FEUDING OLIGARCHS HEAD TO COURT / THE FINANCIAL TIMES

Feuding oligarchs head to court

By Michael Peel and Andrew Jack in London

Published: July 20 2009 22:33


Four Russian oligarchs on Monday renewed their epic court battle in two London cases that promise to offer a rare and revealing window into how some of the country’s most prized assets have been divided up.

Billions of dollars and claims of skulduggery around the aluminium industry and other businesses are at stake in the pair of lawsuits being heard in neighbouring rooms in London’s High Court.

The cases – Boris Berezovsky v Roman Abramovich and Michael Cherney v Oleg Deripaska – are seen as potential sources of political and commercial embarrassment to Russia.

Abramovich served with writ

Boris Berezovsky, the wealthy former Moscow power broker who fled the country under former president Vladimir Putin, was only able to start legal action against Roman Abramovich after personally serving him with a writ in a London store in October 2007 after his bodyguards spotted him in a boutique, writes Andrew Jack.

In written submissions before the case, Mr Abramovich conceded that he paid more than $2bn (€1.4bn, £1.2bn) to Mr Berezovsky and his business partner Badri Patarkatsishvili in relation to ORT, the television network, Sibneft, the oil company, and Rusal, the aluminium group while rejecting claims that Mr Berezovsky had shares in the latter two businesses.

He says Mr Berezovsky had no ownership of the other companies and that he paid $1.3bn in relation to Sibneft “in recognition of the political assistance and protection” Mr Berezovsky provided when Sibneft was set up, and $585m linked to Mr Patarkatsishvili’s “assistance” and “protection” with Rusal.

Mr Berezovsky’s case has been complicated because his only corroborating witness for many of the talks was Mr Patarkatsishvili, who died, from a heart attack, at his Surrey home last year.

In legal filings, Mr Berezovsky describes hosting Mr Abramovich and his representatives at his chateau in France, as well as at the Dorchester hotel in London, and in meetings in Germany and Georgia.

He claims Mr Putin ordered him to surrender his stake in ORT or face imprisonment in 2000, and that his associate Nikolai Glushkov was instead arrested after fleeing Russia.

He alleges Mr Abramovich linked Mr Glushkov’s release to the sale of his stakes in ORT and Sibneft, for which he received payment via Devonia Investments, with Sheikh Sultan bin Khalifa bin Zayed al Nahyan, the ruler of Abu Dhabi, as guarantor.

Mr Abramovich denies any such talks, saying he agreed to requests from Mr Berezovsky to buy the ORT stake “to assist him”.

One senior western banker said disclosures in the Deripaska case – where legal arguments are taking place over whether it should be heard in London or Moscow – could be “extremely damaging”.

The banker said: “[It] does not encourage the world to invest in Russia. It also shows that Russia does not have the necessary legal system to sort all this out and people have to go to foreign courts.”

The two cases are separate but overlap intriguingly in that both involve disputes over the allocation of proceeds of investments in UC Rusal, the aluminium giant. Rusal was formed through a merger of Sibal, Mr Cherney and Mr Deripaska’s aluminium company, with the metals empire of Mr Abramovich and Mr Berezovsky.

Mr Abramovich, the Chelsea Football Club owner and one of Russia’s richest men, is trying to derail a compensation claim by Mr Berezovsky, his former business partner and the country’s most famous exile, over investments he says he held in Rusal and other companies.

Yards away, Mr Deripaska, an embattled plutocrat who is grappling to restructure huge international debts, has launched a fresh effort to stop Mr Cherney bringing a multibillion dollar claim against him in London over their investments in Rusal.

The two long-running cases have been lent a surreal air by their proximity in a third-floor eyrie of the Royal Courts of Justice on the Strand in London.

Mr Abramovich’s lawyers are trying to strike out Mr Berezovsky’s claims that he is owed far more than the $2bn (£1.2bn, €1.4bn) he was paid for investments in businesses, including Rusal, he was forced to sell to the Chelsea owner.

Andrew Popplewell QC, for Mr Abramovich, said Mr Berezovsky was “tilting at windmills” and was seeking to use the case to allege “skulduggery” and “illegal acts by senior figures at the centre of government”, including Vladimir Putin, the former president.

Next door, lawyers for Mr Deripaska were trying to persuade the Court of Appeal that the High Court had “gone seriously wrong” in an earlier ruling allowing Mr Cherney to bring his case in England because he claimed that he risked being killed or wrongly arrested if he pursued it in Russia. Ali Malek QC, for Mr Deripaska – who is under pressure to meet a July 28 deadline to agree on restructuring of $7.3bn in debts owed by Rusal to more than 70 foreign banks – said the Cherney case’s links with England were “extremely thin” compared with the “attractive logic” of holding it in Russia.

If the Court of Appeal confirms the lower court’s ruling, it is likely to fuel debate on the independence of the courts in Russia, and on the role of the Kremlin in disputes involving the country’s natural resources.

Additional reporting by Catherine Belton in Moscow