Streetwise Professor

March 28, 2012

I’ll Take the Other Side of That

Filed under: Economics,Politics,Russia — The Professor @ 4:11 pm

Deutsche Bank and Troika Dialog claim that the odds that Khodorkovsky will be released have risen to 50 percent.  The reasoning of those betting on a release is almost completely economic:

Releasing Khodorkovsky would spur a rally in Russian stocks of 5 percent to 10 percent, Deutsche Bank said in the note. Lissovolik declined to comment further when Bloomberg reached him by phone in Moscow.

“It’s a 50-50 call right now,” said Chris Weafer, chief strategist at Troika Dialog, the investment banking unit of state-run lender OAO Sberbank (SBER).

Micex Index Rises

Chaika’s review “should be completed this weekend and then any cases found to be unsound will go to a presidential commission for final review and recommendation,” Weafer said by phone. “By that time, Putin will be in the Kremlin.”

The Micex Index (INDEXCF) of 30 Russian stocks advanced 1.6 percent to close at 1,565.12 in Moscow, its biggest one-day gain in more than two weeks.

The Russian gauge surged as much as 1.6 percent in August 2008 on a report, later retracted, that Khodorkovsky had been given parole. Medvedev steps aside in May to allow Putin to reclaim the Kremlin spot he occupied from 2000 to 2008.

The new government may want to “make a smash,” by releasing Khodorkovsky, according to Mattias Westman, founder of London-based Prosperity Capital Management, the largest Russia- focused fund manager with about $5 billion in assets.

“It would have a positive effect and would make people reconsider Russia,” Westman said by phone from London. A 5 percent to 10 percent gain for the Micex is not “a bad estimate,” he said.

I think this is nuts. It is best interpreted like Freud interpreted dreams: wish fulfillment by those who want to encourage a rise in stock prices-and a rise in stock trading-in Russia.

It completely discounts the politics, and Khodorkovsky’s imprisonment is all about politics.  110 percent.  In the aftermath of the most unsettling moment in recent Russian political history, do you think Putin would risk releasing Khordorkovsky?  Set aside his visceral hatred of the man.  Just look at the objective reality.  Wide swathes of the Russian public are dissatisfied, and sick of Putin.  But the opposition has failed primarily because it lacked leadership.  Khodorkovsky could provide that leadership.  And he has the money.  And he has reason to go after Putin personally.  Putin has survived in large part by keeping any potential opposition divided and leaderless.  Releasing Khodorkovsky in these fraught and unsettled times?  The upside for Putin is almost zero-the downside is big.  No, Khodorkovsky’s success would not be assured, but the odds of a political crisis are far larger with him free, than with him behind bars.  You really think Putin is going to take that risk?

And know that once released, Khodorkovsky would make every effort to recover what he believes was stolen from him and other Yukos shareholders.  That would strike right at the heart of the siloviki elite and their ill-gotten gains.

So I would definitely short Khodorkovsky’s release at 50-50 odds.  At 10-90 odds even.  I put the odds at virtually zero.

So why the rumor? Great opportunity to sell into the rally brought on by suckers buying based on it.  Another opportunity to part fools and their money.  So I think that this is being floated by people in the Russian government who want to fleece gullible Western dreamers.  And given that business and finance ethics in Russia are epitomized by people like Shuvalov, this is the most likely explanation.

Are we supposed to take investment advice from Deutsche and Troika?  I pass.

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32 Comments »

  1. Plus, there’s the minor matter that even the European Court of Human Rights sez that his conviction wasn’t political, and that he’s indeed guilty of tax fraud on a galactic scale.

    Comment by wanderer — March 28, 2012 @ 4:34 pm

  2. Ok well we’ve all read our Vanity Fair let’s drink the Masha Gessen tell the stupid Westerners what they want to hear koolaid that Khodorkovsky is the most popular public figure in Russia. I need another drink. Even Russophobia cannot descend into self-parodying stupidity like that. As much as I like Ron Paul and realize the GOP screwed him out of wins in Iowa and Maine with the connivance of mainstream and conservative media failing to report the local ‘irregularities’ and Karl Rove, even I don’t say Paul would be elected president next week.

    “It completely discounts the politics, and Khodorkovsky’s imprisonment is all about politics. 110 percent.” How about the brutal murders of two parents by Khodorkovsky’s chief of security? His defense was that they never found the bodies. Jimmy Hoffa wasn’t found either. And the guy Eric Kraus reports on that was shot dead on Khodorkovsky’s birthday after creating adverse publicity for the oligarch and Yukos by going on a hunger strike over unpaid taxes in the company town.

    No, a murderous thug that you exploit to take on someone you hate and believe to be a thug i.e. Putin is no less of a thug, anymore than you believe all that horsecrap about the Libyan rebels being democratic secularists before they hoisted the Salafist head chopper banner from Iraq over Benghazi. But hey, why let the facts get in the way of your endless propaganda war against Russia and on behalf of the National/Homeland Security State?

    Willful propaganda combined with a massive twinge of envy towards Russia’s oligarchic class that has bought up half of London explains Vanity Fair’s arheadedness on Russia. But not SWP’s. That would be more willful malice combined with having pals in the eternal Oceania versus urasia racket.

