Published on 20 September 2021

FIFTH SECTION

Application no. 14767/16 NAFTOGAZVYDOBUVANNYA, PJSC against Ukraine lodged on 11 March 2016 communicated on 1 September 2021

STATEMENT OF FACTS

The applicant company is a private joint-stock company registered in Kyiv. It is Ukraine’s biggest privately owned gas producer.

The applicant company is represented before the Court by Mr A. Bailin, Ms T. Jaber, Ms N. Zar and Ms N. Heffinck, lawyers practising in London, as well as Ms O. Vovkotrub, a lawyer practising in Kyiv.

The facts of the case, as submitted by the applicant company, may be summarised as follows.

(a) Abduction of Mr X. and related criminal proceedings

On 3 February 2012 Mr X., one of the high-level officials of the applicant company, was abducted in broad daylight by a group of unidentified persons. Criminal investigation was opened into his suspected murder and embezzlement of his property (some further details can be found in the “The first and the second injunctions” section below).

On 25 May 2015 Mr X. reappeared alive and well. He made a written statement that neither the applicant company nor any of its officials had been involved in his disappearance and that he had no claims against them.

On an unspecified date later the “murder” offence under the investigation was changed to “attempted murder”.

According to the information provided by the applicant company, no progress was made in the investigation and no notice of suspicion of a criminal offence was announced to anybody.

(b) Tax assessment notices of 25 January 2013 and related proceedings

On 25 January 2013 the Large Taxpayers Office of the Ministry of Revenues and Duties issued three tax assessment notices on tax payments allegedly due by the applicant company.

On 8 February 2013 criminal proceedings were instituted on suspicion of tax evasion by the applicant company on account of its failure to comply with those tax assessment notices.

On 10 September 2014 the Kyiv Circuit Administrative Court quashed the notices in question following the applicant company’s claim.

On 3 December 2014 and 5 August 2015 the Kyiv Administrative Court of Appeal and the Higher Administrative Court, respectively, upheld that decision.

On 3 November 2015 the Supreme Court, however, quashed the lower courts’ decisions and remitted the case to the first-instance court for fresh examination. No information is available on further developments in those proceedings.

(c) Tax assessment notice of 27 November 2013 and related proceedings

On 27 November 2013 the Large Taxpayers Office of the Ministry of Revenues and Duties issued a further tax assessment notice relating to tax payments allegedly due by the applicant company.

On an unspecified date criminal proceedings were instituted on suspicion of tax evasion by the applicant company on account of its failure to comply with that tax assessment notice. It appears that they were joined to those instituted on 8 February 2013 (see above).

On 20 August 2014 the Kyiv Circuit Administrative Court quashed the tax assessment notice of 27 November 2013.

On 1 October 2014 and 15 October 2015 the Kyiv Administrative Court of Appeal and the Higher Administrative Court, respectively, upheld that decision. It appears that, in the absence of further appeals to the Supreme Court, it became final.

There were fourteen injunctions in total [1] . The applicant company complains about five of them [2] and refers to the remaining nine as an important background.

(a) The first and the second injunctions (not being the subject matter of the application)

On 28 March 2015 the Prosecutor General’s Office (“the PGO”) lodged two applications for injunctions with the Kyiv District Pecherskyy Court (“the Pecherskyy Court”), in the context of the criminal investigation into the attempted murder of Mr X. and property embezzlement. The first one sought a ban on any transactions with the applicant company’s shares and the second one sought the freezing of the applicant company’s bank accounts. The prosecutor’s reasoning was as follows. At the time of Mr X.’s abduction, the applicant company’s shares had been in the ownership of several Cypriot companies, which, in turn, belonged to two Ukrainian nationals. They had had an informal agreement with Mr X., according to which the latter had been in charge of the distribution of profits among the three of them and had been allowed to keep 10% of the profits for himself. The investigation authorities therefore considered that Mr X. had de facto owned 10% of the applicant company’s shares. Shortly before the abduction, one of the above-mentioned two shareholders had apparently permitted Mr X. to increase the latter’s part in the company’s profits at the expense of the other shareholder, which had led to a conflict. The two shareholders had reconciled after the abduction of Mr X. and had agreed to share the applicant company’s profits between the two of them equally. The prosecutor observed that each of them had sold 25% of the applicant company’s shares in the course of the year after Mr X.’s abduction. It was suspected that Mr X. had been abducted in order to enable an illegal takeover of the applicant company’s shares by the two shareholders in question.

