Alexander Kudrin and Viktor Zubkov slide to Paris

The court session will be held in the first half of November in Paris.
18.10.2019
Origin source
As The Bell learned, head of the Audit Chamber Alexei Kudrin, chairman of Gazprom’s board of directors Viktor Zubkov and investment banker Oksana Reinhard were invited to speak at the international arbitration hearings in the case of ex-banker Sergei Pugachev.

Details Hearings in the case of “Pugachev v. Russia” will be held in the period from November 12 to 17, according to the website of Sergey Pugachev. The case began with a lawsuit that the side of the ex-banker filed in 2015 with the Permanent Court of Arbitration in The Hague.

Kudrina, Zubkova and Reinhard were invited to speak at the hearing, which they were informed in letters on behalf of the super arbitrator (the chief of the three referees), Eduardo Suleta Jaramillo, said The Bell's interlocutor familiar with the proceedings. According to him, the letters were sent at the end of September, they say that the hearing will be held in Paris (the arbiter himself declined to comment). If the recipients decide to come, they can be asked questions by both the tribunal and both sides, he says. The fact that Kudrin, Zubkov and Reinhard was invited specifically by the arbitration is confirmed by another source of The Bell.
Pugachev’s side asked the court to call all three as witnesses, but the court refused to issue a binding order, another interlocutor, also familiar with the trial, objects. According to him, instead, the court allowed the plaintiff to invite them to speak at the hearing. They were sent invitations signed by the presiding arbitrator, “but on the plaintiff’s side, and not at the request of the tribunal,” he assures. Such invitations are not binding, the source adds.

Kudrina and Zubkova are invited to talk about the Red Square project, which, according to Pugachev, ended with the expropriation of his assets, says one of The Bell’s interlocutors. We are talking about a construction project opposite St. Basil’s Cathedral, which in 2000 was announced by the president’s business affairs, and after that he created the Kremlin enterprise for this. In 2004, Pugachev’s company entered into an investment contract (initially by $ 140 million, then the amount was increased to $ 300 million by agreement of the parties) with a specially created company for this. In return, the banker expected to receive the residential part of the constructed complex in management and partially become its owner. In 2008, E&Y valued the entire project at $ 950 million. But in 2007 the construction was frozen, then the manager terminated the contract and transferred the object to the FSO.

Pugachev began to sue the Ministry of Finance and recovered 1.68 billion rubles. But this did not cover the claims of the investor: he claimed that the buildings were actually confiscated without compensation. During the years of the project, Kudrin was the head of the Ministry of Finance; until 2007, Zubkov headed the Russian Committee for Financial Monitoring (later Rosfinmonitoring), after which he took over as prime minister. Kudrin's representative declined to comment; Zubkov did not respond to The Bell's request.

Reinhard is called to act as the ex-head of special bonds for the Japanese financial company Nomura Securities, the source told The Bell. The fact that she held this position in 2010-2012 is stated in her LinkedIn. According to the interlocutor of The Bell, she already gave written testimony in 2012 in connection with the Pugachev case and the revocation of the license from Mezhprombank. After the collapse of a credit institution, a Nomura representative found out about the fate of holders of the bank’s Eurobonds, wrote Interfax (there are no data on whether Nomura was among them in open sources). Now, judging by her LinkedIn, Reinhard leads the direction of emerging markets in the investment company SMBC Nikko Capital Markets Limited (they did not respond to The Bell's request for comment).

The representative of Pugachev did not comment on the call of witnesses, the law firm Bettolegal representing his interests declined to comment. Arbitrator Thomas Clay, appointed by the prosecution, said he had no right to talk about this case. The law firm White & Case, which represents the interests of the Russian Federation in this proceeding, also declined to comment. Details on the position of the Russian side for July 2017 can be found here (the document is published on the Pugachev website). The Bell sent a request to the Ministry of Justice, but did not receive a response at the time of publication.
History of conflict. The history of mutual claims of Russia and the former “Kremlin banker”, as the media called him, Sergei Pugachev has been going on for almost 10 years and unfolds in the courts of several countries.

In 2015, King & Spalding Law Firm filed a lawsuit against the Russian Federation on behalf of Pugachev, which officially notified Russia. The basis for it was the international treaty of the USSR with France of 1989 on mutual encouragement and mutual protection of capital investments (Pugachev has French citizenship). The amount of the claim is at least $ 12 billion for the damage that, according to Pugachev, was caused to him by the actions of the Russian authorities. The astronomical amount includes investments made by him, interest on loans, lost profits and compensation for damage.

Pugachev accuses Russia of expropriating four groups of assets: shipbuilding enterprises, the Yenisei industrial company, the construction project on the Kremlin’s Red Square (at 5, Red Square, where it was supposed to build an elite hotel) and land in the Moscow Region. Also in the text of this lawsuit, the Russian authorities are accused of initiating criminal and civil proceedings against Pugachev under far-fetched pretexts. The essence of his claims to Russia is described in detail here.

