PMs agree line in telecoms dispute
The Financial Times (May 20, 2009). Telenor, the Norwegian telecom, and Alfa Group of Russia should resolve their shareholder disputes by legal means, the prime ministers of both countries agreed on Tuesday.
Alfa, owned by oligarch Mikhael Friedman, and Telenor have fought a series of legal skirmishes over the past four years for control of Vimpelcom of Russia and Kyivstar of Ukraine, in which they are both the largest shareholders.
The dispute has now escalated to the prime ministerial level after Telenor’s 33.6 per cent shareholding in Vimpelcom was seized by a Russian court in lieu of a $1.7bn damages award that the Norwegian telecom has refused to pay.
Telenor fears that the court could make a forced sale of the stake before it has had a chance to exhaust all the possibilities of appeal.
The Norwegian government has said the Vimpelcom dispute is its most serious bilateral issue with Russia, with whom it has succeeded in forging a successful relationship based on joint oil and gas exploration in the far north.
The case has also once again put the Russian legal and business environment under the spotlight, with Telenor alleging that it has been the victim of dubious corporate and legal machinations.
Both prime ministers reiterated on Tuesday that the dispute should be resolved without politicians having to get involved. However, they emphasised that legal norms must be respected.
At a joint press conference after their meeting, Vladimir Putin urged Telenor and Alfa to resolve their dispute by legal means and not “put spokes in each others wheels”.
He said the government was “absolutely neutral and impartial” but stressed that the handling of the dispute should not be allowed to undermine foreign investor confidence in Russia.
“Our job is to ensure that work towards resolving this dispute is (conducted) in a legal framework,” he said.
Jens Stoltenberg insisted that the legal process be allowed to take its course. “A forced sale should not be allowed to happen before this issue is reviewed by the Russian court system,” he said.
Telenor said on Tuesday that it was happy that the case had been discussed at such a high level. “We hope the attention will make it more difficult to enforce the court ruling before we have actually concluded the legal battle,” said a spokesman.
Jan Edvard Thygesen, Telenor’s executive head of central and eastern Europe, told the Financial Times in an interview that the Vimpelcom court judgement was a real threat to the telecom’s assets in Russia. “We are treating this threat very seriously,” he said. “That is why we have informed our government about this and they also take it very seriously.”
He said that the dispute had also worried other foreign investors in Russian companies. “In a lot of companies questions have been raised about the safety and risk of investing,” he said, adding that “the Russian legal system needs reform so that everyone gets fair treatment.”
The Vimpelcom case has been brought by Farimex, a British Virgin Islands-registered shell company owning 0.002 per cent of Vimpelcom’s shares through ADRs. Telenor alleges that Farimex is a front for Alfa, a claim Alfa denies.
Farimex argues that Vimpelcom was damaged by Telenor’s obstruction of the Russian telecom’s entry into the Ukrainian market, where the Norwegian telecom was already involved through Kyivstar.
A court in Khanty-Mansiysk in Siberia awarded Vimpelcom $2.8bn against Telenor in August last year, a judgement reduced to $1.7bn this February after a retrial in Omsk.