CASE OF RUBTSOV AND BALAYAN v. RUSSIA

1. The case originated in two applications (nos. 33707/14 and 3762/15) against the Russian Federation lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by Russian nationals, Mr Aleksandr Aleksandrovich Rubtsov and Mr Gagik Borikovich Balayan (“the applicants”), on 21 April 2014 and 18 February 2015 respectively.
2. The applicants were represented by lawyers practising in Moscow, Mr F.S. Shishov and Mr D.R. Kevorkov respectively. The Russian Government ("the Government") were represented initially by Mr G. Matyushkin, the Representative of the Russian Federation to the European Court of Human Rights, and then by his successor in that office, Mr M. Galperin.
3. The applicants complained under Article 5 § 1 of the Convention that their detention had been unlawful. The first applicant also complained under Article 5 § 3 of the Convention that he had been held in pre-trial detention and under house arrest without relevant and sufficient reasons.
4. On 2 June 2016 the above complaints were communicated to the Government and the remaining parts of the applications were declared inadmissible pursuant to Rule 54 § 3 of the Rules of Court.
I. THE CIRCUMSTANCES OF THE CASE
5. The applicants were born in 1965 and 1966 respectively and live in Moscow.
A. Application no. 33707/14, Rubtsov v. Russia
6. The applicant, who was one of the indirect beneficial owners of a company, arranged for it to be sold to another company. On 1 October 2013 the applicant was arrested on suspicion of fraud through the execution of a sham sales contract. It was alleged, in particular, that the company purchasing the applicant ’ s company also belonged to the applicant and the price it paid had been unrealistically low. On 3 October 2013 the Taganskiy District Court of Moscow (“the Taganskiy District Court”) held a hearing to determine a preventive measure in respect of the applicant. The latter argued that he should not be detained by reliance on Article 108 § 1.1 of the Code of Criminal Procedure (“the CCrP”), which prohibits the remanding in custody of people suspected or accused of offences committed within the sphere of their business activities. The Taganskiy District Court dismissed that argument in the following terms:
“... [the applicant] is suspected of having committed a serious offence aimed at making a profit which was unconnected to any business activity and had been organised by a group of people; [the offence being] punishable with up to ten years ’ imprisonment, some of the accomplices have not yet been identified and arrested.”
7. On 21 October 2013 the Moscow City Court upheld the detention order.
8. On 28 November 2013 and 27 January 2014 the Taganskiy District Court extended the applicant ’ s detention, repeating its previous findings. On 27 December 2013 and 18 April 2014 respectively the Moscow City Court upheld the above detention extensions on appeal.
9. On 28 March 2014 the Ostankinskiy District Court of Moscow (“the Ostankinskiy District Court”) further extended the applicant ’ s detention. As regards Article 108 § 1.1 of the CCrP, the District Court stated as follows:
“The court dismisses the arguments of the defence and of [the applicant] himself that the offence of which he is accused was committed within the sphere of his business activity because, according to the current bill of indictment, he is accused of having committed an offence motivated by profit with the aim of misappropriating another ’ s property by way of deception or abuse of trust, using an organised group, and on a particularly large scale. The court therefore concludes that the offence imputed to [the applicant] was not connected to the carrying out of a business activity, which is an independent activity undertaken at one ’ s own risk with the aim of obtaining regular revenues from the use of possessions, the sale of goods, or the performance of works or services by people registered in such a capacity in accordance with the law.”
10. On 14 May 2014 the Moscow City Court upheld on appeal the detention extension order of 28 March 2014. It held that the first - instance court had examined and dismissed with proper substantiation the applicant ’ s argument that his alleged offence had been committed within the sphere of his business activity.
11. On 10 April 2015 the Moscow City Court granted bail to the applicant. Upon deposit of the bail sum on 17 April 2015 the applicant was released.
B. Application no. 3762/15, Balayan v. Russia
12. On 15 September 2014 a criminal investigation was opened into the misappropriation of the funds of an insolvent bank. On 23 September 2014 the applicant, who owned the bank, was arrested on suspicion of having transferred money out of the bank ’ s account by acquiring unsecured promissory notes.
13. On 25 September 2014 the Tverskoy District Court of Moscow (“the Tverskoy District Court”) authorised the applicant ’ s detention. The applicant argued that he should not be detained, inter alia, because he was suspected of an offence committed within the sphere of his business activity. The Tverskoy District Court rejected the argument as follows:
“... the court takes the view that, as can be seen from the evidence in the case, the method and circumstances described in the decision to initiate the criminal investigation, and the actions of [the applicant] in misappropriating the funds in this case are not related to [ a business] activity as defined in Article 2 § 1 of the Civil Code of the Russian Federation”.
