Court's Comments Offend Deripaska

APBasic Element chief Oleg Deripaska said the British judge's decision was a poor reflection on Russia's justice system.
Oleg Deripaska defended the Russian judiciary on Friday, saying he was "offended" by comments from a London High Court judge who ruled that possible dangers in Russia meant a $4 billion lawsuit against him could proceed in Britain.

Justice Christopher Clarke said Thursday that Michael Cherney, a figure in 1990s privatizations of the Russian aluminum industry, could sue Deripaska in London because he made a "good arguable case" of the risks of holding the proceedings in Russia, such as "assassination, arrest on trumped-up charges, and lack of a fair trial."

Deripaska, Russia's richest man, blasted the judge's characterization of the Russian legal system and said he was "seeking leave to appeal," according to a statement from the supervisory board of his investment company, Basic Element.

"As a Russian citizen, Mr. Deripaska is offended by the pejorative claims made by the English court about the Russian judicial system," the statement said. "Such pejorative statements are particularly inappropriate at a time when the Russian Federation has made substantial progress in strengthening its judicial system."

Another hearing will be held this month, Cherney spokeswoman Jennifer Morgan said in an e-mail.

"The timing is not yet fixed for the case progressing, and it will depend on future procedural hearings. The next such hearing is expected later in July."

Cherney, born as Mikhail Chernoi, first filed the suit in November 2006. Now he claims that Deripaska owes him at least $4 billion for a 13.2 percent stake in United Company RusAl, the world's biggest aluminum producer.

He says he helped Deripaska's business and opened doors for him into the murky and chaotic world of the just-privatized aluminum industry in the 1990s.

Deripaska said in a witness statement in April that Cherney had never been his business partner in the "commercial and legal sense of the word."

Cherney says he met Deripaska in 1993 and soon after helped him get a job as an executive at a smelter in Sayanogorsk, in the republic of Khakasia. Fearing violence, Cherney moved to Israel in 1994, where he still lives.

Deripaska and Cherney each owned 50 percent in Siberian Aluminum, or SibAl, until 1998, when they both diminished their stakes to 40 percent. Anton Malevsky and Sergei Popov acquired 10 percent stakes, according to a copy of the court's ruling.

SibAl then merged with the aluminum assets of Sibneft, owned by Roman Abramovich, Boris Berezovsky and Badri Patarkatsishvili, to form Russian Aluminum, or RusAl. SibAl and Sibneft each took 50 percent stakes in the new company. Cherney said he was entitled to 20 percent of RusAl after the deal.

After RusAl merged with coal miner SUAL and the alumina assets of Glencore in March 2007, Cherney claimed 13.2 percent in the resulting firm, United Company RusAl. That stake now amounts to $4.35 billion.

At the heart of the conflict are several agreements made in a London hotel in 2001.

According to the court documents, Deripaska says he agreed to pay Cherney $250 million up front for his stake in SibAl. Cherney says Deripaska was also obligated to hold 20 percent of Russian Aluminum's shares for him and sell them in a two-year window from 2005 to 2007 on his behalf. Deripaska says the shares were entitled to Malevsky, not Cherney.

Deripaska paid the $250 million, later saying Cherney and Malevsky were running a protection racket for his business. Malevsky died in a parachute accident in South Africa in 2001.

A Deripaska aide told Bloomberg in April that all financial obligations with Cherney were settled in 2001.

The High Court's ruling may become a precedent for other Russian businessmen who feel they cannot get a fair trial at home, but not everyone is convinced of the sincerity of Cherney's change in venue.

"Cherney seeks publicity, and the London High Court for him is a type of forum through which he can get his information to the Western community," said Roland Nash, chief strategist at Renaissance Capital.

"It would be hard to imagine someone going with the 1990s murky stuff to London for fairness and justice."