Court reduces financial penalty against independent daily

New York, March 24, 2005—An appeals court yesterday reduced the massive damages levied against the independent Moscow daily Kommersant in what a newspaper lawyer called a “tactical victory” in its ongoing legal battle over its reporting on last summer’s banking crisis.

Moscow’s Federal Arbitration Court upheld the finding of liability but reduced the damages to 40.5 million rubles (US$1.46 million)—about one-eighth the original award, according to local and international press reports.

Pavel Astakhov, a lawyer for the parent company Kommersant Publishing House, said the company would further appeal to Russia’s Constitutional Court and the Strasbourg, France-based European Court for Human Rights, the Moscow radio station Ekho Moskvy reported. Astakhov described yesterday’s ruling as a “tactical” gain for the newspaper because it significantly reduced the damages, but he noted its effect was limited because the liability was allowed to stand.

The Federal Arbitration Court in Moscow ordered Kommersant (Businessman) to pay 320.5 million rubles (US$11.5 million) in damages to Alfa-Bank in October for publishing what the court determined to be false information. A Moscow appeals court later reduced damages to 310 million rubles (US$11 million).

The case stemmed from a July 2004 report in Kommersant titled “Banking crisis takes to the streets,” which described lines of customers making withdrawals at Alfa-Bank’s cash machines during the country’s banking woes last summer.

The newspaper published the article a day after Alfa-Bank released a statement on difficulties in the Russian financial market, and two days after other newspapers had reported on financial problems at Alfa-Bank and other banks, local reports said. Alfa-Bank’s management filed a lawsuit against Kommersant claiming its article had hurt the financial market and drove citizens to make large withdrawals from the bank. The newspaper stood by the accuracy of the story.

Kommersant paid the 310 million ruble fine on January 28—roughly the equivalent of the Kommersant Publishing House’s annual revenue—and printed a nearly blank edition of the newspaper on January 31 to protest the court ruling.

According to yesterday’s ruling, Alfa-Bank should return the difference to the daily. The newspaper said it planned to use the money to publish a newspaper in neighboring Ukraine, where press freedom conditions have improved since President Viktor Yushchenko took office in January. It was not clear whether Alfa-Bank would appeal the ruling.

Kommersant has faced persistent pressure from the Kremlin and its allies in retaliation for its independent editorial policy. In February, Federal media regulators in Moscow issued an official warning to the daily for publishing an interview with the Chechen rebel leader Aslan Maskhadov, killed in a raid by Russian forces last month.

“The reduction in damages, while welcome, does not address our fundamental concern, which is the politicized nature of this legal proceeding,” CPJ Executive Director Ann Cooper said.