14. On 10 November 2014 the Moscow City Court upheld the detention order on appeal. The Moscow City Court dismissed the applicant ’ s argument that his alleged offences had been committed within the sphere of his business activity. In particular, the Moscow City Court held as follows:
“... the action of committing an offence by using another ’ s funds and taking on obligations to the Bank ’ s clients without any intention to comply with them, cannot be considered to be a business activity.”
II. RELEVANT DOMESTIC LAW AND PRACTICE
15. Under Article 108 § 1, detention on remand could be ordered by a court in respect of people suspected or accused of having committed a criminal offence punishable by more than three years ’ imprisonment, provided that it was not possible to apply a less restrictive preventive measure. People suspected or accused of having committed a criminal offence punishable by shorter terms of imprisonment could still be remanded in custody in exceptional circumstances, notably if they had no permanent place of residence, if their identity had not been established, or if they had breached a previously imposed preventive measure or had absconded.
16. On 9 April 2010 a new Article 108 § 1.1 entered into force:
“1.1. The preventive measure of detention on remand shall not be applied to a person suspected or accused of having committed offences set down in Articles 159 [fraud], 160 [misappropriation of funds], 165 [causing of pecuniary damage by way of deception or abuse of trust] [of the Criminal Code of the Russian Federation], if these offences have been committed within the sphere of that person ’ s business activity, [...] and none of the [exceptional] circumstances indicated in [...Article 108] § 1 [...] is present.”
17. Since 29 November 2012 an amendment to Article 108 § 1.1 has been in force which also includes people suspected or accused of the various types of fraud introduced by new Articles 159.1-159.6 of the Criminal Code.
18. By Ruling no. 15 of 10 June 2010 the Plenary of the Supreme Court of Russia amended its earlier Ruling no. 22 of 29 October 2009 “On the Practice of the Application by the Courts of Preventive Measures in the Form of Detention on Remand, Bail and House Arrest”. In particular, it added the following paragraph :
“4.1. [ ... ] the offences laid down by Articles 159, 160 and 165 of the Criminal Code of Russia should be considered as having been committed within the sphere of business activity if they were committed by people carrying out a business activity or participating in a business activity and the offences were directly related to that activity.
In determining whether an activity is a business activity, the courts should be guided by Article 2 § 1 of the Civil Code of the Russian Federation, according to which a business activity is an independent activity carried out at one ’ s own risk with the aim of obtaining regular revenues from the use of possessions, the sale of goods, or the performance of works or services by people registered in such a capacity in accordance with the law. ”
19. On 19 December 2013 the Plenary of the Supreme Court issued a new ruling (no. 41) “On the Practice of the Application by the Courts of Preventive Measures in the Form of Detention on Remand, Bail and House Arrest”. The new ruling repealed the previous ones (see paragraph 18 above) and held as follows:
“7. ... when deciding on the question of the detention on remand of a person suspected or accused of offences set down in Articles 159-159.6, 160 and 165 of the CCRF, a court should always establish the sphere of activity in which the offence was committed. [ ... ]
8. In determining whether an activity is a business activity, the courts should be guided by Article 2 § 1 of the Civil Code of the Russian Federation, according to which a business activity is an independent activity carried out at one ’ s own risk with the aim of obtaining regular revenues from the use of possessions, the sale of goods, or the performance of works or services by people registered in such a capacity in accordance with the law.
[...] the offences set down in Articles 159-159.6, 160 and 165 of the CCRF should be considered as having been committed within the sphere of a business activity if they have been committed by a person carrying out a business activity independently or participating in the business activity of a legal entity, and the offences are directly connected with the said activity. Such people include individual businessmen who commit the offences while carrying out their business activity or managing their possessions used for the performance of the business activity, as well as members of the management of a commercial company while using their powers to direct the company or while the company is carrying out its business activity.”
20. On 15 November 2016 the Plenary of the Supreme Court issued Ruling no. 48 “On the Practice of the Application by the Courts of Legal Provisions Regulating Criminal Liability for Offences Committed in the Sphere of Business and Economic Activities”. The Plenary of the Supreme Court reiterated that when the national courts were to rule on the detention on remand of a person suspected or accused of offences set down in Articles 159 §§1-4, 159.1-159.3, 159.5, 159.6, 160 and 165 of the CCRF, they should always have determined whether or not the offence had been committed within the sphere of a business activity.
21. In its review of 18 January 2017 of the national courts ’ practice as regards the application of preventive measures, the Plenary of the Supreme Court stressed the courts ’ obligation to establish whether or not the offence had been committed within the sphere of a business activity. The Plenary of the Supreme Court noted that the national courts had not always provided reasons for their finding that a particular offence had not been committed within the sphere of a business activity. The Plenary of the Supreme Court further mentioned that sometimes the national courts had ignored the defence arguments on the matter, which had led to the unlawful placement in custody of people who should not have been detained and even to extensions of the detention of such people.
