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By John Helmer, Moscow

It is now one week since Rusal obliged Norilsk Nickel to call an extraordinary meeting of shareholders for a fresh round of voting on the Norilsk Nickel board . This is the third such vote; the first was at the regular annual shareholders meeting of Norilsk Nickel on June 28, last year; the second followed on October 21. There will be a fourth when the Norilsk Nickel shareholders return for their annual general meeting in another 12 weeks.

Oleg Deripaska doesn’t like to lose. When he does, he cries foul — which is why he has been recalling the Norilsk Nickel shareholders to vote every three to six months. But as we shall shortly see, in the international court of law whose jurisdiction he trusted to endorse and assist his attack on Norilsk Nickel before last week’s vote, the UK High Court in London, the ruling there went against him also. Here is the judgement issued by Justice Sir Michael Tugendhat on March 1.

Slow reading, to be sure, but tuneful accompaniment while we wait for the official results to be announced of the Norilsk Nickel shareholder vote.

Counting this latest judgement; the three issued so far in the shareholding recovery case against him in favour of Mikhail Chernoy (Michael Cherney); the two cases Rusal brought against rivals at the Tajikistan Aluminium Plant (TadAz, Talco); and in the singular cases Rusal brought in 2003 against advisors in the Republic of Guinea, and the Reuben brothers in 2005, the score is minus 8 for Deripaska – no wins, 8 defeats. Whether British justice is as prejudicial as Deripaska has claimed when he has lost before now, the Tugendhat ruling shows that Deripaska’s continues to fail the credibility test whenever he goes before a court outside Russia.

In the latest case, Rusal asked the High Court for a ruling to compel the US lawfirm Debevoise & Plimpton, and two international banks, HSBC and Citigroup, to divulge information they were alleged to be holding. According to the Deripaska claim, they were part of an unlawful concert-party shareholding operation by Norilsk Nickel, with 8% stakeholder Trafigura, with the purpose of defeating Rusal’s claims at shareholder votes. The claims against the banks were dropped before the case was argued.

Maxim Sokov, a US-trained lawyer who is a Rusal executive, added his separate claim to the applications as Rusal’s director on the Norilsk Nickel board. The judge called his application “unprecedented”.

According to the Tugendhat judgement, Rusal has been in courts all over the world on the same issues – a separate arbitration in London, which began last August, and injunction and discovery claims in Russia, St.Kitts &Nevis, New York and Connecticut. Whether or not Deripaska’s claims reflect his lack of confidence in the Russian courts to get his way against Potanin, the High Court judge reported it was “unusual” that the controllers of two of Russia’s largest corporations (Rusal and Interros) should be in the London court for control of a third (Norilsk Nickel).

After a detailed review of the tit-for-tat measures which Rusal, Norilsk Nickel management, and Vladimir Potanin and his Interros holding (with 30% of the shares) have taken since last year’s AGM, Justice Tugendhat ruled to dismiss the Rusal claims. He added that he doubts there was wrongdoing on the defendants’ side, and nothing proved on Norilsk Nickel’s. And even if there has been wrongdoing, Tugendhat wrote in his judgement, no evidence had been presented by Rusal that the Debevoise lawyers were culpable to the extent that they should be compelled to make amends by handing over the information Rusal said it was after.

The distinction the judge made was between the possible and arguable case that there was wrongdoing by Norilsk Nickel and other shareholders in relation to a “group for the purposes of this law”; and whether there was wrongdoing by the lawyers who were Rusal’s target in court. As the judge pointed out, he wasn’t trying the first case, only the second. He also warned that if there had been wrongdoing, it wasn’t, as Rusal attempted to imply, “in conspiracy or fraud”.

