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European Court of Justice

Rule of law dispute deepens as rulings by Polish and EU courts clash

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Interim measures imposed on the Polish judicial system by the top European court are against the Polish constitution, Poland's Constitutional Tribunal said on Wednesday, accelerating the collision course between Warsaw and Brussels, write Gabriela Baczynska in Brussels and Alan Charlish, Anna Koper and Pawel Florkiewicz in Warsaw, Reuters.

For the second time this week, the tribunal was addressing cases that call into question the primacy of European Union law. Some observers say this could jeopardize Poland's continued membership of the 27-nation bloc.

"With the best will to interpret the constitution, it is impossible to find in it the powers of the (EU) Court of Justice to suspend Polish laws concerning the system of Polish courts," said Constitutional Tribunal judge Bartlomiej Sochanski.

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Wednesday's ruling in Warsaw came as a result of proceedings initiated by Brussels against Poland, as part of which the Court of Justice of the European Union (CJEU) told Warsaw last year to suspend a panel it had created to discipline judges.

The panel - the Polish Supreme Court's disciplinary chamber - asked the tribunal whether such a suspension was constitutional.

Shortly before the ruling on Wednesday, the deputy head of the CJEU again told Poland to immediately halt all activities of the chamber - comments echoed by EU Justice Commissioner Didier Reynders. The CJEU is due to issue another ruling on the disciplinary chamber today (15 July).

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Poland's ruling nationalist Law and Justice (PiS) party says the EU is interfering in its right to make its own laws by challenging its judicial reforms, which it says are necessary to make courts function more effectively and remove a residue of communist influence.

"Fortunately the constitution and normality prevail over an attempt ... to interfere in the internal affairs of a member state, in this case Poland," Justice Minister Zbigniew Ziobro told a news conference.

Opposition parties and human rights groups say the reforms aim to increase political control over the courts, and that questioning the primacy of EU law could result in Poland's eventual exit from the bloc.

"We are in the process of a legal 'Polexit' which is happening step by step, and we will see where it will lead us," said Human Rights Ombudsman Adam Bodnar, a vocal government critic.

On Tuesday the Constitutional Tribunal postponed a ruling on whether the Polish constitution takes precedence over EU treaties. Read more.

Information posted on the Constitutional Tribunal website on Wednesday (14 July) showed that this sitting, initially scheduled to resume today, would instead start again on 3 August.

European Commission

Courts are being taken for a ride by shell-companies

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Barely a month goes by without another news story breaking about the myriad of ways the world’s wealthiest utilize legal and tax loopholes to keep their activities secret. Whether it is celebrities securing super-injunctions to keep their extra-marital affairs off the front pages or oligarchs using offshore tax regimes to hide their reportedly ill-gotten gains.

The latest scheme to worry transparency campaigners has been paper-companies from shadowy jurisdictions using courts of more transparent countries to stymy competitors or slow justice, all while disguising ownership of companies and hiding potential conflicts of interests. At least super-injunctions, one of the more interesting celebrity crazes of the past couple of decades, require an appeal to the English High Court detailing the case and a ruling from a judge. Post-box corporate entities by contrast are being utilised to mislead everyone in the legal system from the Judge down to the courtroom reporter. 

Opaque post-box companies controlled by mystery owners are of course nothing new and have sprung up across the world in a host of different guises. In some situations, they have been established for legitimate reasons.

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Similarly, shell companies – corporate entities without active business operations or significant assets – for example can play a valid role obtaining different forms of financing or acting as a limited liability trustee for a trust. They also feature prominently in many scandals where they are utilised by companies and private individuals for tax evasion and money laundering purposes, with the scale of this practice demonstrated by the leak of the Panama Papers in 2016, as highlighted by MEPs.

Over the past couple of decades shell companies have been increasingly used for laundering money from one jurisdiction to another, often with the assistance of compromised judges. The 'Russian Laundromat', a well-publicized money-laundering scheme that operated between 2010 to 2014, involved the creation of 21 core shell companies based in the UK, Cyprus and New Zealand.

The companies were created with ease and without any transparency to demonstrate the controlling minds and financial interests which stood to gain from misusing them. The hidden owners of these companies would then use them to launder money by creating fake debt between Russian and western shell companies and then bribing a corrupt Moldovan judge to order the company to “pay” that debt to a court-controlled account, which the hidden owner could then withdraw the, now cleaned, funds from. Some 19 Russian banks participated in the scheme which helped to move between $20 billion and €80bn out of Russia through a network of foreign banks, most of them in Latvia, to shell companies incorporated in the West.

