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8 September, 2012  ▪  Michael Binyon

Confrontation in London

After one of the longest, costliest and most colourful court cases in British legal history, Boris Berezovsky has suffered a spectacular loss in his lawsuit against Roman Abramovich, and will have to pay one of the highest bills for court expenses ever incurred by a private individual - amounting, according to most estimates, to well over £100 million.

There will be few tears shed in Britain for him: Abramovich is popular because of the support he has given to Chelsea Football Club, and Berezovsky is not a figure who has won much sympathy in his battle for a greater share of Abramovich's massive wealth.

The four-month case between the two Russian oligarchs has fascinated Britain, with lurid details of mafia protection, intimidation, blackmail, money laundering, arms dealing, secret recordings, lawlessness and riches beyond most people's imagination. Witnesses included several billionaires and a former Kremlin chief of staff. It has also proved immensely revealing of the kind of political and economic culture in post-Soviet Russia. It has uncovered the ruthless pursuit of wealth and power by those who took advantage of the collapse of communism and the chaos of the 1990s, as well as the mindset of the nouveaux riches Russians who still blight all attempts to reform their country's distorted economy.

Most British legal commentators say this is a case that should never have been brought. It arose purely from the greed and envy of a man who once held unchallenged commercial and political power in Yeltsin's Kremlin, but was unable to separate the corrupt pursuit of his own economic interests from the interests of the nascent Russian state. Berezovsky's hubris led him, unwisely, to imagine that he could control Vladimir Putin, the man he hand-picked as Yeltsin's successor. He could not, and swiftly found himself exiled to London. But he also could not curb his resentment of his former business partner Abramovich, who was not only younger than him, but also considerably richer and was still accepted as an influential figure in Putin's Russia.

It says much about Russia today that the case was brought in London. No litigious oligarch - and there are many others around who are still preparing lawsuits against each other - would dream of seeking justice in a Moscow courtroom. High-profile civil cases, just like the trumped-up charges brought against Putin's political opponents, are determined well in advance, and not by a judge or a jury but by influential figures within the Kremlin. Even if Berezovsky was not a wanted man in Moscow, it is unlikely that he would have a received a fair hearing. In London he did. The case was conducted in the Royal Courts of Justice, the country's highest court, by very well paid and experienced lawyers. Before the verdict was announced, Berezovsky said he believed in the system of English justice.

After he lost, he told reporters outside the court that he was "absolutely amazed" at the judge's decision, which he said could have been written by Putin. The case began five years ago when Berezovsky personally served a writ on Abramovich at a Hermes shop in the fashionable Knightsbridge district of London. The dispute centred on Berezovsky's claim that he and Abramovich had been partners in Sibneft, an oil company, and Rusal, an aluminium giant. Berezovsky argued that, after he fled Russia in 2000 when he fell out with Putin, Abramovich intimidated him into surrendering his shares for less than they were worth.

Abramovich asserted that Berezovsky was never a shareholder and that he had merely hired the younger oligarch to provide political favours while he was building his business empire. Although Abramovich admitted paying Berezovsky more than $2 billion after Berezovsky left Russia, he said that this was to buy him out of his "krysha", a protection arrangement. The judge accepted Abramovich's krysha defence, praised the "thoughtful manner" in which he responded to questions and said that there was no evidence that he had tried to bully Berezovsky into selling his shares. She also found that Berezovsky was not a shareholder in Sibneft or Rusal, and that his evidence about their alleged joint venture was "vague, internally inconsistent, exaggerated and, at times, incredible". Indeed, in her summing-up the judge gave a damning verdict on Berezovsky's character, calling him an "inherently unreliable" witness who regarded truth as a "transitory, flexible concept". She dismissed "in their entirety" his claims that Abramovich had cheated him.

Abramovich was forced to give evidence in person during the trial, but he managed to say little about his private life or his own affairs. Questions about how this former uneducated salesman of plastic toys managed to control vast chunks of the former Soviet Union's mineral wealth were not answered during the court case, although he was embarrassingly forced to admit early in the trial that the acquisition of Sibneft from the Russian state in 1995 was rigged. It is known that he hates talking publicly about his affairs, and was often irritated to find himself in the witness box. He was not present in court to hear the verdict last Friday. Had he lost, not only would he have had to pay Berezovsky a large amount from his £10 billion personal fortune, but questions would also have been asked about his fitness to own Chelsea Football Club. The Kremlin, which has failed in several attempts to extradite Berezovsky from Britain to face charges in a Russian court, will be delighted at the verdict. But this is entirely beside the point: there is no way that Putin could have influenced or manipulated Mrs Justice Gloster, the judge. At the same time many Russians in London and probably also in Moscow have been embarrassed by the public discussion of the lawless state of affairs in their country and the political and economic corruption that is so rampant in post-Soviet Russia.

Berezovsky is clearly furious at the verdict and has suggested that he will appeal. But with the prospect of having to pay almost all the costs of this trial (British taxpayers did not have to pay any of the costs), he will probably not have the money for another court case. He is already down to his last £500 million, and suggested that he is now facing bankruptcy.

For both Britain and Russia, there are disturbing lessons to be drawn from the case. For Russia, it is now clear that anyone who wants to run a successful business needs to cultivate friends in the Kremlin. The private sector clearly depends on the "krysha" of the state. This is not going to help Russia either to tackle corruption in the government or to foster a culture of enterprise.

For Britain, the lingering questions concern the tax arrangements of wealthy Russians, who seem to have brought huge sums of money into the country, but have paid very little of this in tax. Berezovsky's fellow oligarchs will not thank him for prompting Britain's tax authorities to look much more closely at their affairs and those of any other wealthy Russian attempting to move his business dealings to London.


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