Russian tycoon Deripaska to sue Montenegro over KAP bankruptcy

Russian tycoon Deripaska to sue Montenegro over KAP bankruptcy
By bne IntelliNews December 7, 2016

Russian tycoon Oleg Deripaska will sue Montenegro for hundreds of millions of euros over the bankruptcy of aluminium smelter Kombinat Aluminijuma Podgorica (KAP) and bauxite mining company Rudnici Boksita, his company CEAC Holding said in a press release on December 7.

Deripaska objects to Montenegro’s decision to declare the two companies insolvent, claiming that this move was a result of sustained hostility against him. So far, Deripaska has filed numerous claims against Montenegro via CEAC Holding and En+ Group, which owns CEAC Holding. However, this is the first time the Russian tycoon will sue the country directly.

“… Mr Oleg Deripaska has, in his personal capacity, served a Notice of Arbitration against the state of Montenegro, claiming unlawful expropriation of his investment and related treaty breaches by the state of Montenegro. Mr Deripaska will be seeking redress in the hundreds of millions of euros,” the statement said.

En+ Group acquired majority stakes in KAP and Rudnici Boksita back in 2005. However, in 2013 the government initiated bankruptcy proceedings due to unpaid debts. Eventually, both KAP and Rudnici Boksita were acquired by Montenegrin private firm Uniprom owned by local businessman Veselin Pejovic. CEAC Holding and En+ Group have objected the sale of KAP to Uniprom as well.

Deripaska also claims that Montenegro denied his investment fair and equitable treatment, in violation of international law and Montenegro’s treaty obligations.

“Mr Deripaska is seeking arbitration against Montenegro under the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL), bringing his claims under the bilateral investment treaty executed between the Russian Federation and the Federal Republic of Yugoslavia in 1995. The place of arbitration is yet to be determined,” the press release reads.

The Russian businessman was once one of the closest allies of Russian President Vladimir Putin, but when he went into financial meltdown in 2008 and asked the Kremlin for billions of dollars in bailout loans, he lost the president’s support. Deripaska has since lost his position as one of Russia’s top 10 richest men and has fallen out of the top 200 richest people in the world, according to a Bloomberg survey, but he is still worth $3.1bn.

Deripaska has already filed numerous claims against Montenegro with several courts. In November, CEAC Holding asked for the annulment of the International Centre for Settlement of Investment Disputes (ICSID) ruling after it lost a case against Montenegro over KAP’s bankruptcy through the centre. 

CEAC filed a claim for €600mn against Montenegro with ICSID in 2014, saying that the decision of the country to declare KAP bankrupt in 2013 violated the trade treaty protecting Cypriot investments in Montenegro. CEAC had a 65.43% stake in KAP before the bankruptcy. However, the ICSID ruled that CEAC did not have headquarters on the territory of Cyprus, therefore it was not a foreign investor according to the terms of the applicable international agreement for protection of foreign investments. CEAC said at the time it would appeal the decision.

Also in November, CEAC said it had launched litigation proceedings against Montenegro in a Cypriot court over KAP’s bankruptcy. CEAC said that it would seek a redress of hundreds of millions of euros, but gave no further information on the sum that would be claimed.

CEAC is also in arbitration with Montenegro under the arbitration rules of UNCITRAL.

In June, Montenegro won another case on KAP’s bankruptcy. The London Court of International Arbitration (LCIA) dismissed arbitration on the claim filed by Russia’s VTB Bank against the bankruptcy of KAP. Following this ruling, Montenegro’s commercial court was allowed to complete the bankruptcy proceedings of KAP.

VTB Bank had filed a claim with LCIA, seeking a court ruling against the bankruptcy declared by the smelter, and to receive more than €30mn in unpaid liabilities. Back in 2010, KAP stopped sending aluminium to its sole client Glencore after it established that the sales revenue paid by Glencore into KAP’s account at VTB had been seized by the lender.

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss