MOSCOW, August 31 - RAPSI, Ingrid Burke.Russian oligarch Roman Abramovich won big today in a England and Wales High Court verdict that could have cost him billions. Holding against Boris Berezovsky on both counts of his multi-billion dollar claim, Judge Gloster held that, “It follows that I dismiss Mr. Berezovsky's claims both in relation to Sibneft and in relation to RusAl in their entirety. I direct that any consequential matters arising out of this judgment should be addressed on a subsequent occasion, when counsel have had an opportunity to consider this judgment and supply me with a draft form of order reflecting my findings.”
Berezovsky filed two claims against Abramovich amounting to approximately $5 billion in connection with losses he allegedly accrued when business relations soured between the two parties.
The first claim relates to oil giant Sibneft. The first claim alleged that Berezovsky and close business partner Badri Patarkatsishvili created two oral contracts with Abramovich in 1995 and 1996. Berezovsky alleges that the terms of the agreement stipulated a 50/50 share in ownership interests and profits. Berezovsky claims that he consistently received large sums of money from Abramovich between 1996 and 2000. He alleges that then between 2000 and 2001, he received a series of threats from Abramovich and the Kremlin effectively forcing him to sell his interest in Sibneft for the deeply undervalued rate of $1.3 billion. For this, he sought $5 billion in damages from Abramovich.
The second claim relates to aluminum giant RusAL. Berezovsky claims that between 1998 and 1999 he, Patarkatsishvili, and Abramovich began together to acquire assets in Russian aluminum. In 1999, an oral agreement was allegedly reached between the parties applying the same business terms as has been agreed upon in the purported 1995 agreement. Somewhere between 1999 and 2000, Berezovsky claims that he, Patarkatsishvili, and Abramovich agreed with Oleg Diripaska to pool their aluminum assets. This merger deal, allegedly finalized orally at London’s Dorchester Hotel within that timeframe, stipulated that Diripaska would have a 50% ownership interest in the resulting aluminum giant, and that Berezovsky, Patarkatsishvili, and Abramovich would collectively share the other 50%. Berezovsky claims that Abramovich represented his and Patarkatsishvili ‘s interests in trust. According to Berezovsky, they agreed that none among them would sell any of his shares without consulting the others. In 2003, Abramovich sold a 25% RusAL share. Berezovsky filed this claim under the theory of breach of contract and/or trust and/or fiduciary duty.
On the difficulties posed in adjudicating the case
Before launching into her rationale in holding for Abramovich, Judge Gloster pointed to several key obstacles she faced in assessing the case.
First, the case had centered on four oral agreements with perilously little in the way of corroborating evidence. These purported agreements were largely unsupported by notes, memos, etc. The documentary evidence that was offered tended to have been dated much later than the oral agreements were purported to have been made. What was submitted was generally quite vague.
Much of the oral evidence submitted was too old to have been reliable, considering the likelihood that details have been forgotten over the years.
The lawyering on both sides was a bit too top-notch in evidentiary terms. Such extensive lawyering led to a shifting of the evidence, and to seemingly doctored witness testimonies.
Finally, this case largely boiled town to a determination of facts, rather than of substantive legal issues. In light of the aforementioned impediments, the judge had the sense it all boiled down to Berezovsky’s word against Abramovich’s.
On the credibility of Berezovsky and Abramovich
Judge Gloster is made clear the fact that she was not thoroughly impressed by Berezovsky’s case, stating, “On my analysis of the entirety of the evidence, I found Mr. Berezovsky an unimpressive, and inherently unreliable, witness, who regarded truth as a transitory, flexible concept, which could be moulded to suit his current purposes.” She later added, “I regret to say the bottom line of my analysis of Mr. Berezovsky’s credibility is that he would have said almost anything to support his case.”
The judge strongly favored Abramovich, recounting fondly, “There was a marked contrast between the manner in which Mr. Berezovsky gave his evidence and that in which Mr. Abramovich did so. Mr. Abramovich gave careful and thoughtful answers, which were focused on the specific issues about which he was being questioned.” She continued, “In conclusion I found Mr. Abramovich to be a truthful, and on the whole reliable, witness.”
