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Photograph GETTY IMAGES/SHUTTERSTOCK

BEREZOVSKY / ABRAMOVICH

38 Legal Business March 2012

In Hermès on Sloane Street on Friday 5 October 2007 Roman Abramovich, the billionaire owner of Chelsea Football Club, is enjoying a quiet afternoon shopping. Two doors down in Dolce & Gabbana,

his former business partner is also indulging in a little retail therapy. In better days the two would visit each other’s superyachts and holiday together. But by 2007 the relationship had soured, and Berezovsky was itching to issue a writ suing his former friend for $6.5bn.

Berezovsky seizes his chance, grabbing the writ from the glovebox of his limousine. An undignifi ed scuffl e breaks out as he squeezes past bodyguards into the luxury boutique. He thrusts the writ at a bemused Abramovich, reportedly saying: ‘I’ve got a present for you. This is for you, from me.’

The writ falls to the ground as Abramovich is bundled away.

Fast forward fi ve years and that dramatic start has climaxed in the largest commercial litigation in the world: a $6.5bn mega dispute in London’s Commercial Court that has seen legions of lawyers line up for both oligarchs and do battle in dramatic fashion.

The court case revealed details of the billionaires’ lifestyles, and the excesses of Russia’s

Two oligarchs; $6.5bn; and enough lawyers to form an entirely new fi rm. This is Berezovsky v Abramovich, the largest litigation in the worldBECKY PRITCHARD

BATTLE

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ROYALE‘wild East’. For two months late last year, the normally staid Commercial Court had paparazzi loitering outside on stepladders and bulletproof limousines parked outside.

The case was a landmark in many ways. It was the fi rst to be heard in London’s new Commercial Court, the Rolls Building – and the last case for Jonathan Sumption QC of Brick Court Chambers before he became a judge in the Supreme Court. It was also groundbreaking in terms of lawyers’ fees – with a major ‘no win low fee’ conditional fee agreement in place for Berezovsky, and Sumption QC reported to be picking up a mammoth fee of anywhere between £4m and £10m.

It was a bitter, twisted dispute played out in the full glare of the world’s media. The ten-week hearing ended in January 2011 and both sides are now waiting for Mrs Justice Gloster to deliver her verdict. Many predict a resolution won’t be reached until June at the earliest.

DARK BEGINNINGSThe case has its origins in the murky world of 1990s’ Russia, where deals were struck on a handshake, political corruption was rife and vast fortunes were there for the taking.

In 1994 Abramovich was a small-scale oil trader with big ambitions. Berezovsky at this stage was a member of Boris Yeltsin’s inner circle and the president’s tennis partner. In 1995 with Berezovsky’s help, Abramovich’s Sibneft won a rigged auction for the privatisation of an oil company and refi nery, a step that made him very rich. In court Berezovsky admitted to rigging the auction after questioning by Sumption QC. ‘You did fi x it, didn’t you?’ said Sumption QC. In response Berezovsky said: ‘No, it’s true.’

In return Abramovich made regular payments to Berezovsky for the next fi ve years, sometimes up to $5m in cash and picked up the bill for his personal expenses on an exuberant scale. At one point during the trial, the court heard how Marina Goncharova, an employee of Abramovich, dragged a holdall full of bank notes up the steep staircase of a Moscow private members’ club to deliver to Berezovsky as he barked angrily down the phone. u




Abramovich’s barrister Sumption QC described the expenses in court as: ‘palaces in France, private yachts and aircraft, jewels for his girlfriend, valuable paintings at Sotheby’s and so on’. But by 2000 the relationship had turned bitter following a clash with Vladimir Putin. Putin, who was president at the time, was reportedly furious with Berezovsky and his media company ORT for its critical coverage of the sinking of the Kursk submarine in August 2000. As a result Berezovsky says he was forced to sell his shares in ORT and in Sibneft before fl eeing Russia and later gained political asylum in the UK in 2003.

Berezovksy claims that those exuberant payments and suitcases full of cash were profi t dividends from his shares in Sibneft and aluminium company Rusal, and that before fl eeing the country he was forced to sell his stake in both companies to Abramovich at a knock-down price. He claims that Abramovich threatened and intimidated him into selling his shares for a massive loss of around £2bn.

