An important detail of Russian court procedure

 

If a court shows clear bias, openly favoring one side in a dispute, it can do so precisely because the courts in Russia are supposed to be independent. All that matters is whether a judge has the support of his superiors. If the top judges who oversee the procedural actions see eye to eye with those below them, the lower court can please itself. After the ructions at Uralkhimmash, Valerii Baidukov, chairman of the Kirov District Court and Balashov’s immediate superior, called him in for an explanation. Balashov informed him that his judgment was what the provincial court had wanted; the ruling had been arranged with Ovcharuk. There were no further questions.

What about the perplexed public, however? The brazen seizure of Uralkhimmash did cause the Yekaterinburg public to ask plenty of questions.

Baidukov explained the circumstances straightforwardly. He assured the people that the courts understood that every minute counted when assets could be siphoned off to who knows where. That was why, in the interests of citizens and owners alike, a ruling had been given with such rapidity.

Incidentally, the Baidukov who was doing all this explaining is the chairman of the provincial council of the bench, the corporate conscience of the judiciary. The case of Olga Vasilieva had passed through his office several times, and each time he had endorsed it, as required by Ovcharuk. The council of the bench is another institution of the community of judges, like the College of Qualifications. Only people agreeable to Ovcharuk belong to either group, and whatever representations he makes to the members produce the desired conclusions. Although Valerii Baidukov is chairman of the Kirov District Court, one has no sense that he is capable of standing up to, or for, anyone. If he ever does have an opinion of his own, it remains hypothetical. He can pontificate about the district court as “the basic link of the Russian judicial system” but falls silent when asked to discuss facts.

Ninety-five percent of all criminal and civil cases in Russia are heard in the district courts, and to that extent they are indeed the basic link in the country’s judicial system. In reality, however, this is a fiction. The district court is highly dependent and manipulable, because the senior judges of the provincial and republican courts have no wish to implement reform and lose the control they enjoy over their inferiors in the district courts. The latter enjoy independence only according to the constitution, and the fact that this document has legal preeminence makes no difference. The district courts have simply not been given procedural independence.

The law gives provincial courts procedural control of district and municipal courts—that is, the responsibility for monitoring their judicial practice. The verdicts of district and municipal courts are reviewed and evaluated by the provincial courts, which decide whether they are correct or flawed. Procedural dependence develops into organizational and career dependence. A lower judge who does not play by the rules of the game is as vulnerable as a baby. A superior judge has the right to criticize and annul his verdicts as he sees fit, without any accountability. The provincial court can overturn the verdict of a district court without explaining what is wrong with it or how it should be improved.

The provincial court does not take responsibility for the final verdict, but it does keep statistics to show how many cases, and from which district judges, have been found to be “erroneous.” Such data are the basis for calculating bonuses for judges, awarding or depriving them of various privileges, such as holidays in the summer or winter months, advancement in the waiting list for an apartment (which is in the hands of the provincial court and matters because judges’ salaries are insufficient for them to buy flats), confirmation of their tenure of office, and so on.

This is the mechanism through which the district court judges—who, according to the constitution, are “fundamental” to the system—have found themselves more dependent on their superiors than under the Soviet regime. The constitution seems to preclude such hierarchical relations, since it declares that all judges are equal and independent, individually appointed by directive of the president. The reality is rather different. They may be equal when they are appointed, but they are not equal when they get the sack. The chair of a provincial court who wishes to get even with a district judge holds all the aces; but if the chair of a provincial court is objectionable to district judges, that is just their hard luck. They cannot facilitate his removal.

Thus the laws and rules regulating the bench, as they have developed since the end of the Soviet era, have allowed Ivan Ovcharuk to become what he is: the official who protects the Urals from judges who might deliver an unpredictable verdict. The legal system has no safeguards to curtail the activities of those at the top of the hierarchy who might go off the rails. The constraints are purely moral. The only way the system could function satisfactorily would be if the person occupying Ovcharuk’s office had different moral and ethical attributes. What sort of a system would that be?

 

To COME BACK to District Judge Balashov. Could he have acted differently in the Fedulev case, and, if so, what should he have done? He had only to postpone consideration of the injunction, which he had every right to do.

In the course of preparing their seizure of Uralkhimmash, Fedulev and his accomplices checked out many district courts in Yekaterinburg to see whether they would play ball.