    Comment by Mr. X — March 28, 2012 @ 5:38 pm

  3. Why ignore the contradictions that Putin might be doing Israel a favor by making sure the MBO doesn’t set up shop on the Golan Heights? Or that the latest Russian mil hardware might have some Hebrew lettering on the bottom? The current mindless anti-Russia lobby couldn’t survive such revealations, which is why if Assange really were a Kremlins agent as your buddy Cointelpro Reggie claims Assange would’ve ‘Wikileaked’ all sortsa secret hanky panky between Bib and the Kremlin to make D.C.’s ‘more pro-Israel than thou’ warmongers collective heads explode.

    Comment by Mr. X — March 28, 2012 @ 5:40 pm

  4. This post is a good example of broken clocks and being right.

    Comment by Sublime Oblivion — March 28, 2012 @ 9:13 pm

  5. > there’s the minor matter that even the European Court of Human Rights sez that his conviction wasn’t political, and that he’s indeed guilty of tax fraud

    There’s even the minor matter that the Kremlin agitprop has been persistently spreading this lie in the hope that, repeated a million times, it will be perceived as truth – but it is not.

    Comment by Ivan — March 29, 2012 @ 12:31 am

  6. AIUI Khodorkovsky got hold of Yukos illicitly in the first place. How do you get that rich, that fast, legally, in Russia?

    Even if he didn’t actually do the crime is in jail for, he sure as hell did something else he should be in jail for but got away with it.

    There is a very sound and widely-recognised principle of jurisprudence at issue here, namely that there’s no smoke without fire. On that basis Khodorkovsky is as guilty as hell.

    Comment by Green as Grass — March 29, 2012 @ 3:46 am

  7. Look, I think it is safe to say that almost 3every oligarch in Russia got their hands on most of their property “illegally”, whatever that meant in the post Soviet reality. The issue with K is that he turned against the system, for whatever reason, and seems to have behaved with great dignity during his legal lynching and incarceration.

    As regards to letting him go there are probably one minor and two major variables that determine whether he will be let go:

    1. The extent that his liberation is complete (e.g. with political rights)- minor-;
    2. The extent that he is viewed as harmless or compromised by the current security services;
    3. the degree that the system gets the credit for saying he will be released, versus the additional credit they might get by actually releasing him. After all why do the real thing, when people will parrot the fake line, and not incur the risk of doing the actual deed?

    My guess is that the whole thin is a head fake towards “Liberalism”, and am with the prof as regards to the odds.

    Comment by sotos — March 29, 2012 @ 8:52 am

  8. here courtesy of Ron Paul advisor Doug Wead is a category of the fraud the hated ‘Ronulans’ have been subjected to, particularly in states like Maine, Nevada and Iowa where turning out a few thousand people makes all the difference:

    In Kentucky they show up to find that their name is on a list prohibited from participation by the County Chairman. He claims he did a drive-by the day before and they had a Libertarian sign in their yard and therefore cannot participate in a GOP caucus.

    In Nevada the microphones are only allowed for favored candidates and are turned off when a young Hispanic tries to speak. There are lots of Hispanics among this crowd. Parliamentary rules are ignored. Prospective delegates are intimidated.

    In Virginia, they are tricked into leaving the building, told that if there is no quorum the vote can be delayed until the rest of their people show up. But once out of the building the County Chairman, herself, locks the door so they can’t get back in.

    In Alaska, election times are changed and their names are excluded from robo calls announcing those changes. Participants from all of the other campaigns are invited. Insiders are reportedly allowed to vote in caucuses by telephone conference calls, meanwhile, young people who show up are turned away in droves, saying they are too late or not registered, in spite of showing registration documents.

    In Maine, a county chairman cancels the caucus, knowing that they will have a strong showing. A GOP official transfers false data and her phony numbers are caught by a local newspaper.

    In an Oklahoma county convention a corrupt chairman adds new delegates who didn’t attend precinct caucuses and eliminates those who actually did. Another establishes a credentials committee which eliminates anyone under the age of thirty.
    And yet, on they come, in spite of the pain, the inconvenience, the open hostility of the Party bosses. They are like a tide of the ocean. And for every precinct or county where they are violated or cheated, there is another where their sheer numbers prevail. These are the Ronulans, the Ron Paul supporters, trying to take back the Mothership from the corrupt Empire. And unseen, unheralded by the national media, they are showing signs of success.

    Comment by Mr. X — March 29, 2012 @ 3:16 pm

  9. But here’s the positive side of the ledger — note the stupid, reflexive hostility of many Santorum backers, which is a reflection of the likes of Mark Levin and others, that Romney’s more pragmatic, pro-Establishment set took advantage of in a few places:

    Perhaps the most dramatic contest centers on Greene County. (Springfield, Missouri.) This is the home to the national headquarters for the Assemblies of God and the Baptist Bible Fellowship, of Jimmy Swaggart and Jerry Falwell fame, respectively. The Ronulans extend a hand of cooperation to the Santorum people but it is rejected. And who can blame them? Santorum had carried the County by 54% in the statewide, non binding, contest. The Romney people quickly step into the breach, make peace with the Ronulans. The end result is a delegation to the State Convention that is 59% Ron Paul, 36% Mitt Romney and 5% Rick Santorum.

    Again in Boone County, (Columbia, Missouri,) Ron Paul organizer, Bruce Summers tries to strike a deal with Santorum supporters and is flatly rejected. The Ronulans promptly elect a new chairman of the caucus and the Romney supporters, seeing the math, fall into line, offering to join with the Ron Paul forces just to be able to get a piece of the delegation that will go onto State.
    Santorum forces become so defensive over the invasion of young Ronulans in Cass County that they make a deal with Romney they didn’t have to make. Just to be certain of keeping out the Ron Paul supporters, they give up five delegates to Romney, their main rival for the GOP nomination. Like the Ron Paul deals with Romney, it is a tactical decision of strategic incompetence.

