Protection of property (Article 1 of Protocol No. 1 to the Convention)
II. Relevant domestic law and practice A. Tax liability 1. General provisions 307. Under Article 57 of the Constitution of Russia, everyone is liable to pay taxes and duties established by law. 308. Article 44 of the Tax Code of 31 July 1998 no. 146-FZ (as in force at the relevant time) states that an obligation to pay a tax or a duty arises, alters or ceases in accordance with that Code and other legislative acts on taxes and fees. 309. Articles 45 and 80 of the Tax Code provide that, as a general rule, taxpayers must comply with their obligation to pay a tax on their own initiative, and define a tax declaration as the written statement by taxpayers on their revenues and expenses, sources of revenue, tax benefits and the calculated sum of the tax, as well as other data related to calculation and payment of the tax. 310. Under Article 45, in the event of non-payment or incomplete payment of the tax in due time, the tax authorities may levy the tax liability directly from the taxpayer’s bank account. 311. Article 11 (2) of the Tax Code defines a branch of an organisation as a geographically separate department, with stable employment posts. 2. Tax inspections 312. Under Articles 82 and 87 of the Tax Code, the tax authorities may carry out documentary and on-site tax inspections of taxpayers. Such inspections may cover only the three calendar years of the taxpayer’s activity directly preceding the year of inspection. In exceptional cases the authorities are allowed to carry out repeated on-site tax inspections. Such cases include, among other things, on-site inspections conducted by way of supervision of the activities of the tax authority that conducted the initial audit (Article 87 (3) of the Code). 313. Article 101 (4) 2 of the Tax Code states that the tax authority may use as evidence during its inspections documents earlier demanded by the authority from a taxpayer, documents submitted or obtained during documentary and on-site tax inspections of that taxpayer as well as other documents in the possession of the authority. 314. Under Article 100 (5) of the Tax Code a taxpayer has two months to file a detailed reply to the report drawn up by the tax authorities on the outcome of the tax inspection. 315. Under Article 81 of the Tax Code, a taxpayer may not be fined in respect of any errors if, prior to commencement of the on-site tax inspection for the relevant year, it files amended tax returns and voluntarily satisfies the related tax liabilities, including default interest. 316. By order no. BG-3-29/159 dated 2 April 2003 the Tax Ministry decided that the period for performance of the demand to pay tax addressed to a taxpayer may not exceed ten calendar days from the date of its receipt by the taxpayer. 317. The Government relied on the following cases as examples of typical terms given to taxpayers for voluntary payment of reassessed taxes and surcharges: (a) Case no. A82-11/2003-A/6 318. On 13 November 2000 the Tax Ministry demanded that respondent OAO Slavneft-YANOS pay reassessed taxes and interest surcharges amounting to over RUB 53 million within one day. The court decisions in the case were taken on 11 June 2003, 7 October 2003 and 19 January 2004. (b) Case no. A33-16983/01-S3a-F02-1826/02-S1 319. On 31 May 2001 the Tax Ministry ordered the Municipal Housing and Utilities Infrastructure of the Kansk District to pay reassessed taxes in the amount of RUB 814,581.54 within one day. The first judgment of 9 April 2002 was upheld by the cassation instance on 16 July 2002. (c) Case no. F04/1724-594/A27-2004 320. On 23 January 2003 the Tax Ministry ordered FGUP PO Progress to pay reassessed taxes in the amount of RUB 72,827,208 within one day. The court decisions were taken on 4 September, 16 December 2003 and 5 April 2004 respectively. (d) Case no. A26-8688/03-26 321. On seven occasions in 2003 the Tax Ministry ordered OOO Krasnaya Rybka to pay reassessed taxes and interest surcharges in the overall amount of RUB 760,043.19 within one day. The first-instance judgment in the case, dated 13 February 2004, was upheld by a cassation decision of 16 June 2004. (f) Case no. F04-2648/2005(10969-A61-37) 322. On 25 August 2004 the Tax Ministry ordered OOO YamalGIS-Servis to pay reassessed taxes in the amount of RUB 268,083 on the same day. The court decisions upholding the demand were taken on 9 December 2004, 24 February and 4 May 2005. B. Applicable taxes 1. General provisions 323. Article 38 of the Tax Code provides that objects of taxation may be operations involving the retailing of goods, works and services, property, profit, income, value of retailed goods, works and services or other objects having cost, quantitative or physical parameters on the existence of which the tax legislation bases the obligation to pay tax. 324. Article 39 of the Code defines retailing of goods, works and services as, inter alia, the transfer (including exchange of services, works and goods) in return for compensation of property rights in respect of goods and results of works from one person to another, as well as the rendering of services from one person to another in exchange for compensation. 325. Article 41 of the Code defines profits as economic gains in monetary form or in kind. 2. Value-added tax (a) Before the entry into force of the Second Part of the Tax Code on 1 January 2001 326. Section 3 of RF Law no. 1992-1 of 6 December 1991 “On Value-Added Tax” (as in force at the relevant time) subjects to VAT, among other things, the turnover generated by the retailing of goods, works and services on the territory of Russia, the rates of which range between 10% and 20%. Under section 5 of the Law, exported goods are exempt from payment of the tax. The exemption becomes effective only if the taxpayer properly justifies the claim. Until these documents are filed, the tax remains payable under the non-export rate. 327. Letter no. B3-8-05/848, 04-03-08 of the State Tax Service of Russia and the Ministry of Finance, dated 21 December 1995, stated that taxpayers were to file the following documents to justify this tax exemption: a contract concluded between the legal personality taxpayer registered in Russia with its foreign partner, proof of payment in respect of the goods, and a customs declaration bearing the appropriate stamp of the customs body, confirming the export of goods from the customs territory of Russia. (b) After the entry into force of the Second Part of the Tax Code on 1 January 2001 328. In respect of VAT, the applicable tax rate is 0% if the traded goods are placed in an “export” customs regime and physically removed from the customs territory of the Russian Federation (Article 164 (1) of the Tax Code). In addition, the taxpayer may claim a refund of the “incoming” VAT already paid in respect of the exported goods. 329. For the zero rate to become effective and in order to claim the VAT refund, it is necessary to justify the claim by filing the following documents with the tax authorities (Article 165 of the Tax Code): the export contract concluded between the taxpayer and the foreign buyer, a bank statement confirming receipt of funds from the foreign buyer by a Russian bank duly registered with the tax authorities, a relevant customs declaration bearing the stamp of the customs bodies confirming the export of the goods from the customs territory of Russia, and copies of relevant transport bills and shipping documents, bearing the stamps of the customs bodies, confirming the export of goods from the customs territory of Russia. 330. On 14 July 2003 the Constitutional Court issued ruling no. 12-P, in which it essentially upheld the constitutionality of Article 165 of the Code. The court distinguished between documents required by public-law norms, such as the taxpayer’s customs declaration bearing the relevant stamps from the customs bodies, and which are mandatory in all cases, and other documents such as contracts, transport bills etc. In view of the different practices of the economic actors, which made the latter type of documents mutually replaceable, the authorities were constitutionally permitted to require a taxpayer to file these documents, but without an excessive degree of formalism. 331. The relevant documents are to be filed with the competent tax authority within 180 days from the date of the customs clearance of the goods in question (Article 165 (9) of the Tax Code). Until these documents are filed, the tax remains payable under the non-export rate. A taxpayer is not precluded from filing the documents in question even after the expiry of the time-limit in question (Article 176 of the Tax Code). 332. By a decision of 28 April 2003 (case no. F09-1159/03-AK) in the case of ZAO Aktsionernaya neftyanaya kompaniya v. the Tax Ministry, the Federal Commercial Court of the Ural District, acting as a cassation review court, rejected the company’s claims for VAT refunds with reference to its failure to satisfy the requirements of Article 165 of the Code. The company could not prove the fact of actual payment for the allegedly exported goods. 333. By a decision of 17 February 2004 (case no. F09-187/04-AK) in the case of OOO Firma Galaktika v. the Tax Ministry, the Federal Commercial Court of the Ural District, acting as a cassation review court, rejected the company’s claims for VAT refunds with reference to its failure to satisfy the requirements of Article 165 of the Code. The company failed to submit a proper bank statement confirming receipt of funds from the foreign buyer. 334. By a decision of 3 May 2005 (case no. A56-31805/04) in the case of ZAO Stroitelnyy trest no. 28 v. the Tax Ministry, the Federal Commercial Court of the North Western District examined the decisions of lower courts whereby the company had been refused VAT refunds at first instance (by a judgment of 11 October 2004 – the company failed to submit the properly stamped customs declaration confirming the actual export of the goods) and had subsequently been granted them on appeal (by a decision of 21 January 2005 – the appeal court decided that the fact of the actual export had been established by a final court decision in a related court dispute). The cassation court quashed the appeal decision, having noted that the requirements set out in Article 165 of the Code were strict and unequivocal and that the law did not allow for any replacement of the customs declaration by other means of proof. 335. By a decision of 9 March 2005 (case no. F09-563/05-AK) in the case of OAO Kachkanarskiy gorno-obogatitelnyy kombinat Vanadiy v. the Tax Ministry, the Federal Commercial Court of the Ural District quashed the decisions of lower courts whereby the company had been granted VAT refunds. The cassation court noted that the requirements set out in Article 165 of the Code were strict and unambiguous and that the law required the taxpayer to prove the actual export solely by means of the properly stamped customs declaration, which had not been done by the company in the present case. Accordingly, the court rejected the company’s claims. 336. By a decision of 27 September 2005 (case no. F09-4252/05-C2) in the case of OAO Nauchno-proizvodstvennyy centr vysokotochnoy tekhniki Izhmash v. the Tax Ministry, the Federal Commercial Court of the Ural District, acting as a cassation review court, rejected the company’s claims for VAT refunds with reference to its failure to satisfy the requirements of Article 165 of the Code in a timely manner, that is, within six months. 3. Motorway fund tax 337. Section 5 (2) of RF Law no. 1759-1 of 18 October 1991 “On motorway funds in the Russian Federation” provides for a 1% motorway users’ tax from the turnover of the retail of goods, works and services, payable by all motorway users. Section 4 also makes subject to a 25% tax the turnover (excluding VAT) of companies trading in fuels and lubricants. 338. This tax was abolished from 1 January 2003. 4. Tax for the maintenance of the housing stock and socio-cultural facilities 339. Section 21 (“Ch”) of RF Law no. 2118-1 of 27 December 1991 “On the foundations of the tax system” imposes a tax of up to 1.5% for the maintenance of the housing stock and socio-economic facilities. 340. This tax was abolished with the entry into force of the Second Part of the Tax Code on 1 January 2001. 5. Corporate property tax (a) Before the entry into force of the Second Part of the Tax Code on 1 January 2001 341. Section 2 (1-2) of RF Law no. 2030-1 of 13 December 1991 “On corporate property tax” provided for a tax of up to 2% in respect of organisations’ property. (b) After the entry into force of the Second Part of the Tax Code on 1 January 2001 342. Chapter 30 of the Tax Code provides for a tax of up to 2.2% in respect of organisations’ property. The exact rate is defined by the regional authorities. 6. Profit tax (a) Before the entry into force of the Second Part of the Tax Code on 1 January 2001 343. Law no. 2116-1 of 27 December 1991 “On profit tax on enterprises and organisations” (sections 2 and 5) provided for a profit tax, the rate of which could vary depending on the type of taxable activity and the rate fixed by the local authorities. The mandatory rate to be transferred to the Federal budget was 11%. (b) After the entry into force of the Second Part of the Tax Code on 1 January 2001 344. Chapter 25 of the Tax Code provides for a profit tax of up to 24% (6.5% to be transferred to the Federal budget and the rest to the regional budget). 7. Advertising tax 345. Section 21 (1) “z” of RF Law no. 2118-1 of 27 December 1991 “On the foundations of the tax system” imposed a tax in respect of the cost of advertisement services. 346. This tax was abolished from 1 January 2005. C. Tax advantages 1. General provisions 347. Article 56 of the Tax Code defines a tax benefit as a full or partial exemption from the payment of taxes, granted by the tax legislation. 348. In letter no. 04/06/08, dated 21 October 1998, the Ministry of Finance noted, inter alia : “...[that] experience in creating and operating free economic zones in the Russian Federation, established pursuant to both federal laws (the special economic zone in the Kaliningrad region) and resolutions of the authorities of constituent entities of the Federation (Kalmykiya, Tuva), [has] demonstrate[d] that the creation of such zones across such vast areas in the absence of a proper analysis of investment projects leads to abuses of the tax and customs incentives granted and, accordingly, to serious losses suffered by the federal and local budgets, as reported by the Ministry of Finance of Russia to the Government of Russia on multiple occasions.” 2. Requirements relating to the registration of taxpayers 349. Under Article 83 (1) of the Tax Code, taxpayers which are legal entities are required to register with the tax authorities at their headquarters (location of their executive bodies), at the location of their branches and at the location of any real estate and places where vehicles belonging to them are registered. 350. Special registration rules applied in respect of large taxpayers, including the applicant company. 351. By Decree no. АП-3-10/399 of the Tax Ministry, dated 15 December 1999, such taxpayers are required to register at their main location, at the location of their branches and at the location of real estate and places where vehicles belonging to them are registered, and in certain specific tax offices (inter-district level or as specifically indicated by the Ministry). 352. Annex 3 to the Decree contains the form “On subsidiary and dependant companies and subsidiary enterprises”, to be filled in by the taxpayer. During registration the taxpayer is required to indicate all of its subsidiary and dependant companies. 353. In respect of domestic off-shore territories, according to commentators, this requirement means that in practice the taxpayer’s executive body should always be physically located and functioning on the territory of the off-shore. If the taxpayer fails to comply with the requirement, the tax authorities could declare its registration void with the subsequent recovery of the entirety of the perceived tax benefits (see A.V. Bryzgalin, Practical Tax Encyclopaedia, Moscow, 2003-2006, Chapter 3 “Methodology of tax optimisation”). 3. Closed administrative-territorial formations (the town of Sarov in the Nizhniy Novgorod Region, the town of Trekhgornyy in the Chelyabinsk Region and the town of Lesnoy in the Sverdlovsk Region) (a) Legal provisions 354. Under section 5 of Law no. 3297-1 of the Russian Federation “On closed administrative-territorial formations”, tax concessions are provided to businesses if, inter alia, they have at least 90% of their fixed assets and conduct at least 70% of their activities on the territory of the respective formation (including a requirement that at least 70% of their employees be made up of persons permanently residing in the ZATO in question, and that at least 70% of their wage bill be paid to employees permanently residing in that territory). 355. Letter no. AП-6-01/505 of the Tax Ministry, dated 24 June 1999, contained Methodological Directions to the tax bodies on issues concerning the lawfulness of the use of additional tax benefits granted by local authorities in the closed administrative-territorial formations. It stated that the tax authorities ought to verify the actual presence of the taxpayer’s assets on the territory in question by checking its accounting records and financial statements, and by confirming the physical location of the organisation at the indicated address and the fact of genuine performance by the taxpayer’s employees at the taxpayer’s registered location. (b) Case no. A42-6604/00-15-818/01 (The Tax Ministry v. OOO Pribrezhnoe), referred to by the applicant company 356. The respondent legal entity was OOO Pribrezhnoe, registered in the closed administrative territorial formation town of Snezhnogorsk, which has a privileged tax regime. The Ministry tried unsuccessfully to contest the use of tax concessions by the respondent, by demonstrating that the entity had not been actually present at the place of its registration. The domestic court found for the respondent. They established that the entity had some assets on the territory of Snezhnogorsk, a number of permanent employees (including a lawyer and the cleaning lady), and a cash account in the local bank, which proved that the entity satisfied the criteria provided for in law. 357. The final decision in the case was taken by the Court of Cassation on 5 June 2002. 4. The Republic of Mordoviya 358. Under Law no. 9-FZ of the Republic of Mordoviya of 9 March 1999 “On the conditions of efficient use of the socio-economic potential of the Republic of Mordoviya”, tax concessions are granted to taxpayers whose entities were established after the entry into force of that law and whose activities meet certain conditions, including but not limited to the following: (a) they conduct export operations, the quarterly proceeds from which account for at least 15%of the business’s total earnings; (b) they engage in wholesale trade in fuel and lubricants and other types of hydrocarbon raw materials, the quarterly proceeds from which account for at least 70% of the business’ total earnings. 359. Section 1 of the Law states that “this Law establishes concessions with the objective of creating favourable conditions for attracting capital into the territory of the Republic of Mordoviya, strengthening the socio-economic potential of the Republic of Mordoviya, developing the securities market and creating new jobs through special arrangements for the taxation of organisations”. 5. The Republic of Kalmykiya 360. Law no. 12-P-3 of the Republic of Kalmykiya of 12 March 1999 “On tax concessions for companies investing in the Republic of Kalmykiya” provides tax concessions to those who meet the following criteria: (a) the taxpayer is not a user of mineral resources in the territory of the Republic; (b) the taxpayer is registered with the Ministry of Investment Policy of the Republic of Kalmykiya as an enterprise investing in the economy of the Republic; (c) the enterprise’s investment in the economy of the Republic meets the criteria established by the Ministry of Investment Policy of the Republic in accordance with this law. 361. By a decision of 16 April 2002 (case no. F08-1134/2002-402) in the case of OOO Simpleks v. the Tax Ministry, the Federal Commercial Court of the North-Caucasian District quashed the decisions of lower courts and instructed them to investigate further whether the taxpayer had indeed complied with the conditions mentioned in the law, had acted in good faith in this respect and had indeed made any investments in the local economy. 