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Cite as: [2010] ECHR 1703
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FIRST SECTION
DECISION
AS TO THE ADMISSIBILITY OF
|
Application no. 4437/03 by Uniya OOO against Russia |
Application no. 13290/03 |
The European Court of Human Rights (First Section), sitting on 7 October 2010 as a Chamber composed of:
Christos
Rozakis,
President,
Nina
Vajić,
Anatoly
Kovler,
Elisabeth
Steiner,
Khanlar
Hajiyev,
Dean
Spielmann,
Sverre
Erik Jebens,
judges,
and Søren
Nielsen, Section
Registrar,
Having regard to the above applications lodged on 28 December 2002 and on 17 March 2003,
Having regards to the decision of the Chamber of 13 December 2005 to join the above-mentioned cases under Rule 42 § 1 of the Rules of Court,
Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicants,
Having deliberated, decides as follows:
THE FACTS
The first applicant, Uniya OOO (application no. 4437/03), is a Russian limited company, registered in Bashkortostan, Alsheyvskiy District. It is represented before the Court by Ms Alekseyenkova, a lawyer practising in Kaliningrad. The second applicant, Belcourt Trading Company (application no. 13290/03), is a company registered in the State of Delaware, USA. It is represented before the Court by Mr Rubinstein, who lives in the Kaliningrad Region, Russia. The Russian Government (“the Government”) were represented by Mr P. Laptev and Ms V. Milinchuk, former Representatives of the Russian Federation at the European Court of Human Rights.
A. The circumstances of the case
The facts of the case, as submitted by the applicant companies, may be summarised as follows.
Between 1997 and 1998 the first applicant company (“Uniya”) imported several consignments of alcohol into the Kaliningrad Region under a contract with the second applicant company (“Belcourt”). The alcohol had been produced in Germany and Belgium. Uniya acted as a commissioner or, in some instances, as a buyer of the alcohol. The alcohol was declared at the border and custom duties were paid. The alcohol was bottled by the producer and sold in the Kaliningrad Region under various brand names (“Petrov-Lemon”, “Uniya Extra”, “Uniya Drink”, etc.).
1. Criminal proceedings against Mr Golovkin (case no. 52012)
On 29 April 1998 the police instituted criminal proceedings on suspicion of unlawful trafficking in alcohol by the top-management of Uniya (criminal case no. 52012). In particular, the police suspected Mr Golovkin, the director of the Kaliningrad branch of Uniya, of importing the alcohol without an appropriate licence. Within that case (hereinafter – “the criminal proceedings” or “criminal case no. 52012”) Mr Golovkin. was charged with “illegal enterprise” (a criminal offence under the Criminal Code). Several other managers of Uniya were also charged within that criminal case. In the following months the investigator in charge of the case seized the alcohol allegedly imported by Uniya.
In the course of the proceedings Mr Golovkin pleaded not guilty. He claimed that he had had a licence for the retail sale of alcohol; as to the requirement to obtain a licence for wholesale trading in “bitter liquors”, this had been introduced into the domestic legislation only on 9 July 1998, by Government Decree no. 727, that is, several months after all transactions had been finalised and implemented.
On 29 March 1999 Mr Golovkin was also charged with tax evasion and money laundering. In particular, the investigators suspected him of having artificially inflated the price of the imported alcohol in the contracts between Uniya and Belcourt in order to reduce the amount of taxes to be paid on the territory of the Russian Federation.
On 17 September 1999 the case against Mr Golovkin was transmitted to the court for examination on the merits.
On 24 November 2000 the Baltiyskiy District Court of Kaliningrad acquitted Mr Golovkin in full.
On 20 March 2001 the Kaliningrad Regional Court quashed the acquittal of Mr Golovkin in part and remitted the case to the prosecution authorities for further investigation. In its decision the Regional Court noted, inter alia, that some of the alcohol seized by the investigators in the retail shops had, at least formally, been purchased from Dionis Ltd and not Uniya.
On several occasions Mr Golovkin requested the authorities to expedite the investigation or to drop the case.
On 31 May 2005 the Baltiyskiy District Court found Mr Golovkin guilty of illegal enterprise. The District Court found, inter alia, that between October 1997 and May 1998 he had, in the capacity of the director of the Kaliningrad branch of Uniya (the first applicant company), imported 2,459,756 litres of various brands of alcohol worth 17,871,860 US Dollars (USD). The District Court found that a special licence was required for such operations, which Mr Golovkin did not have. He was acquitted of the other charges. The court sentenced him to two years' imprisonment, but ordered the sentence to be suspended on account of the expiry of the statutory time-limit within which a person could be prosecuted for such crimes (истечение срока давности привлечения к уголовной ответственности).
On 22 September 2005 the Kaliningrad Regional Court quashed the judgment of 31 May 2005 on appeal and decided to discontinue the proceedings in Mr Golovkin's case on account of the expiry of the statutory time-limit for finding him criminally responsible.
2. Seizure and destruction of the first consignment of alcohol
(a) Seizure
Between May and October 1998 the police investigator in charge of criminal case no. 52012, Mr Zh., ordered the seizure of the alcohol imported by Uniya. Pursuant to his order, between June and September 1998 the police seized 461,049 bottles of various liquors (bottled under the trademarks Extra-Uniya, Drink-Uniya, and Petrov-Lemon), stored in various warehouses (hereinafter “the first consignment”). According to the applicant companies, 120,477 of those bottles belonged to the first applicant company (“Uniya”), whereas 337,104 bottles were the property of the second applicant company (“Belcourt”).
According to the Government, the first consignment of alcohol was seized under Article 167 of the Code of Criminal Procedure. In support of that submission, they produced copies of several seizure orders by the investigator Zh., dated 19 May to 26 October 1998. It appears from these documents that the alcohol was seized on two different grounds: either for the purpose of possible confiscation of the property of the accused (Mr Golovkin and others) or as an exhibit in the criminal proceedings against Mr Golovkin. The seizure orders were thus formulated either as “charging orders” (постановление о наложении ареста на имущество) or “removal orders” (постановление о производстве выемки).
All the seizure orders contained a summary of the charges against Mr Golovkin and indicated where the alcohol in question could be found. The decisions which referred to Article 175 of the Code mentioned that the charging order had been imposed in order to secure the possible payment of civil damages and/or confiscation of property of the suspect (i.e. Mr Golovkin and other managers of Uniya). In other respects the seizure orders were substantially the same.
On 29 June 1998 five bottles of the seized alcohol were examined in Moscow by the Central Laboratory of the State Customs Office, at the request of the investigator. The experts concluded that the content of one bottle could be characterised as “vodka” according to the State manufacturing standard for liquor (GOST 12712-80). The content of the other four bottles could be characterised as “bitter liquor” (State manufacturing standard GOST 7190-93). The experts concluded that the alcohol had been made from food-grade spirit, according to traditional processes, and was drinkable (if consumed in reasonable quantities).
On 13 July 1998 the investigator commissioned another expert examination of the alcohol (hereinafter “the second expert examination”). He sent the experts ten bottles of the alcohol seized by the investigator earlier. The new examination was entrusted to the Centre of Forensic Examination of the Ministry of the Interior in Moscow.
On 14 August 1998 the second expert report was prepared. The experts found that some of the ingredients mentioned on the labels were absent from the sample bottles (such as lemon acid and some aromas as regards the bottles labelled “Petrov Lemon”). The experts further found that all the alcohol's physical and chemical characteristics corresponded to the State manufacturing standard for liquor (GOST 7190-93). However, the alcohol could not be characterised as “bitter liquor”: its examination had shown that the alcohol had been made from non-food-grade raw spirit, whereas under Russian law it had to have been produced from food-grade vegetable-derived raw spirit. The experts based their conclusion on the very low percentage of methanol in the alcohol examined. The experts noted that such alcohol was potentially harmful to consumers.
