Berezovsky v Abramovich (Rev 1)

In action 2007 Folio 942 (“the Commercial court action”) the claimant, Boris Abramovich Berezovsky (“Mr. Berezovsky”), sues the defendant, Roman Arkadievich Abramovich (“Mr. Abramovich”) for sums in excess of US dollars (“$”) 5.6 billion.

Both men are Russian citizens and are, or were, successful businessmen. Mr. Berezovsky fled from Russia to France on 30 October 2000, following a public dispute with Vladimir Putin (“Mr. Putin”), who was elected President of the Russian Federation in March 2000. Mr. Berezovsky subsequently settled in England and applied for asylum in the United Kingdom on 27 October 2001. His application was accepted on 10 September 2003. He is now resident in England. At the time Mr. Berezovsky fled Russia, he had substantial commercial interests in the Russian Federation. According to his United Kingdom tax returns, he remains domiciled in Russia for tax purposes and intends to return to Russia when the political situation permits him to do so.

Mr. Abramovich frequently visits England because of his ownership of Chelsea Football Club. He also had substantial commercial interests in the Russian Federation at material times for the purposes of this litigation.

Jurisdiction in the action was founded on service, or attempted service, of the claim form personally on Mr. Abramovich, whilst in England, and his subsequent decision not to challenge the jurisdiction of the English court. In circumstances where Mr. Berezovsky was unable to return to Russia without facing arrest, and what were accepted, on Mr. Abramovich’s part, to be the difficulties facing Mr. Berezovsky in obtaining a fair trial, if he had attempted to bring civil proceedings in Russia, that was no doubt a realistic decision.

Mr. Berezovsky brings two claims against Mr. Abramovich. The first claim relates to an interest which Mr. Berezovsky alleges that he had in OAO Sibirskaya Neftyanaya Kompaniya (“Sibneft”), a Russian joint stock company, which was created by Decree Number 872 of the President of the Russian Federation, dated 24 August 1995 (“the August 1995 Decree”), as part of a programme of privatisation (“the Sibneft claim”). Sibneft subsequently became a major integrated oil company generating large profits. The second claim relates to an interest which Mr. Berezovsky alleges that he had in OAO Russkiy Alyuminiy, a company registered in Moscow on 25 December 2000 (“RusAl”), which became a substantial company in the Russian aluminium industry (“the RusAl claim”).

Although the formulation of the claim has changed over time, by the start of the trial (Footnote: ¹), the Sibneft claim, was, in broad summary, as follows:

Again, although the formulation of the RusAl claim has changed over time, by the start of the trial, the RusAl claim was, in broad summary, pleaded as follows:

Mr. Abramovich disputed the Sibneft claim. His case was that, while the precise percentage shareholding fluctuated over time, at all material times, the majority of Sibneft’s shares were (indirectly) owned by him through trusts and companies which he controlled; that neither Mr. Berezovsky, nor any entity controlled by him, had ever been the registered or beneficial owner of any significant number of Sibneft shares. He asserted that there never had been any agreement to confer any interest in the company, or in its share capital, or in the profits derived from such interest, on Mr. Berezovsky and Mr. Patarkatsishvili; that, on the contrary, the deal between them was that, in return for substantial cash payments to Mr. Berezovsky, Mr. Abramovich and Sibneft would enjoy Mr. Berezovsky’s political patronage and influence, which was indispensible to the construction of any major business in the conditions of the 1990s, the Russian term for such support being “krysha” (literally translated “roof”). Mr. Abramovich contended that the amount of the various payments made to Mr. Berezovsky for such support was determined by a combination of unilateral demands by Mr. Berezovsky, and ad hoc horse-trading between him or Mr. Patarkatsishvili and Mr. Abramovich, but did not represent dividend or other payments linked to an ownership interest in Sibneft. Mr. Abramovich denied that any threats were ever made by him directly or indirectly to Mr. Berezovsky to persuade the latter to part with any alleged ownership interest in Sibneft or otherwise. He alleged that the payment of $1.3 billion made by him in 2001 to Mr. Berezovsky and Mr. Patarkatsishvili had nothing to do with any alleged sale of the latter’s alleged ownership interests in Sibneft, but, on the contrary, was a final pay-off to discharge Mr. Abramovich’s krysha obligations to the two men in relation to Sibneft. He asserted that, in any event, Mr. Berezovsky had suffered no loss: if he had indeed had some sort of ownership interest in Sibneft, he had never parted with it; if, on the other hand (contrary to Mr. Abramovich’s contentions), the sum of $1.3 billion in fact represented the price paid by Mr. Abramovich to acquire Mr. Berezovsky’s ownership interest in Sibneft, such sum was a great deal more than the value of Mr. Berezovsky’s alleged ownership interest at the time. As a matter of law, he contended that, in any event, the alleged agreements concluded in 1995 and/or 1996 in relation to Sibneft were not valid as a matter of Russian law. Moreover, even if (contrary to Mr. Abramovich’s contentions) threats had been made to persuade Mr. Berezovsky to sell his alleged ownership interest in Sibneft, any intimidation claim, together with any other claim that might be put forward, was time-barred as a matter of Russian law, which was the relevant law governing the alleged tort of intimidation.

In broad summary, Mr. Abramovich denied Mr. Berezovsky’s claim to an interest in the pre-merger aluminium assets based on the allegation that there was an oral binding agreement in 1995 that each of Mr. Abramovich, Mr. Berezovsky or Mr. Patarkatsishvili should be entitled to participate in the same proportions in any future business venture undertaken by either of the others. He further denied that he had ever agreed in 1999, or at any other time, to participate with Mr. Berezovsky and Mr. Patarkatsishvili in the acquisition of the pre-merger aluminium assets on the same terms as the alleged 1995 Agreement. He denied that there had been any agreement made at the Dorchester Hotel meeting (or elsewhere) that Mr. Berezovsky and Mr. Patarkatsishvili would have a share of the aluminium business created by the merger of the pre-merger aluminium assets with Mr. Deripaska’s aluminium assets; or that there had been any agreement that he, Mr. Abramovich, would hold that interest for Mr. Berezovsky and Mr. Patarkatsishvili under an English law trust. He further denied that it had been agreed at the Dorchester Hotel meeting between Mr. Berezovsky, Mr. Patarkatsishvili, Mr. Abramovich and Mr. Deripaska that none of them should be entitled to sell his interest in the merged business without the consent of the others; or that his sale of a 25% share in RusAl in September 2003 to Mr. Deripaska’s holding companies was a breach of such agreement. Further he contended that the governing law of any such arrangement would have been Russian law, under which no concept of trust or equitable proprietary interest was recognised and that, in any event, any arguable claim under Russian law would have been time barred under the relevant Russian law of limitation. He alleged that, in any event, any trust claim would have been bad even under English law, because of the uncertainty of its alleged terms. Finally, he claimed that the RusAl claim had in any event been the subject of a contractual release, which was binding on Mr. Berezovsky. Accordingly, Mr. Abramovich asserted that he had no liability to Mr. Berezovsky in respect of the RusAl claim.

The Sibneft and RusAl claims are distinct claims. However it was common ground they were inter-connected because, in two significant respects, the RusAl claim depended on Mr. Berezovsky proving that he had an interest in Sibneft. That was because:

The two claims were also related in a much more general way. That was because it was necessary to look at the business relationship between Mr. Abramovich, on the one hand, and Mr. Berezovsky and Mr. Patarkatsishvili on the other, as one continuum. Thus the evidence relating to the manner in which the three men subsequently conducted themselves in relation to the RusAl merger, although later in time than the alleged 1995 and 1996 Agreements, was itself relevant to an assessment of whether the original relationship between Mr. Abramovich and Mr. Berezovsky was the contractual relationship alleged by Mr. Berezovsky or the krysha relationship alleged by Mr. Abramovich. For this reason, in coming to my conclusions in relation to the Sibneft issues, I have taken into account the subsequent evidence in relation to the RusAl issues, and vice versa.

Before setting out the chronology relating to the Commercial court action, it is relevant to refer to certain other events which occurred before the issue of proceedings. In addition to the sale to Mr. Deripaska of a 25% shareholding interest in RusAl in September 2003, in July 2004 Mr. Abramovich sold the remaining 25% stake in RusAl to Mr. Deripaska. In September 2005, Mr. Abramovich sold the stake in Sibneft which he then held (through companies controlled by him), said to represent about 72% of the share capital in Sibneft, to OAO Gazprom (“Gazprom”), a Russian public joint stock company, via another company called Gazprom Finance BV.

In July 2006, Mr. Glushkov fled Russia for London.

On 14 May 2007, Mr. Berezovsky’s then solicitors, Carter Ruck, sent a letter before action to Mr. Abramovich, enclosing draft particulars of claim. On 1 June 2007, the Claim Form was issued. On 8 January 2008, re-drafted particulars of claim were served by Mr. Berezovsky.

On 12 February 2008 Mr. Patarkatsishvili died in England.

On 18 and 28 April 2008, there was a two day hearing before HHJ Mackie QC, sitting as a Deputy High court Judge, at which Mr. Berezovsky sought permission to make certain amendments, and at which Mr. Abramovich sought Further Information of Mr. Berezovsky’s case.

Further Information was served by Mr. Berezovsky in correspondence on 25 April 2008, 2 May 2008, and 16 May 2008, and served in consolidated form on 12 June 2008. On 26 June 2008 Mr. Abramovich served his defence. On 2 October 2008 Mr. Berezovsky served his reply.

On 14 November 2008, Mr. Abramovich issued an application notice pursuant to CPR Part 24 for summary judgment in respect of all of Mr. Berezovsky’s claims; and, pursuant to CPR Part 3.4, to strike out all of his claims. In the alternative, Mr. Abramovich sought summary judgment in respect of, or to strike out, parts of the claim. (I shall refer to these applications collectively as “the summary judgment application”.) The summary judgment application came on for hearing before Sir Anthony Colman, sitting as a Deputy Judge, in July and November 2009. Sir Anthony Colman handed down judgment on 31 March 2010; [2010] EWHC 647 (Comm). He dismissed both the application for summary judgment and that to strike out. He gave permission to Mr. Berezovsky to amend his pleadings.

The Court of Appeal heard Mr. Abramovich’s appeal in January 2011, handing down its judgment on 23 February 2011 [2011] EWCA Civ. 153. It dismissed Mr. Abramovich’s appeal against Sir Anthony Colman’s decision.

The parties agreed a list of issues to be determined in the Commercial court action (“the Agreed List of Issues”). They are attached to this judgment as Appendix 1.

It was sensibly agreed between the parties that, because of the unavoidable unavailability of one of the quantum experts, during the relevant trial period set aside for their evidence, issues relating to the quantum of Mr. Berezovsky’s claim in the Commercial court action should be adjourned pending my determination of the liability issues.

In summary, the liability issues which the court has to determine in the Commercial court action can be formulated as follows (Footnote: ¹⁹):

Sibneft

RusAl

In addition to his claim in the Commercial court proceedings against Mr. Abramovich, in late 2008 and early 2009 Mr. Berezovsky also issued three actions in the Chancery Division (“the Chancery actions”). In these actions, Mr. Berezovsky contends that he was Mr. Patarkatsishvili’s partner in relation to a number of substantial business ventures, and seeks to obtain what Mr. Berezovsky alleges is his (i.e. Mr. Berezovsky’s) share of these ventures, including an interest in RusAl.

The first of these Chancery actions was Claim No. HC08C03549 (“the main Chancery action”), which was issued on the 12 December 2008. The defendants to this action are:

At the centre of the main Chancery action is Mr. Berezovsky’s claim that he and Mr. Patarkatsishvili made an oral agreement in Russia in 1995 that all commercial investments made by either of them would be shared on a 50:50 basis. Before me, this allegation has been referred to as “the bilateral joint venture” or the “over-arching joint venture”. As an alternative to this allegation, in the main Chancery action Mr. Berezovsky asserts a number of individual agreements pursuant to which he says he acquired an interest in various assets. One such agreement is alleged to have been made at the Dorchester Hotel meeting where, as set out above, Mr. Berezovsky claims that he and Mr. Patarkatsishvili obtained a 25% interest in RusAl. Mr. Berezovsky says that he is entitled to trace into the assets acquired with the proceeds of sale of that interest, and to the extent he is unable to recover them, seeks damages in the main Chancery action against Mr. Patarkatsishvili’s estate for failing properly to secure them.

The second of the Chancery actions to be issued by Mr. Berezovsky was Claim No. HC09C00494 (“the Metalloinvest action”), which was issued on 18 February 2009. The defendants to that action are the Interim Administrators, the Family defendants, and Vasily Anisimov (“Mr. Anisimov”), a Russian businessman, together with a number of entities controlled by him (“the Anisimov defendants”). In that action Mr. Berezovsky claims an interest in a stake held by Mr. Anisimov in CJSC Holding Company Metalloinvest (“Metalloinvest”), a valuable Russian ore and mining company. It is alleged that the Metalloinvest stake was purchased using monies from the sale of the second 25% interest in RusAl in July 2004. Mr. Berezovsky claims to have acquired an interest in those monies - and, thus, in the Metalloinvest stake purchased with them - as a result of the alleged agreement concluded at the Dorchester Hotel meeting.

The third of the Chancery actions issued by Mr. Berezovsky was Claim No. HC09C00711 (“the Salford action”). The 4th to 9th and 11th defendants in that action (“the Salford defendants”) were, or were alleged to be, members or associates of a group of companies including Salford Capital Partners Inc, a private equity firm specialising in the developing markets of the former Soviet Union and Eastern Europe, alleged to have been involved in the sale of the second tranche of RusAl shares. The Interim Administrators and Ms. Gudavadze are also defendants in the Salford action. The Salford defendants contend that the proceeds of the sale of the second tranche of RusAl shares, and the alleged abortive instruction of the Salford defendants in connection therewith, form no part of the Salford action; and that the claims against the Salford defendants in the Salford action rest upon quite different foundations: namely the alleged bilateral Joint Venture between Mr. Berezovsky and Mr. Patarkatsishvili, and the arrangements which are said to have been made between Mr. Berezovsky and Mr. Patarkatsishvili on the one hand, and the Salford defendants on the other, in May 2002. The Salford defendants say that the question of Mr. Berezovsky’s ownership of RusAl and the fruits of that investment form no more than part of the narrative background to the case that is made against them.

I was informed that the Family defendants are the principal beneficiaries of Mr. Patarkatsishvili’s estate and that, with the approval of the Interim Administrators, and other beneficiaries, the Family defendants have made the running in defending Mr. Berezovsky’s claims against the estate in the Chancery actions.

The Family defendants, Mr. Anisimov and the Salford defendants are participating in this Joint Trial pursuant to an order of Mann J and myself dated 16 August 2010 (“the 16 August order”), made at a conjoined Case Management Conference held in both the Commercial court action and in the Chancery actions, which took place in July and August 2010. The 16 August order identified a number of issues, defined as “the Overlap Issues”, which arise in both the Commercial court action and the Chancery actions. Mann J and I directed that the Overlap Issues should be tried and determined as preliminary issues in the Chancery actions at the same time as the trial of the Commercial court action. We further ordered that each of the parties to the Chancery actions should be bound only by the findings made at the Joint Trial on, and might participate fully in, the Overlap Issues, but should not be bound by findings at the Joint Trial on any other issues. The Overlap Issues, as defined in the Order of 16 August 2010, were slightly amended by orders made respectively on 7 July and 23 January 2012. As finally defined, they were as follows:

“(1)

Did the Claimant [Mr. Berezovsky] acquire any interest in any Russian aluminium industry assets prior to the alleged meeting at the Dorchester Hotel in March 2000 (other than as a result of the joint venture agreement alleged by the Claimant in the Main Chancery Action) and if so, what was the nature and is extent of such interest and how did it arise?

(2)

Was there a meeting at the Dorchester Hotel in 2000 at which the Claimant, Mr. Patarkatsishvili, Mr. Abramovich and Mr. Deripaska agreed to pool their assets in the Russian aluminium industry as the Claimant alleges (the “Dorchester Hotel Agreement”)?

(3)

If so:

(a)

Did Mr. Abramovich agree to hold half his 50% interest on trust for the Claimant and Mr. Patarkatsishvili?

(b)

Was any such agreement governed by English law or Russian law (or another system of law)?

(c)

Did any such agreement give rise to any interest in RusAl under an English law express trust in favour of the Claimant (other than as a result of the joint venture agreement alleged by the Claimant in the Main Chancery Action)?

(4)

In the alternative to 3(c), did the Claimant acquire any interest in RusAl under an English law resulting or constructive trust (other than as a result of the joint venture agreement alleged by the Claimant in the Main Chancery Action)?

[For the purpose of these Overlap issues an ‘interest in RusAl’ is to be understood as referring to a beneficial interest in trust property of the description set out at paragraph C64(4) of the Re-re-re-Amended Particulars of Claim in 2007 Folio 942.]

(5)

Was the $585 million received by Cliren following the sale of the Second Tranche of RusAl shares (as defined at paragraph 29 of the Abramovich List of Issues):

(a)

(i) $450 million of sale proceeds and

(ii)

$135 million of outstanding dividend payments from RusAl?; and/or

(b)

A payment made by Mr. Abramovich to Mr. Patarkatsishvili at the request of Mr. Patarkatsishvili in return for him providing assistance and protection to Mr. Abramovich in relation to Mr. Abramovich’s acquisition of assets in the Russian aluminium industry?”

As can be seen, the Overlap Issues correspond with certain of the RusAl liability issues in the Commercial court action. Paragraph 5 of the 16 August order also referred to certain other issues, which arise in the Commercial court action only, upon which the Chancery defendants could participate and be bound. The Overlap Issues are thus of relevance to two of the three Chancery actions, and of tangential relevance to the third.

The Family defendants and Mr. Anisimov have a very significant interest in the outcome of this trial and the determination of the Overlap Issues. In the Metalloinvest action, whilst recognizing Mr. Patarkatsishvili’s interest in the RusAl proceeds, Mr. Anisimov denies that Mr. Berezovsky had any interest in RusAl or its proceeds or in the Metalloinvest stake held by Mr. Anisimov. Were Mr. Berezovsky to establish an interest in half of the RusAl proceeds by means of the alleged agreement made at the Dorchester Hotel, that would, according to the Family defendants, halve Mr. Patarkatsishvili’s interest in the RusAl proceeds, and therefore that of his estate (of which the Family defendants are principal beneficiaries). In the main Chancery action, in reliance on his claimed interest in the RusAl proceeds, said to arise, inter alia, as a result of the alleged agreement at the Dorchester Hotel, Mr. Berezovsky asserts a claim to a number of valuable assets – in addition to Metalloinvest - which are prima facie held for Mr. Patarkatsishvili’s estate. In addition, Mr. Berezovsky says that the estate is liable to him in damages to the extent that he is unable to secure and recover any such assets. Again, the determination of whether or not Mr. Berezovsky had such an interest in RusAl (and therefore in its proceeds) is of importance to the estate in that action and, thus, to the Family defendants.

Accordingly, as well as sitting as a judge of the Commercial court to determine the Commercial court action, I also, pursuant to a direction of the Chancellor, Sir Andrew Morritt dated 21 June 2011, sat as a judge of the Chancery Division for the purpose of determining the Overlap Issues as preliminary issues in the Chancery actions.

At trial, Mr. Berezovsky was represented by Mr. Laurence Rabinowitz QC, Mr. Richard Gillis QC, Mr. Roger Masefield, Mr. Simon Colton, Mr. Henry Forbes-Smith, Mr. Sebastian Isaac, Mr. Alexander Milner and Ms. Nehali Shah. Mr. Abramovich was represented by Mr. Jonathan Sumption QC, Miss Helen Davies QC, Mr. Daniel Jowell QC, Mr. Andrew Henshaw, Mr. Richard Eschwege, Mr. Edward Harrison and Mr. Craig Morrision. In the Chancery actions, the Anisimov defendants were represented by Mr. Ali Malek QC, Ms. Sonia Tolaney QC and Ms. Anne Jeavons. Mr. David Mumford Esq appeared for the Salford defendants to the Chancery actions, and Mr. Jonathan Adkin and Mr. Watson Pringle appeared for the Family defendants to the Chancery actions.

For a case which at its centre required the proof of oral contracts and intimidation, the universe of documentation and case materials was huge. There were 20 different sets of bundles, designated from A to T, with each set in itself often comprising further subsets of bundles, and numerous numbered individual files. For example: there were 9 subsets of what were euphemistically referred to as “Selected Disclosure” bundles, of which the principal subset of chronological documents itself ran to what in hard copy was 99 lever arch files; there were 13 files of witness statements, 36 files of expert evidence addressing Russian history and Russian law, and 57 files of expert valuation reports which, in the event, the court did not need to address. Most importantly, for the trial alone, there were approximately 4000 pages of written submissions submitted by counsel.

The court and the parties had the inestimable advantage of having all the documentation and case materials, including daily transcripts, legal arguments and authorities presented in a highly organised web-based electronic format. This meant that it was extremely quick and easy to access all the necessary materials both in and out of court, including notes which I myself had made during the hearing. There was extensive hyper-linking, which rendered access even easier. In effect, I was able to work in a virtually paperless environment although counsel and witnesses often preferred to use hard copy materials for the purpose of cross-examination.

I return to this topic at the end of this judgment, but there was no doubt that electronic presentation of documentation was not only essential, given the amount of material involved, but also that it also greatly contributed to the efficient conclusion of the trial within the time allotted. Whether the facility of electronic compilation and presentation unnecessarily increases the number of documents presented to the court at trial, and whether this in itself can give rise to a potential increase in costs, is a matter for debate on another occasion.

I should perhaps also mention that, because, for various reasons, the trial had to start on 3 October 2011, it was not possible for any formal time to be allocated in the court schedule for judicial pre-reading in advance of the trial itself. Necessarily, therefore, a certain amount of pre-reading had to be done in my own time, and a considerable amount of time was required both during, and after the conclusion of the trial, to complete the reading process.

Both Mr. Berezovsky and Mr. Abramovich described the claim as one arising out of a “uniquely Russian story”. Indeed, Mr. Berezovsky sought to rely, in support of his case, on a lengthy and detailed report by Professor Stephen Fortescue about contemporary Russian history, together with a large number of press articles and similar materials upon which the report was based. The claim could also be characterised as a uniquely personal story, centred as it was on a relationship between two men, of different ages, both in their time extremely successful and powerful, and whose fortunes changed as the dynamic of their relationship changed. The dispute between the two men has to be evaluated against the sometimes turbulent political and economic backcloth of Russia in the late 1990s and early 2000s, and in the context of the deterioration of their relationship. Nonetheless, the dispute is in essence a commercial one, which, like any other tried in this court, has to be decided on the factual evidence, both oral and documentary, relating to the specific transactions in issue. And, although this court necessarily views that evidence “Under Western Eyes (Footnote: ²¹)“, it has to be careful about applying what it might regard as conventional Western European business standards to judge the conduct of businessmen operating in the very different, and largely unregulated, commercial and political environment of Russia at the material times. As I remind myself: “… this is not a story of the West of Europe” (Footnote: ²²).

The reason why the Russian historical context was relevant was that it was the background against which the inherent probabilities of Mr. Berezovsky’s and Mr. Abramovich’s respective cases fell to be evaluated. What is inherently probable in a secure and relatively ordered society, governed by the rule of law, is not necessarily inherently probable in the extraordinary conditions that prevailed in Russia in the 1990s.

Interesting as it was, however, I obtained limited assistance from the evidence about Russian contemporary history in determining the inherent probabilities of Mr. Berezovsky’s claims or Mr. Abramovich’s defence. Much of the so-called historic material relied upon was no more than hearsay reportage, some of it of an obviously unreliable or self-serving character. Nor was it necessary, save in certain limited areas, for me to make any factual findings about what might be characterised as political events. Accordingly, I have mainly restricted any references below to those events whose nature and occurrence was effectively, or to a large extent, agreed between the parties and their respective experts. Where the experts’ reports were of particular assistance was in relation to the concept of krysha which I explain below.

The following is a largely non-contentious summary of the relevant factual background to Mr. Berezovsky’s claims taken from the opening submissions on both sides and the expert evidence. In so far as such summary departs from agreed facts, it reflects my findings of fact based on the evidence at trial.

The late 1980s and 1990s were a period of extraordinary upheaval in Russian history. During this period a political system, an economic model and a legal framework for trade and industry were scrapped and replaced. After the final collapse of Communism in 1992, Russia became Europe’s “Wild East”. A country, which had never in its entire history been either liberal or democratic in its governmental institutions, experienced, in less than a decade, a transition to capitalism which had taken other European countries more than a century to achieve. The result of this was an immense social upheaval, the partial collapse of old structures of authority, the enfeeblement and the impoverishment of the state, and the disappearance of the rule of law.

Between 1987 and 1991, under the policies of glasnost (“openness”) and perestroika (“restructuring”), the government of the USSR under Mikhail Gorbachev began to dismantle the Soviet centrally planned economy. Between 1987 and 1991, new legislation in the USSR relaxed certain conditions relating to: the engagement and holding of non-personal private property; the entitlement of individuals to engage in private economic activity; the establishment of enterprises for profit; and the entry into market transactions by individuals.

By 1991, a large number of Soviet enterprises had effectively been unilaterally privatised by their Soviet era managers, who ceased to report to the central planning authorities and operated their factories and plants for their own profit. These managers subsequently became known as “Red directors”. At the same time, a small group of proto-capitalists from outside the Soviet management structures were starting to develop businesses which would make them very rich.

On 12 June 1991, Boris Yeltsin was elected as President of the Russian Soviet Federative Socialist Republic. The coup attempt by Soviet hardliners in August 1991 accelerated the delegitimisation of the Communist Party and the Soviet government, and, in December 1991, the Soviet Union was dissolved. The Union Republics of the former USSR, including Russia, became independent and President Yeltsin (until then only the President of a subsidiary Republic within the USSR) became President of a newly independent Russia, a position he held until 31 December 1999.

It was common ground between the historical experts that, during the transition from a socialist to a market economy, the Russian business and legal environments were turbulent. For example, Professor Fortescue described the transition as follows:

“During the transition from a socialist economy to a market economy, Russia struggled to pass and implement comprehensive and consistent legislation governing business activities. There were gaps in the law, sometimes filled in a stop-gap way by Soviet-era law; there were widespread problems with poor drafting, caused by inexperience and incompetence; and the legislative and administrative process was bedevilled by bitter political fights and intense lobbying that produced unpredictable and inconsistent outcomes. This meant that there was widespread lack of knowledge and certainty about the proper methods of behaviour and documentation.”

Professor Robert Service, Mr. Abramovich’s historical expert, described the situation as follows:

“Businessmen operated in the same environment. They could see that due legal process and constitutional rights counted for little in the brutal economic transformation that was occurring in Russia. Courts were notoriously venal and subject to political manipulation. Policemen were often corrupt. The official legislation on ownership, enterprise registration, arbitration and trading was slow in being formulated and refined.”

Professor Bruce Winfield Bean, the Family defendants’ historical expert, expressed the point in similar terms:

“… there were inconsistent laws, incomplete laws, missing laws, and (in the very early 1990s) regulations sometimes available only to bureaucrats, all of which led to uncertainty …

…

… the uncertain Russian legal environment, overly aggressive tax inspectors, outmoded tax regimes based upon turnover, unhelpful obstructionist governmental agencies and bureaucrats, potentially unreliable courts which could be exploited by aggressive competitors, and political uncertainty ….”

These types of problems were confirmed by Sibneft itself in an offering circular issued by Salomon Brothers in 1997, which said:

“Russian law is made up of federal legislation, presidential decrees, government decrees and ministerial regulations that at times are complemented by regional and local rules and regulations. These bodies of law can overlap and sometimes conflict with one another, with uncertain results. Furthermore, the application of Russian laws by Russian governmental authorities is often subject to a high degree of discretion, which can result in inconsistent stances being taken by different authorities or even within the same authority by different officials.

The Russian judicial system is generally untested and may not be fully independent from outside social, economic or political forces. The course of litigation in Russian courts can be slow, and court decisions can be difficult to predict, in part because of limited judicial precedent and experience in free-market commercial matters. Accordingly, an investor may find seeking redress by pursuing an action in Russian courts difficult or impossible.”

It was in this context that, during the late 1980s and early 1990s, a small group of individuals were able to take the opportunities and manage the risks of the transition economy in a way which allowed them to achieve huge wealth and influence in a very short time. They were commonly, if (arguably) inaccurately, referred to as “oligarchs” (Footnote: ²³).

The concept of krysha (literally Russian for “roof”) played an important role in this case. The meaning of the concept was effectively common ground as between the respective historical experts and the parties. In a society which is not governed by the rule of law, people devise alternative structures to govern their relations, based not on law but on power. Krysha is an alternative system of obligation; the classic product of a society where businessmen cannot count on the protection of the law, either because the law is itself defective or because the administrative and judicial agencies charged with its enforcement cannot be relied upon to do so. Where there is no effective law, or no effective legal process of enforcement, relationships are governed instead by power. It was common ground among the experts that the situation in Russia in the 1990s and early 2000s was that, although there were laws, the legal processes were defective.

