Tuesday, November 30, 2010

Ukrainian President Vetoes Tax Code

Ukraine’s President Viktor Yanukovich vetoed the new Tax Code recently approved by the parliament. Ukrainian entrepreneurs had protested en masse against the Code's proposed restricted application of simplified taxation methods that apply lower tax rates.


Video: www.24tv.com.ua

Update: Yanukovich signes Tax Code with corrections

Monday, November 29, 2010

High-Ranking Russian Official Suspected of Links with Organized Crime

Leading Russian business newspaper Vedomosti published an article alleging that Vasily Yakimenko, the head of Rosmolodezh (Federal Youth Agency of the Russian Federation), was among the members of a company named Akbars established in 1994 in Moscow. All five members of the company, except Yakimenko, were convicted in 2006 on charges of participation in an organized criminal group, racketeering, and numerous murders. The leader of the gang, Yuri Eremenko, also a member of Akbars, was sentenced to life imprisonment, and the other 31 gang members were sentenced to a total of over 400 years in prison. According to Yakimenko’s spokesperson, Yakimenko was included in the member list without his knowledge. Vedomosti notes that Yakimenko initiated the creation of controversial pro-Kremlin youth movements (such as “Nashi”) that have cost taxpayers about $15 mln. Yakimenko is also known for his conflict with journalist Oleg Kashin, who was recently seriously beaten by assailants who have not been identified.


Georgia Promises Not To Attack Russian “Occupants”

Georgian President Mikheil Saakashvili announced that Georgia will never use force to restore control over its breakaway provinces Abkhazia and South Ossetia, whose independence was recognized by Russia after the 2008 Russia-Georgia war over South Ossetia. In his address to the European Parliament, Saakashvili said Georgia was ready for “unilateral initiative to declare that Georgia will never use force to roll back the Russian occupation and restore control over the occupied areas.” Russia’s Foreign Ministry responded that the pledge can be “perceived seriously” only if it “is put on paper” and when “it becomes legally binding.”


Friday, November 26, 2010

Visa Restrictions Proposed Against Russian Officials

The European Parliament's Foreign Affairs Committee voted to recommend denying visas to 60 Russian officials believed to have been involved in the investigation of tax advisor Sergei Magnitsky, who died in pretrial detention for lack of proper medical care in 2009. The recommendation, which would take effect only if adopted by member states, are based on a similar recommendation by US Senator Benjamin Cardin to the State Department. Russia responded to the European proposal with a threat to "very harshly retaliate" if the restrictions are adopted.


Moscow Court Disregards Plea Bargain in Bribery Case

Moscow City Court sentenced Grigory Domovets, a former senior investigator in the Investigation Committee of the Prosecutor's Office Grigory Domovets, to three years in prison on bribery charges. Judge Valery Novikov disregarded a deal with the prosecution under which Domovets pleaded guilty and testified to expose his corrupt superiors and the prosecution withdrew some of the charges and requested a suspended sentence. After the sentencing, the prosecution reversed its position and announced that the sentence is well-grounded and lawful. The defense intends to appeal.


Thursday, November 25, 2010

Arbitral Award Worth $3.6 b. against Naftogaz Ukraine Upheld

Ukraine's Supreme Court upheld a Stockholm arbitral award requiring Naftogaz Ukraine to make an in-kind payment of 12.1 billion cubic meters of gas (worth US $3.6 b. in today's European prices) to Swiss trading company Rosukrenergo, which is 50% owned by Russia's Gasprom. The dispute arise in 2009, when Naftogaz bought the trader's $1.7 b. debt to Gasprom, took 11 billion cubic meters from the trader's underground storage facility to satisfy the debt, and made a direct supply agreement with Gasprom. The arbitral award, providing for a return of the gas together with a penalty, could force Ukraine to decide between rescuing the company or letting it go bankrupt.