(b) Destruction
On 26 January 1999 the investigator in charge of the criminal case against Mr Golovkin concluded that the liquor seized was “derelict property”. The investigator's reasoning can be summarised as follows. The first consignment had been purchased by Uniya from Belcourt. Between January and March 1998 the alcohol had “ostensibly” been returned to Belcourt. The fact of the return was confirmed by several invoices issued by Uniya, as well as by a “Reciprocal Debt Settlement Agreement” signed between Uniya and Belcourt on 18 March 1998 and discovered by the investigating authorities. The agreement had been signed on behalf of Belcourt by their agent, Mr I. The latter had been questioned by the investigator. He had testified that he had never heard of Belcourt or any alcohol. On that ground the investigator concluded that the alcohol had no lawful owner. Basing himself on the expert report of 14 August 1998, the investigator concluded that it was “non-drinkable” alcohol and derelict property. He ordered 462,290 bottles of the liquor to be sent to a competent regional authority (hereinafter “the Alcohol Commission”) for “further disposal or processing”.
On 30 April 1999 the local police department signed an agreement with a private firm, Fakel, which undertook to destroy the alcohol for 29,956 Russian roubles (RUB).
On 1 June 1999 the Alcohol Commission held a meeting. According to the minutes of the meeting, the State obtained title to the alcohol received by the Commission from the investigator on 26 January 1998. The Government produced a report by the State Environment Protection Committee of the Kaliningrad Region authorising the destruction of the alcohol seized (Extra-Uniya, Drink-Uniya and Petrov-Lemon).
Between 13 September and 21 October 1999 the first consignment of alcohol was destroyed, allegedly by being burnt and poured into the sewage system. According to the official reports, it took seven days to dispose of 462,299 litres of alcohol.
(c) Criminal investigation into the destruction of the first consignment
On 31 July 2000 police investigator Ms S. opened an investigation into the destruction of the first consignment of alcohol (case no. 022155). Having examined the records of disposal, she concluded that it could not have been done within seven days. According to the investigator, it would take 462 working days to destroy the alcohol using the method described in the official reports. Furthermore, it was unclear where all the empty bottles had gone. The investigator concluded that only 2% of the alcohol had really been destroyed; the whereabouts of the rest of the alcohol remained unknown.
On 13 January 2002 the investigation was closed. The police investigator Mr Ya. concluded that police investigator Mr Zh. had acted within his powers and reasonably. The title to the alcohol had been unclear, since Mr Golovkin had denied that the alcohol had belonged to him or to Uniya in order to avoid criminal responsibility. Furthermore, the examination of that alcohol of 14 August 1998 showed that it had been made from non-food-grade spirit. As a result, the investigator had considered the alcohol to be “derelict property” and undrinkable and ordered it to be destroyed. It had been sent to Fakel for disposal. It was impossible to establish how many bottles of alcohol had been destroyed, and what had happened to the empty bottles. The investigator also concluded that since the criminal proceedings against Mr Golovkin had still been pending, it had been impossible to establish who had owned the alcohol at issue. As a result, the case had been closed.
The first applicant company challenged that decision in court, seeking the reopening of the proceedings.
On 3 September 2002 the Leningrad District Court of Kaliningrad upheld the decision of the investigator of 13 January 2002. The District Court confirmed that the investigator had acted within his powers and in accordance with the applicable legislation. The Alcohol Commission had also been competent to take the decision to destroy the alcohol.
(d) First criminal-law complaint by Mr Golovkin
On 16 March 2000 the Baltiyskiy District Court of Kaliningrad trying the case against Mr Golovkin (case no. 52012) ordered a fresh expert examination of the alcohol seized earlier by the investigator. The examination was entrusted to a different group of experts.
On 25 May 2000 the experts concluded that the six samples of alcohol could be characterised as “bitter liquor” and complied with the State manufacturing standards GOST 7190-93 and GOST 12712-80, and the sanitary and hygiene standard SanPiN 2.3.2.560-96. The experts contested the findings of the previous expert team that the alcohol had been made from non-food-grade spirit.
On 24 November 2000, following the acquittal of Mr Golovkin, the Baltiyskiy District Court issued a special ruling (частное определение) to the police and the regional prosecutor's office. In that ruling the court held that the removal of exhibits had been tainted by procedural irregularities: the investigator had failed to attach the exhibits to the materials in the criminal case and had not decided where to store the exhibits, as required by the Code of Criminal Procedure. Further, the investigator had unlawfully transmitted the alcohol to the regional authorities for destruction. Since the alcohol had been seized as an exhibit, “physical evidence of a crime”, only the trial court had power to decide what to do with it. Moreover, when transmitting the consignment the investigator had had at his disposal a second expert report which stated that the alcohol had been drinkable. In its ruling the court found that the destruction of the consignment had resulted in significant pecuniary loss for the first applicant. The court requested the regional prosecutor to take appropriate measures in that respect. That ruling was not challenged and remained in force.
On 17 March 2003 Mr Golovkin lodged a complaint with the Baltiyskiy District Court, seeking to have the seizure of the first consignment of alcohol declared illegal. He insisted, inter alia, that the alcohol seized in 1998 had not belonged to him and, therefore, should not have been seized in the criminal proceedings against him. He submitted that 120,477 litres of alcohol belonged to Uniya, whereas the rest (337,104 litres) belonged to Belcourt. Mr Golovkin further indicated that the criminal-law provisions under which he had been charged did not provide for a sanction such as the confiscation of property. Therefore, there had been no need to seize any property at all, even if it had belonged to him. The investigating authorities maintained, in reply, that it was unclear who was the lawful owner of the alcohol seized.
On 17 June 2003 the Baltiyskiy District Court examined the complaint. The court confirmed that the offences imputed to Mr Golovkin were not punishable by confiscation of property, and that, in any event, the alcohol seized had not belonged to him. However, Mr Golovkin's complaint was dismissed on the ground that “the investigation of the criminal case was still pending and it was unclear whether any new charges or civil claims would be brought against him or against any prospective civil defendants”. The court also noted that the prosecution had lodged a civil claim for damages caused by the allegedly illegal activities of Mr Golovkin. Mr Golovkin appealed.
On 22 July 2003 the Kaliningrad Regional Court upheld the lower court's decision, stating that “given that the criminal investigation with respect to ... Mr Golovkin was still pending, and the prosecution had lodged a civil claim in respect of damage caused to the State”, the lower court's conclusion with respect to Mr. Golovkin's complaint had been correct.
In 2004 Mr Golovkin renewed his complaint against the seizure orders concerning the first consignment.
On 31 January 2005 the Baltiyskiy District Court refused to examine the complaint in so far as it concerned the “removal orders”, as being essentially the same as the complaint examined on 17 June 2003, but examined the complaint concerning the “charging orders” of 1998. Mr Golovkin appealed.
On 12 April 2005 the Kaliningrad Regional Court examined the appeal and dismissed it.
On an unspecified date in 2005 Mr Golovkin requested the Baltiyskiy District Court of Kaliningrad to exclude two items of evidence from the materials of the case file in his criminal case, namely, the expert examination of 16 November 1998, and the decision of the investigator of 26 January 1999.
On 14 April 2005 the Baltiyskiy District Court of Kaliningrad granted the request. It found that the expert examination of 16 November 1998 had been tainted by serious procedural flaws which made it unreliable. Further, the court noted that the decision of the investigator of 26 January 1999 had been based on the expert examination which had already been discarded by the court as unreliable as well. However, it had not been the investigator who had ordered the first consignment of alcohol to be destroyed; he had simply sent it to the Alcohol Commission, which had taken the decision to destroy it. As a result, the District Court decided to exclude the expert examination from the body of evidence and rejected the remainder of the application.
On 20 April 2005 the Baltiyskiy District Court of Kaliningrad refused to examine the complaint by Mr Golovkin against the seizure orders of 1998. The court decided that this complaint was essentially the same as the one that had already been examined earlier and resulted in the final decision of 22 July 2003 of the Kaliningrad Regional Court.
(e) Civil claim by Belcourt in the commercial courts
On an unspecified date the second applicant (“Belcourt”) lodged a civil claim with the Commercial Court of the Kaliningrad Region, seeking compensation for damage caused by the seizure and destruction by the authorities of 366,785 bottles of liquor allegedly belonging to Belcourt and constituting part of the first consignment. The first applicant participated in those proceedings as a third party.