362. By a decision dated 29 April 2002 (case no. F08-1368/2002-506A) in the case of OOO Impuls v. the Tax Ministry, the Federal Commercial Court of the North-Caucasian District quashed the decisions of lower courts and instructed them to investigate further whether the taxpayer had indeed complied with the conditions mentioned in the law, had acted in good faith in this respect and indeed made any investments in the local economy. 363. By a decision of 20 May 2002 (case no. F08-1678/2002-614A) in the case of OOO Sibirskaya transportnaya kompaniya (one of the sham entities belonging to the applicant company) v. the Tax Ministry, the Federal Commercial Court of the North-Caucasian District ruled as follows: “[b]ased on the content and meaning of the [above-mentioned] law and Resolution no. 7 of the Elista Town Administration, [the purpose of the municipal legislation] is to attract funds from various investors for development of the regional and local economies, given the lack of funds in the regional and local budgets and the need for their replenishment to ensure the activities of the Kalmyk Republic and the town of Elista ... The case documents show that RUB 27,196 came from the plaintiff for development of the regional and local economies, whereas RUB 6,918,617 did not enter the regional and local budgets directly. Thus, the investments made by [OOO Sibirskaya transkportnaya kompaniya] amount to 0.4% of the amount of taxes that would otherwise have been payable by it. They have no effect on the development of the economy [and] do not cover the budgetary losses related to the granting of incentives to taxpayers; on the contrary, they have consequences in the form of unfair enrichment at the expense of budgetary funds. Thus, given that the amount of the investments made by the plaintiff is incommensurate to the amount of incentives used, the plaintiff abused its right, that is, it acted in bad faith”. Accordingly, the court quashed the decisions of the lower courts and instructed them to investigate further whether the taxpayer had complied with the above-mentioned conditions and whether it had acted in good faith. 364. By a decision of 28 May 2002 (case no. F08-1793/2002) in the case of ZAO Telekom Zapad Komplekt v. the Tax Ministry, the Federal Commercial Court of the North-Caucasian District ruled that: “[b]ased on the meaning and contents of the [above-mentioned] law and Resolution no. 7 of the Elista Town Administration, it follows that [the purpose of the municipal legislation] is to attract funds from various investors for development of the regional and local economies, given the lack of funds in the regional and local budgets and the need for their replenishment to ensure the activities of the Kalmyk Republic and the town of Elista... ... [the court has to examine] the proportion between the investments made by the [taxpayer] and the amount of tax that did not enter the budget [in order] to resolve the issue of the plaintiff’s good faith and its abuse of its rights”. Accordingly, the court quashed the decisions of the lower courts and instructed them to investigate further whether the taxpayer had complied with the above-mentioned conditions and had acted in good faith. 365. By a decision of 4 June 2002 (case no. F08-1864/2002-697A) in the case of ZAO Promyshlennaya korporaciya Shar v. the Tax Ministry, the Federal Commercial Court of the North-Caucasian District quashed the decisions of the lower courts and instructed them to investigate further whether the taxpayer had indeed complied with the conditions mentioned in the law, had acted in good faith in this respect and had indeed made any investments in the local economy. 366. By a decision of 5 August 2002 (case no. F08-2762/2002-1009A) in the case of OOO Promet v. the Tax Ministry, the Federal Commercial Court of the North-Caucasian District quashed the decisions of the lower courts and instructed them to investigate further whether the taxpayer had indeed complied with the conditions mentioned in the law, had acted in good faith in this respect and had indeed made any investments in the local economy. 367. By a decision of 13 August 2002 (case no. F08-2892/2002-1051A) in the case of OOO TD Dion v. the Tax Ministry, the Federal Commercial Court of the North-Caucasian District quashed the decisions of the lower courts and instructed them to investigate further whether the taxpayer had indeed complied with the conditions mentioned in the law, had acted in good faith in this respect and had indeed made any investments in the local economy. 368. By a decision of 29 August 2002 (case no. F08-3158/2002-1140A) in the case of ZAO Stanford v. the Tax Ministry, the Federal Commercial Court of the North-Caucasian District quashed the decisions of the lower courts and instructed them to investigate further whether the taxpayer had indeed complied with the conditions mentioned in the law, had acted in good faith in this respect and had indeed made any investments in the local economy. 369. By a decision of 20 February 2003 (cases nos. F08-270/2003-91A and F08-1679/2002-622A) in a dispute between the Tax Ministry and OOO “Vostochnaya perestrakhovochnaya kompaniya”, the Federal Commercial Court of the North-Caucasian Circuit found as follows: “The investments made by the [taxpayer] amount to 0.14% of the amount of taxes that would otherwise have been payable by it. They have no effect on the development of the economy... but ... their effect is unfair enrichment .... Therefore, [as] the amount of investments by [the taxpayer] was incommensurate to the amount of the benefits received, [the taxpayer] abused its right, that is, it acted in bad faith” 370. By a decision of 20 February 2003 (case no. F08-268/2003-98A) in the case of OOO Bazis Sekyuritis v. the Tax Ministry, the Federal Commercial Court of the North-Caucasian District quashed the decisions of the lower courts and instructed them to investigate further whether the taxpayer had indeed complied with the conditions mentioned in the law, had acted in good faith in this respect and had indeed made any investments in the local economy. 371. By a decision of 8 April 2003 (case no. F08-1013/2003-383A) in the case of OOO Gravite v. the Tax Ministry, the Federal Commercial Court of the North-Caucasian District quashed the decisions of the lower courts and instructed them to investigate further whether the taxpayer had indeed complied with the conditions mentioned in the law, had acted in good faith in this respect and had indeed made any investments in the local economy. 6. The Evenk Autonomous District 372. Under section 9 of Law no. 108 of the Evenk Autonomous District “On specific features of the tax system in the Evenk Autonomous District” of 24 September 1998, substantially lower tax rates apply to local businesses whose activities meet certain conditions with regard to the special taxation procedure set out in section 8 of that Law. D. The use and interpretation of terms of civil legislation in tax disputes 373. Under Article 11 of the Tax Code, the institutions, notions and terms of the civil legislation of Russia used in the Tax Code keep their respective meanings, unless specifically stated. E. General principles governing the status of legal entities 1. Presumption of independence 374. Under Article 2 of Civil Code of 30 November 1994 no. 51-FZ (as in force at the relevant time), the legal status of parties involved in civil-law transactions, the grounds for the creation of ownership and other property rights and the order of exercising those rights are defined by the civil legislation, which also regulates contractual and other obligations. 375. The civil legislation regulates the relations between persons engaged in business activities or in those activities performed with their participation, on the assumption that business activity is an independent activity performed at one’s own risk and aimed at systematically deriving a profit from the use of property, the sale of commodities, the performance of work or the rendering of services by those persons registered in this capacity in conformity with the legally-established procedure. 376. It is formally prohibited to make any unilateral property transfers (gifts, grants or gratuitous loans) between independent commercial legal entities (Articles 575 and 690 of the Civil Code). Unilateral property transfers are permitted by Article 251 (1) 11 of the Tax Code and not counted for the purposes of profit tax if they are made between associated entities, where one of them holds more than 50% of shares in the equity of the other entity. 2. Rules applicable to subsidiary and dependant companies 377. Article 105 of the Civil Code provides that a subsidiary company is one controlled by another company, either through ownership of the subsidiary company’s shares, by virtue of a contract or by any other means. 378. The controlling company is jointly responsible for debts incurred by the subsidiary company as a result of compliance with the controlling company’s instructions. The controlling company may be held vicariously responsible for a debt of the subsidiary company in the event of the latter’s insolvency. 379. Article 106 of the Code provides that a company is dependant when the other company owns over 20% of the first company’s voting stock. A company which purchases over 20% of the voting shares in other companies is obliged to make this information public. 380. Similar rules are established in respect of limited liability companies ( обществa с ограниченной ответственностью ) by section 6 of Law no. 14-FZ on limited liability companies of 8 February 1998. F. Definition of a property owner 381. Article 209 of the Civil Code defines an owner as the person who has the rights of possession, use and disposal of his property. In respect of this property, the owner is entitled, at his will, to perform any actions not contradicting the law and the other legal acts, and not violating the rights and legally protected interests of other persons. G. Contractual freedom and its limits 1. Presumption of good faith and prohibition on abuse of rights 382. Articles 9 and 10 of the Civil Code provide that the parties involved in civil-law transactions are free to act contractually within the limits defined by law. 383. Article 10 (1 and 2) of the Code states specifically that parties involved in civil-law transactions are prohibited from abusing their rights. In such cases, the courts may deny legal protection in respect of the right which is being abused. Article 10 (3) establishes a refutable presumption of good faith and reasonableness of actions on the parties in civil-law transactions. 2. Examples of the case-law of the domestic courts concerning the notion of bad faith 384. In its decision no. 24-P dated 12 October 1998, the Constitutional Court of Russia for the first time made use and interpreted the notion of “bad/good faith” to assess the legal consequence of the conduct of taxpayers in its jurisprudence. In this case this was done to define the moment at which a taxpayer can be said to have discharged his or her constitutional obligation to pay taxes. 385. In its decision no. 138-O dated 25 July 2001, the Constitutional Court of Russia again confirmed that there existed a refutable presumption that the taxpayer was acting in good faith and that a finding that a taxpayer had acted in bad faith could have unfavourable legal consequences for the taxpayer. The case again concerned the definition of a moment at which a taxpayer can be said to have discharged his or her constitutional obligation to pay taxes. 386. The domestic commercial courts applied this approach in a number of cases concerning the eligibility of taxpayers to tax concessions in the Republic of Kalmykiya, such as decision no. F08-1134/2002-402 of 16 April 2002 of the Federal Commercial Court of the North Caucasian Circuit, decision no. F08-1864/2002-697A of 4 June 2002 of the Federal Commercial Court of the North Caucasian Circuit, decision no. F08-2762/2002-1009A of 5 August 2002 of the Federal Commercial Court of the North Caucasian Circuit, decision no. F08-2892/02-1015A of 12 August 2002 of the Federal Commercial Court of the North Caucasian Circuit, decision no. F08-3158/2002-1140A of 29 August 2002 of the Federal Commercial Court of the North Caucasian Circuit, decision no. F08-268/2003-98A of 20 February 2003 of the Federal Commercial Court of the North Caucasian Circuit, decision no. F08-1013/2003-383A of 8 April 2003 of the Federal Commercial Court of the North Caucasian Circuit. 387. In its decision no. 168-O of 8 April 2004 the Constitutional Court noted that it would be inadmissible for bad-faith taxpayers to manipulate the legal civil-law institutions to create and operate schemes for unlawful enrichment at the expense of the State budget. The case concerned the use of exchange notes in the sphere of VAT refunds. 3. Rules governing sham transactions (a) Statutory law 388. Under Article 153 of the Civil Code, transactions are defined as activities of natural and legal persons creating, altering and terminating their civil rights and obligations. 389. Article 166 of the Civil Code states that a transaction may be declared invalid on the grounds established by that Code, either by force of its being recognized as such by the court (a voidable transaction, оспоримая сделка ), or regardless of such recognition (a void transaction, ничтожная сделка ). 390. Under Article 167 of the Civil Code, void transactions entail no legal consequences, apart from those relating to their invalidity, and are invalid from the moment they are conducted. 391. Article 170 (2) establishes specific rules in respect of two types of void transactions: ‘imaginary’ transactions (“ мнимая сделка ”, effected only for form’s sake, without the intention to create the corresponding legal consequences) and ‘sham’ transactions (“ притворная сделка ”, which are effected for the purpose of screening other transactions). This provision condemns both imaginary and sham transactions as void. 392. It also provides that in the event of sham transactions, the rules governing the transaction that was in fact intended by the parties may be applied by a court, regard being had to the substance of this transaction (the so-called “substance over form” rule). 393. Under Article 45 (2) 3 of the Tax Code the power to re-characterise transactions by a taxpayer with third parties, their legal status and the nature of the taxpayer’s activity in tax disputes lies with the courts (as opposed to executive bodies). Section 7 of Law no. 943-1 of 21 March 1991 “On Tax Authorities in the Russian Federation” vests the power to contest such transactions and recover everything received in such transactions with the State budget. (b) Academic sources 394. Comments on the Civil Code (O.N. Sadikov, Comments on the Civil Code, Yuridicheskaya firma Kontrakt Infra-M, Moscow, 1998) states, with reference to Bulletin no. 11 of the Supreme Court of RSFSR (page 2), that any evidence admitted by the rules on civil procedure may also serve as proof of the invalidity of sham transactions. H. General rules on price formation and the price adjustment mechanism 395. Article 40 (1) of the Tax Code requires that the parties trade at market prices. It also establishes a refutable presumption that the prices agreed to by the parties correspond to market levels and are used for taxation purposes. THE LAW I. COMPLIANCE WITH ARTICLE 35 § 2 (b) OF THE CONVENTION 516. The Court reiterates that it declared this application admissible on 29 January 2009 (see OAO Neftyanaya Kompaniya Yukos v. Russia (dec.), no. 14902/04, 29 January 2009) and decided to hold a hearing on the merits of the case. Subsequently, but prior to the hearing, the Court was informed that arbitration proceedings, allegedly brought against the Russian Federation by the applicant company’s former owners, were pending and considered that these developments raised an issue of the applicant company’s compliance with the requirements of Article 35 § 2 (b) of the Convention. It invited the parties to address this question in their submissions at the hearing. A. The parties’ submissions 517. The Government submitted that in February 2005 the applicant company’s former majority shareholders Hulley Enterprises Ltd, Yukos Universal Ltd and Veteran Petroleum Ltd, which had jointly owned over 60% of shares in the applicant company, brought arbitration proceedings against the Russian Federation for the alleged breaches of the Energy Charter Treaty in the Permanent Court of Arbitration in The Hague. The Government pointed out that the applicant company had ceased to exist and that it was obvious that the above-mentioned majority shareholders had been behind the present case in the Court and that they would be the end-beneficiaries of any eventual award in these proceedings. The Government also mentioned a number of arbitration proceedings brought against the Russian Federation by groups of minority shareholders under bilateral investment treaties. Overall, the Government invited the Court to discontinue the case with reference to Article 35 § 2 (b) of the Convention. 518. The applicant company denied any participation in and any knowledge of any other international proceedings that may be of relevance. At the same time, it invited the Court to rule that the parties in the proceedings before this Court (the applicant company) and in The Hague arbitration proceedings (the applicant company’s controlling shareholders) were not the same. According to the applicant company, the subject-matter in the two cases was different. It also claimed that the arbitration proceedings in the Hague were conducted before ad hoc tribunals, constituted by the parties, and were not comparable to the Court in their structure, permanence or authority. Overall, the applicant company argued that its application complied with Article 35 § 2 (b) of the Convention and that any parallel proceedings should not undermine its case before the Court. B. The Court’s assessment 519. The Court will examine this issue under Article 35 § 2 (b) of the Convention, which reads as follows: “... 2. The Court shall not deal with any application submitted under Article 34 that ... (b) is substantially the same as a matter that has already been examined by the Court or has already been submitted to another procedure of international investigation or settlement and contains no relevant new information. ...” 520. At the outset, the Court would reiterate that Article 35 § 2 (b) of the Convention is intended to avoid the situation where several international bodies would be simultaneously dealing with applications which are substantially the same. A situation of this type would be incompatible with the spirit and the letter of the Convention, which seeks to avoid a plurality of international proceedings relating to the same cases (see, among others, Smirnova v. Russia, (dec.) nos. 46133/99 and 48183/99, 3 October 2002, and Calcerrada Fornieles and Cabeza Mato v. Spain, no. 17512/90, Commission decision of 6 July 1992, Decisions and Reports (DR) 73). In determining whether its jurisdiction is excluded by virtue of this Convention provision the Court would have to decide whether the case before it is substantially the same as a matter that has already been submitted to a parallel set of proceedings and, if that is so, whether the simultaneous proceedings may be seen as “another procedure of international investigation or settlement” within the meaning of Article 35 § 2 (b) of the Convention. 521. The assessment of similarity of the cases would usually involve the comparison of the parties in the respective proceedings, the relevant legal provisions relied on by them, the scope of their claims and the types of the redress sought (see Vesa Peltonen v. Finland (dec.), no. 19583/92, 20 February 1995; Cereceda Martin and Others v. Spain, no. 16358/90, Commission decision of 12 October 1992; Smirnova, cited above, and Decision on the competence of the Court to give an advisory opinion [GC], § 31, ECHR 2004 ‑ VI). 