Hulley v. Russia 2014

426.Tax reassessments would later be made against Yukos for Mitra for the year 2000,387 totaling RUR 27,124,001 (USD 948,750).388

Vald-Oil

427. Vald-Oil was registered by Resolution 1441 of the Lesnoy Town Administration on 30 December 1997. It was founded by OOO Neftemarket, holding 5 percent of the shares, and

OOO Al-Gem holding 95 percent of the shares.

428.In February 1998, Vald-Oil and the Lesnoy Town Administration apparently concluded an investment agreement389 which granted incentives in relation to 16 different types of taxes and required payment of 5% of the value of the tax benefits to an off-budgetary fund. It was supplemented by a further agreement in January of 2000.390

429.As set out above, however, concerns that Vald Oil might not have been fulfilling the requirements of the legislation in substance (as opposed to form), and other concerns about the entity’s conduct, led to a criminal investigation inquiring into whether the managers of the Lesnoy entities were involved in tax evasion. The investigation was ultimately suspended, but, as noted earlier, charges relating to the Lesnoy entities figured in the case by the Russian prosecutor against Messrs. Lebedev and Khodorkovsky in 2003.

430.On 5 March 2001, Vald-Oil was merged into Perspektiva Optimum, which later merged into Investproekt.

431.Tax reassessments would eventually be made against Yukos for Vald-Oil for the year 2000,391 totaling RUR 1,362,216,581 (USD 47,647,943).392

3872000 Decision, p. 76, Exh. C-104.

388Yukos Tax Reassessment Breakdown, p. 6, Exh. C-1752. RUR to USD calculated at 28.5892:1, the official exchange rate on 14 April 2004, Exh. R-334.

3892000 Decision, p. 6, Exh. C-104 (referring to investment agreements with, among others,Vald Oil).

3902000 Decision, p. 80, Exh. C-104 (referring to Agreement No. 2, 28 January 2000).

391Ibid., p. 83.

392Yukos Tax Reassessment Breakdown, p. 6, Exh. C-1752. RUR to USD calculated at 28.5892:1, the official exchange rate on 14 April 2004, Exh. R-334.

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ii.Trekhgorny

432.Far less information is available to the Tribunal regarding the activities of the trading companies in the Trekhgorny ZATO than is available for those in Lesnoy. What the Tribunal has gleaned from the record is that in March 2001, some of the companies based in Trekhgorny (“Greys”, “Nortex”, “Alebra”, “Muskron”, “Flander”, “Kolrein” and “Kverkus”) merged into Torgovaya Kompaniya Alkhanay or Alkhanai Trading on 16 March 2001, a company registered in Aginskoye, in the Aginsko-Buryatsky region.393 Two months later, in May 2001, Alkhanai Trading merged with Perspektiva Optimum (the company created from the Lesnoy trading companies) into Investproekt, a company initially based in Kirov, but which then moved to the Chita Autonomous Region as of August 2001.394

Grace

433.Grace was registered by Order 1316 of the Trekhgorny Municipal Administration on 25 July 1997. On 15 March 2001, it merged into Alkhanai Trading, which later merged into Investproekt. Grace was founded by ZAO Trigor (holding 5 percent of the shares) and OOO Bark (holding 95 percent).395

434.On 11 March 1998, Grace and the Trekhgorny Municipal Administration concluded an investment agreement, supplemented by another agreement on 21 January 2000, under which incentives in relation to 17 different types of taxes were granted.396

435.Tax reassessments would eventually be made against Yukos for Grace for the year 2000,397 totaling RUR 20,247,201 (USD 708,212).398

393Judgment in the Name of the Russian Federation, Meshchansky District Court of the City of Moscow, 16 May 2005, p. 48, Exh. R-379.

394See various documents on Alkhanay and Perspektiva Optimum, 20 May 2001, Exh. R-302; see also Information letter from the Inspectorate of the Ministry of Taxes and Levies of the Russian Federation for Shabalinskiy District, 20 August 2001, Exh. R-301 (noting Investproekt’s change of address to the Chita Region). For further information as to Investproekt, see paragraphs 389–408 above.