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While the laundromat was eventually shut down, those behind it had years to clean and move tens of billions in ill-gotten or otherwise compromised fortunes into the western banking system. Moldovan businessman and former MP, Veaceslav Platon was named the architect of the Russian Laundromat by the Moldovan court. He remains the only convicted person to date as a result of criminal investigations into the scheme across several jurisdictions. The lynchpins for the entire scheme were western justice systems which, though operating in good faith, did not require sufficient transparency about who stood behind the companies that were accessing these courts.

While the laundromat has been shut down, murky sham companies have found a new way to exploit western justice systems by using litigation in respectable legal jurisdictions. In 2020 it was reported that Russian oligarchs were using fake companies to launder money via English courts. The report claimed that oligarchs would bring cases against themselves in English courts using a sham company, located in an opaque tax jurisdiction, that they were the sole beneficiary of and then would deliberately “lose” the case and be ordered to transfer the funds to the company. Using this approach, money from dubious sources could be laundered by way of a court order and enter the western banking system as clean cash with an apparently legitimate origin. 

A further worrying development is the recent evidence that credible arbitration systems being used as a tool to advance corrupt practices. One such case was brought in London by Process and Industrial Developments (P&ID), a British Virgin Islands company, against the Government of Nigeria over the collapse of a 20-year contract to generate power. P&ID accused the west African state of a breach of contract and in 2017 an arbitration panel ruled in the company’s favour awarding them almost $10bn.  It was only when the matter was referred to the High Court that it was reported  that cash “gifts” in brown envelopes had been allegedly paid to Ministry of Petroleum Resources officials.

P&ID, co-founded by Irish entrepreneurs Mick Quinn and Brendan Cahill, has strenuously denied the allegations or of any wrongdoing. While the arbitration is far from over, the case has, it has been argued, demonstrated just how easily dispute settlement processes might be manipulated.  

Another ongoing case in Ireland has further revealed the degree to which shell companies can allegedly manipulate Western courts. The Irish High Court has become the latest arbiter of a decade long Russian corporate dispute concerning ToAZ, one of the world’s largest ammonia manufacturers, in a case which has seen around 200 affidavits filed in Ireland alone. At its heart the case is a battle over ownership of the company between convicted father and son Vladimir and Sergei Makhlai, and Dmitry Mazepin a rival Russian businessman who holds a minority stake in the business. In 2019 a Russian court found the father and son team guilty of conducting fraud by reportedly selling the ammonia ToAZ produced at a price well below market rates to a linked company which ten sold it on at a higher market rate allowing the Makhlais to pocket the difference at the expense of ToAZ shareholders.

Having fled Russia before they could be jailed, the Makhlais are now believed to be using four shell companies in the Caribbean to hold their majority stake in ToAZ. These four companies have now reportedly used the existence of another Irish post-box company to file a $2bn claim for damages against Mazepin in Ireland’s courts, allegedly without having to revel who their shareholders are, who controls the companies or how they came to be in possession of shareholdings in a Russian ammonia company.

While this may seem like all in a day’s work for your standard legal dispute between Russian oligarchs and hardly a matter of concerns for the general public, it points to the worrying rise in dummy companies being used as fronts in legal cases. Generally, it seems a mockery of the notion of open justice for Caribbean shell-companies to have access to reputable common law courts to have their cases heard, use procedural chicanery to slow proceedings and prevent enforcement elsewhere all while being able to hide their owners and controlling minds from the public and the courts. While current examples relate to very wealthy individuals allegedly using these tactics against other rich folk, there is no principle or precedent which would stop unscrupulous interests using shell-companies to hide their involvement as they launch proceedings against ordinary citizens, NGOs or journalists.

A Brussels based financial expert said: “For Western justice systems to pay more than just lip-service to the principle of open justice basic transparency standards must be applied to party seeking to access the court. As a long overdue first step privately held foreign companies should be the first target of new standards in litigation transparency. A clear view on the controlling minds and commercial beneficiaries of litigants is in the interests of the public and, more importantly, the interests of justice.”

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EU

EU member states should be held accountable when they break promises in extradition cases

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In my new report, Not worth the paper they’re written on: The unreliability of assurances in extradition cases, published last week by campaign group Due Process, I explain that promises given by requesting authorities in European Arrest Warrant cases cannot and should not always be trusted, writes Emily Barley.

In April 2016 the European Court of Justice decided that in order to prevent extradition, evidence of the likelihood that the human rights of the accused would be violated needed to be specific and substantial – meaning that extraditions to countries with serious, systemic problems leading to large numbers of human rights violations could continue where ‘assurances’ were given to guarantee the person in question would be treated properly.

