HACC Decision in Case of Suspicion to Kobolyev

Legal Advisor to Transparency International Ukraine Pavlo Demchuk analyzed the decision of the HACC Appeals Chamber on the interim measure in the case against the ex-head of NJSC Naftogaz Andriy Kobolyev.

In short, the panel of judges of the Appeals Chamber of the High Anti-Corruption Court (HACC) decided that the investigating judge had too carefully analyzed the presence in the actions of Andriy Kobolyev of signs of the crime and evidence proving this. After all, the suspicion notice is an initial assumption that a person committed a crime, so, it may change during the pre-trial investigation, depending on what evidence will be collected. The investigating judge may not decide on the prospects of the case, as well as the guilt or innocence of the person. That is why the NABU and the SAPO have a legitimate opportunity to collect evidence that can make the picture clearer.

The defense was as follows.

1. Andriy Kobolyev is charged with the fact that a person who has any powers over property appropriated it illegally. However, the suspect could not assign himself a bonus because this is the competence of the Supervisory Board.
2. The Supervisory Board was not accountable to the chair of the board and did not depend on him, but, on the contrary, controlled the board and its head. No regulatory act limited the chair of the board of Naftogaz of Ukraine in the opportunity to initiate the issue of bonuses.
3. The draft submission for the bonus did not specify any amounts, as this is the exclusive competence of the Supervisory Board.
4. The reference to the fact that the members of the Supervisory Board were misled by the suspect is not confirmed by anything, since such persons were not interrogated.
5. Until 2020, the provisions of the CMU Resolution No. 859 did not apply to the decisions of the Supervisory Board on bonuses.
6. After the decision of the Supervisory Board on the payment of bonuses, Andriy Kobolyev could not but sign the relevant order.
7. The bonus is a motivation to achieve results without corruption risks. And the idea of corporate governance reform is that the state should have no influence on the supervisory boards, since they are independent of the Government. 

Why were such arguments of the defense taken into account by the first instance, but did not work in the appeal? Let’s consider the decision of the HACC AC judges regarding Kobolyev step by step.

1. The reasonableness of the suspicion.

The HACC AC judges drew attention to the fact that the standard of proof “reasonable suspicion,” which is used for the purpose of applying an interim measure, is not defined in national legislation. Therefore, through the analysis of the ECHR practice, they came to the conclusion that notification of the suspicion is a subjective formulation of prosecution in the form of a certain statement, based on the relevant structure of the crime, which only in the process of pre-trial investigation can develop into an allegation in the form of an indictment. Thus, at the stage of pre-trial investigation, the investigating judge is not authorized to assess the evidence obtained by the investigation, the procedure for obtaining it, as well as the admissibility and sufficiency (except in the case of their obvious inadmissibility).

Analyzing the arguments of the decision of the investigating judge, the HACC AC stated that the investigating judge Oleh Fedorov resorted to assessing the relevance, sufficiency, and admissibility of evidence, and therefore went beyond the subject of the consideration of the motion.

Denying that the suspicion was unreasonable, the panel of judges reached the following conclusions.

• Andriy Kobolyev acquired the status of a suspect because he notified of suspicion in the prescribed manner on January 19, 2023.
• The pre-trial investigation body (NABU) provided evidence confirming the involvement of Andriy Kobolyev in the commission of the incriminated criminal offense (the decision contains a large list of documents: from the collective agreement of NJSC Naftogaz of Ukraine, which refers to Resolution No. 859, to the act of official investigation of NJSC Naftogaz of Ukraine, which establishes the circumstances of the initiation and subsequent payment of the bonus to the chair of the board, which coincide with the content of the suspicion notice).
• The investigating judge did not assess any of the studied evidence of the prosecution, either separately or in their entirety, and did not refute the arguments of the prosecutor regarding the confirmation of the specific circumstances of the proceedings by this evidence.
• Considering the motion for temporary access to things and documents in this criminal proceeding, investigating judge Oleh Fedorov decided that the suspicion was reasonable.
• The content of the suspicion and the legal qualification of a criminal offense are discretionary powers of the pre-trial investigation body, and therefore they are presented in the form that the employees of this body consider necessary.
• The investigating judge noted that the materials of the motion were not sufficient to justify further investigation under such suspicion or bringing charges. The judge also concluded that the suspect could not be the sole perpetrator of the incriminated crime. And this goes beyond the powers of the investigating judge.
• Based on the results of the appellate review, the panel of judges did not establish the circumstances that would clearly and unequivocally indicate the non-participation of Andriy Kobolyev in the criminal offense. That is why, currently, the court has no reason to believe that the notification of suspicion is unreasonable. The court also pointed out that the actions committed by Kobolyev to receive the bonus allow to justify their further investigation and claim that such a crime could have happened.