On 30 March 2015 the Pecherskyy Court allowed the PGO’s first application and rejected the second one. It prohibited the applicant company from carrying out any transactions with its shares (the first injunction). That measure was deemed necessary “with a view to ensuring compensation for damage caused by the criminal offence, possible confiscation of property or a civil claim”. PGO’s application for the freezing of the applicant company’s bank accounts was rejected as the PGO had failed to demonstrate that the relevant legal requirements had been met.

On 4 April 2015 the PGO lodged with the Pecherskyy Court an application for an injunction order virtually identical to the one rejected on 30 March 2015 (see above). This time, in addition to seeking the freezing of the applicant company’s bank accounts, the PGO also requested that the applicant company be banned from disposing of or alienating hydrocarbons extracted from its nineteen gas extraction wells. On 4 April 2015 the Pecherskyy Court allowed that application and issued the injunction requested (the second injunction). The judge held that the assets in question had been the target of the investigated criminal offences. Accordingly, it was considered necessary to prevent their unlawful alienation or other consequences capable of hindering the criminal investigation.

On 21 and 22 April 2015 the Kyiv City Court of Appeal, by final rulings, quashed the second and the first injunction orders. It criticised the first ‑ instance court for not having verified, in the first place, whether there was any evidence of commission of a criminal offence. It noted that there were no documents confirming Mr X.’ ownership of the applicant company’s shares. Nor was there any evidence of his involvement in the alleged conflict between the two major shareholders. Furthermore, the legal qualification of the offences under investigation raised serious issues and the amount of damages supposedly caused had never been established.

(b) The third injunction (not being the subject matter of the application)

On 7 April 2015 the PGO applied for yet another injunction order in the context of the criminal investigation related to the abduction of Mr X. It requested that the applicant company be banned from disposing of or alienating hydrocarbons extracted from four additional wells. The reasoning was similar to that for the first and the second applications referred to above.

On 8 April 2015 the Pecherskyy Court allowed that application. It held that the PGO had provided sufficient grounds for the injunction order.

On 23 April 2015 the Kyiv City Court of Appeal, by a final ruling, quashed that injunction order as unlawful. Its reasoning was similar to that given in its rulings of 21 and 22 April 2015 (see above).

(c) The fourth injunction (not being the subject matter of the application)

On 22 April 2015 the PGO applied, once again, for an injunction order in respect of the applicant company’s shares and hydrocarbons extracted from its wells. It also asked for freezing of “the expenditure side” of the applicant company’s bank accounts. Like before, that application was made in the context of the investigation regarding the abduction of Mr X. The reasoning was identical to that provided earlier.

On the same date the Pecherskyy Court granted that application. It prohibited the applicant company from carrying out any transactions with its shares and from disposing of or alienating hydrocarbons extracted from its twenty-three wells (those referred to in the second and the third injunction proceedings (see above)). Furthermore, it froze “the expenditure side” of the applicant company’s bank accounts.

On 28 May 2015 the Kyiv City Court of Appeal, by a final ruling, upheld the Pecherskyy Court’s decision in so far as it concerned the injunction order in respect of the applicant company’s shares and quashed it in the remaining part. It noted, in particular, that the applicant company had provided a written statement by Mr X. that no “murder” or “property embezzlement” had been committed in his regard, that no damages had been caused to him and that he objected to any injunctions in respect of the applicant company’s assets. The appellate court held that, while the injunction in respect of the applicant company’s shares was a justifiable measure for securing evidence (given that the shares might have been the object of the criminal encroachment), there were no legal grounds for injunctions in respect of the applicant company’s other assets.

On 10 August 2015 the applicant company asked the Pecherskyy Court to lift the injunction in respect of its shares. On 23 November 2015 that request was rejected as unfounded.

On 24 December 2015 the Pecherskyy Court, however, granted the applicant company’s identical renewed request submitted on an unspecified date.