On 2 April 2001 the Kaliningrad Region Commercial Court allowed the claims of Belcourt. The court held, in particular, that the State could only have appropriated alcohol belonging to the second applicant company pursuant to a court judgment and not on the basis of a decision by an investigating authority. The investigator had failed to establish to whom the alcohol had belonged. Further, the conclusions of the expert examination of 14 August 1998 had been unreliable because the State standards established only the maximum permissible percentage of methanol in the end product and not the minimum percentage. A fresh expert examination carried out at the request of the Baltiyskiy District Court in 2000 had fully disproved the second expert examination. Belcourt had been a lawful owner of part of the first consignment; its seizure had been unlawful and arbitrary. The declared customs value of the alcohol had been USD 7.31 per bottle. As a result, the Commercial Court ordered the defendant (the Ministry of Interior) to pay the second applicant company RUB 76,810,056 in damages. The defendant appealed.
On 10 July 2002 the appeal court suspended the proceedings pending the criminal investigation against Mr Golovkin.
On 4 September 2002 the Court of Cassation ordered the resumption of the proceedings and remitted the case to the appeal court.
On 15 November 2002 the Kaliningrad Regional Commercial Court, sitting as a court of appeal, examined the merits of the case. The defendant claimed that the contracts between Uniya and Belcourt had been null and void. The court rejected that argument. The court established that Belcourt had purchased several cargos of alcohol from a German producer through a chain of intermediary companies. The initial price of the alcohol, as sold by the producer, varied between 1.09 and 1.12 German marks per bottle. That alcohol was then sold by Belcourt to Uniya at another price. The alcohol had been shipped by the German producer directly to Uniya, which had paid for that alcohol directly to the German producer as well. Uniya had obtained from Belcourt a 180-days respite on the payment of the contract price.
The Commercial Court also found that Uniya had sold the first cargos in Russia successfully, but a part of the last shipment had not been sold. Uniya and Belcourt had signed an agreement which provided for the return of the unsold part of the last shipment (554,162 bottles) to Belcourt. That agreement further stipulated that the debt of Uniya before Belcourt would be consequently decreased by 4,050,923 US Dollars (i.e. the average price of the alcohol returned had been estimated at 7.31 US Dollar per bottle).
However, that agreement had not been fully executed. A part of that alcohol, 337,104 bottles, had been seized by the police. The court concluded that those 337,104 bottles of alcohol in fact belonged to Belcourt.
The Commercial Court found that although Belcourt, by virtue of the agreement with Uniya, had the property title to that alcohol, it had not been under an enforceable obligation to pay for it. The conclusive paragraphs of the judgment read as follows:
“The calculation of damages in the amount of 76,810,056 Roubles, based on the price of [the alcohol] indicated in the agreement on the return of [the alcohol], and not in the contract of sale, was ill-founded, because it does not follow from the materials of the case that those prices were identical.
The plaintiff did not prove that it had paid to the producer of the goods either. In such circumstances there is not evidence that the plaintiff has suffered any real loss as a result of the seizure of the goods.
Equally, there is no evidence of either the lost profits, or of the amount of the such lost profits”.
The court further held that under Article 1069 of the Civil Code of the Russian Federation, only the damage caused unlawfully could be recovered. However, the seizure had taken place within the framework of the criminal proceedings against Mr Golovkin; therefore, the alleged illegality of that seizure could only be established in the course of those criminal proceedings, which were still pending. The special ruling of the Baltiyskiy District Court of 24 November 2000 could not have served as a basis for assessing the lawfulness of the acts of the investigating authorities complained of. As a result, the appeal court dismissed the claims of the second applicant in full.
On 4 March 2003 the Commercial Court of the North-West Circuit upheld the decision of the Kaliningrad Regional Commercial Court of 15 November 2002. It held as follows:
“The unlawfulness of the acts of the investigating authorities should be established in accordance with the Code of Criminal Procedure of the Russian Federation, because the alcohol was seized within the framework of the criminal case. The special ruling of the Baltiyskiy District Court of 24 November 2000, in which the court referred to certain breaches of law by the investigating authorities when seizing the alcohol cannot serve as a basis for declaring the actions of the investigating authorities as being in breach of the law on criminal procedure”.
The second applicant company appealed to the Supreme Commercial Court of Russia, seeking to have the judgment of the Commercial Court of the North-West Circuit reversed by way of supervisory review. On 17 June 2003 a panel of three judges refused to institute proceedings before the full court. They held as follows:
“The pre-trial investigation in the case, within the framework of which the seizure of the alcohol was ordered, is still pending; therefore, the courts of appeal and cassation were unable to assess the lawfulness of the acts of the investigating authorities, and, consequently, to examine whether there was any damage requiring compensation”.
(f) Criminal-law complaint by Belcourt
On 19 May 2003 the second applicant company lodged a claim with a court of general jurisdiction, the Baltiyskiy District Court, under Article 125 of the Code of Criminal Procedure. They sought to have the seizure of the alcohol ordered by the investigator declared illegal. The second applicant company referred to the decision of 4 March 2003 of the Commercial Court of the North-West Circuit, which they interpreted to mean that the lawfulness of the seizure orders could be established in the context of the proceedings in the case against Mr Golovkin (no. 52012).
On 21 May 2003 the second applicant company sent a letter to the Kaliningrad Regional Court, summarising the substance of the dispute and asking whether it was within the competence of the courts of general jurisdiction. On 21 June 2003 the Vice-President of the Kaliningrad Regional Court replied that he could not give legal advice to private persons.
On 16 June 2003 the Baltiyskiy District Court, by a simple letter, returned the case file to the second applicant company without examination. In that letter the court stated that since the Belcourt trading company was not a party to the criminal proceedings in case no. 52012, they had no legal standing to lodge such a claim. The court advised the second applicant company to lodge a specific civil claim, challenging the seizure of property under the legislation on civil procedure. The court's letter did not contain references to any legal provisions in the area of civil procedure.
The second applicant company forwarded that letter to the Commercial Court of the Kaliningrad Region. They claimed that since the court of general jurisdiction did not accept the case, it should be examined by a commercial court. On that ground they requested leave to resume the proceedings before the commercial courts.
On 11 August 2003 the Commercial Court of the Kaliningrad Region dismissed that request, stating that the letter from a district court was not a valid reason for reopening the proceedings.
On 3 October 2003 that decision was upheld by the Commercial Court of the North-West Circuit.
(g) Civil-law complaint by Uniya in the courts of general jurisdiction
Following the partial acquittal of Mr Golovkin and discontinuation of the proceedings as to the remainder of the charges against him, Uniya lodged a complaint with the Baltiyskiy District Court of Kaliningrad. They noted that the courts had not ruled on the issue of the alcohol seized in the criminal proceedings and asked the court to declare unlawful the decisions of the investigators concerning the seizure and destruction of the first consignment of alcohol.
On 29 December 2005 the Baltiyskiy District Court refused to examine the complaint by Uniya. It ruled that since the seizure had been ordered in the criminal proceedings, a civil court had no competence to examine that issue in civil proceedings.
On 8 February 2006 that decision was upheld by the Kaliningrad Regional Court.
(h) First tort claim by Uniya in the commercial courts
In 2000 the first applicant company (“Uniya”) brought civil proceedings against the police department in charge of the criminal case against Mr Golovkin claiming damages for the unlawful seizure and destruction of 120,477 bottles of liquor, constituting part of the first consignment of alcohol. In the course of the proceedings they increased the amount of damages sought.
On 23 July 2001 the Commercial Court of the Kaliningrad Region decided in favour of Uniya, stating that the alcohol at issue had been unlawfully seized and destroyed (case no. 4943/1968/1). The Commercial Court found that the alcohol had belonged to the first applicant company. The alcohol had passed customs clearance. Its price thus corresponded to its “customs value” declared to the authorities at the border. The expert examination of the alcohol of 14 August 1998 had been defective in many respects and thus unreliable. Its findings had been discarded by an independent expert examination of 25 May 2000. Uniya had been operating without a special licence because in 1998 there had been no requirement to obtain a licence for the importation of alcohol. The court awarded Uniya the damages sought (RUB 25,930,253), to be recovered from the Ministry of Internal Affairs.
On 10 October 2001 the appeal court upheld that judgment.
On 20 December 2001 the Commercial Court of the North-West Circuit quashed the lower courts' judgments and remitted the case to the first-instance court for fresh consideration. The court rejected the defendant's argument that the commercial courts were not competent to examine the case; however, the court suggested that the proceedings should be stayed pending the criminal investigation. It also noted that the issue of the ownership of the alcohol had not been clear.