‘[Mr Berezovsky] fell out with those in power in the Kremlin,’ said Berezovsky’s barrister

Laurence Rabinowitz QC of One Essex Court on the fi rst day of the trial. ‘Forced to leave his home and create a new life abroad, leaving Mr Abramovich in a position where he was in effect required to make a choice: to remain loyal to Mr Berezovsky, his friend and mentor and the person to whom he owed his newly acquired great fortune, or instead, as we submit, to betray Mr Berezovsky and to seek to profi t from his diffi culties.’

Abramovich’s case is that Berezovsky never owned shares in Sibneft or Rusal in the fi rst place. Instead Berezovsky was paid in the 1990s to act as a ‘political godfather’ to the younger man. The Chelsea FC owner paid for yachts and jewels in exchange for political protection or ‘krysha’ (in Russian it literally means ‘roof’) from Berezovsky.

The case hinges on one simple question – did Abramovich force Berezovsky to sell his shares at a low price?

DRAMATIS PERSONAELawyers on both sides have spent the past fi ve years trying to unravel that seemingly simple question.

Back in 2007 when the writ was fi rst served in Hermès, Abramovich turned to his usual advisers Skadden, Arps, Slate, Meagher & Flom.

The Skadden relationship with Abramovich goes back a long way. Skadden European managing partner Bruce Buck told LB in 2003 how he landed the relationship through a former Citibank banker who he met in the early 1990s (see ‘Game on’, LB138, page 49). The banker later joined Russian oil company

‘These sorts of cases have a higher propensity to run over on costs. It’s far harder to estimate and costs escalate.’Matthew Amey, TheJudge

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March 2012 Legal Business 41

Sibneft where Abramovich was a major shareholder.

The Abramovich relationship is so ingrained that Buck has been the chairman of Chelsea FC since 2003. While the fees paid may be low (club accounts show it paid Skadden £360,000 in legal fees over 2009/10) the strong relationship has meant that, bar a few minor disputes, Abramovich and his holding company Millhouse Capital have loyally stuck with the white-shoe fi rm over the past decade.

Skadden head of European disputes Paul Mitchard QC became lead partner on the case in 2007, but after relocating to Hong Kong in 2009, fellow disputes partner Karyl Nairn took over the lead role.

Abramovich is notoriously publicity shy and that extends to his lawyers, with Skadden

refusing to provide on-the-record comment for this feature.

Australian Nairn, who graced the cover of LB in 2007 (see ‘Top girls’, LB178, page 56), is described by colleagues as ‘extraordinarily bright’ and having ‘real presence’. She cuts a glamorous fi gure, tying up her red hair in a beehive. At the trial her striking red hair and large dark sunglasses meant she was often photographed by the paparazzi.

Cadwalader, Wickersham & Taft’s Michelle Duncan initially represented Berezovsky. Duncan now works at Paul Hastings and by the end of 2008 Berezovsky was on the hunt for new lawyers.

John Kelleher, a mild-mannered litigator at Addleshaw Goddard, was at his desk at the fi rm’s Milton Gate headquarters in London when he got the call from an unnamed barrister’s chambers about doing some work for Berezovsky in late 2008. He approached fellow litigation partner Mark Hastings to check his availability.

‘I remember it clearly, John asked me what I was involved with at the moment – I told him that a big case I’d been working on had just settled and I’d love to be working this. It was just good timing,’ says Hastings.

Within weeks Hastings, Kelleher and Pietro Marino were meeting Berezovsky to pitch for the work.

In October 2010 Marino left Addleshaws to set up litigation boutique Enyo Law with former Addleshaws head of litigation Simon Twigden, leaving Kelleher and Hastings as the lead partners on the case.

Hastings, who is Addleshaws’ youngest-ever equity partner, has now been working on the case full-time for three years straight and clearly enjoys the role. ‘It was a dramatic start, dramatic fi nish and dramatic in-between,’ he says.

To win the work Addleshaws offered a ‘no win low fee’ conditional fee agreement (CFA), offering a massive monthly billing discount to the Russian billionaire for the privilege of taking on the case. The fi rm is rumoured to be offering a 50% monthly discount on the case and has been billing around £1.5m a month on the case for the past two years. If Addleshaws wins it is set to receive a major success fee pay out, thought to be in the tens of millions of pounds.