They all agreed to act like Balashov with the exception of one, the Chkalov court. Ivan Ovcharuk invited the chairman of that court, Sergey Kiyaikin, to work in Magadan, in the extreme northeast of the country. Traditionally, “to be sent to Magadan” has meant to be exiled there, but Kiyaikin, an obstinate judge who had grown up in Yekaterinburg, a man with roots and pride in the city and the Urals region who had graduated in chemical engineering from the prestigious Uralkhimmash, was only too glad to get as far away as possible from his native region. He did not want to be killed or to have his family attacked.

Balashov is a loyal guardian of Fedulev’s interests. He has gotten the production of verdicts to safeguard his friend down to a fine art. Here, for example, is one of Balashov’s rulings, delivered on February 28, 2000.

Fedulev had decided to sell Uralelektromash, not a factory but a company that handled transactions in shares he owned. They happened to include his shares in the Kachkanar OEC and in Uralkhimmash.

Fedulev decided to sell in exchange for a certain sum of money, as he had every right to do. Sometime later, the new owners of Uralelektromash discovered that, although they had paid the money, they had not received the corporation’s documents. Fedulev had sort of sold Uralelektromash, but he had kept all the shares. The purchasers realized they had been swindled and naturally demanded an explanation. Fedulev told them he had changed his mind. They countered, “Give us our money back. Then you can keep everything yourself.” Fedulev replied, “I’m not going to give you any money back. You haven’t got any documents. You are nobody. Go away.” His Uralkhimmash shareholding was in the same situation. Emerging from prison in Moscow and eager to hold on to what he had already sold for several million dollars, Fedulev said, “I know nothing about it. It wasn’t registered in the prescribed manner. The deal is invalid.” He went to Judge Balashov, who found in Fedulev’s favor.

To understand what Fedulev did, you need to appreciate that Russian legislation still has many loopholes. In this instance the flaw was that any company, when it issues shares, is required to register the fact. In the early days, nobody in Russia knew how to go about this. There had been no stock market in the Soviet Union and hence no shares. After the collapse of the Soviets, the relevant governmental institutions took a long time to find their bearings. They could neither explain nor decide how shares should be registered. As a result, shares in many companies were unregistered. They were, and still are, traded in. The stock market continued on its way.

What should be done? Naturally, it was assumed that you just needed to be honest with your partners. That is not the basis on which Fedulev operates, however. Having spotted an opportunity, he first contracted to sell the shares of Uralelektromash and only then applied to have them registered with the appropriate state agency, the Federal Commission for Securities. When the shares were eventually registered, after a long delay because the transactions were bogged down in a morass of discoordination, Fedulev informed his purchasers that the contract to sell Uralelektromash had been concluded before the shares had been registered. He looked them straight in the eye and said, “The money is mine, too. It was your mistake, and you have to pay for it.” The court once again rubber-stamped in Fedulev’s favor.

Is Fedulev so clever that, unlike most other people, he knows all the details and can exploit the system? Of course not. He is rich enough to hire the savviest lawyers who spot the loopholes. He has managed to create an oligarchic pyramid to ensure that, whatever he undertakes, all those involved are links in the chain. None can do without the others.

So Judge Balashov ruled in Fedulev’s favor in the Uralelektromash case. The judicial process followed the pattern we observed with Uralkhimmash: a highly complex case—running to many volumes of evidence that could be made sense of only by calling in experts in the subtleties of the Russian stock market—was examined by Balashov in next to no time.

After that, things took off. The exiling of a judge to Magadan was the least of it. The writ regarding the disputed Uralelektromash shares was the prologue to the bloody events at Uralkhimmash.

Another budding Balashov, the obliging Judge Ryazantsev, works in the Kachkanar Municipal Court. In late January 2000, as we have seen, the Kachkanar complex was brazenly seized by Fedulev’s armed heavies. How did the courts react? On February 1, Judge Ryazantsev found no infringement of the law in the conducting of a meeting of the board of directors under the muzzles of assault rifles. The hearing was conducted à la Balashov, at high speed, without any prehearing submission or involvement of those whose rights had been trampled. And, of course, the writ was presented the following day.

On February 15, just a fortnight later, the Judicial College for Civil Cases of the Sverdlovsk Provincial Court (i.e., Ovcharuk’s diocese) confirmed Ryazantsev’s ruling, again without a hearing. The process represented incredible speed for the Russian appeals machinery, which normally takes six months.