Since then the use of assurances in EAW cases has increased, with promises given over things like prison conditions, fair trials, medical care, and other concerns relevant in the individual cases.

However, this system is not fit for purpose. The promises made by requesting authorities are frequently broken, and the full extent of the problem is not known because the UK has no monitoring system in place – despite a House of Lords committee calling for monitoring back in 2015.

Experts including extradition lawyer Ben Keith have pointed out the fundamental flaw in the system of assurances: whatever promises requesting authorities may make, they are unable to change the physical situation in prisons that leads to human rights abuses.

And it’s not always a matter of circumstances overriding good intentions – some EU member states have told outright lies too. The Romanian justice minister in 2016 admitted that she had lied about a €1 billion prison building programme which would have substantially improved the dire state of the country’s prisons. "We do not have the money in the budget," she eventually confessed. Horrific overcrowding, dirty, rat and bug infested conditions, poor or no access to hygiene facilities, and lack of medical care continues to be the standard state of affairs in Romanian prisons.

Romania, of course, has become famous in the UK for its corrupt pursuit of London resident Alexander Adamescu under a politically motivated EAW. Adamescu has almost exhausted the limited appeals process allowed within the EAW system, and is now hoping British Home Secretary Priti Patel will intervene in the case.

In this context, what is to be done about the broken system of assurances? My conclusion is simple: requesting authorities must be held accountable when they break their promises. Where previous assurances have not been complied with, extraditions should be halted. Where there are substantial, systemic problems causing the violation of human rights, extraditions should be halted. This is the only way EU member states can ensure they avoid becoming complicit with violations and fulfil their moral and legal human rights obligations.

In order to facilitate this kind of accountability, a system of monitoring should be established. And, finally, the UK should use the opportunity of Brexit to rethink extraditions and shift to a more cautious system that offers greater protections for human rights.

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Air quality

Top EU court backs Brussels citizens’ right to #CleanAir

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Europe’s top court has backed Brussels citizens and ClientEarth in their fight for clean air in the Belgian capital with a judgment on 26 June.

The Court of Justice of the European Union (CJEU) was asked by a Brussels judge to look at two aspects of ClientEarth’s case, which it has taken with five of the city’s residents to challenge the Brussels government’s failure to tackle illegal air pollution.

It ruled that citizens have the right to go to court to challenge how authorities are monitoring pollution and that compliance with air pollution limits must be assessed at monitoring stations where people’s exposure to pollution is the greatest, not with an average across an area.

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The judgment sets an important precedent for people across the EU as the law is now crystal clear that citizens can challenge how air pollution is measured if they think there is a problem with it.

It also means that the Brussels authorities cannot hide poor air quality in some areas by using a city-wide average. According to an interim ruling from the Brussels court, this means the Brussels authorities must immediately start work on a new plan to clean up the city’s air.

ClientEarth lawyer Ugo Taddei said: “We’re very happy with the court’s decision. Brussels citizens have a right to clean air and they can breathe a little bit easier knowing that Europe’s top court has upheld that right today.

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“The Brussels authorities must act now and adopt an air quality plan which meets legal standards and monitor the air quality in a way that gives an accurate picture of the levels of air pollution in the city.”

The court made it very clear in its judgment that EU air quality rules were there to protect the environment and public health.

One of the claimants in the case, Lies Craeynest said: “We are delighted that the Court of Justice confirmed today what we have known for a long time: we are entitled to take our government to court to ensure they monitor air quality accurately and provide us with accurate information.

“The Brussels government must now act to protect the people living and working in its city from breathing harmful air.”

Karin DeSchepper, another claimant added: “The ruling today sends a clear message not just to the incoming Brussels government, but to all authorities in Belgium, that if they do not make clean air for all a priority, then they will face the legal consequences.

“The actions are known and feasible, so there can be no more excuses. We now need to see concrete action so that we all can breathe the clean air we deserve.”

ClientEarth and Brussels citizens brought a case against the Brussels regional government in 2016 for failure to deal with illegal and harmful levels of air pollution in the city.

The judge found that the authority’s current plans to clean it up are inadequate, but requested further guidance from the Court of Justice of the European Union (CJEU) before making a final decision.

The case will now return to the Court of First instance in Brussels for a final judgment.

At the end of last year, the Commission sent a letter of formal notice to Belgium for its continuous failure to address illegal levels of air pollution and to properly monitor air quality. Belgium had two months to comply or the COM would send an additional letter of formal notice. So, Brussels Energy and Environment Minister Céline Fremault, announced that the government would install an additional monitoring station every year until 2026. Any outdated stations would be upgraded or replaced. However, there has been no subsequent information on where the new monitoring stations will be.

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