It’s an unusual arrangement as CFAs are rarely used in such large disputes as Matthew Amey, director at litigation risk broker TheJudge, explains: ‘These sorts of cases have a higher propensity to run over on costs. It’s far harder to estimate and costs often escalate. They are more common in small commercial

CASE TIMELINE

5 October 2007Boris Berezovsky issues Roman Abramovich with a writ suing him for billions of dollars in Hermès on Sloane Street.

May 2008Berezovsky makes an application to amend his case. Abramovich successfully defeats the application on the basis that the amendments are time barred.

November 2009Addleshaw Goddard begins representing Berezovsky under a large conditional fee agreement.

April 2009Packages containing Berezovsky’s confi dential client documents stolen from his lawyers Cadwalader, Wickersham & Taft are sent to Abramovich’s London home.

July 2009Abramovich’s team attempts to have Berezovsky’s claims thrown out because he has insuffi cient evidence to support them. The hearing lasts for three weeks but the court rules in Berezovsky’s favour, saying that the case should go to trial.

March 2010Abramovich’s lawyers make another application to have the claim struck out but the claim is rejected.

January 2011The Court of Appeal upholds the lower court’s earlier decision to allow the case to go to trial.

3 October 2011The court case begins; it is the fi rst to be held in London’s new Rolls Building.

19 January 2012The court case closes with judgment not expected by Mrs Justice Gloster until June at the earliest.

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disputes.’ The fi rm attributed a £6m shortfall in its 2010/11 turnover on the decision to run a number of cases under CFAs. But Hastings denies they are overexposed on the case, claiming the disputes department is on track for a record year of turnover whether they win the Berezovsky case or not.

Addleshaws would not comment on Berezovsky’s specifi c fee arrangements, but in a statement told LB: ‘We are very thoughtful before entering into any CFA. We consider a range of criteria before agreeing one and continue to monitor the portfolio on an ongoing basis, so that our business would not be adversely affected in the event of any loss.’

From the beginning Skadden’s tactic was to avoid a trial at all costs by arguing that Berezovsky’s claims lacked clarity. There were

several strike-out hearings, with one in July 2009 lasting three weeks instead of the normal three days.

‘It lasted that long because of the complexity of the legal and factual issues,’ says Hastings. ‘It’s diffi cult to imagine a case that throws up so many interesting issues – it takes in the collapse of communism, the rise of the oligarchs and Putin’s rise to power. It’s effectively the story of modern Russia.’

But despite the three-week hearing Skadden failed to get the case struck out and a trial date was set for October 2011.

CIRCUS MAXIMUSOn the fi rst day of the trial on 3 October 2011, Court 26 of the Rolls Building was packed. The modern new court – all beech wood desks,

white walls and fl at screen monitors – couldn’t accommodate the mass of lawyers, bodyguards, and reporters who turned up to watch.

Around 20 people were left standing, including a pregnant journalist, and Mrs Justice Gloster spent the fi rst ten minutes dealing with the seating problems. ‘I’m going to be very sexist here and if there’s a pregnant lady of the press, she can come and sit down here,’ she said.

After a week, two separate rooms with a live stream of the trial were set up for journalists to ease the congestion. One room showed the case in English and the other with a Russian translation for the large group of Russian journalists present.

Throughout the trial there was the constant murmur of the two translators who sat in a glass booth in the court doing a live Russian

RUSSIA’S DIRTY LAUNDRYLondon has seen a spate of major cases involving Russian parties in the past few years. ‘The High Court has become a rather large washing machine for Russia’s dirty laundry,’ says Louis Flannery, a litigation partner at Stephenson Harwood. Russian parties are attracted by the enforceability of English law judgments around the world and the impartiality of the English courts. ‘London undoubtedly has a justifi able reputation for judges and arbitrators being unbribable. You will have your day in court and it will be a fair fi ght,’ he says.