3952000 Decision, p. 27, Exh. C-104.

397Ibid. pp. 30–31.

398Yukos Tax Reassessment Breakdown, p. 6, Exh. C-1752. RUR to USD calculated at 28.5892:1, the official exchange rate on 14 April 2004.

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Muskron

436.Muskron was registered by Order 1433 of the Municipality of Trekhgorny on 12 August 1997. It was founded by Trigor ZAO, with an address in Trekhgorny and a 5 percent shareholding, as well as Vokit OOO, with an address in Moscow and a 95 percent shareholding. Vokit bought out Trigor in April of 2000, before selling a 2 percent stake to Neftetrade (itself wholly owned by OAO Yukos Oil Company at the time of Neftetrade’s incorporation). As of September 2000, Neftetrade had acquired 100 percent of Muskron’s shareholding.399

437.On 12 July 1998, Muskron and the Trekhgorny Municipal Administration concluded an investment agreement, with a supplementary agreement on 12 January 2000, which granted incentives in relation to eight different types of taxes.400

438.On 15 March 2001, Muskron was merged into Alkhanai Trading, which then merged into Investproekt.401

439.Tax reassessments would eventually be made against Yukos for Muskron for the year 2000,402 totaling RUR 7,398,094 (USD 258,772).403

Norteks (aka Nortex)

440.Norteks was registered by Order 1435 of the Municipality of Trekhgorny 12 August 1997.404 It was founded by Trigor ZAO, with an address in Trekhgorny and a 5 percent shareholding, as well as OOO Corvet, with an address in Kaluga and a 95 percent shareholding. OOO Neftetrade bought Trigor’s shares in Norteks in June of 2000.405

441.On 6 February 1998, Norteks and the Trekhgorny Municipal Administration concluded an investment agreement, supplemented by another agreement on 21 January 2000, granting

401Ibid., p. 35.

402Ibid., p. 41.

403Yukos Tax Reassessment Breakdown, p. 6, Exh. C-1752. RUR to USD calculated at 28.5892:1, the official exchange rate on 14 April 2004.

4042000 Decision, p. 14, Exh. C-104.

405Ibid., p. 15.

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incentives in relation to eight different types of taxes and requiring payment of five percent of tax benefits into administration’s account.406

442.On 15 March 2001, Norteks was merged into Alkhanai Trading, which then merged into Investproekt.407

443.Tax reassessments would eventually be made against Yukos for Norteks for the year 2000,408 totaling RUR 3,152,537,572 (USD 110 Million).409

Kverkus (aka Quercus)

444. Kverkus was registered by Order 1315 of the Administration of the Municipality of Trekhgorny on 25 July 1997.410 It was founded by Trigor ZAO, with an address in Trekhgorny and a 5 percent shareholding, as well as OOO Cadet, with an in Kaluga and a 95 percent shareholding. OOO Neftetrade bought out Trigor’s shares in Kverkus in June of 2000.411

445.On 26 August 1997, Kverkus and the Trekhgorny Municipal Administration concluded an agreement granting tax benefits to the trading companies.412 On 11 March 1998, a second investment agreement was concluded,413 which was supplemented on 21 January 2000,414 granting incentives in relation to eight types of taxes.

446.On 15 March 2001, Kverkus was merged into Alkhanai Trading, which then merged into Investproekt.

407Ibid., p. 14.

408Ibid., p. 19.

409Yukos Tax Reassessment Breakdown, p. 6, Exh. C-1752. RUR to USD calculated at 28.5892:1, the official exchange rate on 14 April 2004, Exh. R-334.

4102000 Decision, p. 49, Exh. C-104.

411Ibid., p. 50.

412Ibid., p. 52 (referring to Tax Agreement No. 51, 26 August 1997).

413Ibid. (referring to Tax Agreement No. 103, 11 March 1998).