On 12 March 2002 the Commercial Court of the Kaliningrad Region re-examined the case and again upheld Uniya's claims. The Commercial Court concluded, inter alia, that the civil dispute before it could be resolved independently from the criminal proceedings pending against Mr Golovkin. In particular, criminal proceedings did not aim at establishing whether the contract for sale of the first consignment between Uniya and Belcourt had been null and void within the meaning of the Civil Code. On the contrary, the court considered that the sale contract had been entered into by duly authorised persons and that the parties had started implementing it, declared the alcohol at the border, paid customs duties, etc. The contract was therefore valid. The fact that Uniya had no direct contractual relationship with the firms which had produced the alcohol was immaterial. Therefore, Uniya had been the legitimate owner of the 120,377 bottles of alcohol seized by the police investigator. As to the quality of the alcohol, the expert examination of 14 August 1998 had been scientifically defective. Furthermore, the serial numbers of the bottle labels described in the expert report did not correspond to those of the bottles imported by the applicant company. The Commercial Court also noted that that type of alcohol could have been imported in 1998 without any special licence. In conclusion the court granted the applicant company's claim in full, awarding it RUB 27,482,321 in damages. The defendant appealed.
On 6 November 2003 the Commercial Court of the Kaliningrad Region, sitting as a court of appeal, quashed the lower court's judgment. The court stated that the alleged unlawfulness of the seizure could only be established in the course of the criminal proceedings. The reasoning of the court in that case was almost identical to the reasoning of the same court in the case of the second applicant, stated in the decision of 15 November 2002.
On 24 February 2004 the Commercial Court of the North-West Circuit upheld the judgment of the appeal court rejecting the first applicant company's claims in full.
(i) Second criminal-law complaint by Mr Golovkin
On 31 May 2005 the Baltiyskiy District Court found Mr Golovkin guilty of illegal enterprise. It found that he, as a director of Uniya, had been under an obligation to purchase a licence for wholesale trading in alcohol. He was acquitted in respect of the other charges brought against him.
On 22 September 2005 the Kaliningrad Regional Court upheld the acquittal. As to the conviction of Mr Golovkin, the Regional Court quashed the judgment of 31 May 2005 and discontinued the proceedings in this part.
Thereafter, on an unspecified date Mr Golovkin challenged the decision of the investigator of 26 January 1999, concerning the destruction of the first cargo of alcohol, in the Leningradskiy District Court of Kaliningrad. The prosecutor acknowledged, in his reply, that the decision at issue had been unlawful.
On 25 November 2005 the Leningradskiy District Court allowed the claim by Mr Golovkin. The court ruled that the investigator's conclusion that the first consignment of alcohol had been “derelict property” had not been sufficiently justified. Therefore, the investigator had had no right to dispose of the property before the final resolution of the criminal case. The prosecution appealed.
On 17 January 2006 the Kaliningrad Regional Court upheld the decision of 25 November 2005.
(j) Second claim for damages by Uniya in the commercial courts
On 8 December 2005 the first applicant lodged an application with the Commercial Court of the Thirteenth District (appeal court) seeking the reopening of the proceedings on grounds of newly discovered circumstances. On 14 March 2006 the Commercial Court rejected the application.
On 14 June 2006 the Commercial Court of the North-West Circuit, sitting as a cassation court, quashed the decision of 14 March 2006 and remitted the case to the appeal court for fresh consideration.
On 15 January 2007 the Commercial Court of the Thirteenth District examined the claims anew. The first applicant's claims against the State were dismissed in full. The first applicant company appealed.
On 16 April 2007 the Commercial Court of the North-West Circuit examined the cassation appeal against the decision of 15 January 2007 and upheld it.
In its judgment the Commercial Court referred to the decision of 3 September 2002 of the Leningradskiy District Court which had found that the decision to seize and destroy the alcohol had been taken by the investigator and the Alcohol Commission within their powers.
The plaintiff (“Uniya”) claimed that the first consignment of alcohol belonged to it. The Commercial Court acknowledged that customs declarations, transportation documents and other documentary evidence showed that the alcohol had been imported by Uniya. However, later Uniya had informed the Commercial Court that the right to claim compensation for the seizure had been re-assigned by Uniya to two other companies: DIVO Ltd and Belcourt.
The Commercial Court further endorsed the findings of the investigator in his decision of 26 January 1999, in particular as regards the return of the consignment to Belcourt and the description of the alcohol as “undrinkable”.
According to the decision of the appeal court of 20 March 2001, some of the alcohol had been sold to retail shops not by Uniya but by Dionis Ltd, a company affiliated with Mr Golovkin and his co-defendants in the criminal case, whereas that alcohol had earlier been imported into Russia by Uniya.
The Commercial Court referred to the assignment agreement signed on 18 March 1998 between Uniya, Dionis and Belcourt. According to that agreement, Uniya transferred ownership of the alcohol to Dionis because it did not have the appropriate licence. However, on 30 March 1998 Dionis returned 149,989 bottles to Uniya. According to the testimony of Mr Golovkin given to the investigator, the assignment agreement had not been implemented and the alcohol had been returned by Dionis to Uniya. At the same time, as can be seen from the judgment in the case against Mr Golovkin, 150,000 litres of alcohol had been transferred to Dionis as a contribution by Uniya to the company capital of Dionis. Part of the alcohol seized was physically located in the warehouses of Dionis.
According to an audit report of the Uniya's business activities, carried out at the request of the investigator, Uniya bought 2,459,756 bottles of alcohol from Belcourt. 1,769,014 bottles were returned to Belcourt some time later. 353,007 bottles were sold to retail shops. 150,000 bottles were transferred to Dionis as a contribution to its capital. However, only 81,963 bottles were discovered in Uniya's warehouses.
On 12 January 2001 Uniya and Belcourt signed another reciprocal debt settlement agreement. As could be seen from that agreement, Uniya had never paid Belcourt for the alcohol seized. The agreement stipulated that Uniya's non-fulfilment of its contractual obligations resulted from the unlawful seizure of the alcohol by the State authorities. Despite having signed that agreement in 2002 Belcourt brought proceedings against the State claiming damages for the loss of 460,000 litres of alcohol, including part of the consignment which had allegedly belonged to Uniya.
In conclusion the Commercial Court found that “the above-mentioned contradictions had not been eliminated by the plaintiff”. The court referred to Article 65 of the Code of Commercial Procedure, according to which the burden of proving the facts on which the claim was based was on the plaintiff.
The court then considered the amount of damages. It noted that the damages had been calculated by Uniya on the basis of the value of the alcohol as declared to the customs authorities (USD 7,41 per bottle). The price stipulated in the contract between Uniya and Belcourt was USD 7.35 per bottle. The Commercial Court noted that Uniya had not explained why the customs value of the bottle had been the basis for calculating the amount of damages.
Finally, the Commercial Court found that there was no causal link between the actions of the investigating authorities and any losses of Uniya. The alcohol had been destroyed on the initiative of the Alcohol Commission, not the investigator. The investigator had simply decided to transmit the alcohol to the Alcohol Commission; it had been up to the Commission to decide what to do with it. Consequently, the fact that the Leningrad District Court had earlier recognised the actions of the investigator as unlawful did not mean that the Alcohol Commission had acted unlawfully. Uniya could have challenged the Alcohol Commission's decision to destroy the alcohol before the competent authorities, but had failed to do so.
As a result, the first applicant company's civil claim for damages was dismissed in the final instance.
3. Seizure and destruction of the second consignment of alcohol
(a) First decision to seize (charging orders)
Between May and June 1998 the investigator ordered a further seizure of alcohol from the warehouses of the Kaliningrad custom office rented by Uniya. By three charging orders (of 20 May, 26 May and 16 June 1998) 1,145,760 bottles of alcohol were seized (hereinafter “the second consignment” – 62 containers). According to the applicants, that consignment fully belonged to Uniya.
On 5 October 1998 the investigator commissioned an expert examination of the alcohol. It was entrusted to the same institution as the second expert institution that had carried out the second examination of the alcohol from the first consignment (the Centre of Forensic Examination of the Ministry of Interior in Moscow), but to a different group of experts.
On 16 November 1998 the experts examined samples of alcohol from the second consignment and came to the same conclusions as their colleagues who had previously prepared the second expert report in respect of the first consignment, mainly that it had been made from non-food-grade raw spirit and had therefore been potentially harmful.