For an English translation of the decision, see http://www.sccinstitute.com/filearchive/3/38196/Ruling%20of%20the%20Supreme%20Court%20of%20Ukraine%2024%20November%202010_2.pdf


President Discovers “Stagnation” in Russia

Russian President Dmitry Medvedev stated in his video blog that the country is showing symptoms of political stagnation similar to that experienced in the Soviet era, which Medvedev believes is “equally damaging” to both the ruling party and the opposition. “If the opposition has no chance at all of winning fair elections, it deteriorates and becomes marginalized. If the ruling party never loses a single election, it just ‘bronzes over.’ Ultimately, it too deteriorates like any living organism that remains static,” Medvedev said.


OCSE Condemns Arrest of “Russia Today” Journalists in US

The Organization for Security and Co-operation in Europe (OSCE) condemned the detention and arrest of several journalists covering demonstrations outside the Fort Benning military base in the U.S. A television crew from Russia Today was found guilty of violating city ordinances. Each journalist paid a $290 fine. OSCE's Representative on Freedom of the Media, Dunja Mijatovic, wrote to U.S. Secretary of State Hillary Clinton: “The fact that local police officers would detain, handcuff and arrest members of the press as they engaged in their duty to report on a public event is disturbing.”

http://www.youtube.com/watch?v=3YCyY3FzG_c (video)

Monday, November 22, 2010

Smartphone Scanner Will Allow for In-Store Price Comparison

Internet marketers in Russia will now be able to compete with traditional retailers in their territories through a new service called "Yandex".  Yandex will allow a smartphone user to scan the bar code of a product in the store, and to compare the in-store price with the product's price on the Internet.  Similar services in the U.S. and Europe, including PriceGrabber, RedLaser, ShopSavvy, and Pic2shop, have been operating for several years.  According to Sergei Savin, analyst for Johnson & Partners, smartphones account for just 10% of the total phones used in Russia, with the percentage of people using all of the smartphones' capabilities even lower.  At least initially, the Yandex service is thus not expected to have a major impact on bottom-line Internet sales in Russia.

Russia to Privatize Ownership of Three Major Banks by 2015

As part of a privatization campaign aimed at raising up to $59 billion in the next five years, Russia is expected to cut its stakes in three major state banks, Sberbank, VTB, and Rosselkhozbank, by 2015.  A document published Monday on Russia’s domestic bank association Web site (available at:  asros.ru/ru/events/?id=152) suggests that “ . . . the state stake could be cut to less than 50 percent plus one voting share in the coming two to three years."  According to the same document, Russia plans to sell its stakes to strategic investors and through initial or secondary share offers.  The Duma, Russia's lower chamber of parliament, is expected to discuss the strategy at a committee meeting on December 1st. http://www.reuters.com/article/idUSLDE6AL0FA20101122

Supreme Arbitrazh Court to Review Minority Shareholders' Right to Information

On December 9, the Presidium of Russia's Supreme Arbitrazh (Economic) Court will consider draft guidelines for resolving disputes over shareholder requests for company information. The draft guidelines (in the form of an “information letter” that would not be formally binding but would have persuasive authority with lower courts) provide that an open joint stock company must provide information unless the request is irrelevant to the company’s economic performance or is legally irrelevant (including for reasons of expiration of a statute of limitations). The draft guidelines also provide that the shareholder is not required to state a motivation for the request. The impetus for the Court’s consideration of the issue is a case pending before the Court between Rosneft and minority shareholder Alexei Navalny over his request for minutes of meetings of the board of directors in 2009. (See Nov. 18 post on Navalny's dispute with Transneft.)


Constitutional Court Chairman: Russia May Withdraw from European Convention on Human Rights

Russia’s Constitutional Court Chairman, Valery Zorkin, publicly warned that “Russia, if it wishes, may withdraw from the jurisdiction of the European Court of Human Rights.” The European Court of Human Rights in Strasbourg is a judicial body established by the European Convention on Human Rights to provide legal recourse of last resort for those who feel that their human rights have been violated by a country participating in the Convention. The Russian Constitutional Court resolves Russian constitutional law issues. Zorkin made his statement in the context of a dispute over which Court’s decision would prevail in case of a conflict. A recent example of that kind of conflict is the Markin v. Russia case, wherein it was determined that a military serviceman was not entitled to the same parental leave as a military servicewoman would have had in his place. Zorkin's Constitutional Court okayed this practice, but the Strasbourg Court found it discriminatory.