Boris Berezovsky is a particular fan of litigation in London, and besides the Abramovich case has also been kept busy with three other disputes:

The Patarkatsishvili estate: October 2012Berezovsky is back in court this October. This time he is up against three defendants, Russian metal magnate Vasily Anisimov, the estate of Arkady ‘Badri’ Patarkatsishvili (formerly Georgia’s richest man), and investment company Salford Capital Partners. The dispute centres on Berezovsky’s claim to a stake in Patarkatsishvili’s estate.

Hogan Lovells partner Graham Huntley is representing the Patarkatsishvili parties and is instructing Serle Court’s Jonathan Adkin.

Freshfi elds Bruckhaus Deringer partner Ian Terry is acting for Anisimov and is instructing 3 Verulam Buildings. Mark Hastings and John Kelleher of Addleshaw Goddard are representing Berezovsky and have instructed Mark Hapgood QC of Brick Court Chambers. Macfarlanes partner Iain Mackie is representing the Salford defendants and has instructed Maitland Chambers’ David Mumford.

Yacht problems: July 2010Berezovsky was in court in July 2010 after his yacht brokers Edmiston & Company claimed that he owed the company commission for its role in selling his 360ft vessel Darius. Berezovsky was represented by Tobey Butcher of Enyo Law and instructed Tim Howe QC of Fountain Court Chambers as barrister. Hill Dickinson partner Russell Gardner instructed 7KBW’s Stephen Hofmeyr QC to act for Edmiston & Company.

Libel: March 2010Berezovsky was awarded £150,000 by the High Court after he was falsely named on Russian state television as the man behind the murder of the former Moscow agent Alexander Litvinenko. Berezovsky was advised by Carter-Ruck who instructed 5RB’s Desmond Browne QC. All-Russian State Television and Radio Broadcasting Company (RTR) declined to take part in the proceedings.

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translation of the proceedings. Abramovich, who does not speak English, listened to the action on headsets throughout.

When LB stopped by the Rolls Building near the end of the case on 17 January 2012, we counted 17 lawyers, including counsel, on Abramovich’s side and 14 in Berezovsky’s team, not including the assorted paralegal bag carriers and trainees in the public seats. Most striking, however, was the level of security used by both oligarchs. At a break in proceedings, burly men in suits with earpieces were milling around the waiting area. One muttered into his cuff link: ‘He’s gone to the toilet.’

For the lawyers involved, it didn’t take long for them to get used to the strange world of the oligarchs. Kelleher says of the bodyguards: ‘The level of security is strange but you get used to

that presence quite quickly, and I always found them to be courteous and charming.’

The Addleshaws team had around six associates working on the case in the build up to the trial and instructed Rabinowitz QC as counsel. Insiders describe ‘Laurie’ Rabinowitz as ‘a very decent guy’, ‘an excellent barrister’ and ‘One Essex’s top man’.

Skadden used interpreters and two Russian-speaking associates to speak with Abramovich. The team also relied on of counsel litigator Rory McAlpine and a further fi ve associates on the case.

Skadden instructed Sumption QC, with the case his swansong before he took up his new position at the Supreme Court in January. Rumour has it among barristers’ clerks that Abramovich’s team decided that Sumption QC

was their man and that money was no object. They apparently rang up the clerks and let them name his fee, with The Times reporting that the fee was between £4m and £10m.

The relationship between both sets of lawyers and their high-profi le clients is strikingly different. Skadden refers to Abramovich simply as ‘RA’. In contrast, the team at Addleshaws call their client ‘Boris’, and clearly have a close relationship with the client, helpful because they will be working with him on another major litigation later in the year (see ‘Russia’s dirty laundry’, page opposite).

WAR OF WORDSAt its heart the case is about the personal and professional relationship between Berezovsky and Abramovich in the 1990s. The diffi culty of doing business in Russia at that time

‘The level of security is strange but you get used to that presence quite quickly, I always found them to be charming.’John Kelleher, Addleshaw Goddard

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THE CASE OF THE CYBER ATTACK In April 2009 two packages were sent to Roman Abramovich’s London home. His staff opened one of the packages and read a covering letter (see below) from a third party called ‘Igor’ who claimed to have hacked into Boris Berezovsky’s former lawyers Cadwalader, Wickersham & Taft’s computer system to gain access to confi dential client documents.