    In Iowa, where it all began last January, where the Romney State Chairman delayed reports that Santorum had really won after all, they have announced a new State Chairman. He is A.J. Spiker, the State co-chairman for Ron Paul for president. And still, the AP delegate tracker suggests that split of delegates from Iowa will be Santorum 14, Romney 12, and Ron Paul 1. Clearly, if the Ronulans can replace the Romney State Chair with their own man, they will get much more than one delegate to Tampa.

    So who are these Ron Paul supporters? They are young. He carried 48% of the youth vote in Iowa, 47% in New Hampshire, while six other candidates split the rest. They are Hispanic. He carried 52% of the Hispanic vote in Clark County, Nevada ( Las Vegas) while all of the others split the rest. And they are Independents. In a recent CBS poll he did better among Independents than all other candidates including Barack Obama. [Nice demographics for all of you who hate Ron Paul, heh? Wait'll till Rand in 2016 after Romney loses]

    And that means that they are the future. It means they are going to keep coming. They cannot be stopped, only delayed. And not for long. They are coming. They are coming.

    History belongs to who shows up. And no one wants to show up for a bankrupt, pro-endless war pro-eternal money printing agenda.

    Comment by Mr. X — March 29, 2012 @ 3:20 pm

  10. “There’s even the minor matter that the Kremlin agitprop has been persistently spreading this lie in the hope that, repeated a million times, it will be perceived as truth – but it is not.”

    You wish, lying prick Ivan.

    Here’s a link to the judgement itself, on the ECHR’s website.

    http://cmiskp.echr.coe.int/tkp197/view.asp?action=html&documentId=891996&portal=hbkm&source=externalbydocnumber&table=F69A27FD8FB86142BF01C1166DEA398649

    And here’s some of the highlights of the Court’s conclusions:

    590. Having examined the materials of the case and the parties’ submissions and despite its earlier conclusions under Article 6 §§ 1 and 3 (b) of the Convention in respect of the 2000 Tax Assessment (see paragraph 551), the Court has little doubt that the factual conclusions of the domestic courts in the Tax Assessment proceedings 2000-2003 were sound. The factual issues in all of these proceedings were substantially similar and the relevant case files contained abundant witness statements and documentary evidence to support the connections between the applicant company and its trading companies and to prove the sham nature of the latter entities (see paragraphs 14-18, 48, 62-63, 165, 191-193, 212 and 213). The applicant company itself did not give any plausible alternative interpretation of this rather unambiguous evidence, as examined and accepted by the domestic courts.

    591. From the findings of the domestic courts and the parties’ explanations, the Court notes that the company’s “tax optimisation techniques” applied with slight variations throughout 2000-2003 consisted of switching the tax burden from the applicant company and its production and service units to letter-box companies in domestic tax havens in Russia. These companies, with no assets, employees or operations of their own, were nominally owned and managed by third parties, although in reality they were set up and run by the applicant company itself. In essence, the applicant company’s oil-producing subsidiaries sold the extracted oil to the letter-box companies at a fraction of the market price. The letter-box companies, acting in cascade, then sold the oil either abroad, this time at market price or to the applicant company’s refineries and subsequently re-bought it at a reduced price and re-sold it at the market price. Thus, the letter-box companies accumulated most of the applicant company’s profits. Since they were registered in domestic low-tax areas, they enabled the applicant company to pay substantially lower taxes in respect of these profits. Subsequently, the letter-box companies transferred the accumulated profits unilaterally to the applicant company as gifts. The Court observes that substantial tax reductions were only possible through the mixed use and simultaneous application of at least two different techniques. The applicant company used the method of transfer pricing, which consisted of selling the goods from its production division to its marketing companies at intentionally lowered prices and the use of sham entities registered in the domestic regions with low taxation levels and nominally owned and run by third persons (see paragraphs 14-18, 48, 62-63 for a more detailed description).

    592. The domestic courts found that such an arrangement was at face value clearly unlawful domestically, as it involved the fraudulent registration of trading entities by the applicant company in the name of third persons and its corresponding failure to declare to the tax authorities its true relation to these companies (see paragraphs 311, 349-353, 374-380). This being so, the Court cannot accept the applicant company’s argument that the letter-box entities had been entitled to the tax exemptions in questions. For the same reason, the Court dismisses the applicant company’s argument that all the constituent members of the Yukos group had made regular tax declarations and had applied regularly for tax refunds and that the authorities were thus aware of the functioning of the arrangement. The tax authorities may have had access to scattered pieces of information about the functioning of separate parts of the arrangement, located across the country, but, given the scale and fraudulent character of the arrangement, they certainly could not have been aware of the arrangement in its entirety on the sole basis on the tax declarations and requests for tax refunds made by the trading companies, the applicant company and its subsidiaries.

    593. The arrangement was obviously aimed at evading the general requirements of the Tax Code, which expected taxpayers to trade at market prices (see paragraphs 395-399), and by its nature involved certain operations, such as unilateral gifts between the trading companies and the applicant company through its subsidiaries, which were incompatible with the rules governing the relations between independent legal entities (see paragraph 376). In this connection, the Court finds relevant the warning given by the company’s auditor about the implications of the use of the company’s special fund during the year 2002 (see paragraphs 206-209) and is not persuaded by the applicant company’s reference to case no. A42-6604/00-15-818/01 (see paragraphs 356-357), the expert opinion of its counsel (see paragraph 577) and its reliance on Article 251 (1) 11 of the Tax Code (see paragraph 376).

