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Boris Berezovsky has a number of fights on his hands, not least the next instalment of his epic with fellow Russian oligarch Roman Abramovich. Katy Dowell looks ahead to one of the biggest battles the City’s courts are likely to see in 2011
The $2bn (£1.28bn) legal showdown between Russian oligarchs Boris Berezovksy and Roman Abramovich is set to be one of the biggest cases of 2011. The road to the High Court has been rocky for both sides, but theirs is an archetypal fight that has caught the attention of the profession for more than just legal reasons.
The self-exiled Berezovsky has created a micro-legal market all of his own in London.
Through his several disputes with former business partners, the Russian has not only fed his own lawyers at Addleshaw Goddard and libel specialists Carter Ruck, but also countless others acting for those he has or is litigating against.
Skadden Arps Slate Meagher & Flom partner Paul Mitchard QC, one of the world’s leading litigators, is representing Abramovich in his dispute with Berezovsky. Mitchard has instructed Brick Court’s Andrew Popplewell QC to lead the case.
Meanwhile, Inna Gudavadze, the widow of another former business partner, Arkady ’Badri’ Patarkatsishvili (once Georgia’s richest man), instructed former UK attorney general and Debevoise & Plimpton partner Peter Goldsmith QC to represent her interests in the fight. She has since switched lawyers, bringing in Hogan Lovells partner Graham Huntley.
Several more firms, including Clyde & Co and Hill Dickinson, are also in on the action. For oligarchs wanting to litigate, London is the Rolls-Royce destination.
“Over the past few years,” says Addleshaws partner Mark Hastings, who is acting for Berezovsky, “London’s seen a significant increase in large-scale litigation arising out of events in Russia and the surrounding CIS states. One reason for this is that more wealthy Russians are choosing to live in London. Another is that they rightly perceive the English legal system to offer guarantees of fairness and impartiality not always available in other jurisdictions.”
Berezovsky claims in the suit that Abramovich used “threats and intimidation” to force him to sell shares in oil company Sibneft at a fraction of their value. Berezovsky sold Abramovich the Sibneft stake for $1.3bn between 2001 and 2003.
Abramovich’s legal team has attempted, on more than one occasion, to have Berezovsky’s claims against him thrown out on the grounds that he has insufficient evidence to support them.
In March Mr Justice Colman ruled that the case should be set down for a 12-week hearing in October 2011. Before that, in January, there will be a final attempt by Abramovich’s team to have the claims struck out.
Dig the new breed
To understand the background to the dispute, let us rewind to the mid-1990s, when a new breed of Russian oligarch began their rise to the top.
Abramovich was Berezovsky’s protégé at the time and, together with Patarkatsishvili, they began building a vast stock of Russian commodities and media interests. In the summer of 1995, as the Russian president Boris Yeltsin was creating the privatised oil company Sibneft by decree, the trio agreed that they would buy up and divide the business among them.
They bought up Sibneft for a mere $100m. When it was valued on the open market two years later, it was worth $5bn.
Cracks in the relationship began to emerge after Vladimir Putin came to power. Berezovsky had been a one-time confidant of Putin’s predecessor Yeltsin, but Putin, who Berezovsky had helped elevate, was more hostile toward Russia’s oligarchs.
In the particulars of Berezovsky’s claim against Abramovich, which has been submitted to the court, one incident that is alleged to have triggered his fall from grace was Berezovsky’s apparent criticism of how the Putin regime handled the explosion of the Russian submarine the Kursk, in which all crew members perished.
The television channel owned by Berezovsky, OFT, suddenly became critical of Putin. According to the claim, he was asked to relinquish his ownership of the former state-controlled television channel. It is claimed that this is when Abramovich began to turn on Berezovsky.
It is also alleged that Putin himself wanted control and state officials threatened to imprison Berezovsky if he refused to give in.
Abramovich’s legal team refuses to acknowledge any alleged threats stipulated in Berezovsky’s claim. Abramovich’s team also refuses any knowledge of the claim that relations between Berezovsky and Putin deteriorated significantly. This, it is alleged, ultimately resulted in Berezovsky absconding to France and then to the UK, where he was granted political asylum.