On 23 March 1999 the Constitutional Court of the Russian Federation ruled that an appeal lay against charging orders. A few days later Mr Golovkin challenged the charging orders before a court.
On 14 April 1999 the Baltiyskiy District Court quashed the charging orders and ruled that the alcohol seized should be returned to Uniya.
(b) Second decision to seize (removal order)
On 22 April 1999 the investigator issued a removal order in respect of 1,012,704 bottles of the Extra-Uniya liquor and 133,056 bottles of the Uniya liquor stored in the warehouses of the Kaliningrad customs office.
On an unspecified date the decision of 14 April 1999 was challenged by way of supervisory review by the President of the Kaliningrad Regional Court. The proceedings were reopened and the case was sent to the first-instance court for retrial.
On 20 September 1999 the Baltiyskiy District Court again quashed the charging orders of May-June 1998 and also quashed the removal order of 22 April 1999. It noted that the first charging order had been issued by the investigator with a view to possible confiscation of the property. However, originally Mr Golovkin had been charged with “illegal enterprise”, for which confiscation of property was not a possible sanction. Consequently, the first charging order (of 20 May 1998) had been void. The subsequent charging orders had been issued after the charges against the applicant had been extended. However, those charging orders concerned the property of Belcourt, and not that of Mr Golovkin or any other person within the jurisdiction of the Russian courts.
On 15 October 1999 the decision of the Baltiyskiy District Court of 20 September 1999 was quashed in part by the Presidium of the Kaliningrad Regional Court by way of supervisory review. The Presidium decided that the investigator had acted within his powers in issuing the removal order of 22 April 1999. Furthermore, the Presidium ruled that the question of whether the alcohol belonged to Mr Golovkin or anybody else could only be resolved within the “main” proceedings against Mr Golovkin, since it was linked to the substance of the accusation against him.
On 24 November 2000 the Baltiyskiy District Court of Kaliningrad acquitted Mr Golovkin in full and lifted the removal order of 22 April 1999 in respect of the second consignment. On the same day, by a special ruling, the Baltiyskiy District Court declared the seizure of the second consignment unlawful and requested the regional prosecutor to take appropriate measures in respect of the alcohol seized.
However, the second consignment of alcohol remained in the warehouses of the Kaliningrad customs office. According to the first applicant company, since the warehouses were not adequately equipped, and since the expiry date for the second consignment of the alcohol had been 2001, its market value had significantly decreased, and it had ceased to be drinkable (at least, without prior processing). In support of its submission, the first applicant company produced a report by the Examination of Commodities Bureau, which had produced its conclusions on 30 July 2001.
On an unspecified date the applicant company asked the customs office to allow customs clearance in accordance with the rules in force at the time of seizure of the second consignment. However, in a letter of 28 July 2001, no. 06-12/25461, the State Customs Committee required that the first applicant company immediately “re-export” the alcohol so that it could undergo the “special marking” procedure before entering Russian territory again. This was a costly operation, and since Uniya was unable to pay for it, the consignment remained in the warehouses of the customs office while Uniya was looking for a prospective buyer for the consignment without customs clearance.
The first applicant company brought proceedings in the Commercial Court of the Kaliningrad Region (case no. 4558), seeking to obtain an injunction against the customs office and authorisation to subject the second consignment to clearance pursuant to the “old” rules. On 31 August 2001 the Commercial Court dismissed the case. It held that the first applicant company had to comply with the new rules irrespective of the fact that the alcohol had been seized when they had not yet been applicable.
On 15 September 2001 the second consignment was sold by Uniya to Moscow Vine and Spirits GMBH, a firm based in Germany, for USD 126,073. The contract indicated that the alcohol was not drinkable without further processing on account of the expiry of its storage life. The second consignment physically remained in the warehouses of the customs office. According to the new rules, the buyer had to pay the money only after the consignment passed customs clearance.
(c) Civil claim brought by Belcourt against Uniya
On an unspecified date the Belcourt brought civil proceedings in the Commercial Court of the Kaliningrad Region against Uniya claiming damages for its failure to pay for the second consignment of alcohol. In those proceedings Uniya claimed that it was not its fault that the alcohol had been seized by the authorities.
On 4 December 2001 the Commercial Court awarded the plaintiff (Belcourt) USD 17,203,586 in damages. It found that 62 containers of alcohol had been sold by Belcourt to Uniya. The contract of sale provided that the unsold part of the consignment could be returned to the seller. However, the consignment had neither been paid for in full nor returned to Belcourt. The fact that the consignment had been seized by the authorities was irrelevant, since it was part of the professional risks incurred by Uniya.
(d) Third decision to seize and destruction; first criminal-law complaint lodged by Mr Golovkin against the seizure
In the meantime the proceedings against Mr Golovkin were resumed, following the decision of the Kaliningrad Regional Court of 20 March 2001.
On 21 September 2001 the second consignment of alcohol was again declared an exhibit by the investigator, who again ordered its removal. According to the removal order, it concerned 1,170,312 bottles of alcohol stored in 62 containers. Mr Golovkin appealed to a supervising prosecutor.
On 26 September 2001 the Deputy Transport Prosecutor of Baltiyskiy District quashed the removal order of 21 September 2001 as unlawful and insufficiently reasoned.
On 29 October 2001 the Prosecutor of the Kaliningrad Region confirmed the validity of the removal order. Mr Golovkin then challenged the Prosecutor's decision before the court, claiming that the alcohol belonged not to him but to a third person.
On 9 July 2002 the Chief of the Transport Police wrote a letter to the head of Kaliningrad Customs Office asking to send 62 containers of alcohol to a firm designated by the police, for further storage.
On 7 August 2002 the head of the Customs Office refused to remove the second consignment from the customs warehouse. He explained to the Chief of the Transport Police that the containers had not undergone customs clearance according to the new rules, so could not be released into circulation on the territory of the Russian Federation.
On 7 August 2002 the Baltiyskiy District Court dismissed the complaint by Mr Golovkin against the removal order of 21 September 2001. It decided that the law on criminal procedure, namely, Articles 81 and 82 of the old Code of Criminal Procedure, corresponding to Articles 82 and 83 of the new Code of Criminal Procedure (see “Relevant domestic law”, below), provided that items could be removed for use as exhibits. As regards ownership of the alcohol, the court held that that issue could be raised by the companies claiming ownership in separate court proceedings. The fact that the first removal order had been declared invalid did not affect the validity of the second order issued after the reopening of the proceedings against Mr Golovkin.
On 2 September 2002 the investigator ordered the alcohol to be sent to a private firm specialising in alcohol processing for further storage.
On 17 September 2002 the Kaliningrad Regional Court upheld the decision of 7 August 2002.
On 30 September 2002 the Head of the Investigative Department of the Ministry of Interior wrote a letter to the Head of the State Customs Committee asking for permission for the transferral of 62 containers of alcohol to a private firm without prior customs clearance. On 25 November 2002 the Deputy Head of the State Customs Committee allowed the transferral without payment of the custom duties.
On 19 December 2002 the investigator concluded that the alcohol seized had been imported into Russia under invalid contracts, and, moreover, was not drinkable according to State standards. On that ground the investigator ordered a private firm to destroy the whole consignment.
On 25 December 2002 the second consignment was sent to the private firm. In the following months it was processed and transformed into non-freezing windscreen washer fluid. According to the official records signed by the firm and the police, 8,584 litres of alcohol had been lost during transportation of the consignment, owing to “breakage”.
On 16 June 2003 the Baltiyskiy District Court wrote a letter in which it indicated that the second applicant company could apply to have the seizure order lifted in respect of the second consignment.
(e) First claim for damages brought by Uniya in the commercial courts
On an unspecified date the first applicant company (“Uniya”) brought proceedings against the State claiming damages for unlawful seizure on 22 April 1999 of the second consignment of alcohol.
On 21 May 2002 the Commercial Court of the Kaliningrad Region stayed the proceedings pending the criminal investigation.
On 14 August 2002 this decision was upheld by the appeal court.
On 22 October 2002 the Commercial Court of the North-West Circuit upheld the findings of the lower courts and held that it was impossible to rule on the issue of damage allegedly caused by the investigating authorities to the applicant company before the criminal investigation was over.
(f) First criminal law complaint by Uniya
On an unspecified date Uniya lodged a criminal-law complaint under Article 125 of the Code of Criminal Procedure challenging the seizure orders of 1998, concerning the second consignment of alcohol.