The concept of krysha was described by Mr. Berezovsky’s historical expert, Professor Fortescue, in paragraphs 188 to 190 of his first report. He emphasised that the concept was not limited to physical protection. He explained as follows:

“188.

The term first came into use in everyday usage in Russia in the early to mid-1990s when the world was taken over by racketeers and took on criminal overtones. In that context, it meant ‘protection’. Protection racketeering was a very large part of the activities of criminal gangs in the 1990s although with all the violent and involuntary connotations of the word protection, a criminal krysha was likely to also provide services beyond the immediate one of keeping other criminal groups away from your business. These included debt collection, i.e. contract enforcement, and conflict resolution. In the absence of an effective state, the krysha fulfilled some of the functions of the state, and collected tax for doing so.

189.

As I noted above, in the late 1990s the Russian state began to assert itself and to operate more effectively. This not only reduced the role of criminal groups but also led to a new application of the word krysha (which was not in general usage in the early and mid-1990s). It was now bureaucrats and politicians who provided a krysha. Like the criminal gangs, they also provided protection from a business person’s enemies and competitors. They also advanced the interests of their business client within the bureaucracy and political arena and were well remunerated for doing so. Volkov says of this more recent usage of the word krysha that:

‘In current Russian business parlance [it] is used to refer to agencies that provide institutional services to economic agents irrespective of the legal status of providers and clients. Such agencies are not necessarily criminal groups but are composed of a variety of criminal, semi legal (informal), legal, and state organisations.’

190.

Used in this way, the term krysha does not carry the necessary implication that the services in question will be criminal or illegal.”

In November 2003, an article in The Economist observed that:

“… most [Russian businessmen] already know that their best protection is still not the law but their krysha, or “roof” – a well-connected power broker”.

The evidence at trial demonstrated that the essential features of krysha were as follows:

It was Mr. Abramovich’s case that the relationship between Mr. Berezovsky and himself was founded principally on political krysha or protection: not merely at the outset in 1995, but also thereafter. He claimed that the relationship with Mr. Berezovsky included the provision of an element of physical, as well as political, protection; but that it was not Mr. Berezovsky who provided physical protection, but rather his associate, Mr. Patarkatsishvili. Mr. Abramovich’s evidence was that he was concerned to maintain his connection with a known and influential political protector right through to the time when Mr. Berezovsky fell out with Mr. Putin in 2000, and that, even then, he did not regard the relationship as unilaterally terminable. It was also his evidence that the physical protection provided by Mr. Patarkatsishvili was also valuable and, in relation to the RusAl acquisition, essential.

It was also Mr. Abramovich’s case that the lobbying activities of Mr. Berezovsky, as a protector providing political krysha for Mr. Abramovich, were inherently corrupt; and that, likewise, the deal between the two men, whereby Mr. Abramovich agreed to pay Mr. Berezovsky for his krysha services, was also corrupt. Mr. Sumption accepted that Mr. Abramovich was privy to that corruption but submitted that the reality was that that was how business was done in Russia in those times. Mr. Berezovsky certainly accepted the business reality of the need for influence; he said repeatedly in his witness statements that, without his political influence over President Yeltsin, Mr. Abramovich would have got nowhere in the world of Russian business and would certainly not have acquired control of Sibneft. That was accepted by Mr. Abramovich, and indeed was part of his case.

I address below my findings in relation to the evidence and arguments relating to Mr. Abramovich’s krysha allegations.

Mr. Berezovsky was a significant and highly controversial figure in Russian business and politics during the 1990s. Born in 1946, he was for many years an academic mathematician, having obtained a degree in applied mathematics. He remains a correspondent member of the Russian Academy of Sciences, with over 100 scientific publications to his name. As Head of the Department of System Design at the Institute of Control Sciences (a research centre associated with the motor industry), he had begun to work in 1973 with the largest car manufacturer in Russia, the State-owned AvtoVAZ.

In 1989, Mr. Berezovsky was involved in the creation of ZAO LogoVAZ (“LogoVAZ”), Russia’s largest independently owned car dealership. This was initially set up as a Russian joint venture between AvtoVAZ, LogoVAZ’s main supplier, Logosystems, an Italian company, and the Institute of Control Sciences. Later, it was restructured into a Russian closed joint stock company. Mr. Berezovsky never had more than a small direct shareholding in LogoVAZ; it amounted to 6.78% in 1996. But he exercised effective management control over LogoVAZ until about 1995, and made his initial wealth out of the business in this period. He was the General Director at LogoVAZ (equivalent to Chief Executive Officer).

Amongst the individuals who participated in the establishment and operation of LogoVAZ together with Mr. Berezovsky, and who play a part in this case, were Mr. Glushkov, who, as I have already mentioned, was one of Mr. Berezovsky’s closest friends and business associates, and Vladimir Kadannikov (“Mr. Kadannikov”), a former General Director of AvtoVAZ and Deputy Prime Minister of Russia from 1996. Mr. Glushkov had a doctorate in theoretical and mathematical physics and had also studied economics at the All Russian Academy of Foreign Trade. By the time Mr. Berezovsky had met him in 1989, Mr. Glushkov had spent approximately ten years working for the Ministry of Foreign Trade, had acted as a consultant to the Chamber of Commerce and had experience of establishing joint ventures in Russia. He became head of LogoVAZ’s commercial department, and shortly thereafter became Deputy General Director for Commerce.

At first, LogoVAZ functioned as a centre for the implementation of scientific research into advanced software and sold software to different research institutes in the USSR. However, later, the company moved into the automobile business: first as an importer of second-hand cars to Russia, and then, once private dealerships were made legal, as a reseller of AvtoVAZ-manufactured vehicles to private buyers.

Between 1989 and 1991, Mr. Berezovsky and Mr. Glushkov met with André & Cie, a Swiss commodities trader which was a major buyer and exporter of commodities produced in the Soviet Union. The result of those discussions was that, in 1991, it was agreed that André & Cie should take a stake in LogoVAZ, and would replace Logosystems as shareholder. As a result, LogoVAZ was restructured into a closed joint stock company (rather than a Russian joint venture). A special purpose vehicle, a newly formed Swiss company, Anros SA, was created to enable André & Cie to co-invest in LogoVAZ. The shares in Anros SA were held as to 10% by André & Cie and as to 90% by Mr. Berezovsky, Mr. Glushkov, Mr. Patarkatsishvili, Mr. Kadannikov and others. The name Anros reflected a combination of the name “André & Cie” with “Rossiya” (or “Russia”) to represent the two sides of the arrangement.

In 1992, with the assistance of André & Cie, Mr. Berezovsky initiated the establishment of the Forus group of companies, in order to provide Western project finance and import financing arrangements to support the operations of AvtoVAZ. The top group holding company was Forus Holdings SA, a Luxembourg company (“Forus”). Mr. Berezovsky, together with Mr. Patarkatsishvili, Mr. Glushkov, Mr. Kadannikov, André & Cie and other of Mr. Berezovsky’s associates were apparently shareholders in Forus at this early stage.

As a result of changes in the law in Russia in the late 1980s, private enterprises were allowed to develop and own their own banking operations. In the 1990s, banking became one of the most popular businesses as the new free market began to spread. Many large companies and businessmen established their own corporate banks, as there was little confidence within the business community in the State-controlled banking sector.

Consolidated Bank, (sometimes referred to Obyedinenniy Bank) was a bank set up by LogoVAZ on Mr. Berezovsky’s initiative in 1992, in order to support LogoVAZ’s business interests and in the hope that it would develop into a successful business of its own. As such it was, in effect, the in-house bank of LogoVAZ. It was common ground that Mr. Berezovsky was in a position, by virtue of his management control of LogoVAZ, to exercise effective management control over Consolidated Bank. However, Mr. Berezovsky’s actual ownership interest in Consolidated Bank was small. The Quarterly Reports on Securities for Consolidated Bank disclosed that, as at the last quarter of 1996, Consolidated Bank was owned by five companies:

Of these companies, it appeared that in 1995 Mr. Berezovsky himself held only a 6.78% direct interest in LogoVAZ, a 25% interest in Atol and at most a 33.33% interest in Forus. In combination, these would have given him at most a 13.7 % indirect interest in Consolidated Bank.

In 1994 or 1995, Mr. Berezovsky offered Ruslan Fomichev (“Mr. Fomichev”) a senior role at Consolidated Bank. He later became chairman of the Executive Board of Consolidated Bank and Mr. Berezovsky’s chief aide, and “in-house” financial adviser. However, although at an earlier stage of the proceedings Mr. Berezovsky indicated that Mr. Fomichev would be called as a witness on his behalf, subsequently, before trial, the two men fell out and, in the event, Mr. Fomichev was not called as a witness. I deal with certain matters relating to Mr. Fomichev below.

In 1993, Mr. Berezovsky established an entity called All Russian Automobile Alliance (“AVVA”) in order to engage in the construction of a new automobile assembly plant at Togliatti. The founding members of AVVA included AvtoVAZ, LogoVAZ, Forus and Consolidated Bank. Mr. Berezovsky was General Director. The scheme was that AVVA would raise funds by selling shares both privately and to members of the public. However, for various reasons the scheme failed. It was alleged on Mr. Abramovich’s behalf that AVVA was involved in pyramid selling, an allegation which Mr. Berezovsky denied. It is not an issue which I need to decide.

In early 1994, AVVA and André & Cie participated in the establishment of a joint venture company called Andava SA (“Andava”). Andava was set up to raise capital in the West for AVVA and as a treasury centre for AVVA. However, it does not appear that Western capital was in fact raised for such purpose. From 1996, Andava provided central treasury services for Aeroflot, the Russian State airline, but, according to Mr. Berezovsky, that was not something which was apparently envisaged when Andava was founded. Although Mr. Berezovsky and Mr. Glushkov had no ownership interest in Aeroflot (Footnote: ³¹), they received, through Andava, various income streams derived from Andava’s dealings with Aeroflot. As described below, this subsequently led to warrants being issued for both Mr. Berezovsky’s and Mr. Glushkov’s arrest on charges of fraudulent misappropriation of Aeroflot’s funds.

According to Mr. Berezovsky, from about 1992 his main interest had been politics and his business activities had served mainly as a vehicle for funding his political career. During 1993 and 1994, LogoVAZ was subject to repeated, violent attacks. Then, on 7 June 1994, Mr. Berezovsky himself was the victim of an assassination attempt. As he was leaving the LogoVAZ club, a remote-controlled bomb exploded, killing his driver instantly and severely injuring his bodyguard. Mr. Berezovsky was badly burned and went to Switzerland for medical treatment.

Whilst recuperating in Switzerland, Mr. Berezovsky decided that:

“… in order to help to ensure the development of a stable democratic society and a secure political base for entrepreneurship and the free market in Russia, he would become active in politics (Footnote: ³²).”

In his evidence he stated that he believed passionately in the importance of preventing Russia from relapsing into communism and that at that time he had concluded that the best way to promote a democratic political agenda would be through owning key mass media outlets.

In the course of Mr. Berezovsky’s business dealings, he developed various business and social relationships which he utilised, both commercially and politically, in the years to come. These relationships included inter alia, relationships with:

From 1994 onwards, Mr. Berezovsky acquired considerable influence over the inner circle of advisers surrounding President Yeltsin. In particular, he enjoyed privileged access to:

Mr. Berezovsky also had strong connections with Viktor Chernomyrdin (Prime Minister of Russia from 1992-1998), who was a neighbour of Deputy Prime Minister Soskovets, and with General Alexander Lebed, a political rival of President Yeltsin. General Lebed later became Governor of the Krasnoyarsk region, a region which acquired some importance during the so-called “aluminium wars” of the late 1990s.

Mr. Berezovsky was therefore extremely well connected in political circles at the time he met Mr. Abramovich.

The centre of Mr. Berezovsky’s network of influence was the LogoVAZ club in Moscow. It plays a part in this story. This was the place where Mr. Berezovsky spent almost all of his working time when he was not travelling. It was also the place he used as the main venue for meetings with business partners and associates, politicians and friends. Mr. Berezovsky did however travel very frequently, and it was commonplace for his business meetings to take place outside Russia. Mr. Berezovsky described the function of the club as follows (Footnote: ³³):

“34

In the spring of 1993 we completed the construction of the ‘LogoVAZ club’ in Moscow. This became the centre of my business operations and when I was not travelling, I spent almost all of my working time there and used this as the main venue for meetings with my business partners and associates as well as with friends and politicians. When I was working at the LogoVAZ club I would usually have meetings there all day. We had our own restaurant and so meetings would continue as we would move from our offices into the restaurant. I could often work for a period of twenty-four hours or more without leaving the club.”

In the course of 1994, Mr. Berezovsky used his political influence and contacts to persuade President Yeltsin to authorise the partial privatisation of the Russian State Television and Radio Broadcasting Company, Ostankino, which was then the only television network in Russia with a nearly universal reach across the national territory. Mr. Berezovsky argued that the channel could be used to support the interests of democratically inclined Russians whose interests were represented by President Yeltsin’s re-election campaign. President Yeltsin ultimately agreed to the proposal on the basis that the State would retain majority ownership of the channel.

It was proposed that Ostankino’s assets should be transferred to a new company, OAO Obshestvennoye Rossiyskoe Televvidenie (“ORT”), with a view to its being partially privatised. ORT had been created by Presidential Decree on 29 November 1994. The plan was for the State to sell 49% of the shares in ORT to a syndicate of private investors organised by Mr. Berezovsky, whilst retaining a controlling 51%. The 49% shareholders would be expected to fund ORT’s media operations, and in return would obtain effective editorial control. Thus although, technically, the private investors were buying a minority stake in a State-owned company, in fact, the votes of minority shareholders of ORT were necessary for central aspects of its decision-making. For example, under ORT’s Charter, a quorum of 2/3 was necessary for the General Meeting of Shareholders, and a simple majority vote at a General Meeting of Shareholders was insufficient for the appointment of the Board of Directors. At the original privatisation of ORT, Mr. Berezovsky and Mr. Patarkatsishvili acquired 8% through LogoVAZ. In addition, Mr. Berezovsky persuaded a number of ‘oligarchs’ with whom he had a relationship, to take stakes in ORT, on the basis that they would allow Mr. Berezovsky to manage their shareholdings on their behalf. In September and October 1995, Mr. Berezovsky was given a power of attorney over their shareholdings (which effectively gave him control of their ORT shares).

ORT began operations on 1 April 1995. Subsequently, from 1996 onwards, Mr. Berezovsky and Mr. Patarkatsishvili bought out the shareholdings of the other private shareholders, who did not wish to incur the costs of running the station, so that, by the end of the 1990s, they had 49% of the shares, held through two companies (LogoVAZ and ORT-KB) and management control of the station through its board. Mr. Berezovsky persuaded Mr. Patarkatsishvili to take over as ORT’s First Deputy General Director, a role which he held until 2000.

By the time of the Russian presidential elections in the summer of 1996, there was real concern in certain quarters of the Russian electorate that the Communists might be re-elected. Mr. Berezovsky’s evidence was that, at the World Economic Forum in Davos in February 1996, he became concerned that the Communist candidate, Gennady Zyuganov (“Mr. Zyuganov”), Leader of the Communist Party of the Russian Federation, might win the next Russian presidential election due to be held on 3 July 1996.

Mr. Berezovsky anticipated that, with the benefit of editorial control, he would be able to use ORT to assist President Yeltsin to win the 1996 presidential election. He organised a high profile media campaign supporting President Yeltsin’s re-election, in which ORT played a major part.

On 3 July 1996 Mr. Yeltsin was re-elected President with 54% of the vote, with Mr. Zyuganov achieving 40%.

On 9 August 1999, Vladimir Putin (“Mr. Putin”, or “President Putin”) was appointed acting Prime Minister by President Yeltsin. On 1 January 2000, Mr. Putin became acting President of Russia. On 26 March 2000, he was elected President and, on 7 May 2000, was inaugurated as such.

Thus the evidence established that Mr. Berezovsky in his prime was the archetypal “well-connected powerbroker”. According to Professor Fortescue, in the early and mid-1990s Mr. Berezovsky was “one of the most politically influential ‘oligarchs’ in Russia”, an assessment with which Mr. Berezovsky readily agreed in cross-examination. Professor Fortescue identified three main factors which accounted for his influence: (i) his relationship with the so-called family advisers of President Yeltsin; (ii) his close relations with other “oligarchs”; and (iii) his media interests.

This was broadly confirmed by Mr. Berezovsky, with the characteristic proviso that the main factor accounting for his influence was “my intellectual capacity”. Mr. Berezovsky’s ability to lobby for the creation and privatisation of ORT, and its transfer into his control, and thereafter to run it, apparently without interference, clearly demonstrated the level of influence which he was able to exert at the time. The evidence also established that he exercised close control over its editorial policy and that, between 1995 and 2000, editorial control of ORT was the main source of Mr. Berezovsky’s political influence.

Mr. Patarkatsishvili was a Georgian citizen who began his career in the Georgian operations of the State-owned car manufacturer AvtoVAZ. By 1980/81 he had become head of the division responsible for the distribution of spare parts in the Caucasus. He later told Mr. Berezovsky’s solicitors that he had provided the start up capital for LogoVAZ in 1989, or at least for Mr. Berezovsky’s share of it. At some stage he moved to Moscow at Mr. Berezovsky’s invitation to join its management. Mr. Berezovsky’s account of the origins of their relationship was rather different. He said that Mr. Patarkatsishvili joined LogoVAZ as an employee in 1992, at a time when he had no significant private assets. By 1994, he had risen under Mr. Berezovsky’s patronage to become its First Deputy General Director for Commerce, and had begun to acquire a modest shareholding (4%) in LogoVAZ as well as interests in other enterprises in which Mr. Berezovsky was involved. It is not necessary for me to decide any issues about the origins of the two men’s business relationship in these proceedings, and I do not do so. It was common ground that Mr. Patarkatsishvili’s strong feature was that he was an outstanding financial manager. According to Eugene Shvidler (“Mr. Shvidler”), one of Mr. Abramovich’s close business associates, who was President of Sibneft from July 1998 to October 2005, and Chairman of the Board of RusAl from 2000 – 2003, Mr. Patarkatsishvili also had a reputation, apparently acquired in Georgia, as a “tough guy” with connections to even “tougher individuals”. When, in early 1995, Mr. Berezovsky acquired an interest in ORT, Mr. Patarkatsishvili was very quickly installed as its First Deputy General Director. In about March 1995, while his discussions with Mr. Berezovsky were continuing, Mr. Abramovich first met Mr. Patarkatsishvili at the LogoVAZ club.

Mr. Berezovsky alleges that in 1995 he reached agreement with Mr. Patarkatsishvili that, unless otherwise agreed, they would participate in any future and existing businesses on a 50:50 basis. As I have already mentioned, that is disputed, in particular by the defendants in the Chancery proceedings. As a result of an earlier decision of mine dated 6 May 2011, in which I refused Mr. Berezovsky leave to amend to raise the point in his claim against Mr. Abramovich, it is common ground that it is not an issue which can or should be resolved at this trial. Mr. Abramovich’s position is that he appreciated that Mr. Berezovsky and Mr. Patarkatsishvili were close business associates but never knew the exact nature or terms of their relationship. Mr. Berezovsky claims to have told Mr. Abramovich in 1995 that he had a 50:50 partnership with Mr. Patarkatsishvili, who managed their joint business. Mr. Abramovich does not accept that he was told this. Again, these are not issues which arise for determination at this trial, and are not issues which can subsequently be raised as against Mr. Abramovich.

The following is a summary of additional relevant events in relation to Mr. Berezovsky and Mr. Patarkatsishvili which are, to a lesser or greater extent, connected with the issues in the case. They are largely, but not exclusively, taken from the agreed chronology:

There were a number of significant features of the case which the court had to bear in mind when approaching the evidence.

First, at the core of the dispute between the parties were four highly contentious alleged oral agreements, relating to substantial assets which, if established, had serious financial and commercial consequences for the alleged parties to those agreements. Every, or almost every, aspect of the alleged agreements was in dispute. Significantly, there were no contemporaneous notes, memoranda or other documents recording the making of these alleged agreements or referring to their terms. Such documents as were relied upon by Mr. Berezovsky as circumstantial evidence supporting his case, were usually (but not invariably) considerably later in origin than the alleged agreements; they were not documents that were communicated to Mr. Abramovich or his representatives; and were documents which were open to various interpretations as to whether they were supportive of Mr. Berezovsky’s case.

Second, the oral evidence relating to such claims was extremely stale. The court was being asked, in effect, to make findings based on limited direct evidence relating to events which occurred many years ago; these included the alleged agreements between Mr. Abramovich, Mr. Berezovsky and Mr. Patarkatsishvili in 1995 and 1996 relating to Sibneft; between the three men in 1999 relating to the aluminium interests; the alleged Dorchester Hotel Agreement said to have been concluded between Mr. Abramovich, Mr. Berezovsky, Mr. Patarkatsishvili and Mr. Deripaska on 13 March, 2000, relating to RusAl; and alleged threats said to have been made by Mr. Abramovich relating to the sale of Mr. Berezovsky’s and Mr. Patarkatsishvili’s interests in ORT in 2000, and in relation to their alleged interests in Sibneft in 2001. In a case which is dependent upon establishing oral agreements, evidence relating to events which occurred a long time ago necessarily gives rise to particular problems. Apart from the fact that, not surprisingly, it is often difficult for witnesses to remember what happened many years ago, and they can rarely be expected to remember the specific words which they used, witnesses can easily persuade themselves that their recollection of what happened is the correct one. That problem was compounded in this case by the fact there had been substantial summary judgment proceedings, followed by the appeal to the Court of Appeal, during the course of which round after round of evidence was produced by various witnesses on each side. Given the substantial resources of the parties, and the serious allegations of dishonesty, the case was heavily lawyered on both sides. That meant that no evidential stone was left unturned, unaddressed or unpolished. Those features, not surprisingly, resulted in shifts or changes in the parties’ evidence or cases, as the lawyers microscopically examined each aspect of the evidence and acquired a greater in-depth understanding of the facts. It also led to some scepticism on the court’s part as to whether the lengthy witness statements reflected more the industrious work product of the lawyers, than the actual evidence of the witnesses. However, it would not have been practical, given the length and complexity of the factual issues involved, for the court to have required evidence in chief to have been given orally. It was for that reason that cross-examination, in particular of Mr. Berezovsky and Mr. Abramovich, assumed such a critical importance.

Third, the lapse of time and staleness of the claims also gave rise to the inevitable problem that the court did not have before it all the evidence which it might otherwise have done, had the dispute been resolved nearer the time that the alleged oral agreements had been made, rather than 16 years after they were alleged to have been concluded. A number of witnesses, who would, or might, have been able to have given key evidence, were dead; these included Mr. Patarkatsishvili himself, an English solicitor, Stephen Curtis (“Mr. Curtis”) and two other English solicitors, Nick Keeling (“Mr. Keeling”) and Mr. Stephen Moss (“Mr. Moss”). A number of witnesses were not prepared to give evidence. Documents which might have been available at the time had been destroyed in the normal course of business, or were not able to be found.

Fourth, the burden of proof was on Mr. Berezovsky to establish his claims. As the only witness, on his side, who could give direct oral evidence of the making of the alleged agreements or the alleged threats, the evidential burden on him was substantial. Whilst Mr. Rabinowitz submitted in his oral closing submissions that:

“… there was one overarching question that the court will want to ask itself, namely has Mr. Abramovich on his case provided a plausible explanation for the enormous and indeed admitted payments made to Mr. Berezovsky and Mr. Patarkatsishvili”,

this somewhat distorted the reality that the burden of proof at all times lay fairly and squarely on Mr. Berezovsky. It was true that the evidential burden shifted to Mr. Abramovich to explain the reason for the substantial payments which he made to the two men (and this is a topic with which I deal below), but, ultimately, it was for Mr. Berezovsky to convince the court, on the balance of probabilities, that the alleged oral agreements and threats had indeed been made, not for Mr. Abramovich to convince the court otherwise.

Fifth, as I have already mentioned, the context in which the business arrangements between Mr. Abramovich, Mr. Berezovsky and Mr. Patarkatsishvili were concluded was the Russian business and political environment in the period 1995-2001. Whilst the respective parties’ historical experts were able to give certain background evidence in relation to the period, ultimately it was for the court to decide whether, or the extent to which, that context explained or informed the probabilities of the arrangements being as respectively contended for by either side. The Russian context gave rise to another problem; apart from the fact that many witnesses gave their evidence in Russian, the business arrangements between Mr. Abramovich, Mr. Berezovsky and Mr. Patarkatsishvili would have been discussed, made and conducted in Russian; the nuances of the words used between them in such discussions would not necessarily be conveyed in translation to the non-Russian speaker; particular care therefore had to be taken when considering, for example, information given by Mr. Patarkatsishvili to non-Russian speakers such as Mr. Curtis, and Mr. Berezovsky’s English solicitors.

Sixth, this case fell to be decided almost exclusively on the facts; in the event, very few issues of law were involved. Because of the nature of the factual issues, the case was one where, in the ultimate analysis, the court had to decide whether to believe Mr. Berezovsky or Mr. Abramovich. It was not the type of case where the court was able to accept one party’s evidence in relation to one set of issues and the other party’s evidence in relation to another set of issues.

Because both the Sibneft and the RusAl claims depended so very heavily on the oral evidence of Mr. Berezovsky, the court needed to have a high degree of confidence in the quality of his evidence. That meant confidence not only in his ability to recollect things accurately, but also in his objectivity and truthfulness as a witness. Before addressing his credibility in more detail, I record that Mr. Berezovsky spoke excellent English. Although his evidence did not always appear on the transcript as syntactically correct, it was easy to understand. Sometimes he had difficulty in expressing himself and I give full allowance for the fact that, under pressure, he may sometimes have given an answer which did not accurately reflect what he wanted to say. But he gave his evidence in an assured and confident manner and had little, if any difficulty, in understanding the questions put to him in cross-examination by Mr. Sumption. Indeed he gave the impression, if not of precisely enjoying the experience, at least of relishing the opportunity to present his story to the court and a large audience, and to fence with Mr. Sumption. However, I have little doubt that he found the experience a stressful one. At all times he had a Russian interpreter at his side, who was able to provide immediate assistance on the relatively few occasions he required it. He appeared to have diligently read the transcripts. He was cross-examined for seven days in all, six days by Mr. Sumption and, on the seventh day, by Mr. Malek and Mr. Adkin. He was unfailingly courteous to the court and to counsel who cross-examined him.

A court’s assessment of the credibility of a witness is not meant to be some sort of pseudo-psychological analysis of his character. But, as submitted by Mr. Sumption, Mr. Berezovsky’s personality was one of the dominant themes of the trial, which provided a key to his credibility as a witness, as well as an explanation for his evidence in relation to some of the critical events. For that reason, it is appropriate to refer to certain aspects of his personality which were displayed in his evidence, and in his demeanour. In his time, Mr. Berezovsky had clearly been a person of real political significance in Russia, who had played his part in its transition from a Communist state to a free market and capital-based economy. He was, and is, as he would be the first to profess, an intelligent man, who was able to engender considerable loyalty and support from the many people around him who believed in his abilities and powers of influence. He had been a skilful manipulator of the Russian media, and was astute in deploying it, and his numerous contacts, in order to achieve his political and personal goals. He certainly regarded himself as a champion of the free press in Russia. But, by the time of the trial he had been in exile for some 11 years, and was no longer a colossus bestriding centre stage of the Russian political scene, as he had once been. The evidence demonstrated that he personally resented Mr. Abramovich, whom he regarded as a former protégé whom he had created from nothing, but who had survived under a Russian regime, which Mr. Berezovsky hates, for what he regards as its unacceptable political values and for driving him into exile. The evidence also established that Mr. Berezovsky resented the business stature and wealth which Mr. Abramovich had acquired, as a result of being publicly perceived as the owner of Sibneft and, with Mr. Deripaska, as the creator of RusAl.

The manner in which he gave, and the content of, his evidence also showed him to be a man with a high sense of his own worth, who was keen to portray himself as the central and indispensable figure in political and commercial events. The following are examples from the transcripts:

On my analysis of the entirety of the evidence, I found Mr. Berezovsky an unimpressive, and inherently unreliable, witness, who regarded truth as a transitory, flexible concept, which could be moulded to suit his current purposes. At times, the evidence which he gave was deliberately dishonest; sometimes he was clearly making his evidence up as he went along in response to the perceived difficulty in answering the questions in a manner consistent with his case; at other times, I gained the impression that he was not necessarily being deliberately dishonest, but had deluded himself into believing his own version of events. On occasions he tried to avoid answering questions by making long and irrelevant speeches, or by professing to have forgotten facts which he had been happy to record in his pleadings or witness statements. He embroidered and supplemented statements in his witness statements, or directly contradicted them. He departed from his own previous oral evidence, sometimes within minutes of having given it. When the evidence presented problems, Mr. Berezovsky simply changed his case so as to dovetail it in with the new facts, as best he could. He repeatedly sought to distance himself from statements in pleadings and in witness statements which he had signed or approved, blaming the “interpretation” of his lawyers, as if this somehow diminished his personal responsibility for accounts of the facts, which must have been derived from him and which he had verified as his own.

