Wild East comes to London (again)

If London’s chancery and commercial courts have increasingly become media circus events recently much of the blame can be laid at the revolving door of Russian oligarchs


If that means airing their dirty laundry in public, then so be it.

The latest bun fight – set to play out this week at the Royal Courts of Justice – pits tycoon, Michael Cherney against Oleg Deripaska, CEO and largest shareholder of RUSAL, the world’s top aluminium producer.

It comes as UK-exiled media baron and one time Vladimir Putin supporter, Boris Berezovsky and Chelsea Football Club owner, Roman Abramovich, await judgement on their recent $7.75bn clash over Berezovsky’s claim Abramovich had ‘intimidated’ him into selling shares in Russian oil company Sibneft for a fraction of their true worth.

At issue for Cherney and Derispaska though is a $1.2bn stake in RUSAL – Cherney claiming he and Deripaska were business partners and signed a document in London’s Lanesborough Hotel in 2001 giving Cherney 13.2 percent in the now publicly-listed RUSAL. Deripaska denies any such agreement.

For Cherney, the diminishing size of his stake reflects a more than halving of RUSAL’s share price since its April 2011 high, following a slump in aluminium prices and debt issues.

Cherney, who like Deripaska amassed much of his fortune from aluminium, is expected to give evidence via videolink from Israel, where he now lives, because of an outstanding arrest warrant in Spain where he’s wanted for questioning as part of a money laundering investigation. Coming to London would have left him open to extradition.

Deripaska for his part will claim he was paying Cherney off and was the victim of a protection racket agreement, known locally in Russia as a krysha (translated as roof) – Cherney himself allegedly connected to Russian criminal syndicates.

What isn’t in dispute is that a $250m sum changed hands in the Lanesborough that day.

The case is expected to be adjourned – once opening arguments have been submitted – until September, when witnesses will be called.

Deripaska is well known in the West, hitting the headlines back in October 2008 when George Osborne, now the UK’s Finance Minster, was forced to confirm his political party had rejected a donation from a company owned by Deripaska.

This revelation came after earlier press reports that a donation had been sought and that Osborne had met previously met Deripaska five times.

Deripaska had indicated through his friend, Nat Rothschild (of banking family fame), that he could be interested in making a donation.

If the current case, originally filed in 2006, marks one of the biggest actions to be heard before a London court in recent years, it also offers, yet again, an insight into the chaotic, often lawless privatisation environment of the early 1990’s, following the collapse of the Soviet Union.

With an estimated 60 percent of disputes in London’s chancery and commercial courts initiated by East Europeans, including Russians, the authorities in Moscow are more than interested observers.

Earlier this year, Anton Ivanov, head of Russia’s Supreme Arbitrazh (Economic) Court said the practice of Russian businessmen bringing disputes before mainly London courts meant special legislation was needed to protect Russia from ‘encroachments upon its sovereignty.’

Premier Dmitry Medvedev concurred, describing Ivanov’s plan as a ‘civilised means of resolving issues’. Which is a more polite way of saying that the assets of those oligarchs still supportive of the Kremlin need to be protected at all costs. That’s easier said than done when many of the assets are held outside Russia and beyond Moscow’s jurisdiction.