522. As regards the analysis of the character of parallel proceedings, the Court’s examination would not be limited to a formal verification but would extend, where appropriate, to ascertaining whether the nature of the supervisory body, the procedure it follows and the effect of its decisions are such that the Court’s jurisdiction is excluded by Article 35 § 2 (b) (see Lukanov v. Bulgaria (dec.), 21915/93, Commission decision of 12 January 1995; Decision on the competence of the Court to give an advisory opinion [GC], cited above; Celniku v. Greece, no. 21449/04, §§ 39-41, 5 July 2007, and Peraldi v. France (dec.), no. 2096/05, 7 April 2009). 523. Turning to the case at hand, the Court finds that there is no need for it to examine whether the proceedings in the Hague brought by the company’s majority shareholders or the proceedings brought under the bilateral investment treaties brought by various groups of the company’s minority shareholders may be seen as “another procedure of international investigation of settlement” as it is clear that the cases are not “substantially the same” within the meaning of Article 35 § 2 (b) of the Convention for the following reasons. 524. The Court observes that it was Hulley Enterprises Ltd and Veteran Petroleum Ltd (both registered in Cyprus) and Yukos Universal Ltd (registered in the Isle of Man), which in February 2005 initiated arbitration proceedings against the Russian Federation before the Permanent Court of Arbitration in the Hague, referring, among other things, to the same events and proceedings as those complained of by the applicant company in the present application before the Court and alleging numerous violations of their rights as investors under the Energy Charter Treaty. Some of the company’s foreign minority shareholders also initiated similar proceedings under bilateral investment treaties. The Court notes, however, that despite certain similarities in the subject-matters of the present case and of the arbitration proceedings, the claimants in those arbitration proceedings are the applicant company’s shareholders acting as investors, and not the applicant company itself, which at that moment in time was still an independent legal entity. 525. The Court further notes that the present case has been introduced and maintained by the applicant company in its own name. Although the above-mentioned entities could arguably be seen as having been affected by the events leading to the applicant company’s liquidation, they have never taken part, either directly or indirectly, in the Strasbourg proceedings. The Court reiterates that in November 2007 the applicant company was liquidated and that despite this fact in its admissibility decision of 29 January 2009 it nevertheless accepted the application “because the issues raised by the case transcend[ed] the person and the interests of the applicant [company]” and “... striking the application out of the list under such circumstances would undermine the very essence of the right of individual applications by legal persons, as it would encourage governments to deprive such entities of the possibility to pursue an application lodged at a time when they enjoyed legal personality...”, which shows that the Court has throughout placed emphasis on the applicant company in its own right. 526. In these circumstances, the Court finds that the parties in the above-mentioned arbitration proceedings and in the present case are different and therefore the two matters are not “substantially the same” within the meaning of Article 35 § 2 (b) of the Convention. It follows that the Court is not barred, pursuant to this provision, from examining the merits of this case. II. ALLEGED VIOLATIONS OF ARTICLE 6 OF THE CONVENTION 527. The Court notes that in the admissibility decision in this case it has established that Article 6 applied under its criminal head to the 2000 Tax Assessment proceedings and has declared admissible the company’s grievances that: (1) the Ministry had brought the action in these proceedings within the grace period; (2) the time to prepare for trial had been too short; (3) its lawyers could not obtain from the Ministry answers to all the questions they wished to ask in the hearings before the first-instance court and the first-instance court pronounced its judgment without having studied all the evidence; (4) the statutory time-limit for appeal had been unjustifiably abridged; (5) and that the appeal court had delayed the delivery of the reasons for its judgment thereby preventing the applicant company from lodging a cassation appeal. 528. The Court will examine these grievances under Article 6 of the Convention, which, in its relevant parts, provides as follows: “1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. ... 3. Everyone charged with a criminal offence has the following minimum rights: (b) to have adequate time and facilities for the preparation of his defence; ...” A. The parties’ submissions 1. The applicant company’s submissions 529. As regards the first instance proceedings, at the admissibility stage of proceedings before this Court the applicant company argued that the supporting material underlying the Tax Assessment for 2000 had first been provided to it as a result of the City Court’s decision of 14 May 2004. It alleged that the disclosure did not occur until 17 May 2004, when the Ministry filed 24,000 pages of documents, and continued on 18 May 2004 with approximately 45,000 further pages and a further 2,000 pages late on 20 May 2004, i.e. on the eve of the first-instance hearing. The company conceded that its representatives had indeed been given access to all these materials, both prior to the hearings and during the trial, but submitted that the manner and time for such access had been so unsatisfactory that it was of no practical use. It also argued that it had been unable effectively to access the court’s filed documents during the first-instance hearings except during the lunch breaks. Overall, the company insisted that it had had insufficient time to prepare its defence and familiarise itself with the evidence before the court and that it had not had an opportunity to take cognisance of and comment on all of the evidence adduced or observations filed, nor to express its views on every document in the file, contrary to Article 6. It referred to the Ruiz-Mateos v. Spain and Krčmář v. Czech Republic cases. In their post-admissibility observations the company submitted that the Ministry had had sufficient time to disclose the evidence, as the relevant documents had been in the possession of the Ministry and that the Ministry could have disclosed them at any point from 8 December 2003 (some six months before the beginning of the hearing). It further noted that the documents filed by the Ministry had been in complete disorder and had been stored in nineteen plastic crates (ten of them containing six thousand pages each and nine more containing some four thousand pages each) and simply could not be studied properly over such a short period. The documents were kept in a room measuring three to four square metres and containing two chairs, a desk and one window. A request for additional space had been turned down. The above-mentioned conditions were reflected in a record dated 18 May 2004, drawn up by the applicant company’s counsel. The Ministry’s representative had refused to sign it and stated that he disagreed with its contents. More generally, the applicant company criticised the Ministry for bringing an action against it before the expiry of the grace period and argued that the first instance proceedings had been unfair because its lawyers could not obtain from the Ministry answers to all the questions they wished to ask in the hearings and that it was under the impression that the first-instance court had pronounced judgment without having studied all the evidence. 530. As regards the appeal proceedings, the applicant company also insisted on the breach of Article 6. It submitted that the domestic courts had failed to address the question of whether the abridgement of time had affected its substantive right to a fair hearing and that, equally, it did not rely on Article 267 of the Code of Commercial Courts Procedure, referred to by the respondent Government. Also, the rule in Article 267 requiring an appeal to be determined within one month is not respected in practice by the Russian courts; failure to comply with this requirement, even for a whole year, has no consequences for the proceedings. There was, according to the applicant company, no evidence of any particular urgency in listing or resolving the appeal: neither the Ministry, nor the co-appellant, OOO ‘YUKOS’ Moscow, sought expedition when their appeals were lodged and the co-appellant did not oppose the applicant company’s applications to adjourn the appeal hearing. In response to the Government’s criticism suggesting that the company’s appeal was misaddressed by the omission of part of the postal code from the envelope, the applicant stated that no evidence had been provided of any mistake in this respect and that, after all, the appeal had been received by the court and the tax authorities. In any event, the court had made no criticism of the company in relation to the exercise of this appeal. Overall, the abridgement of the appeal period was a serious interference with the company’s right to prepare for the appeal hearings, which failed to cure but rather accentuated the unfairness of the first-instance proceedings, and no substantive reason has been offered as to why this acceleration was lawful, necessary or consistent with the requirements of a fair trial. 531. The applicant company submitted in respect of the complaint about the delay in the delivery of the appeal judgment that the delay meant that the decision had been immediately enforced against the company, rendering any further cassation appeal nugatory. Only an application for a stay of enforcement pending an appeal in cassation, coupled with a valid appeal in cassation, could have been effective against the enforcement. In the company’s view, such a valid appeal was strictly dependent on filing of the reasons by the appeal court. The appeal decision had become subject to immediate forcible execution, the company had become liable for an additional surcharge of 7% of the total liability and the opportunity to exercise an effective appeal against these measures had been circumvented. 2. The Government’s submissions 532. As regards the argument that the company had insufficient time for preparation of the defence, the Government referred in their admissibility observations to the domestic legislation, which established a two-month time-limit for the examination of the case at first instance (Article 134 of the Code of Commercial Courts Procedure). The applicant company had at least 37 days to prepare its defence from the date of the filing of the suit, which, in view of the above time-limit, had not been unreasonable. Furthermore, the applicant company first became aware of the Ministry’s arguments on 29 December 2003, when the Ministry issued the report indicating the applicant company’s large tax liability and by 12 January 2004 the company had also filed its objections to the report under Article 100 (5) of the Tax Code. Moreover, the principal arguments contained in these objections remained unchanged throughout the proceedings. It could not be said therefore that the applicant company was unprepared to state its case, since it was well aware of the Ministry’s arguments five months prior to the beginning of the court proceedings. In addition, the Government pointed out that the applicant company’s lawyers were given an opportunity to study the evidence both in court and at the Ministry’s premises throughout May, June and July 2004. According to the documents submitted by the Government, counsel for the applicant company availed themselves of this opportunity at least on two occasions, on 18 and 19 May 2004 respectively. Lastly, the Government argued that the applicant company’s arguments about insufficient time for the preparation of the case had been carefully examined and eventually dismissed by the domestic courts as unfounded. In their post-admissibility observations the Government also submitted that the proceedings before commercial courts in Russia were generally conducted without serious delays (referring, for instance, to the lack of any cases against Russia on account of length of proceedings before the commercial courts). They further argued that in its submissions the applicant company had asserted generalities and had never mentioned any specific documents to which they had not had proper access. The evidence in question had been documents which were well known to the applicant company, as the Ministry had requested these documents from it during the on-site inspection (the Government relied on Article 101 (2) 4 of the Tax Code in this respect) and that the documents had been itemised in a register dated 17 May 2004 no. 14-3-02/22-13-1 and had been copies of original documentation reflecting the relations between the applicant company and its sham entities. In addition, the Government argued that any number of the company’s lawyers could have come to study the evidence and that the applicant company had apparently felt no need to do so, since it had been represented by eight lawyers in the first-instance proceedings and only two to four of them had studied the documents. Overall, the Government suggested that the dispute was more legal rather than factual, so that the crux of the applicant company’s objections concerned the interpretation of the domestic law rather than controversy about the particular circumstances of the tax evasion. In addition, the Government argued that the appeal hearing constituted a de novo examination of the case and that by then the applicant company had had a perfectly adequate opportunity to review the documentary record. By asking to adjourn the proceedings the applicant merely intended to delay the delivery of the judgment. 533. As regards the appeal proceedings, in the Government’s view they too were in compliance with Article 6. The applicant company had brought appeal proceedings against the first-instance judgment of 26 May 2004: the possibility of review on both points of fact and law had been expressly provided for by Russian law (Article 268 of the Code of Commercial Courts Procedure) and the company had used it. Under Article 267 of the Code of Commercial Courts Procedure, which requires an appeal court to examine the appeals by the parties within a month of the date on which they were filed, the Appeal Court had to examine the case within a month of 1 June 2004, which was the date on which one party to the case, OOO ‘YUKOS’ Moskva, first lodged an appeal brief, notwithstanding the fact that the applicant company lodged its appeal on 17 June 2004. The appeal hearings, which represented a full re-trial of the case within the meaning of Article 268 of the Code of Commercial Courts Procedure, started on 18 June and lasted eight days, that is, until 29 June 2004, which was in line with the above rule. In addition, the applicant company deliberately delayed the examination of the case by dispatching the appeal brief to an erroneous address. Lastly, the Government underlined that the appeal decision had not been final and had been appealed against by the applicant company both in cassation instance and by way of supervisory review. The Government submitted that the fact that the reasoned copy of the Appeal Court decision of 29 June 2004 had been produced on 9 July 2004 did not affect the fairness of the proceedings as, in any event, it was open to the applicant company to lodge its cassation appeal within a two-month time-limit from the date of delivery of the appeal decision on 29 June 2004, even in the absence of the reasoned copy of the decision. The applicant company had lodged its cassation appeal on 6 July 2004 in the absence of the reasoned copy of the appeal decision. The cassation appeal was accepted for consideration and on 17 September 2004 its full version was examined and dismissed by the Circuit Court. B. The Court’s assessment 534. The Court would reiterate that while Article 6 of the Convention guarantees the right to a fair hearing, it is not the Court’s function to deal with errors of fact or of law allegedly committed by a national court and the question which must be answered is rather whether the proceedings as a whole were fair (see, for example, Öcalan v. Turkey [GC], no. 46221/99, §§ 148-49, ECHR 2005 ‑ IV; Gäfgen v. Germany [GC], no. 22978/05, §§ 162-88, ECHR 2010 ‑ ...). The Court will examine the applicant company’s grievances in turn to make an overall conclusion in this connection. 1. The complaint about the bringing of the action by the Ministry 535. Turning to the applicant company’s complaint that in the proceedings before the Moscow City Court the action in respect of the Tax Assessment 2000 and the request to attach the company’s assets as a security for the claim was brought by the Ministry within the grace period (see paragraphs 25 and 26 ), the Court observes that this argument was examined by the Circuit Court, which dismissed it as unfounded and recognised the Ministry’s action as lawful in this respect (see paragraph 72 ). The Court recalls the the Ministry’s action was lodged under the rule which made it unnecessary to wait until the end of the grace period if there was evidence that the dispute was insoluble and, regard being had to the circumstances of the case, finds no indication of arbitrariness or unfairness within the meaning of Article 6 of the Convention in this connection. 2. The complaint about the allegedly insufficient time for preparation of the defence at first instance 536. The Court notes that it is common ground between the parties that during the first-instance proceedings the applicant company did not have access to the documents in the court file, other than the report of 29 December 2003, the decision of 14 April 2004 and their annexes, until 17 May 2004 when the Ministry invited the company’s lawyers to study the documents at its premises (see paragraphs 41 -45). It is also undisputed that the hearings in the case commenced on 21 May 2004, which is four working days later, and the evidence at issue amounted to at least 43,000 pages (see paragraphs 44 and 46 ). It is also not in dispute that on a few occasions the applicant company requested to adjourn the hearings referring to, among other things, their wish to study the evidence in the case, and that these requests were turned down by the trial court as unfounded (see paragraph 46 ). 537. The Court further notes that according to the applicant company this period was manifestly short, whilst the Government argued with reference to the sequence of the events in the proceedings and the applicant company’s conduct that it had no real need to study these documents since the documents came from the company itself and it was entirely familiar with them. The Government also argued that the appeal hearing constituted a de novo examination of the case and that by then the applicant company had had a perfectly adequate opportunity to familiarise itself with the evidence at issue. 