22. By its Ruling no. 33 of 3 October 2017, the Plenary of the Supreme Court again brought to the attention of the national courts the need to assess in detail all the arguments and supporting evidence relating to offences allegedly committed in the business sphere and the applicability of Article 108 § 1.1 of the CCrP.
23. In accordance with Rule 42 § 1 of the Rules of the Court, the Court decides to examine the applications in a single judgment, given their similar factual and legal background (see Kazakevich and other “Army Pensioners” cases v. Russia, nos. 14290/03 and 9 others, § 15, 14 January 2010).
II. ALLEGED VIOLATION OF ARTICLE 5 OF THE CONVENTION
24. The applicants complained that their detention was unlawful under Article 5 of the Convention. In particular, they claimed that by virtue of Article 108 § 1.1 of the CCrP, they should not have been placed in custody because the offences imputed to them had been committed within the sphere of their business activities. However, the national courts dismissed their argument under Article 108 1.1 of the CCrP without providing any reasons. The first applicant also complained about his excessively long and unreasonable pre-trial detention. The applicants invoked Article 5 of the Convention which provides as follows:
“1. Everyone has the right to liberty and security of person. No one shall be deprived of his liberty save in the following cases and in accordance with a procedure prescribed by law: [ ... ]
(c) the lawful arrest or detention of a person effected for the purpose of bringing him before the competent legal authority on reasonable suspicion of having committed an offence or when it is reasonably considered necessary to prevent his committing an offence or fleeing after having done so; [ ... ]
3. Everyone arrested or detained in accordance with the provisions of paragraph 1 (c) of this Article shall be brought promptly before a judge or other officer authorised by law to exercise judicial power and shall be entitled to trial within a reasonable time or to release pending trial. Release may be conditioned by guarantees to appear for trial. [ ... ]”
25. The Court notes that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible.
26. The Government submitted that the applicants ’ detention was lawful. In particular, Article 108 § 1.1 of the CCrP was not applicable to the applicants because their offences were clearly unrelated to business activities. They referred to the explanations given by the Plenary of the Supreme Court of Russia in its respective rulings (see paragraphs 18 - 19 above).
27. Referring to the same rulings of the Supreme Court of Russia, the applicants asserted that they had performed the actions imputed to them while managing the business activity of their commercial enterprises. In particular, the first applicant was accused of fraud in relation to the sale of shares by a commercial company in which he was a majority shareholder. The second applicant was charged with fraud in relation to the purchase of promissory notes executed by his bank. The applicants claimed that their alleged offences had been committed within the sphere of their business activity and that, by virtue of Article 108 § 1.1 of the CCrP, they should therefore not have been placed in detention on remand.
28. The Court notes that the present cases focus on the issue of the applicability of Article 108 § 1.1 of the CCrP. It should be mentioned that none of the exceptional circumstances enumerated in Article 108 § 1 of the CCrP (see paragraph 15 above) was referred to by the national authorities to justify the inapplicability of Article 108 § 1.1 of the CCrP to the applicants ’ situations. The sole disagreement between the parties was the question of whether or not the applicants ’ alleged offences had been committed within the sphere of their business activities. If they were, the applicants could not have been detained by virtue of Article 108 § 1.1 of the CCrP which, as noted above, prohibited the remanding in custody of people suspected or accused of offences committed within the sphere of business activities. The provision itself did not define the concept of a “business activity”. Two months after Article 108 § 1.1 of the CCrP entered into force, the Supreme Court of Russia instructed the national courts to be guided by the definition of a “business activity” given by the Civil Code of Russia ( see paragraph 1 8 above).
29. The Court observes that Article 108 § 1.1 of the CCrP, together with the Supreme Court ’ s instruction regarding the concept of a “business activity” was included in Russian criminal procedure only in 2010. Thus, at the material time of the applicants ’ pre-trial detention (2013-2014), the legal rule as a whole was relatively recent and the pertinent case-law was arguably not abundant. It was up to the national courts to dissipate any interpretational doubts regarding the rule ’ s application (see Rekvényi v. Hungary [GC], no. 25390/94, § 34, ECHR 1999 ‑ III, Navalnyye v. Russia, no. 101/15, § 55, 17 October 2017 ).
30. The Court reiterates that it is not its task to replace the national authorities, which are better placed to interpret national legislation, to examine all the circumstances of a case and to take all the necessary decisions, including those in respect of detention on remand (see, for instance, Murray v. the United Kingdom, 28 October 1994, § 66, Series A no. 300 ‑ A; Bąk v. Poland, no. 7870/04, § 59, 16 January 2007; and Kotov v. Russia [GC], no. 54522/00, § 122, 3 April 2012). It is essentially on the basis of the reasons given in those domestic courts ’ detention decisions that the Court is called upon to decide whether or not there has been a violation of Article 5 of the Convention (see, mutatis mutandis, Labita v. Italy [GC], no. 26772/95, § 152, ECHR 2000 ‑ IV, and Stašaitis v. Lithuania, no. 47679/99, § 82, 21 March 2002 ).