Berezovsky alleges that it was in 2000, after he had fled to France, that Abramovich first requested he gave up his shareholding in ORT. The claim alleges that the request was made directly on behalf of Putin and that he was told that if he immediately relinquished his shareholding, the Russian government would release Nikolai Glushkov, a close friend and business associate of his. If he refused to sell up, Putin would seize their assets and Glushkov would remain in jail. Together with Patarkatsishvili, they would be paid $175m for their shares.
To be clear, such allegations are furiously refuted by Abramovich’s legal team, which suggests that it was Berezovsky who wanted to sell for $150m, and eventually the price was raised to $175m. This was still a minute sum compared with the channel’s market value, it is claimed.
Patarkatsishvili’s widow Inna Gudavadze became embroiled in the row after her husband died unexpectedly in February 2008. Berezovsky and Patarkatsishvili had announced publicly that they were to split their assets in 2001. However, Berezovsky now claims that was merely a ruse designed to lift political pressure being put on them by the Kremlin. He claims he is owed half of the Patarkatsishvili estate.
According to Abramovich, the precise details surrounding Berezovsky’s claims are vague and as such should be struck out. Any deals allegedly made between the three oligarchs were never agreed contractually, claims Abramovich.
At the strike-out hearing, which began in July 2009, Popplewell told the High Court that Berezovsky’s claim lacked clarity. “We want to know where the oral threats were made so that witnesses could be called,” he said. “This is a case that cries out for a summary judgment or strike-out.”
In their skeleton argument, Berezovsky’s lawyers argued that Abramovich’s strike-out application was absurd. “The suggestion that the court should conclude that Mr Berezovsky’s claim has no realistic prospect of success on the basis of inferences from putative undisclosed documents is frankly absurd, and is another clear indication of the misguided nature of Mr Abramovich’s application,” they said.
On 10 March, just weeks before Colman J gave his decision in that case, the libel judge, Mr Justice Eady, had awarded Berezovsky £150,000 after he was falsely named on Russian state television as the man behind the murder of the former Moscow agent Alexander Litvinenko.
Berezovsky’s counsel, 5RB’s Desmond Browne QC, instructed by Carter Ruck, told the court that the Russian State Television and Radio Broadcasting Company (RTR) had declined to take part in the proceedings.
“I can say unequivocally that there is no evidence before me that Mr Berezovsky had any part in the murder of Mr Litvinenko,” Eady J stated bluntly in his ruling. “Nor, for that matter, do I see any basis for reasonable grounds to suspect him of it.”
It was a good month for Berezovsky. Just weeks later Colman J said the “complexity and multiplicity of issues” of his claim meant it was “exactly the kind of claim” that is unsuitable for applications under [the rules that give judges power to strike out claims].”
Yacht a palaver
Berezovsky was back in court in July after Edmiston & Company claimed he owed the yacht-broking company commission for its role in selling his 360ft vessel Darius to one of the world’s richest Arab dynasties, the Al Futtaim family. Berezovsky had denied that Edmiston & Company had been an “effective cause” of the sale and disputed the broker’s right to commission.
Hill Dickinson partner Russell Gardner instructed 7KBW’s Stephen Hofmeyr QC to act for Edmiston & Company.
Mr Justice Field ruled in favour of Edmiston & Company, stating that Berezovsky had found himself “in a difficult situation” as deadlines approached for the sixth and seventh payments on the unfinished yacht.
“He didn’t have the ready means to pay the shipbuilding contract instalments as they fell due, and if he failed to pay any of them by the due date he stood to lose at least a substantial part of his investment in the yacht,” the judge added.
The judge said Berezovsky had instructed Nicholas Edmiston, founder of the yacht-broking firm, to market the part-finished boat “on a discreet basis”, and that without him the sale would not have gone through.
The ruling was handed down just weeks after Berezovsky’s wife, Galina, was granted a divorce from the billionaire, leaving her able to claim £100m of his estate. The former Mrs Berezovsky instructed Mishcon de Reya to represent her interests. The couple were married for 18 years but had been separated for 16.
Berezovsky’s legal battle with Abramovich will be epic, but it is not his only fight. The one-man litigation whirlwind has blown through the High Court, and the storm he has created is giving lawyers plenty to clean up.