous amendments to the Charter in the period between its adoption and publication. It is not immediately clear which version, if any, is now in force.

Thursday, September 3, 2009

64,000 Phones Wiretapped in 2009

According to officially published statistics, Russian courts in the first six month of 2009 gave 64,000 permissions for wiretapping suspects’ phones to law enforcement bodies. In 1,500 cases such a permission was denied.

Wednesday, September 2, 2009

Investigator Discloses State Secret

Attorneys for Boris Kuznetsov, a lawyer prosecuted for disclosing a state secret, announced that the investigator responsible for the case, when requesting an order for Kuznetsov's arrest, submitted classified documents to the court. Kuznetsov was prosecuted for a similar act: he copied a classified document (a memo on wiretapping that he argued was illegal) from his client's file and submitted it to the Constitutional Court. The defense has requested that the case against Kuznetsov be dismissed or that the investigator be punished. Kuznetsov fled to the U.S. in 2007 and obtained political asylum.

Abkhazian Citizen Convicted of Spying for Georgia

The Supreme Court of Abkhazia, a Georgian breakaway province, sentenced Abkhazian citizen Diana Shedania (Aseeva) to 19 years of imprisonment for espionage. She was charged transmitting secret information on Abkhazian military objects to the Georgian intelligence service.

Tuesday, September 1, 2009

Public Prosecutors Subject to Drunk Driving Laws

New regulations authorize the Russian traffic police to prevent public prosecutors and other officials with legal immunity from driving. According to a traffic police spokesman, intoxicated officials with immunity have caused many fatal accidents.

South Ossetian Officer Convicted of Spying for Georgia

The Supreme Court of South Ossetia, a Georgian breakaway province, sentenced Major Timur Gutsmazty (Guchmazov), formerly a South Ossetian border control officer, to 16 years of imprisonment for espionage. He was charged with selling secret information to the Georgian intelligence service. Reportedly, Guchmazov has Russian citizenship and was captured by the South Ossetian KGB on Russian territory.

Turkish Skipper Sentenced in Georgia

Turkish citizen Mehmet Öztürk was sentenced by a Georgian court (the Gagra City Court in exile) to 24 years of imprisonment for illegally crossing the Georgian border and breaching the “rules of navigation on occupied territory.” Öztürk was the captain of a Panamanian-flagged tanker delivering oil products to Abkhazia, a Georgian breakaway province. Georgia also seized and confiscated the tanker. In response Abkhazia has threatened to seize Georgia-bound ships.

Demonstration in Support of Freedom of Assembly Dispersed

The Moscow police dispersed an opposition demonstration meeting in support of Article 31 of the Russian Constitution, which guarantees the "right to assemble peacefully, without weapons, hold rallies, meetings and demonstrations, marches and pickets." Thirty participants were detained.