538. The Court reiterates that the principle of equality of arms is one feature of the wider concept of a fair trial, which also includes the fundamental right that criminal proceedings should be adversarial. The right to an adversarial trial means, in a criminal case, that both prosecution and defence must be given the opportunity to have knowledge of and comment on the observations filed and the evidence adduced by the other party. Various ways are conceivable in which national law may meet this requirement. However, whatever method is chosen, it should ensure that the other party will be aware that observations have been filed and will get a real opportunity to comment on them (see Brandstetter v. Austria, 28 August 1991, §§ 66 and 67, Series A no. 211; Ruiz-Mateos v. Spain, 23 June 1993, § 67, Series A no. 262; mutatis mutandis, Milatová and Others v. the Czech Republic, no. 61811/00, § 65, ECHR 2005 ‑ V and, a fortiori, Krčmář and Others v. the Czech Republic, no. 35376/97, §§ 41-45, 3 March 2000). Furthermore, the Court reiterates that Article 6 § 3 (b) guarantees “adequate time and facilities for the preparation of his defence” and therefore implies that the substantive defence activity on the accused’s behalf may comprise everything which is “necessary” to prepare the trial. The accused must have the opportunity to organise his defence in an appropriate way and without restriction as to the possibility to put all relevant defence arguments before the trial court and thus to influence the outcome of the proceedings (see Can v. Austria, no. 9300/81, § 53, Commission’s report of 12 July 1984, Series A no. 96, and Moiseyev v. Russia, no. 62936/00, § 220, 9 October 2008). The facilities which should be enjoyed by everyone charged with a criminal offence include the opportunity to acquaint himself, for the purposes of preparing his defence, with the results of investigations carried out throughout the proceedings (see C.G.P. v. the Netherlands (dec.), no. 29835/96, 15 January 1997, and Galstyan v. Armenia, no. 26986/03, § 84, 15 November 2007). 539. Turning to the case at hand, the Court observes that the Ministry’s claims to the applicant company in respect of the year 2000 were based on the audit report of 29 December 2003, which became available to the applicant company on the same date and was later used in the decision of 14 April 2004, served on the applicant on 15 April 2004. It is true that these two documents were very detailed, and contained the attachments to substantiate the Ministry’s position, and that the applicant company had on a few occasions opportunity to contest them. The fact remains, however, that the object of the trial court’s examination during the hearings of 21 to 26 May 2004 was neither the audit report of 29 December 2003 and the decision of 14 April 2004 as such, nor the copies of the documents allegedly already in possession of the applicant company, but rather the Ministry’s court claims based on the above-mentioned two documents and the additional body of evidence filed by the Ministry and comprising at least 43,000 pages. It is clear to the Court that in order to provide the applicant company with an adversarial trial and “adequate time and facilities for the preparation of [its] defence” the applicant company should have been given an adequate opportunity to study the entirety of these documents and, more generally, to prepare for the hearings of the merits of the case on reasonable terms. 540. Having regard to the parties’ arguments and the circumstances of the case, the Court is of the view that the trial court failed to reach this objective, as the mere four days during which the applicant company could have access to the case materials were insufficient for the applicant company to prepare properly, no matter the number of lawyers in its defence team or the amount of other resources which the applicant company would have been able to commit during its preparations. As regards the Government’s reference to the applicant company’s conduct during the proceedings and its argument that the company had no real need to study that evidence, the Court finds that it was incumbent on the trial court in the situation at hand to ensure that the applicant company had a sufficiently long period of time during which it could study such a voluminous case file and prepare for the trial hearings and it was up to the applicant company to use this time as it wished. As regards the Government’s argument that the trial court was simply doing its best to comply with the two-month time-limit set out in Article 215 of the Code of Commercial Court Procedure for examination of cases of this category, the Court is of the view that even though it is no doubt important to conduct proceedings at good speed, this should not be done at the expense of the procedural rights of one of the parties, especially given the relatively short overall duration of the proceedings for a case of such magnitude and complexity. 541. Overall, the Court is of the view that the applicant company did not have sufficient time to study the case file before the first instance hearings. 542. The Court takes note of the Government’s argument that any possible defects in the fairness of the proceedings at first instance have been remedied on appeal or in the cassation instance. Since this argument is too closely related to the applicant company’s complaint about the early beginning of the appeal hearings in the 2000 Tax Assessment case, the Court will examine them together below. 3. The complaints about the trial hearings and the allegedly bad quality of the first instance judgment 543. As regards the applicant company’s allegations that its lawyers could not obtain answers from the Ministry to all the questions they wished to ask in the hearings before the court and that the trial court abruptly interrupted the pleadings of the applicant company’s lawyer, the Court finds that these complaints are vague and unspecific and there is nothing in the company’s arguments to suggest that the conduct restrictions imposed by the first-instance or appeal court on the company’s counsel during the hearings were arbitrary or adversely affected the fairness of the proceedings as a whole. The Court also finds unsubstantiated the applicant company’s allegation that the Moscow City Court had given its judgment without having studied the evidence. 4. The complaints about the early beginning of the appeal hearings 544. The Court observes that under Articles 257 and 259 of the Code of Commercial Court Procedure a party has thirty days to file its appeal (see paragraph 422 above). It further notes that the full text of the first-instance judgment of 26 May 2004 became available to the parties on 28 May 2004 and that, despite the applicant company’s requests for adjournment, the appeal hearing in the case commenced on 18 and lasted until 29 June 2004 (see paragraphs 51, 57 and 58 ). 545. The Court finds that the beginning of the appeal proceedings on 18 June 2004, that is, twenty-one days after the full text of the first-instance judgment on 28 May 2004 had become available, restricted the applicant company’s ability to advance its arguments and, more generally, to prepare for the appeal hearings by shortening the statutory time-limit by nine days. Given the number of the participants, the complexity and magnitude of the case as well as the previous restrictions on the applicant company’s ability to study the case at first instance, the Court finds that the applicant company did not have “adequate time and facilities for the preparation of [its] defence” within the meaning of Article 6 § 3 (b) on account of the restricted time for preparation of the appeal hearing. It also finds that the appeal court failed to acknowledge, let alone to remedy the shortcomings committed by the first-instance court as regards the applicant company’s restricted access to the case file. 546. In so far as the Government relied on Article 267 of the Code of Commercial Court Procedure to justify the promptness in question, the Court would again reiterate that the legitimate goal of conducting proceedings at good speed should not have been achieved at the expense of the procedural rights of one of the parties, especially given the lack of any indication of unjustified delays in the proceedings which lasted at the first two instances for only 3 months and 15 days. In any event, the Court is not persuaded by the interpretation of the text of the provision in question suggested by the Government. It would take note of the fact that recently the domestic authorities themselves have found it necessary to modify and explain the provision in question by amending it (see paragraphs 422 and 423). In its present day version the time-limit in question lasts two months rather than one, and starts running only after the expiry of the time-limit for bringing appeals, and not simultaneously to it, as suggested by the Government in its submissions. In addition, the appeal court now has the discretion to increase the term up to six months, depending on the number of the participants and the complexity of the case. 547. Lastly, in so far as the respondent Government argued that the subsequent examination of the case at the cassation instance had remedied these shortcomings, the Court observes that the cassation hearing took place on 17 September 2004, four months after the disclosure of the evidence and about three months after the appeal hearing which took place between 18 and 29 June 2004. Despite the fact that the company may have had enough time to prepare for the cassation hearing, the cassation court, as a review court, had restricted competence in relation to the assessment of evidence already made by the first-instance and appeal courts (see paragraph 426) and, on the facts, it failed to recognize any shortcomings in the judgments of the lower courts (see paragraph 71 ). 548. Overall, the Court finds that the early beginning of the appeal hearing impeded the applicant company’s ability to prepare and present properly its case on appeal. 5. The complaint about the alleged delay in the production of a reasoned version of the appeal judgment 549. In so far as the applicant company also complained about the alleged delay in providing the reasons for the Appeal Court’s judgment in the proceedings in respect of the 2000 Tax Assessment, the Court would note that the applicant company did not complain about the proceedings in cassation as such but rather claimed that, in its situation, effective access to the cassation court was impossible without a stay of enforcement of the appeal decision of 29 June 2004. In this respect, the Court observes that the immediate enforcement of the appeal decision did not prevent the company from lodging its cassation appeal and whilst Article 6 provides an applicant with the right of access to court, it does not guarantee, as such, the right to an automatic stay of enforcement of an unfavourable court decision. The Court would underline that the applicant company in the present case had access to courts of two levels of jurisdiction before any enforcement measures were taken and that the enforcement of the appeal decision of 29 June 2004 did not make it impossible for the applicant company to exercise its right to appeal in cassation, or to pursue further proceedings by way of supervisory review or before the Constitutional Court. The applicant company lodged its cassation appeal and additional submissions on the basis of the reasoned copy of the appeal decision of 29 June 2004 on 7 July 2004 (see paragraph 67 ). The appeal was accepted for consideration, and on 17 September 2004 its full version was examined and dismissed by the Circuit Court (see paragraph 70 ). Not only the cassation appeal, but also the request to stay the enforcement of the appeal decision of 29 June 2004 were examined by the domestic courts at two instances and eventually dismissed as unfounded (see paragraphs 127 - 129 ). 550. Overall, the Court concludes that there is no indication of unfairness within the meaning of Article 6 on account of the alleged restrictions on the applicant company’s access to the cassation instance. 6. Conclusion 551. Having regard to the above, the Court finds that the applicant company’s trial did not comply with the procedural requirements of Article 6 of the Convention for the following reasons: the applicant company did not have sufficient time to study the case file at first instance, and the early beginning of the hearings by the appeal court unjustifiably restricted the company’s ability to present its case on appeal. The Court finds that the overall effect of these difficulties, taken as a whole, so restricted the rights of the defence that the principle of a fair trial, as set out in Article 6, was contravened. There has therefore been a violation of Article 6 § 1 of the Convention, taken in conjunction with Article 6 § 3 (b). III. ALLEGED VIOLATIONS OF ARTICLE 1 OF PROTOCOL No. 1, TAKEN ALONE AND IN CONJUNCTION WITH ARTICLES 1, 7, 13, 14 AND 18 OF THE CONVENTION 552. Under Article 1 of Protocol No. 1, taken alone and in conjunction with Articles 1, 7, 13, 14 and 18 of the Convention, the applicant company complained about the allegedly unlawful, arbitrary and disproportionate imposition and enforcement of the 2000-2003 Tax Assessments. The company complained furthermore that the sale of OAO Yuganskneftegaz had been unlawful, arbitrary and disproportionate. 553. These grievances fall to be examined principally under Article 1 of Protocol No. 1, regard being had, where appropriate, to other Convention provisions relied on by the applicant company. Article 1 of Protocol No. 1 reads: “Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.” 554. The Court reiterates that in accordance with its constant and well-established case-law Article 1 of Protocol No. 1 comprises three distinct rules. The first rule, which is of a general nature, enounces the principle of peaceful enjoyment of property; it is set out in the first sentence of the first paragraph. The second rule covers deprivation of possessions and subjects it to certain conditions; it appears in the second sentence of the same paragraph. The third rule recognises that the States are entitled, amongst other things, to control the use of property in accordance with the general interest, by enforcing such laws as they deem necessary for the purpose; it is contained in the second paragraph. The three rules are not, however, “distinct” in the sense of being unconnected. The second and third rules are concerned with particular instances of interference with the right to peaceful enjoyment of property and should therefore be construed in the light of the general principle enunciated in the first rule (see Sporrong and Lönnroth v. Sweden, 23 September 1982, § 61, Series A no. 52, and James and Others v. the United Kingdom, 21 February 1986, § 37, Series A no. 98). 555. The Court notes that between December 2003 and January 2005 the domestic authorities subjected the applicant company to a number of measures in connection with its alleged failure to pay the correct amount of tax for the years 2000-2003. In particular, as a result of the Tax Assessment proceedings the applicant company was found guilty of repeated tax fraud and was ordered to pay an overall sum of at least RUB 572 billion (around EUR 16 billion) in outstanding taxes, default interest and penalties. In the enforcement proceedings, simultaneously conducted, the applicant company was ordered to pay an additional 7% enforcement fee on the overall amount of the debt: its assets were attached and seized, whilst 76.79 percent of shares in its main production unit, OAO Yuganskneftegaz, were sold in satisfaction on the mentioned liability. 556. The Court notes that the parties did not dispute that these measures, whether taken alone or together, constituted an interference with the applicant company’s property rights as guaranteed by Article 1 of Protocol No. 1. The Court further notes that the company complained about the measures separately and that it also complained about the Government’s intentions in connection with those measures. In this latter respect, the applicant company argued that, in bringing the relevant proceedings, the authorities had sought to destroy the company and expropriate its assets. The Court has now to satisfy itself that each instance of such interference met the requirement of lawfulness, pursued a legitimate aim and was proportionate to the aim pursued. 557. Having regard to the circumstances of the case and the nature of the applicant company’s complaints, the Court finds that the complaints concerning the separate decisions and measures in the context of the proceedings against the applicant company fall to be examined under the third rule of Article 1 of Protocol No. 1, taken in conjunction, where appropriate, with other Convention provisions relied on by the applicant company. The Court will examine the complaints in the following order: (A) the complaints about various aspects of the tax assessment proceedings for the years 2000-2003; (B) the complaints concerning the measures taken by the domestic authorities to enforce the debt resulting from the tax assessment proceedings on the applicant company and the Government’s related plea of non-exhaustion, which in the decision on admissibility of 29 January 2009 it joined to the merits; (C) the applicant company’s allegations concerning the Government’s intentions in these proceedings, made under Article 18 of the Convention, taken in conjunction with Article 1 of Protocol No. 1. A. The complaints about the Tax Assessments 2000-2003 558. The Court reiterates that it was not in dispute between the parties that the Tax Assessments 2000-2003 represented an interference with the applicant company’s property rights. It remains to be determined whether these decisions met the requirement of lawfulness, pursued a legitimate aim, were proportionate to the aim pursued, as required by Article 1 of Protocol No. 1, and whether they were not discriminatory within the meaning of Article 14 of the Convention, taken in conjunction with Article 1 of Protocol No. 1. 1. Compliance with Article 1 of Protocol No. 1 (a) Whether the Tax Assessments 2000-2003 complied with the Convention requirement of lawfulness 559. The Court reiterates that the first and most important requirement of Article 1 of Protocol No. 1 is that any interference by a public authority with the peaceful enjoyment of possessions should be lawful: the second paragraph recognises that the States have the right to control the use of property by enforcing “laws” (see Iatridis v. Greece [GC], no. 31107/96, § 58, ECHR 1999 ‑ II). This means that the interference should be in compliance with the domestic law and that the law itself be of sufficient quality to enable an applicant to foresee the consequence of his or her conduct. As regards the compliance with the domestic law, the Court has limited power in this respect since it is a matter which primarily lies within the competence of the domestic courts (see Håkansson and Sturesson v. Sweden, 21 February 1990, § 47, Series A no. 171 ‑ A, and, mutatis mutandis, Tre Traktörer AB v. Sweden, 7 July 1989, § 58, Series A no. 159). As regards the quality of the law, the Court’s task is to verify whether the applicable provisions of domestic law were sufficiently accessible, precise and foreseeable (see Hentrich v. France, 22 September 1994, § 42, Series A no. 296-A, and Lithgow and Others v. the United Kingdom, 8 July 1986, § 42, Series A no. 110). In so far as the tax sphere is concerned, the Court’s well-established position is that States may be afforded some degree of additional deference and latitude in the exercise of their fiscal functions under the lawfulness test (see National & Provincial Building Society, Leeds Permanent Building Society and Yorkshire Building Society v. the United Kingdom, 23 October 1997, §§ 75-83, Reports 1997 ‑ VII) and that, in view of the complexity of the relevant field of regulation, corporate entities, as opposed to individual taxpayers, may be required to act with additional caution and diligence by consulting competent specialists in this sphere (see Špaček, s.r.o., v. the Czech Republic, no. 26449/95, § 59, 9 November 1999). 