Thursday, November 18, 2010

Russian Blogger Exposes $4 bln “Theft”

Alexey Navalny, a Russian minority shareholder rights lawyer and well-known blogger, accused the former management of Russia’s pipeline monopoly, Transneft, of embezzling at least $4 billion during the construction of the East Siberia-Pacific Ocean pipeline. Navalny published in his blog copies of the documents allegedly presented in 2008 to Russia’s Audit Chamber by the new management of Transneft (its former CEO Semen Vainshok was removed in 2007 and now lives abroad). The documents appear to explicitly confirm large-scale overpricing and other financial violations. Audit Chamber’s head, Sergey Stepashin, later denied the existence of the $4 bln theft, but confirmed that the Audit Chamber had inspected Transneft in 2008. “We sent the materials to the Interior Ministry and the Prosecutor General’s Office,” the official said.


Wednesday, November 17, 2010

Nokia to Open Skolkovo Research Center

Finnish communications company, Nokia, committed on Wednesday to open a research facility at the Skolkovo high-tech innovation center being set up outside of Moscow.   Victor Saeijs, CEO of Nokia Eurasia, said Russia will now join Europe, India and China as key sites of Nokia intellectual activity, and Russia will be the eighth country where the company has such a center.  The Nokia Center at Skolkovo will work in cooperation with leading Russian universities, and will employ about 25 technical specialists who will conduct research in fields such as mobile computing, nanotechnology, and quantum technology.  Although Nokia representatives declined to specify the exact amount of Nokia's investment in the Skolkovo center, total investment is expected to be in the range of "double-digit millions of dollars."

Tuesday, November 16, 2010

NY Times Spotlight on Russian Juries

Continuing its series of occasional articles on corruption and abuse of power in post-Communist Russia, the New York Times has published an extensive report of official pressure on jurors to return guilty verdicts or to excuse themselves in cases where it seemed that acquittal was likely. The article focused in particular on the murder trial of former senator Igor Izmestiev, who was linked to the deposed ruling family of oil-rich Bashkortostan. Several jurors from the Izmestiev trial who were interviewed by the New York Times had previously told their stories to Russian media.


Kazakhstan Unblocks LiveJournal

After a two-year ban, Kazakhstan has restored access to the most popular Russian-language bloghosting service, LiveJournal, which is operated from Russia. The Kazakhstan government has never explained or officially admitted the existence of the ban on LiveJournal, nor has it explained why it was lifted. One theory is that the “secret ban” was related to the now-suspended blog of Rakhat Aliyev, formerly a Kazakh media tycoon, state official, and son-in-law of Kazakhstan President Nursultan Nazarbayev.  After a 2007 conflict with his father-in-law, Aliyev sharply criticized President Nazarbayev in his blog, and is now a divorced fugitive wanted in Kazakhstan on various criminal charges. On November 9, 2010 the LiveJournal administration permanently suspended Aliyev’s blog on the grounds that its entries “invade the privacy and libel another person.”  On November 13th, access to LiveJournal in Kazakhstan was restored.


Thailand Extradites Russian Citizen to US

Following a recent extradition decision, Thailand handed over suspected Russian arms dealer, Viktor Bout, to the U.S.  Bout, dubbed by U.S. media as the "Merchant of Death", was flown on a charter flight from Thailand to the U.S., where he will face terrorism charges. The U.S. says Bout, a former Soviet air force officer, ran an air cargo network that shipped weapons to conflict zones such as Afghanistan and Rwanda. Bout denies wrongdoing, saying he was framed by U.S. undercover agents who posed as Colombian rebels during his arrest in Bangkok two years ago. The Russian Foreign Ministry stood up for Bout, stating, in particular: “No doubt the illegal extradition of V.A. Bout is a consequence of the unprecedented political pressure put by the U.S. on the government and judicial authorities of Thailand.”