    594. By contrast to the Tax Assessments in issue, the respondent entity in case no. A42-6604/00-15-818/01 was not alleged to have been part of a larger tax fraud and the Ministry failed to prove that it had been sham. The courts established that the entity had some assets, employees and a bank account at the place of its registration and dismissed the Ministry’s claims. As regards the expert opinion and the company’s reference to Article 251 (1) 11 of the Tax Code, the Court finds them irrelevant as they refer to the relations of openly associated companies and not, as was the case at issue, to the use of sham entities fraudulently registered in the name of certain third parties. Thus, the Court cannot agree with the applicant company’s allegation that its particular way of “optimising tax” had been previously examined by the domestic courts and upheld as valid or that it had used lawful “tax optimisation techniques” which were only subsequently condemned by the domestic courts. The above considerations are sufficient for the Court to conclude that the findings of the domestic courts that applicant company’s tax arrangements were unlawful at the time when the company had used them, were neither arbitrary nor manifestly unreasonable.

    595. The Court will now turn to the question whether the legal basis for finding the applicant company liable was sufficiently accessible, precise and foreseeable. In this connection, the Court notes that in all the Tax Assessments (see paragraphs 14-18, 48, 62-63, 165, 191-193, 212 and 213) the domestic courts essentially reasoned as follows. The courts established that the trading companies had been sham and had been entirely controlled by the applicant company and accordingly reclassified the transactions conducted by the sham entities as transactions conducted in reality by the applicant company.

    596. The courts first decided that the transactions of the sham entities failed to meet the requirements of Article 39 of the Tax Code defining the notion of a sales operation (see paragraphs 48 and 324) as well as Article 209 of the Civil Code describing essential characteristics of an owner of goods (see paragraph 48 and 381). In view of the above and relying on Article 10 (3) of the Civil Code which established a refutable presumption of good faith and reasonableness of actions of the parties in commercial transactions (see paragraph 48 and 382-383), the courts then changed the characterisation of the sales operations of the sham entities. They decided that these were in reality conducted by the applicant company and that it had been incumbent on the latter to fulfil the corresponding obligation to pay various taxes on these activities. Finally, the courts noted that the setting up and running of the sham arrangement by the applicant company resulted in an understating of the taxable base of its operations and, as a consequence, the intentional non-payment of various taxes, which was punishable as a tax offence under Article 122 of the Tax Code (see paragraph 400).

    597. Having regard to the applicable domestic law, the Court finds that, contrary to the applicant company’s assertions, it is clear that under the then rules contractual arrangements made by the parties in commercial transactions were only valid in so far as the parties were acting in good faith and that the tax authorities had broad powers in verifying the character of the parties’ conduct and contesting the legal characterisation of such arrangements before the courts. This was made clear not only by Article 10 (3) of the Civil Code relied on by the domestic courts in the Tax Assessment proceedings, but also by other relevant and applicable statutory provisions which were available to the applicant company and other taxpayers at the time. Thus, Article 45 (2) 3 of the Tax Code explicitly provided the domestic courts with the power to change the legal characterisation of transactions and also the legal characterisation of the status and activity of the taxpayer, whilst section 7 of the Law on the Tax Authorities of the Russian Federation granted the right to contest such transactions to the tax authorities (see paragraph 393). In addition, the case-law referred to by the Government indicated that the power to re-characterise or to cancel bad faith activities of companies existed and had been used by the domestic courts in diverse contexts and with varying consequences for the parties concerned since as early as 1997 (see paragraphs 382-393 and paragraphs 428-468). Moreover, in a number of its rulings, including decision of 25 July 2001 no. 138-0 specifically relied upon by the domestic courts in the Tax Assessment proceedings against the applicant company (see paragraphs 384-387), the Constitutional Court confirmed the significance of this principle, having mentioned various possible consequences of a taxpayer’s bad faith conduct.

    598. In so far as the applicant company complained that the bad faith doctrine had been too vague, the Court would again reiterate that in any system of law, including criminal law, there is an inevitable element of judicial interpretation and there will always be a need for elucidation of doubtful points and for adaptation to changing circumstances. In order to avoid excessive rigidity, many laws are inevitably couched in terms which, to a greater or lesser extent, are vague and whose interpretation and application are questions of practice (see, among other authorities, Sunday Times, cited above, § 49 and Kokkinakis, cited above, § 40). On the facts, it would be impossible to expect from a statutory provision to describe in detail all possible ways in which a given taxpayer could abuse a legal system and defraud the tax authorities. At the same time, the applicable legal norms made it quite clear that, if 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. And this is precisely what happened to the applicant company in the case at hand.

    599. Overall, having regard to the margin of appreciation enjoyed by the State in this sphere and the fact that the applicant company was a large business holding which at the relevant time could have been expected to have recourse to professional auditors and consultants (see Špaček, s.r.o., cited above, § 59), the Court finds that there existed a sufficiently clear legal basis for finding the applicant company liable in the Tax Assessments 2000-2003.