2. The position of the HACC AC on the individual conclusions of the investigating judge.

The panel of judges also decided that it was appropriate to state that the investigating judge prematurely made conclusions regarding:

• the subject of regulation of the Resolution No. 859, namely, that it did not apply to the Supervisory Board of NJSC Naftogaz of Ukraine,
• the inadmissibility of the prosecutor’s statements that Andriy Kobolyev misled the members of the Supervisory Board,
• the duration of the pre-trial investigation, when the prosecution did not interrogate direct witnesses of the events in 5 years;
• the impossibility of establishing from the materials of the motion whether the amount of the bonus of USD 10 mln was determined personally.

The judges stated that Resolution No. 859 applies to these legal relations because it establishes restrictions on the amount of bonuses to the heads of enterprises based on the state form of ownership. Moreover, clause 4.6. of the Collective Agreement for 2017-2020 of NJSC Naftogaz of Ukraine indicates that the level of the salary of the board chair of the company is determined considering this resolution. Moreover, the provisions of this resolution were considered when making decisions on the payment of previous bonuses to the chair of the board of NJSC Naftogaz of Ukraine.

Interestingly, the Sixth Administrative Court of Appeal came to similar conclusions in its ruling dated December 9, 2021, in case No. 640/3186/19. This is the case under the claim of NJSC Naftogaz of Ukraine to the State Audit Service of Ukraine to cancel the requirement to eliminate the violation of the legislation on the payment of the bonus to the chair of the board. The court decision states that the resolution of the Cabinet of Ministers of Ukraine No. 859 (the version as of 2018) established the maximum amount of the bonus. At the same time, clause 2 of this resolution expressly provides that its precepts apply, in particular, to the chairs of the boards of public joint-stock companies. NJSC Naftogaz already applied the Resolution of the Cabinet of Ministers of Ukraine No. 859 when awarding the heads of the board, which is provided directly in the minutes of the Company’s meeting dated July 26, 2017, No. 318-KI. That is, when deciding on the bonus for the Chair of the Board of NJSC Naftogaz, the plaintiff was obliged to consider the restrictions established by the said resolution of the Cabinet of Ministers, which determines the appropriate maximum amounts of the bonus.

The HACC AC stressed that it was worth checking the feasibility of paying a bonus of USD 10 mln in terms of the amount of Andriy Kobolyev’s personal participation and contribution to the victory of NJSC Naftogaz of Ukraine in arbitration disputes with PJSC Gazprom, despite the fact that the prosecution did not focus on this aspect. The judges noted that the representation of Naftogaz in the Stockholm arbitration was carried out not by employees of the legal department, but by the Norwegian law firm Wikborg Rhine, the Swedish law firm Gernandt & Danielsson and two Ukrainian lawyers from LLC Aequo. Andriy Kobolyev stressed at the meeting that all decisions on the case were made personally by him, and also all responsibility was assigned to him. The court stated this should be assessed during the pre-trial investigation.

3. The essence of the corporate governance system.

The panel of judges noted that the said criminal proceedings had drawn public attention, and thus its legal content was lost. After all, the main question is whether the requirements of the legislation in 2018 were met when determining the size of the bonus to the chair of the board, and what was his role in determining the USD 10 mln bonus for himself. Instead, the defense is trying to reduce the essence of the suspicion to an attack on corporate governance reform.

Despite this, the panel of judges analyzed a number of aspects of corporate governance reform, the study of the level of salaries in public authorities and state enterprises in Ukraine and other European countries. The court concludes that even in the richest countries, where energy companies make significant profits, the bonuses do not even come close to USD 10 mln. Judges also analyze the size of other bonuses of the suspect.

4. The risks.

The investigating judge of the first instance did not provide a thorough risk assessment, since he recognized that the suspicion was unreasonable, and therefore the interim measure could not be applied. Therefore, the panel of judges had to assess which risks the interim measure should be aimed at preventing.

They came to the following conclusions.

• The crime in which Andriy Kobolyev is suspected is particularly serious, and he may be sentenced to up to 12 years in prison.
• The suspect often left the territory of Ukraine, last left on February 12, 2022, and returned on January 12, 2023. He has no restrictions on crossing the state border due to the presence of three minor children who, together with the suspect’s ex-wife, live abroad. The mother of the suspect is also abroad, as well as the person with whom he lives together.
• There is a risk of destruction, concealment, or creation of documents that are important for establishing the circumstances of the criminal offense, since not all documents were collected during the pre-trial investigation, and measures had been previously taken to hide individual documents.
• Not all members of the Supervisory Board and the persons present at its meeting were interrogated, so, there is a risk of influencing them, as well as the expert who must conduct an economic examination.
• The HACC AC did not assess the risk of obstruction of criminal proceedings, which was stated by the head of the SAPO. He pointed out that the head of the Civil Oversight Council at the National Anti-Corruption Bureau of Ukraine demanded explanations regarding the evidence collected in the said proceedings, and also put pressure on the detectives. The court drew attention to the fact that this was an independent basis for initiating the issue of revising the composition of the NABU Civil Oversight Council.