On 22 October 2004 the Baltiyskiy District Court dismissed the applicant company's complaint on the ground that the same court had already found earlier that the seizure of 62 containers of alcohol had been lawful (decision of 7 August 2002). Furthermore, the District Court noted that the criminal proceedings against Mr Golovkin were pending and it was therefore premature to rule upon the issue relating to the exhibits.
On 7 December 2004 the Kaliningrad Regional Court upheld the decision of the Baltiyskiy District Court of 22 October 2004.
(g) Constitutional-law complaint by Mr Golovkin
On an unspecified date Mr Golovkin lodged a complaint with the Constitutional Court of the Russian Federation concerning the provisions of the new Code of Criminal Procedure (see “Relevant Domestic Law”, below) which had allowed the seizure and destruction of the alcohol without prior judicial authorisation. In his opinion, the impugned provisions of the Code of Criminal Procedure violated the Constitution of the Russian Federation.
On 10 March 2005 the Constitutional Court issued Ruling no. 97-O (opredeleniye). It held that the provisions of the Code of Criminal Procedure, namely, Article 82 § 3 did not, as such, contradict the Constitution, in so far as they were interpreted in the light of the earlier case-law of the Constitutional Court on that matter.
The Constitutional Court held that provisional measures such as the temporary seizure of property may be required in criminal proceedings and should not be considered as a violation of constitutional rights, including property rights. Judicial authorisation of such measures should encompass an assessment of whether other measures would be inappropriate, with due regard to the seriousness of the charges in relation to which the provisional measures have been taken, as well as to the nature of the property concerned, its importance for its owner or holder and other possible negative effects that the seizure might have. Thus, it was incumbent on the investigator and, subsequently, on the reviewing court to satisfy themselves as to whether the property subject to the charge should or should not be returned to its owner for safekeeping until the closure of the criminal proceedings.
The Constitutional Court held that the temporary seizure of property in the criminal proceedings was permissible provided that there was an ex-post facto judicial review. However, where the seizure involved the definitive deprivation of property, a prior court review of such a measure was necessary. In particular, such prior control was required where the alcohol was seized for further processing or destruction on grounds of the danger it posed to public health. Article 82 did not, however, exclude prior judicial control over such measures, when read in conjunction with other provisions of the Code of Criminal Procedure and the Constitution itself.
(h) Second criminal-law complaint by Uniya
On an unspecified date Uniya lodged a complaint against the decision of the investigator of 19 December 2002.
On 7 November 2005 the Baltiyskiy District Court of Kaliningrad examined the complaint. Referring to the Ruling of the Constitutional Court of the Russian Federation of 10 March 2005, the District Court held that the destruction of the alcohol had been unlawful because it had been ordered by the investigator without a court order. Furthermore, the law provided that any seizure and subsequent destruction had to be authorised in separate administrative proceedings. No such proceedings had been instituted in the case at hand. Consequently, the Baltiyskiy District Court declared the decision of the investigator of 19 December 2002 unlawful and quashed it.
(i) Second claim for damages brought by Uniya in the commercial courts
Following the judgment in the case of Mr Golovkin (of 31 May 2005, as partially modified on 22 September 2005), Uniya re-introduced its civil claim against the State in the commercial courts. It claimed RUB 550,250,790 in direct damages and loss of income for the alcohol seized in 1998. In support of its claims the applicant company referred, inter alia, to the debt to Belcourt established by the judgment of 4 December 2001.
On 19 April 2006 the Commercial Court of Kaliningrad Region dismissed the applicant company's claims. It held, in the relevant part, as follows:
“The plaintiff has not proved, in a reliable and unquestionable manner, that it sustained any damage [as a result of the seizure], and [has not substantiated] the amount of damages. The calculation of damages has not been supported by primary documentary evidence, which would support [its allegations about] the cost of the goods, and the amount of lost income has not been proven.”
As regards the judgment of the Commercial Court of 4 December 2001, the Commercial Court held that it did not have the force of res judicata for the purposes of the proceedings before it, since the proceedings that ended in 2001 involved only Uniya and Belcourt as litigants. The State authorities had not participated in those proceedings in any capacity. Furthermore, the Commercial Court noted that the execution order issued to Belcourt against Uniya had never been implemented and the three-year time-limit of its validity had already expired. The Commercial Court concluded that Uniya had not sustained any damage in connection with the seizure.
On 5 September 2006 the Commercial Court of the Ninth District examined an appeal by the first applicant against the judgment of 19 April 2006. It repeated the reasons given by the first-instance court. In addition, it noted that the applicant company had not proven that it had paid Belcourt for the alcohol seized by the investigating authorities. Furthermore, it was unclear whether the alcohol seized in the criminal proceedings against Mr Golovkin had indeed belonged to the first applicant company, and that it was the same consignment of alcohol that had been the subject-matter of the proceedings between Uniya and Belcourt that had ended in 2001. It also noted that the execution order had been returned to Belcourt by the court bailiffs and, since then, had not been resubmitted for enforcement.
On 10 January 2007 the Commercial Court of the Moscow Circuit upheld the judgment of 19 April 2006 and the decision of the appeal court of 5 September 2006.
B. Relevant domestic law
1. Exhibits (physical evidence)
(a) Under the old Code
Under Article 83 of the Code of Criminal Procedure of 1960 (“old CCrP", or “old Code”, in force until 1 July 2002), the notion of “exhibits” (physical evidence, вещественные доказательства) comprised money and other valuables acquired by the suspect as a result of his criminal activities. Under Article 84 of the Code, an exhibit could be taken by the investigator in order to be attached to the materials in the case file. If an exhibit taken was too bulky, it could be sent to third persons for safekeeping. Under Article 85, those items had to be kept until the court judgment in the case became final. If they were “easily perishable but [could not) be returned to their owner, they [had to be] transmitted to a competent authority for disposal according to their intended purpose. If necessary, the owner [could] be compensated by items of the same kind or monetary payment of equivalent value” (Article 85, part III, of the old CCrP). Pursuant to Article 86 of the old Code, the court had to specify, in its judgment, what should be done with the exhibits taken by the investigating authorities. Thus, unlawfully acquired property or derelict property could be appropriated by the State. Property removed from circulation could be transferred to a competent authority or destroyed.
Article 167 concerned removal (выемка) of documents and exhibits by the investigator. Removal had to be ordered by a reasoned decision of an investigator. That Article stipulated that exhibits relevant for the case could be removed “when necessary”.
(b) Under the new Code
Article 82 of the new Code of Criminal Procedure (in force from 1 July 2002, the “new Code” or “new CCrP”) deals with the storage of exhibits. Its relevant provisions, as in force at the material time, can be summarised as follows.
If there is a dispute concerning title to the property seized as an “exhibit”, it should be resolved in civil proceedings. For bulky objects, large batches of commodities, or goods which require very expensive conditions of storage three options are provided:
(a) such exhibits may be photographed or video-recorded, sealed and kept at a place indicated by the investigator.
(b) they may be returned to their owner if this is possible without detriment to the normal course of justice;
(c) such objects may be sold in accordance with the rules specified by the Government. The proceeds of the sale shall be kept on the deposit account of the investigating body.
For perishable products options (b) and (c) are applicable. In addition, perishable products can be destroyed if they can no longer be used. Alcohol withdrawn from circulation must be examined and transmitted for processing or destroyed. Money or other valuables that are the proceeds of the crime should be charged with a view to possible confiscation.
On 16 July 2008 the Constitutional Court of the Russian Federation (Judgment no. 9-P) ruled that the destruction or sale of exhibits could not be ordered by simple decision of the investigator without prior judicial review of the matter.
2. Charging orders
Under the old Code a person who had sustained pecuniary damage or loss as a result of a criminal offence had a right to lodge a civil claim against the accused. He or she could exercise this right from the commencement of the criminal proceedings until the opening of the trial (Article 29 of the old Code).
Articles 175 and 176 of the old Code authorised the charging of property pending trial in order to secure enforcement of civil awards made in connection with the imputed criminal offences or possible confiscation of the suspect's property. Under that provision, the investigator could impose a charging order on the property of the suspect himself, as well as on the property of anyone who was liable for a tort committed by the suspect. Property acquired as a result of the suspect's criminal activities but kept by other persons could also be charged under these provisions.