Whilst I can readily understand that, in a case of this sort, which involved a considerable amount of evidence at the interlocutory stage given by lawyers on instructions (Footnote: ³⁷), it is not surprising that the principal witness ultimately describes aspects of the case in significantly different terms, that could not excuse the extent of Mr. Berezovsky’s deviations from his previous case as presented in his pleadings and witness statements. His “I blame my lawyers” excuse was not convincing. Finally, it was obvious that Mr. Berezovsky approached his evidence, as he approached his financial affairs, with what Mr. Sumption described as “an imperial level of generality”. That again was a factor which had to be borne in mind when assessing his credibility.

In public interviews with the media prior to June 2001, Mr. Berezovsky had consistently and clearly denied, whenever directly asked, that he was a shareholder in Sibneft. He had never suggested in such interviews (which were frequently based on the journalist’s assumption that he indeed had such a shareholding, whether held directly or indirectly through other companies) that he had a beneficial interest in, or some sort of contractual entitlement to, Sibneft shares pursuant to arrangements with Mr. Abramovich. In cross-examination he saw nothing wrong (on the basis that he was correct in his claim that he had a beneficial interest in Sibneft shares) in misleading journalists in this respect.

In this judgment I have identified numerous instances where I have not been able to accept Mr. Berezovsky’s evidence. Although there are many other instances demonstrating Mr. Berezovsky’s lack of credibility as a witness, for present purposes it is sufficient to cite the following additional examples:

But this turned out to be untrue. Two witnesses, Natalia Nosova (“Dr. Nosova”) and her husband, Mr. Lindley, a solicitor, stood to gain very substantially if Mr. Berezovsky were to win these proceedings. Mr. Berezovsky’s excuse in re-examination, on Monday 17 October, for not giving a truthful answer was wholly unconvincing (Footnote: ⁴¹):

“Q. I just want to come back, if I may, to page 147 between lines 8 and 12 because there you say that none of your witnesses stand to gain financially if you win the action. Do you see that?

A. Yes, I see that.

Q. My question is this: is Mr. Lindley one of your witnesses?

A. Yes. My Lady, I have read this transcript on the weekend and I am not correct here because my reflection was that did I give was that: did I pay money for witness, yes? Not witnesses. But it’s not my English, my English is okay.

My reflection was wrong. And when I read that, I just -- and if you wouldn’t put me this question, I in any case arise this question. My -- now -- and I return to this point and try to recollect what’s happened.

I have agreement with four people more as a beneficiary if I win against of not only Abramovich, against of anyone: Abramovich or Anisimov or Salford or family, yes? And, as I -- as we discussed now, that I have obligations to pay 5 per cent of this tape, for this recording. But additionally to that I have obligations in front of two witnesses and two who are not witnesses, the same obligation. And the reason why I have this obligation because those people participate in all my events which we’re discussing here.”

This aspect of his evidence requires greater elaboration. I regard Mr. Berezovsky’s attempts to conceal the fact that two of his witnesses, Dr. Nosova and her husband, Mr. Lindley, a solicitor, each stood to gain 1% of Mr. Berezovsky’s winnings, (up to $140 million in total) if he won the action, as typical of his attitude towards the integrity of the trial process. Dr. Nosova was one of the key witnesses for Mr. Berezovsky in this litigation. In correspondence and in her disclosure statement, Dr. Nosova sought to emphasise her independence from Mr. Berezovsky for the purposes of disclosure, describing herself as a “businesswoman” who had “use of” an office at Mr. Berezovsky’s office premises. Mr. Lindley was described by Dr. Nosova as having a “managerial” role in this litigation although he sought to downplay it by describing it merely as that of a financial controller. He attended at least two meetings with Mr. Berezovsky and Mr. Patarkatsishvili in relation to the litigation in June 2007, where he took lengthy attendance notes and was called to give evidence about them. Mr. Lindley’s evidence, to the effect that he had not mentally made the connection between the payment and his evidence, was an astounding answer. In addition, Mr. Berezovsky had agreed to pay 1% of the proceeds of any successful recovery against Mr. Abramovich to a Mr. Cotlick, a long-standing assistant of Mr. Berezovsky’s and a qualified Israeli lawyer, who not only assisted Mr. Berezovsky in the conduct of this litigation but who also played a major role, in conjunction with Addleshaw Goddard, in relation to disclosure of Mr. Berezovsky’s documents, but who was not going to feature as a witness.

These contingency fee agreements were apparently entered into to compensate Mr. Lindley, Dr. Nosova and Mr. Cotlick for managing the litigation on Mr. Berezovsky’s behalf. According to Mr. Lindley, he drafted Mr. Cotlick’s agreement and Mr. Cotlick (using Mr. Lindley’s draft as a template) prepared Mr. Lindley’s agreement and that of his wife, Dr. Nosova. The contingency fee arrangements were documented by means of express written agreements about which there can have been no doubt as to their existence or consequences. There was no justification whatsoever for the fact that these arrangements were not disclosed to Mr. Abramovich’s lawyers, until they were introduced into evidence by Mr. Rabinowitz in re-examination. Neither Mr. Lindley nor Dr. Nosova referred to their contingency fee arrangements in their witness statements. It was also notable that Mr. Lindley had not informed his firm, Streathers, in which he was a partner, and which had been previously instructed by Mr. Berezovsky in this litigation, of his contingency fee arrangements until their disclosure in the course of Mr. Berezovsky’s re-examination, notwithstanding that Streathers were receiving professional fees for his work in connection with the case. Nor were Addleshaw Goddard informed of their existence by any of Dr. Nosova, Mr. Lindley, Mr. Cotlick or Mr. Berezovsky himself. They were first informed on Friday, 14 October, 2011, after Mr. Berezovsky had given his evidence in cross-examination.

But, importantly, Mr. Berezovsky’s cross-examination was not the first occasion on which the existence of these arrangements had been concealed from Mr. Abramovich and his solicitors, Skadden or, indeed the court. In particular, on 23 March 2011, Mr. Hastings of Addleshaw Goddard served his fifth witness statement. The background to the statement was the revelation that Mr. Berezovsky had entered into a contingency fee agreement whereby he agreed to pay 5% of any recovery from the claim to the intermediary who had provided the Le Bourget recording. In that context, Skadden had applied for details of that arrangement and for details of any other payments made to any witnesses in the dispute. It was known by that point in time that Dr. Nosova would be a witness. Mr. Lindley was sent a copy of the fifth witness statement of Mr. Hastings and he accepted in cross-examination that he had read it. Mr. Cotlick was referred to expressly in that witness statement. As Mr. Lindley acknowledged, Mr. Cotlick was also aware of Mr. Hastings’ witness statement. On 29 March 2011 there was a court hearing at which reference was made to Mr. Hastings’ witness statement. Both Mr. Cotlick and Mr. Lindley were present in court on that occasion and, indeed, sat next to each other.

Mr. Hastings’ fifth witness statement said:

37.

…

(e)

I can confirm that no other payments have been made by Mr. Berezovsky for evidence in these proceedings. A payment was made by Mr. Berezovsky in relation to the Metalloinvest proceedings in the Chancery Action, in order to obtain a copy of the Parex Schedules which show how the RusAl proceeds had been paid...

(f)

Finally, Mr. Berezovsky has agreed, in line with the rules set out in the CPR, to compensate certain witnesses for their time lost in assisting him with the preparation of the witness statements to be served in due course to support his case, and the provision of conduct money in the event that they are called to give evidence at trial.”

The first paragraph of Mr. Hastings’ fifth witness statement confirmed that Addleshaw Goddard had instructions to make the witness statement on Mr. Berezovsky’s behalf. By a letter dated 13 July 2011, in response to a query from Skadden, Addleshaw Goddard confirmed that paragraphs 37(e) and (f) as set out above “remain correct”. Addleshaw Goddard subsequently confirmed that they had instructions from their client to send that letter. As was properly accepted in correspondence by Addleshaw Goddard, in light of the contingency fee arrangements, those paragraphs of Mr. Hastings’ witness statement and the confirmation given in the letter dated 13 July 2011 were (unbeknownst to Addleshaw Goddard at the time) incorrect.

In such circumstances, I find it difficult to accept that Mr. Berezovsky, Mr. Cotlick, the individual with key responsibility for Mr. Berezovsky’s disclosure, and Mr. Lindley, one of the managers of the litigation on Mr. Berezovsky’s behalf, did not appreciate that the court, Skadden and Addleshaw Goddard were being misled. But even approaching this incident on the most generous of bases, so far as Mr. Berezovsky is concerned, and assuming that he did not appreciate that there had been a deception, it still raises real concerns about his attitude to the trial process and his credibility.

I should perhaps also say, in this context, that whilst there was, of course, always the possibility that Mr. Abramovich might have made similar, but informal, arrangements promising, but not contracting, to compensate his witnesses for giving testimony supporting his case, there was no evidence suggesting or indicating the existence of such arrangements.

Accordingly, I concluded that, in the absence of corroboration, Mr. Berezovsky’s evidence frequently could not be relied upon, where it differed from that of Mr. Abramovich or other witnesses. I regret to say that the bottom line of my analysis of Mr. Berezovsky’s credibility is that he would have said almost anything to support his case.

The witnesses called by Mr. Berezovsky had no direct evidence to give about critical issues such as the alleged 1995, 1996 and 1999 Agreements or the alleged threats in relation to ORT or Sibneft. Nor, with the exception of Mr. David Reuben (whose evidence was not in fact supportive of Mr. Berezovsky’s case), and of Mr. Michael Cherney (who declined to appear as a witness, and with whose evidence I deal subsequently), were they able to give any direct evidence in relation to the alleged acquisition by Mr. Berezovsky and Mr. Patarkatsishvili of interests in the aluminium assets or RusAl or in relation to the Dorchester Hotel meeting. These witnesses had not been involved in the relevant events. The most which their evidence amounted to was, effectively, that the evidence which Mr. Berezovsky was giving at trial was consistent with what he had previously told them. All Mr. Berezovsky’s witnesses who gave such evidence of previous, allegedly consistent, statements fell into the category of his loyal supporters, who were either fellow exiles with him, or who were, or had at some time been, financially reliant upon him to a considerable extent. Their evidence was almost exclusively derived from what the witnesses had been told by Mr. Berezovsky. They were all plainly motivated by a loyal desire to support evidence that had previously been given by Mr. Berezovsky. Indeed, Mr. Glushkov, who sat through Mr. Berezovsky’s evidence, changed his own evidence in relation to whether his arrest had been a foregone conclusion, from the account which he had previously given not only in his witness statement, but also in his own asylum proceedings, apparently in order to support Mr. Berezovsky’s revised case on this topic. I could attach very little weight to the evidence of this type given by witnesses such as Mr. Glushkov, Mr. Goldfarb and Mr. Dubov. Their recollection was, not surprisingly, vague as to details, dates and specifics, and, apart from being totally dependent on what Mr. Berezovsky had told them, also required an ability to differentiate between the various occasions on which the particular witness had discussed the issues with Mr. Berezovsky.

I had difficulty in accepting Dr. Nosova as a truthful witness. Although she claimed to know a lot about the background to the case, she was not directly involved in the critical discussions or events relating to Sibneft and RusAl. Given her undisclosed contingency fee agreement, and that of her husband, she had a substantial financial interest in the outcome of the proceedings, which clearly coloured her approach to her evidence. She sat in court throughout Mr. Berezovsky’s cross-examination and the impression I formed was that she was motivated by a desire to craft her evidence to promote his case. Apart from her loyalty to Mr. Berezovsky, she departed from her evidence, both written and oral, when it suited her, and at times gave the impression of making up her evidence as she went along. I address specific aspects of her evidence in greater detail below. Consequently, I therefore approached her evidence with considerable caution.

Mr. Abramovich gave his evidence in Russian which was simultaneously translated. He also had the benefit of having a translator standing beside him throughout his cross-examination to provide linguistic assistance. It was obvious that his ability to speak, understand or read English was limited and I had no reservations about the genuine nature of his wish to give his evidence in Russian. Although it is always more difficult to cross-examine through an interpreter, in this case, because of the technical skills and abilities of the simultaneous translators, that difficulty was significantly reduced. I did not form the impression that Mr. Abramovich in any way used the translation process as a means of evading giving a direct answer or of delaying his answers to any questions put to him. Despite the fact that he gave his evidence in Russian, I was able to form a clear view of his demeanour and credibility from the answers which he gave and the manner in which he gave them. Mr. Abramovich was cross-examined over a period of nine days. He was also unfailingly courteous to the court and counsel who were cross-examining him.

In his oral closing submissions, Mr. Rabinowitz submitted that Mr. Abramovich:

“… whilst undoubtedly a smooth and well-prepared witness, proved himself to be a thoroughly dishonest and cynical witness as well, willing to perpetuate a false case, not only by giving evidence which he knew to be untrue, but also by calling as witnesses his associates who again, as Mr. Abramovich well knew, gave, as they were intended to do, thoroughly untrue evidence designed only to mislead the court (Footnote: ⁴²).”

Mr. Berezovsky’s written closing submissions contained similar arguments. Thus at paragraph 88 the submission was made:

“88.

Mr. Berezovsky observed of Mr. Abramovich that “He is good at getting people to like him, and good at psychology in that way. He is good at appearing to be humble”: Berezovsky 4 ¶239 …. Mr. Abramovich’s own Written Closing observed that he “gave careful and thoughtful answers”: at ¶5(4) … It was a highly controlled performance by Mr. Abramovich, who was meticulously prepared for the evidence he would give, and who had worked closely with his witnesses to put forward a story which he calculated would be accepted by the Court. It was also, however, a highly cynical and deceitful manipulation of the trial process.”

But cross-examination is a very revealing process, particularly when it takes place over a number of days and requires the witness to face detailed and intensive questioning in respect of a large number of topics and documents. However well-prepared a witness may be, or however controlled he may appear to be, when giving his answers, it is very rare that the court is not able to reach a conclusion as to whether he is telling the truth or not. Contrary to Mr. Berezovsky’s views, Mr. Abramovich did not present himself in cross-examination as a “humble man” or as someone who was attempting to appear likeable, or to be liked. Whilst his demeanour was reserved and restrained, he made no attempt to pretend that he was anything other than a highly successful and very wealthy businessman, who had made a very substantial fortune in the challenging Russian business environment of the 1990s and early 2000s, largely as a result of his and his colleagues’ entrepreneurial, management and financial skills. I also had little doubt that, if the need arose, he would have been prepared to act ruthlessly in a business context to achieve his commercial goals.

But there was a marked contrast between the manner in which Mr. Berezovsky gave his evidence and that in which Mr. Abramovich did so. Mr. Abramovich indeed gave careful and thoughtful answers, which were focused on the specific issues about which he was being questioned. At all times, he was concerned to ensure that he understood the precise question, and the precise premise underlying the question which he was being asked. He was meticulous in making sure that, despite the difficulties of the translation process, he understood the sense of the questions which were being put to him. To a certain extent that difference, no doubt, reflected the different personalities of the two men, for which I gave every allowance possible to Mr. Berezovsky. But it also reflected Mr. Abramovich’s responsible approach to giving answers which he could honestly support. Where he had relevant knowledge, he was able to give full and detailed answers; he took care to distinguish between his own knowledge, reconstructed assumptions and speculation. He was not afraid to give answers which a less scrupulous witness would have considered unhelpful to his case. For example, he never sought to underplay the significant and essential role which Mr. Berezovsky had played in the acquisition of Sibneft, and, likewise, the essential contribution which Mr. Patarkatsishvili had made in connection with the acquisition of the aluminium assets. There were few differences between Mr. Abramovich’s oral evidence and the evidence given in his witness statements. Such differences as there were, were largely attributable to the legitimate addition of corroborative detail in response to questions in cross-examination, and to difficulties inherent in the translation process. Whilst, not surprisingly, there were occasions where his evidence was inconsistent, or his recollection was faulty, or had changed over time, none of these occurrences was so startling as to give me concerns about his basic truthfulness and reliability as a witness.

I do not accept Mr. Rabinowitz’s characterisation of Mr. Abramovich’s demeanour in the witness box as “smooth” or “a highly controlled performance” or any pejorative gloss implicit in the suggestion that he had been “… meticulously prepared for the evidence he would give”. Mr. Abramovich clearly found the cross-examination process a stressful one, not least because he was not in control of the questions which he was being asked, or of the court process, and because he clearly needed to concentrate hard to understand and answer the questions.

I reject the serious allegations made by Mr. Rabinowitz that Mr. Abramovich was a thoroughly “dishonest and cynical witness” who deliberately called witnesses whom he knew would give “as they were intended to do, thoroughly untrue evidence designed only to mislead the court.” Neither the evidence, nor my analysis of it, supported that allegation. Likewise I reject the allegation that he manipulated the trial process or engaged in improper collusion with his witnesses, or was part of a “smears and innuendo” campaign.

On the contrary, I found Mr. Abramovich to be frank in making concessions where they were due, for example in relation to the backdating of documents, the concealment of his 44% beneficial interest in Sibneft, or in relation to the mis-description of his educational qualifications in a Sibneft circular (the last of which I suspect largely arose as a result of translation difficulties and which were, in any event, of minimal importance). Contrary to the assertion that he, together with Mr. Shvidler and Mr. Tenenbaum, were involved in a smear campaign, Mr. Abramovich was extremely reticent about referring to personal or reputational matters concerning Mr. Berezovsky and did not attempt to embarrass him. What was referred to as the “dressing gown” evidence (Footnote: ⁴³) was initially addressed by Mr. Abramovich in cross-examination in a very low-key way, and was only expanded upon in re-examination when Mr. Sumption pressed him to do so; the evidence was genuinely relevant to the question of how significant and businesslike the Dorchester Hotel meeting really was. Similarly there was no basis for the suggestion that Mr. Abramovich, Mr. Deripaska and Mr. Shvidler had colluded in relation to such evidence, or that Mr. Shvidler and Mr. Tenenbaum had colluded in relation to the text message evidence concerning Mr. Fomichev, with which I deal in greater detail below.

In conclusion, I found Mr. Abramovich to be a truthful, and, on the whole, reliable witness.

Mr. Abramovich called as witnesses almost every member of his staff who had been concerned with the matters at issue in the litigation, as well as a number of witnesses independent of Mr. Abramovich, such as Mr. Deripaska and Mr. Hauser. Their evidence was broadly consistent with that of Mr. Abramovich. Their evidence was attacked on behalf of Mr. Berezovsky on the basis that, so far as the employees were concerned, their loyalty overrode their honesty, and so far as they and Mr. Deripaska were concerned, that they had colluded in relation to various aspects of their evidence. It is not necessary for me to analyse the detailed evidence relating to the issue of alleged collusion set out in Mr. Berezovsky’s closing submissions, Mr. Abramovich’s Errata schedule and Mr. Berezovsky’s Second Schedule. The allegation was not supported by the evidence. The evidence showed that, although Mr. Abramovich’s various witnesses had, to a certain extent, discussed the events in which they had been mutually involved, prior to making their witness statements, each, when making their witness statements and giving their oral evidence had given their own personal evidence and recollection. Indeed Dr. Nosova described a very similar process within the inner circle of Mr. Berezovsky’s advisers, as well as their attempts to reconstruct dates and events from documents. Such practices are the normal, everyday reality of litigation, and unobjectionable, provided that the particular witness applies his own mind to what he can remember from his own knowledge, and distinguishes between what he personally can recall and what he has learned from someone else. It is rare to find that the integrity of individual recollection is preserved 100% intact; but, absent something more, such practices do not amount to “collusion”. I did not find it “astonishing”, as Mr. Rabinowitz suggested, that Mr. Abramovich’s witnesses did not refer to these type of discussions in their witness statements. Mr. Berezovsky’s witnesses did not do so either.

Various individual attacks were also made on the credibility of others of Mr. Abramovich’s witnesses, in particular, Mr. Shvidler, Mr. Tenenbaum, Ms. Panchenko, Mr. Gorodilov, Ms. Goncharova, and Ms. Khudyk, on the basis of their loyalty to Mr. Abramovich and other matters. I have carefully taken into account these factors, in my assessment of their credibility and evidence, as well as, in the case of Mr. Shvidler, Mr. Tenenbaum, Ms. Panchenko, and Mr. Gorodilov, their friendship with Mr. Abramovich. I did not find that their loyalty to Mr. Abramovich adversely affected the reliability of their evidence. Mr. Shvidler, Mr. Tenenbaum and Ms. Panchenko were particularly helpful witnesses, who gave their evidence in a straightforward and articulate fashion.

I address Mr. Deripaska’s evidence below. There was no reason to suppose that he crafted his evidence to suit his purposes in the ongoing claim brought against him by Mr. Michael Cherney (Footnote: ⁴⁴).

Mr. Berezovsky’s written closing submissions also contained the allegation that there had been a deliberate policy on Mr. Abramovich’s part of destroying documents in order to impede investigations into Mr. Abramovich’s dealings, and that this adversely affected the credibility of his case and his witnesses. I address this topic elsewhere but merely comment here that full and satisfactory explanations were given for the absence of certain documents, in particular by Ms. Goncharova. I did not find it at all surprising, given the passage of time and the staleness of Mr. Berezovsky’s claim, that certain documents were not available. There was certainly no evidence supporting an allegation of a “deliberate policy of document destruction” on the part of Mr. Abramovich.

Mr. Rabinowitz invited the court to draw adverse inferences from the fact that Mr. Abramovich did not call Mr. Fomichev, Mr. Smolensky and Mr. Bosov. I was satisfied that Mr. Abramovich had provided persuasive reasons why none of these three men were called as witnesses by him. I deal with the position of Mr. Fomichev in the RusAl section of this judgment. So far as Mr. Smolensky was concerned, I accept that the reason why he was not called was because, in the light of the cross-examination of Mr. Berezovsky and Mr. Abramovich, it became apparent that his evidence was marginal at best. Mr. Bosov was an independent third party witness out of the jurisdiction, whose witness statement was served under a hearsay notice solely to address a disclosure matter relating to an alleged video recording in the possession of Mr. Abramovich. This was a matter that did not, in the event, arise for the court’s determination. Mr. Bosov was nonetheless requested by Mr. Abramovich to give oral evidence, but was not in the event willing to attend to do so. In the circumstances, I draw no adverse inference against Mr. Abramovich in relation to the fact that he did not call any of these three witnesses.

I found Mr. Anisimov to be a reliable and credible witness, who gave evidence about matters directly within his own knowledge and declined to speculate even when invited to do so. I do not consider that his financial interest, as a defendant in the Metalloinvest action provided any reason per se why I should not accept his evidence. I address his evidence in greater detail below in the RusAl section of this judgment.

Likewise, I address the credibility of Mr. Anisimov’s witnesses below.

On my analysis of the entirety of the evidence, I found Mr. Berezovsky an unimpressive, and inherently unreliable, witness, who regarded truth as a transitory, flexible concept, which could be moulded to suit his current purposes. At times the evidence which he gave was deliberately dishonest; sometimes he was clearly making his evidence up as he went along in response to the perceived difficulty in answering the questions in a manner consistent with his case; at other times, I gained the impression that he was not necessarily being deliberately dishonest, but had deluded himself into believing his own version of events. Accordingly, I could not accept Mr. Berezovsky as a reliable and truthful witness.

I found Mr. Abramovich to be a truthful, and on the whole, reliable, witness.

Issue A1 correlates with Issue 1 in the Agreed List of Issues

“What was the nature of the arrangement or agreement between Mr. Berezovsky, Mr. Patarkatsishvili and Mr. Abramovich in relation to the acquisition of Sibneft?”

Issue A1 also addresses Issue 3 in the Agreed List of Issues:

“Was there an agreement reached in 1996 between Mr. Berezovsky, Mr. Patarkatsishvili and Mr. Abramovich in the terms alleged in paragraph C37 of the Re-re-re-Amended Particulars of Claim?

Issue A1 is the most critical issue in the case. Unless Mr. Berezovsky can prove that the agreement entered into between Mr. Abramovich, Mr. Patarkatsishvili and himself in 1995, conferred upon him and Mr. Patarkatsishvili an ownership interest in Sibneft, the remainder of his claims are difficult to establish. That is because, as I have already explained, Mr. Berezovsky’s claim to have had an interest in RusAl is ultimately dependent on his assertion that he and Mr. Patarkatsishvili had previously owned half of the aluminium assets which were contributed to the merger with Mr. Deripaska. That suggestion in turn depends upon Mr. Berezovsky’s contention that there was an agreement to give him the same interest in the pre-merger aluminium assets as he claims to have had in Sibneft, and that the aluminium assets were acquired with Sibneft assets or with that of his, Mr. Berezovsky’s, claimed share in Sibneft profits.

However, as I have already explained, because it is necessary to look at the relationship between Mr. Abramovich and Mr. Berezovsky over the entire period to which the action relates, I have had regard to various evidence relating to aspects of the RusAl claim in coming to my conclusion in relation to the Sibneft claims, and vice versa. That is because, for example, evidence of the subsequent conduct of the parties in the period 2000-2004, that might tend to show that Mr. Abramovich was operating as a partner to Mr. Berezovsky and Mr. Patarkatsishvili in relation to RusAl, might have had a bearing on whether the parties had indeed made an agreement in the terms alleged by Mr. Berezovsky to share their business interests on a 50:50 basis.

It was common ground that there was an agreement or understanding between Mr. Abramovich and Mr. Berezovsky in early 1995 in relation to the creation of Sibneft. There was also a limited measure of common ground about the terms of agreement or understanding. Thus:

But it was not common ground that there was any legally binding agreement between the parties; that the “precise terms of the relationship were finalised” shortly before August 1995; nor were the parties agreed as to the extent of Mr. Berezovsky’s role in assisting with the securing of finance for the acquisition of Sibneft shares.

The critical dispute between the parties in relation to the issue, was whether Mr. Berezovsky was going to be rewarded for his role in the creation and privatisation of Sibneft by receiving, jointly with Mr. Patarkatsishvili, a contractual entitlement to an ownership interest in Sibneft and a proportionate entitlement to its profits and/or the profits of Mr. Abramovich’s trading companies generated as a result of the latter’s acquisition of control of Sibneft (as Mr. Berezovsky contended); or whether he and Mr. Patarkatsishvili were going to be rewarded by payments on demand for their krysha or patronage services (as Mr. Abramovich contended). As Mr. Sumption bluntly put the matter, was Mr. Berezovsky trading his undoubted political influence at the Kremlin and elsewhere, and his contacts with senior bankers and businessmen, in return for straight cash, or was his reward to be an entitlement to a share in the ownership of Sibneft, and the profits generated as a result of Mr. Abramovich’s acquisition of control?

My conclusion on this issue is that there was no such agreement of the nature and in the terms alleged by Mr. Berezovsky in paragraphs C33-C34 of the Re-re-re-Amended Particulars of Claim and paragraphs 97-105 of Mr. Berezovsky’s fourth witness statement, nor as subsequently developed in his case at trial. Nor was any agreement reached in 1996 between Mr. Berezovsky, Mr. Patarkatsishvili and Mr. Abramovich in the terms alleged in paragraph C37 of the Re-re-re-Amended Particulars of Claim.

Thus I find that:

Whilst it may have been the case that:

The arrangement was one which, by its very nature, might have caused Mr. Berezovsky and Mr. Patarkatsishvili to have regarded themselves, in the vernacular, as having, or being entitled to “a piece of the Sibneft action”. That, in a very loose sense, was the nature of the deal with Mr. Abramovich, and the nature of many payments under so-called patronage or “protection” arrangements. But that does not translate into the complicated contractual agreement for which Mr. Berezovsky contended.

Having rejected Mr. Berezovsky’s case, I do not need to decide what the precise terms of the arrangement between the three men were. Whilst I conclude that it was – at least - in general terms of the nature asserted by Mr. Abramovich in paragraphs D.32 of the Re-re-Amended Defence, paragraphs 55-58 of his third witness statement and his oral evidence, I suspect, given what I can only describe as the obscure nature of the relationship, first: that the “requirements” made of Mr. Abramovich, or, put another way, his krysha type obligations, changed over time; and second, that there were other aspects of the business arrangements between the three men which have not been referred to in evidence in this trial. I am not convinced that the court has been presented with the full picture of the business arrangements between the three men. But that is irrelevant. What I have to decide is whether Mr. Berezovsky has proved, on the balance of probabilities, his case in relation to the alleged 1995 and 1996 Agreements. He has not done so.