414Ibid. (referring to supplementary tax agreement, 21 January 2000).

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447.Tax reassessments would eventually be made against Yukos for Kverkus for the year 2000,415 totaling RUR 3,031,422,237 (USD 106,033,825).416

Colrain (aka Kolrein)

448.Colrain was registered by Order 1431 of the Municipality of Trekhgorny on 12 August 1997.417 It was founded by Trigor ZAO, with an address in Trekhgorny and a 5 percent shareholding, as well as OOO Bark, with an address in Kaluga and a 95 percent shareholding.418 In November 1999, Trigor sold its five percent share in Colrain to Polinep ZAO.419 Neftetrade then bought that five percent share in June 2000.420

449.In August 1997, Colrain and the Trekhgorny Municipal Administration concluded an agreement granting tax benefits to the company.421 In February 1998, a second investment agreement was concluded,422 which was amended once in 1999423 and supplemented in January 2000,424 granting incentives in relation to eight types of taxes.

450.On 15 March 2001, Colrain merged into Alkhanai Trading, which then merged into Investproekt.425

451.No tax reassessments would be made against Yukos for Colrain.

Virtus

452.Virtus was registered by Order 1116 of the Head of the Municipality of Trekhgorny on 27 June 1997.426 It was founded by OOO Akra OOO, with an address in Kaluga and a 90 percent

415Ibid., p. 55.

416Yukos Tax Reassessment Breakdown, p. 6, Exh. C-1752. RUR to USD calculated at 28.5892:1, the official exchange rate on 14 April 2004.

4172000 Decision, p. 57, Exh. C-104.

418Ibid., p. 58.

419Ibid.

420Ibid.

421Ibid., p. 59 (referring to Tax Agreement No. 44, 20 August 1997).

422Ibid. (referring to Tax Agreement No. 8, 6 February 1998).

423Ibid. (referring to amendments on 12 July 1999).

424Ibid. (referring to a supplementary tax agreement, 21 January 2000).

425Ibid., p. 58.

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shareholding, OOO Depor with an address in Moscowand a 5 percent shareholding, and Trigor ZAO, with an address in Trekhgorny and a 5% shareholding. Akra bought Trigor’s shares in Virtus in March of 2000.427

453.On 6 February 1998, Virtus and Trekhgorny Municipal Administration concluded an investment agreement,428 which was supplemented on 21 January 2000.429 It granted incentives to the company in relation to eight different types of taxes, and required payment of five percent of tax benefits into the administration’s account.

454.Tax reassessments would eventually be made against Yukos for Virtus for the year 2000,430 totaling RUR 2,359,700 (USD 82,538).431

(d)Sarov

455.Sarov is a ZATO in the Russian Federation.

i.Yuksar

456.Yuksar was registered by the Sarov Municipal Administration on 13 October 1997.432 Yuksar was founded by Yukos with a 49 percent shareholding and YNG with a 51 percent shareholding.433 Yuksar was ultimately liquidated.434

457.On 23 October 1997, Yuksar and the Sarov Municipal Council concluded an agreement granting tax incentives to the company.435 It was supplemented on 12 March 1998.436

4262000 Decision, p. 68, Exh. C-104.

427Ibid. pp. 67–68.

428Ibid., pp. 68–69 (referring to Tax Agreement No. 7, 6 February 1998).

429Ibid., p. 69 (referring to supplementary tax agreement, 21 January 2000).

430Ibid., p. 69.

431Yukos Tax Reassessment Breakdown, p. 6, Exh. C-1752. RUR to USD calculated at 28.5892:1, the official exchange rate on 14 April 2004.

4322000 Decision, p. 20, Exh. C-104

433Ibid.

434Ibid (referring to extract from Unified State Register of Legal Entities on 3 November 2003).

435Ibid., p. 22 (referring to Tax Agreement No. 74/01-17, 23 October 1997).

436Ibid. (referring to supplementary tax agreement, 12 March 1998).

