German Wins Right To Kremlin Property

A German court has awarded an entrepreneur seeking millions of euros from the Russian government the right to auction off Kremlin property in the city of Cologne as compensation for a company he lost in St. Petersburg in 1994.

The 3,570-square-meter estate in Cologne, which formerly housed the Soviet trade representation in West Germany consisting of three multistory apartment buildings, could be worth around 20 million euros ($30.8 million), the entrepreneur, Franz Sedelmayer, said in a telephone interview Thursday.

The ruling by Cologne's higher court might open the floodgates in Germany for debt claims against the Russian government, legal experts said.

Sedelmayer has been fighting for years for compensation for assets he says he lost after the Kremlin's property department confiscated his St. Petersburg-based security company, together with its luxury mansion headquarters.

He also said that President Vladimir Putin -- at the time a deputy to St. Petersburg Mayor Anatoly Sobchak -- had advised him to sue the Kremlin.

"I got on very well with Putin then," Sedelmayer said by telephone from Pullach, Germany.

His lawyer, Wolfgang Heinicke, said the ruling was unprecedented.

"This is the first time Russian state property will be forcibly fully auctioned," he said by telephone from Munich.

The auction, administered by the local judiciary, could begin in the next few months, he said.

Viktor Khrekov, spokesman for the department, said he could not comment on the ruling before it had been examined by lawyers.

"So far, we have not even officially received the decision," he said Thursday afternoon. "We will look into it carefully once we get it."

Legal experts said the ruling could have a profound effect on similar cases.

"This kind of decision may inspire certain creditors to proceed with claims in Germany," said Yan Dasgupta, a partner with Moscow-based law firm Gridnev & Partners.

Heinicke, Sedelmayer's lawyer, said one party likely to be interested in the decision was the Swiss trading company Noga, which has been seeking more than $60 million from Russia over an abortive oil-for-food deal in 1991.

"It is strange that they have not been in touch with us," he said.

Attempts to reach Noga at its offices were unsuccessful Thursday.

Like Noga, Sedelmayer has tried to seize Russian assets wherever they appear, including a jet airliner at a Berlin air show.

Khrekov, the Presidential Property Department spokesman, dismissed the lawyers' suggestions.

"They are all crystal-ball gazers," he said.

The Cologne decision is based on a 4.9 million euro arbitration award that Sedelmayer won in Stockholm, Sweden, in 1998. He said that, with interest, his claim today amounts to 6.5 million euros, or $10 million).

He said he was planning a new case for a much larger sum to recoup the potential earnings from his expropriated business.