The Russian billionaire personally appeared in court to testify. Since 2005, the amount of claims in the case, which has roots in the late 1990s, has almost tripled from about $17.5 million to about $46.8 million.
On Wednesday, May 2, the civil court in the Swiss district of Sarin (canton of Freiburg) began a public hearing on the EBRD lawsuit against Roman Abramovich, his partner Yevgeny Shvidler and Gazprom neft. Abramovich personally appeared in court and testified, reports AP. The amount of the claims today reaches 46 million Swiss francs (about $46.8 million) excluding interest.
The public debate comes 13 years after the lawsuit was filed as a result of a conflict between the EBRD and Runicom. The latter was Sibneft’s exclusive export agent in the late 1990s (72.7 percent of the company was sold in late 2005 to Gazprom for $13 billion). The hearing is expected to be attended by 17 lawyers and will require special security measures, 24 heures wrote.
How it all began
Before the 1998 financial crisis, the EBRD gave the Russian bank SBS-Agro several loans worth a total of $35 million, all under the small and medium-sized business aid program. The bank, which had the right to dispose of these funds, gave one of them, for about $15 million, to Runicom SA of Switzerland. A few days before the August default, the bank ceased to exist. As a result of the negotiations, the EBRD obtained the rights to claim the loan from SBS Agro to Runicom SA.
Not having received this money, in 1999 the EBRD filed a lawsuit against the oil trader. The legal battle ended in 2002 with the bank’s victory in the Supreme Arbitration Court of Russia, which decided to pay $17.5 million. The court made its decision despite the fact that the defendant had provided the documents for repayment of the debt back in 1998. The High Arbitration Court ruling was issued, as former Millhouse CEO Yevgeny Tannenbaum claimed, after a letter supposedly sent by the EBRD to the court on the eve of the hearing. The letter stated that a ruling in favor of the bank would help improve the investment climate in Russia.
But the EBRD was never able to recover the money. In 2003, liquidation proceedings began against Runicom SA. As the Financial Times wrote, Sibneft “for tax reasons” changed it for another oil trader – Runicom Ltd. registered in Gibraltar.
In 2004, the FT, citing Eugene Tannenbaum, wrote that the EBRD had not conducted due diligence when accepting the rights of claim on the Runicom loan. This prevented the bank from finding out that the loan to SBS-Agro had already been closed. A Forbes source familiar with the details of the case stressed that the EBRD “has always been extremely serious about reviewing all loan agreements and did high-class due diligence when no one in Russia had heard those words yet”. “Representatives of the bank, disposing of the money of European taxpayers, have always been very careful about checking all the documents,” the Forbes interlocutor said. – The amount of the claims, though small for the Russian economy, but its return is crucial for the EBRD.”
Chances of success
When considering the new claim in Switzerland, the court will proceed from the fact that the Russian court sided with the bank and confirmed the debt, points out Yulia Romanova, head of the group of the law firm Bryan Cave Leighton Paisner Russia.
“It will be much harder to prove the fact that Runicom was controlled by Abramovich and Shvidler both before and after 1998, although this is the reason why they are defendants in the case in Switzerland,” Romanova says. – In this respect the proceedings in Swiss jurisdiction are convenient, firstly, due to the long limitation period and, secondly, due to the fact that the court treats seriously and takes into account also indirect evidences of control”. The whole question is what kind of evidence has been found throughout the preparation of the lawsuit, she adds.
Earlier, the EBRD representatives cited as indirect evidence, in particular, copies of payment documents for cosmetology services of Roman Abramovich’s former wife Irina, sent from Sibneft’s fax machine on the letterhead of Runicom SA in 1997. In 1999, according to the EBRD, Runicom SA partially paid a hotel bill for Abramovich and his partner Alexander Mamut #41 .
Claims against controlling persons and de facto directors in order to impose responsibility for bringing a company to bankruptcy are provided for by most legal systems, including the Swiss law, says Alexander Pakhomov, managing partner of the company Law and Business Management Company. “It is interesting that information about Roman Abramovich’s control was published back in the early 2000s, and Runicom appeared in the court proceedings between Abramovich and Berezovsky in 2007,” he notes. – There is a lot of evidence in the press about the affiliation of the defendants with Runicom SA, but their direct relation to the management of the company and issuance of binding orders is to be proved in court, which will not be easy to do, given the prescription of the case and liquidation of the main borrower – SBS-Agro Bank”.
Theoretically, there is a possibility to seize some assets of the defendants, says Yulia Romanova. “But the whole question is what kind of assets it can extend to. It is not certain that the decisions of the Swiss court will be automatically recognized in the EU,” she concludes.