560. The applicant company argued in respect of the Tax Assessment 2000 that prosecution for tax evasion had been time-barred. Furthermore, it also argued that the decisions in question had been generally unlawful in that they had not been based on any reasonable and foreseeable interpretation of the domestic law, for which reason there had been no basis in law to impose taxes, double fines or to deny the repayment of VAT in respect of the export of oil and oil products. The applicant company also complained that it had been the first entity ever to have been punished for the tax optimisation scheme, hitherto generally tolerated. i. The allegation that the prosecution for the alleged tax evasion during the year 2000 was time-barred α. The applicant company’s submissions 561. The applicant company complained that in the Tax Assessment proceedings for the year 2000 the domestic courts had failed to apply the three-year statutory time-bar set out in Article 113 of the Tax Code. Since the relevant claims by the Ministry had been time-barred by virtue of Article 113 of the Tax Code, the Tax Assessment 2000 had been unlawful, unforeseeable and retroactive in the light of the decision of the Constitutional Court of 14 July 2005. It also noted that this domestic provision applied to tax assessments proceedings in general and not just to fines and that the doubling of the fines for the year 2001 had also been unlawful. β. The Government’s submissions 562. The Government disagreed. They underlined that the issue only concerned the fines for the year 2000, and not reassessed taxes or surcharges. They argued that the decision of the Constitutional Court of 14 July 2005 had simply confirmed the proper application of Article 113 of the Tax Code for all taxpayers, that it explained the meaning of this norm, that this meaning had been in line with international practice and that it had not been aimed at the applicant individually. The Government also stated that the decision had concerned the specific situation of a bad-faith tax evasion where a taxpayer hinders and obstructs tax inspections, and also relied on examples from foreign jurisdictions, where specific rules apply to taxpayers in such situations. They quoted certain Russian cases where the courts applied the Constitutional Court’s ruling in a manner similar to that in the applicant company’s case and also referred to the Court’s judgment in the case of National & Provincial Building Society, Leeds Permanent Building Society and Yorkshire Building Society v. the UK. They also noted that the three-year time-limit had not been particularly long and that in other countries time-limits were even longer. γ. The Court’s assessment 563. The Court finds at the outset that this grievance concerns the outcome of the Tax Assessment proceedings for the year 2000 only in the part concerning the imposition of penalties, since Article 113 of the Tax Code which provided for the time-limit in question, only applied to the collection of fines (see paragraph 403 ) and that no similar Convention issues arise in respect of the collection of additional taxes and interest payments (see paragraph 404). The Court further notes that Article 113 of the Tax Code provided for a three year time-limit for holding a taxpayer liable and that this period ran from the first day after the end of the relevant tax term. According to the practice directions of the Supreme Commercial [7] Court dated 28 February 2001, the moment at which a taxpayer was held liable within the meaning of Article 113 of the Tax Code was the date of the relevant decision of the tax authority (see paragraph 405 and 406). 564. On the facts, such a decision in connection with the company’s activities in the year 2000 was adopted on 14 April 2004 (see paragraph 21 ), which was clearly outside the above-mentioned three year time-limit. In response to the argument raised by the applicant company during the court proceedings, the lower courts decided that the rules on a statutory time-bar were inapplicable because the applicant company had been acting in bad faith (see paragraph 49 ). Thereafter the supervisory review instance decided that such an interpretation of the rules on the statutory time-limits had not been in line with the existing legislation and case-law (see paragraph 80 ) and referred the issue to the Presidium of the Supreme Commercial Court, which, in turn, referred it to the Constitutional Court (see paragraph 81 ). 565. Having initially refused to consider the applicant company’s individual complaint concerning the same issue (see paragraphs 76 and 77), the Constitutional Court accepted the reference from the Presidium of the Supreme Commercial Court and on 14 July 2005 gave a decision in which it disagreed with the lower courts (see paragraphs 82 -88), noting that the rules on the limitation period should apply in any event and that, exceptionally, if a taxpayer impeded the inspections by the tax authorities, and thereby delayed the adoption of the relevant decision, the running of the time-limit could be suspended by the adoption of a tax audit report setting out the circumstances of the tax offence in question and referring to the relevant articles of the Tax Code. Thereafter the case was referred back to the Presidium of the Supreme Commercial Court which applied this interpretation to conclude that the applicant company had been actively impeding the tax inspections (see paragraphs 17 and 90 ). Since the audit report in respect of the year 2000 had been adopted and served on 29 December 2003, the court decided that the Ministry’s claims for 2000 had been brought on time. The Court notes that the Constitutional Court’s decision of 14 July 2005 resulted in a change in the interpretation of the relevant rules on the statutory time-limits of the proceedings. Accordingly, an issue arises as to whether such a change was compatible with the requirement of lawfulness of Article 1 of Protocol No. 1. 566. In making its assessment the Court will take into account its previous finding that the 2000 Tax Assessment proceedings were criminal in character (see OAO Neftyanaya kompaniya Yukos (dec.), cited above, § 453) and will also bear in mind that the change in question concerned the collection of fines for intentional evasion of tax. In this connection, it would again reiterate that the third rule of this Convention provision explicitly reserves the right of Contracting States to pass “such laws as they may deem necessary to secure the payment of taxes” which means that the States are afforded an exceptionally wide margin of appreciation in this sphere (see Tre Traktörer AB v. Sweden, 7 July 1989, §§ 56-63, Series A no. 159). 567. The Court reiterates the principle, contained primarily in Article 7 of the Convention but also implicitly in the notion of the rule of law and the requirement of lawfulness of Article 1 of Protocol No. 1, that only law can define a crime and prescribe a penalty. While it prohibits, in particular, extending the scope of existing offences to acts which previously were not criminal offences, it also lays down the principle that the criminal law must not be extensively construed to an accused’s detriment, for instance by analogy. It follows that offences and the relevant penalties must be clearly defined by law. This requirement is satisfied where the individual can know from the wording of the relevant provision and, if need be, with appropriate legal assistance, what acts and omissions will make him criminally liable (see Coëme and Others v. Belgium, nos. 32492/96, 32547/96, 32548/96, 33209/96 and 33210/96, §§ 145-146, ECHR). 568. Furthermore, the term “law” implies qualitative requirements, including those of accessibility and foreseeability (see, among other authorities, Cantoni v. France, 15 November 1996, § 29, Reports of Judgments and Decisions 1996 ‑ V; and E.K. v. Turkey, no. 28496/95, § 51, 7 February 2002). These qualitative requirements must be satisfied as regards both the definition of an offence and the penalty the offence in question carries (see Achour v. France [GC], no. 67335/01, § 41, ECHR 2006 ‑ IV). The Court has acknowledged in its case-law that however clearly drafted a legal provision may be, in any system of law, including criminal law, there is an inevitable element of judicial interpretation. There will always be a need for elucidation of doubtful points and for adaptation to changing circumstances. Again, whilst certainty is highly desirable, it may bring in its train excessive rigidity and the law must be able to keep pace with changing circumstances. Accordingly, 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, mutatis mutandis, Sunday Times v. the United Kingdom (no. 1), 26 April 1979, § 49, Series A no. 30 and Kokkinakis v. Greece, 25 May 1993, § 40, Series A no. 260 ‑ A). The role of adjudication vested in the courts is precisely to dissipate such interpretational doubts as remain (see Cantoni, cited above, § 29). 569. Thus, the requirement of lawfulness cannot be read as outlawing the gradual clarification of the rules of criminal liability through judicial interpretation from case to case, “provided that the resultant development is consistent with the essence of the offence and could reasonably be foreseen” (see Kafkaris v. Cyprus [GC], no. 21906/04, § 141, ECHR 2008 ‑ ...). 570. The Court previously defined limitation as the statutory right of an offender not to be prosecuted or tried after the lapse of a certain period of time since the offence was committed. Limitation periods, which are a common feature of the domestic legal systems of the Contracting States, serve several purposes, which include ensuring legal certainty and finality and preventing infringements of the rights of defendants, which might be impaired if courts were required to decide on the basis of evidence which might have become incomplete because of the passage of time (see Stubbings and Others v. the United Kingdom, 22 October 1996, § 51, Reports 1996 ‑ IV). 571. Turning to the facts of the case, the Court would note firstly that the rule which, in the present case, underwent changes as a result of the decision of 14 July 2005, was contained in Article 113 of Chapter 15 “General provisions concerning the liability for tax offences” of the Tax Code (see paragraph 403 ) and thus formed a part of the domestic substantive law. Even though the rule in itself did not describe the substantive elements of the offence and the applicable penalty, it nevertheless constituted a sine qua non condition with which the authorities had to comply in order to be able to prosecute the relevant taxpayers in connection with the alleged tax offences. Accordingly, Article 113 of the Tax Code defined a crime for the purposes of the Court’s analysis of lawfulness. It remains to be determined whether in the circumstances the decision of 14 July 2005 could be seen as a gradual clarification of the rules on criminal liability which “[was] consistent with the essence of the offence and could reasonably be foreseen” (see Kafkaris, cited above, § 141). 572. In this connection the Court may accept that the change in question did not change the substance of the offence. The Constitutional Court interpreted the existing rules on time-limits in relation to taxpayers who acted abusively. At the same time, the Court is not persuaded that the change in question could have been reasonably foreseen. 573. It observes that the decision of 14 July 2005 had changed the rules applicable at the relevant time by creating an exception from a rule which had had no previous exceptions (see paragraphs 86 and 88). The decision represented a reversal and departure from the well-established practice directions of the Supreme Commercial Court (see, by contrast, Achour, cited above, § 52) and the Court finds no indication in the cases submitted by the parties suggesting a divergent practice or any previous difficulty in connection with the application of Article 113 of the Tax Code at the domestic level (see paragraphs 407-408). Although the previous jurisprudence of the Constitutional Court contained some general references to unfavourable legal consequences which taxpayers acting in bad faith could face in certain situations, these indications, as such, were insufficient to provide a clear guidance to the applicant company in the circumstances of the present case. 574. Overall, notwithstanding the State’s margin of appreciation in this sphere, the Court finds that there has been a violation of Article 1 of Protocol No. 1 on account of the change in interpretation of the rules on the statutory time-bar resulting from the Constitutional Court’s decision of 14 July 2005 and the effect of this decision on the outcome of the Tax Assessment 2000 proceedings. 575. Since the applicant company’s conviction under Article 122 of the Tax Code in the 2000 Tax Assessment proceedings laid the basis for finding the applicant company liable for a repeated offence with a 100% increase in the amount of the penalties due in the 2001 Tax Assessment proceedings, the Court also finds that the 2001 Tax Assessment in the part ordering the applicant company to pay the double fines was not in accordance with the law, as required by Article 1 of Protocol No. 1. ii. The allegation that the Tax Assessments 2000-2003 had not been based on a reasonable and foreseeable interpretation of the domestic law α. The applicant company’s submissions 576. The applicant company disagreed with the factual conclusions reached by the domestic courts in respect of the trading companies. In its submission on the admissibility of the case, the applicant company argued that it had been the wrong defendant in the tax assessment proceedings, that there had been no links of dependency between the trading companies and itself, and that there were no grounds for making the applicant company, a holding company with, at the material time, only two employees with highly important but small-scale administrative functions, liable for the trading companies’ tax liabilities and creating a previously virtually unknown concept of “bad-faith taxpayer”. In its submissions on the merits of the case, the applicant company argued that “the Yukos Group”, including the trading companies, had operated as a unit and that the authorities had been aware of all the details of this unit’s functioning, including its relations with the trading companies, because all the entities forming the group made regular tax declarations. The company also submitted that the Ministry made regular checks of the whole group, involving the mapping of the entire course of every link in the chain of transactions from the original purchase of oil by the trading companies until its export, and that Yukos officials held monthly meetings with the Ministry’s officials to discuss the company’s functioning and tax returns. Overall, the applicant company considered that its tax arrangement had never been secret. 577. The applicant company also submitted that Russian law had contained no legal provision allowing for the attribution of tax liabilities as had occurred in its case, that the denial of VAT reductions had been unlawful, that the use of domestic off-shores by the applicant company had been lawful, that the legal theories used by the authorities in its case had been without legal precedent, that the way in which the authorities had assessed taxes had led to double taxation, and that the payment of interest and fines had been domestically unlawful. As regards the attribution of tax liabilities, the applicant company considered that Russian law contained no provisions that permitted piercing of the corporate veil in order to hold one company liable for the actions of another, whether the latter was a subsidiary, an affiliate or a separate entity. The company claimed that the legal theories used by the Ministry in its tax assessment cases had been unprecedented and it referred to legal remedies that could have been used by the Ministry in this situation but had not been employed. In particular, the applicant company argued that the authorities should have applied the anti-transfer pricing mechanism of Articles 20 and 40 of the Tax Code or that the courts should have invalidated individual transactions by the trading companies so as to make either them or the applicant company’s subsidiaries liable for the allegedly underpaid tax. The applicant company considered that in any event, under the applicable domestic law, the authorities could not have held it directly liable for the actions of the trading companies. Furthermore, the company relied on Article 251 (1) 11 of the Tax Code to justify the unilateral transfers of cash from the trading companies to the applicant company’s Fund. It argued that there had been no such notion as “sham entity” in Russian law and that the “bad faith” doctrine had been too vague a legal tool to be used to prosecute it. The applicant company also submitted to the Court an opinion dated 7 September 2003 by the company’s counsel, the law firm “Pepelyev, Goltsblat i Partnery”, confirming the lawfulness of the arrangement whereby “a subsidiary company makes a transfer of its profits to the parent company, which in turn creates a Fund [out of these monies] to return them to the subsidiary companies for use ... or to pay the dividends” and also relied on case no A42-6604/00-15-818/01 to demonstrate that its tax arrangement had been lawful at domestic level. Lastly, the applicant company considered that the Government’s explanations in this connection and in particular its reference to Articles 168, 169 and 170 of the Civil Code could not justify the authorities’ actions in the tax assessment proceedings, since these provisions had not been relied upon by the domestic courts. 578. The applicant company further argued that the denial of tax benefits to the trading companies and the failure to repay VAT in respect of the export of oil and oil products had been unlawful and unsubstantiated. The applicant argued that the Ministry had known about all of the trading companies’ transactions because of their monthly VAT returns and regular requests for tax refunds, and that since all of the traded oil had been for export and exempt from VAT its use of tax arrangements with the trading companies had not achieved any savings in this connection. Both in its initial application to the Court and in further submissions on the admissibility of the case, the applicant company expressed dissatisfaction with the domestic courts’ refusal to recalculate the amount of the VAT due in the relevant Tax Assessment proceedings, purportedly as a result of the company’s failure to file for VAT refunds in its own name. In its final submissions to the Court at the hearing on 4 March 2010, the company alleged that on 31 August 2004 it had filed the VAT exemption forms in its own name for each of the years 2000 to 2003. In addition, with reference to Article 75 (3) of the Tax Code, the applicant company claimed that it should not have been ordered to pay interest surcharges at all. β. The Government’s submissions 579. In their admissibility observations the Government stated that the tax inspections in respect of the applicant company had been conducted in accordance with the domestic law and that the company had been acting in bad faith throughout the proceedings, in blatant breach of tax legislation, and had merely been mimicking compliance with the law. In respect of the factual conclusions of the domestic courts, they argued that the applicant company had committed blatant tax evasion, as confirmed by the findings of the domestic courts. The evidence to confirm the Ministry’s claims was abundant and it was clear that the whole setup with trading companies was organised solely for the purpose of tax evasion. During the proceedings the applicant company had been unable to explain the economic reasons for the transactions in question. As an example of the sham nature of the arrangement, the Government referred to the fact, established by the domestic courts in the proceedings against the applicant company, that on one occasion a person managing one of the company’s sham entities signed three contracts simultaneously in three different locations, namely Samara, Nefteyugansk and the Tomsk region, situated at great distances from each other. In addition, the Government referred to an “internal” opinion by the audit company PriceWaterhouseCoopers, which specifically mentioned various problems with the applicant company’s “tax optimisation” scheme, including the Fund used by the company for receiving the money generated by the sham entities, and mentioned by the Appeal Court in its decision of 29 June 2004. This was in breach of the Russian legislation, as money could only be transferred from one independent commercial entity to another independent commercial entity in exchange or payment for services or goods (Article 575 of the Civil Code). In addition, the company misled the public in its reports and financial statements. For example, in February 2004 in its report for nine months of the year 2003 under the US Generally Accepted Accounting Principles standards, the company accounted for the difference between the nominal profit tax rate and the actual rate by its use of affiliate companies registered in foreign tax havens. This statement was not true since, as established by the domestic courts, the applicant company used sham entities located in domestic tax havens. The widespread use of promissory notes was also mentioned by the auditor as being non-compliant with the legislation in force. The Government submitted that the company’s management had used this opportunity to present a distorted picture of the company’s performance and thus attract investors. 