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CHELYABINSK COURT RULING RELEASED — RASHNIKOV GETS HIS COMEUPPANCE FROM RUSSIAN JUDGE

By John Helmer, Moscow

The unprecedented display of judicial power against the steel oligarch, Victor Rashnikov, on his home turf continued yesterday and today.

Yesterday, at a hearing in the Chelyabinsk Arbitrazh Court Judge Natalia Bulavintseva took a few minutes without the attendance of lawyers, plaintiff Elena Egorova, or executives of Magnitogorsk Metallurgical Combine (MMK), to dismiss an urgent motion from Rashnikov to lift an injunction preventing his completing his A$554 million (US$571 million) takeover of Flinders Mines, an iron-ore prospector in Western Australia.

This morning, not twenty-four hours later, Judge Bulavintseva issued her ruling [1]. As was the case in the two previous rulings the judge has issued in the case, this one runs to six pages. 666 – a devilishly unlucky number for Rashnikov and his company; unless, as a growing number of sources in Moscow believes, Rashnikov has been ordered by a senior government official to find a way to cancel his Australian transaction, and conserve MMK’s investible cash and borrowing capacity for Russian iron-ore projects instead.

According to one of these sources, “there are two big differences between Rashnikov and his Australian iron-ore project and [Alexei] Mordashov’s Putu iron-ore iron-ore project in Liberia. One is that west Africa is geopolitically important to Russia; Australia isn’t. The other is that Mordashov asked for [President-elect Vladimir] Putin’s permission.”

The latest ruling from the regional court reveals for the first time that MMK has accused Egorova of “present[ing] false information concerning the financial condition of JSC MMK”. Exactly what this refers to has not yet been disclosed, as neither the text of Egorova’s submission on March 29 nor MMK’s court filing on April 9 has been released on the court website. Egorova cannot be found; MMK refuses to answer questions about the case or its defence.

According to the judge’s recital, Egorova the plaintiff is accused of “abus[ing] his [her] rights as a shareholder of the company since the acquisition of shares of a company investment is a measure by the respondent for further profit.” The latter implies the allegation that Egorova bought shares in order to challenge Rashnikov and greenmail MMK.

The judge responds that “having examined the available evidence in the case, [the court] concludes that there is no reason to cancel the court-adopted security measures [freeze order].”

There follows a brief, but likely the most profound lesson in Russian constitutional democracy that Rashnikov has ever received. “The court presumes,” writes Bulavintseva, “that the right to petition the court to invalidate the decisions of the company [is] provided to any shareholder of the company regardless of the number and size of its shares, while the court’s consideration of an application for interim measures [injunctions] is based on the equality of all before the law , [and] evaluation of the plaintiff’s right to sue.”

The judgement goes on to inform MMK’s lawyers that their arguments for lifting the injunction have been mistimed and misapplied; they belong, Bulavintseva rules, in the next hearing scheduled for April 25. “The validity of his [her] arguments (abuse of discretion) can be verified in court when considering the merits of the case… the court considers [these] issues that should be ascertained when considering the merits of the case.”

In the final section of today’s judgement, MMK is reproved for failing to provide “any evidence that the circumstances have ceased to exist, which gave rise to the adoption of these interim measures, or that there are new circumstances giving rise to the need for their removal, such as the execution of the transaction , the presence of obstacles in the implementation of the defendant’s business operations which have occurred since the court ordered the interim measures. Also, the defendant presented no evidence to support the argument that in the acquisition of shares in Flinders Mines Limited on 25/11/2011…[there are] in the [acquisition] agreement, conditions that can lead to negative consequences for JSC [Joint Stock Company] MMK. In such circumstances, the Court finds no reason to meet the request for cancellation of security for the claim [the injunction].”

The judge told MMK that it has the right to come back to court if it can improve on its arguments, and it has a month in which to appeal the ruling to a higher level.