I found Mr. Berezovsky’s evidence (and that of his witnesses) in relation to this issue to be vague, internally inconsistent, exaggerated and, at times, incredible. Whilst there were defects in certain aspects of Mr. Abramovich’s evidence (and that of his witnesses), I found it, on the whole, to be more reliable and easier to square with the inherent probabilities of the business relationship between the two men and the circumstantial evidence.

My conclusions are based not only on the direct evidence given by each man as to the arrangements between them, but also on the circumstantial evidence.

The following paragraphs of this section summarise the respective pleaded cases, the salient direct evidence in relation to this issue, the indirect circumstantial evidence relating to the issue and my relevant findings of fact and conclusions. Necessarily not all evidential issues are addressed.

In the final version of his pleaded case Mr. Berezovsky alleged as follows in relation to the alleged 1995 Agreement (Footnote: ⁴⁵):

“C32 Sibneft was created by Decree Number 872 (“the August 1995 Decree”) of the President of the Russian Federation, dated August 24 1995, as part of a programme of privatisation. It represented a combination of the previous interests of the Russian state of the Omsk oil refinery, Noyabrskneftegaz, and oil and gas producing company, Noyabrskneftegazgeofizica, an oil exploration company and Omsknefteprodukt, a marketing company.

C33. Prior to the August 1995 decree Mr. Berezovsky, Mr. Patarkatsishvili and Mr. Abramovich agreed orally to acquire a controlling interest in Sibneft on its creation. In the period leading up to the August 1995 decree, Mr. Abramovich was principally concerned with the identification of the appropriate corporate components which were then combined to form Sibneft; and Mr. Berezovsky was principally concerned with discussing the possible privatisation with President Yeltsin and his administration and with raising the finance required.

C34. In that period the three also agreed orally (“the 1995 Agreement”) that:

(1)

the ownership interest they would acquire in Sibneft would be held for their benefit as follows: 50% for the benefit of Mr. Abramovich; and 50% for the benefit of Mr. Berezovsky and Mr. Patarkatsishvili;

(2)

profits would be split in the same percentages;

(3)

any future business interests they acquired, whether or not related to Sibneft, would be shared between them in the following proportions: 50% would be owned by Mr. Abramovich; and 50% by Mr. Berezovsky and Mr. Patarkatsishvili.

C34A …

C34B Pursuant to the Russian law rights which arose by virtue of the 1995 Agreement Mr. Berezovsky and Mr. Patarkatsishvili (1) had the right to demand from Mr. Abramovich a distribution of the acquired ownership interest in Sibneft in the agreed proportion; (2) would acquire rights of co-owners in respect of any property directly acquired by Mr. Abramovich as a result of the 1995 Agreement; and (3) had the right to demand distribution of profits resulting from the joint activity in the agreed proportion”.

In the final version of his pleaded case Mr. Berezovsky alleged as follows in relation to the alleged 1996 Agreement (Footnote: ⁴⁶):

“C36 Initially, Mr. Berezovsky and Mr. Patarkatsishvili legally owned or controlled AKB Obedinyonniy Bank which controlled and legally owned 50% of NFK, which acquired the rights in Sibneft set out in paragraph C35 above. However, as Mr. Berezovsky became more heavily involved in politics, and while Mr. Patarkatsishvili continued to manage the largest and politically the most influential TV channel, ORT, it was decided and agreed between Mr. Berezovsky, Mr. Patarkatsishvili and Mr. Abramovich that Mr. Berezovsky and Mr. Patarkatsishvili would be distanced from the Sibneft business. Mr. Abramovich proposed that he, or his companies, should own all of the Sibneft shares.

C37 It was orally agreed by the three in 1996 (‘the 1996 Agreement’) that:

(1)

Mr. Abramovich, Mr. Berezovsky and Mr. Patarkatsishvili would arrange matters so that Mr. Abramovich, or his companies, was the legal owner of all the Sibneft shares which had been acquired prior to the 1995 Agreement;

(2)

Mr. Berezovsky and Mr. Patarkatsishvili would continue to have the rights and interests which they had acquired pursuant to the 1995 Agreement in the shares that would be held by Mr. Abramovich;

(3)

Mr. Abramovich would, upon request, transfer to Mr. Berezovsky and/or Mr. Patarkatsishvili shares equivalent to their interest in Sibneft on the basis of the percentage split referred to above;

(4)

Mr. Berezovsky and Mr. Patarkatsishvili would continue to be entitled to dividends and any other payments made by Sibneft to its owners on the basis of the percentage split referred to above;

(5)

thereafter and further acquisitions of Sibneft shares would be held on the same basis.

C37A The 1996 Agreement is governed by Russian law; and took effect under Russian law as a binding ‘sui generis’ agreement between the parties.

C38 By about August 1997, the 1996 Agreement had been implemented and Mr. Abramovich or his companies was the legal owner of all, or substantially all, of the Sibneft shares which had been acquired pursuant to the terms of the 1995 and/or 1996 Agreements, with Mr. Berezovsky and Mr. Patarkatsishvili having that shareholding in the agreed proportions pursuant to the terms of the 1995 and/or 1996 Agreements.”

There was no written document recording the terms of either the alleged 1995 Agreement or the alleged 1996 Agreement. I address below the documentary materials which Mr. Berezovsky alleged supported their existence in the terms alleged by him.

Mr. Berezovsky’s evidence about the making of the alleged 1995 Agreement was set out in his 4th witness statement (his principal witness statement for trial, dated 31 May 2011). In his 2nd witness statement dated 17 July 2009 (his principal witness statement served in the course of the summary judgment proceedings, where he had also described the making of the alleged 1995 Agreement in similar detail) Mr. Berezovsky had said that:

“Although all of the commercial relationships and agreements described above were oral and none of them was recorded in writing, I have a clear recollection of what was agreed.”

This sentence was not included in the equivalent passage in his 4th witness statement. In his oral evidence, Mr. Berezovsky said:

“I don’t remember the details; it’s a long, long time ago”.

Sibneft was not, he said, the “… number one priority”. But I found there to have been a marked difference between the detail which he was apparently able to remember in the course of drafting his two witness statements and that which he was able to recall at trial.

The evidence which Mr. Berezovsky gave describing the making of the alleged 1995 Agreement can be summarised as follows. From early 1995, “… it was accepted …” that he, Mr. Patarkatsishvili and Mr. Abramovich:

“… would work together as partners to acquire the company [that became Sibneft] and would then be partners in the company once we acquired it. The three of us discussed this on many different occasions between January and August 1995, mainly at the LogoVAZ club (Footnote: ⁴⁷).”

Mr. Berezovsky then said that at some stage between then and August 1995, a more detailed distribution of functions was agreed. In paragraph 96 of his 4th witness statement he said:

“96.

Many different aspects of what was a complex project were discussed. Due to the passage of time, and the large number of meetings and discussions that we had, agreement developed through the first half of 1995, and the gist of the terms which were finalised between us.”

These included terms that Mr. Berezovsky would be responsible for lobbying the government to include the assets in the loans-for-shares programme; Mr. Berezovsky and Mr. Patarkatsishvili would raise funds for the project; Mr. Patarkatsishvili would lead commercial negotiations with key business counterparties; and Mr. Abramovich would co-ordinate his contacts in the oil sector and with the senior management of the companies involved in the project and, if the project succeeded, would recruit the managing staff and run the new company (Footnote: ⁴⁸).

According to Mr. Berezovsky, the “exact shares” of the three parties were agreed only shortly before the Sibneft decree in July or August 1995: “50:50 between [Mr. Patarkatsishvili] and me on the one side and Mr. Abramovich on the other”. In his 4th witness statement he said:

“99.

It was also discussed and agreed early on that we would all be partners in the project and in the oil company if we acquired one. However, the exact shares which we would each have in the project were not agreed until later on, closer to the time of the decree, in July or August 1995.

100.

In the last few weeks before the Sibneft decree, when it became clear that President Yeltsin would be issuing it, Badri proposed that the future company should be owned in equal shares, two thirds for him and me jointly and one third for Mr. Abramovich. I proposed that the ownership should be split 50:50 between Badri and me on the one side and Mr. Abramovich on the other. My reasoning was that Mr. Abramovich would be in charge of the management of the company. I knew that Mr. Abramovich might offer some of the benefits of his ownership of the company to his associates such as Eugene Shvidler. I made this decision on the same principle as I had proposed to share with Badri, 50:50.”

But in his oral evidence, Mr. Berezovsky was not able to explain with any clarity what had been agreed as to how, in practice, his and Mr. Patarkatsishvili’s 50% was to be held, or indeed in what entity they were to have an interest of 50%, or what the nature of that interest was going to be. The vagueness of his evidence on this point did not give any confidence as to the veracity of his case.

As I describe in greater detail below, it was common ground that at some stage it was agreed that companies respectively controlled by Mr. Abramovich on the one hand and Mr. Berezovsky/Mr. Patarkatsishvili on the other would respectively have a 50% share in the vehicle company which was to be used to acquire management control of Sibneft through an auction process, referred to as the “loans-for-shares” scheme. This process involved a loan to the State (effectively by the pledgee), a pledge by the State of 51% of the share capital of Sibneft as security for the loan, and the possibility of default by the State, when the shares would be sold by the pledgee and available for purchase by the highest bidder.

However, it was far from clear from Mr. Berezovsky’s evidence what his case actually was as to the interest which he was going to have in the 49% of the share capital of Sibneft which was designated for ultimate privatisation, or the 51%, that might be sold in the event of a default, by the State, on the loan. He suggested first that “it was not agreed that I will be a registered shareholder of the company” (Footnote: ⁴⁹); then that “it’s absolute clear agreed that we are shareholder, all of us, of the company (Footnote: ⁵⁰)“; and, finally, that in 1995 there was no discussion at all about whether or not they would be registered shareholders so that Mr. Berezovsky might, or might not, have been a registered shareholder (Footnote: ⁵¹). It was ultimately his evidence that there had been no agreement at all about what would happen when the shares became available for purchase, other than that it would be:

“… up to Roman how will he organise that. … It’s just -- it was very unusual that from the beginning I trust Roman so much that I gave him 50 per cent of the company (Footnote: ⁵²)”;

and that it was up to Mr. Abramovich completely to decide how the company would be “structurised” and when they would become shareholders (Footnote: ⁵³).

When challenged that there was no agreement in 1995 that Mr. Abramovich would hold any Sibneft shares for Mr. Berezovsky and Mr. Patarkatsishvili, Mr. Berezovsky said:

“It was not agreement, you’re absolutely correct. But agreement was that he organise everything and I did not care... which turned out that later on, when we start to buy 49 per cent step by step, it turned out that mainly Abramovich company own that shares. Because, as you understand, 51 per cent still was in management control. And only later on I decide, according to Abramovich again request, because of my dangerous political exposure, to give up to him to hold that (Footnote: ⁵⁴).”

At the same time, according to Mr. Berezovsky, it was agreed that the parties would have corresponding 50:50 shares of “the profits”. Contrary to Mr. Rabinowitz’s submission (Footnote: ⁵⁵), it was not clear which profits Mr. Berezovsky alleged that the parties had orally agreed that they were to share under the terms of the alleged 1995 Agreement. Paragraph C34 of the Re-re-re-Amended Particulars of Claim (quoted above) referred solely to Sibneft’s profits. Paragraph C37(4) (also quoted above) asserted that in 1996:

“… Mr. Berezovsky and Mr. Patarkatsishvili would continue to be entitled to dividends and any other payments made by Sibneft to its owners on the basis of the percentage split referred to above.” [Emphasis supplied]

Paragraph C34B of the Re-re-re-Amended Particulars of Claim (also quoted above) appeared to go further and alleged that, pursuant to the Russian law rights which arose by virtue of the alleged 1995 Agreement, but not as a result of any express oral agreement

“Mr. Berezovsky and Mr. Patarkatsishvili …

(2)

would acquire rights of co-owners in respect of any property directly acquired by Mr. Abramovich as a result of the 1995 Agreement; and

(3)

had the right to demand distribution of profits resulting from the joint activity in the agreed proportion.”

In his fourth witness statement, Mr. Berezovsky said that he was entitled to a share of profits “in respect of our share of Sibneft” (Footnote: ⁵⁶). In his oral evidence, however, Mr. Berezovsky, asserted (effectively, subject to the allegation in paragraph C34B, for the first time) that the express oral agreement was that he and Mr. Patarkatsishvili were to share with Mr. Abramovich, not just in Sibneft’s profits, but also in some undefined further profit pool. Thus he said: “we invest together through our dividends or through our profit generated everything connected to Sibneft”; and that he would be entitled to “whatever we will generate by the new company”; “in different ways, through the other companies but connected to the resources which Sibneft has” in the same proportions as his alleged interest in Sibneft; or to the “shared profit of Sibneft everything which lead to Sibneft generation”; or to “any profit which initially generate by Sibneft, which base of the profit is Sibneft” (Footnote: ⁵⁷).

By the time of closing submissions this was formulated as an allegation that the express oral agreement between the parties was that he and Mr. Patarkatsishvili were entitled to a 50% profit share, not only in Sibneft’s profits, but also in profits generated indirectly through Mr. Abramovich’s trading companies (Footnote: ⁵⁸) as a result of his acquisition of control of, or involvement with, Sibneft.

For reasons which I elaborate below, I conclude that it was highly unlikely that Mr. Abramovich would have agreed, in contractually binding terms, to have paid a defined percentage of such a vague proportion of his trading companies’ profits to Mr. Berezovsky.

Another difficulty in Mr. Berezovsky’s oral evidence related to the terms of the express oral agreement, as pleaded in paragraph C34(3) of the Re-re-re-Amended Particulars of Claim, in relation to 50:50 participation in “… any future business interests they acquired, whether or not related to Sibneft”.

However, unlike the pleaded allegation contained in paragraph C34(3), neither Mr. Berezovsky’s witness statements nor his oral evidence suggested that this amounted to an automatic right of participation in other business ventures. In cross-examination, Mr. Berezovsky initially confirmed that the pleaded account was correct (Footnote: ⁵⁹). However, when presented with the version of the alleged agreement as set out in his fourth witness statement, he then resiled from that proposition and said that what was agreed was a “… right of first refusal to take part in the venture on the same 50:50 basis on which we were partners in Sibneft” (Footnote: ⁶⁰).

I conclude that it was wholly implausible that either Mr. Berezovsky or Mr. Abramovich would have agreed to such a term in the circumstances prevailing in 1995. In 1995, according to his own evidence, Mr. Berezovsky was an established business man with considerable influence in the Kremlin. He had known Mr. Abramovich for only a few months, had not yet participated with him in any business venture, and in any event regarded Mr. Abramovich as a small-time oil trader with no business track record. His case was that he allowed Mr. Abramovich a 50% stake in Sibneft in order to incentivise him as its manager. But on the basis of this term as to future business, he was giving Mr. Abramovich the right to take a stake in any of Mr. Berezovsky’s and Mr. Patarkatsishvili’s future ventures, even if Mr. Abramovich was not managing such a venture. Likewise, I find it equally incredible, that Mr. Abramovich would have contractually bound himself to allow Mr. Berezovsky to take a participation in any future business venture that he might choose to engage in.

Mr. Berezovsky also alleged for the first time in his fourth witness statement:

“We agreed that none of us could sell our shares in what was to become Sibneft without the agreement of the others (Footnote: ⁶¹).”

But this allegation was never pleaded. Mr. Berezovsky appeared to suggest that the reason why this term of the alleged agreement had not been pleaded (despite the many amendments to his statement of case) was because he had not been asked any questions about it by his lawyers (Footnote: ⁶²). However, he insisted that he had checked his pleaded case: “It’s absolutely correct, I checked the pleaded statement as well because I put my signature” (Footnote: ⁶³); but then said that he had checked it “not attentively” (Footnote: ⁶⁴). Again, this did not inspire confidence in the veracity of the allegation.

Again, in the circumstances of 1995, I find it incredible that either Mr. Berezovsky or Mr. Abramovich would have agreed to such a term. I cannot see why either of them would have wished to have locked themselves in to an eternal partnership as shareholders in Sibneft, only dissolvable by common consent. No commercial rationale was suggested for such a term. The only inference which I draw is that the allegation of such a term was consistent with Mr. Berezovsky’s case in relation to RusAl.

In his written evidence, Mr. Berezovsky said that no attention had been given in 1995 to the manner in which shares of Sibneft would be held. He said:

“… under the 1995 Agreement there had been no focus on which structures controlled by which of us would be used to acquire interests in Sibneft” (Footnote: ⁶⁵).

Thus, he contended that it was under the terms of the alleged 1996 Agreement that the three men agreed the manner in which the Sibneft shares were to be held. According to Mr. Berezovsky, immediately after the Davos forum of February 1996, Mr. Abramovich told him and Mr. Patarkatsishvili that he was uncomfortable with Mr. Berezovsky’s active involvement in Russian politics, and that Mr. Berezovsky’s high political profile was liable to have an adverse effect on Sibneft’s interests. Mr. Berezovsky said (Footnote: ⁶⁶):

“165

Immediately after the Davos forum, Mr. Abramovich told Badri and me that he was uncomfortable with my active involvement in Russian politics. He said that he was concerned by the stance I had taken against powerful political factions, particularly the Communists, who were building strong public support in anticipation of forthcoming elections and who had re-nationalisation of key industries, including oil, firmly on their political agenda. Although my relationship with President Yeltsin had been key to creating the opportunity for us to acquire Sibneft, Mr. Abramovich considered that my political profile had the potential to have a detrimental effect on Sibneft’s interests. I acknowledged these concerns as having a reasonable basis and took very seriously Mr. Abramovich’s request that I should not publicly put myself forward as owner of Sibneft.

166

During a series of conversations which took place at the LogoVAZ club and at my home in Alexandrovka between March and June 1996 (that is, after the Davos forum and before the first round of voting in the presidential elections), Mr. Abramovich said that he felt very strongly that I should distance myself from the business because I was so involved politically. He also suggested that Badri should distance himself from Sibneft because he was heavily involved with the management of ORT which was to play a decisive role in the elections, was closely associated with me and was well known to be my partner. Although under the 1995 Agreement there had been no focus on which structures controlled by which of us would be used to acquire interests in Sibneft, Mr. Abramovich proposed that from now on he, or his companies, should own all of the Sibneft shares. Badri and Mr. Abramovich’s associate, Mr. Shvidler, were present during some of these discussions.”

Mr. Berezovsky alleged that it was therefore agreed in the course of a series of conversations between March and June 1996 that he and Mr. Patarkatsishvili would be “distanced” from Sibneft because of the prospect of a Communist victory in the 1996 elections (Footnote: ⁶⁷).

Mr. Berezovsky’s case as presented at trial was that it was agreed that Mr. Abramovich would hold his and Mr. Patarkatsishvili’s interest for them, and that he would “… continue to pay us the share of profits we would otherwise have received in respect of our share of Sibneft”.

He said (Footnote: ⁶⁸):

“169.

As part of our agreeing to what he was suggesting, Mr. Abramovich told us that he would continue to pay us the share of profits we would otherwise have received in respect of our share of Sibneft and that he would, upon request, transfer to us shares in Sibneft equivalent to our 50% interest. He said again to us that we could trust him and I recall him saying to me: “Boris, you understand that I will look after your interest. My interests are your interests, your interests are my interests”. He used the Russian word “интересы”, or “interesy” which means ‘interests’. I also distinctly recall him using the Russian word “benefitsiary” and stating that Badri and I would be the “benefitsiary” of the shares.”

In his Defence, Mr. Abramovich denied Mr. Berezovsky’s case in relation to the alleged 1995 Agreement in the following terms:

“D32. Paragraph C32 is admitted, save that the legislative measures involved in the creation of Sibneft were (i) Presidential Decree No. 872 of 24 August 1995 ‘On the Establishment of the OAO Siberian Oil Company’ (‘the August 1995 Decree’) and (ii) Government Resolution No 972 of September 1995 ‘On the Foundation of the Open Joint-Stock Company Siberian Oil Company’ (‘the September 1995 Resolution’). Prior to the August 1995 Decree, the defendant informed Mr. Berezovsky that he wished to acquire a controlling interest in Sibneft on its creation. In return for the defendant agreeing to provide Mr. Berezovsky with funds he required in connection with the cash flow of ORT, Mr. Berezovsky agreed he would use his personal and political influence to support the project and assist in the passage of the necessary legislative steps leading to the creation of Sibneft which, in the event, were the obtaining of the August 1995 Decree and the September 1995 Resolution.

D33. Save that:

(a)

as is set out in paragraph D32 above, Mr. Berezovsky had agreed to use his personal and political influence to support the project and assist in what proved to be the obtaining of the August 1995 Decree and the September 1995 Resolution and to that end the defendant assumes that Mr. Berezovsky did discuss the privatization with President Yeltsin and/or members of his administration;

(b)

it is admitted that, in the period leading up to the August 1995 Decree and the September 1995 Resolution, the defendant was concerned with all other necessary arrangements leading to the creation of Sibneft, including arranging the necessary finances.

paragraph C33 is denied. The defendant did not agree with Mr. Berezovsky and/or Mr. Patarkatsishvili that they should jointly acquire a controlling interest in Sibneft.

D34. Save that it is admitted and averred that Russian law would govern any oral agreement reached between the parties in 1995, paragraphs C34, C34A and C34B are denied. There was no such agreement.”

Mr. Abramovich denied that any such agreement as alleged by Mr. Berezovsky had been made in 1996, or that Mr. Berezovsky or Mr. Patarkatsishvili had or would have any interest in or rights in relation to Sibneft.

In his third witness statement he described his arrangements with Mr. Berezovsky as follows:

“53.

I remember explaining to Mr. Berezovsky [on a Caribbean cruise] that I wanted to combine the Omsk Oil Refinery and Noyabrskneftegaz into a single company, whose management I would control. I explained that there was the potential to make a lot of money by consolidating control over these companies and directing their sales through my Trading Companies. At that time, I thought it was necessary first of all to get management control of the new company and only once that was achieved to then start preparations for the auctions to acquire its shares. I am absolutely certain that at the time he and I did not discuss any ‘loans-for-shares’ programme, because I knew nothing about this at the time, since the idea for such programme itself arose only in the spring of 1995, which I describe below. Although I gathered from our conversation that Mr. Berezovsky knew little about the oil industry, he was clearly excited by the prospect of a business which had excellent potential for the creation of substantial and regular cash flows. For myself, I considered that once I got access to the flow of products and ·could introduce efficiency to the management, I would be able to improve my trading income and so be able afford to pay for protection services rendered to my business. I appreciated from the outset that if he were to provide me with any assistance in relation to the creation of the new company, Mr. Berezovsky would expect a substantial financial reward in return. This was not something I relished but I was realistic enough to know that without krysha my idea of creating a vertically integrated oil company would remain just an idea. We absolutely did not discuss either during the Caribbean cruise or subsequently the idea of Mr. Berezovsky owning half of the company. That frankly did not interest him since our discussion did not assume that the integrated company itself would produce profit, at least not in the short term, and he was only interested in cash flow. I was also certainly not offering to make Mr. Berezovsky a 50% owner in my Trading Companies since I had built my trading business without him. I recall that during the cruise Mr. Berezovsky flew to Moscow and then came back to the Caribbean and we continued our communication. He was then full of talk about OAO Obshestvennoye Rossiyskoe Televidennie (“ORT”), which owned the central Russian television channel, and the importance for him of being able to fund his ORT project. Mr. Berezovsky and I agreed to continue our discussions once we had returned to Moscow.

The Understanding with Mr. Berezovsky [as discussed in Moscow]

55.

Having explained to Mr. Berezovsky my plan to bring Omsk Oil Refinery and Noyabrskneftegaz together and to direct their sales through my Trading Companies, I asked Mr. Berezovsky if he would be able to assist me with having necessary documents prepared and adopted for the formation of the new oil company. Mr. Berezovsky agreed to provide the so-called krysha in return for payments towards his substantial ‘expenses’. We had a discussion about what these ‘expenses’ were likely to be. He explained that he required money to fund a company which he actually regarded as ‘his’ company, ORT. I was aware from our discussions that Mr. Berezovsky regarded it as a key tool for furthering his political ambitions. I understood from him that one of the conditions of his acquisition of ORT shares from the Russian Government was that he would secure financing for ORT. Some time after Mr. Berezovsky’s purchase of shares, ORT’s management had declared a temporary moratorium on advertising. Without the revenue from advertising, Mr. Berezovsky had an even stronger need for cash for ORT in particular.

56.

I recall that Mr. Berezovsky indicated that he would require approximately US$30 million per year for ORT and his personal expenses. That number was discussed during our meetings at Aleksandrovka. I also remember that Mr. Berezovsky inquired how much I could make per year if my idea of creation of a vertically-integrated company succeeded. I understood the inquiry as addressing the total income I could generate from my Trading Companies since at the time that was my only source of income. I formed the impression that Mr. Berezovsky was making his own judgment about which of the many projects he was being offered at around that time would be worth agreeing to support. I knew he needed to be satisfied that I could pay his fee, particularly if the new business was not the success I had hoped. Accordingly, I informed him that I currently generated around US$40 million per year through my Trading Companies and that I expected to be able increase that to around US$100 million per year, assuming I could secure control of a new company comprising both the Omsk Oil Refinery and Noyabrskneftegaz. I am absolutely clear· that he did not fix his fee by reference to 50% of my anticipated trading income or otherwise make any reference to sharing profits. Rather, he told me the approximate fee and asked about my likely income the following year in order to see if I could afford him.

57.

His proposed fee was already approximately my entire annual business earnings so I hoped that I would have to cover Mr. Berezovsky’s expenses only after the new integrated company had been created and when I would be receiving additional revenue. However, already in March 1995, he demanded that I make the first payment, which I assumed at the time was his way of both indicating that our krysha relationship had started and also letting me know where the balance of power lay. It was clear to me that he wanted to receive money from me up front, before actually providing any service.

58.

Nothing about our arrangement was written down and there was no specific agreement over which of the Trading Companies would provide funds for the payments or for how long the arrangement would last. Nor did we have an agreement as to what particular amounts would have to be paid other than for the first year, and I assumed that this would depend each year on the nature of services to be provided during particular time periods and what the expenses of Mr. Berezovsky and ORT would be. Mr. Berezovsky showed no interest in the Trading Companies or their names, never required me to furnish him with accounts or financial statements for the Trading Companies, and we did not consider formalising what we discussed. Our agreement was a practical arrangement where each party had to prove his worth as events developed and the participants would be bound by mutual understanding; moreover, breaking such an understanding would not only end the relationship but entail certain negative repercussions as well. There were too many uncertainties at that time in Russia about what the future business and political climate would be. We certainly never discussed or agreed about plans to acquire jointly (in any proportions) the oil company. Moreover, there was no discussion about Sibneft cash flows ever becoming the source of funding for Mr. Berezovsky. Nor did we discuss then or afterwards forming a partnership for any such purpose, as I understand Mr. Berezovsky now alleges.

No discussions of share acquisition in any proportion

59.

When I initially discussed my ideas for creating a vertically-integrated oil company with Mr. Berezovsky in late 1994 and early 1995, we did not talk about his obtaining title to the shares of the new company. When loans-for-shares auctions did come on the scene, which I describe below, I realized that this was exactly the method of obtaining management control over the company without acquiring ownership of the shares.

60.

As I have also said above, at that time ownership of companies was not regarded as important and what was typically sought was control over the flow of goods and cash, for which purpose in turn it was necessary to control management.”

Mr. Abramovich’s evidence about the understanding reached in 1995 can thus be summarised as follows:

Both Mr. Abramovich and Mr. Shvidler disputed that any such discussions took place or that any such agreement was made (Footnote: ⁸²).

Mr. Rabinowitz submitted that there were a number of critical aspects of the circumstantial evidence which strongly supported Mr. Berezovsky’s account of the nature and terms of the alleged 1995 and 1996 Agreements, and which demonstrated that Mr. Abramovich’s case was untrue. In headline terms, these were as follows:

Mr. Sumption, on the other hand, submitted that Mr. Abramovich’s account of the alleged 1995 Agreement was more likely to be correct for the following principal reasons:

To a certain extent, and not surprisingly, many of these points were the other side of the coin to those made by Mr. Rabinowitz.

I analyse the circumstantial evidence alleged to support the respective cases of Mr. Berezovsky and Mr. Abramovich in relation to the Sibneft issues under the following, loosely chronological headings:

As already mentioned, before coming to my conclusion in relation to this issue, I also took into consideration the evidence relating to the RusAl issues.

The relationship between Mr. Berezovsky and Mr. Abramovich

Mr. Rabinowitz submitted that the relationship between Mr. Berezovsky and Mr. Abramovich strongly supported Mr. Berezovsky’s case. He submitted that the evidence relating to their close relationship was very much more consistent with there having been a partnership between them, than it was the sort of relationship of protector and protectee suggested by Mr. Abramovich.

Mr. Berezovsky and Mr. Abramovich first met in December 1994 on a yachting holiday in the Caribbean, hosted by the Russian businessman and politician, Mr. Aven.

