Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Lomonosov Renationalization Ruling Suspended

A federal court has suspended a lower court's ruling to renationalize St. Petersburg's Lomonosov Porcelain Factory ahead of a hearing over an appeal lodged by foreign investors, major plant shareholder Delta Capital Management said Tuesday.

The federal arbitration court of the northwestern region is scheduled Feb. 17 to hear Delta Capital Management's appeal over an earlier St. Petersburg arbitration court decision permitting the State Property Ministry to renationalize some of Lomonosov's property.

"We were very pleased to see that the court suspended the ruling," said Douglas Boyce, the recently elected director of the factory and a vice president of Delta Capital Management.

"But we still have to fight hard to see that our property ... is not renationalized," he said by telephone from St. Petersburg. "We are hopeful that we will get a fair trial and an objective review of the law."

Foreign shareholders, who own an 84 percent stake in the 255-year-old Lomonosov, are fighting an Oct. 11 ruling that declared the 1993 privatization of Lomonosov illegal and effectively left them holding worthless shares. The court stood by its decision in a Dec. 21 appeal.

The federal court will now examine how the lower court reached its decision and if it followed the rule of law.

Despite the legality of the claim to the factory by investors such as U.S. company Delta Capital Management and Wall Street buyout giant Kohlberg Kravis Roberts, the Lomonosov struggle is fraught with political issues. The renationalization ruling was made after factory management and the State Property Ministry asked the court to take back Lomonosov, saying Russia was losing a part of its heritage to the West.

"We expect any decision made by the court will be very political," Boyce said of the February hearing. "There are many letters flying around [acting President Vladimir] Putin [concerning the factory]."

Still, Western shareholders have made progress in the battle for control of the factory, founded by one of Tsar Peter the Great's daughters in 1744. Last week, investors voted in a foreign-shareholder-controlled board of directors at the factory's annual shareholders meeting and named Boyce as Lomonosov director.

But plant director Yevgeny Barkov on Tuesday continued to refuse to recognize the validity of the shareholders meeting and to step down as requested by the new board, Delta Capital Management officials said.

Barkov could "expect to be the recipient of personal legal action" in the near future, Boyce said.

Boyce was barred from the factory Friday, the day after the shareholders meeting, but did hold talks with plant officials in the factory Monday, he said. Foreign shareholders laid out their legal rights to the factory and discussed how to implement a transition in management, Boyce said.

Barkov did not attend the talks, citing a busy schedule, Boyce said.

Barkov was unavailable for comment Tuesday.

Further meetings between the two sides are planned for this and the upcoming weeks, but the struggle over Lomonosov could drag on for months, Delta Capital Management officials said.

"We are miles and miles and miles away from getting into the factory," said Alistair Stobie, newly elected chairman of the board at Lomonosov and a vice president of Delta Capital Management. "The director controls the plant and we are not of the confrontation nature.

"We want to translate what appears to be a little support for us into being able to enter the plant," he said.

Meanwhile, St. Petersburg City Hall on Monday voiced its support for the foreign shareholders in their dispute.

"There is no conflict between the investors and the St. Petersburg administration," said Valery Nazarov, chairman of the City Property Committee. "The investment fund is involved in several other projects in St. Petersburg that cost from $3 million to $7 million, and there is nothing wrong going on with these projects."

Delta Capital Management is also helping finance the television station TV-3 and the construction of a RadissonHotel at 49 Nevsky Prospekt.

- Staff writer Galina Stolyarova contributed to this story from St. Petersburg.