Norway Kicks Some Russian Ass in U.S. Corporate Battle

A reader offers the following fascinating tale of Russian corporate intrigue from the Ukraine:

It seems that Russia and Norway are locked in a battle for control of a Ukrainian telecommunciations company called Kyivstar GSM. In 2004, a Russian-controlled company called Storm LLC and a Norwegian-controlled company called Telenor Mobile Communications AS established Kyivstar as a joint venture, and signed a shareholders agreement (this followed about six years of negotiations). Storm was the proxy of the Russia-controlled firm Altimo Holdings & Investment Ltd., the Russian control being funneled through a Cyprus proxy company known as Hardlake and a minority shareholding company called Alpren. They soon began to fight over control (basically, the Russian side wanted to seize it), and proceeded to arbiration in New York as per the terms of the 2004 agreement (Telenor insisted on this provision because it feared the reliability of the Ukrainian courts and the motivations of its Russian partner, which turned out to be quite a good idea).

Despite entering into arbitration, Storm immediately began to claim that the arbitration clause was not binding (likely as soon as it saw that it had little chance of winning in the American court). It claimed that its General Director, one Valeriy Nilov, was not authorized to sign the arbitration agreement with Telenor and tried to disavow it. Shortly after the arbitration began, Alpren filed a lawsuit in Urkaine seeking to have the arbitration agreement declared invalid. In a classic Russian move, it “forgot” to tell either Telenor or the New York arbitrators that it had done so until the Ukrainian court had ruled in its favor. It then informed the New York arbitrators of the results, but they valiantly refused to stop their activities and Storm filed suit in a New York state court to block the arbitration from going forward based on the Ukrainian court’s order. Telenor moved the case to federal court where it convinced the judge to side with Norway.

On December 15th of last year, the federal judge determined that the Ukrainian court proceeding “had a number of curious features.” First of all, though a representative of Storm appeared and claimed to oppose the proceedings because it was in arbitration, the whole thing only lasted ten minutes. Then, Storm’s representative in the proceeding was not only not a lawyer, he was an Altimo executive. This caused the federal judge to decide that Storm’s opposition may have been “somewhat perfunctory.” In other words, it was a classic Russian tour-de-force. Therefore, though the Russian companies were represented by expensive lawyers from the top American firm of Cravath Swaine & Moore, the federal judge nullified the Ukrainian proceedings and ordered the arbitration to go forward.

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