580. As regards the lawfulness of the company’s use of domestic tax havens, the Government referred to statements by a senior partner in the law firm “Pepelyaev, Goltsblat i Partnery”, which advised the applicant company and its majority shareholder, Group Menatep. In an interview with the Raschyot magazine of 30 January 2001, he stated that, as time passed, any widely replicated optimisation scheme became known to the tax authorities and they started fighting it. Penalties were being imposed with regard to low quality schemes, but the better quality schemes remained safe. The use of Russian low-tax regions was a crude form: where a company was registered in, for example, Kalmykiya, while the director, office and bank account were in Moscow. In such instances the court would rule that the location of the organisation was Moscow and not Kalmykiya. The scheme would be ruined and the company be forced to pay in Moscow. However, there could be more subtle schemes, where everything was arranged in such a way that the director, accountant and some staff were in Kalmykiya and there was an account in a Kalmyk bank, [and] thus the organisation would appear to have an actual presence there. Certainly, business would be conducted in Moscow but through another company, so that the entire profit went through appropriate contracts to Kalmykiya. Such subtle schemes were left untouched because formally there was nothing to pick on. According to the Government, the applicant company used the schemes described in their crudest form and undoubtedly knew that such schemes were illegal. 581. In respect of the lawfulness of the domestic authorities’ actions, the Government submitted that the company’s tax liability had been established by the domestic courts on the basis of, among other things, Article 122 of the Tax Code, which penalised the understatement of revenues and corresponding taxes, RF Law no. 2116-1 of 27 December 1991 “On profit tax of enterprises and organisations”, RF Law no. 1759-I of 18 October 1991 “On road funds in the Russian Federation”, RF Law no. 2118-I of 27 December 1991 “On the basics of the tax system”, RF Law no. 2030-I of 13 December 1991 “On property tax of enterprises”, RF Law no. 1992-I of 6 December 1991 “On valued-added tax” and RF Law no. 3297-I of 14 July 1992 “On closed administrative territorial entities”, which were all clear and foreseeable at the relevant time. 582. In their post-admissibility observations, the Government submitted that the company’s tax arrangement, consisting of the systemic use of dozens of shell entities which were controlled by the applicant company, organised in special low-tax zones within Russia, transfers of profits from the shell entities to the applicant company and multiple layers of trading activities between the company’s production units and the ultimate customer, had been clearly unlawful and had one and only one aim – to avoid payment of taxes. The applicant company tried to hide its involvement in this scheme by renaming the shell entities on a regular basis and by operating through a complex system of promissory notes’ exchanges aimed at hiding the transfers of profits from the shell entities to the company. The whole setup had been managed by the applicant company, although on paper the shell entities had been owned and managed by third parties. 583. The Government also described instances where the applicant company had actively resisted the authorities by failing to present the necessary tax documents following requests by the Ministry, by attempting to hide its corporate register just prior to its seizure by the bailiffs, by making multiple offers of payment with shares in OAO Sibneft (which in reality had not belonged to the applicant company), by lying about its financial status and by rejecting the Ministry’s tax claims in respect of years 2001 to 2003 instead of cooperating. 584. As regards the lawfulness of the manner in which the authorities had assessed the applicant company’s liability for additional taxes, the Government relied on the Constitutional Court’s judgment no. 14-P dated 28 October 1999, which had endorsed the ‘substance-over-form’ approach, and to the extensive case-law of the commercial courts in interpreting and applying it. In all of these cases, exactly the same method as that used by the authorities in the applicant company’s case had been used – i.e. the courts had looked behind appearances and taken account of the substance of the transactions in question. As regards the bad-faith theory, the Government relied on two decisions of the Constitutional Court, nos. 138-O and 168-O, dated 25 July 2001 and 8 April 2004 respectively, and the case-law of the commercial courts. They also relied on international experience, quoting rules adopting the substance over form approach in the UK, France, Germany, Italy and the US. 585. As regards the VAT repayments, the Government insisted that the domestic law clearly adopted an approach whereby the owner of the goods in question should apply for any VAT reductions and relied on judgment no. 12-P of the Constitutional Court, dated 14 July 2003, and the extensive case-law of the commercial courts to substantiate their point. They also referred to rules in the UK and France to show that these countries used essentially the same approach in respect of VAT refunds. More generally, the Government also argued that the refusal to grant VAT repayment was a direct consequence of the company’s own recklessness in operating its tax optimisation plans and that it had failed to make any attempts to comply with the legal requirements for VAT refunds even after the tax fraud had been exposed. The Government submitted that the applicant company had never made any applications for VAT refunds in its own name. 586. The Government also stated that all of the cases cited in their observations had been available in the legal database Konsultant-Plus. The authorities could not be accused of having tolerated the company’s tax optimisation, as they could not have had any prior knowledge of it on account of its complex and well-masked character. They also argued that the present case had a moral and social dimension, in the sense that the applicant company had been one of the biggest taxpayers in Russia, that many social programmes run by the State had depended on the company’s tax payments, that the company’s resources had been transferred to it during privatisation in exchange for their efficient and honest use, and that the colossal scope of the tax evasion had led to an incorrect redistribution of wealth and the denial of their social responsibility by a small number of the company’s core shareholders. The Government also insisted that the Court take into account the wide margin of appreciation which is mentioned in the Convention and recognised by the Convention case-law in any assessment of the company’s complaints. They disagreed with the applicant company’s argument regarding expropriation, as the Government viewed the events referred to by the applicant company as a mere enforcement of tax laws. In addition, they drew the Court’s attention to the fact that the applicant company had consistently presented incomplete or untrue information in their arguments. 587. Lastly, they again referred to the statements on tax optimisation techniques made in 2001 by a senior partner in a law firm advising the applicant company and its controlling shareholder, in which, in the Government’s opinion, he had openly conceded that the company’s techniques had been unlawful and that everything depended on whether or not the given arrangements would be discovered by the authorities. In the Government’s view, if this adviser knew this, then his clients, the company’s majority shareholders, could not have failed to be aware of the unlawfulness of the arrangement and any associated risk. γ. The Court’s assessment 588. The Court notes that in this complaint the applicant company challenged the lawfulness of the Tax Assessments 2000-2003 only in the part linked to the payment of reassessed taxes. The examination will therefore be confined to the question of the lawfulness of the additional tax liability. The Court further notes that the company did not seem to dispute that the relevant laws made it clear what taxes were due, at what rate and when. Rather, the company claimed that in 2000, 2001, 2002 and 2003 it used lawful “tax optimisation techniques” which were only subsequently condemned by the domestic courts in 2004, 2005 and 2006. It also complained that any existing legal basis for finding the company liable fell short of the Convention requirements in respect of the quality of the law and that, in any event, the application of the relevant laws contradicted established practice. Accordingly, the Court has to determine whether the relevant tax arrangements were domestically lawful at the time when the relevant transactions took place and whether the legal basis for finding the applicant company liable was sufficiently accessible, precise and foreseeable. 589. Turning to the first question, the Court would note at the outset that the applicant company disputed the findings of the domestic courts concerning the nature of relations between the applicant company and its trading entities. In view of its conclusion that the tax assessment proceedings in respect of the year 2000 did not comply with the requirements of Article 6 §§ 1 and 3 (b) of the Convention, the Court is required to decide whether the factual assessments made by the domestic courts could be used for the purposes of its legal analysis under Article 1 of Protocol No. 1. In this respect, the Court reiterates that according to its well-established case-law 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 and establish the facts. The Court will not, in principle, intervene, unless the decisions reached by the domestic courts appear arbitrary or manifestly unreasonable (see, mutatis mutandis, Ravnsborg v. Sweden, 23 March 1994, § 33, Series A no. 283 ‑ B; Bulut v. Austria, 22 February 1996, § 29, Reports of Judgments and Decisions 1996 ‑ II, and Tejedor García v. Spain, 16 December 1997, § 31, Reports 1997 ‑ VIII) or if the court decisions have been issued in “flagrant denial of justice” (compare Stoichkov v. Bulgaria, no. 9808/02, § 54, 24 March 2005). 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. 2. Compliance with Article 14, taken in conjunction with Article 1 of Protocol No. 1 (a) The applicant company’s submissions 608. The applicant company argued that the courts’ interpretation of the relevant laws had been selective and unique, since many other Russian companies such as Sibneft and TNK International Ltd. had also used domestic tax havens. 609. The company also submitted that the authorities had tolerated and even endorsed the tax optimisation techniques used by the applicant company in that they had accepted the applicant company’s and its trading companies’ tax returns and payments on a regular basis, and the company’s rate of tax payment had been comparable to or even higher than that of its competitors. In this connection, the applicant company relied on statistical data contained in a report by the Centre for Development, a report of the Financial Research Institute and reports of the Accounts Chamber of Russia. The company also under this heading argued that the legislative framework had permitted the company to use such techniques and that the interpretation of the domestic law in its case had been unique, selective and unforeseeable. (b) The Government’s submissions 610. The Government responded that the allegations that other taxpayers may have used similar schemes could not be interpreted as justifying the applicant company’s failure to abide by the law. They further contended that the occurrence of illegal tax schemes at a certain stage of Russia’s historical development was not due to failures or drawbacks in the legislation, but rather due to “bad-faith” actions by economic actors and weakened governmental control over compliance with the Russian tax legislation on account of objective criteria, such as the 1998 economic crisis and the difficulties of the transition period. 611. At present, the Government was constantly combating tax evasion and strengthening its control in this sphere. They also referred to statistical data by AK&M and some other news agencies in 2002, which had reported that OAO LUKOIL and OAO Surgutneftegas, two other large Russian oil producers, had posted sales proceeds of RUB 434.92 billion and RUB 163.652 billion and paid RUB 21.190 billion and RUB 13.885 billion in profit tax respectively, whilst the applicant company had posted sales proceeds of RUB 295.729 billion and paid only RUB 3.193 billion in profit tax. The Government submitted that at least two Russian oil majors, OAO Surgutneftegaz and OAO Rosneft, had never engaged in such practices, whilst some, in particular OAO Lukoil, had ceased using them in 2002. (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. B. The complaints about the enforcement of the debt resulting from the Tax Assessments 2000-2003 617. The Court now has to determine whether the manner in which the domestic authorities enforced the debt resulting from the 2000-2003 Tax Assessment proceedings on the applicant company complied with the requirements of Article 1 of Protocol No. 1. 618. The Court reiterates that the enforcement of the debt resulting from the Tax Assessments 2000-2003 involved the seizure of the company’s assets, the imposition of a 7% enforcement fee on the overall amount of the debt and the forced sale of the applicant company’s main production unit OAO Yuganskneftegaz. These measures constituted an interference with the applicant company’s rights under Article 1 of Protocol No. 1 and it remains to be decided whether these measures met the requirement of lawfulness, pursued a legitimate aim and were proportionate to the aim pursued. 1. The applicant company’s submissions 619. The applicant company complained that the enforcement proceedings in its case had been unlawful, disproportionate and arbitrary. In particular, it argued that the authorities ought to have allowed the company to settle the debt and that it had been wrong to sell off its main production unit at auction with such speed. The company complained that the courts ought to have intervened and corrected the assessment of this matter by the bailiffs. The authorities should have first considered and accepted its offers of shares in OAO Sibneft, and/or allowed the company to make deferred payments over a prolonged period. As regards such deferred payments, the company submitted that the domestic law and practice gave priority to such a solution and that OAO Rosneft was able to obtain such a deferral in respect of the tax debts of OAO Yuganskneftegaz following the auction of 19 December 2004. The company argued that it could have repaid the debt, entirely or in part, had it not been for the attachment imposed by the court. It further criticised the authorities’ failure to act during the twenty-two months following the auctioning of OAO Yuganskneftegaz, as well as the imposition of an unlawful and disproportionate enforcement fee. 620. The applicant company contended that the seizure had been disproportionate in that the authorities had ordered the applicant company to pay and, at the same time, had frozen the company’s assets, which were worth considerably more than the company’s then liability. The authorities refused to use the company’s equity in the Sibneft company or other realistic means of settling the debt. According to the applicant company, the domestic authorities should have accepted those other realistic means of settlement (letter of 5 July 2004, letter of 9 August 2004, letter of 4 November 2004, letter of 23 March 2006) because they were required to do so by precedent in the practice of the commercial courts. The period of merely a couple of days granted to the applicant company for payment was absurdly short. 621. The applicant company was also of the view that the sale of OAO Yuganskneftegaz had been unlawful, disproportionate and had resulted in gross undervaluing by means of a clearly controlled auction with the unlawful participation of a sham bidder, OOO Baykalfinansgrup. It disagreed with the decision to sell OAO Yuganskneftegaz, arguing that under the domestic legislation OAO Yuganskneftegaz should have been the last item to be auctioned, and that the auction had been incapable of generating a reasonably good price because of the limited number of candidates, the widespread perception of the need for political support to acquire the item in question and insufficient time for preparation. The applicant company was also dissatisfied with the decision to sell only the voting shares of OAO Yuganskneftegaz, as opposed to all of the shares. The company argued that even though the authorities put no open obstacles in the path of potential buyers, there had been practical obstacles, such as the need for the buyers to comply with internal corporate procedures and to request anti-competition clearance. 622. More generally, the applicant company viewed the auction as a sham, because OAO Gazprom, OAO Rosneft (both State-owned companies with considerable involvement of State officials in their day-to-day management), the organisers of the auction and the bailiffs were acting in concert. It also relied on interviews by the then President of Russia and argued that the State banks had financed the acquisition and that the State had failed to apply anti-monopoly laws in connection with the auction. The company argued that its actions in the US bankruptcy court had had no effect on the outcome of the auction of OAO Yuganskneftegaz because neither OAO Rosneft nor OOO Baykalfinansgrup had applied for participation before the company filed for bankruptcy in the U.S. 623. The applicant company argued that the above circumstances showed that the proceedings against it, taken as a whole, were abusive in that the State clearly wanted to destroy the company and to take control of its assets. 624. As regards its alleged failure to exhaust domestic remedies, the applicant company considered that exhaustion had been unnecessary in view of the lack of prospects of success. The domestic courts consistently rejected the company’s attempts to contest the actions of the bailiffs, so other attempts would have been futile. In any event, the company had not contested the valuation report in respect of OAO Yuganskneftegaz, since it was not so materially inaccurate as to be realistically challenged in litigation. Furthermore, the company submitted that it did challenge the entire process by which the voting shares in OAO Yuganskneftegaz were sold to a state-owned company, OAO Rosneft. 2. The Government’s submissions 625. The Government submitted that the enforcement proceedings in respect of the applicant company had been lawful and proportionate. 626. It argued that the company had failed properly to exhaust domestic remedies in respect of this part of the application. In particular, its complaints about the seizure of property pending the enforcement proceedings, the alleged failure of the bailiffs to grant the company access to the case in the enforcement proceedings, the alleged inaction of the bailiffs in respect of the Sibneft’s shares, the order to pay a 7% enforcement fee and the circumstances of valuation and sale of OAO Yuganskneftegaz were inadmissible on account of a failure to exhaust domestic remedies. 