At this stage, Mr. Berezovsky, by then some 48 years old, already had a reputation as a man of great wealth with significant political connections and influence in Moscow, as I have already described above. The evidence showed that he was the classic power broker; he described himself as one of the most influential oligarchs in Russia. His influence derived, as Professor Fortescue stated, and as he himself confirmed in his evidence, primarily from his connections within the Kremlin but also from his ability to operate in conjunction with other oligarchs, and from the control which he was, in 1995, in the process of acquiring over the national television network in Russia, ORT, formerly owned by the State corporation, Ostankino.

I find as a fact that his main priority at this time was to find a method of funding ORT, so as to enable him to pursue his objective of assisting Mr. Yeltsin in the forthcoming election. The broadcasting business was known to be heavily loss-making. Mr. Berezovsky faced a funding shortfall despite drawing on LogoVAZ and other fellow investors. The lack of advertising revenue limited the prospect of financial recovery at least in the medium term. Mr. Berezovsky was therefore looking for another source of funding.

In his evidence, he said that, even before his first meeting with Mr. Abramovich, he had decided that one solution would be to acquire a big, cash-generating oil company. Dr. Nosova suggested in her written evidence that in November 1993 Mr. Berezovsky had visited various cities primarily for the purpose of promoting investments in AVVA. However, she claimed that Mr. Berezovsky also used this trip to explore investment opportunities in the oil sector, and, whilst he and the colleagues travelling with him were in Noyabrsk, Mr. Berezovsky organised a visit to the oil fields there, in order to meet Mr. Viktor Gorodilov, the President of Noyabrskneftegaz, for the purpose of having exploratory discussions about investing in Noyabrskneftegaz’s business. Mr. Voloshin, however, said that the purpose of the trip to the city of Noyabrsk, as with the visits to the other cities, was to attract co-investors in AVVA, and they involved а series of promotional presentations to potential investors (private and corporate). Mr. Voloshin gave evidence in his witness statement to the effect that Mr. Berezovsky did not express any interest in oil investments during the period of this trip, or that if he did, he did not discuss such proposals with him. Nor did Mr. Voloshin have any recollection of hearing about а meeting with Mr. Viktor Gorodilov during this trip. Neither witness was cross-examined on the point however.

In late 1994, Mr. Abramovich was 28 years old. He had begun his career as a mechanic, but like many others (including Mr. Berezovsky) had gone into business in the late 1980s when private business was authorised in Russia for the first time in many years. He had studied part-time at the Moscow Road Engineering Institute for a period of four years from 1987 to 1991. Subsequently, after a one–year’s “distance-learning” course, he had obtained a diploma in law in 2001.

His business career had begun in 1987, when he was employed as a mechanic in a construction office. At the time of Mr. Gorbachev’s announcement of the start of “perestroika”, allowing for the establishment of small businesses known as “cooperatives”, he was one of the country’s early entrepreneurs, serving from 1989 through 1991 as chairman of a cooperative which specialised in the manufacture of plastic toys for children. In 1991, he had begun to participate in the trading and transportation of oil, petroleum products, mineral fertilisers and cement. In the period from 1991 to 1996, he founded his first petroleum trading companies: Russian MPI A.V.K and AOZT Petroltrans (“Petroltrans”) from 1991 to 1993, and then, in 1994, a Swiss company, Runicom SA (“Runicom SA”). He had two other petroleum products trading businesses as well as fuel oil and cement trading companies, the most important of which was BMP in Germany. Petroltrans, BMP and Runicom SA together became one of the largest petroleum trading networks in Russia, sourcing their products, from among other sources, from the government-owned Omsk Oil, in Western Siberia, as well as from refineries in Ukhta, Samara and Moscow. Petroltrans managed logistics, sales and distribution of petroleum products on the domestic market. According to Mr. Abramovich, and Mr. Shvidler, whose accounts I have no reason to disbelieve: from 1993 BMP was a leading exporter of fuel oil, petrol and diesel to markets in Romania and Moldova; the network of companies began by trading nearly 400,000 tonnes of petroleum product exports in 1993 and rapidly expanded to handle an annual volume of 3 - 3.5 million tonnes in the following year; in 1994, it also expanded its product line to include petrochemicals and aromatic hydrocarbons, which it exported to markets in Western Europe; the network was the top supplier of fuel to power stations and factories in Romania and Moldova; it was thus a natural progression to move into trading electricity, cement and aluminium produced in that region. At trial these trading companies were referred to as Mr. Abramovich’s “Trading Companies”, regardless of whether they were domiciled in Russia or abroad. I shall likewise so refer to them hereafter.

At the time when he met Mr. Berezovsky, Mr. Abramovich was already a moderately successful businessman, but, as was common ground, he was little known by the extremely wealthy Russian businessmen in whose circle Mr. Berezovsky moved, and was without political influence. In his principal witness statement at trial, Mr. Berezovsky described Mr. Abramovich as “a small scale oil trader who had not achieved anything in business in late 1994”. Mr. Berezovsky was equally scathing in his oral evidence about Mr. Abramovich’s success at that time. He described Mr. Abramovich as not being “smart” (Footnote: ⁸⁵) and said of him “He looks like not a person of first level, of first-level businessman at that time” (Footnote: ⁸⁶). He said that, when he met Mr. Abramovich on Mr. Aven’s cruise, he, Mr. Berezovsky, had never heard of him (Footnote: ⁸⁷). He regarded Mr. Abramovich as a small-time oil trader with no significant track record in business. He accepted that he knew nothing about the size of Mr. Abramovich’s business or the financial situation of his Trading Companies. According to Mr. Patarkatsishvili, when Mr. Berezovsky later introduced him to Mr. Abramovich he described him as a “nice boy who wanted to discuss commercial projects”. That description underestimated Mr. Abramovich’s business achievements at that date, and was also inconsistent with Mr. Berezovsky’s own recognition, in an earlier witness statement, that Mr. Abramovich had given him “the impression of being a serious businessman” when they first met in 1994. It was also inconsistent with a description of Mr. Abramovich given by Pietro Marino, Mr. Berezovsky’s then solicitor, as “an emerging and reasonably successful oil trader” in his first statement (the accuracy of which Mr. Berezovsky expressly confirmed). However, even after their first meeting, Mr. Berezovsky never, subsequently looked upon Mr. Abramovich as an equal to himself. At trial, Mr. Berezovsky spoke disparagingly of Mr. Abramovich’s business talents.

One of the principal trading counterparties of Mr. Abramovich’s oil trading group was Omsk Oil, which operated a large modern refinery at Omsk in Western Siberia. The refinery was supplied with crude oil by Noyabrskneftegaz, one of the largest producers in Russia. In the course of his trading operations, Mr. Abramovich had developed good relationships with both companies. Both were at the time in public ownership, and, in Mr. Abramovich’s opinion, were not well managed. Mr. Abramovich’s evidence was that, as a result of a meeting that he had attended in October 1994, he had conceived the idea of creating a new vertically integrated oil company combining both the production and the refining businesses. He believed that he could make more money if he could obtain management control of the combined entity and run it in conjunction with his existing oil trading network. To achieve the integration of Omsk refinery and Noyabrskneftegaz as a free-standing enterprise, and acquire management control over them, so as to create a new vertically integrated oil company, Mr. Abramovich needed access to someone who was in a position to influence the key decision-makers in government and to assist in securing the necessary legislation.

It was suggested to Mr. Abramovich in cross-examination that the idea, or “vision” of integrating the two companies had originated with Mr. Victor Gorodilov, the general director of Noyabrskneftegaz, and not with him. Mr. Abramovich did not accept this. Precisely what proposal Mr. Victor Gorodilov may have conceived, or had in mind, or discussed with Mr. Abramovich, is irrelevant. What was clear from the evidence, as indeed Mr. Berezovsky accepted in both his written and oral evidence, was that it was Mr. Abramovich who brought the proposal of establishing a new vertically integrated oil company, through the merger of the two companies and their effective privatisation, to Mr. Berezovsky. In his witness statement Mr. Vladimir Voronoff, an associate and close friend of Mr. Berezovsky and Mr. Patarkatsishvili, claimed that Mr. Berezovsky regarded the creation of Sibneft as his “brainchild”. Whilst Mr. Berezovsky may well have presented the creation of Sibneft as his own idea to others such as Mr. Voronoff, I am satisfied that, as between Mr. Berezovsky and Mr. Abramovich, the idea of creating Sibneft was brought to the table by Mr. Abramovich. Such a concept required knowledge of how the various oil enterprises operated and interacted. This Mr. Abramovich had acquired as a result of his dealings with those enterprises as an oil trader. It was clear that Mr. Berezovsky did not have such knowledge.

Mr. Abramovich and Mr. Berezovsky discussed the idea of combining the businesses of Omsk Oil and Noyabrskneftegaz on the cruise, and their discussions continued once they returned to Moscow. As I have already said, Mr. Berezovsky accepted that it was Mr. Abramovich who presented to him the idea of forming a viable vertically-integrated oil company by the creation of a company such as Sibneft.

Mr. Berezovsky, by his own account, saw the plan as “offering the opportunity for great wealth”, which “would allow me to fund ORT and other media acquisitions”. In his oral evidence, he acknowledged that the main reason why he became interested in the Sibneft project was that it would provide a source of funding for ORT (Footnote: ⁸⁸).

It was common ground that Mr. Berezovsky and Mr. Abramovich met each other frequently during this period, and indeed in the immediately following years, and formed a close relationship. As Mr. Abramovich admitted in his Defence, they became friends. In his third witness statement, he described their relationship as follows:

“Mr. Berezovsky has said that there was a time when I was his trusted and close business colleague. With the benefit of hindsight, I hesitate to call him a former close ‘friend’, although I felt a strong emotional bond to him and I had previously respected him. For the reasons I explain below, our relationship may not qualify as friendship or regular business association. He did not regard me as an equal. Our relationship was a peculiarly Russian relationship typical for a particular time in Russia’s post-communist history. The Russian word to describe the nature of his relationship with me is ‘krysha [roof]’. A person providing krysha to another was a person who acted as a protector. Krysha could take the form of political protection or physical protection. During the 1990’s and 2000’s, I needed both kinds of protection in order to ensure a sufficiently stable environment in which to build my businesses.”

In his written closing submissions, Mr. Rabinowitz suggested that Mr. Abramovich had sought to deny that friendship, and had been “… obliged to retreat from that position” when faced with “… voluminous evidence of the friendship”. I disagree. Mr. Abramovich’s point was a more subtle one: with the benefit of hindsight he did not regard himself as a close friend. Whilst he did regard himself as a friend of Mr. Berezovsky between 1996 and the end of 1999 and early 2000, he was not a friend in 1995 (Footnote: ⁸⁹):

“A. …. Because I spent 1995 in his anteroom, in Mr. Berezovsky’s anteroom, waiting for meetings to be arranged between me and him, so I would not really describe that as friendship.

…

A. In my witness statement what I’m saying is that looking from today, looking back from today, I would not describe what happened at that time as him being my close friend.

Q. But at the time you did regard him as your close friend; is that right?

A. I would just desist from using the term ‘close’, the qualifier ‘close’. He was just a friend. In Russian, when you describe someone as your ‘close friend’, this has a very specific, focused meaning.

…

Q. The question for you, Mr. Abramovich, was what you meant by having a strong emotional bond with Mr. Berezovsky.

A. What I meant was that we had a very good relationship, that we spent time together. We relaxed together, we spent time together, but I would not describe that as being a close friendship.”

Mr. Abramovich went to say that his close friends were men such as Mr. Shvidler, Mr. Andrei Gorodilov and Mr. Tenenbaum, with whom he worked and relaxed; but that he would not describe Mr. Berezovsky as falling into that category.

The evidence also showed that the two men’s families went on holiday together about eight times in the four years between 1995 and 1998 (although with other families as well); that one year, Mr. Abramovich rented one of Mr. Berezovsky’s properties at Cap d’Antibes; that in 1996-1997, Mr. Berezovsky and Mr. Abramovich were meeting each other on almost a daily basis; that Mr. Abramovich’s then wife and Ms. Gorbunova were friends; and that Mr. Abramovich was invited to Mr. Berezovsky’s birthday parties from 1996 up until and including 2000.

I do not consider that the evidence relating to the undoubted friendship between the two men and their families supports Mr. Berezovsky’s case, even if, as Mr. Rabinowitz submitted, Mr. Abramovich attempted to underplay the closeness of that friendship. In 1995, at the start of their relationship, Mr. Abramovich was a moderately successful, 28 year old businessman, with resources, but not enormous resources, who clearly needed the political influence of a powerful and influential older politician such as Mr. Berezovsky. The evidence clearly showed that Mr. Berezovsky never regarded Mr. Abramovich as an intellectual or social equal, notwithstanding that their relationship developed into one of friendship. That was apparent, not only from the evidence relating to incidents such as the Dorchester Hotel meeting, but also from the disparaging terms in which Mr. Berezovsky spoke about Mr. Abramovich’s brain and business achievements. It was clear, moreover, that the younger man, initially at least, looked up to and respected the elder man.

I conclude, therefore, that the nature of the two men’s friendship did not support Mr. Berezovsky’s case. The uneven balance of their personal relationship, which reflected Mr. Berezovsky’s greater age and superior status, was, in my judgment, more consistent with Mr. Abramovich’s case that their relationship was one of krysha.

The conduct of the parties between 1995 and 2000

This next section of this judgment summarises the evidence relating to the creation of Sibneft, the loans-for-shares programme, and Sibneft’s subsequent privatisation. In order to assess the probabilities as to whether there were indeed contractually binding agreements between Mr. Abramovich and Mr. Berezovsky, in the terms alleged by the latter in relation to Sibneft, it is necessary to have a detailed understanding not only of those events, but also of the part each of the two men played in them and their respective contributions to what happened. The evidence as to the events themselves (i.e. objectively what happened) was largely not in dispute. What was in dispute were the roles respectively played by Mr. Berezovsky and Mr. Abramovich in relation to the creation of Sibneft, what was referred to as the loans-for shares programme, and Sibneft’s subsequent privatisation. In so far as facts were in dispute, the following account reflects my findings in relation to those issues which I consider material.

Mr. Berezovsky and Mr. Abramovich each contended that the evidence relating to their respective contributions to the process strongly supported their respective cases.

Mr. Berezovsky’s “lobbying” of the Russian government was described in paragraphs 110 to 133 of his fourth witness statement. The essence of it was that he arrived at an understanding with President Yeltsin and his officials that, if the government agreed to take the necessary steps to put the businesses of Noyabrskneftegaz and Omsk Oil under the control of his associates, he (Mr. Berezovsky) would be able to extract enough money from Sibneft to fund the cost of ORT’s operations and to put ORT’s considerable influence behind Mr. Yeltsin’s campaign for re-election in the presidential elections due in June 1996. In his written evidence, Mr. Berezovsky put the point in this way (Footnote: ⁹⁰):

“The main way in which I was able to persuade President Yeltsin and the government to agree to the creation of Sibneft was by emphasising the importance of ORT for the re-election of President Yeltsin in the following presidential elections, and the need to secure a new business venture which could provide the funding to support ORT ... I discussed with President Yeltsin ORT’s support of the democratic reforms in the upcoming election. I explained that ORT continued to be loss-making and short of funds and said that alternative funding would have to be found in order for ORT to maintain its influence and stage a strong television campaign in favour of the re-election of Mr. Yeltsin, a democratic candidate against the communists.”

As Mr. Abramovich accepted, without the exercise by Mr. Berezovsky of his political influence, Mr. Abramovich would not have obtained control of Sibneft. Had Mr. Berezovsky not provided his assistance:

In addition to Mr. Berezovsky’s lobbying for political support, it was essential to obtain the support of the top management of Noyabrskneftegaz and Omsk Oil. The critical figures here were the “Red” directors, Mr. Viktor Gorodilov, the then General Director of Noyabrskneftegaz, and Ivan Litskevich (“Mr. Litskevich”), the then General Director of Omsk Oil, and subsequently Konstantin Potapov (“Mr. Potapov”) who replaced Mr. Litskevich. Mr. Abramovich knew Mr. Viktor Gorodilov and Mr. Litskevich from his previous dealings with Noyabrskneftegaz and Omsk Oil, and indeed Mr. Berezovsky had been impressed on first meeting Mr. Abramovich that Mr. Abramovich had been able to forge a business relationship with Mr. Viktor Gorodilov. Mr. Berezovsky also knew them.

The evidence showed that Mr. Berezovsky played an important role in securing the support of the Red directors to the acquisition of Noyabrskneftegaz and Omsk Oil by Sibneft and their effective merger. But it also showed that Mr. Abramovich played an important part, as he was responsible for negotiating the terms and conditions with the Red directors. Mr. Litskevich did not initially support the merger proposal, and was vacillating, so Mr. Abramovich asked Mr. Berezovsky to sign a letter to him recommending him to do so. The letter contained a manuscript note from Mr. Berezovsky: “Roman Abramovich (whom you know) will come to you today and explain everything. You can trust him”. Mr. Abramovich agreed that this note was necessary because otherwise Mr. Litskevich would not have taken him seriously as someone who could bring about the merger of two major State assets by means of a presidential decree.

On 10 February 1995, Mr. Viktor Gorodilov wrote to President Yeltsin, explaining the benefits of creating an independent oil company. There was a dispute between Mr. Berezovsky and Mr. Abramovich, about which of them arranged for Mr. Viktor Gorodilov to write this letter. Mr. Abramovich suggested he did so; Mr. Berezovsky on the other hand suggested that he and Mr. Abramovich did so. It is not necessary for me to resolve this dispute. What was clear, as Mr. Abramovich accepted during cross-examination, was that Mr. Berezovsky, as a much more important and influential person than Mr. Abramovich at that time, was instrumental in obtaining Mr. Viktor Gorodilov’s support.

Mr. Abramovich was cross-examined about various agreements signed by Mr. Berezovsky on behalf of a proposed entity, Neftyanaya Finansovaya Korporatsiya, purportedly as its chief executive officer, with, respectively, Mr. Viktor Gorodilov and Mr. Potapov. Neftyanaya Finansovaya Korporatsiya may have been destined as the vehicle to be used for the purposes of exercising management control of Sibneft; however it was never in fact incorporated. The agreements (or proposed agreements) were:

Mr. Abramovich explained that Mr. Viktor Gorodilov was well-respected not only in the industry, but also among company personnel, and that it was essential to secure his support to the Sibneft proposal. Given his role at Omsk Oil, Mr. Potapov was similarly important. Mr. Abramovich said that he had negotiated all the terms and conditions of the above agreements with the two men, but, in order to make these agreements more meaningful had asked Mr. Berezovsky to sign them on behalf of Neftyanaya Finansovaya Korporatsiya, since his status, influence and political position at the time added credibility to the obligations in the agreements. He also gave evidence to the effect that, in the end, Neftyanaya Finansovaya Korporatsiya was never formed, although the vehicle eventually set up for the bid in the loans-for-shares auction did have a very similar name. The relevance of these agreements was that they show the importance which Mr. Abramovich attached to the involvement of Mr. Berezovsky. They also demonstrate the role which Mr. Abramovich played in their negotiation.

Subsequently Presidential Decree No. 872 dated 24 August 1995 “On the Establishment of the OAO Siberian Oil Company” (already defined above as “the August 1995 Decree”), formally authorised the formation of Sibneft. The August 1995 Decree also provided that the Russian government was “… to provide during the formation of OAO Sibneft that 51% of its shares be kept in the federal property for three years.”

At its inception, Sibneft was one of Russia’s largest companies. Its component units had produced about 22 million tons of crude oil in 1994 (8% of Russian production), with estimated reserves of 835.7 million tons, and a refining capacity of about 26 million tons a year.

It was common ground that Mr. Berezovsky’s political influence and connections was invaluable in relation to this stage. However, contrary to the evidence which he gave, I do not accept that his connections with Mr. Victor Gorodilov were determinative. Whilst, as I have held above, his participation was extremely important, Mr. Abramovich himself also had very strong business relations with Mr. Victor Gorodilov as a result of the dealings between the Trading Companies and Noyabrskneftegaz.

The Russian government’s loans-for-shares programme appears to have originated in March 1995. Mr. Vladimir Potanin (“Mr. Potanin”), a Russian businessman who owned substantial interests in OneximBank (sometimes known as UneximBank), and was later first Deputy Prime Minister (Footnote: ⁹¹), along with others, conceived, and persuaded the Kremlin to adopt, the loans-for-shares scheme, whereby a consortium of banks offered to lend money to the Russian government secured on State holdings in leading Russian companies. The proposal was formally adopted on 31 August 1995, with the issue of Presidential Decree No. 889 “On Pledging Federally Owned Shares”. This provided for the Committee for the Management of State Property to determine within ten days which shares would be pledged. Sibneft was not on the original list of companies to be included in the “loans-for shares” programme.

Mr. Abramovich’s evidence was that, although his initial goal had simply been to create Sibneft, in September 1995 he and Mr. Berezovsky met the Committee for the Management of State Property to discuss Sibneft’s inclusion on the list of companies to be included in the “loans-for shares” programme.

Mr. Berezovsky had separate meetings on the same subject with Alfred Kokh (“Mr. Kokh”), the Deputy Head and acting Chairman of the committee, and with Mr. Viktor Gorodilov.

Decree No. 972 of the Government of the Russian Federation dated 29 September 1995 provided for the Committee for the Management of State Property to contribute to the authorised share capital of Sibneft the State’s shares in Noyabrskneftegaz, Omsk Oil, OAO Noyabrskneftegazgeofizika (“Noyabrskneftegazgeofizica”) (an oil exploration company associated with Noyabrskneftegaz), and OAO Omsknefteprodukt (“Omsknefteprodukt”) (a marketing company associated with Omsk Oil). At the same time the decree approved a summary privatisation plan for Sibneft, which envisaged that 51% of Sibneft’s shares would be issued to the State for a period of three years (as had been expressly required by the August 1995 Decree), and that the remaining 49% would be sold by tender or auction to private investors. Pursuant to this decree, Sibneft was officially registered on 6 October 1995 in the City of Omsk. Mr. Viktor Gorodilov was appointed as its first President. On 11 October 1995, the Committee for the Management of State Property issued directive No 1462-r, confirming the transfer of shares in each of Noyabrskneftegaz, Omsk Oil, Noyabrskneftegazgeofizica and Omsknefteprodukt to Sibneft and approving the summary privatisation plan of Sibneft.

Again, Mr. Abramovich accepted that Mr. Berezovsky’s political influence and connections were invaluable in relation to this stage of the process. It was clear however that Mr. Abramovich and his team also played a significant part in the process.

A further Presidential Decree and a Government Decree, both dated 27 November 1995, approved arrangements for selling, by auction, the right to enter into a “loans-for-shares” agreement in respect of the 51% of Sibneft shares to be retained in State ownership. Under these arrangements, participants in the auction were to make competitive bids stating the amounts which they were willing to lend to the State. The bidder offering the largest loan would enter into a loan agreement and security documentation in prescribed form, taking a pledge by way of security over the 51% of the equity reserved to the State, and acquiring the right to manage that holding for three years. The successful bidder would obtain no property in the Sibneft shares by virtue of these arrangements. In the event of a default, the successful bidder would be required to auction the shares and apply the proceeds in repayment of the loan.

This was not an auction of Sibneft shares in themselves. What was being sold was the right to lend money to the State on the security of a pledge of the 51% shareholding in Sibneft which the State proposed to retain. Under the terms of the pledge, the lender would have the right to manage the company for a period of three years. Under the terms of the pledge, the lender became nominal holder of the shares only whilst ownership remained with the Russian government (Footnote: ⁹³). The lender had the right to sell the shares only after September 1996 (assuming no repayment of the loan by the State) and, even then, only as agent of the government. The successful bidder accordingly acquired management control but no proprietary interest. In a press interview on 9 January 1996, Mr. Berezovsky made this point with some force:

“It seems that the public at large have got the impression that the companies are sold. While in fact the companies by no means are sold, the companies are transferred to management for a very limited period.”

There was an issue about whether it was inevitable that the Russian government would default on these loans, with the result that the State’s 51% holding would in due course be sold, but the area of dispute was narrow. At the time of the decree authorising the loans, there was no provision in the Russian federal budget for their repayment, but that might or might not have changed later. Mr. Berezovsky said that it was practically inevitable that the loan would go into default because the Russian government was bankrupt. Mr. Shvidler’s evidence was that default was probable but by no means certain. One of the many uncertainties affecting the position was the forthcoming 1996 Presidential election. If the Communist candidate were to be elected, there would be no question of the shares then being allowed to fall into private hands. The precise degree of likelihood that the loan to the State would go into default is not an issue that it is necessary for me to decide; all I need say is that it was highly likely, but not inevitable.

The loans-for-shares auction was held on 28 December 1995. The rules governing the conduct of the auction required at least two bidders. The successful bidder was Neftyanaya Finansovaya Kompaniya (“NFK”), with the support of AKB Stolichny Savings Bank (“SBS”). The under-bidder was a consortium organised by Bank Menatep. As was common ground, NFK never acquired any shares in Sibneft; all it ever had was management control (Footnote: ⁹⁴).

NFK had been created just before the loans-for-shares auction. The Audit Chamber report records that NFK was registered on 7 December 1995. NFK’s foundation agreement was dated 6 December 1995. NFK was 50% owned by OOO Vektor-A (which, as was common ground, was indirectly owned by Mr. Abramovich) and 50% by Consolidated Bank (which, as was common ground, and as I have already mentioned, was under the effective management control of Mr. Berezovsky). Again, as I have already mentioned, Mr. Berezovsky had, at most, a 13.7 % indirect interest in Consolidated Bank, and thereby, at most, a 6.85 % indirect interest in NFK.

It was Mr. Abramovich’s idea to arrange for NFK to be partly owned by Consolidated Bank. His reason was that Consolidated Bank was widely regarded as being associated with Mr. Berezovsky, and the association with Mr. Berezovsky was seen as politically valuable. In practice, Mr. Abramovich controlled NFK through its officers, all of whom acted on his instructions; and, in practice, it was Mr. Abramovich and his associates who managed Sibneft, not NFK.

NFK had no genuine competition in the loans-for-shares auction. Effectively, between them, Mr. Berezovsky, Mr. Patarkatsishvili and Mr. Abramovich, had persuaded other potential bidders, by various means, either not to bid at all, or to put in bids of lesser amount than NFK.

The only other bidder at the auction itself was a syndicate organised by Bank Menatep, controlled by Mr. Khodorkovsky. He had agreed with Mr. Berezovsky, in advance, to bid slightly more than the reserve and slightly less than NFK. According to Mr. Berezovsky, this resulted from earlier agreements with Mr. Khodorkovsky and his Menatep colleagues, and with other oligarchs (Footnote: ⁹⁵) who were interested in obtaining control of other State businesses under the loan-for-shares scheme, that they would not compete against each other in any of the loans-for-shares auctions. A third bidder was disqualified on technical grounds.

A fourth bidder, OAO Samarskaya Metallurgicheskaya Kompaniya (“Sameko”), an aluminium company, was persuaded by Mr. Patarkatsishvili to withdraw by a promise of payment of debts which it owed to AB Inkombank (“Inkombank”), a Russian bank owned by Vladimir Vinogradov. Inkombank was the main creditor of Sameko at the time and had been pushing Sameko to take part in the Sibneft auction as Inkombank’s bidding vehicle. Mr. Abramovich had learnt of its proposed bid, and had discussed it with Mr. Patarkatsishvili, who had said that he would seek to persuade the General Director of Sameko, Maxim Ovodenko (“Mr. Ovodenko”), to withdraw Sameko’s bid. Mr. Patarkatsishvili, together with Mr. Victor Gorodilov, travelled to Samara a day or two before the auction to negotiate with Mr. Ovodenko. The day before the auction itself, Mr. Abramovich, Mr. Kulakov, Mr. Fomichev and Mr. Andrei Gorodilov (Mr. Victor Gorodilov’s son), also travelled to Samara to meet the Sameko personnel. Although by the time they arrived, the negotiations in principle had been completed by Mr. Patarkatsishvili and by Mr. Victor Gorodilov, there was a final meeting at which Mr. Abramovich and his team attended in order to complete and sign the documentation which guaranteed compensation to Sameko for all its losses resulting from its withdrawal from the auction as well as to help with the restructuring of Sameko’s debts with Inkombank should this become necessary.