Abramovich’s staff read the letter and immediately sent the packages untouched to Skadden, Arps, Slate, Meagher & Flom European managing partner Bruce Buck who put the material in a safe before contacting Cadwalader. The documents were then returned to Cadwalader and later to Berezovsky’s current lawyers Addleshaw Goddard.

After the bizarre incident, Cadwalader brought in a third-party security company to investigate but found no weaknesses in its IT systems or evidence of hacking into its systems. It also informed the police but again nothing came of the matter.

There is no suggestion of any wrongdoing by Abramovich or his staff.Read the letter in full:

Hello dear Roman Arkadievich,

I am a computer specialist engaged in research in the area of computer systems security. As a

result of one such piece of research I gained access to electronic materials from the claimant̓ s

side on the court process between you and Boris Berezovsky concerning the division of shares in

the companies Sibneft and Rusal. I suggest these materials may interest you. The character of

the materials is absolutely varied: investigatory materials, company documents, witness evidence,

materials from witness interviews, analytical informational materials etc. As an example I give a

list of a few fi les:

Again, I bring to your attention that the list quoted above does not represent even a

hundredth of all the information.

Conscious that the time factor might be critical for you, I have not carried out a more

detailed analysis. The source of the materials is the law fi rm Cadwalader, Wickersham & Taft. As

further confi rmation I attach various pages printed from some of the documents quoted above:

Should you be interested or not interested in these materials. I ask you to contact me at the

following e-mail address: [email protected]

I also wish to assure you that the address this letter is sent to was taken from those

sources.

Yours faithfully,

Igor

• Boris Berezovsky Witness Statement.doc• Arkady Patarkatsishvili Witness Statement.doc• Note of Ruslan Fomichev Interview.doc• Berezovsky – List of Issues-Dr4.doc.doc• Transcript of Andrew Stephenson Notes from

Badri Meeting 30.06.05.doc• 30.06.05- Badri Meeting- Andrew Stephenson

Notes.pdf• Claim Form.pdf

• Correspondence.pdf• Draft of Proof of Evidence of Badri

Patarkatsishvili (7.7.05).doc• OJSC OIL V ROMAN ABRAMOVICH.doc• Prescience Reporting on Rusal 26 March 2008.pdf• Project Bridge File Note 16.10.07.doc• Sibneft Agreement.pdf• WS M Cherney- 4 Dec.doc

• Boris Berezovsky Witness Statement.doc

• Note of Ruslan Fornichev Interview

• Arkady Patarkatsishvili Witness Statement.doc

• [Draft] Witness Statement of Michael Cherney.doc

• Advice_001.pdf




meant that there was little documentary evidence to rely on. It posed a major challenge for both sets of lawyers who had to act more like detectives than corporate lawyers, hunting for plane ticket stubs and trawling hotel receipts to prove that individuals were at key meetings.

As the case kicked off in October 2011, Sumption QC set the scene by talking about Russia as the ‘wild East’. ‘It isn’t easy for an English lawyer on either side of the court to assess the behaviour of people who have to live in such a world,’ he told the court. ‘In our own national experience we have to go back to the 15th century to fi nd anything remotely comparable.’

‘To comprehend it,’ he said, ‘read Shakespeare.’The Shakespearean undertones were

underlined during the trial when details emerged of a cyber attack on Berezovsky’s former lawyers Cadwalader. An individual who called himself ‘Igor’ sent two packages to Abramovich’s London home in April 2009. The packages contained a list of confi dential documents stolen from Berezovsky and are thought to have been obtained by hacking Cadwalader’s IT network (see ‘The case of the cyber attack’, opposite).

With little reliable documentary evidence, the case was always going to rest on the cross-examination of Berezovsky and Abramovich.

For Kelleher it was the most exciting part of the trial. ‘It was compelling to see the two main protagonists who had been so close to each other stand up in court. We’d heard so much about their relationship, to hear their evidence was amazing,’ he says.

Berezovsky was fi rst to take the stand, speaking in heavily accented English and occasionally conferring with a Russian interpreter. He described Russia’s turbulent decade when both he and Abramovich made their fortunes. At times things got personal with Berezovsky saying that he had to be ‘smart’ to be successful.

‘He [Abramovich] was not so,’ said Berezovsky. ‘To get leverage you need to be smart… He looks like not a person of fi rst level… at that time.’

