On September 27, 2010 the Federal Arbitration of the Moscow District carried a Resolution confirming lawfulness of partial compensation of the value added tax amount claimed by North-West Telecom for compensation, namely 88 million rubles.

In March 2009, Interregional Inspectorate for Largest Taxpayers No. 7, Federal Tax Service of Russia (IILT No. 7) completed the office tax audit of the updated declaration of N.W.Telecom on the Value Added Tax (VAT) for January 2006. Based on its results, IILT No. 7 carried a Resolution denying the VAT compensation to N.W.Telecom to the amount of 88 million rubles.

In September 2009, N.W.Telecom challenged the Resolution of the tax authority before the Arbitration of Moscow, which in January 2010 passed a Judgment declaring invalid the Resolution of IILT No. 7 as regards denial of partial compensation of the value added tax amount of RUR 88 million. The Ninth Arbitration Court of Appeal of Moscow left the judgment of the Arbitration Court of First Instance unchanged, and the appeal of IILT No. 7 unsatisfied.

The Federal Arbitration of the Moscow District (court of review) by its Resolution dated 27.09.2010 left the awards of the courts of first and appeal instances unchanged, and the review appeal of the Interregional Inspectorate for Largest Taxpayers No. 7, Federal Tax Service of Russia, unsatisfied.

Noted Nikolai V. Nemchinov, Director, Legal Support Dept. N.W.Telecom, “having obtained recognition of invalidity of the value added compensation to the amount of RUR 88 million by the Interregional Inspectorate for Largest Taxpayers No. 7, Federal Tax Service of Russia, N.W.Telecom has proved its reputation of a law-abiding taxpayer acting strictly within the legal domain of the Russian Federation.”