Because Mr. Abramovich was going to be in Samara, he and Mr. Berezovsky agreed that Mr. Berezovsky would present the bid at the auction on behalf of NFK. This also had the advantage of lending Mr. Berezovsky’s undoubted political reputation and stature to the bid. Although Mr. Berezovsky claimed in his written evidence that the amount of the bid was left to his discretion, that statement was not correct. The day before the auction, he and Mr. Abramovich had discussed the current bid situation and Mr. Abramovich had set a range for the bid of up US $101 million. They had also discussed а second option for the bid, in case the bid from the key competitor, Sameko, was not withdrawn. They agreed that, in that event, Mr. Berezovsky would be authorised to put forward what Mr. Abramovich referred to as a “totally out-of-this-world” alternative bid figure of $217 million. Mr. Abramovich knew that the second figure was unrealistic because:

At the time of the auction Mr. Abramovich, and Mr. Fomichev were on their way back from Samara with Mr. Patarkatsishvili. Mr. Berezovsky went to the auction with two bids: the lower bid, for $ 100.3 million, which was intended to be submitted; the other, for $ 217 million, was kept in his pocket in case Mr. Patarkatsishvili failed to persuade Sameko to withdraw. But it was not necessary to use it. Mr. Patarkatsishvili, together with a representative of Sameko, arrived from the airport at the auction just five minutes before it began. The representative of Sameko brought with him written confirmation from Sameko that it had withdrawn from the process.

The bid price, i.e. the amount to be lent to the Russian Ministry of Finance, was $ 100.3 million, which was regarded as a very large amount of money to raise in Russia at the time (Footnote: ⁹⁶). Under the agreement with the State, the lenders were NFK and SBS. Of the loan monies, $ 3 million had been paid directly by NFK by way of pre-auction deposit against the amount of the loan. This amount was borrowed by NFK from Russian Industrial Bank and repaid within a month. The role of SBS was, in effect, to interpose itself as the nominal lender of the balance ($ 97.3 million) in order to give financial assurance to the State.

However, although formally the lender, SBS had little, if any, exposure to the financial risk that the State would not repay. As the evidence of Messrs Abramovich, Shvidler, Andrei Gorodilov and Grigoriev showed, SBS was fully secured by:

A back-to-back guarantee was also provided by Bank Menatep to SBS. Due to the amount involved, it was necessary to obtain this type of back-to-back guarantee from a second bank, since the Russian Central Bank rules in force at the time limited a bank’s commitments to a proportion of its capital. However, like SBS, Bank Menatep had little or no financial exposure in providing its guarantee, since the $ 100.3 million had been deposited in SBS prior to the auction as already described above.

The loans-for-shares auction for Sibneft has been a controversial topic in Russia ever since it took place. In December 1997, the Audit Chamber of the Russian Federation issued a highly critical report on the way it was authorised and conducted (Footnote: ⁹⁷). The main criticisms of its conduct were that the reserve was set too low, and that there was no effective competition because it had been stitched up in advance. Mr. Berezovsky has always robustly rejected these criticisms, but at trial neither he, nor Mr. Abramovich, demurred from them. Mr. Berezovsky made the different point, however, that the State received good value because, until the businesses incorporated in Sibneft were turned round by their new management, they made large losses which were a burden to the State. It is not necessary for me to comment upon, let alone decide, whether the criticisms of the Audit Chamber were well-founded, or whether the authorisation, or conduct of the auction was corrupt or unlawful practice as a matter of Russian law at the time (Footnote: ⁹⁸).

After the auction, Mr. Andrei Blokh became the first vice president of Sibneft, and Mr. Abramovich’s associate, Mr. Shvidler, became the vice president for finance. Mr. Abramovich himself became the Head of the Moscow branch. Mr. Shvidler and Mr. Gorodilov gave evidence that, for the purposes of the loans-for-shares auction, and appointment to the board of Sibneft, on behalf of NFK, Mr. Berezovsky was called the “chairman” of NFK, but that this was a meaningless title because NFK had no board, NFK being a ZAO company which was run by a general director, and the NFK charter specified neither that position nor a body such as a board of directors. Mr. Shvidler said that “he needed to be called something”. Nor did Mr. Berezovsky subsequently perform any functions or duties related to that, or any other, position in NFK, such as, for example, chairing meetings. Indeed in his written evidence not only did Mr. Berezovsky not assert that he was chairman of NFK, but also disavowed any “hands-on involvement in deciding on the corporate structures used for the purpose of the vehicles that bid in the December 1995 auction (Footnote: ⁹⁹).”

Mr. Abramovich did not dispute the significance of Mr. Berezovsky’s political contribution to the creation of Sibneft, and the achievement of management control over it. Mr. Abramovich accepted that it was indispensable. He also accepted that the help which Mr. Patarkatsishvili gave in persuading Sameko to withdraw its bid was invaluable, and that, without such help, Sameko would not have provided a letter of confirmation to that effect. It was also common ground that Mr. Berezovsky had been instrumental in persuading Mr. Khodorkovsky and Bank Menatep to put in a lower bid than NFK.

There was, however, an issue between the parties about Mr. Berezovsky’s contribution to the commercial preparations for the auction, and the nature of the contribution which he made to the raising of bank finance to support the bid.

My findings in relation to this issue may be summarised as follows:

Dr. Dubov, one of Mr. Berezovsky’s witnesses, gave unchallenged evidence that, towards the end of 1995, he attended SBS with the LogoVAZ seal, having been told by Mr. Patarkatsishvili that he was in financial negotiations with SBS and might require a guarantee from LogoVAZ and Dr. Dubov’s signature. Dr. Dubov was shown a draft of the guarantee which it was proposed that LogoVAZ would give. He did not recall to whom the loan was to be given. He was kept hanging around SBS offices for some time but, in the event, no guarantee from LogoVAZ was required. It was for an amount close to $100 million, which, according to Dr. Dubov, was approximately half of what LogoVAZ was worth at the time, which was a matter which concerned him. Mr. Grigoriev did not recall any discussion of a guarantee; he commented that such a guarantee might have been prepared, but that, if it was, then it was not in connection with the Sibneft transaction but rather in connection with a loan to ORT which was also being documented at that time. However ORT’s line of credit which was being negotiated was only in the sum of approximately $20million, whereas a figure of $100 million was close to the amount which SBS had undertaken to lend in respect of the Sibneft transaction. Mr. Abramovich himself did not recall any discussion about a proposed guarantee from LogoVAZ and pointed out that, in his view, the required amount would have been significantly greater than half of the financial capacity of LogoVAZ at that time. Whilst I accept that there may have been some discussion as between Mr. Patarkatsishvili and an SBS representative about the possibility of LogoVAZ providing a guarantee, it clearly came to nothing.

Accordingly I reject the conclusion contended for by Mr. Berezovsky that he “played a central role in all of the major aspects of the funding for “the loan for shares” auction” (Footnote: ¹¹¹).

The 49% of Sibneft’s share capital which was not under NFK’s management control pursuant to the pledge under the loans-for-shares scheme, was sold off by the Russian State in three separate auctions conducted in 1995 and 1996.

The first of the three cash auctions by which the State disposed of the 49% of Sibneft earmarked for immediate privatisation closed on 4 January 1996. The auction began on 1 November 1995 and bids were accepted until 4 January 1996 (originally the deadline had been 1 December 1995 but this was extended on 27 November 1995). 15% of the company was available for sale. Out of the 15%, 12.22% was acquired by Runicom SA at a cost of about $ 30 million (Footnote: ¹¹²).

Mr. Abramovich’s evidence was that the decision to participate in this cash auction was his, and his alone; that, although he and Mr. Berezovsky discussed the auctions from time to time, there was never any discussion of anyone else, such as Mr. Berezovsky and Mr. Patarkatsishvili, owning the shares acquired; and that it was Mr. Abramovich and his team who prepared the bid and arranged the funding for it.

Mr. Berezovsky said that he was aware that the auctions were taking place but was not involved in the arrangements for participating, and did not recall being consulted on the bidding process or structures used. He accepted that he made no attempt to find out before the auctions whether or not Mr. Abramovich proposed to bid, and if so at what price, or even (so far as his evidence shows) to discover afterwards what the outcome had been. Nor did he claim to have made any direct contribution to the cost of acquiring the shares.

The financing for Runicom SA’s acquisition of the 12.22% stake was as follows: $ 24.5 million (of the total purchase price of $ 26 million) was lent by SBS Bank to Runicom pursuant to two loans secured by some sort of suretyship (Footnote: ¹¹³) or guarantee agreement from Omsk Oil, and, after 7 February 1996, by a pledge of the Sibneft shares acquired by Runicom SA. The remaining $ 1.5 million came from Runicom’s own funds, generated from its trading operations in oil and petroleum products.

In his oral evidence, Mr. Berezovsky said that the money used to buy the Sibneft shares in this first cash auction of shares, derived from profits generated by Sibneft’s or Runicom’s trading activities (which, was unclear) as a result (effectively) of transfer pricing. As such, he claimed, as a result of the alleged 1995 Agreement, any such funds retained in Sibneft or Runicom belonged to him and Mr. Abramovich equally. He also suggested that SBS would not have made this loan to Runicom, had it not been for his influence with Mr. Smolensky. I do not accept this description of how this first acquisition of shares was financed. The evidence showed that, as I have described, it was funded principally by a loan from SBS and from Runicom SA’s own funds. Nor do I accept that Mr. Berezovsky (or indeed Mr. Patarkatsishvili) played any part - other than the original introduction to Mr. Smolensky - in obtaining finance from SBS. The negotiations to obtain the finance were conducted by Mr. Abramovich’s team.

The second cash auction was held on 20 September 1996. 19% of Sibneft was sold by auction to ZAO Firma Sins (“Firma Sins”) for about $ 60 million (comprising $ 15 million payable under the share sale agreement and $ 45 million in obligations to fund Sibneft’s investment programme). Firma Sins was a company owned as to 49.99% by ZAO Branko and as to 49.99% by ZAO PK-Trast. It was common ground that ZAO Branko was (indirectly) owned by Mr. Abramovich. So far as PK-Trast was concerned, it had been registered on 25 May 1996, prior to the auction, with Mr. Berezovsky and Mr. Abramovich as joint co-founders and each nominally owning half of its shares. Mr. Abramovich’s evidence (which I accept) was: that he asked Mr. Berezovsky to become a co-founder of the new company, given the latter’s powerful political position in order to make it easier to resolve various issues with different governmental agencies and because the association with Mr. Berezovsky gave credibility to the bid; and that Mr. Berezovsky agreed to do so. At some time before February 1997, Mr. Berezovsky ceased to be a shareholder in PK-Trast and the company was liquidated in 2001. Mr. Berezovsky’s evidence was that he had no knowledge of any of this (Footnote: ¹¹⁴); he accepted that he was not involved in the auction, was not consulted by Mr. Abramovich about it, or about the financing of the acquisition, and personally contributed nothing to the cost of acquisition (Footnote: ¹¹⁵). He said that it had been Mr. Abramovich’s function, pursuant to the delegation which he had been given under the alleged 1995 Agreement, to manage the auctions, to structure the relevant acquisition vehicles and to obtain the finance; that was because he, Mr. Berezovsky, was heavily involved in what were to him far more important priorities than Sibneft, namely winning the election and managing ORT, so as to achieve that end.

The bid was funded by a loan from SBS, arranged by Mr. Abramovich and Mr. Andrei Gorodilov. The latter discussed the details with Mr. Alexei Grigoriev, at that time the Chairman of the SBS Management Board. The loan was initially secured by guarantees provided by Noyabrskneftegaz, Omsk Oil and Runicom, and then by the pledge of the Sibneft shares previously acquired by Runicom. Again Mr. Berezovsky suggested that the reason why he had not been asked by Mr. Abramovich to contribute to the funding of the bid, or had not needed to discuss the bid with him, was that the funds used to finance the bid had been generated from profits earned by Sibneft, “… which belonged to me, to Badri [Mr. Patarkatsishvili] and to [Mr. Abramovich]”. Mr. Grigoriev give evidence to the effect that neither Mr. Berezovsky nor Mr. Patarkatsishvili was involved in any way in such loans (Footnote: ¹¹⁶). Mr. Grigoriev was extensively cross-examined in relation to certain inconsistent evidence which he had given to the Russian prosecuting authorities in relation to Mr. Abramovich’s participation in this process. Mr. Grigoriev explained in his cross-examination why his evidence to the Russian prosecutor was incorrect. He had been summoned to answer questions about a particular loan to Runicom SA and it was in that context that he said that he had not met or discussed matters with Mr. Abramovich. At the time, he thought, in the context of the enquiry, that it was a “minor issue” that did not warrant correction. Despite the fact that he had clearly not given a full and truthful explanation to the Russian prosecutor, I accept his explanation as to why he had not corrected his evidence. As far as the evidence he gave in these proceedings was concerned, I conclude that he gave his evidence honestly.

The third and last cash auction was held on 25 October 1996. The remaining 15% of the 49% of the share capital of Sibneft, which had been earmarked for privatisation, was sold to ZAO Refine Oil (“Refine Oil”) for approximately $ 48 million. The purchase price consisted of $ 12.5 million paid by Refine Oil under the share sale agreement, and $ 35.5 million in obligations undertaken to fund Sibneft’s investment programme; these included direct investments into Sibneft’s subsidiaries; annual lease payments for Sibneft’s Moscow Representative Office; and payment of tax arrears owed by Sibneft’s subsidiaries, payable to the federal budget. It was common ground that Refine Oil was (indirectly) owned by Mr. Abramovich. The bid was funded by a further loan from SBS, secured by guarantees by Sibneft group companies and the pledge of Sibneft shares by companies controlled by Mr. Abramovich. Again Mr. Berezovsky accepted that he was not involved in the auction and contributed nothing to the funding of the acquisition of the 15% holding. Mr. Andrei Gorodilov gave evidence that no assistance had been received from Mr. Berezovsky or Mr. Patarkatsishvili in relation to the acquisition or its funding. Again Mr. Berezovsky suggested that the reason why he had not been asked by Mr. Abramovich to contribute to the funding of the bid, or had been involved in it, was that the funds used to finance the bid had been generated from profits earned by Sibneft which he and Mr. Patarkatsishvili jointly owned with Mr. Abramovich.

In due course, as anticipated, the Russian State defaulted on its loan. NFK exercised its right as pledgee to sell the 51% shareholding in Sibneft under its management. The stake was sold at auction on 12 May 1997. The auction was conducted by NFK and Mr. Patarkatsishvili served as chairman of the auction committee. According to Mr. Shvidler, Mr. Patarkatsishvili would certainly have seen it as his role to discourage other bidders. Mr. Abramovich’s team, and, in particular, Mr. Gorodilov, arranged the incorporation of another vehicle for the purpose of bidding in this auction, namely OOO Finansovaya Neftyanaya Korporatsiya (“FNK”), a different corporate entity from NFK. Its owners were initially ZAO Alkion Securities and ZAO Obedinennaya Depozitarnaya Kompaniya, two depositary companies owned by SBS. However, it was common ground that, for practical purposes, FNK was indirectly owned and controlled by Mr. Abramovich through these companies.

FNK won the auction by offering $ 110 million for the State’s 51% stake in Sibneft. In addition, in accordance with the terms of the auction, FNK had the obligation to fulfil a number of requirements including:

According to Mr. Andrei Gorodilov, FNK’s purchase was financed by SBS, which:

He also gave evidence to the effect that “… the actual source of the funds …” with which FNK was capitalised were monies which Runicom SA, Noyabrskneftegaz and Omsk Oil had in the accounts which had been opened by those companies with SBS at the end of 1995, pursuant to the cash collateral arrangements already described in relation to the loans-for-shares auction. It was common ground that the monies which had been deposited as security for SBS’ loan at the time of the loans-for-shares auction were the same monies eventually used to capitalise FNK.

Once again, the arrangements for the auction and the financing were all organised and negotiated by Mr. Abramovich’s team. There was no evidence to suggest that Mr. Berezovsky or Mr. Patarkatsishvili had any discussions with Mr. Abramovich or Mr. Shvidler, or indeed any other members of Mr. Abramovich’s team, about financing, about the fulfilment of FNK’s obligations following its successful bid, or otherwise about the acquisition, other than the role played by Mr. Patarkatsishvili in relation to the auction process itself. Indeed, Mr. Berezovsky’s evidence was that it had all been left to Mr. Abramovich. Mr. Berezovsky acknowledged that he had not been involved in the process and had not been consulted. This was consistent with Mr. Abramovich’s evidence that he did not believe that he had discussed the cash auction with Mr. Berezovsky.

In his witness statement Mr. Berezovsky did not claim to have had any interest in either ZAO Alkion Securities or ZAO Obedinennaya Depozitarnaya Kompaniya, nor did he claim to have contributed to the cost of FNK’s acquisition of the 51%. Indeed, immediately after the auction, on 13 May 1997, he was reported as having denied to Reuters that he had any links to FNK as the buyer of a majority stake in Sibneft and quoted as saying “I have no ties to FNK”.

But in cross-examination, Mr. Berezovsky at one point appeared to suggest that there was an “… agreement … to transfer what was NFK to FNK”, or at least to transfer NFK’s management control to FNK. His evidence on this point was difficult to understand; he appeared to be asserting that it was agreed that FNK would be 100% owned by Mr. Abramovich, in order to protect himself and Mr. Patarkatsishvili “better”, and in order (at Mr. Abramovich’s insistence and with his concurrence) to distance himself (i.e. Mr. Berezovsky) from the business. He also said for the first time that he did have an “interest” in FNK; thus, when it was put to him: “You don’t claim to have had any interest in it [FNK], do you?” he replied:

“Interest, definitely. Interest means that Abramovich hold my shares and pay me my interest as dividends or profit from our activity. It depends in general what sense means “interest”. Sometimes interest means shareholding; sometimes interest means just result of the activity of the company.”

but he finally admitted that he “did not have any official connections to FNK”.

What he did assert, however, was that effectively the money used to buy the 51% majority stake “… came from profit which generate Sibneft and the company linked to here like Runicom” (Footnote: ¹¹⁷). In other words, as with the funds used to finance the earlier auctions, he claimed that, in reality, the cash collateral used to provide security for the SBS finance derived directly or indirectly from profits generated either by Sibneft and its subsidiaries (Noyabrskneftegaz and Omsk Oil) themselves, or by Runicom as a result of its trading with those companies, whether by means of transfer pricing or otherwise. For that reason he claimed that, under the terms of the alleged 1995 Agreement, he had an interest in those monies and therefore could be regarded as having contributed to the acquisition.

At paragraph 353 of Mr. Berezovsky’s closing the following submission was made:

“Accordingly, by the end of 1997 Mr. Abramovich had acquired (as the parties intended) control of a large majority of the shares in Sibneft, 88% in total. In doing so, the only funding actually put in by Mr. Abramovich was the $17.3 million put in by Runicom SA in 1995 – which was re-used in 1997 to fund FNK’s outright purchase of the state’s 51% stake – and $1.5 million in the January 1996 auctions: a total of just $18.8 million in return for obtaining approximately 90% of Sibneft. All other funds used to acquire shares were therefore a result of the efforts of Mr. Berezovsky and Mr. Patarkatsishvili in 1995, in securing support from SBS; in securing control of Noyabrskneftegaz and Omsk oil refinery; and (after January 1996) in enabling Mr. Abramovich to acquire shares in Sibneft.”

The evidence did not support the submission that “the parties intended” that Mr. Abramovich should acquire control of a large majority of the shares. As I have already said, it was common ground that the monies which had been deposited as security for SBS’ loan at the time of the loans-for-shares auction were the same monies eventually used to capitalise FNK. But the point does not assist Mr. Berezovsky. He had no financial exposure whatever: Runicom did, however, and it was common ground that the company was wholly-owned by Mr. Abramovich and that Mr. Berezvosky had no interest in it.

Second, I do not accept the statement that:

“All other funds used to acquire shares were therefore a result of the efforts of Mr. Berezovsky and Mr. Patarkatsishvili in 1995.”

The evidence, as summarised above, simply did not support this assertion, other than in the loosest sense that their efforts in 1995 had assisted in the acquisition of management control of Sibneft, and therefore the ability to procure Noyabrskneftegaz and Omsk Oil to provide security at the time of the loans-for-shares auction and subsequently. But Mr. Berezovsky did not participate in the cash auctions of Sibneft shares or in the negotiations conducted by Mr. Abramovich’s team to obtain finance for those share acquisitions. No suggestion was made to the effect that it was unlawful as a matter of Russian law or otherwise commercially inappropriate for subsidiaries such as Noyabrskneftegaz and Omsk Oil to support loans for the acquisition of shares in their holding company; and such security appears to have been acceptable to SBS.

Initially only 2.8% of Sibneft was owned by the public. However that proportion increased when Sibneft increased its capital in 1997. By 1998, public investors comprised 3.2% of the company. Thereafter, the proportion of shares held by the public varied up to 14.8%. The “free” shares were traded on the Moscow Stock Exchange.

After the original loans-for-shares auction, Mr. Abramovich and his management team transformed Sibneft from a loss-making Soviet-style bundle of assets into a competitive, profitable, modern corporation. A summary of the various steps that were taken was provided by Mr. Shvidler in his evidence. Neither Mr. Berezovsky nor Mr. Patarkatsishvili played any part in this process. Nor did they claim to have done so.

I have already largely set out above my findings as to the part played, and the contribution made, by Mr. Berezovsky in the loans-for-shares auction whereby NFK acquired management control of Sibneft, and the four subsequent auctions of Sibneft shares at which Mr. Abramovich’s companies acquired shares in the company. There was a marked difference between Mr. Berezovsky’s active involvement and participation in the former, and his apparent indifference to the latter acquisitions, which is difficult to comprehend if indeed the deal between him and Mr. Abramovich was that Mr. Berezovsky (together with Mr. Patarkatsishvili) were to acquire Sibneft shares in partnership with Mr. Abramovich. Mr. Berezovsky’s evidence was that he played no part in the subsequent auctions and did not need to do so, because Mr. Abramovich was organising everything. But that hardly explained Mr. Berezovsky’s lack of interest in the result of the auctions if he personally was indeed acquiring an interest in any Sibneft shares acquired as a result of the auction process.

What was particularly surprising (if Mr. Berezovsky’s account were the correct one) was that the parties had agreed that a joint-venture vehicle, namely NFK, should be used for the purposes of the loans-for-shares auction, (i.e. for the purpose of obtaining management control) but that, in relation to the first privatisation auction which took place just one week later, in January 1996, Mr. Abramovich’s company, Runicom, was the purchaser of 12% of the 15% of Sibneft shares sold. According to Mr. Berezovsky’s case, at this stage – i.e. late 1995 early 1996 - there were no arrangements in place (under the terms of the alleged 1995 Agreement) for his stake to be held for him indirectly via Mr. Abramovich or one of his companies; it was only in May or June 1996 that such an agreement (the alleged 1996 Agreement) was made.

In such circumstances, if it had been agreed that Mr. Berezovsky and Mr. Patarkatsishvili were indeed meant to obtain a partnership interest in 50% of any Sibneft shares acquired by Mr. Abramovich, it was surprising that the joint-venture vehicle, NFK, or some other 50:50 vehicle, was not used for such acquisition. At the least, one might have expected Mr. Berezovsky and Mr. Patarkatsishvili to have raised some point with Mr. Abramovich as to what price was going to be paid for any Sibneft shares which the three partners were to acquire, how “their” Sibneft shares were going to be paid for, and how they were going to be held on their behalf, and to have expressed some interest in the outcome of the auction.

Mr. Berezovsky’s explanation that he left the conduct and the financing of the share auctions, on their behalf, to Mr. Abramovich to arrange as the person charged with the management of Sibneft under the alleged 1995 Agreement was not convincing. At one stage Mr. Berezovsky insisted that Mr. Abramovich had to make a bid and that he, Mr. Abramovich, could decide on the bid price, but that the latter could come to Mr. Berezovsky if he was in difficulties. Yet there did not appear to have been any obligation on Mr. Berezovsky and Mr. Patarkatsishvili to pay for any Sibneft shares acquired by Mr. Abramovich; none was pleaded or referred to in Mr. Berezovsky’s witness statements.

At another stage Mr. Berezovsky suggested that it was up to Mr. Abramovich, in the exercise of his powers of management, to meet Mr. Berezovsky’s proportion of the cost of acquiring Sibneft shares by setting it off against his share of Sibneft profits (Footnote: ¹¹⁸). At yet another stage, Mr. Berezovsky relied on a new formulation of the agreement that “we just agreed that all expenses” would be shared.

But not only did the evidence show that, at the relevant times, there were no Sibneft profits available which could be applied to paying for Mr. Berezovsky’s share of the purchase price, but also, as was common ground, what was actually agreed in 1995 was that Mr. Abramovich and his team would run Sibneft after management control had been acquired. As was submitted on Mr. Abramovich’s behalf, it is not normally part of the function of a company’s manager to purchase shares in that company on behalf of potential investors or to pay for them out of distributions, even on the footing that there are distributions available for that purpose.

In addition to the above points, in support of his contention that the evidence relating to the acquisition of the Sibneft shares in 1996 and 1997, and the manner in which they were held thereafter, supported his case in relation to the alleged 1995 Agreement, Mr. Berezovsky sought to rely upon:

I found none of these points persuasive. Dealing with them in turn:

Accordingly, I conclude that the evidence relating to the acquisition of the Sibneft shares in 1996 and 1997, and the manner in which the shares were subsequently held, coupled with the absence of any evidence (or a pleaded allegation) that Mr. Abramovich was obliged under the terms of the alleged 1995 Agreement to buy shares for Mr. Berezovsky and Mr. Patarkatsishvili in the subsequent auctions of Sibneft shares, supports Mr. Abramovich’s case that he was acquiring such shares on his own behalf and at his own expense and does not support Mr. Berezovsky’s case of an alleged partnership agreement under which he and Mr. Patarkatsishvili would be entitled to 50% of all shares acquired in Sibneft.

The timing of the arrangements between the parties

The essence of the dispute about timing between the parties was as follows. Mr. Berezovsky’s case was that the three men were partners and that they agreed the partnership in July or August 1995, after working together for many months; and that is was in July or August 1995 “… when they agreed that they would split their interests in Sibneft 50:50” (Footnote: ¹²⁰). By contrast, Mr. Abramovich’s case was that the basic features of his arrangements with Mr. Berezovsky had been substantially agreed in February 1995, and in any event, by March 1995, when Mr. Berezovsky said that he would expect $30 million a year. Mr. Abramovich accepted that, thereafter, as the project developed, and the government legislation opened new opportunities, the assistance that Mr. Berezovsky agreed that he would provide extended into helping Mr. Abramovich in obtaining management control through the loans-for-shares auction.

Mr. Rabinowitz submitted that it would have been extremely unlikely for Mr. Abramovich, in February/March 1995, at a time when he barely knew Mr. Berezovsky, and when the value of Mr. Berezovsky’s future contribution was wholly unknown, to have agreed that, in return for Mr. Berezovsky’s assistance, Mr. Abramovich would pay Mr. Berezovsky unlimited sums depending entirely on Mr. Berezovsky’s demands. He also submitted, that it would have been “bizarre” for Mr. Abramovich to have agreed in February/March 1995 to make a payment, in that first year, to Mr. Berezovsky of $30 million, given that such sum represented 75 percent of Mr. Abramovich’s oil trading profits of $40 million for the previous year.

Mr. Sumption submitted that, on the contrary, Mr. Abramovich’s account of the understanding reached in 1995 was supported by the fact that the timing was more consistent with his version than any other. In support of this contention he submitted:

I conclude that, to a certain extent, the arguments on timing support Mr. Abramovich’s case.

There is force in Mr. Abramovich’s submission that Mr. Berezovsky’s active engagement on the project from early 1995, and in particular, his lobbying of the government from, at the latest, February, would have been unlikely to have taken place without some prior agreement as to his remuneration. Likewise, there is force in Mr. Abramovich’s submission that the first payment made to Mr. Berezovsky in about February 1995, and the further payments in the following months of 1995, (which, as set out below, I conclude were indeed made), were, similarly, unlikely to have been made in the absence of some prior agreement. At that stage, no profits were being generated that could be said to be attributable, directly or otherwise, to any interest in Sibneft, however widely the term “profits” might be defined.

On the other hand, the fact that Mr. Berezovsky’s alleged partnership with Mr. Patarkatsishvili was claimed to have dated only from August 1995 is consistent with Mr. Berezovsky’s case that the alleged 1995 Agreement was concluded in August 1995.

But I am not persuaded by Mr. Rabinowitz’s submissions as to the unlikelihood of Mr. Abramovich agreeing in February/March 2005 to pay Mr. Berezovsky $30 million in the first year, notwithstanding that, at that stage, Mr. Berezovsky had not demonstrated that he could achieve anything concrete, and that he was not personally well known to Mr. Abramovich. Mr. Abramovich’s evidence was convincing on this point; there could be no realistic expectation of Mr. Berezovsky exerting his influence at the Kremlin without a prior commitment on Mr. Abramovich’s part to remunerate him for that activity; Mr. Abramovich regarded Mr. Berezovsky’s personal and political reputation and standing at that time as considerable; given the potential future revenues which Mr. Abramovich rightly believed he could generate by consolidating control over Omsk Oil Refinery and Noyabrskneftegaz, through the incorporation of Sibneft, and directing their sales through his Trading Companies, he would not have needed the track record of a prior business relationship to justify an agreement to pay large sums for Mr. Berezovsky’s future assistance.