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458.Tax reassessments would ultimately be made against Yukos for Yuksar for the year 2000,437 totaling RUR 95,875,131 (USD 3,353,544).438

(e)Baikonur

459.As noted earlier, Baikonur is a low-tax region, leased by the Russian Federation from Kazakhstan during the Soviet era for use as a spaceport and aerospace facility.439

i.Mega-Alliance (aka Mega-Alyans)

460. Mega-Alliance was registered by Order 00411 of the Administration of Baikonur on 21 December 2000.440 The sole founder of the company was Ms. Gulnara Karimovna Zhukova, who was also a founder of Macro-Trade. The share capital of the company was RUR 8,350. On 28 April 2001, amendments were made to the Charter of Mega-Alliance OOO under which the sole shareholder of Mega-Alliance became Dorchestergate Trading Limited, a company registered in Cyprus.441

461. As noted in paragraph 351 above, Ms. Zhukova later denied any connection to Mega-Alliance or Macro-Trade, both of which she was alleged to have founded. A letter dated 24 October 2003 from the Russian Federation Federal Security Service’s Directorate for Moscow Space Forces indicated that Ms. Zhukova had denied any connection with MegaAlliance and reiterated her story about the theft of her passport.442

462.In 2001, Mega-Alliance and the Administration of Baikonur entered into a tax agreement.443 It granted benefits to the company in relation to four types of taxes and required payments to the value of three percent of their tax benefits into the “target funds” for the development of the region of Baikonur.

437Ibid., p. 23.

438Yukos Tax Reassessment Breakdown, p. 6, Exh. C-1752. RUR to USD calculated at 28.5892:1, the official exchange rate on 14 April 2004.

439Transcript, Day 14 at 54.

4402001 Decision, p. 112, Exh. C-155.

441Ibid.

4422001 Decision, p. 112, Exh. C-155 (referring to Letter No. 31/4664 from the Russian Federation Federal Security Service’s Directorate for Moscow Space Forces, 24 October 2003).

443Ibid., p. 114 (referring to contract between the Administration of Baikonur and Mega-Alliance, 24 October 2003).

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463.Later that year, the decision of the Government of the Russian Federation No. 747 on the Approval of the Rules for the Granting of Tax Privileges to Organisations and Individual Businessmen Registered on the Territory of the City of Baikonur was issued.444 It granted permission to the head of the Administration of Baikonur to grant tax privileges, provided that the individual businessman or organization had “the presence of premises, of property, industrial or other complexes necessary for the manufacture of goods, works or services and situated on the territory of the city of Baikonur (including the Baikonur Spaceport); [and] the realisation of the products, works or services on the territory of the city of Baikonur (including the Baikonur Spaceport).”445 It also cautioned that previously offered tax benefits that conflicted with the decision would be considered terminated from the date the decision entered into force.446

464.In 2002, Mega-Alliance merged into Regionalniy Finansoviy Tsentr or Regional Finance Center.447 Regional Finance Center was liquidated in July of that year.448

465.Tax reassessments would later be made against Yukos for Mega Alliance for the year 2001,449 totaling RUR 1,276,878,700 (USD 43,646,213).450

(f)Evenkia

466.The Evenkia autonomous district is located in Eastern Siberia.451 At the time that the trading companies were established in Evenkia, the district had a federally financed budget, fuel supplies were difficult to secure, and unemployment was very high.452 Of all the regions of the

444Decision of the Government of the Russian Federation No. 747, 25 October 2001, Exh. C-411.

445Ibid.

446Ibid.

447Notice on record with the unified state register of legal entities of entry on dissolution of legal entity, 19 April 2002, Exh. R-3158.

448Information Extract No. 29170, 27 March 2012, Exh. R-3159.

4492001 Decision, p. 115, Exh. C-155.

450Yukos Tax Reassessment Breakdown, p. 6, Exh. C-1752. RUR to USD calculated at 29.2552:1, the official exchange rate on 2 September 2004.

451Yukos Review, Issue # 3, May–June 2001, p. 8, Exh. C-9.