Such decisions could be appealed to a higher prosecutor but not to a court (Articles 218 and 220). On 23 March 1999 the Constitutional Court of the Russian Federation struck down the latter two provisions as unconstitutional in so far as they prevented the parties concerned from appealing against such decisions to a court.
Article 303 of the old Code obliged the trial court to decide, in its judgment, inter alia, the civil claim and the amount to be paid.
Under Article 115 § 1 of the new Code, in order to ensure execution of a judgment in the part pertaining to a civil claim, to satisfy other pecuniary penalties or (possibly) confiscate property, an inquirer or investigator, subject to the prosecutor's consent, or a prosecutor, has to apply to a court for a charging order in respect of the suspect's or accused's property. The court has to examine such a request under the procedure set out in Article 165 of the Code. A charge on property prohibits the proprietor or owner from disposing of, and, if appropriate, using the property; it may require impounding of that property and its transfer for safekeeping to its proprietor or owner or a third person (§§ 2 and 6). A charging order is lifted by the authority dealing with the criminal case when no longer necessary (§ 9).
3. Judicial review of the investigator's orders
Under the old Code, decisions ordering the charging of property or removal of exhibits in criminal proceedings could be challenged before the higher prosecutor, but not the court.
In accordance with the Judgment of the Constitutional Court of the Russian Federation of 23 March 1999, no. 5-П, third parties whose rights and legitimate interests were affected by a decision of the investigating authorities taken in the course of a criminal investigation, could challenge those decisions in court. Those complaints had to be examined separately from the main criminal proceedings, without waiting for those proceedings to end.
Under Article 123 of the new Code, decisions of the investigator can be appealed against to the court by persons who are not parties to the criminal proceedings if the decisions at issue affect their rights or legitimate interests.
4. Criminal responsibility for the offences, imputed to Mr Golovkin
Articles 171, 174 and 199 of the Criminal Code of 1996 (“Illegal enterprise”, “Money Laundering” and “Tax evasion by a legal entity”) do not provide for confiscation of property as a form of punishment.
5. Judicial review of administrative action by way of a civil-law complaint
Federal Law No. 4866-1 on Judicial Review of Measures and Decisions Infringing Individual Rights and Freedoms dated 27 April 1993 (hereinafter “the Judicial Review Act”), as amended in 1995, provides for a judicial avenue for claims against public authorities. It states that any measure, decision or omission by a state body or official could be challenged before a court of general jurisdiction if it encroaches on an individual's rights or freedoms. Such complaints have to be introduced and examined under the rules of the Code of Civil Procedure. Section 3 of the Act provides that this did not apply to situations for which the law establishes a different legal avenue of judicial review. The Ruling of the Plenary Session of the Supreme Court of the Russian Federation of 21 December 1993 (no. 10) specifies that a civil-law complaint, provided for by the Judicial Review Act, is not an appropriate legal remedy against decisions of the prosecution authorities taken in criminal proceedings. Such decisions are to be challenged under the provisions of the Code of Criminal Procedure.
Federal Law No. 119-ФЗ on Enforcement Proceedings of 21 July 1997 (hereinafter “the Enforcement Act”) regulates the enforcement of judgments and other decisions (including charging orders) taken by the courts in civil and administrative proceedings. The Enforcement Act confers the enforcement of court decisions on the bailiffs. If a charging order is wrongly imposed on a property which does not belong to the defendant, the owner of that property can request the court to remove the charge imposed by the bailiff (section 92). However, as can be seen from section 7 of the Enforcement Act, it does not establish the procedure for enforcement of court decisions taken in criminal proceedings.
6. Illegal traffic in alcohol
The Federal Act on Circulation of Alcoholic Beverages (hereinafter the “Alcohol Act”, Law no. 171-FZ of 22 November 1995) requires that a person involved in the alcohol trade should obtain a licence. The law provides several exceptions from this general rule, for example, for retail sales of alcohol or for sales of non-food-grade alcohol. The rules on licensing and legal definitions of “alcohol”, “food-grade alcohol”, and so forth are technically complex.
Section 25 of the Alcohol Act establishes that alcohol products should be “removed from circulation” if they were being traded without a licence, or without hygiene and sanitary certificates of compliance with State standards, or if they did not correspond to State standards, or if they were made from non-food-grade raw spirit (except for non-food-grade alcohol), or if they were, inter alia, derelict property (section 25(1)). The “removal from circulation” has to be conducted in accordance with the legislation of the Russian Federation. Section 25 provides that alcohol products made from non-food-grade raw spirit should be transformed on a contractual basis into technical ethanol (технический этиловый спирт) or into non-food-grade alcohol products (section 25(4)).
On 8 July 1999 the Law on Administrative liability for Irregular Alcohol Trade was enacted (“the Administrative Liability Act”, no longer in force). Section 2 provided that wholesale trading in alcohol without the appropriate licences was punishable by a fine and confiscation of the alcohol at issue. Section 3 of the Act provided that alcohol produced from non-food-grade raw spirit should be confiscated. The Act established a procedure for implementing various administrative measures: an administrative offence report had to be drawn up and submitted for consideration to an appropriate State authority (tax authority for trading in alcohol without a licence; sanitary and epidemiological authority for use of alcohol made from non-food-grade spirit). Under section 13(3), confiscation of alcohol could be ordered only by a judge.
On 30 December 2001 the new Code of Administrative Offences was enacted (in force from 1 July 2002), which repealed the Administrative Liability Act of 1999. Article 6 § 14 of the new Code of Administrative Offences (as in force at the material time) provided for the confiscation of alcohol which did not correspond to State standards, sanitary rules and hygiene standards. The Code established the rules of administrative procedure applicable in such cases.
On 11 December 2002 the Government of the Russian Federation adopted decree no. 883 by which it determined the procedure for the removal of “illegal alcohol” from circulation pursuant to the Alcohol Act. As can be seen from the decree, alcohol could be seized by the investigating authorities as an exhibit in a criminal case.
7. Right to compensation for unlawful criminal prosecution
Article 133 of the new Code of Criminal Procedure establishes the right to claim compensation for pecuniary damage “caused to the citizen as a result of the criminal prosecution”. It shall be compensated by the State in full, regardless of whether the law-enforcement bodies were guilty or not. Under paragraph 3 of that Article a right to compensation also vests in “any person who has been unlawfully subjected to coercive procedural measures in the course of the proceedings in the criminal case.” “Coercive procedural measures” are defined in Section IV of the Code. That Section mentions charging orders as a coercive measure (Article 115 of the new CCrP), but not the seizure of exhibits.
Under paragraph 4 of that Article, there is no right to compensation “when the coercive procedural measure or the conviction ... have been set aside or modified in view of ... the expiry of the prescription period for criminal liability”.
In other cases disputes relating to compensation for damage incurred as a result of criminal prosecution shall be dealt with in the civil proceedings.
8. Civil liability for damage caused by unlawful administrative action
Article 1064 of the Civil Code contains general provisions on liability for damage. It provides that damage caused to the person or property of an individual shall be compensated in full by the person who caused the damage (Article 1064 § 1).
Article 1070 of the Civil Code determines liability for damage caused by unlawful actions of law-enforcement authorities or courts. Paragraph 1 establishes the principle of strict liability of the State Treasury for damage caused by (i) unlawful conviction; (ii) unlawful institution of criminal proceedings; (iii) unlawful application of a preventive measure in the form of placement in custody or an undertaking not to leave the place of residence, and (iv) unlawful administrative detention or mandatory labour.
Paragraph 2 provides, in particular, that the federal or regional treasury shall be liable for damage sustained by an individual in the course of the administration of justice provided that the judge's guilt has been established in a final criminal conviction.
COMPLAINTS
The applicant companies complained of the lack of an effective judicial review of the taking of the property they claimed was theirs (alcohol). They relied on Article 6 § 1 of the Convention in that connection.
The applicant companies further complained that they had been deprived of the two consignments of alcohol in breach of Article 1 of Protocol No. 1 to the Convention. They claimed that 120,477 of the bottles from the first consignment belonged to the first applicant company (Uniya), whereas 337,104 bottles were the property of the second applicant company (Belcourt). The second consignment of alcohol (1,145,760 bottles in 62 containers) fully belonged to the first applicant company.