http://www.youtube.com/watch?v=7m_e4oiJDwQ (video)

Monday, November 15, 2010

Changes Proposed in Russian Company Formation and Governance

Proposed Civil Code amendments, mostly concerning charter capital and formation of companies, will be submitted to President Dmitri Medvedev for review by the end of the year. The draft amendments include increased charter capital requirements: 500,000 rubles (~$20,000) for limited liability companies, five-million rubles for “private corporations” (a new name to replace closed joint stock companies), and 100 million rubles for “public joint stock companies” (replacing open joint stock companies). Capital will have to be paid in money (instead of the current practice of allowing contribution of rights and other property), and three-quarters will have to be paid upon registration of the company. Registration will be handled by the Justice Ministry and its local divisions, rather than by the tax authorities, and registration can be denied when foundation documents do not conform to the law. Management rights will be closely tied to partners’ shares in a company, which will reduce the flexibility of shareholders’ agreements. The stricter requirements for creating companies are designed to combat fraud and illegal hostile takeovers, but some observers argue that sophisticated fraud will not be prevented, and that honest small businesses will suffer from the amendments.

Friday, November 12, 2010

Corruption Alleged in Moscow's Savelovski Court

An inspection of Savelovski District Court in Moscow, initiated by Moscow City Court Chief Judge Olga Egorova following an anonymous complaint of corruption, has led to the resignation of two judges and disciplinary hearings that were scheduled for November 18 against four other judges. The complainant asserted that after he filed a lawsuit, a judge recommended that he hire a particular advocate's office, which instructed him to pay 50,000 rubles (~$2,000) that would go to another judge who would ensure expedited consideration of the case. The advocate's office further advised that a payment of an additional 50,000 rubles would go to yet another judge, who would ensure a favorable result in the case. According to Judge Egorova, the inspection found “gross and systematic” violations of judicial ethics in the Savelovski court. The City Court’s announcement did not specify the roles of the four judges who are the subject of the hearings; the disciplinary measure requested against them is a warning.


Disabled Russian Journalist Convicted of Slander

A Russian court convicted journalist, Mikhail Beketov, of slander but relieved him of punishment because of an expired statute of limitations.  Beketov, editor of the Khimkinskaya Pravda weekly, is confined to a wheelchair as a result of a brutal attack against him in November 2008.  Following the attack, Beketov sustained brain damage, lost a leg and fingers, and also lost his ability to speak.  Beketov was on trial for slander after accusing Khimki's mayor, Vladimir Strelchenko, of being involved in blowing up Beketov’s car. The journalist made the allegations against Strelchenko, a former Afgan war veteran, in September 2007 during a television interview.  Beketov had been following controversial plans to build a highway through the Khimki forest. Whether or not by coincidence, numerous other journalists and political activists who have criticized Khimki authorities have also ended up brutally beaten. The most recent victims are ecologist Konstantin Fetisov (beaten on November 4th) and journalist Oleg Kashin (beaten on November 6th), both of whom are still in a coma.

http://newsru.com/russia/09nov2010/himki.html (list of victims)
http://www.svobodanews.ru/content/feature/2215594.html (video)

Kushchevskaya Massacre Solved

Police in the south Russian region of Krasnodar have arrested four men for the murder of a wealthy farmer and 11 others at the farmer's home in the Kushchevskaya village. Eight adults and two children were found stabbed to death inside the farmhouse, along with the bodies of two other children. After the murders, the farmhouse was set on fire. Apparently, the crime was a result of a conflict between the farmer and a gang operating in the region. One of the arrested has already confessed and exposed his alleged accomplices.