(d) The fifth injunction (falling within the subject matter of the application)

On 28 May 2015 (the day when the Kyiv City Court of Appeal quashed the fourth injunction order in part – see above) the PGO lodged an application for an injunction order virtually identical to the one within the fourth injunction proceedings. Like before, it was made in the context of the criminal investigation regarding the abduction of Mr X.

On 29 May 2015 the Pecherskyy Court allowed that application in so far as it concerned the ban on disposing of or alienating hydrocarbons extracted from the twenty-three wells and the freezing of “the expenditure side” of the applicant company’s bank accounts. As regards the PGO’s reference to the applicant company’s shares, the judge noted that the share capital was already under the injunction within the fourth injunction proceedings (see above). The Pecherskyy Court upheld the investigator’s reasoning that the injunction was necessary “with a view to ensuring compensation for damage caused, securing a civil claim or enabling a potential property confiscation, as well as in order to ensure a comprehensive and impartial investigation”.

The applicant company appealed. It observed that the damages, if any, had never been estimated, that there was no civil claim and that a property confiscation was not among potential penalties that could be imposed in the pending criminal proceedings. The applicant company also emphasised that Mr X. was alive, but that the judge had neither clarified the circumstances of his reappearance nor enquired about his subsequent questioning by the prosecution authorities. The applicant company further argued that the freezing of “the expenditure side” of its bank accounts would entirely block its economic activities. Lastly, it observed that similar injunctions had already been quashed as unlawful on four occasions and that there was no justification for applying it this time.

On 8 July 2015 the Kyiv City Court of Appeal found against the applicant company, having overall upheld the first-instance court’s findings.

The applicant company asked that the injunction be lifted on many occasions. While having rejected several such requests, the Pecherskyy Court eventually changed its position (without explaining that change) and decided to grant the applicant company’s request identical to those refused earlier. As a result, on 21 December 2015 it lifted the fifth injunction. The judge observed, in particular, that none of the applicant company’s officials had been declared suspects in the criminal proceedings in question and that no civil claim had been lodged.

(e) The sixth injunction (falling within the subject matter of the application)

On 3 June 2015 the PGO lodged an application for an injunction order in respect of hydrocarbons extracted from an additional well (not concerned by the earlier injunction proceedings) and “the expenditure side” of an additional bank account of the applicant company. The application was made in the context of the criminal investigation regarding the abduction of Mr X. and the reasoning was similar to that given before (see above).

On 30 June 2015 the Pecherskyy Court allowed that application. It considered that the injunction was required to prevent alienation of property, which might have been the target of the investigated criminal offences, or hindering the criminal investigation.

The applicant company appealed. It submitted, in particular, that no relation was shown to exist between the investigated criminal offences and its property.

On 16 July 2015 the Kyiv City Court of Appeal found against the applicant company. It held that the first-instance court had had sufficient legal grounds for ordering the injunction and had duly reasoned its ruling.

On 11 August 2015 the applicant company asked the Pecherskyy Court to lift the injunction. On 22 September 2015 its request was rejected.

It appears that the injunction was lifted in December 2015.

(f) The seventh, the eighth and the ninth injunctions (only the seventh and the ninth injunctions falling within the subject matter of the application)

On 11 June 2015 the PGO lodged three further applications for injunctions: in respect of hydrocarbons extracted from twenty-five wells belonging to the applicant company, its shares and “the expenditure side” of its bank accounts. While all those assets were already subject to injunctions (the hydrocarbons, from twenty-four out of twenty-five wells referred to, ‑ within the fifth and the sixth injunction proceedings, “the expenditure side” of the bank accounts – within the fifth injunction proceedings and the shares – within the fourth injunction proceedings), this time the PGO sought injunction orders in the context of the criminal investigation related to suspected tax evasion.

On the same day the Pecherskyy Court allowed all three PGO’s applications and issued injunction orders: in respect of hydrocarbons extracted from the applicant company’s twenty-five wells (the seventh injunction), in respect of its shares (the eighth injunction) and in respect of “the expenditure side” of its bank accounts. The judge held, in particular, that those measures were necessary for securing the eventual confiscation or a civil claim and that otherwise the property in question might be damaged or alienated or there might be other adverse consequences hindering the criminal investigation.

The applicant company appealed against the injunction orders. It observed, in particular, that the tax assessment notices, which had been at the origin of the criminal proceedings in question, had been quashed in the meantime.

