Judge revokes order freezing Mikhail Khodorkovsky assets

Russian Federation ‘disappointed’ at Ireland’s decision to release oligarch’s €100m

A freezing order on almost €100 million belonging to the former Russian oligarch Mikhail Khodorkovsky has been revoked by the District Court.

The former billionaire has welcomed the judgment and said he will use some of the money to fund his Open Russia movement which campaigns for the rule of law in Russia.

The Russian Federation, in a statement issued after the ruling, said it was “surprised and disappointed” at the court’s decision to release the funds.

“The Irish authorities did not notify us about the proceedings and therefore we could not participate and submit evidence despite being ready and willing.”

Judge Timothy Lucey said he had not been shown that there were reasonable grounds for maintaining the order. The money has been frozen, on the order of the court following requests from the Garda, since March 2011.

A second fund, understood to contain about €20 million and to be beneficially owned by six other former Yukos shareholders, which was also first frozen by court order in 2011, may now be released too.

The second fund is controlled by the same trust services firm as the one holding funds for Mr Khodorkovsky. Seán Gillane SC, for Saffrey Champness, of Jersey, asked the judge that his ruling should also apply to the money owned by this second trust.

The court was told gardaí would now consider the ruling made in relation to Mr Khodorkovsky’s trust insofar as it affected the second trust.

Richest men

Mr Khodorkovsky was formerly the majority shareholder of Russia’s first privatised oil firm, Yukos, and was once one of the richest men in Russia.

He is now a prominent critic of the Russian president and his Open Russia organisation campaigns for the rule of law in Russia.

The 53-year-old businessman, who lives in London, contested the ongoing freeze orders on the money issued under the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010.

The Act provides for 28-day freezing orders to be issued on a summary basis by the District Courts on the application of gardaí when they swear they have reasonable grounds for suspecting that money is linked to crime, and where they are conducting an ongoing investigation.

Judge Lucey said he had to decide the case on the basis of the evidence put before him and that there had been a lack of engagement shown by gardaí in relation to the whole process.

While there was evidence that an investigation was ongoing, he was not satisfied that the funds, if released, would produce a money-laundering transaction.

Clashes with Putin

Mr Khodorkovsky clashed with Vladimir Putin in 2003.

He was arrested that same year and two years later found guilty of tax offences linked to Yukos. He was again convicted in 2009 for embezzlement and theft, again in relation to Yukos.

The funds were frozen by the Irish courts in 2011, after an Irish-based funds custodian learned they were owned ultimately by the Russian businessman, and notified the Garda.

Mr Khodorkovsky had the remainder of his sentence pardoned by Mr Putin in 2013, following negotiations with the German government on behalf of the EU. He moved to Switzerland, and more recently the UK.

Other jurisdictions have refused to extradite former Yukos executives to Russia on the grounds they would not receive a fair trial, and the convictions of Mr Khodorkovsky have been widely condemned as being politically motivated. Mr Khodorkovsky pleaded innocent to all charges.

Michael McDowell SC, for the Garda, told a four-day hearing last month that gardaí were conducting an ongoing investigation into the source of the €100 million. He said members of the force had travelled to Moscow as part of the investigation.

‘Pariah’ of Europe

Remy Farrell SC, for Mr Khodorkovsky, told Judge Lucey his client said the money came from Yukos dividend and share buyback payments in 2003 that went into an offshore shareholder structure and into funds controlled by trusts. He said there was no real prospect of Ireland seeking to prosecute his client and that if it did so it would be the “pariah” of Europe.

Mr Khodorkovsky said the Yukos transactions in 2003 led to $2 billion being transferred into offshore trusts, with further payments occurring after that. The court heard there were seven trusts linked to seven unnamed former Yukos shareholders.

Judge Lucey noted that Mr Khodorkovsky had been granted asylum in the UK and could not be extradited to Russia, where there are now warrants extant in relation to charges of murder and attempted murder.

He noted the 28-day freeze order had been renewed approximately 80 times since it was first granted in 2011.

During the trial, he said it could not have been the intention of the Oireachtas that the law would be used to freeze €100 million for 5½ years.