    600. Lastly, the Court observes that the applicant company made a number of additional arguments under this head. In particular, it also alleged that there was no basis in law to deny the repayment of VAT in respect of the export of oil and oil products, that the domestic courts had failed to apply Articles 20 and 40 of the Tax Code, that it should have been dispensed from payment of interest surcharges under Article 75 (3) of the Tax Code and that in respect of the year 2000 the company had been subjected to double taxation in respect of the profits of the sham entities.

    601. The Court notes that both Section 5 of Law no. 1992-1 of 6 December 1991 “On Value-Added Tax” governing the relevant sphere until 1 January 2001 as well as Article 165 of the Tax Code applicable to the subsequent period provided unequivocally that a zero rate of value-added tax in respect of exported goods and its refund could by no means be applied automatically, and that the company was required to claim the tax exemptions or refunds under its own name under the procedure set out initially in Letter no. B3-8-05/848, 04-03-08 of the State Tax Service of Russia and the Ministry of Finance and subsequently in Article 176 of the Tax Code to substantiate the requests in order to obtain the impugned refunds (see paragraphs 326-336). In view of the above, the Court finds that the relevant rules made the procedure for VAT refunds sufficiently clear and accessible for the applicant company to able to comply with it.

    602. Having examined the case file materials and the parties’ submissions, including the company’s allegation made at the hearing on 4 March 2010 that it had filed the VAT exemption forms for each of the years 2000 to 2003 on 31 August 2004, the Court finds that the applicant company failed to submit any proof that it had made a properly substantiated filing in accordance with the established procedure, and not simply raised it as one of the arguments in the Tax Assessment proceedings, and that it had then contested any refusal by the tax authorities before the competent domestic courts (see paragraphs 49 and 171, 196, 196 and 216). The Court concludes that the applicant company did not receive any adverse treatment in this respect.

    603. As regards the company’s argument that Articles 20 and 40 of the Tax Code should have been applied by the domestic courts in their case and that the Ministry’s claims were inconsistent with the above provisions, the Court notes that the Ministry and the domestic courts never relied on these provisions and there is nothing in the applicable domestic law to suggest that they had been under a legal obligation to apply these provisions to the applicant company’s case. Thus, it cannot be said that the authorities’ failure to rely on these provisions rendered the Tax Assessments 2000-2001 unlawful.

    604. Finally and in so far as the company disagreed with the interpretation of Article 75 (3) of the Tax Code by the domestic courts and also alleged to have been subjected to double taxation, the Court would again reiterate that it is not its task to take the place of the domestic courts, which are in the best position to assess the evidence before them, establish the facts and to interpret the domestic law. On the facts, the former provision only applied to cases where the taxpayer was unable to pay the tax debt solely due to the seizure of its assets and cash funds (see paragraph 402). The domestic courts established that the company had been unable to pay because of the lack of funds and not because of the injunctions and refused to apply Article 75 (3) of the Tax Code in the applicant’s case (see paragraph 216). The Court does not find this conclusion arbitrary or unreasonable. Likewise, the Court finds nothing in the parties’ submissions or the case file materials to cast doubt on the findings of the domestic courts, which specifically established that the Ministry took account of the sham entities’ profits in calculating their claims so as to avoid double taxation (see paragraph 49).

    605. Overall, the Court finds that, in so far as the applicant company’s argument about the allegedly unreasonable and unforeseeable interpretation of the domestic law in the Tax Assessments 2000-2003 is concerned, the Tax Assessments 2000-2003 complied with the requirement of lawfulness of Article 1 of Protocol No. 1.

    (b) Whether the Tax Assessments 2000-2003 pursued a legitimate aim and were proportionate

    606. The Court is satisfied that, subject to its findings in respect of the lawfulness of fines for the years 2000 and 2001 made earlier, each of the Tax Assessments 2000-2003 pursued a legitimate aim of securing the payment of taxes and constituted a proportionate measure in pursuance of this aim. The tax rates as such were not particularly high and given the gravity of the applicant company’s actions there is nothing in the case file to suggest that the rates of the fines or interest payments can be viewed as having imposed an individual and disproportionate burden, as such, on the applicant company (see Dukmedjian v. France, no. 60495/00, §§ 55-59, 31 January 2006).

    (c) Conclusion concerning the compliance with Article 1 of Protocol No. 1 as regards the Tax Assessments 2000-2003

    607. Overall, the Court finds that there has been a violation of Article 1 of Protocol No. 1 on account of the 2000-2001 Tax Assessments in the part relating to the imposition and calculation of penalties. Furthermore, the Court finds that there has been no violation of Article 1 of Protocol No. 1 as regards the rest of the 2000-2003 Tax Assessments.

    (Skip a bit, Brother…)

    (c) The Court’s assessment

    612. The Court will examine this grievance under Article 14 of the Convention, taken in conjunction with Article 1 of Protocol No. 1. This former provision reads:

    Article 14 of the Convention

    “The enjoyment of the rights and freedoms set forth in [the] Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”

    613. Before considering the complaints made by the applicant company, the Court would reiterate that Article 14 does not forbid every difference in treatment in the exercise of the rights and freedoms recognised by the Convention (see, for example, Lithgow and Others, cited above, § 117). It safeguards persons (including legal persons) who are “placed in analogous situations” against discriminatory differences of treatment; and, for the purposes of Article 14, a difference of treatment is discriminatory if it “has no objective and reasonable justification”, that is, if it does not pursue a “legitimate aim” or if there is not a “reasonable relationship of proportionality between the means employed and the aim sought to be realised” (see, amongst many authorities, Rasmussen v. Denmark, 28 November 1984, §§ 35 and 38, Series A no. 87). Furthermore, the Contracting States enjoy a certain margin of appreciation in assessing whether and to what extent differences in otherwise similar situations justify a different treatment in law; the scope of this margin will vary according to the circumstances, the subject-matter and its background (ibid., § 40).