The mocking of Themis, goddess of justice, did not end there. On the same day, when it was clear that the provincial court was not going to overturn his earlier verdict, Judge Ryazantsev, to avoid the possibility of any further mishaps, prohibited the holding of any more meetings of shareholders of the Kachkanar OEC.

A municipal court has not the slightest right to do anything of the sort. More than that, nowhere in the Code of Civil Procedure is there provision for prohibiting acts of persons not party to a dispute.

But who among the guardians of the law in Sverdlovsk Province cares about that? Was Ryazantsev removed for acting illegally? No way. The courts rolled out their verdicts without even bothering to check whether Fedulev was the legal owner of the complex. In fact, the 19 percent of Kachkanar shares that Fedulev flourished so effectively did not actually exist. They had long ago been impounded in the course of an examination of Fedulev’s affairs in Moscow by the investigative committee of the Ministry of Internal Affairs. In fact, the reason he had been imprisoned on fraud charges was that he had twice sold the same 19 percent to different companies.

After February 2000, people began to take notice of what was going on. The Supreme Court in Moscow tried to challenge the rampaging of the Sverdlovsk Provincial Court on more than one occasion, but nothing changed. Fedulev retained control of the Kachkanar OEC, those he had duped hid abroad, and the Kachkanar Municipal and Sverdlovsk Provincial courts enjoyed the benefit of a mass of cases ancillary to the effective recognition of the Kachkanar complex as bankrupt.

The judiciary of Sverdlovsk Province thus facilitated a succession of deals that, together, and as intended, brought about the complex’s insolvency. Such connivance, incidentally, is a criminal act, but who is going to bother looking into it? As we have seen, when Putin came to power, he made it clear that his loyalty lay with the likes of Fedulev and Rossel. On July 14, 2000, shortly after his first election, Putin flew to Yekaterinburg. He participated in the solemn laying of the foundation stone of Mill 5000 at the Nizhny Tagil Metallurgical Complex, the largest enterprise of its kind in the world. The players at that complex are the same people as in Kachkanar. Fedulev has pride of place, and Mill 5000 is a major investment project of Eduard Rossel’s. The image of the president laying its foundation stone was excellent PR for Fedulev’s continuing expansion of his criminal empire. Indeed, new money followed Putin. In response to this beneficence, Fedulev and Rossel are active supporters of Putin and underwrite the functioning of the Urals section of his United Russia Party. They supported Putin in his reelection campaign in 2004.

On the surface, everything in Russia is going swimmingly and the nation is democratic. The principle of an independent judiciary has been proclaimed, and any obstruction of justice is a criminal offense. The federal law on the status of judges is progressive and supposedly safeguards their independence. The reality, however, is that these constitutional and democratic principles are violated with the utmost cynicism. Lawlessness is demonstrably more powerful than the law. The kind of justice you get depends on what class you belong to, and the upper echelons of society, the VIP level, are reserved for the Mafia and the oligarchs.

What about those who are not at the VIP level? Well, you don’t miss what you never had.

Since we are now building capitalism, there is private property. As long as there is property, there will be someone who wants to get a hold of it and someone else who does not want to part with it. What matters is the methods used in resolving the issue, the rules by which people behave. In our corrupt nation, for the time being, we live by the rules of Pashka Fedulev.

One final scene before we bring down the curtain. It is March 2003 in Yekaterinburg. Life in the province is sluggish, but for several days in a row, from March 25 to 28, a protest demonstration has been taking place. The protesters are the civil-rights activists of Sverdlovsk Province: the International Center for Human Rights, the Social Committee for the Defense of Prisoners’ Rights, and an umbrella organization called Our Union Is the Land of People’s Power. They are collecting signatures demanding the immediate retirement of Ivan Ovcharuk. They chant that Ovcharuk, with his long-standing collaboration with the crime bosses of the Urals, is the mainstay of judicial arbitrariness in the Urals and of opposition to judicial reform. They tell anyone who will listen that Ovcharuk is continuing to choke off any signs of democracy and will fight to the death against the introduction of trial by jury: he declares that it “is contrary to the interests of the inhabitants of Sverdlovsk Province.” As the protestors see it, his only real concern is to prevent any changes that might cramp the corrupt legal system he has created for the benefit of the criminal underworld of the Urals.

March 2003 again, but Moscow this time. The president has reappointed Ivan Ovcharuk as chairman of the Sverdlovsk Provincial Court.