On 30 June 2015 the Kyiv City Court of Appeal rejected the applicant company’s appeals against the seventh and the eighth injunctions. On 7 July 2015 it also rejected the appeal against the ninth injunction. The appellate court held that the judge of the Pecherskyy Court had duly examined all the arguments and that the injunction orders were well grounded.

In September-December 2015 the applicant company requested on several occasions that the injunction orders be lifted. The Pecherskyy Court initially rejected such requests, but eventually changed its position (without explaining why) and granted the applicant company’s requests identical to those refused earlier. The judge lifted: the eight injunction (in respect of the shares) on 14 December 2015, the seventh injunction (in respect of hydrocarbons) on 21 December 2015, and the ninth injunction (in respect of the applicant company’s bank accounts) on 30 December 2015. It was noted that the tax assessment notices, which had been at the origin of the criminal proceedings in question, had been quashed in September 2014, that none of the applicant company’s officials had been declared suspects in the criminal proceedings in question and that there was no evidence that the property concerned had been acquired as a result of the investigated criminal offences. In its ruling of 30 December 2015 the Pecherskyy Court also noted that there had been no assessment of the proportionality between the damages allegedly caused as a result of the investigated criminal offences and the assets subject to injunction.

(g) The tenth and the eleventh injunctions (only the eleventh injunction being the subject matter of the application)

On 26 June 2015 the PGO lodged two applications for injunctions before the Pecherskyy Court. While both of them concerned hydrocarbons extracted from the same additional well belonging to the applicant company, one application was made in the context of the criminal investigation in relation to Mr X.’s abduction (the tenth set of injunction proceedings) and another one in the context of the investigation related to suspected tax evasion by the applicant company (the eleventh set of the injunction proceedings).

On the same date the Pecherskyy Court allowed both applications. It held that the injunctions were necessary for securing the eventual compensation for damage caused or a civil claim and that otherwise the property in question might be damaged or alienated or there might be other consequences hindering the criminal investigation.

The applicant company appealed.

The Kyiv City Court of Appeal rejected its appeals: against the eleventh injunction on 30 July 2015 and against the tenth injunction on 1 October 2015.

In November and December 2015 the applicant lodged several requests for lifting of the injunctions. On 9 December 2015 the Pecherskyy Court allowed some of them and lifted the tenth and the eleventh injunctions. It noted that there were no suspects in the criminal proceedings in question and that no civil claim had been lodged. Nor was there any indication that the assets concerned had been acquired as a result of the investigated criminal offences.

(h) The twelfth injunction (not being the subject matter of the application)

On 16 November 2015 the Pecherskyy Court allowed PGO’s application of an unspecified date for an injunction in respect of hydrocarbons extracted from two additional wells belonging to the applicant company. It held that that measure was necessary in the context of the criminal investigation in respect of the “attempted murder and property embezzlement” case.

The injunction was lifted at some point in December 2015.

(i) The thirteenth injunction (not being the subject matter of the application)

On 12 December 2015 the PGO applied for an injunction order in respect of hydrocarbons extracted from the applicant company’s three wells referred to in the tenth, the eleventh and the twelfth injunction proceedings. That application was made in the context of the criminal investigation in respect of the “attempted murder and property embezzlement” case.

On 16 December 2015 the Pecherskyy Court allowed PGO’s application.

On 24 December 2015 it, however, lifted the injunction at the applicant company’s request.

(j) Fourteenth injunction (not being the subject matter of the application)

On 15 December 2015 the PGO applied for an injunction in respect of the applicant company’s shares, referring to the criminal investigation related to the suspected tax evasion.

On 16 December 2015 the Pecherskyy Court allowed that application and prohibited the applicant company from carrying out any transactions with its shares.

On 25 December 2015 it, however, lifted the injunction at the applicant company’s request.

Article 132 of the Code of Criminal Procedure of 2012 (“the CCP”) provided for general rules for application of injunctions ( заходів забезпечення ) in criminal proceedings. It prohibited application of injunctions if the investigating authorities had not proved that there was a reasonable suspicion of commission of a sufficiently serious criminal offence and that the needs of the pre-trial investigation justified such an interference with the person’s property rights.