Berezovsky said that his decision to sell his Sibneft stake was infl uenced by fears that, if he refused, Abramovich would ensure Putin intervened and the shares would be confi scated.

Abramovich adopted a different style on the stand, calm and measured, he said little and spoke in Russian, with the packed courtroom listening to a translation via headphones. Abramovich admitted in court that he went on a witness familiarisation programme provided by consultants Bond Solon who taught him to ‘breathe deeply, look at the judge’.

Russian-speaking barrister Mary Malecka of Garden Court Chambers delivered the training for Bond Solon to Abramovich and several other Skadden witnesses in Moscow and London. ‘Most people aren’t in court very often; it’s a very stressful situation. So it’s about demystifying the process and teaching them that it’s all about listening to the question and making sure to answer the question,’ she says.

He replied to many of the questions with a single word: ‘Da’ (‘yes’), and claimed that he needed political protection to keep hold of Sibneft. He also described how he liked to keep a low profi le to save himself political problems.

‘I decided: sit quietly and do business and don’t stick your neck out and tell everybody everything belongs to me etc… that would only cause problems for myself,’ he told the court.

In written statements he also attacked Berezovsky: ‘There was at times something of a megalomaniac about him that could lead to extraordinary or even fantastic suggestions on his part.’

FORUM SHOPPINGAs the case neared its conclusion, the barristers didn’t pull their punches. In his summing up, Sumption QC said that Berezovsky was a man of ‘vanity and self-obsession’ and had a ‘constant and palpable desire’ to portray himself as the ‘central indispensable fi gure in every venture that he has touched’.

In response, Rabinowitz QC said that Abramovich ‘was a smooth witness but dishonest’ and had ‘cynically manipulated the evidence’.

The trial ended in January and a judgment is not expected from Mrs Justice Gloster until June at the earliest. It’s diffi cult to see which way her decision will go but many independent parties believe Abramovich will win out. This is because the court may fi nd it diffi cult to rule in favour of Berezovsky for such a vast fortune given that there is so little documentary evidence and many of the witnesses are unreliable.

There’s no clear indication whether either party will seek leave to appeal either, but consensus is that should Berezovsky win, Abramovich will appeal but if Berezovsky loses he won’t appeal.

It’s clearly been a landmark case in many ways, not least for the lawyers involved. ‘It’s a unique piece of litigation, it’s been a privilege to be involved,’ says Hastings. ‘There is a lot about this case that you just couldn’t make up.’

It’s also been signifi cant for London as a litigation venue, a sign that the UK is the destination of choice for big commercial cases.

Over the next few years, other rich Russians will be using London to air their dirty linen. Later this year, Berezovsky will go back to court to battle over the fate of the estate of another of his former partners, Arkady ‘Badri’ Patarkatsishvili, formerly Georgia’s richest man (see ‘Russia’s dirty laundry’, page 42).

With the continued popularity of London as a litigation venue, we may yet have more writs issued in designer shops on Sloane Street and more bulletproof limos parked outside the Rolls Building. LB

[email protected]

LORD GOLDAddleshaw Goddard and Skadden, Arps, Slate, Meagher & Flom may have taken centre stage but other solicitors were involved. In a scrap of this magnitude it is perhaps unsurprising that Lord David Gold, former senior partner of Herbert Smith, appeared in the public gallery twice in November 2011.

‘He’s a pretty recognisable guy, he’s quite short with a distinctive face so when he turned up in court even the judge recognised him,’ says one lawyer who was present. Lord Gold now runs a litigation boutique, David Gold Associates, and is effectively a gun for hire, stepping in to provide extra fi repower on big disputes. He has a track record for representing powerful and

wealthy individuals, most famously Lord Alan Sugar.

After he was spotted in court an article appeared in Legal Week claiming Lord Gold was instructed by Abramovich to help with running the case and preparing him and witnesses for trial. But insiders claim that although a few meetings were held between Roman Abramovich and Lord Gold earlier in the year they amounted to little.

When questioned about Lord Gold’s involvement, Abramovich circumspectly said in court: ‘At some point in time [Lord Gold] did advise me, but he is not playing any role or performing any function within the framework of this trial.’

Skadden and Lord Gold refused to comment.

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