THE LAW
Under Article 6 of the Convention, the applicant companies complained that they had been unable to obtain an effective judicial review of the removal of the alcohol. Article 6 § 1, in so far as relevant, reads as follows:
“In the determination of his civil rights and obligations ... everyone is entitled to a fair ... hearing ... by [a] ... tribunal ...”
The applicant companies further claimed that they had been deprived of their possessions (first and second consignments of alcohol) in breach of Article 1 of Protocol No. 1 to the Convention, which reads as follows:
“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.”
A. The parties' submissions
1. Exhaustion of domestic remedies
(a) The Government
The Government submitted two sets of observations. In the first set, dated 5 June 2006, the Government pleaded that the applicant companies' complaints should be dismissed for non-exhaustion of domestic remedies. Their arguments can be summarised as follows. First, the Government claimed that Mr Golovkin, as the defendant in criminal case no. 52012, could have applied to the court under Article 133 of the Code of Criminal Procedure alleging unlawful prosecution and claiming damages. Second, on 16 June 2003 Belcourt (the second applicant company) was informed by the Baltiyskiy District Court that the company could bring a civil-law complaint seeking the lifting of the seizure order from the part of the first consignment which it considered to be its property. Third, the Government maintained that from 23 March 1999 (date of the Constitutional Court's Judgment no. 5-П), the investigator's decision to seize and destroy the alcohol had been amenable to judicial review.
In the second set of observations, dated 10 December 2007 and concerning the first applicant company, the Government informed the Court about recent developments in the case of Uniya (the first applicant company) in the commercial court concerning the second consignment of alcohol (ending with the decision of 10 January 2007). The Government concluded that that part of the first applicant company's application should be dismissed as manifestly ill-founded.
(b) The applicants
The applicant companies' arguments in reply to the non-exhaustion plea by the Government can be summarised as follows. They maintained that they had used all remedies available to them in order to defend their rights. Mr Golovkin was not an applicant in the present case, so the fact that he had not lodged a claim in tort in connection with his unlawful prosecution was irrelevant. Belcourt (the second applicant company) had tried to lodge a criminal-law complaint, but the court had refused to consider it because Belcourt had not been a party to the criminal proceedings. That decision of the Baltiyskiy District Court had not been amenable to appeal. The companies' civil claims had been unsuccessful too. The applicant companies had applied to the commercial courts and to the courts of general jurisdiction which were competent to decide on the lawfulness of the seizure orders and to award compensation for the damage caused by the investigating authorities. However, the courts had stayed the proceedings or refrained from ruling on the substance of the applicant companies' complaints pending completion of the criminal proceedings against Mr Golovkin. To date, even though in November 2005 the Baltiyskiy District Court and the Leningradskiy District Court had declared the seizure and destruction unlawful, no final decision concerning the damage caused by unlawful seizure had been taken.
2. Merits
(a) The Government
The Government claimed that the applicant companies had had access to the courts in respect of their complaints concerning the seizure and destruction of the alcohol. Thus, the courts had examined their claims, and had even satisfied them in part. Even if those decisions had subsequently been quashed, and the outcome of the proceedings had been unfavourable to the applicants, that did not mean that they had been deprived of the right to have their claims examined by the courts. Furthermore, as regards the litigation between the first and second applicants before the commercial courts (ending with the judgment of 4 December 2001), this had been resolved and an execution order in favour of the second applicant had been issued.
The Government further claimed that the seizure and destruction of the alcohol had been lawful. They maintained that the applicant companies had been “deprived of their possessions” in the context of the criminal case against Mr Golovkin, in accordance with the law and its usual application by the State law-enforcement bodies. The seizure had been ordered on two legal grounds: pursuant to Article 175 (charging of property), and Articles 167 and 171 (removal of exhibits) of the old CCrP. Under Articles 84-86 of the old CCrP, exhibits which were perishable could have been transmitted to the competent authorities for disposal. The Government referred, further, to the provisions of the new CCrP concerning the keeping of exhibits, in particular Article 82 of the new CCrP which provided that alcohol removed from unlawful circulation, or alcohol which was dangerous for public health, should be processed or destroyed.
The Government indicated that that practice of seizures had later been declared unconstitutional by the Constitutional Court of the Russian Federation. As a result, on 10 March 2005 the destruction of the two consignments of alcohol had been found unlawful. However, the applicant companies had been unable to show the existence of a causal link between the unlawful seizure and the damages they had claimed, which was a condition sine qua non for receiving compensation under Article 1070 of the Civil Code.
In their second set of observations, which concerned the second consignment, the Government claimed that the seizure had been ordered by the State in order to “control the use of property” by the applicant companies under paragraph 2 of Article 1 of Protocol No. 1 to the Convention. The authorities had the widest possible margin of appreciation in that area and could even confiscate the property.
Furthermore, the Government noted that the applicant companies had failed to prove that they had been the owners of the two consignments at issue. The first applicant had proved that it had been a recipient of the alcohol, but had failed to prove its title to it. The Government noted that “the ongoing conflict over the property rights in respect of the alcohol products remained unresolved to date”. The Government also claimed that the first applicant had not had any “possession” within the meaning of Article 1 of Protocol No. 1 to the Convention, but only a legal claim of a pecuniary nature vis-à-vis the State.
Finally, the Government claimed that the first applicant company had failed to provide a convincing calculation of the amount of damages claimed. It had referred to the amount awarded to the second applicant company by the Commercial Court of Kaliningrad on 4 December 2001 in the dispute with the first applicant company. However, the amount awarded had never been paid by the first applicant company to the second applicant company. Therefore, the former had suffered no pecuniary loss. The Government concluded that it was impossible to establish the amount due to the applicant for the alleged violation of its rights.
(b) The applicant companies
The applicant companies maintained that the proceedings concerning the alcohol seized had been unnecessarily protracted. For many years the commercial courts and the courts of general jurisdiction had declined to review the lawfulness of the seizure orders and rule on the applicant companies' claims for damages, referring to the pending investigation in the criminal case against Mr Golovkin.
Further, they maintained that the alcohol in both consignments had been of good quality, as had been confirmed by the expert examination carried out at the request of the Baltiyskiy District Court. The seizure and destruction constituted an interference with the applicant companies' property rights. Pursuant to Article 35 of the Constitution of the Russian Federation, any taking of property had to be done pursuant to a court order. However, the alcohol at issue had been taken and destroyed without any judicial decision. The unlawfulness of the seizure had been confirmed by the special ruling of the Baltiyskiy District Court of 24 November 2000, by the decision of that court of 7 November 2005, and by the decision of the Leningradskiy District Court of 25 November 2005. It had taken the courts more than six years to rule on the issue of unlawfulness of the seizure.
They further claimed that the Alcohol Act of 1995 contained provisions regarding “confiscated” alcohol, whereas the alcohol seized from the applicant companies had not been “confiscated” from them under the provisions of the Alcohol Act, but seized in criminal proceedings.
The question of material loss sustained by Uniya and Belcourt as a result of the seizure was self-evident. It was irrelevant whether Uniya or Belcourt had ever paid any third party for the alcohol.
B. The Court's assessment
The Court observes that one of the main substantive issues raised in the present case is the alleged inability of the applicant companies to obtain an effective judicial review of the lawfulness of the seizure and destruction of the alcohol. The parties' arguments under Article 35 § 1 of the Convention in this connection are thus closely connected with the substance of the applicant companies' complaints under Article 6 § 1 of the Convention and, to a certain extent, under Article 1 of Protocol No. 1 to the Convention. The Court thus considers that the question of the applicants' compliance with the requirements set out in Article 35 § 1 is closely linked to the merits of the case and that it is inappropriate to determine these at the present stage of the proceedings. The Court therefore decides to join the Government's objection as to the non-exhaustion of the domestic remedies to the merits.
The Court considers, in the light of the parties' submissions, that the applications raise complex issues of law and fact under the Convention, the determination of which should depend on an examination of the merits of the applications. Consequently, the Court concludes the applications cannot be declared manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. No other ground for declaring them inadmissible has been established.
For these reasons, the Court unanimously
Decides to join to the merits the Government's objections concerning the applicant companies' compliance with the exhaustion requirement of Article 35 § 1 of the Convention;
Declares the applications admissible, without prejudging the merits.
Søren Nielsen Christos Rozakis
Registrar President