    614. The Court would reiterate that nothing in the case file suggests that the applicant company’s tax arrangements during the years 2000-2003, taken in their entirety, including the use of fraudulently registered trading companies, were known to the tax authorities or the domestic courts and that they had previously upheld them as lawful (see paragraphs 592-594). It thus cannot be said that the authorities passively tolerated or actively endorsed them.

    615. As regards the applicant company’s allegation that other domestic taxpayers used or continue to use exactly the same or similar tax arrangements as the applicant company and that the applicant company was the only one to have been singled out, the Court finds that the applicant company failed to demonstrate that any other companies were in a relevantly similar position. The Court notes that the applicant company was found to have employed a tax arrangement of considerable complexity, involving, among other things, the fraudulent use of trading companies registered in domestic tax havens. This was not simply the use of domestic tax havens, which, depending on the exact details of an arrangement, may have been legal or may have had some other legal consequences for the companies allegedly using them. The Court notes that the applicant company had failed to submit any specific and reliable evidence concerning such details. It further notes that it cannot be called upon to speculate on the merits of the tax arrangements of third parties on the basis of data contained in non-binding research and information reports and that therefore it cannot be said that the situation of these third parties was relevantly similar to the situation of the applicant company in this respect.

    616. The Court concludes that, in so far as the complaint about discriminatory treatment is concerned, there has been no violation of Article 14 of the Convention, taken in conjunction with Article 1 of Protocol No. 1.

    Whew….

    This looks to me like the legal equivalent of 400 guns per kilometer of front obliterating Army Group Center. And after it, there is little left of the “Yukos was a model of Western management practices and corporate governance” the Putin-haters have been pushing since 2003 as there was of AGC in May 1945.

    Comment by wanderer — March 29, 2012 @ 3:43 pm

  11. “This looks to me like the legal equivalent of 400 guns per kilometer of front obliterating Army Group Center. And after it, there is little left of the “Yukos was a model of Western management practices and corporate governance” the Putin-haters have been pushing since 2003 as there was of AGC in May 1945.”

    Unless, of course, “…Western management practices and corporate governance…” includes massive tax evasion, fraud, and, quite possibly, murder.

    Comment by wanderer — March 29, 2012 @ 3:49 pm

  12. Looks like major fail for Ivan, and for Khodorkovsky apologetics in general.

    I see the same desperation, the same insane desire to discredit everyone who’s critiquing a crumbling system all over the place, from Ron Paul delegates getting shouted down and arrested for trespass to Bernanke’s failed public relations campaign at GWU.

    Reginald Quills, to name SWP’s Twitter buddy, as but one example. And that LibertyLynx gal has something like 43,000 Tweets. Can someone say OCD?

    So now the pissed off D.C. brigades turn their fire once again on Putin simply because they didn’t get to carry out their glorious revolution to install the Muslim Brotherhood in Syria. Well cry me a river. The KGB also thought ‘the world was going are way’ in the late 1970s all the way up until the whole thing started to unravel at home and abroad. The same thing is happening to the neocons/globalists as their projects crash and burn.

    Comment by Mr. X — March 29, 2012 @ 6:43 pm

  13. “Looks like major fail for Ivan, and for Khodorkovsky apologetics in general.”

    And not just for lying prick Ivan, but for the Streetwise Professor too, who smears above:

    “Khodorkovsky’s imprisonment is all about politics. 110 percent.”

    No, its about fraud and tax evasion running into the billions, and maybe even murder.

    Comment by wanderer — March 29, 2012 @ 8:22 pm

  14. Mr. X. Did you really bring up the subject of OCD? Really? You?

    I say again: YOU?

    That is the funniest, most un-self-aware fucking thing I have read. Ever. Jesus H. Christ, you write more on this blog than I do-and you call somebody else OCD?

    Listen, son-tweets are 140 characters, at most. Want to count the number of characters you’ve spewed here? You know, on that insignificant blog that nobody cares about.

    And re Quills-I mentioned him once because he sent me something that was quite interesting. And you-in yes, your OCD way-assert we are joined at the hip. Or married. Or something.

    Get. A. Fucking. Grip.

    And before you call somebody else OCD-get help.

    The ProfessorComment by The Professor — March 29, 2012 @ 10:09 pm

  15. @wanderer. Reading you brings Joshua Foust to mind. Just a wild guess.

    The ProfessorComment by The Professor — March 29, 2012 @ 10:27 pm

  16. Well, nice to know you don’t CONDONE referring to Ron Paul supporters as Nazis and neo-Confederates, or some such, like Cointelpro Reggie who contrary to your disclaimer hangs on your every Tweet.

    Or maybe you did. Sort of. You at least settled for claiming all those thousands of people who come to Paul rallies, like the one at UW-Madison last night, must hate America.

    First, much of the most trenchant criticism of Paul and his cultish followers (more on them later) comes from people who are sympathetic with many of the position he takes. These critics think that government is far too large, and that our liberties have been progressively (pun intended) eroded. And I agree.