31. In the present case the national courts rejected the applicants ’ argument that their offences had been committed within the business sphere. However, even if they did refer to or cite Article 2 § 1 of the Civil Code of Russia and its definition of a “business activity”, they did not distil the constituent elements of that concept and did not compare those to the particular facts of the applicants ’ cases (see, by contrast, Włoch v. Poland, no. 27785/95, § 114, ECHR 2000 ‑ XI). In respect of the first applicant, who was suspected of defrauding his partners by arranging the sale of their company to him alone, the national courts simply stated that his offence was not connected with his business activity, without any apparent analysis. In respect of the second applicant, whose private bank had allegedly acquired unsecured promissory notes to transfer the money out of the bank ’ s account, the national courts refused to apply Article 108 § 1.1, referring to the “method and circumstances” of his alleged offence (see paragraphs 13-14 above), again without any further explanation. Based on the above, the Court considers that the national courts failed to explain their decision not to apply Article 108 § 1.1 of the CCrP in the light of the specific facts of the applicants ’ cases.
32. The Court does not deny that there may have existed reasons why the national courts did not consider the applicants ’ alleged offences as having been committed in the sphere of their business activities. However, even if such reasons existed, they were not set out in the relevant domestic decisions (see, mutatis mutandis, Ilijkov v. Bulgaria, no. 33977/96, § 86, 26 July 2001). The Court also notes in this respect the latest recommendations of the Supreme Court of Russia to the national courts to pay special attention to and examine in detail the arguments and supporting evidence on the matter of the applicability of Article 108 § 1.1 of the CCrP (see paragraphs 20-22 above ).
33. The first - instance courts ’ failure to explain the reasons for the inapplicability of Article 108 § 1.1 of the CCrP prevented the applicants from filing a meaningful appeal in that respect (see Suominen v. Finland, no. 37801/97, § 37, 1 July 2003, and Ignatenco v. Moldova, no. 36988/07, § 77, 8 February 2011 ). As a result, the applicants ’ allegations that their alleged offences fell within the sphere of their business activities and that Article 108 § 1.1 of the CCrP was therefore applicable to their situations remained unexplored by the national courts.
34. The Court reiterates that the absence of reasoning in a detention order may demonstrate its arbitrariness and therefore give rise to a violation of Article 5 § 1 of the Convention (see Stašaitis, cited above, § 67). At the same time, Article 5 § 1 of the Convention is mostly concerned with the existence of a lawful basis for a detention within criminal proceedings, whereas the possible justifications for such detention fall under Article 5 § 3 of the Convention (see Khodorkovskiy v. Russia, no. 5829/04, § 165, 31 May 2011).
35. The Court observes that the detention orders in the present case had a legal basis and contained at least some reasoning, even if, as the applicants argued, that reasoning was flawed or insufficient. Thus, it cannot be said that the applicants ’ detention was unlawful under Article 5 § 1 of the Convention. As for the relevance and sufficiency of the reasons given by the national courts, the Court considers it more appropriate to examine the matter under Article 5 § 3 (see Buzadji v. the Republic of Moldova [GC], no. 23755/07, § 61, ECHR 2016 (extracts)).
36. As the Court has established (see paragraph 30 above), the national courts provided little or no explanation with reference to the specific facts of the applicants ’ cases as to why they refused to apply Article 108 § 1.1 of the CCrP, which could arguably have shielded them from detention on remand. Thus, the Court considers that the authorities failed to provide relevant and sufficient reasons to justify the applicants ’ pre-trial detention.
37. There has accordingly been a violation of Article 5 § 3 of the Convention.
38. Having regard to the above finding, the Court considers it unnecessary to assess separately the first applicant ’ s complaint under Article 5 § 3 of the Convention concerning the relevance and sufficiency of the reasons given by the domestic courts for his continued detention.
III. APPLICATION OF ARTICLE 41 OF THE CONVENTION
39. Article 41 of the Convention provides:
“If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.”
40. The first applicant claimed pecuniary damage ( loss of salary) in the amount of 6,480,000 of Russian roubles (about 97,000 euros ( EUR ) ). He also claimed EUR 1,500,000 in respect of non-pecuniary damage.
41. The second applicant claimed EUR 100,000 for pecuniary damage (loss of income) and another EUR 100,000 for non-pecuniary damage.
42. The Government requested that, if a violation of the Convention were to be found, just compensation in accordance with the Court ’ s case ‑ law be awarded to the applicants.
43. The Court considers that the applicants ’ claims in respect of pecuniary damage have not been sufficiently substantiated and, therefore, rejects these claims. On the other hand, it awards each of the applicants EUR 5, 0 00 in respect of non-pecuniary damage.