5. Regarding the type and size of the interim measure.

In determining the type of the interim measure, the court considered the following circumstances:

1) the presence of evidence justifying further investigation and indicating the possible involvement of Andriy Kobolyev in the commission of a crime under Part 5 of Art. 191 of the Criminal Code of Ukraine;

2) this offense is particularly serious and may be severely punished;

3) for 2017-2022, the suspect has a total income of UAH 431 mln;

4) he has not been previously convicted;

5) there is no information on the application of interim measures or notification of suspicion of committing another criminal offense.

Therefore, the court decided that the bail was a sufficiently effective interim measure. At the same time, the basis of such an interim measure was the economic interest of the suspect in preserving the amount of money, as well as his moral obligations to other individuals or legal entities that have acted as pledgers.

The court also imposed the following obligations on the suspect:

• to arrive at each demand of the detective, the prosecutor in this proceeding, the investigating judge, and the court,
• not to leave Kyiv without the permission of detectives, prosecutors, and the court,
• to inform the detective and the prosecutor about the change of his place of residence,
• to refrain from communicating with individuals;
• to deposit with the State Migration Service of Ukraine all his passports for traveling abroad and all other documents entitling him to leave Ukraine, including the passport of a citizen of Ukraine.

The term of these obligations is 2 months, but within the period of pre-trial investigation in criminal proceedings.

Interestingly, when assessing the property status, the HACC AC considered the fact that Andriy Kobolyev rented a garden house in Kyiv Oblast, but forbade him to leave Kyiv without the permission of detectives, prosecutors, and the court.

Determining the amount of bail, the panel of judges:

• paid great attention to the problem of corruption — considering the provisions of international declarations, conventions, and recommendations;
• drew attention to the fact that from 2017 to 2022, the suspect received income of more than UAH 413 mln, and also owns many assets (Mercedes-Benz ML 550 car, water vehicle, trailer to the boat, a number of works of art, other valuable property);

• considered that there is no information about the blocking of accounts or their seizure in the case file, neither did the defense refer to the presence of circumstances that complicate the implementation of the suspect’s right to bail;

• decided that a bail of UAH 229,248,492 would be sufficient.

Our interim conclusions

The case of Andriy Kobolyev, which has already been called an “attack on reformers,” highlighted problems that are overlooked in less popular cases.

1. The quality of legislation. If a regulatory act is somewhere incorrectly applied, and then it is not applied correctly, then this immediately sows doubts about where and how it should have been applied. If we are talking about complex areas of legal regulation, then often, this cannot be understood by both the officials themselves and other lawyers.
2. The category “reasonableness of suspicion”: at what level should prosecutors prove the presence of a crime during the pre-trial investigation?
   There is a position that can be traced, in particular, in the canceled decision of the investigating judge that when choosing an interim measure, the prosecution must provide evidence at least of the existence of the crime event, as well as that, based on his position, the suspect could commit a crime. In this case, for example, after the suspicion was served, prosecutors should have been ready to prove the use of Andriy Kobolyev’s personal powers contrary to the interests of his service, as well as the fact that he generally had special powers. But the process of the pre-trial investigation is dynamic, and evidence can also be obtained after notification of suspicion. The pre-trial investigation body may also change the criminal legal qualification, and this affects the circumstance in proof.
3. The “deception” incriminated to Andriy Kobolyev is also interesting in this context: the seizure of funds by deception is a fraud. But would it be possible to mislead regarding the application of the regulatory act? It appears that no because this document can be opened and read.
4. Big bonuses are a sensitive topic because of the attitude of our society to public servants. Determining their size is usually a discretionary power because it is difficult to regulate (apart from the size limit). Moreover, this size should be reasonably justified. Again, reasonableness is an evaluative term. In this case, it is difficult to argue that the amount of the bonus was unreasonable, since as a result of the consideration of the dispute, the Tribunal ruled to recover USD 4,674 mln from Gazprom PJSC in favor of Ukraine as compensation for the damage caused. So, the victory was ensured.
5. The proportionality of the interim measure to the incriminated crime. The court did not quite successfully use the practice of the European Court of Human Rights to consider the gravity of the incriminated crime and determine the amount of bail. After all, the severity of the crime alone, and the size of the suspect’s property, cannot indicate that there should be an extremely large bail. First of all, the court must establish that Andriy Kobolyev can pay a bail of the specified amount.

This publication was prepared with the financial support of the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.