627. The Government pointed out that, in the course of the enforcement proceedings, there had been no restrictions on the company’s production cycle or the sale of petroleum and mineral oils and that the applicant company had remained fully operational. In view of the State’s wide margin of appreciation in the fiscal sphere and the applicant company’s abusive conduct, illustrated by its attempts to hinder enforcement action by hiding the register of the shareholders of its three largest subsidiary companies, the Government were of the view that the fair balance between the private and public interests had been struck. 628. The Government further submitted that the procedure for compulsory recovery of arrears of mandatory tax payments had been used in respect of the applicant company, that such tax payments were recovered by way of charging the company’s cash flows on bank accounts, that in the case of insufficient or non-existent funds, the recovery of tax was carried out using the taxpayer’s assets and that the whole procedure was described in detail in the domestic legislation and had been followed by the authorities. In the circumstances, the measures represented the control of the use of property and were in full compliance with the Convention. 629. As regards the seizure of property, the Government referred to the Gasus Dosier and AGOSI cases and considered that, having regard to relevant factors, such as the enormous amount of arrears, the bad-faith conduct of the applicant company and the need for an expedient and efficient recovery of tax to the State budget, the measure in question was in compliance with the requirements of Article 1 of Protocol No. 1. The Government submitted that both the seizure and freezing orders were usual practice, both domestically and internationally, and their use was especially appropriate in the present case because of the unprecedented amounts of the tax debts, the unrepentant and defiant attitude of the applicant company, claims that the authorities’ actions were a “malicious tax racket” and the applicant company’s history, namely its management and core shareholders moving corporate assets into new shell entities and sometimes into foreign tax havens. These measures were merely precautionary in character. 630. In respect of the April injunction, the Government disagreed with the applicant company’s claim that it could have repaid the debt but for the seizure of its assets. The injunction did not cover either cash or cash revenues and the applicant company did subsequently repay a portion of its debt using the cash in the frozen account. The applicant company could have had the injunction lifted had it provided adequate counter-security, which it failed to do, or liquidated some of its foreign assets not covered by the injunction. The Government maintained that instead of selling its foreign assets to meet its tax debts the applicant company simply stripped them away, which in itself proved that the company’s complaint about the injunction was unsubstantiated. As regards the freezing orders, the Government submitted that they had been issued by the bailiffs pursuant to court writs dated 30 June 2004, which froze the company’s accounts in Russian banks as of the date of issue of the respective freezing orders. The company could still dispose of cash added to its frozen accounts after 30 June 2004 and could use its non-seized accounts abroad. The funds in these accounts had been far lower than the company’s then liabilities. The Government further noted that as of 14 July 2004 the applicant company had still to pay 96.5% of its then liability and that the company’s voluntary payment only commenced on 14 July 2004, apparently as a response to the seizure of the shares of OAO Yuganskneftegaz. The very fact that the payments had been made through the frozen accounts demonstrated that the company’s allegations about the effects of the cash freezing orders were untrue. 631. As regards the proposals for respite and payment spread, the applicant company first made such a request on 16 July 2004 by sending a letter to the Ministry of Finance. The Government pointed out that the Ministry of Finance had not been the proper authority to grant these measures as only a commercial court could and that the law set out clear rules regarding the conditions that should have been satisfied so that the request could be granted, i.e. the request should have been made one to six months before the original payment deadline and on specific grounds only, such as the risk of bankruptcy. In addition, the law did not allow for respite and payment spread if there were pending tax proceedings against the taxpayer at issue. The applicant not only failed to substantiate its request with reference to the criteria set out in law, but it was also clear that such a request was bound to fail because of the pending tax proceedings against the applicant company. 632. The Government relied on the applicable domestic law and cases to demonstrate that asking a guilty taxpayer to pay within one or two days had been standard and lawful practice followed in all cases. They claimed that this period was sufficient, as taxpayers usually learned about tax claims - with a specific indication of the sums to be paid - in the Ministry’s audit reports, which were usually served from several weeks to a few months in advance. Thus, in the present case the applicant company had first learned of the Ministry’s claims for the years 2000-2003 109, 66, 19 and 18 days in advance. More generally, in such cases the taxpayer usually knew well in advance the sums that had been underpaid (typically during tax evasion), so it cannot claim that it was unprepared. In addition, very similar practices existed internationally. 633. As to the choice of OAO Yuganskneftegaz as the first item to be auctioned in satisfaction of the company’s liabilities, the Government pointed out that the offers made by the applicant company had been unacceptable. The first three offers, made on 22 April, 2 July and 13-14 July 2004, all involved various portions of shares of OAO Sibneft, allegedly owned by the applicant company. All three offers were rejected, not only because the company’s ownership of these shares had been contested in various unrelated proceedings by third persons, but also because the offers had been made in violation of injunctions issued by the courts in the above-mentioned unrelated proceedings. In fact, the sale of shares that did belong to the applicant company (some 20%) would have been insufficient to cover the company’s then debt, even in part, let alone satisfy the Ministry’s upcoming claims for the years 2001-2003. It was a minority stake of uncertain value and any such value was in any event insufficient to satisfy the company’s tax arrears. As regards the fourth offer, dated 9 August 2004, it involved 20% of OAO Sibneft and a farrago of shares in fifteen companies (some of them subsidiaries, some of them minority stakes and all of uncertain liquidity). In any event, this offer was “too little and too late” for the Government, since preparation for the auctioning of OAO Yuganskneftegaz had been under way. The above-mentioned “shopping list” did not offer any guarantee of a “good chance of fetching a price sufficient to discharge much of [the applicant’s] rapidly increasing tax liabilities” and in addition involved a high risk of third-party claims to the property in question in each case. 634. The Government maintained that the choice of OAO Yuganskneftegaz was lawful under Russian law, aimed at securing the payment of taxes and had been effected in full compliance with the provisions of the Federal Enforcement Proceedings Act. Under section 54 (2) of the Enforcement Proceedings Act, the sale of the applicant company’s property was made by a specialised organisation pursuant to the terms of commission and the relevant legislation. On 18 November 2004 the bailiffs decided to sell 43 shares (76.8%) of OAO Yuganskneftegaz at auction. The Government noted that OAO Yuganskneftegaz was itself the debtor in mandatory payments to the budget totalling RUB 102.09 billion, so that the above arrears inevitably affected the price of the auctioned shares, as defined by the valuation institution and the results of the auction. The date of the auction and invitation to participate in the open auction were published in the mass media in due time. The auction itself was open, both with regard to its participants and to the form of submissions of price bids. Bids were received between 19 November and 18 December 2004. On 19 December 2004 the open auction took place. The winner of the auction was recognised as OOO Baykalfinancegrup, which offered RUB 260,753,447,303.18 for the shares in question. The auction itself was public. The mass media representatives provided extensive media coverage. The results were published in the mass media and broadcast. With regard to the proportionality of the sale, the sum of 260.5 billion roubles generated as a result of the sale did not, however, cover the arrears of OAO Yukos entirely. The Government also underlined that the subsequent bankruptcy was not caused by the sale of OAO Yuganskneftegaz, but had been initiated by a consortium of foreign banks and that the representatives of the applicant company had allegedly acknowledged that the company had been in good financial condition even despite the sale of OAO Yuganksneftegaz. In sum, the Government considered that there had been no breach of the Convention. 3. The Court’s assessment 635. The applicant company submitted a number of grievances about these proceedings. In particular, the applicant company complained that the enforcement of the tax liability had been deliberately orchestrated with a view to preventing the applicant company from repaying its debts. In this connection the company maintained that the seizure of its assets pending litigation had prevented it from repaying the debt. It was furthermore dissatisfied that it had been ordered to pay a 7% enforcement fee in respect of the entirety of its debt, that the time for voluntary compliance with the Tax Assessments 2000-2003 had been too short and that the sale of the company’s main production unit OAO Yuganskneftegaz had been unlawful, arbitrary and generally disproportionate. 636. Before turning to the substance of these complaints, the Court reiterates that in its decision on admissibility it joined to the merits the question of exhaustion of domestic remedies. Thus, the Court needs to determine whether the applicant complied with the requirement to exhaust domestic remedies in respect of this part of the application, as required by Article 35 § 1 of the Convention, which, in its relevant parts, provides: “1. The Court may only deal with the matter after all domestic remedies have been exhausted, according to the generally recognised rules of international law ...” 637. The Court reiterates that the rule of exhaustion of domestic remedies under Article 35 § 1 of the Convention obliges applicants to use first the remedies which are available and sufficient in the domestic legal system to enable them to obtain redress for the breaches alleged. The existence of the remedies must be sufficiently certain both in theory and in practice, failing which they will lack the requisite accessibility and effectiveness. Article 35 § 1 also requires that complaints intended to be brought subsequently before the Court should have been made to the appropriate domestic body, at least in substance and in compliance with the formal requirements and time-limits laid down in domestic law and, further, that any procedural means that might prevent a breach of the Convention should have been used. However, there is no obligation to have recourse to remedies which are inadequate or ineffective (see, for example, Aksoy, 18 December 1996, §§ 51-52, Reports 1996–VI; Akdivar and Others v. Turkey, 16 September 1996, §§ 65-67, Reports 1996 ‑ IV; and, more recently, Cennet Ayhan and Mehmet Salih Ayhan v. Turkey, no. 41964/98, § 64, 27 June 2006). 638. The Court has emphasised that the application of the rule of exhaustion of domestic remedies must make due allowance for the fact that it is being applied in the context of machinery for the protection of human rights that the Contracting States have agreed to set up. Accordingly, it has recognised that Article 35 § 1 must be applied with some degree of flexibility and without excessive formalism. It has further recognised that the rule of exhaustion is neither absolute nor capable of being applied automatically; for the purposes of reviewing whether it has been observed, it is essential to have regard to the circumstances of the individual case. This means, in particular, that the Court must take realistic account not only of the existence of formal remedies in the legal system of the Contracting State concerned but also of the general context in which they operate, as well as the particular circumstances of the applicant. It must then examine whether, in all the circumstances of the case, the applicant did everything that could reasonably be expected of him or her to exhaust domestic remedies (see Akdivar and Others, cited above, § 69; Aksoy, cited above, §§ 53-54; and Tanrıkulu v. Turkey [GC], no. 23763/94, § 82, ECHR 1999 ‑ IV). 639. The Court reiterates that at the admissibility stage of the proceedings the Government claimed that the applicant company had failed to exhaust domestic remedies in respect of the attachment and seizure of its assets pending the enforcement proceedings, the alleged failure by the bailiffs to grant the company access to the case in the enforcement proceedings, the bailiffs’ alleged inaction in respect of the Sibneft shares, the orders to pay a 7% enforcement fee and the circumstances of the valuation and sale of OAO Yuganskneftegaz. 640. Having examined the case file and the parties’ submissions, the Court finds that in the part concerning the attachment and seizure of the assets the applicant company properly exhausted the available domestic remedies by raising its grievances before the competent domestic courts. The attachment order of 15 April 2004 was reviewed and upheld by the Appeal Court on 2 July 2004 (see paragraph 92 ) and was also examined and confirmed by the City Court in its decision of 23 April 2004 in the context of the examination of the company’s request of 22 April 2004 (see paragraphs 96 - 97 ), and by the City Court and the Appeal Court on 23 April and 2 July 2004 respectively in the context of examination of the company’s request for an injunction against the attachment (see paragraphs 101 and 102 ). The seizure order of 1 July 2004 was reviewed at first instance on 17 September 2004 and in cassation on 2 February 2005 (see paragraphs 116 - 120 ). The seizure of OAO Yuganskneftegaz on 14 July 2004 was reviewed by the courts at four instances, on 6, 9 August, 25 October and 17 December 2004 respectively (see paragraphs 137 - 146 ). As regards the seizure orders of 14 July 2004 concerning OAO Tomskneft-VNK and OAO Samaraneftegaz, the City Court upheld them by respective judgments of 13 August and 2 September 2004, whilst the Circuit Court confirmed this conclusion by the respective decisions of 5 November 2004 and 18 January 2005 (see paragraphs 147 - 155 ). 641. Admittedly, the applicant company did not complain about the attachment order of 15 April 2004 by way of cassation and omitted the appeal procedure when contesting the seizure of its subsidiaries on 1 July 2004 and the seizure order of 14 July 2004 concerning OAO Tomskneft-VNK and OAO Samaraneftegaz. The Court would note, however, that given the circumstances of the applicant company’s tax case, its overall situation at the relevant time, the applicable domestic law and the courts’ responses to the arguments put forward by the applicant company in those proceedings, it is clear that both the attachment order of 15 April 2004 and the subsequent seizure orders of 1 and 14 July 2004 have been properly examined and confirmed by the domestic courts at various levels of jurisdictions and it does not appear that the applicant company’s complaints in this connection had any additional prospects of success, had the company not omitted the above-mentioned judicial instances. 642. As regards the complaints about a 7% enforcement fee, the Court observes that the applicant company was ordered to pay this fee for the years 2000-2003. The company’s challenge to this fee was examined and dismissed by the courts at three instances only in respect of the year 2000 (see paragraphs 130 - 134 ), whilst its complaints about the payment of the fee for the year 2001 were examined only at first instance and in cassation (see paragraphs 177 - 187 ). Also, it is not entirely clear whether the applicant company brought court proceedings in respect of the entire amount of the fee for the year 2002 (see paragraphs 200 - 204 ) and whether it brought any proceedings against such an order for the year 2003 (see paragraph 221 ). The Court again finds that, given the similarity of the orders for payment of enforcement fees for the years 2000-2003 and in view of other relevant circumstances such as the applicable domestic law and the courts’ answers to the company’s arguments in respect of the fee for the year 2000, there is nothing in the Government’s submissions to suggest that the applicant company’s complaints in this connection would have had any prospects of success had the applicant company appealed against them. 643. As regards the alleged failure by the bailiffs to grant the company access to the case in the enforcement proceedings and the bailiffs’ alleged inaction in respect of the Sibneft shares, the Court notes that the above-mentioned grievances are entirely subsumed by the complaint concerning the method of enforcement of the tax debt and in particular the choice of OAO Yuganskneftegaz as the first asset to be sold in satisfaction of the tax claims. In this connection, the Court would note that the applicant company clearly exhausted the available domestic remedies as regards the seizure and the subsequent measures leading to the eventual sale of OAO Yuganskneftegaz (see paragraphs 137 - 146 ), and it is also clear that the relevant domestic law specifically disallowed the courts to rearrange or otherwise postpone the repayment of the debt (see paragraphs 471-477) if there were, as in the case at hand, pending tax proceedings against the debtor. Thus, the applicant company could not have been expected to bring separate court proceedings in this connection. Overall, it is clear to the Court that the applicant company used all the remedies that it could reasonably be expected to use in connection with this part of the application. 644. Thus, the Court finds that the applicant company has complied with the requirement to exhaust domestic remedies in respect of this part of the application and dismisses the Government’s preliminary objection accordingly. 645. Turning to the substance of the applicant company’s complaints, the Court notes that in April 2004, simultaneously with the Tax Assessment proceedings, the domestic authorities initiated enforcement proceedings aimed at securing their tax claims and later recovering the sums awarded by the courts as a result of the examination of these claims. They attached the company’s assets located in Russia and later partly froze the company’s domestic bank accounts and seized the shares of the applicant company’s Russian subsidiaries. On 20 July 2004 it was decided to auction off the company’s principal production subsidiary OAO Yuganskneftegaz, in satisfaction of the company’s tax liability, which at the time amounted to RUB 106.182 billion (some EUR 3.005 billion). As a result of the proceedings with regard to the Tax Assessments 2001 and 2002, the company’s debt to the tax authorities further increased and by the time the auction of OAO Yuganskneftegaz took place in December 2004 the company already owed the tax authorities some RUB 431.259 billion (some EUR 11.061 billion). In addition to the payments resulting from the Tax Assessments 2000-2003, the company was also required to pay the bailiffs a 7% enforcement fee on the overall amount of the debt. 646. The Court notes that the authorities used a variety of measures in connection with the enforcement of the debt, such as the attachment and freezing orders, the seizure orders, the orders to pay enforcement fees and the compulsory auction procedure. Though each of these measures could be seen as a separate instance of interference with the applicant company’s rights under Article 1 of Protocol No. 1, their common and ultimate goal was to force the company to meet its tax liabilities. Accordingly, the appropriate way to analyse this part of the application is to examine the enforcement proceedings in their entirety as one continuous event. The Court further notes that the enforcement measures in question fall to be analysed under the third rule of Article 1 of Protocol No. 1, which allows the member States to control the use of property in accordance with the general interest, by enforcing “such laws as [they] deem necessary to secure the payment of taxes or other contributions or penalties”. It follows that the Court’s task is to determine whether the State authorities complied with the Convention requirement of lawfulness and, if so, whether they struck a fair balance between the legitimate state interest in enforcing the tax debt in question and the protection of the applicant company’s rights set forth in Article 1 of Protocol No. 1. 