Unnamed Kremlin Source: Hitman Sent after Fugitive Intelligence Colonel

Leading Russian political newspaper Kommersant published an article, based on unnamed official sources, alleging that a Colonel Shcherbakov (no first name given) betrayed Anna Chapman and the nine other  Russian spies who were then captured in the U.S. According to the article, Colonel Shcherbakov, a senior Foreign Intelligence Service (SVR) officer, fled to the U.S. days before the arrests and later participated in the interrogations conducted by U.S. authorities. “Don’t you doubt - a Mercader has already been sent after him,” an unnamed high-ranking Russian Presidential Administration official told the paper. The mention of "a Mercader" refers to Soviet agent, Ramón Mercader, who, in 1940, murdered exiled bolshevik Leon Trotsky with an ice axe in Mexico.


Tuesday, November 9, 2010

Armenia, Azerbaijan Exchange Dead Bodies

Armenia handed over to Azerbaijan the bodies of two Azerbaijani soldiers killed in recent military clashes on the border. In exchange, Azerbaijan transferred to Armenia a body of an Armenian found in a river. The exchange was agreed upon during the recent meeting of the Presidents of the two respective countries, Armenia’s Serzh Sargsyan and Azerbaijan’s Ilham Aliyev.


Fifteen “Russian Spies” Captured in Georgia

Georgian authorities arrested fifteen people, citizens of both Russia and Georgia, and charged them with spying for Russia. Georgian TV broadcasted the confessions of some of the suspects. Russian authorities deny any links with the alleged spies.


Monday, November 8, 2010

Azerbaijan Holds Parlimentary Elections

Voting concluded in Azerbaijan's general election, with the ruling party expected to retain power. Opposition leaders said that many candidates were prevented from registering and that the results had been pre-determined. The Organisation for Security and Co-operation in Europe (OSCE) sent more than 400 monitors to the elections. The OSCE reported having received credible reports of voter intimidation; opposition candidates, it said, had, in some cases, been disqualified for no reason.


Journalist Attacked in Moscow

Oleg Kashin, a prominent Russian journalist writing for the Kommersant newspaper, was attacked and brutally beaten by two unknown men in central Moscow outside his apartment. Kashin had a fractured jaw, broken shins and injuries to his fingers and skull. The police have begun an investigation and are treating this as a case of attempted murder. Kashin’s colleagues believe the attack was retribution for articles he wrote. Kashin is now in a hospital in an induced coma.

http://rt.com/Top_News/2010-11-08/journalist-kashin-beaten-moscow.html (video)
http://www.lifenews.ru/news/42779 (video)

Tuesday, November 2, 2010

Khodorkovsky: I Wish You Courage, Your Honor

Mikhail Khodorkovsky made his final statement in his and his colleague Platon Lebedev’s “second trial,” which took place in Moscow. Khodorkovsky said the outcome of the trial will be crucial for all of Russia because it will be indicative of whether the law is able to protect persons and their property. “Nobody believes that an acquittal verdict is possible in a Moscow court in a Yukos case,” Khodorkovsky stated. “I understand you are uneasy and perhaps scared. I wish you courage,” Khodorkovsky went on to tell Judge Viktor Danilkin, who will return a verdict, as well as a sentence, if applicable. The verdict and any applicable sentence should be announced on 15 December 2010.



Ходорковский и Лебедев в Хамовническом суде

Opposition Demonstration in Moscow Half-Allowed

On October 31, the Moscow opposition held its traditional demonstration on the Triumfalnaya Square in support of Article 31 of the Russian Constitution (freedom of assembly). For the first time, authorities did not ban the demonstration outright but rather insisted that it be held in a remote part of the square and that the number of demonstrators not exceed 800. As a result, two demonstrations were held simultaneously in different parts of the square, one allowed and the other banned. The police dispersed the disallowed demonstration, after which the oppositionists attempted to march on a nearby government building. Several dozen demonstrators were detained by the police.

http://lenta.ru/photo/2010/08/31/meeting/ (photo)
http://www.lenta.ru/photo/2010/10/31/strategy2/ (video)

European Commission to Sue Poland over Contract with Russia

The European Commission may challenge in court a recent Russian-Polish agreement under which Russia’s Gazprom is to increase its supply of natural gas to Poland. European officials believe the agreement violates the European anti-monopoly rules.