However, on both men’s respective evidence: their discussions continued from January throughout 1995; they were both actively engaged from that date in the project; and the situation itself remained fluid and dynamic, given the development in the underlying legislative background.

Thus, none of the timing points relied upon by Mr. Sumption per se would have precluded the making of a further agreement, in August 1995, or indeed thereafter, in relation to any entitlement to Sibneft shares that might subsequently be acquired as a result of the loans-for-shares programme, or in the subsequent privatisation auctions, or in relation to an entitlement to participation in profits, as the underlying situation developed. I accept, of course, that this is not what was pleaded by Mr. Berezovsky. He did not suggest, for example, that the payments made from February 1995 and thereafter in that year were payments on account of anticipated profits from the alleged joint venture. He simply denied that he had received them at all: at least in connection with his Sibneft arrangements with Mr. Abramovich.

In conclusion, whilst the timing arguments lend some support to Mr. Abramovich’s defence, if I were otherwise satisfied as to the truth of Mr. Berezovsky’s case, such points would not persuade me to find against him.

The absence of any written record

It was submitted on behalf of Mr. Abramovich that, if an agreement had indeed been made in August 1995 in the terms alleged by Mr. Berezovsky, it would have been recorded in writing, whereas the absence of any written record of their arrangements strongly supported Mr. Abramovich’s case that the nature of the arrangements between the two men had been based on a krysha type of relationship.

Mr. Berezovsky, on the other hand, alleged in his fourth witness statement that, in 1995, Mr. Abramovich had insisted that there should not be a written agreement, in case the Communists won the 1996 presidential election and took action against businesses with which Mr. Berezovsky was associated. Because it was such a critical part of Mr. Berezovsky’s case, I set out his written evidence on the point (Footnote: ¹²⁶):

“106

During the course of our discussions, Mr. Abramovich insisted that our agreement should not be written down. Mr. Abramovich said that this was because of my political involvement and my high-profile support for and relationship with President Yeltsin. In the event that President Yeltsin lost his re-election bid and the Communists returned to power (as many thought would happen), it was expected that I would be their first and foremost target. This was a commonly held view by those inside and outside of Russia. George Soros warned me that if the Communists were elected I would ‘hang from a lamp post’. Mr. Abramovich said that I should distance myself from the company and that there should not be any papers linking me to it as otherwise this might harm Sibneft. Though the agreement between Mr. Abramovich, Badri and me was not written down, all parties to it were clear as to what their obligations were to their partners. There was no question in my mind that all three of us understood that we were binding ourselves to behave in accordance with our agreement. I am sure that we all understood that we were to treat each other in good faith as partners. I do not believe that it occurred to any of us that the force of our agreement, or the rights which we obtained, was affected by not having written it down. I am told that Mr. Abramovich has argued that the agreement between the three of us should have been in writing. I did not know that. I had at this point never been involved in any Russian court proceedings, and it did not occur to me that an agreement between three individuals such as ourselves needed to be in writing.

107

Whilst I realise that, from a Western perspective, it may seem unusual for businessmen to enter into undocumented agreements in respect of very significant assets, my arrangements with Mr. Abramovich should be viewed in their context:

(a)

Mr. Abramovich and I had grown close while planning the formation and acquisition of Sibneft, and I was spending even more time with him than I was with Badri. I felt I was able to trust him in the same way I trusted my other close business associates, such as Badri.

(b)

Additionally, such oral agreements were simply common practice at that time between Russians in Russia, where most business dealings at the level at which I operated necessarily placed a high emphasis on personal trust and on the mutual expectations of good faith between the parties (not least because the court system in Russia was an unreliable way of settling disputes, even if agreements were in writing). Further, in common with other Russian businessmen at the time, I was concerned that if documents fell into the wrong hands, they might be used abusively against my interests.

108.

At that time, I conducted many of my business deals orally and am aware that other influential businessmen did too.”

Mr. Abramovich denied the allegation that it was at his suggestion that nothing was recorded in writing. In his written evidence (Footnote: ¹²⁷) he said as follows:

“35.

In addition, if I had entered into an agreement such as that described by Mr. Berezovsky, I would have recorded it in writing. My usual practice at that time was to arrange for any acquired assets to be added to my holdings and, if there were partners in the project, to draw up legal agreements in writing in the form of shareholders’ agreements, protocols or memoranda. Mr. Berezovsky seeks to excuse the lack of what would obviously be necessary documentation by making the false claim that I insisted that the agreement between us with regard to Sibneft and all other agreements remain in oral form (Berezovsky 4, paragraph 106). In fact, the only arrangement between us was in the nature of ‘protection’, and we did not discuss any formalising. By virtue of its non-legal nature, ‘krysha’ could not have been the subject of compulsory performance through а court petition. Mr. Berezovsky’s claim that I did not want to formalise our relations in written form, since I was afraid of association with him, is contradicted by my particular efforts during this time to advertise my connection with Mr. Berezovsky and his patronage for my undertakings, including the future Sibneft, as I described in my previous statement. I had no use for Mr. Berezovsky’s ‘secret’ patronage.”

This evidence was not expressly challenged in cross-examination, although, since time did not permit either party to challenge each and every factual assertion in cross-examination, I assume that it was impliedly challenged.

I find the absence of any written agreement or similar document recording the alleged 1995 Agreement, and the alleged 1996 Agreement, as highly surprising if agreements had indeed been concluded in the terms alleged by Mr. Berezovsky. I regard the absence of any written record, in the circumstances, as a significant factor supporting Mr. Abramovich’s case and undermining that of Mr. Berezovsky.

My reasons for reaching the conclusion that it was inherently improbable that, if such an agreement had indeed been made, there would have been no written record of it, may be summarised as follows.

Whilst commercial oral agreements may have been less uncommon in Russia in the 1990s than they would have been, for example, in New York or London, the evidence did not suggest that they were the norm. Mr. Berezovsky himself at that time had made plenty of written agreements relating, for example, to Anros, LogoVAZ and ORT, even though some of these agreements were made with people, such as Mr. Glushkov, who were close and trusted associates of long-standing. As Dr. Nosova explained in her evidence, and as was confirmed by Mr. Berezovsky, the practice of denying unrecorded interests in joint ventures, referred to as “kinut” in Russian, was a well known hazard in Russia at the time.

Objectively, and even leaving aside the characters of the participants, I find it highly unlikely that, in Russia in 1995, there would be no formal written agreement, or even informal written record, of a joint venture or partnership agreement, whose subject matter was (according to Mr. Berezovsky):

As I have already explained, it was not part of Mr. Berezovsky’s pleaded case that he was entitled to a share of anything other than the profits of Sibneft. As developed in his oral evidence, his case by the end of the trial was that it had been agreed that the parties would share in the relevant proportions:

“… (a) any shares in Sibneft they might acquire, (b) all benefits generated by reason of Sibneft (whether received through the Trading Companies or otherwise), and (c) all losses and expenses of the joint venture. What was to be split was not gross revenues but profit.

As Mr. Berezovsky explained, “… everything what generate Sibneft and everything what generate connected to Sibneft, from the Sibneft activity, belong to us together”. It did not matter whether the profit was made by Sibneft itself or by Mr. Abramovich’s Trading Companies: if it derived from the control of Sibneft or the parties’ joint activity, then it was to be shared (Footnote: ¹²⁹).

But, contrary to Mr. Rabinowitz’s submission (Footnote: ¹³⁰), the suggestion that participation extended to include profits made by Mr. Abramovich’s Trading Companies, at least to the extent that such profits derived from Mr. Abramovich’s acquisition of control, or involvement with, Sibneft would have given rise to real uncertainty as to the scope and definition of what was included in the alleged partnership: not merely as to the identification of the relevant Trading Companies, but also as to the identification of the relevant revenues, expenses and profits, and the methodology for computing and auditing relevant profits. Likewise, the other alleged terms of the agreement, as suggested by Mr. Berezovsky in his evidence: for example:

Moreover, I find it inconceivable that, if there had been such an agreement as alleged by Mr. Berezovsky, Mr. Abramovich, advised as he was by Mr. Shvidler, would not have insisted on a properly drawn up commercial agreement recording the terms of the three men’s “partnership”. The consequences of such an agreement for his future business activities would have been so swingeing, given, for example, the alleged obligation to provide a 50% participation to Mr. Berezovsky/Mr. Patarkatsishvili in every new venture, and the constraints upon dealing with the Sibneft shares, that it is inherently unlikely that he would have agreed to such a proposal without a written record clearly setting out the conditions (for example as to timing of the exercise of the rights, and the provision of capital) attaching to such rights of first refusal and the other constraints on his ability to deal with his assets.

As a witness, Mr. Abramovich presented as a man with a keen requirement for detail, certainty and precision of expression. In my judgment, he was the last man one would have supposed to have been content to have such an agreement left in the limbo of oral recollection. I find it difficult to believe that he would have had a different approach in 1995.

From the perspective of Mr. Berezovsky, the absence of a written agreement was particularly striking in the circumstances prevailing in 1995. At that stage, Mr. Berezovsky had only just met Mr. Abramovich, a man of whom he had never previously heard and whom he says he regarded as someone with no significant track record in business. Indeed, as I have already mentioned, in the early part of his evidence in cross-examination Mr. Berezovsky spoke of Mr. Abramovich’s abilities with some degree of contempt. The two men had never done a deal together before. I did not find Mr. Berezovsky’s evidence that by August 1995 he trusted Mr. Abramovich so implicitly, there was no need to have any written agreement, as remotely plausible. On Mr. Berezovsky’s hypothesis, Mr. Abramovich was being trusted not only to run a multimillion dollar oil business in which Mr. Berezovsky and Mr. Patarkatsishvili owned a 50% share, but also to hold the two men’s ownership interests on their behalf, in a manner that was never made clear to them. Mr. Berezovsky’s lack of concern with the detail of his financial affairs and the fact that at that date he was concentrating on the re-election of Mr. Yeltsin, provided no satisfactory explanation for the absence of a written agreement.

On the other hand, if the true nature of the arrangement was a political arrangement, that is to say, a trade in influence and protection, in return for payment of large sums of money, as opposed to an oil industry partnership, it is readily understandable that both men, and particularly a person in Mr. Berezovsky’s position, would not have wanted there to have been anything recorded in writing. As was submitted in Mr. Abramovich’s written closing submissions (Footnote: ¹³³):

“Such an arrangement would have been simple enough for a document to be unnecessary, and embarrassing enough for it to be undesirable. It is hardly conceivable that the parties could have intended that an understanding which it is common ground required Mr. Berezovsky to use his influence over the President to his own financial advantage and that of Mr. Abramovich, should have been intended as a binding agreement on which recourse might be had to the Russian courts in case of dispute. It is obvious that the arrangement was intended to be binding in honour, not in law.”

I regard that submission as compelling.

I reject Mr. Berezovsky’s evidence to the effect that it was Mr. Abramovich who had insisted that the agreement should not be recorded in writing. In cross-examination he initially appeared confused as to whether any such stipulation had been made, and then appeared to suggest Mr. Abramovich’s insistence had come in 1996 at the time of the alleged 1996 Agreement. But even if one attributes his muddled evidence on this topic to an understandable difficulty in recollection, given the passage of time, and even making full allowances for that fact, I still had real difficulty in accepting his evidence.

First, the allegation was not included among the reasons given for the absence of a written agreement in Mr. Berezovsky’s second witness statement, prepared for use in the summary judgment proceedings, although he claimed in that statement to have a “clear recollection” of what was said. The suggestion that a written record was dispensed with at the request of Mr. Abramovich was first made in the Re-Amended Reply, served in July 2010 (Footnote: ¹³⁴) (on any basis somewhat late in the day), a factor which does not reinforce its credibility. Second, the reason given by Mr. Berezovsky for Mr. Abramovich’s “insistence” on there being no written record was very difficult to follow. He appeared to be saying that any written agreement would reveal to the Communists, if they came into power, that he was associated with the company, and that, as a result, they would be more likely to re-nationalise Sibneft, than if merely Mr. Abramovich appeared to be associated with the company. But the evidence showed that the declared policy of the Communists at the time was to retain the business assets of the State and to renationalise all those which had been previously privatised. Thus, if the Communists came to power, the likelihood was that any project for acquiring shares in Sibneft would have been doomed, whether Mr. Berezovsky was associated with it or not, and irrespective of whether there was any agreement in writing. Third, the reality was that Mr. Berezovsky was publicly associated with NFK at the time of the Sibneft loans-for-shares auction of 28 December 1995, and Mr. Abramovich’s evidence was that, far from keeping Mr. Berezovsky’s association hidden, he regarded Mr. Berezovsky’s association with the project as a political asset which he wanted to advertise, because Mr. Berezovsky was known to have the ear of President Yeltsin. Mr. Berezovsky himself admitted in cross-examination that everybody knew that he was connected with NFK which managed Sibneft, but said that “… not everything is absolutely logical, we should understand, and my behaviour … also was not very logical sometimes” (Footnote: ¹³⁵). This undermines the suggestion that the two men thought that confidentiality about Mr. Berezovsky’s association was either possible or necessary, or likely to assist in dealing with the Communists, such as to explain the absence of a written record of the agreement.

Mr. Berezovsky’s purpose at the time of the alleged 1995 Agreement

The evidence showed that Mr. Berezovsky’s main priority in 1995 was to ensure that, as a matter of urgency, ORT was adequately funded so that it could give effective support to President Yeltsin’s campaign. The driver behind Mr. Berezovsky’s agreement in 1995 to assist Mr. Abramovich to acquire control of Sibneft, as explained to Mr. Abramovich (and indeed as acknowledged by Mr. Berezovsky), was to generate a source of funds for ORT (Footnote: ¹³⁶). Moreover, this was the basis on which the proposal was put to President Yeltsin. According to Mr. Berezovsky:

“The main way in which I was able to persuade President Yeltsin and the government to agree to the creation of Sibneft was by emphasising the importance of ORT for the re-election of President Yeltsin in the following presidential elections, and the need to secure a new business venture which could provide the funding to support ORT. … I discussed with President Yeltsin ORT’s support of the democratic reforms in the upcoming election. I explained that ORT continued to be loss-making and short of funds and said that alternative funding would have to be found in order for ORT to maintain its influence and stage a strong television campaign in favour of the re-election of Mr. Yeltsin, a democratic candidate against the communists (Footnote: ¹³⁷).”

When this passage was put to him in cross-examination, Mr. Berezovsky gave the following evidence (Footnote: ¹³⁸):

“A. It is correct.

Q. So your argument was: in order to fund ORT and support the president’s re-election campaign, I need to have these two Siberian businesses separated from Rosneft and partially privatised so that I can use them as a source of funds for financing ORT’s operations. That was the argument, wasn’t it?

A. It was the argument.

Q. And it was the argument that succeeded, wasn’t it?

A. It was succeeded.

Q. Now, the deal therefore, in summary, that you made with Boris Yeltsin was this, wasn’t it: “You, Mr. President, get the support of my television network and I get put in a position where I can extract large sums of money from these two Siberian businesses”? That’s the deal, isn’t it?

A. It’s correct.”

Mr. Sumption submitted that ownership of Sibneft shares, with a consequent participation in Sibneft profits, would not have helped Mr. Berezovsky in 1995 to fund ORT, and would not therefore have achieved what Mr. Berezovsky’s own evidence shows to have been his main purpose in joining up with Mr. Abramovich; whereas, on the contrary, a krysha type arrangement with Mr. Abramovich would, and in fact did, enable Mr. Berezovsky to make an immediate and significant contribution to ORT’s funding shortfall.

In support of this submission Mr. Sumption put forward the following arguments:

On the other hand, Mr. Rabinowitz, on behalf of Mr. Berezovsky, submitted as follows in relation to Mr. Berezovsky’s purposes in 1995:

My conclusions in relation to this issue are as follows:

These findings support Mr. Abramovich’s case, and undermine that of Mr. Berezovsky.

The alleged 1996 Agreement

This topic is not strictly a topic of circumstantial evidence, since whether there was an agreement reached in 1996 in the terms alleged by Mr. Berezovsky in paragraph C37 of the Re-re-re-Amended Particulars of Claim is one of the defined issues in the Agreed List of Issues. However, it is convenient, chronologically and logically, to deal with it at this stage.

Mr. Berezovsky’s case was that between March and June 1996, Mr. Abramovich made clear to him that he felt very strongly that Mr. Berezovsky should distance himself from Sibneft, because Mr. Berezovsky was so involved in politics and that he and Mr. Patarkatsishvili should be secret partners, without their names appearing on any documents relating to ownership of Sibneft. Mr. Berezovsky says that he agreed to this on the terms set out in paragraph C37, namely

Mr. Rabinowitz submitted that Mr. Berezovsky’s case was supported not only by Mr. Berezovsky’s own evidence, but also by the following evidentiary materials:

Mr. Rabinowitz further submitted that the rationale of the alleged 1996 Agreement strongly supported Mr. Berezovsky’s case because, early in 1996, Mr. Berezovsky’s public association with Sibneft presented a real threat to the business. He submitted that an analysis of the evidence showed that Mr. Abramovich was acutely aware of the potential risks of being seen to associate too closely with a person as politically active, and thus politically exposed, as Mr. Berezovsky.

In support of his arguments that there was a strong rationale for the making of the alleged 1996 Agreement, Mr. Rabinowitz referred to the following matters:

On the other hand, Mr. Abramovich’s case was that no distinct agreement had been made in 1996, and that Mr. Berezovsky’s case in relation to the alleged 1996 Agreement had been devised when Mr. Berezovsky had persuaded himself that shares in Sibneft had originally been acquired and held by NFK (the successful bidder in the loans-for-shares auction, half of which was owned by Consolidated Bank).

In support of that contention, Mr. Sumption submitted that, on that basis, it was necessary for Mr. Berezovsky to explain how the Sibneft shares later came to be held by Mr. Abramovich’s companies in a manner consistent with Mr. Berezovsky continuing to be interested in them. The alleged 1996 Agreement was devised to serve as this explanation. In what were referred to as the “re-drafted Particulars of Claim”, as served on 8 January 2008 (Footnote: ¹⁴⁸), Mr. Berezovsky alleged that in 1996 there had been an agreement to transfer “his” and Mr. Patarkatsishvili’s shares from his own companies to Mr. Abramovich’s companies, to be held on trust for him and Mr. Patarkatsishvili. Mr. Sumption referred to paragraphs 35-38 of the Particulars of Claim which alleged:

“35.

This ownership interest in Sibneft was acquired in summary as follows:

(1)

The original issued share capital of Sibneft was 4,516,396,20 shares.

(2)

By Decree Number 972 of the Government of the Russian Federation, dated 29 September 1995, the Russian Government approved a privatisation plan whereby 51% of Sibneft’s shares would be issued and transferred into state ownership for three years, and the remaining 49% of the shares would be sold by commercial tender at auction.

(3)

By a Decree made on or around 30 October 1995, the Russian Government proposed to auction the right to enter into a ‘Loans for Shares’ agreement in respect of the 51% of Sibneft shares retained in state ownership, under which a creditor would loan money to the state and manage the state’s shareholding, and at the end of a period of three years the share would, if the state failed to repay the loan, be transferred to the lender.

(4)

A company owned and controlled by Mr. Berezovsky, Mr. Patarkatsishvili and Mr. Abramovich, Neftyanaya Finansovaya Kompaniya (‘Petroleum Financial Company’) (‘NFK’), made a bid of $100.3 million in conjunction with Stolichny Savings Bank, and this bid was announced as successful on 28 December 1995.

(5)

The remaining 49% of the shares were sold by auctions commencing in January 1996. The majority of these shares were acquired by entities owned or controlled by Mr. Berezovsky, Mr. Patarkatsishvili and/or Mr. Abramovich.

(6)

In May 1997, NFK transferred its rights to manage the shares to Finansovaya Neftyanaya Korporatsiya (‘Financial Petroleum Corporation’) (‘FNK’), another company owned and controlled by Mr. Berezovsky, Mr. Patarkatsishvili, and Mr. Abramovich.

(7)

In about October 1998, the State failed to repay the loan, and its 51% shareholding was transferred to FNK as envisaged in the Decree pleaded in subparagraph (3) above.

(8)

On 16 December 1998, Sibneft issued another 224,093,389 shares to various minority shareholders of Sibneft’s subsidiary companies.

(9)

At all material times after December 1998, the share capital of Sibneft was 4,741,229,639 shares. Approximately 86% of the issued share capital had been acquired by entities on behalf of Mr. Berezovsky, Mr. Patarkatsishvili and Mr. Abramovich.”

The manner in which the shares were held

36.

Initially, Mr. Berezovsky and Mr. Patarkatsishvili legally owned or controlled companies which controlled and legally owned their proportions of the Sibneft shares. However, as Mr. Berezovsky became more heavily involved in politics, and while Mr. Patarkatsishvili continued to manage the largest and most influential TV channel, ORT, it was decided and agreed between Mr. Berezovsky, Mr. Patarkatsishvili and Mr. Abramovich that Mr. Berezovsky and Mr. Patarkatsishvili would be distanced from the Sibneft business. Mr. Abramovich proposed that all shares held by Mr. Berezovsky and Mr. Patarkatsishvili should be transferred legally to him or to entities under his ownership or control.

37.

It was orally agreed between the three by 1996 that:

(1)

such a transfer would take place;

(2)

Mr. Berezovsky and Mr. Patarkatsishvili would continue to beneficially own the shares so transferred, which would be held on trust for them by Mr. Abramovich;

(3)

Mr. Berezovsky and Mr. Patarkatsishvili would continue to be entitled to receive dividends and to any other payments made by Sibneft to its beneficial owners on the basis of the percentage split referred to above.

(4)

thereafter any further acquisitions of Sibneft shares would be hold on the same basis.

38.

By about August 1997, this agreement had been implemented and Mr. Berezovsky and Mr. Patarkatsishvili’s shareholding had been transferred to and was legally owned or controlled by Mr. Abramovich or by companies owned or controlled by him, the beneficial ownership of that shareholding held on trust by Mr. Abramovich for Mr. Berezovsky and Mr. Patarkatsishvili in the agreed proportions set out at paragraph 34 above.” [emphasis supplied]”

Accordingly, Mr. Sumption submitted, the assertion in the first sentence of paragraph 36 was inaccurate, because:

I have little or no hesitation in rejecting Mr. Berezovsky’s case on the alleged 1996 Agreement. My reasons can be summarised as follows:

It follows that I decide Agreed Issue 3 in the negative. There was no such agreement as alleged by Mr. Berezovsky.

The conduct of the parties between 1995 and 2000 (b): whether any payments were made to Mr. Berezovsky and/or Mr. Patarkatsishvili prior to 1996

The conduct of the parties between 1995 and 2000 (c): the nature of the payments of the payments made to Mr. Berezovsky and/or Mr. Patarkatsishvili between 1995 and 2000 and whether they were referable to 50% of (a) Sibneft’s profits or (b) Sibneft’s profits and profits generated indirectly through Mr. Abramovich’s Trading Companies as a result of his acquisition of control of, or involvement with, Sibneft

I take these two topics together as, to a certain extent the relevant evidence is common to both.

Mr. Berezovsky’s pleaded case is that it was agreed that he would “… be entitled to dividends and to any other payments made by Sibneft to its owners” (Footnote: ¹⁵²). As I have already explained, and contrary to Mr. Rabinowitz’s submission (Footnote: ¹⁵³), there was no pleaded case that one of the express terms of the alleged 1995 Agreement was to the effect that profits earned by Mr. Abramovich through other corporate entities, as a result of the latter’s trading with Sibneft, or as a result of Mr. Abramovich having acquired control of, or involvement with, Sibneft, should be split 50:50. Likewise, Mr. Berezovsky’s 4th witness statement did not suggest that there had been any agreement to share profits made by other corporate entities.

Again, as I have already explained, Mr. Berezovsky’s oral evidence, however, was that it was expressly agreed that he (and Mr. Patarkatsishvili) would be entitled to all profits “in respect of our share of Sibneft”, whether generated directly by Sibneft or indirectly through, or as the result of any trading connection between Mr. Abramovich’s Trading Companies and, Sibneft. This was the way in which the case was formulated in Mr. Berezovsky’s written and oral closing submissions: for example at paragraph 401 of Mr. Berezovsky’s written closing, his evidence was summarised as follows:

“Mr. Berezovsky made it clear that it was his understanding that his entitlement to Sibneft profits extended to profits derived from owning Sibneft, however and by whatever corporate vehicle Mr. Abramovich caused them to be earned.”

Mr. Rabinowitz, in closing (Footnote: ¹⁵⁴), submitted that there was nothing adverse to be inferred by the absence of any pleading of such an express term, since such a term would in any event be implied as a term of any Russian partnership agreement. I disagree. If indeed such a term was the subject of an express oral agreement under the terms of the alleged 1995 Agreement, I would have expected it to have been pleaded, or at the least referred to, in Mr. Berezovsky’s principal witness statement for trial.

Mr. Berezovsky admitted in his oral evidence that he did not “know at all” what relation his payments bore to Sibneft’s profits, or indeed the profits of Mr. Abramovich’s Trading Companies. The evidence showed that he never did know, and took no steps to find out; he said that it was Mr. Patarkatsishvili who informed him. He suggested that there were regular meetings between Mr. Patarkatsishvili and Mr. Abramovich, but then admitted that he did not know what Mr. Patarkatsishvili did to ascertain the profits of Sibneft. He said that he was “[d]efinitely not” interested in knowing how large Sibneft’s profits were.

The dispute between the parties in relation to payments made by Mr. Abramovich principally focused on:

Mr. Berezovsky submitted that:

Mr. Abramovich, on the other hand, contended that he paid Mr. Berezovsky and Mr. Patarkatsishvili sums in the region of $ 20-30,000,000 in 1995, and that neither those payments, nor payments made to him and to Mr. Patarkatsishvili between 1995 and 2000, bore any relation to Sibneft’s profits or to those profits combined with the profits of Mr. Abramovich’s Trading Companies. He submitted that the fact that payments were made to Mr. Patarkatsishvili, as well as to Mr. Berezovsky, was not consistent only with the partnership relationship alleged by Mr. Berezovsky; on the contrary, that fact was also consistent with Mr. Abramovich’s krysha allegation.

The evidence in relation to these two topics, to the extent to which it was (largely) un-controversial, can be summarised as follows:

Mr. Berezovsky accepted that substantial payments were made to him and/or Mr. Patarkatsishvili between 1996 and 2000; he did not put forward a positive case as to the ballpark figures but was reluctant to accept that the sums put forward in Mr. Abramovich’s evidence were the sums which had been paid, although the figures for 1996-8 were presented by him as accurate to the French investigating judge in evidence given in June 2011 in the context of a judicial investigation into alleged money-laundering (Footnote: ¹⁵⁶).

The evidence put forward by Mr. Abramovich and his witnesses showed the following profits or losses for Sibneft and the following payments made to Mr. Berezovsky and/or Mr. Patarkatsishvili for the relevant years:

The figures given in the table for Sibneft profits were derived from the audited annual group financial statements. In cross examination Mr. Berezovsky asserted that the audited financial statements did not reflect the true profits of Sibneft, on the grounds that the trial of Mr. Khodorkovsky in 2003 showed that Russian oil companies generally transferred profits to connected entities by way of artificial transfer pricing, apparently in order to reduce their taxable profits (Footnote: ¹⁵⁸). I deal with this assertion below.

The figures given in the table for the years 1995-1999 were based upon estimates provided by Mr. Abramovich and Ms. Goncharova of sums which she handled on his behalf. For 1997, the table added to Ms. Goncharova’s estimates a further 96.5 million French Francs and $4.35 million, approximating $20 million in total, which was paid by Runicom SA in that year for expenses associated with Mr. Berezovsky’s property at Cap d’Antibes. These payments were not handled by Ms. Goncharova. The quantum of the French expenses paid in 1997 were confirmed by Hans-Peter Jenni (“Mr. Jenni”), a Swiss lawyer, who acted as legal and business adviser to Mr. Berezovsky from about 1991 and to Mr. Patarkatsishvili from about the same date to February 2008, and whose firm dealt with some of the administrative arrangements. For the year 2000, the figures were derived from an extant spreadsheet (the “Bolshoi Balance”), prepared under the supervision of Ms. Panchenko on the instructions of Mr. Shvidler (Footnote: ¹⁵⁹). This spreadsheet gave a detailed breakdown by categories of payee and by month. Ms. Panchenko explained that the total payments made to Messrs Berezovsky and Patarkatsishvili or their companies in 2000 were contained in a table described as “the FOM table”.

Except for the payments allegedly made in 1995, these estimates were not seriously disputed by Mr. Berezovsky. His case as to what he was in fact paid was unclear. According to Mr. Rabinowitz, “Mr. Berezovsky does not in fact assert a case as to what precisely he was paid in these years”. It appeared to be that he did “no[t] dispute at all that the sums were paid”, but:

“do[es] not accept … that those particular sums that Mr. Abramovich asserts were paid were in fact the sums that were paid” (Footnote: ¹⁶⁰).