Article 170 of the CCP concerned orders on a freezing injunction ( накладення арешту на майно ). It defined a f reezing injunction as a temporary withholding of the right to alienate, dispose of and/or use assets where there were sufficient grounds to consider that they were a target, means or instrument of a crime, or constituted evidence of a crime, or had been acquired by criminal means, or constituted proceeds of crime, or had been acquired from proceeds of crime, or could be subject to confiscation from a suspect, an accused, a convict, or a legal entity to which “criminal legal measures” could be applicable [3] , or where such assets could be subject to “special confiscation” [4] .

COMPLAINTS

The applicant company complains that the fifth, the sixth, the seventh, the ninth and the eleventh injunctions were in breach of Article 1 of Protocol No. 1. It argues that the legal preconditions for applying such measures under the domestic law were not met. The applicant company further alleges that the injunctions were arbitrary, given that they were ordered immediately after the identical injunction orders had been quashed by the final judicial decisions as being unlawful. It also observes that the amount of the damage allegedly caused and the value of its assets subject to injunctions had never been assessed, and submits that the interference with its property rights was grossly disproportionate. The applicant company furthermore alleges that the courts failed to address its key arguments: notably, that the victim in the “attempted murder” case had denied any involvement of the applicant company in his abduction and that there were no formal suspects in that case; and, furthermore, that the “tax evasion” case was based on the applicant company’s supposed non-compliance with the tax surcharge notices, which had been quashed by the courts in the meantime. The applicant company also complains that its numerous requests for lifting the injunctions were dismissed in a formalistic manner. In sum, it claims that it was unlawfully and arbitrarily prevented from using its assets for more than seven months, until late December 2015, and that even thereafter it could not be certain that similar injunctions would not be ordered again.

The applicant company also complains under Article 6 of the Convention of the lack of independence and impartiality of the courts, as well as of various procedural violations in the judicial proceedings.

Lastly, it complains under Article 13 of the Convention that it had no effective domestic remedies in respect of the alleged interference with its property rights. In its view, the fact that eventually the injunctions were lifted did not indicate the effectiveness of the existing remedies. The applicant company points out in that connection that the domestic courts’ eventual change of stance leading to the injunctions’ lifting, in the absence of any changes in the circumstances of the case, was nothing else than manifestation of unfettered discretion.

QUESTIONS TO THE PARTIES

1. Did the applicant company comply with the six-month time-limit under Article 35 § 1 of the Convention?

2. Was there an interference with the applicant company’s peaceful enjoyment of possessions, within the meaning of Article 1 of Protocol No. 1, on account of the fifth, sixth, seventh, ninth and eleventh injunctions?

3. Were the injunctions lawful? Did they strike the requisite fair balance between the demands of the general interest and the requirements of the protection of the applicant company’s right of property?

4. With regard to the applicant company’s complaint that it did not have at its disposal an effective domestic remedy in respect of the alleged violation of Article 1 of Protocol No. 1 and that the remedies it used proved ineffective, including as a result of alleged lack of judicial independence and procedural violations, has there been a violation of Article 6 and/or Article 13 of the Convention?

Your Government are also requested to provide a brief and clear summary, in a table or other easily readable format, of all the injunctions and related judicial proceedings.

[1] For the sake of clarity and consistency, the present summary refers to the injunctions by their numbers used by the applicant company in its application before the Court.

[2] Namely, the subject matter of the application concerns the five sets of injunction proceedings (the fifth, the sixth, the seventh, the ninth and the eleventh), in which the appellate court upheld the injunction orders by a final ruling, excluding those in respect of the applicant company’s shares (given that, as explained by the applicant company, it is not the owner of the shares). The tenth and the eleventh injunctions concerned the same assets and the applicant company complains about only one of those injunctions (the eleventh).

[3] That is, as specified in Articles 96-3 to 96-11 of the Criminal Code (“the CC”), a fine or liquidation, the latter being accompanied by property confiscation, in case of commission of some particularly serious criminal offences by the legal entity’s officials.

[4] Under Articles 96-1 and 96-2 of the CC, “special confiscation” was confiscation of assets acquired as a result of a crime or constituting proceeds of crime or having been a target of crime, including from third persons (with certain additional precisions and subject to exceptions).