Embedded inside a “command centre” in Moscow, US law firm White & Case is leading the Kremlin’s legal fight to fend off claims by former Yukos shareholders on several foreign fronts, while also advising Russian state companies on how to navigate the sanctions minefield, bne IntelliNews can reveal.
The Kremlin set up the command centre within its newly-constituted International Centre for Legal Protection after the Permanent Court Arbitration in The Hague awarded Yukos shareholders compensation worth $50bn in July 2014. The government’s refusal to pay compensation for the 2006 break-up of the Russian oil company formerly owned by Mikhail Khodorkovsky triggered a full-scale hunt for overseas sovereign assets to enforce The Hague decision.
Russia’s stake in broadcaster Euronews was frozen on October 29 following seizures of Russian property in France and Germany. President Vladimir Putin’s spokesman Dmitry Peksov vowed that legal efforts to protect “the legitimate interests of Russia and its property” will be taken – a task the Kremlin has decided to undertake with the help of White & Case’s expertise.
The Yukos case has proved to be a goldmine for a number of US law firms representing both sides over the past decade. Shearman & Sterling ended up billing about $77mn in fees for representing GML Ltd, the vehicle through which Khodorkovsky and his former Yukos colleagues held their controlling stake in Russia's once largest oil producer. The Russian state, which was ordered to pay GML’s legal fees as part of the settlement, forked out $31.5mn to Cleary Gottlieb Steen & Hamilton and Baker Botts for their representation.
And now White & Case, which was retained in the summer, is getting its share. “The firm doesn’t have to hold their nose too much to do this work,” a senior Moscow lawyer at a rival firm tells bne IntelliNews. “This is a prestigious mandate being retained by a sovereign and they will be thrilled to do it because the budgets are very high and it impresses corporate clients.”
The legal command centre, which is fronted by Andrey Kondalkov, a former director of economic cooperation from the Ministry of Foreign Affairs Department, draws on the best arbitration lawyers in the business from White & Case, Hanotiau & van den Berg in Belgium and Holland, and De Gaulle Fleurance et Associés in France.
It deals with all claims against Russia instead of “having to go from one ministry to another ministry,” explains David Goldberg, a partner at White & Case.
“We have a mandate to deal with the Yukos proceedings in the US, the UK and Germany, and we are cooperating with the other firms in the other jurisdictions,” Goldberg tells bne Intellinews in an interview. “The most important set is in Holland. If the award is set aside, there will be nothing to enforce in most jurisdictions, although there are some countries that may look into enforcement of an award set aside at the place of arbitration.”
Russia’s argument is that the UK and US courts don’t have jurisdiction because the Kremlin never signed any arbitration agreements. “Even if awards were legal, no way someone should be responsible for debts of another person,” Goldberg said. “So far this story has been one-sided because the Russian government was silent, while the other side seems to have spent millions on PR in the US and UK.”
White & Case’s office in Moscow is located at the Romanov Dvor business centre, which is about a five-minute walk to Red Square. Goldberg, an Oxford-educated Russian who works on the Yukos case, was once described by clients in the Legal 500 directory as “a highly trained ruthless assassin”.
Goldberg, who divides his time between London and Moscow, doesn’t shirk from the description. “As a litigator and an arbitration practitioner, winning cases is important to me,” he says.
The firm, however, declined to discuss its work on sanctions on behalf of any state companies. “White & Case helps a wide variety of clients, both Russian and foreign, respond to a broad range of questions about the EU and US sanctions on Russia, but that as a matter of principle we do not disclose their identities,” Andrew Newsham, a London-based spokesman wrote in an emailed statement to bne IntelliNews. “We are not able to comment beyond this.”
White & Case’s website reveals the law firm ran seminars this year in Frankfurt, Germany on how badly sanctions have affected German businesses in Russia. And a joint seminar last year in London with PwC discussed the effect of sanctions on financial institutions.
Good for business
White & Case’s work for the Russian state is also paying dividends in the private sector. The firm was number one legal advisor in Russia by deal value and volume last year and in 2013, according to data provided by Mergermarket.
It advised the Russian lender AK BARS Bank on a $350mn Eurobond in August, which was the first time a Russian financial institution has managed to access the international markets following the imposition of sanctions in 2014. AK BARS, based in Kazan, is partly controlled by the government of the Republic of Tatarstan.
“Our long history and experience advising financial institutions in Russia allows us to successfully bring important transactions like this to market,” London-based partner Stuart Matty said in a statement at the time.
Working for the Russian state has not prevented the law firm from building ties with Ukraine, which has fraught relations with its neighbour since Russia’s annexation of Crimea and the war with the pro-Russian separatists in the east. White & Case represented the Ukrainian government in its recent restructuring of $17bn of debt, of which $3bn belongs to Russia.
White & Case is also embroiled in a Russian spy case in New York. Scott Hershman, one of its lawyers, is representing Evgeny Buryakov, who was charged earlier this year with posing as a banker in New York while secretly spying for Moscow.
Buryakov is accused along with two other Russians of committing economic espionage on behalf of Russia. He denies the charges.
Buryakov’s legal tab is being picked up by Russian state development lender Vnesheconombank, or VEB, as it’s also known. VEB also avails itself of the firm’s Moscow-based partners, Natalia Nikitina and Thomas McDonald, for transactional work for the bank.
Ketchum, the US PR firm employed by the Kremlin in the West, ended its nine-year relationship work with the Russian government in March after earning as much as $23mn in fees. Ketchum was continuously lambasted in the Western media for its efforts to improve Russia’s image, especially after it became so tarnished following the annexation of Crimea 18 months ago.
However, there is little sign White & Case is under any public pressure to quit working for Kremlin Inc.”They [the Russian government] went for the best in international arbitration, and we are the best according to leading legal directories including Chambers and Legal 500,” Goldberg says.