Cancellation of the arrest of “Firtash regional gas companies”. What was it?

Spoiler: the problem is not in the decision of the VACS, but in the way the SBI investigators work...

On June 25, 2024, the investigating judge of the High Anti-Corruption Court (HACC) canceled the arrest of “Firtash regional gas companies.” This became known on June 28, and a few hours later the Pechersk court heroically restored justice and re-imposed the arrest.

The head of ARMA, Elena Duma, even joined VAKS’s condolences: “The question of further revenues to the state budget and bringing criminals to justice are questionable.” And this is surprising, because Mrs. Duma must understand the main tasks of criminal proceedings, which are not limited to filling the state budget, but consist of due legal procedure.

On July 3, a court decision appeared in the public domain, so we decided to understand the motives of the investigating judge to lift the arrests from this property of Firtash.

Spoiler: the problem is not in the VACS decision, but in the fact that SBI investigators recognize as “material evidence” everything that they want to transfer to ARMA. And the Pechersk court, when imposing an arrest, is not very willing to understand the details, which on its part creates threats to the entire investigation.

Why were Firtash’s regional gas companies seized?

The SBI is investigating the case of budget losses of almost 1.5 billion UAH in favor of the fugitive oligarch Dmitry Firtash. What is the essence of this matter?

According to the law, gas distribution network operators (GDS) had to pay the state annually if they used state property in their work. But, as the SBI revealed, in May-June 2017, the then officials of the Ministry of Energy and Coal Industry, in collusion with the “regional, city gas companies,” concluded agreements with 37 private operators, among which 26 belonged to Dmitry Firtash, in which they actually agreed on the free use of state property. And over three years, the state suffered damage amounting to UAH 1.488 billion.

The scheme of Firtash and Co., according to the prosecution, consisted in the fact that an official of the Ministry of Energy and Coal Mining signed separate protocols of disagreements with some of the gas transmission operators. According to them, such payment for the use of state property by regional gas companies was provided only on the condition that these costs were included in the structure of the gas tariff. That is, regional gas companies, in order not to fulfill the legal agreement, entered into agreements with the state and changed the entire principle of such deductions in such a way as not to pay anything to the state at all. It is clear that the tariff was not changed then, and therefore the budget lost funds. And, of course, this contradicted the Law of Ukraine “On the Natural Gas Market” and other acts.

In May 2022, the investigating judges of the Pechersk Court seized the shares of the mentioned 26 regional gas companies of Firtash due to the fact that they were recognized as material evidence in criminal proceedings and became the subject of a criminal offense. But at that time no analysis was carried out as to whether the investigator legitimately recognized such actions as material evidence.

Then the court, unfortunately, limited itself to only general phrases, which led to the adoption of a decision by the Supreme Court on June 25, 2024 to cancel the arrest. The Kiev Court of Appeal, which reviewed the decisions of the Pechersk Court on this arrest, also did not correct the mistakes made. We assume this happened because stretching the concept of “physical evidence” is a common practice in the work of the Pechersk court, and the case is high-profile, so the decision to arrest should have added reputational points for the pre-trial investigation body and more publicity for the case itself.

What did VAKS decide?

Such shortcomings in the work of the prosecutor and the court did not go unnoticed. Therefore, the owners of shares of 14 foreign and Ukrainian companies associated with Dmitry Firtash petitioned the Anticorruption Court to cancel the arrest, since it was imposed unlawfully. And therefore, the investigative judge of the HAKS analyzed the factual circumstances of the criminal crime under investigation and indicated that the shares cannot be material evidence in it.

The fact is that a certain object can be material evidence when it:

• was an instrument of a criminal offense;
• retained traces of a criminal offense;
• contains other information that can be used as evidence of a fact or circumstances established during criminal proceedings.

So, in the case of regional gas companies, Firtash was not identified from the materials of the criminal proceedings, and the prosecutor who was in court did not prove that the seized shares somehow met the specified criteria. Moreover, the fact that simple uncertificated registered shares belong to a certain person can be confirmed without their arrest.

Therefore, the judge invalidated the prosecutor’s arguments that the crime was committed through the management of regional gas companies by shareholders, including in the matter of their influence on the signing of protocols of disagreement.

After all, 1) probable illegal actions of shareholders are not the subject of this criminal proceeding, 2) the prosecutor did not provide any evidence of the influence of shareholders on officials of regional gas companies in concluding protocols of disagreements both at the time of seizure of property in 2022 and at the time of consideration of these petitions.

Therefore, in the opinion of the investigating judge of HAKS, the arrest was imposed unreasonably, because the seized items are not and cannot be material evidence in this criminal proceeding.

Why was this case considered by the Anticorruption Court?

Everyone was bewildered why the case, which was being investigated by the State Bureau of Investigation, was being heard by VAKS. But the investigating judge in a separate resolution explained that, based on the criteria of jurisdiction, judicial control in criminal proceedings should be carried out by the investigative judges of this court.

This is because the case is being investigated due to the probable commission of a criminal offense under Art. 364 of the Criminal Code of Ukraine (abuse of official powers), and the amount of damage caused to the state represented by the Ministry of Energy and Coal of Ukraine is UAH 1,488,645,641.22. In addition, officials of the Ministry of Energy and Coal were probably involved in its commission, which is the reason for this case to be considered by the Supreme Anti-Corruption Court.

And this also indicates that the case should have been investigated not by the State Bureau of Investigation, but by NABU. And the likely consequence of such an “error” is that all evidence collected by the SBI may be considered inadmissible.

What is the problem

The main one is the quality of work of investigators in high-profile cases. Everyone remembers well how the State Bureau of Investigation and some other law enforcement agencies like to conduct high-profile searches with a large number of photographs, but there are no results in the form of indictments or court sentences.

So in this case, it was important to arrest the shares of “Firtash regional gas companies” and transfer them to ARMA, and confiscation of assets is a task already unattainable for them. I am forced to remind you of the notorious fate of the Odessa Oil Refinery, which was once very loudly “confiscated” during the time of Lutsenko’s prosecutor.

Consequently, it is necessary to improve the quality of the investigation and put more effort into collecting evidence, so that later the decisions of the investigating judges will be reasonable and will withstand scrutiny by international courts. And when we are talking about such “seasoned” defendants as Dmitry Firtash, even more attention should be paid to the quality of the investigation.

In addition, in one of the materials we mentioned that transferring only material evidence to ARMA forces investigators and courts to unnecessarily “stretch” the definition of material evidence and transfer to ARMA something that is not actually material evidence.

In this case, the prosecutor said at the HACC meeting that shares in regional gas companies could be subject to special confiscation, but again did not prove this at the stage of seizure.

Therefore, it is interesting, when re-seizing the arrest, the investigators of the State Bureau of Investigation and the Pechersky Court corrected their mistakes? Because again we will read the news about the high-profile lifting of the arrest by the VAKS investigative judges at the request of the owners of shares in regional gas companies. And this may lead to the fact that it will be impossible to apply special confiscation at all.