The ex-senator left Russia in 2011. A year earlier, Mezhprombank, founded by him, lost its license (Pugachev said that at that time he was no longer its shareholder). According to the investigation, which formed the basis of the criminal case on misappropriation and embezzlement on an especially large scale, Central Bank loans worth 32 billion rubles were withdrawn from the bank through a chain of offshore companies (Pugachev said that he simply transferred his own money from the correspondent account to VTB and the amount was a bit different). In 2015, SK opened another case in connection with Mezhprombank, as a result, claims against Pugachev reached about 100 billion rubles. He is wanted and arrested in absentia.

The Agency for Deposit Insurance (DIA) is hunting for the assets of the ex-banker around the world: first, at the suit of the agency, the Moscow Arbitration Court brought Pugachev and the former managers of Mezhprombank to 76 billion rubles in subsidiary liability for his debts (in detail about the mutual claims of Pugachev and the former DIA deputy head Valery Miroshnikov, we wrote here). Then the High Court of London, in accordance with the DIA lawsuit, in 2014 decided to freeze Pugachev’s assets by $ 2 billion worldwide, some of them have already been sold, and the proceedings are ongoing. Also in 2015, the court forbade him to leave the borders of England and Wales, but Pugachev managed to move to France. He explained the departure by the fact that his stay in the UK threatened his life. Also, a British court in absentia sentenced Pugachev to two years in prison for contempt of court.

What's next. The invitation, which, according to one of the interlocutors of The Bell, received Kudrin, Zubkov and Reinhard, does not say that they are called as witnesses. They are invited to “stand trial and testify” (appear and testify), he says.

In what quality were the recipients called. If the invitation to speak at the hearing does not indicate the recipient’s status, but says that he was called to “stand trial and testify,” then it’s likely to call a witness (at least because the rules of the UN Commission on International Trade Law do not imply participation in the process of someone other than the parties, witnesses and experts). But the essence of this concept may differ from the meaning adopted in the Russian language. This is not about a defense or prosecution witness, but about a person who is called to establish legal facts, explains Alexander Zakharov, partner of Paragon Advice Group. The notion of “witness” is mentioned in criminal cases and is not used in disputes between the state and investors, Forward Legal attorney Daria Shlyapnikova explains. Also, we are not talking about affidavits.
Who chooses the witnesses. The decision on who to invite to hearings is made by the arbitration tribunal, the parties can petition for it, lawyers say. In 2017, Pugachev already announced plans to ask the tribunal to summon Kudrin as a witness in this process. Then the ex-banker gave a few more names - for example, the head of Rosneft Igor Sechin and Minister of Economic Development Alexei Ulyukaev. Pugachev’s representative did not answer The Bell’s question about whether the ex-banker’s side asked to invite witnesses this time.

To go or not to go. Formally, the recipient of such a letter may ignore the meeting, explains Anton Imennov, Managing Partner of the Pen & Paper Bar Moscow Office. There is no responsibility for this, adds Shlyapnikova from Forward Legal. It is an invitation, not an agenda. However, the court can draw conclusions from the consent or refusal of witnesses to attend the hearing, said a lawyer from a law firm operating in Europe. In theory, if the invitee is in the EU, a judge can appeal to a state court with a request to bring a witness (this is prescribed in the EU regulations). If a person is not in the EU, but, for example, in Russia, the court still has the tools with which he can compete for the participation of those invited in the process, explains Imennov from Pen & Paper. The procedure is this: the Dutch state court makes a judicial request to the Dutch Foreign Ministry, and the latter to the Russian Foreign Ministry. But in such a scenario, “the terms will be greatly extended and will be at least six months,” says Imennov.
What a trial. The Permanent Court of Arbitration in The Hague, where the case is being considered, is an international arbitration court established to deal with interstate disputes, as well as disputes of foreign investors and states. It is also sometimes called the Hague Court of Arbitration, explains Imennov from Pen & Paper. Under the common wording “The Hague Tribunal” they usually mean the International Criminal Court, which is prosecuted for war crimes - this is not about it.

International Hague Arbitration considers disputes if the parties have not agreed to understand somewhere else and have not reached a settlement. For each such case, a separate ad hoc arbitration is collected (for this case), adds Shlyapnikova from Forward Legal. The question is whether the applicant was a citizen of the French Republic when he lost his assets. If this is not the case, his right as a foreign investor to demand protection of investment raises questions, says Zakharov of the Paragon Advice Group.

Progress. In July 2016, the process was suspended due to the fact that Russia did not appoint an international arbitrator on time. Then the hearings resumed, and at the beginning of 2017 the tribunal made the first technical decision, it was published on the Pugachev website. Then the Russian Federation appealed to the tribunal with a request to classify the process, it says there. In July 2017, the tribunal agreed to partially restrict access to process information. He also decided to suspend the extradition of Pugachev from France in criminal cases.

* The Bell asked lawyers questions about the trial, without naming the parties to the process and the details of the proceedings.

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