    But the dislike of Paul and the Paulians for the government has curdled into a hatred of America. There is no ugly anti-American conspiracy theory that they do not embrace. 9-11 Trutherism, for instance. They routinely recycle theories first floated by the KGB. No wonder RT loves Paul and gives Rockwell plenty of air time. And it is this profound anti-Americanism that repels people like me, and other Paul critics–people who believe that America is flawed but the last, best hope of mankind that has on balance been a profound force for good at home and in the world at large.

    So Russians who don’t like Putin = patriots, Ron Paul supporters who say they love their country but fear their government = America haters. We get the double standard loud and clear.

    And 43,000 times 140 characters is still more than I could post here or would care to in a lifetime, which is to say more than perhaps everybody here.

    Comment by Mr. X — March 29, 2012 @ 11:40 pm

  17. And yes your blog is insignificant in the big scheme of things — who needs a supposed academic’s blog to insist that there was no evidence of manipulation pushing oil prices to $150 a barrel in 2008? They could just read any USG press release for that. No your fake libertarian defense of the Almighty Status Quo is quite boring, save for the fun I get from rubbing Reginald Q and his Cointelpro buddies noses in their failure. Fail to convince Americans to back the Muslim Brotherhood so they can have another war in Syria five years from now, fail to convince that even occasionally kooky critics of the Establishment like Alex Jones are Kremlin stooges, failure to convince that the channel formerly denounced as Jihad TV aka Al Jazeera is brave crusading journalism rather than pro-war propaganda, and failure to convince that all gold bugs are America haters since the Federal Reserve = America.

    Comment by Mr. X — March 29, 2012 @ 11:48 pm

  18. No, you’re going to get exactly what you and all the other ‘Right’ hacks who denounced Ron Paul and the thousands of people who turned out for him as cult followers or Commie dupes deserve — another four years of Obama. The wheels are going to come off, the NDAA and all the other bills you said only idiot conspiracy theorists cared about are going to get their teeth, and we’ll be lucky if Rand Paul is even allowed to run for President come 2016 when the GOP has completely screwed itself.

    How’s that Mittens doing in Pennsylvania, Ohio and Florida this week?

    Comment by Mr. X — March 29, 2012 @ 11:52 pm

  19. “@wanderer. Reading you brings Joshua Foust to mind. Just a wild guess.”

    Like I care what a truth-challenged smear artist thinks of me.

    I have an idea. Every time you refer to “Saint Mikhail, patron of Western management practices and corporate governance in the Russian oil sector”, I’ll repost the link and ECHR conclusions above, just to make it clear how little you really care about truth or legality as long as Russia gets screwed out of billions in revenues owed the Russian government.

    Comment by wanderer — March 30, 2012 @ 3:36 am

  20. Jeez wanderer-I agree that Khodorkovsky is a soulless prick but are you actually casting this as the triumph of good over evil. That Putin and Sechin combined their divine motives to imprison a tax cheat. That jointly they couldn’t in good conscience tolerate MK’s violation of the tax code? That jointly they decided to pursue this law breaker no matter what the personal cost to themselves to protect the common good? Whoa-talk about being far from the truth.

    Comment by pahoben — March 30, 2012 @ 9:15 am

  21. Dear Prof,

    Monomania, not OCD! You already are in trouble with the carnies, now with other innocent steppers on sidewalk cracks, etc. If this keeps up and someone prints your address, you run the risk of being beaten to death with large pink stuffed animals, with the crime scene being littered by discarded medicine bottles.

    Comment by sotos — March 30, 2012 @ 10:33 am

  22. Pahoben, I have no opinion on the state of Khodorkovsky’s soul, but he belongs where he is, and the fact that the Western investment community would take the pardon of a solidly convicted tax cheat, fraud, and alleged murderer as a favorable indication of Russia’s investment climate says a lot about the Western invwstment community and its mouthpieces The Economist and Financial Times.

    Comment by wanderer — March 30, 2012 @ 10:45 am

  23. @wanderer-I know things were done in Nefteyugansk that I couldn’t attribute to someone with a soul.

    The business environment in Russia doesn’t depend one whit on Khodorkovsky’s location. He might be freed if Putin thought it would attract a new round of suckers by changing the perceptions of the naive. In this case these mouthpieces would only be doing Putin’s bidding. In any event I agree with your assessment of these rags.

    @sotos-funny

    Comment by pahoben — March 30, 2012 @ 11:15 am

  24. reality is so much more interesting and backstabbing than SWP’s fantasy world where Obama licks Putin’s shoes while the Kremlins all high five in the background and Karl Rove’s American Crossroads runs idiotic ads about the scary Russians sans mentioning that it’s footage from Victory (aka VE) Day celebrations on Red Square. I guess soon with Obama’s fundraising suffering post-Keystone he’ll have to start recycling Paul and Santorum ads against Romney, while Romney’s ‘independent group’ ads all feature cheap $hit James Bond cuts.

    They don’t call the GOP the Stupid Party for nothing. Once again Kiwi Dzughashvili, tell me how screwing Ron Paul so obviously out of winning just a couple of rural states in IA and ME has helped Mittens Romney get a massive lead over Obama in the polls — y’know by pissing off all those dang kids who were trampling on the GOP geezers’ lawns. And how Misha the Tie Eater’s man Randy Scheunemann got John “we’re all Georgians now” McCain elected in 2008. Right?

    Comment by Mr. X — March 31, 2012 @ 12:41 am

  25. And SWP, what’s with the j-had against Joshua Foust anyway? Did he piss in your corn flakes, or are you secretly Reginald Quills, since he’s been all hot and bothered by Foust too?