452Ibid., p. 5.

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Russian Federation, Evenkia ranked last in average per capita volume of industrial production, and 69th (out of 89) in terms of per capita income.453

467.In September 1998, Law No. 108 of the Evenkia Autonomous Region “On the Particularities of the Tax System in the Evenkiysky Autonomous District” was enacted,454 which offered incentives to investors in the region. Pursuant to Article 6(1)(d) of the law, preferential tax rates were offered to participants in investment projects on the territory of the Evenkiysky Autonomous District. Pursuant to Article 5(1) of the Law, commercial and noncommercial entities were deemed participants of investment projects which are created in the territory of the region, regardless of the origin of their capital, and can include those with foreign legal entities as shareholders, so long as they were participants in programs for the social and economic development of the region and investment projects.

468.In May 2001, Mr. Boris Zolotarev, the former head of Yukos R&M, became governor of Evenkia. After his election, he spoke about the positive effects he hoped Yukos investment could have on the region.455

i.Evoil

469.Evoil was registered by Order 158 of Administration of Ilimpiisk District of Evenkia on 23 May 2002.456 It was founded by Fiana Ltd., a limited liability company registered in Cyprus.457

470.In June 2001, pursuant to an order of the Administration of the Evenkiysky Autonomous District, “On Application of Special Tax Regime,” Evoil was granted targeted tax benefits.458 It also enjoyed benefits under Law 108 of 24 September 1998, including corporate profit tax payable at a reduced rate of 10.5 percent and a property tax rate of 0 percent.459

453Ibid., p. 8.

454Law of the Evenkiysky Autonomous District No. 108, 24 September 1998, Exh. C-412.

455Yukos Review, Issue # 3, May–June 2001, p. 5, Exh. C-9.

4562002 Decision, p. 146, Exh. C-175.

457Ibid.

458Resolution of the Federal Arbitrazh Court for the Moscow District No. KA-A40/3222-05, p. 30, Exh. C-184 (referring to Order No. 53 of the Administration of the Evenkiysky Autonomous District, 29 June 2001).

4592002 Decision, p. 154, Exh. C-175.

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471.Tax reassessments would later be made against Yukos for Evoil for the years 2002460 and 2003,461 totaling RUR 203,629,769 (approximately USD 6,787,659).462

ii.Interneft

472.Interneft was registered by Order 333 of Administration of Ilimpiisk District of Evenkia on 23 October 1998.463 The sole founder of Interneft is OOO Netax Advertising Agency,

registered in Kalmykia.464 It was founded with an initial capital of RUR 8,400, split into 100 ordinary registered shares with nominal value of RUR 84.465

473.On 26 July 1999, Interneft was awarded a “Certificate of assignment of the status of Participant in the investment programs of the Evenki Autonomous Region.”466

474.Tax reassessments would later be made against Yukos for Interneft for the year 2000,467 totaling RUR 224,642 (USD 7,858).468

iii.Petroleum-Trading (Trion)

475.Petroleum-Trading was registered under the name Trion by Order 146-p of the Administration of Ilimpiisk District of Evenkia on 25 April 2000. Its new name was registered by Order 193 of Administration of Ilimpiisk District of Evenkia on 31 May 2000.469 Petroleum-Trading was

founded by Neftepromstroiservice ZAO and Neftepromburservice ZAO, each holding

460Ibid. pp. 154–55.

4612003 Decision, p. 142, Exh. C-190.

462Yukos Tax Reassessment Breakdown, p. 6, Exh. C-1752. The RUR to USD exchange rate used here is approximate, based on a rate of 30:1.

4632000 Decision, p. 76, Exh. C-104

464Ibid.

465Ibid.

466Ibid., p. 77.

467Ibid., p. 78.

468Yukos Tax Reassessment Breakdown, p. 6, Exh. C-1752. RUR to USD calculated at 28.5892:1, the official exchange rate on 14 April 2004.

4692000 Decision, p. 55, Exh. C-104.

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