That point having been made, Tugendhat’s judgements go against Rusal on each count:

“I conclude that Rusal has not shown that there is an arguable case that the Trafigura Deal is a breach of Russian law in this respect, that is on the basis that the 10% threshold is passed so as to require permission. There is no good arguable case on the material before me upon that it could properly be inferred that title to the shares which Norilsk Nickel have announced were sold to Trafigura remains vested in Corbiere or Raleigh. There is no good arguable case that any of these companies owns more than 10% of the shares in Norilsk Nickel.” (sect. 87).

“It is for an applicant to show a good arguable case that there has been wrongdoing. I assume that under Russian law, as under English law, it is wrong for the directors of a company intentionally to dispose of a company’s assets at an undervalue or for no adequate consideration. I reject this submission of Rusal’s on the ground that its case is speculative, and no more than suspicion. I do not accept that Rusal has a good arguable case that the difference between the “market terms” under which the Trafigura Deal is said to have been done, and the premium paid to shareholders under the Buy Back Deal, represents damage to Norilsk Nickel or Rusal.” (sect. 88).

“The case of Mr Sokov is different. He does not rely upon the wrongdoing alleged by Rusal. He relies on what Mr Sokov and Mr Chernyshov state to be the law in respect of his rights and duties as a director, and of the liabilities which he might incur under Russian law. The wrongdoing relied on in his case, as I understand it, is the wrongdoing of Norilsk Nickel in failing to provide him with the information which he requires to carry out his duties as a director. However, wrongdoing is essential to the Norwich Pharmacal jurisdiction. I can see no wrongdoing arising out of the impugned deals which forms any basis on which Mr Sokov can rely….” (sect. 95-96).

While accepting that there may be an arguable case that Norilsk Nickel’s shareholding deal with Trafigura, and its share buy-back offer might constitute an unlawful concert-party scheme to defeat Rusal as a minority shareholder, the judge ruled: “There is no arguable case that, taken on its own, there is anything unlawful in the Offer Memorandum or the Buy Back Deal. Any unlawfulness of the kind referred to in para 93 above arises from any agreements or arrangements there may have been between Corbiere, as the holder of the shares bought pursuant to the Offer Memorandum, and other shareholders, as to how their shares were to be voted.” (sect. 106).

“If there has been wrongdoing on the part of a company in failing to give information to its shareholders, it is impossible to see how Debevoise can be said to have been involved in it.” (sect. 131).

“Mr Dutton [for Debevoise against Rusal] submits that the scope of the material sought [by Rusal] is so wide as to be an abuse of the process of the court in the light of the limits on the permissible scope Norwich Pharmacal relief set out in para 122 above. In my judgment that submission is well founded.” (sect. 139-140).

Less than 14 days after the Tugendhat ruling, Alisher Usmanov revealed in Moscow that he and Deripaska had agreed on a concert-party arrangement themselves, and had acted together, adding Rusal’s 25% of Norilsk Nickel to Metalloinvest’s 5%, making 30% or more of the Norilsk Nickel shareholding. Usmanov has subsequently said he is buying more shares to expand on this number. The immediate objective was to elect Usmanov’s partner, Farhad Moshiri, to the Norilsk Nickel board. The common purpose, agreed in secret between Deripaska and Usmanov before the vote, was “joint action…in matters relating to the development of Norilsk Nickel”, Usmanov is reported to have told the Moscow newspaper he owns.

One of the few things confirmed about the outcome of the voting a week ago is that the entire meeting took less than 45 minutes. There has been no official ballot result yet, neither announced by Norilsk Nickel nor denounced by Rusal. The Moscow press leaks suggest, however, that Rusal has once again lost its bid for a vote of confidence from the Russian and international shareholders, and from the free floating shareholders.

If the Moscow press leaks are correct, Alexander Voloshin, the Yeltsin-era placeman, appears to have won a seat on the new board, along with Moshiri. The former cannot be counted as a Rusal gain, since Potanin backed him also. Moshiri’s seat is thus the one gain Rusal’s campaign has achieved. Since that now makes four seats for Rusal on the 13-man board, but no more, there looks to be no shift in the balance of power on the board, and so no improvement in Rusal’s position.

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