    16.@wanderer. Reading you brings Joshua Foust to mind. Just a wild guess.

    Comment by The Professor — March 29, 2012 @ 10:27 pm

    Comment by Mr. X — March 31, 2012 @ 12:42 am

  26. X, The Streetwise Professorcan’t stand to be shown wrong with his “Khodorkovsky’s behind bars 110% because of politics” smear. As we all see above, Yukos’ mouthpieces couldn’t show that the Russian government was letting similar tax evaders slide, or that any other Russian company was doing the same.

    It seems that eight years of constant accusation from Khodorkovsky’s shills in the Russian and Western media does not amount to even a scintilla of evidence.

    And The Streetwise Professor isn’t happy about that.

    Comment by wanderer — March 31, 2012 @ 5:18 am

  27. Uhm, I’ve mentioned Foust once. And that comprises a jihad? If so, what are you waging against Quills? Who I’ve also mentioned-once.

    The ProfessorComment by The Professor — March 31, 2012 @ 11:59 am

  28. My, aren’t we touchy. And if you remind me of somebody . . . uhm, so? To be honest, everything you’ve said since only makes the similarities all the more striking.

    And whom would I be smearing-you or him?

    The ProfessorComment by The Professor — March 31, 2012 @ 12:00 pm

  29. You make the factually ungrounded, utterly unsubstantiated accusation that Khodorkovsky’s in jail 110% because of politics.

    The ECHR disagree. He’s in the slammer because there is voluminous, well -grounded evidence and testimony that he’s guilty.

    Comment by Wanderer — March 31, 2012 @ 3:32 pm

  30. SWP @29 and @ 30 — just to clear the record, I am not Foust. Your club of Twittering fake libertarian/conservative hyperinterventionists should know that. :)

    I assume all the hate directed Foust’s way has something to do with this:

    http://cips.uottawa.ca/event/the-moral-and-strategic-failures-of-humanitarian-interventions/

    The D’s cling hard to their cherished myth of the Balkan interventions of Bill Clinton as a glorious success and overlook the anti-Orthodox Christian pogroms and ethnic cleansing of Serbs. Most of the GOP still pretends 1 million Christians were not forced to flee Iraq and many of the ‘rebels’ in Syria would like to create an encore.

    But then, this blog has never been too concerned with Christianity or the fate of people of faith in general.

    Just like the leftoids your Twitter fanatic brigade wastes time arguing with re: Assange, whatever advances the narrative, and whatever doesn’t like MK’s murderous chief of security — is airbrushed out. You really mirror image your intellectual ‘adversaries’.

    The GOP got caught in ND trying to screw Santorum and Paul out of their respective 1st and 2nd place finishes this week in favor of Mittens Romney who finished a very distant third. Who says it’s really about the votes and not about the Establishment getting their pro-bailout, pro-eternal warfare man to head off those pesky defense cuts looming on the horizon with a good bout of Russophobic hysteria?

    Comment by Mr. X — March 31, 2012 @ 8:08 pm

  31. Sorry I forgot to mention the Black Hawk Down/Somalia intervention above, though I think I covered the drone strikes. I also forgot the Nobel Peace Prize winner’s deployment of 100 SpecOps soldiers to Uganda that KONY 2012 was meant to turn into a full blown AFRICOM intervention. Nevermind. The Weekly Standard is calling for more troops to be sent to Mali after a coup there following their glorious betrayal of the brother Colonel resulted in thousands of Malian refugees fleeing Arab Wahhabi death squads.

    And Foust (on the ‘left’?) along with Daniel Larison on the AmCongMag Right has really elevated himself lately among my favorite foreign policy writers. There’s this gem:

    I don’t want to spend too much time dissecting Mitt Romney’s war-path to the presidency — the one that’s tarred anything he’s touched, and dropped his unfavorability numbers to record lows — because A) I’d hate to alienate any secret Romneycons among my friends, and B) while I do have enough time, I’d rather spend it transcribing minor league interviews, or clipping my toenails, or practicing my Russian case-endings for the seventieth time today. That is to say, I’d like to avoid entering the GOP’s rabbit hole of un-reason, and continue on with my life…

    Indeed, that’s what Senor Equis is going to do. Forget about all the rabid Russophobes here bitterly clinging to the eternal war between Oceania and Eurasia and get on with my life. Because as I’ve said here many times, it isn’t as if all the hate/lies/cheating/literally locking out of delegates directed Ron Paul’s way has drastically boosted Mittens’ poll numbers or that the GOP doesn’t deserve the Stupid Party label for running a pro-individual health insurance mandate rich RINO in this year three of Great Depression 2.0. They’ll get what they deserve good and hard and before you know it four years from now Fox News will be the new MSNBC, a massive in kind contribution to certain pols but deep down a money loser with its audience dwarfed by Alex Jones’ rants on YouTube.

    Comment by Mr. X — March 31, 2012 @ 8:30 pm

  32. So when the rabid idiocy of the Establishment has driven both the casual Palin-dissing Lefties and the religious Orthodox Righties to the same barricades while SWP leers on the other side, you know real change is afoot. And all the Reginald Quills of this world and their Cointelpro backers can’t change that.

    http://registan.net/index.php/2012/03/29/romney-and-russia-and-around-we-go/

    Comment by Mr. X — March 31, 2012 @ 8:32 pm

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