647. As regards the lawfulness of the measures in question, the Court has no reason to doubt that throughout the proceedings the actions of various authorities had a lawful basis and that the legal provisions in question were sufficiently precise and clear to meet the Convention standards concerning the quality of law. The attachment, freezing and seizure orders were reviewed by the domestic courts and found to have been lawful. Likewise, the 7% enforcement fee was upheld by the domestic courts and cannot be said to have been selective, given the domestic case-law cited by the Government. As regards the decisions leading to the forced sale of OAO Yuganskneftegaz at auction and the auction process itself, the Court notes that they too were reviewed and upheld by the domestic courts as lawful (see paragraphs 263 and 265) and there is nothing in the case file or the parties’ submissions to cast doubt on these conclusions. The only question that remains is whether the enforcement measures were proportionate to the legitimate aim pursued. 648. In this connection the Court would reiterate that its task is to determine whether a fair balance was struck between the demands of the general interest of the public and the requirements of the protection of the individual’s fundamental rights. It finds it natural that in the tax sphere the Contracting States should enjoy a wide margin of appreciation in order to implement their policies. Nevertheless, the Court cannot fail to exercise its power of review and must determine whether the requisite balance was maintained in a manner consonant with the applicant company’s right to “the peaceful enjoyment of [its] possessions”, within the meaning of the first sentence of Article 1 of Protocol No. 1. 649. At the outset the Court notes the background to this case and, in particular, the fact that the applicant company was one of the largest taxpayers in Russia and that it had been suspected and subsequently found guilty of running a tax evasion scheme, committed consecutively in 2000-2003. From the parties’ submissions and the case file it seems clear that the applicant company had no cash funds in its domestic accounts to pay its tax debts immediately, and in view of the nature and scale of the debt it was unlikely that any third party would agree to assist the company with a loan or some form of security. Regard being had to the scale of the tax evasion, the sums involved for the years 2000-2003, the fact under domestic law that they were payable almost at once after the production of the respective execution writ (see paragraph 471), and even taking into account the Court’s previous findings in respect of the fines for the years 2000 and 2001, it was questionable whether at the time when the authorities decided to seize and auction OAO Yuganskneftegaz the company was at all solvent within the meaning of section 3 of the Insolvency (Bankruptcy) Act, which generally expected the solvent debtor to repay its debts “within three months of the date on which compliance should have occurred” (see paragraph 496). 650. In view of the above considerations, the Court finds that the crux of the applicant company’s case did not lay in the attachment of its assets and cash as such, but rather and essentially in the speed with which the authorities demanded the company to pay, in the decision which had chosen the company’s main production unit, OAO Yuganskneftegaz, as the item to be compulsorily auctioned in the first instance, and in the speed with which the auction had been carried out. 651. Given the paramount importance of the measures taken by the authorities to the applicant company’s future, and notwithstanding the Government’s wide margin of appreciation in this field, the Court is of the view that the authorities were obliged to take careful and explicit account of all relevant factors in the enforcement process. Such factors were to include, among other things, the character and the amount of the existing debt as well as of the pending and probable claims against the applicant company, the nature of the company’s business and the relative weight of the company in the domestic economy, the company’s current and probable economic situation and the assessment of its capacity to survive the enforcement proceedings. Furthermore, the economic and social implications of various enforcement options on the company and the various categories of stakeholders, the attitude of the company’s management and owners and the actual conduct of the applicant company during the enforcement proceedings, including the merits of the offers that the applicant company may have made in connection with the enforcement were to be properly considered. 652. The Court notes that the authorities examined and made findings in respect of some of these factors (see, for instance, the findings in respect of the offers of shares in OAO Sibneft in paragraph 124 or the findings in respect of request for payment spread in paragraph 157 ), but it is clear that at no point in the enforcement proceedings did they make an explicit assessment in respect of all of them. In particular, neither the seizure order of 14 July 2004, which set in motion the process of auctioning OAO Yuganskneftegaz (see paragraph 137 ), nor any of the subsequent decisions, including the judicial decisions in the context of the company’s complaints against the actions of the bailiffs (see paragraphs 137 - 158 ), mentioned or discussed in any detail possible alternative methods of enforcement and the consequences that they might have on the future of the company. 653. The Court finds this aspect of the enforcement proceedings of utmost importance when striking a balance between the interests concerned, given that the sums that were already owed by the company in July 2004 made it rather obvious that the choice of OAO Yuganskneftegaz as the first item to be auctioned in satisfaction of the company’s liability was capable of dealing a fatal blow to its ability to survive the tax claims and to continue its existence. 654. The Court accepts that the bailiffs were bound to follow the applicable domestic legislation which might limit the variety of options in the enforcement procedure. Nonetheless, the Court is of the view that, notwithstanding these constraints, the bailiffs still had a decisive freedom of choice, the exercise of which could either keep the company afloat or eventually lead to its demise. Although the Court, in principle, does not find the choice of OAO Yuganskneftegaz entirely unreasonable, especially in view of the overall amount of the tax-related debt and the pending as well as probable claims against the company, it is of the view that before definitively selecting for sale the asset that was the company’s only hope of survival, the authorities should have given very serious consideration to other options, especially those that could mitigate the damage to the applicant company’s structure. This was particularly so since all of the company’s domestic assets had been attached by previous court orders (see paragraph 27 ), and were readily available, the company itself did not seem to have objected to their sale (see paragraph 159) and there had been virtually no risk of the company seriously opposing these actions. 655. The Court further notes one other factor which seriously affected the company’s situation in the enforcement proceedings. The applicant company was subjected to a 7% enforcement fee in connection with the entire amount of its tax-related liability, which constituted an additional hefty sum of over RUB 43 billion (EUR 1.16 billion), the payment of which could not be suspended or rescheduled (see paragraphs 484-486). This was a flat-rate fee which the authorities apparently refused to reduce, and these sums had to be paid even before the company could begin repaying the main body of the debt (see paragraph 484). The fee was by its nature unrelated to the actual amount of the enforcement expenses borne by the bailiffs. Whilst the Court may accept that there is nothing wrong as a matter of principle with requiring a debtor to pay for the expenses relating to the enforcement of a debt or to threaten a debtor with a sanction to incite his or her voluntary compliance with enforcement writs, in the circumstances of the case the resulting sum was completely out of proportion to the amount of the enforcement expenses which could have possibly been expected to be borne or had actually been borne by the bailiffs. Because of its rigid application, instead of inciting voluntary compliance, it contributed very seriously to the applicant company’s demise. 656. Lastly, the Court would again emphasise that the authorities were unyieldingly inflexible as to the pace of the enforcement proceedings, acting very swiftly and constantly refusing to concede to the applicant company’s demands for additional time. Admittedly, this rigidity may have resulted at least in part from the relevant requirements of the domestic law (see paragraphs 471, 481 and 489). Nevertheless, the Court finds that in the circumstances of the case such lack of flexibility had a negative overall effect on the conduct of the enforcement proceedings against the applicant company. 657. On the whole, given the pace of the enforcement proceedings, the obligation to pay the full enforcement fee and the authorities’ failure to take proper account of the consequences of their actions, the Court finds that the domestic authorities failed to strike a fair balance between the legitimate aims sought and the measures employed. 658. To sum up, the Court concludes that there has been a violation of the applicant company’s rights under Article 1 of Protocol No. 1 on account of the State’s failure to strike a fair balance between the aims sought and the measures employed in the enforcement proceedings against the applicant company. C. The complaint about the Government’s intentions in the tax and enforcement proceedings against the applicant company 659. The Court notes that, in addition to various specific grievances about the tax and enforcement proceedings already mentioned above, the applicant company also argued that the overall effect of these proceedings showed that the Government had brought and conducted the proceedings with the intent to destroy the company and to take control of its assets. 660. The Court will examine this part of the application under Article 18 of the Convention, taken in conjunction with Article 1 of Protocol No. 1. Article 18 of the Convention “The restrictions permitted under [the] Convention to the said rights and freedoms shall not be applied for any purpose other than those for which they have been prescribed.” 1. The applicant company’s submissions 661. The applicant company argued that the circumstances of the tax assessment and enforcement proceedings as well as the allegedly “political” motivation behind the prosecution of Mr M. Khodorkovskiy and other owners and senior officials of the applicant company showed that the proceedings against it, taken as a whole, were abusive in that the State clearly wanted to destroy the company and to take control of its assets. 2. The Government’s submissions 662. The Government disagreed, having maintained that tax assessment and subsequent enforcement proceedings had been lawful and regular and that the applicant company’s demise was the direct result of its carrying out over many years a gigantic tax fraud. 3. The Court’s assessment 663. The Court reiterates that Article 18 of the Convention does not have an autonomous role. This provision can only be applied in conjunction with the Convention provisions protecting substantive rights. It also follows from the terms of Article 18 that a violation can only arise where the right or freedom concerned is subject to restrictions permitted under the Convention (see, for example, Gusinskiy v. Russia, no. 70276/01, § 73, ECHR 2004 ‑ IV). The Court further notes that in order to hold a member State liable under this provision an applicant should be able to furnish the Court with an incontrovertible and direct proof in support of his or her allegations. 664. The Court would observe that in its previous analysis under Article 6 of the Convention and Article 1 of Protocol No. 1 it has already addressed the applicant company’s points about the nature of its debt to the authorities, and in particular the merits of the 2000-2003 Tax Assessments proceedings. Despite the fact that it found a violation of Article 6 of the Convention on account of the speed with which the courts had conducted the proceedings in the 2000 Tax Assessment case and a violation of Article 1 of Protocol No. 1 on account of the interference by the Constitutional Court with the outcome of the 2000 Tax Assessment case in the part relating to penalties, the Court rejected the applicant company’s claims that the company’s debt had been recognised as a result of an unforeseeable, unlawful and arbitrary interpretation of the domestic law (see paragraphs 605 and 616). The Court also recognised the right of the State to enforce, as such, the court judgments, but reached conclusions concerning the handling of the enforcement proceedings by the domestic authorities which lead to the finding of a violation of Article 1 of Protocol No. 1. In view of these findings, the Court will proceed on the assumption that the company’s debt in the enforcement proceedings resulted from legitimate actions by the respondent Government to counter the company’s tax evasion and the burden of proof would accordingly rest on the applicant company to substantiate its allegations. 665. Regard being had to the case file and the parties’ submissions, including the applicant company’s references to the allegedly political motivation behind the prosecution of the applicant company and its owners and officials, the Court finds that it is true that the case attracted massive public attention and that comments of different sorts were made by various bodies and individuals in this connection. The fact remains, however, that those statements were made within their respective context and that as such they are of little evidentiary value for the purposes of Article 18 of the Convention. Apart from the findings already made earlier, the Court finds no indication of any further issues or defects in the proceedings against the applicant company which would enable it conclude that there has been a breach of Article 18 of the Convention on account of the applicant company’s claim that the State had misused those proceedings with a view to destroying the company and taking control of its assets. 666. To sum up, the Court finds that there has been no violation of Article 18 of the Convention, taken in conjunction with Article 1 of Protocol No. 1, on account of the alleged disguised expropriation of the company’s property and the alleged intentional destruction of the company itself. D. Alleged violations of Articles 7 and 13 of the Convention 667. Regard being had to the particular circumstances of the present case and to the reasoning which led it to find a violation of Article 6 of the Convention and Article 1 of Protocol No. 1 to the Convention, the Court finds that there is no cause for a separate examination of the same facts from the standpoint of Article 7 of the Convention and through the prism of the “effective remedies” requirement of Article 13. IV. APPLICATION OF ARTICLE 41 OF THE CONVENTION 668. Article 41 of the Convention provides: “If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.” 669. The applicant company claimed a lump sum of over 81 billion euros and a daily interest payment of EUR 29,577,848 in respect of pecuniary damage, “no less than 100,000 euros” in respect of non-pecuniary damage and EUR 171,444.60 in respect of costs and expenses. 670. The Government disagreed, having contested both the authority of Mr Gardner to make the Article 41 claims on behalf of the applicant company as well as the well-foundedness of the calculations in question. 671. The Court considers that the question of the application of Article 41 is not ready for decision. Accordingly, it shall be reserved and the subsequent procedure fixed having regard to any agreement which might be reached between the applicant company and the respondent Government (Rule 75 § 1 of the Rules of Court).
The Court held that there had been a violation of Article 1 (protection of property) of Protocol No. 1 regarding the imposition and calculation of the penalties concerning the 2000-2001 tax assessments for two reasons, the retroactive change in the rules on the applicable statutory time-limit and the consequent doubling of the penalties due for the 2001 tax year. However, observing that the rest of the 2000-2003 tax assessments were lawful, pursued a legitimate aim (securing the payment of taxes) and were a proportionate measure, it found no violation of Article 1 of Protocol No. 1 regarding the rest of the 2000-2003 tax assessments. As regards enforcement proceedings, given the pace of the enforcement proceedings, the obligation to pay the full enforcement fee and the authorities’ failure to take proper account of the consequences of their actions, the Court found that the Russian authorities had failed to strike a fair balance between the legitimate aims sought and the measures employed, in violation of Article 1 of Protocol No. 1. In this case the Court also found violations of Article 6 §§ 1 and 3 (b) (right to a fair trial) of the Convention in respect of the 2000 tax-assessment proceedings on the grounds that the applicant had not had sufficient time to study the case file at first instance (four days for at least 43,000 pages) or to make submissions and, more generally, to prepare the appeal hearings. It further held that there had been no violation of Article 14 (prohibition of discrimination) of the Convention in conjunction with Article 1 of Protocol No. 1 as, in view of the considerable complexity of the tax arrangements it had put in place, the applicant was not in a relevantly similar position to any other company. Lastly, the Court found that there had been no violation of Article 18 (limitation on use of restrictions on rights) of the Convention in conjunction with Article 1 of Protocol No. 1, as the applicant had failed to substantiate its claims that the authorities’ aim had not been to take legitimate action to counter tax evasion, but to destroy it and take control of its assets.  In its judgment on just satisfaction of 31 July 2014, the Court further decided: that Russia was to pay the shareholders of the applicant company as they had stood at the time of the company’s liquidation and, if applicable, their legal successors and heirs 1,866,104,634 euros in respect of pecuniary damage, and that Russia had to produce, in co-operation with the Council of Europe’s Committee of Ministers, a comprehensive plan for distribution of the award of just satisfaction; that the finding of a violation constituted in itself sufficient just satisfaction for the non-pecuniary damage sustained by the applicant.