Diplomatic relations between the British government and its Russian counterpart have become increasingly frosty in recent years. This has not been helped by the UK’s apparent willingness to shelter oligarchs that have fallen foul of the Russian government.
For an elite band of City firms, however, relations have boomed as Russia’s wealthiest businessmen prove that they love the English legal system almost as much as they love oil. There are number of reason for this romance.
According to one London partner, litigating in the High Court is almost seen as a status symbol. “The more proceedings that are issued in the High Court, the more kudos and status an oligarch has,” the partner says.
Others, however, believe it is the quality of the UK legal system that has attracted some of the world’s richest businessmen to London.
Addleshaw Goddard partner Mark Hastings, who has spent the last year representing self-exiled Russian oligarch Boris Berezovsky in his $5bn (£3.02bn) case against Chelsea FC owner Roman Abramovich, comments: “Over the past few years, London has 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.”
The Berezovsky case
Berezovsky’s case against Abramovich is the sort of stuff spy novels are made of (although given recent history’s tally of one murder and numerous deportations involving Russian and UK spies on each other’s soil, it might be more tactful to use another analogy). The tale begins in the immediate aftermath of the break-up of the Soviet regime, when a number of savvy businessmen brought up the country’s assets through government auctions. Abramovich and Berezovsky were among the big-time buyers. In 1995, together with Georgia’s then richest man Arkady ‘Badri’ Patarkatsishvili, they bought up the Russian oil company Sibneft for a mere $100m. When it was valued on the open market two years later it was worth $5bn.
With his wealth growing, Berezovsky began to gain political power. Ultimately this led to his fall from grace in Russian oligarch circles. Despite being a one-time confidant of President Boris Yeltsin, Berezovsky found himself out of favour when President Vladimir Putin came to power.
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 and, 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.
In his response to the claims, Abramovich refused to acknowledge such threats. His legal team also refused 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 Britain, where he was granted political asylum.
At around this time, the claimant says he was still in business with Abramovich and Patarkatsishvili, although Abramovich was moving ever closer to the Putin regime. The defendant rejects this allegation but concedes to having a good working relationship with Putin.
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. They suggest 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 channel’s market value, it is claimed.
It is also alleged by Berezovsky that the three agreed to purchase significant shareholdings in the Russian oil company Sibneft, which was privatised in 1995. According to Abramovich, the precise details surrounding Berezovsky’s claims are vague and as such should be struck out by the Commercial Court. Deals allegedly made between the three oligarchs were never contractually agreed. As such, Abramovich’s lawyers are seeking to have the claims thrown out of the Commercial Court because they are without merit.
Instructed by Skadden Arps Slate Meagher & Flom partner Paul Mitchard QC for Abramovich, Brick Court’s Andrew Popplewell QC went to the court in July to demand that Addleshaw provides more detail about Berezovsky’s claim.
Popplewell said: “We want to know when the oral threats were made so that witnesses could be called if Mr Berezovsky says they were there. This is basic information that should have been sent to us.”
He continued: “This is a case that cries out for a summary judgment or strike-out.”
In his long list of allegations, Berezovsky suggests that after purchasing shares in Sibneft he had become more politically active while Patarkatsishvili became more involved with the television channel ORT. It was because of this that the three agreed to put the shares under Abramovich’s control.
“We want to know when the beneficial trust was created,” Popplewell told Justice Anthony Colman in July.
In setting out a skeleton argument for the hearing, One Essex Court’s Laurence Rabinowitz QC dismisses the call for a strike-out, calling it “misconceived, for reasons both of law and principle”.
It is argued that it is not for the court to decide to draw inferences from undisclosed evidence in a case, which is yet to proceed to full trial.
If the court were to accept such arguments around privileged documents, it is suggested that this should also apply to Abramovich’s legal team, which is alleged to have failed to disclose relevant material.
“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,” the skeleton argument states bluntly.
The strike-out hearing was originally listed for five days, but that was then extended to three weeks.
“A three-week strike-out hearing in the commercial court is almost unprecedented,” a source close to the case tells The Lawyer. “It just goes to show the enormity of the situation.”
Another source says because the hearing escalated to three weeks, Abramovich’s lawyers had to address the issue of counsel. The source says Popplewell became unavailable for the continued hearing and in August Skadden turned instead to Fountain Court’s Michael Brindle QC.
With the stakes running high for both claimant and defendant, the legal teams involved will be hoping for a speedy judgment. For City firms the length and value of such claims make them an attractive proposition.
As one clerk highlights: “People are always going nuts about the Middle East and what opportunities it has to offer. Russia and the CIS has huge oil and gas reserves, and that will create some interesting work for the lawyers who manage to corner this market.”
Berezovsky appears to have created a legal market all of his own. Patarkatsishvili suddenly died in February 2008, leaving an estate to be battled over. Berezovsky is claiming he is owed half of his former partner’s $12bn investment portfolio and has launched a High Court suit against his widow Inna Gudavadze.
If appearing in the High Court is considered a status symbol, Berezovsky has to be the Rolls-Royce of litigators.