Friday, September 28 07:37:17
Russian billionaires Oleg Deripaska and Michael Cherney reached an 11th-hour settlement in a dispute over a billion dollar slice of aluminium giant RUSAL , shortly before they were due to give evidence in a drawn-out London court case. The case, which had been expected to run well into 2013, was due to dwell on allegations of broken promises, criminality and mob rule while shining a light on the murky carve-up of lucrative smelters in the 'wild east' of post-Soviet Siberia.
"Mr. Deripaska announces that Mr. Cherney's litigation in London against him has been terminated," a spokesperson for Deripaska said in a brief statement. "Neither party will be making any further comment in relation to the litigation or matters raised therein." Cherney's team released a nearly identical statement. Cherney, born in Ukraine, raised in Uzbekistan, Jewish by creed and living in Israel since leaving Russia in 1994, alleged that metals mogul Deripaska reneged on a deal to buy him out of their joint aluminium business, RUSAL.
Well-connected Deripaska, who controls RUSAL and is a survivor of President Vladimir Putin's crackdown on oligarchs who once wielded great political power, denied having had any such business relationship with Cherney. He alleged he was the victim of a protection racket Cherney helped orchestrate - an accusation Cherney denied. Cherney, who in 2008 won the right to bring his case against Deripaska in London's respected courts - the venue of choice for the warring Russian wealthy - was due to be cross-examined next Tuesday via video-link from Israel. An outstanding arrest warrant relating to a separate money laundering investigation prevents him from travelling to London. Lawyers were intrigued at the last-minute deal. "The experience in most of these cases is that they do go to trial because no one is willing to back down," said Philippa Charles, a litigation partner at law firm Mayer Brown. "So it's interesting that the level of publicity has perhaps focused the minds of both parties on whether or not it is actually worth having their dirty linen washed in public."
The Russian aluminium industry, like much of Russia's raw materials sector, came under the control of a few powerful oligarchs during the huge selloff of state assets that followed the collapse of communism and of the Soviet Union in 1991. The brutality of the business rivalry over aluminium smelters gave birth to the term 'aluminium wars'. Cherney's case against Deripaska had overtones of a recent battle between Russian oligarchs Boris Berezovsky and Roman Abramovich, which in August helped ensure the concept of "krysha", or roof, was established in English courts.
Berezovsky's claim for $6 billion was dismissed and Judge Elizabeth Gloster described him as an 'inherently unreliable witness'. Abramovich had said he had paid money to Berezovsky for 'krysha' services of political cover and protection, A "krysha", in Russian gangster parlance, can be either a figure who genuinely protects, in return for payment, the interests of a business in a sometimes brutal business world or it can refer to a racketeer extorting money by intimidation. The boundary between the two can, of course, be blurred. The case, which began in July when both sides published opening statements and lawyers laid out the details of their arguments in front of Judge Andrew Smith, hinged in part on what was agreed in a London hotel 11 year ago.
Cherney and Deripaska agreed they met at the Lanesborough Hotel on a March morning in 2001, that they signed one document and that Deripaska handed Cherney $250 million. Everything else, even exactly when they first met each other, was disputed. Deripaska says he made the payment to terminate a krysha arrangement with Cherney, partly because his business was now powerful enough, and his security forces strong enough, to confront criminal gangs.
Cherney says he had orally agreed a 50/50 partnership with Deripaska in 1993, which lasted until March 2001. He alleges Deripaska then agreed at the Lanesborough meeting to pay him a preliminary $250 million for his aluminium interests held by Deripaska - and also agreed to buy him out of the remainder of his stake within a few years. RUSAL, the product of a slew of takeovers and mergers mainly in Siberia, where the hydro-electric power needed to fuel hungry smelters comes cheap, has emerged as Russia's only aluminium producer. Cherney alleged a 13.2 percent stake belongs to him.
Deripaska, a former physics student who started investing in aluminium assets in 1991 who has entertained top British politicians on his 70 million pound ($114 million) yacht, says he was forced into a "krysha" after being threatened by some of the country's most powerful criminal gangs in the mid-1990s. Stories abound about such "protection" mobs attacking the wives and relatives of those who failed to do their bidding, launching fictitious criminal proceedings, violent takeovers of businesses or simply liquidating rivals and critics. ( C) Reuters