On the Sibneft claim
Judge Gloster began by denying the existence of the oral agreements allegedly established by Abramovich, Berezovsky, and Patarkatsishvili in 1995 and 1996, at least of any complying with the nature of and governed by the terms asserted by Berezovsky.
She went on to explain that even if the 1995 agreement had in fact existed, it would not have been considered binding upon the parties under Russian law. The agreement’s terms lacked sufficient certainty to govern in the case of a dispute. Furthermore, the judge explained that, “there was no intention to create legal relations, the intention being that it should be binding in honour only.”
To the claim that Abramovich had intimidated Berezovsky into selling his Sibneft shares, Judge Gloster reasoned that the charge was baseless, and that Abramovich had never threatened Berezovsky—either explicitly or implicitly—with the intention of forcing him to sell shares he allegedly owned in Sibneft. In a similar vein, the judge refused to believe that President Putin had threatened Berezovsky in order to force his sale of shares in 2000.
Judge Gloster engaged in a lengthy analysis of the question of whether Berezovsky sold his purported interest in Sibneft to an investment firm called Devonia Investments Ltd. and Sheikh Sultan Crown Prince of Abu Dhabi, Sheikh Sultan Bin Khalifa Al Nahyan.
First, she began with a denial of the sales agreement’s legitimacy, explaining that, “It was a sham agreement, entered into for the purposes of generating documentation that would give a false impression that a genuine commercial transaction had been entered into, so as to satisfy the money-laundering requirements of the UK bank, into accounts at which the $1.3 billion paid by Mr. Abramovich to Mr. Berezovsky and Mr. Patarkatsishvili was, ultimately, going to be paid.”
Second, the judge asserted that Abramovich was not involved in the sales agreement, and had no reason to be savvy to sales terms.
Third, contrary to the terms of the agreement, there was never any intention that it would transfer shares being purchased.
Fourth, in fact no such interests were ever transferred as a result of the purported sales agreement.
Based on her finding that it had been a sham document, the judge held that it lent no legitimacy to the oral agreements purportedly established between the parties in 1995 and 1996. She added that the documents submitted with the intent of evidencing the sales agreement did nothing to enhance her view of Berezovsky’s credibility.
Based on her findings that the oral agreements lacked validity, the judge found that it would be irrelevant to answer claims relating to choice of law and other issues connected with Berezovsky’s tort claim for intimidation.
On the Rusal claim
Judge Gloster began with the conclusion that no agreements were made between Abramovich and Berezovsky, either in 1995 or 1999, that can be construed as having granted Berezovsky an interest in any of the pre-merger aluminum assets.
Likewise, she held that no agreement was made at the Dorchester Hotel that can be seen as having granted Berezovsky or Patarkatsishvili a share in the aluminum business arising from the merger between the pre-merger aluminum assets and Deripska’s aluminum assets. She added, “The evidence relating to this issue supports my conclusion that the relationship between Mr. Berezovsky and Mr. Abramovich was based upon a protection, or krysha, type relationship and not on any contractually binding agreement between the two men.”
Having found that Berezovsky and Patarkatsishvili lacked any interest in the pre-merger aluminum assets, Judge Gloster found it would be unnecessary to consider whether Abramovich had held such interest in trust under English law on behalf of Berezovsky and Patarkatsishvili. On similar bases, she withheld consideration of choice of law issues relating to the Dorchester hotel deal.
She held that no constructive trust can be read into the agreement based on the fact that under English law, because Berezovsky and Patarkatsishvili lacked any interest in the pre-merger assets, they cannot be seen as having acquired any interest by virtue of a resulting or constructive trust.
Furthermore, Judge Gloster found that “No such agreement to the effect that none of Mr. Deripaska, Mr. Abramovich Mr. Berezovsky or Mr. Patarkatsishvili would be entitled to sell his interest in the merged business without the consent of the others, was concluded at the Dorchester Hotel meeting.”
Thus she held that it would be irrelevant to consider the propriety of Abramovich’s 2003 sale of 25% of the Rusal.