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. Last Updated: 07/27/2016

MOST Group Plans To Sue Over MinFins

Media conglomerate Media-MOST will file cross-default charges against the government in international courts on up to $400 million of sovereign debts, company officials said Monday.

The media holding company, which enjoyed a far cozier relationship with the government back in 1996, when it helped back President Boris Yeltsin's re-election bid, has decided to sue the government in foreign courts because of its frustration with the Russian court system.

"It's not possible to get a fair decision here in Russia. Judges are not free. So we made the decision to appeal to international courts to enforce payment," said Dmitry Ostalsky, spokesman for Media-MOST.

The media group will file for up to $400 million of its portfolio of third, fourth and fifth tranche MinFin debt. Affiliated financial institution MOST-Bank will also file for $100 million worth of holdings in the debt, Ostalsky said.

Officials from the Finance Ministry were unavailable for comment Monday.

The Finance Ministry defaulted on payment of $1.3 billion on MinFin 3s when the paper matured in May this year, saying it could not pay all the debts incurred by the Soviet Union. The first five tranches of MinFin paper were issued by the government against corporate hard currency accounts blocked in state-owned banks after the collapse of the Soviet Union. So far MinFin 3s are the only defaulted paper.

If Media-MOST were to win rulings for a cross default on MinFin 4 and 5 debts, that would raise the prospect of the government having to meet billions of dollars in debt falling due at once.

Legal expert Sergei Avramov, an associate at law firm Baker and MacKenzie, said Media-MOST had better chances of suing the government in international courts.

Other holders of MinFin 3 debt, both corporate and private, have accused domestic courts of deliberately delaying proceedings on Finance Ministry orders.

"According to Russian law, we should win the case against the government, but it's a question of how long that may take," said Valeria Selevanova, chief lawyer at law firm Rusatommet, which is acting on behalf of 10 clients for a total of about $100 million in MinFins.

"There have been many cases of hearings being postponed because of bomb scares in court buildings," she added.

Other private holders have gone as far as to accuse the ministry of ordering assaults on individuals to pressure them into withdrawing their lawsuits.

Moscow resident Ivan Belousov, the head of a group of private bondholders was detained by police Sunday for not carrying any documentation. The incident took place shortly before a recorded interview with him was aired on NTV's weekly political analysis show, Itogi, that gave full vent to his claims the ministry had a vendetta against him.

A close associate and fellow MinFin holder, Alexander Tingayev, said Belousov was beaten so badly by police while he was being detained that he was later taken to hospital.

An official at the Koptevskoye police station where Belousov had been detained denied that he had been beaten. The official, who refused to be identified, did say that police had later taken Belousov to hospital - not because he was injured but because he was drunk.

Finance Minister Mikhail Kasyanov denied Monday that the restructuring scheme for MinFin 3s was confiscatory and had been drawn up unfairly.

Kasyanov denied on NTV's "Hero of the Day" program rumors that his ministry had tried to influence court rulings on MinFin 3 suits, but he did say a decision to overturn a previous ruling against the ministry was "in state interests."

The government could not break the line drawn between not meeting Soviet debts and meeting Russian debt to satisfy the a few individuals' claims, he said. Holders had the choice of keeping dollar paper and waiting until 2007 before receiving any funds, or swapping the debt for ruble paper and receiving coupon payments starting next year, he added.