He did not put forward a positive case even as to a ballpark figure which he accepted he received.

The only real issue on the figures related to whether Mr. Berezovsky had received any payments in 1995. He denied receiving anything in that year pursuant to his version of the alleged 1995 Agreement. Such denial was consistent with his case that the payments represented Sibneft profits, or related to profits derived from the acquisition or control of Sibneft, since Sibneft was not formed until October 1995 and management control of the company was not acquired until the following year. But since he claimed to have no precise recollection of dates or figures, and said that he did not concern himself with the details of payments which he received, because this was left to Mr. Patarkatsishvili, his own evidence was not of much assistance on this issue. He was unable to give any satisfactory explanation in cross-examination for payments which certain documents showed had been made to him or LogoVAZ in 1995, including a sum of $4 million paid in September 1995. His suggestion that payments were made to LogoVAZ because Mr. Abramovich’s companies had bought cars for its employees was unconvincing, and was, I find, rebutted by Mr. Abramovich in his oral evidence.

Mr. Abramovich and Ms. Goncharova gave evidence about the 1995 payments. Mr. Abramovich recalled an initial payment of $8 million in early 1995. He recalled a further payment of $10 million in the autumn, $4 million of which was paid directly to LogoVAZ. In cross-examination he also referred to a cash payment of $16,000 made to Mr. Berezovsky to enable him to pay off a debt to a Mr. Denisov and a payment made a couple of months later of a further $50,000.

Ms Goncharova recalled dealing with payments from early 1995 until late 2000 (Footnote: ¹⁶¹). She said that she was instructed by Mr. Abramovich to make a payment to Mr. Berezovsky of around $5 million in cash in early 1995. In her oral evidence, she gave a graphic and wholly credible account of personally delivering approximately $5 million of US dollars in banknotes in a holdall to Mr. Berezovsky at the LogoVAZ Club between February and March 1995 in instalments of $1 million and $500,000. She was able to pinpoint early 1995 as the relevant date, because it was around the time that Mr. Abramovich’s staff had just moved into their new office premises. Mr. Abramovich’s and Ms. Goncharova’s recollection as to the timing was also consistent with the evidence that ORT was in desperate need of money in 1995.

Mr. Shvidler also gave evidence about a payment of $1 million paid by Runicom SA to Atrium Consolidated Limited on 6 December 1995. There was no dispute that such a payment was made, as Mr. Berezovsky disclosed a document showing that it had been. Mr. Shvidler’s evidence was that Atrium was connected to Mr. Aven, to whom Mr. Berezovsky allegedly owed a debt.

Mr. Rabinowitz submitted that the evidence of Mr. Abramovich’s team asserting that payments were made under the 1995 Agreement before 1996 was:

“… clearly untrue. It was evidence which was (1) the product of collusion between witnesses; (2) reconstructed, following disclosure, from documents without any genuine recollection; and (3) in parts, demonstrably false.”

In particular he submitted that Mr. Abramovich had changed his case about the basis on which payments were made, because reference was made in the Defence, and the evidence served in support of the summary judgment application, only to payments in respect of ORT and that the specific payments which were:

“… now alleged by Mr. Abramovich to have been made to Mr. Berezovsky or Mr. Patarkatsishvili, or at their direction, prior to 1995, were not ORT payments”.

Mr. Rabinowitz suggested that this posed a problem for Mr. Abramovich’s case, because in evidence served in support of his strike-out application, by Paul Mitchard, a partner at Skadden, there was no reference to any payments unconnected with ORT. Mr. Rabinowitz submitted that, on the contrary, the statement made clear that only ORT-related payments were alleged; that was despite all of the major witnesses to payments – Mr. Shvidler, Ms. Panchenko, Ms. Goncharova, Ms. Khudyk – having been interviewed by Mr. Mitchard. Mr. Rabinowitz sought to point the contrast between the evidence of Mr. Abramovich’s witnesses at the summary judgment stage and that given in their written witness statements, claiming that payments to Mr. Berezovsky were krysha payments to cover Mr. Berezovsky’s “personal expenses”, and not limited to ORT-related payments. He said that this was as the consequence of collusion between Mr. Abramovich’s witnesses. The various witnesses were cross-examined by him and Mr. Gillis to this effect.

I reject Mr. Rabinowitz’s attack on the veracity of the evidence of Mr. Abramovich’s witnesses in this respect. Mr. Abramovich’s case had always been that the agreement with Mr. Berezovsky arose in the context of Mr. Berezovsky needing to meet the cash flow requirements of ORT, so that Mr. Berezovsky could use his control over the TV station to maintain his political power and influence. As both Mr. Abramovich and Mr. Shvidler said in their written and oral evidence, the great majority of the funds constituting $30 million paid in the first year did in fact go to ORT, but the scope of Mr. Berezovsky’s demands expanded over time, so that there was a gradual increase in the proportion of Mr. Berezovsky’s personal expenditure that was being funded by Mr. Abramovich. It was Mr. Berezovsky’s own evidence that, by 1997, his entire personal expenditure was in fact being funded by Mr. Abramovich. Mr. Abramovich was not involved in ORT and had no particular reason to be concerned about whether or not the money was strictly being applied for ORT purposes. Mr. Berezovsky has never alleged that it was a term of the alleged 1995 Agreement that the money paid to him had to be applied for ORT purposes. Mr. Abramovich’s concern was with the amounts, not with what the purpose to which Mr. Berezovsky applied the funds.

In his written evidence (Footnote: ¹⁶²), Mr. Shvidler described the changing position as follows:

“129.

However, before long, Mr. Berezovsky began to widen the scope even further and there was a sense of ‘ORT Project’ or rather ‘Project Boris’ i.e. we were expected to meet all the expenses that went along with elevating and maintaining Mr. Berezovsky’s position as a powerful and wealthy man. This was supposed to be our ‘insurance policy’ to make sure that we retained our control of Sibneft. We paid for his house in the South of France as part of Project Boris. Mr. Abramovich told me at the time that Mr. Berezovsky had asked for money for a house in the South of France, which Mr. Berezovsky had said he needed for entertaining consistent with being the controller of a major TV company. Mr. Berezovsky would regularly send us invoices related to other businesses or for personal items, on the basis that it was necessary to enhance his standing.”

And, in cross-examination, Mr. Shvidler said:

“I think whatever Mr. Berezovsky says was ORT was ORT”.

I have no doubt that this was the case.

Mr. Rabinowitz’s arguments, in my judgment, placed undue semantic emphasis on what was said by Mr. Mitchard (who was not involved in the actual events) at the pre-disclosure, summary judgment stage. Mr. Abramovich and his witnesses gave credible oral explanations as to how their evidence came to be summarised by Mr. Mitchard at that early stage. As I have said earlier in this judgment, this was a case where the evidence given by witnesses in oral cross-examination and re-examination was on the whole more reliable – in the sense of more nearly approximating the truth – than what was said in closely crafted witness statements on earlier interlocutory occasions.

I also reject the suggestion, put to Mr. Abramovich and Ms. Goncharova in cross-examination, that the 1995 payments were a recent invention or emerged as a result of collusion. These payments were not required to be specifically pleaded, and were mentioned on the first occasion on which evidence on the merits was served on Mr. Abramovich’s behalf. Mr. Mitchard’s third witness statement (served for the summary judgment application) states on the basis of information provided by Mr. Abramovich that the payments began “… in the first half of 1995 before Sibneft had even been established”, and that Ms. Goncharova had confirmed that “… she was responsible for payments to ORT from about the beginning of 1995”. Nor do I accept Mr. Rabinowitz’s criticisms of the evidence of Mr. Abramovich, Ms. Goncharova and Mr. Shvidler in this context (Footnote: ¹⁶³). Mr. Abramovich was very careful in his evidence to differentiate between what he could actually remember or “recollect”, and that which he had reconstructed from documents shown to him. Likewise I accept Ms. Goncharova and Mr. Shvidler’s evidence in relation to the 1995 payments. Ms. Goncharova’s oral account of struggling with a heavy holdall, laden with dollars, to the LogoVAZ club, was particularly convincing, as was her dating of this trip by reference to the move to the new offices. Nor do I find anything surprising about the fact that Mr. Abramovich consulted Ms. Goncharova, amongst other sources, about these payments, as he frankly admitted in cross-examination. Since she was the person in charge of handling the payments, it was the obvious thing for him to do.

As an example of this type of criticism, Mr. Rabinowitz, in his written closing submissions (Footnote: ¹⁶⁴), referred to Mr. Abramovich’s cross-examination about his evidence recalling a demand in Autumn 1995 by Mr. Berezovsky for $10 million, of which $4 million was paid by Runicom SA to LogoVAZ. Mr. Rabinowitz criticised Mr. Abramovich for claiming “a mixture of recollection and reconstruction” and for the fact that Mr. Abramovich was allegedly “unable to give an explanation” for the narrative on a Debit Advice from Runicom SA’s bank, United Overseas Bank, Geneva, to Runicom SA showing a payment of $4 million to LogoVAZ. The narrative read: “Payment under Settlement Agreement”. That criticism was not justified. The cross-examination was as follows:

“Q. This document does indeed show a payment from Runicom SA to LogoVAZ in September 1995 but it refers, Mr. Abramovich, to payment under a settlement agreement. Are you suggesting that Runicom SA was issuing false invoices that misrepresented what the payments were being made for?

And my question to you, if you’re suggesting that this was not a payment being made under a settlement agreement, is whether your suggestion is that Runicom SA were issuing false invoices that misrepresented what the payments were being made for?

A. Now, if I understand you correctly, this settlement agreement - or that name, it’s a very broad term, and I’m sure that that document was executed at that time because otherwise the bank, the paying bank, would not have accepted this payment and would not have made the payment. So there is nothing false about it.

Q. So is your evidence now that this payment was made as a result of some agreement called the settlement agreement between Runicom SA and LogoVAZ?

A. I can only speculate. It’s been a long time and it’s very hard for me to recall. But if it says what it is, then this is what it is. But I can comment why that money was needed.

Q. What I’m interested in is why it was paid, Mr. Abramovich, because if you say there was a settlement agreement and it was paid as a result of a settlement agreement, then I suggest to you that is not consistent with this being paid as krysha.

A. If I recall correctly, Mr. Berezovsky demanded that that payment be made and he needed this in order to pass it on to Mr. K[h]orzakhov (Footnote: ¹⁶⁵) later on. Part of it was paid in hard cash and part of it was in non-hard cash, i.e. bank transfer.”

Thus Mr. Abramovich not only gave an explanation of the narrative on the debit note, but also gave one which was wholly consistent with the payment being of a krysha nature. Indeed, vague, broad-brush wording, such as “Settlement Agreement”, is just the type of wording one might expect a payer to use to describe a payment destined to secure political influence, in circumstances where, on the one hand, as Mr. Abramovich described, the payer needed to convince the bank that the payment was legitimate so that it would effect payment, and, on the other, might wish to conceal from the bank the true nature of the payment. Whilst such description is one that might justifiably be open to criticism in a Western accounting context, as providing a false explanation, its use was understandable in the circumstances. Mr. Berezovsky speculated in his evidence that this payment might have been for motor cars purchased by Runicom SA from LogoVAZ, but that suggestion was rebutted by Mr. Abramovich’s evidence, which on this point I accept.

In his written closing submissions (Footnote: ¹⁶⁶), Mr. Rabinowitz also suggested that Ms. Goncharova’s evidence “had been exposed as untrue”; because, it was said, she had referred to an assistant of Mr. Berezovsky’s called Ivan; and because, Mr. Berezovsky, following this evidence:

“… had been able to locate the employment records for ‘Ivan’ - Ivan Surov - who worked at the LogoVAZ club.”

The assertion was made that:

“Mr. Surov was first employed on 4 December 1996, very much later than the time when Ms. Goncharova claims to have interacted with him there”

and accordingly “her recollection was false”. However the documents produced by Mr. Berezovsky did not in fact demonstrate that Mr. Surov was employed by Mr. Berezovsky (or entities associated with him) only as from December 1996. On the contrary, what the documents produced by him and other documents suggested was:

This evidence was not put to Ms. Goncharova and no application was made by Mr. Rabinowitz to have her recalled or to adduce further evidence relating to the date when Mr. Surov first started working as Mr. Berezovsky’s assistant. Nor do I accept the other criticisms made by Mr. Rabinowitz as to, for example, the late emergence of this evidence, the alleged inconsistencies in her evidence, and the absence of any cross-examination of Mr. Berezovsky’s witnesses in relation to Mr. Surov (Footnote: ¹⁶⁹). This was precisely the sort of detail which one might expect to emerge in cross-examination. I accept Ms. Goncharova’s evidence in this respect.

Accordingly, I conclude on the evidence that sums in the region of $20-30 million were indeed paid by Mr. Abramovich to Mr. Berezovsky, or to his order, in the year 1995. Whilst these payments could have been characterised as being consistent with Mr. Berezovsky’s case, on the grounds, for example, that they were effectively payments on account of an entitlement to 50% of future or anticipated profits to be earned by Mr. Abramovich’s Trading Companies as a result of the acquisition of control of Sibneft, that was not the way in which Mr. Berezovsky chose to address the issue. As I have said, he simply denied that payments had been made in 1995. In those circumstances, I conclude that the evidence in relation to the 1995 payments does indeed undermine Mr. Berezovsky’s case in relation to the alleged 1995 Agreement.

Mr. Rabinowitz submitted (Footnote: ¹⁷⁰) that the evidence suggested that the payments to Mr. Berezovsky and Mr. Patarkatsishvili were, consistently with the alleged 1995 Agreement, actually calculated as 50% of the profits generated from Mr. Abramovich’s influence and control of Sibneft, as a result of his alleged partnership with Mr. Berezovsky and Mr. Patarkatsishvili. He also submitted (Footnote: ¹⁷¹) that the quantum of such payments correlated with the profits made by Mr. Abramovich “as a result of his control of Sibneft”. In support of these contentions, Mr. Rabinowitz submitted as follows:

Contrary to Mr. Rabinowitz’s submission, I conclude that the evidence did not demonstrate that the payments made to Mr. Berezovsky and Mr. Patarkatsishvili were “actually calculated as 50% of the profits generated from Mr. Abramovich’s influence and control of Sibneft”. Nor did such evidence establish that there was in fact any correlation as between such payments and the profits made by Mr. Abramovich as a result of his control of Sibneft. Accordingly I do not accept that Mr. Berezovsky’s case in relation to the alleged 1995 Agreement finds support from the evidence relating to the payments. My reasons for this conclusion are set out below.

First, none of the payments which were made in the period 1995-1999 were referable to Sibneft profits, as shown in its annual audited group financial statements. Indeed this was accepted on behalf of Mr. Berezovsky. Mr. Rabinowitz referred to this point as “a red herring”. However it was one that was in issue between the parties, at least at some stage during the trial, and was a point prayed in aid by Mr. Abramovich. The fact that the payments were not referable to Sibneft’s profits was shown by the following:

Second, I reject Mr. Berezovsky’s allegation that the audited financial statements did not reflect the true profits of Sibneft on the grounds that it had improperly transferred profits to connected entities by way of artificial transfer pricing, whether in order to reduce its taxable profits or to transfer profit to certain shareholders, and that Sibneft’s profits should therefore be treated as including the profits of Mr. Abramovich’s Trading Companies. Mr. Berezovsky’s referred to this process as “tricked” (Footnote: ¹⁷³).

Mr. Rabinowitz sought to stress both during the course of the trial, and in his written closing submissions, that Mr. Berezovsky was not making any allegations about transfer pricing and sought to disavow any such allegation. But Mr. Berezovsky’s own evidence in response to questions put by Mr. Sumption in cross-examination clearly suggested that he was indeed alleging that the profits on sales of the oil were improperly not being taken in Sibneft, which he accepted was not profitable, but rather being captured abroad or in one of Mr. Abramovich’s Trading Companies. The following passages give a characteristic sample of Mr. Berezovsky’s evidence on this point:

“Q. Sibneft didn’t make a single penny of profits in 1996, did it?

A. Mr. Sumption, I explain you again and I agree again -- explain to you again: they use all company, all oil company, the same way. Company itself was not profitable but they make money trading oil abroad and selling for the other price. Nothing changed that time.

Q. You have no knowledge, do you, of what the trading terms were between Sibneft and those to whom it sold export oil? You have no personal knowledge of that at all, do you?

A. About how they deal -- how the -- what is technology of this deal?

Q. No. As I understand it, the last answer that you gave was talking about transfer pricing. Right?

A. It’s different terminology. Some use transfer pricing, some use different pricing, but I learned that only after. I didn’t know these words before.

Q. You still have not got the faintest idea, have you, of what the terms of trading were between Sibneft and those to whom it sold oil?

A. Mr. Sumption, I am sorry for this example. When I present my PhD, I try to explain it to my mum -- she doesn’t have this education like me -- because the sense of the problem I understand well, anyone in the world. I heard by TV that you have the greatest mind in England, I accept that; but believe me this is not your level, a little bit less, to understand what means to get profit from abroad when you sell in the country.

Q. Do you actually know anything about the terms of trade between Sibneft and those to whom it sold oil?

A. I don’t know anything about the terms I know how it was done.

Q. How do you know how it was done?

A. Because it was common knowledge. Every oil company, they have done the same, and Khodorkovsky is in jail because of that.

Q. You don’t know at all?

A. It’s common knowledge for everybody who knew a little bit. It’s known, it’s common knowledge.

Q. You say that other companies engaged in transfer pricing and therefore you assume that Sibneft did, but you don’t know at all, do you?

A. Mr. Sumption, I knew that at all. Excellent. I knew -- I don’t knew any details but I knew the construction. It’s very simple and you know that (Footnote: ¹⁷⁴).

…

Q. Now, you have just suggested, in the answer that you last gave, that the profits generated by Sibneft ended up with Runicom. That’s what I understood you to suggest.

A. ‘Ended up’? (Consults interpreter) Sibneft itself that time did not generate the profit. Sibneft that time generate oil and refinery of oil and sell it to Runicom and then Runicom generate the profit because Sibneft -- it was exactly what happened in Soviet Union when Sibneft was vertical-integrated company: one company produce oil, the second company refinery oil, the third company sell oil. The company which produce oil didn’t get anything because they just produce oil; that’s it. It’s expensive, it’s not a profit. The company that refine it, they also don’t produce the profit: they produce the product which is profitable. And then only on the last stage it was -- the company who sell all that, this company generate the profit. It’s happened at the beginning that all oil company tricked. What does mean ‘tricked’? They sell oil and product which produced refinery company with low price, then sell this -- produced price, then sell it to another Russian company and companies sold abroad and after that it generated profit. It’s what Abramovich has done and all other oil company have done (Footnote: ¹⁷⁵).”

It was for Mr. Berezovsky to adduce evidence to support this allegation of improper transfer pricing. He did not do so. His own conclusions based on disclosures in court proceedings about the affairs of Yukos, another oil company, and Mr. Khodorkovsky, were of no evidential weight.

He produced no evidence to show that Sibneft’s financial statements, audited by Arthur Andersen, in accordance with US GAAP, subject to any overriding requirements of Russian law, understated Sibneft’s profits by excluding profits earned as a result of transfer pricing transactions, whether with connected parties or third parties. Indeed Mr. Berezovsky did not appear to challenge them (Footnote: ¹⁷⁶). As Mr. Berezovsky acknowledged, Sibneft was one of the first major Russian companies to have its accounts audited in accordance with general accounting standards applicable in the West. Sibneft’s financial statements referred to “Related party transactions”, (i.e. transactions between the company and its directors, managers or shareholders, or companies in which its directors, managers or shareholders have material interests). The relevant connected parties in the case of Sibneft were Runicom SA or Runicom Ltd (Footnote: ¹⁷⁷), which were controlled by Mr. Abramovich. Sibneft sold export crude and products to Runicom SA/Runicom Ltd until 2000 when the oil trading operations were consolidated with the Sibneft group. The accounts in the relevant period dealt specifically with transactions between Sibneft and these companies, stating, for example, the percentage of total sales made to such companies and amounts receivable from such companies. In 1996 there was a specific statement to the effect that the sales were at market prices, although this statement did not appear in subsequent years. The auditors would have been obliged to have noted any inappropriate transfer pricing transactions that artificially or improperly reduced Sibneft’s profits, to the detriment of its shareholders who were not related parties. No such irregularities were reported.

The course of trading between Sibneft and Runicom SA/Runicom Ltd, which were appointed as Sibneft’s exclusive export agents from 1995, was also described in a Sibneft Eurobond offering circular of 1997 (Footnote: ¹⁷⁸). The accuracy of the information in the circular was verified by Salomon Brothers and Cleary Gottlieb. Mr. Patarkatsishvili, who was a director of Sibneft at the time, was among those who took responsibility for it. In summary, export crude oil was sold to Runicom SA or Runicom Ltd at world market prices less a commission of about 2% until March 1997 when the commission discounts ceased. Products were sold at world market prices throughout. Both companies, moreover, had other trading operations unconnected to Sibneft. Mr. Abramovich’s evidence was that, in addition to Sibneft, his Trading Companies obtained significant business from elsewhere, for example as exporters of Rosneft products. Mr. Abramovich’s evidence was that his Trading Companies did not engage in transfer pricing, and were not in a position to do so because the oil price was highly regulated (Footnote: ¹⁷⁹). Mr. Shvidler also dealt with the question of alleged “transfer pricing” in his third witness statement. The use of ZATOs and other internal tax zones and vehicles was described by Mr. Gorodilov (Footnote: ¹⁸⁰). He explained the use that Sibneft made of such entities and the distribution of the amounts earned by the tax efficient companies as between the Trading Companies controlled by Mr. Abramovich and Sibneft, in such a way as to ensure that Sibneft itself was in the same financial position as it would have been if the tax efficient companies had not been used.

Their evidence on these matters was not challenged in cross-examination. The only evidence that was referred to on Mr. Berezovsky’s behalf (Footnote: ¹⁸¹) which might possibly have supported an allegation of improper transfer pricing was the 2002 Audit Chamber’s Report (although this was referred to by Mr. Rabinowitz in the different context of the quantum of receipts of Mr. Abramovich’s Trading Companies), but Mr. Rabinowitz did not seek to rely on such report and, as I have said, expressly disavowed any allegation of improper transfer pricing. Certainly, if such an allegation had been pursued, I would have expected evidence, expert or otherwise, to show that the Sibneft audited financial statements had either mis-stated the position, or could not be relied on to reveal the fact that the “real” profits from Sibneft’s oil were being captured by trading counterparties. Accordingly, I do not accept the suggestion, to the extent that it was made by Mr. Berezovsky, that Sibneft’s funds or profits were improperly diverted or siphoned off to Mr. Abramovich’s Trading Companies or tax vehicles, and therefore that, for that reason, the profits of the Trading Companies should be treated as “Sibneft’s profits”.

Notwithstanding my conclusions in relation to the transfer pricing allegation, and notwithstanding the inadequacies of Mr. Berezovsky’s pleaded case, I approached the matter (in Mr. Berezovsky’s favour) on the basis that, if there had been a profit share agreement with Mr. Abramovich, it would have been wholly logical, from a commercial perspective, for Mr. Berezovsky to have insisted on having a profit entitlement to share not only in Sibneft profits, but also in a wider pool of profits generated by Mr. Abramovich’s Trading Companies. That was because:

I turn, therefore, to consider whether evidence relating to the quantum of the payments made to Mr. Berezovsky and Mr. Patarkatsishvili supports Mr. Berezovsky’s final version of the alleged 1995 Agreement (Footnote: ¹⁸²). Mr. Berezovsky’s argument depended upon him showing an actual correlation between what he and Mr. Patarkatsishvili were paid in each of the years 1995 – 2000 on the one hand, and, on the other hand, 50% of the profits generated by Mr. Abramovich’s Trading Companies that were attributable to trading with Sibneft, or Mr. Abramovich’s control of, or involvement with, Sibneft. As was pointed out in Mr. Berezovsky’s written closing submissions (Footnote: ¹⁸³), and accepted by Mr. Abramovich, there was a considerable amount of evidence to show that Mr. Abramovich’s Trading Companies generated very substantial profits as a result of their trading with, and/or Mr. Abramovich’s control of, or involvement with, Sibneft. The evidence also showed, as I have already said, that the payments to Mr. Berezovsky and/or Mr. Patarkatsishvili came from Mr. Abramovich’s Trading Companies.

But my third reason for rejecting Mr. Berezovsky’s argument under this head is that Mr. Berezovsky was unable to demonstrate, on the evidence, that numerically what he and/or Mr. Patarkatsishvili were paid bore any, or any real, correlation to 50% of the profits of Mr. Abramovich’s Trading Companies derived from their trading with Sibneft or as a result of Mr. Abramovich’s control of, or involvement with, Sibneft.

The allegation that there was such a correlation appeared to be based on three arguments put forward by Mr. Rabinowitz:

I am not persuaded by either of the first two arguments. As to the first, the fact that Mr. Berezovsky demanded more, as Mr. Abramovich and Mr. Abramovich’s Trading Companies became richer, and became in a position to pay more, was not indicative of an agreed entitlement to participate in 50% of such profits; nor was it any more consistent with Mr. Berezovsky’s case than with Mr. Abramovich’s case. As to the second argument, apart from the fact that Mr. Berezovsky did not accept that any payments were made to him at all in 1995, Mr. Abramovich’s evidence was not “that it was agreed that Mr. Berezovsky’s reward for performing his side of the bargain would be 50% of this profit”. Mr. Abramovich explained that it was Mr. Berezovsky who indicated that he would require approximately $30 million per year for ORT and his personal expenses, and that he subsequently inquired how much Mr. Abramovich could make a year in order to satisfy himself that Mr. Abramovich could afford to pay his fee. It was in that latter context that Mr. Abramovich indicated that he currently generated around $40 million per year and expected to be able to increase it to around $100 million per year. As Mr. Abramovich explained in his witness statement

“I am absolutely clear that he did not fix his fee by reference to 50% of my anticipated trading income or otherwise make any reference to sharing profits.”

Likewise in his oral evidence Mr. Abramovich made it clear that Mr. Berezovsky was not interested in how Mr. Abramovich’s Trading Companies would perform; he was only interested in whether Mr. Abramovich could pay $30 million:

“He was interested in the cashflows that I was able to provide. (Footnote: ¹⁸⁵)”

I accept this evidence. It was entirely consistent with Mr. Berezovsky’s lack of interest in detailed financial matters.

As to Mr. Rabinowitz’s third argument, I deal with the evidence relating to the figures shown in the Bolshoi Balance for the year 2000 below.

My fourth reason for rejecting Mr. Berezovsky’s allegation of correlation (which, indeed, applies more widely in relation to his case as to the alleged profit sharing terms of the alleged 1995 Agreement), is that his evidence was vague and uncertain as to which profits he claimed that he and Mr. Patarkatsishvili had a 50% entitlement. Even leaving to one side the absence of any pleading of this alleged express term, his case as to the relevant profit source was wholly unclear. Was it to be a share only in the increased profits of Mr. Abramovich’s Trading Companies, generated as a result of Mr. Abramovich acquiring influence and control of Sibneft (as paragraph 445 of Mr. Berezovsky’s closing, and its reference to $30 million as 50% of $60 million, would appear to suggest)? If that were so, there would, it is to be supposed, have had to have been a fairly complex annual calculation of what the Trading Companies were making prior to such acquisition (as they were already making profits and trading with Noyabrskneftegaz and Omsk Oil), followed by a calculation which stripped out those profits, as well as those generated by trading with non-Sibneft entities, from the quantification of Mr. Berezovsky’s and Mr. Patarkatsishvili’s 50% profit share. On that basis, there would also have had to have been a calculation of the profits earned by Sibneft itself. Or was the claimed share to include all profits of Mr. Abramovich’s Trading Companies, even those generated as a result of trading with non-Sibneft entities? And would a proportionate share of the losses incurred by Sibneft in 1995 and 1996 have fallen to be deducted from Mr. Berezovsky’s and Mr. Patarkatsishvili’s 50% share? Mr. Berezovsky’s evidence did not attempt to provide the answers to any of these questions.

Fifth, the evidence showed that no attempt was ever made at the time to relate the payments made to Mr. Berezovsky and Mr. Patarkatsishvili either to the profits of Sibneft, or to the profits made by Mr. Abramovich or his Trading Companies by virtue of their trading with, or his control of, Sibneft. Mr. Abramovich’s evidence, which I accept, was that Mr. Berezovsky was never interested in the activities of his Trading Companies or Sibneft, and that no one ever sought to audit, or verify the profits, for the purposes of distributing some defined share to Mr. Berezovsky or Mr. Patarkatsishvili. No information was ever provided to Mr. Berezovsky or Mr. Patarkatsishvili about Sibneft’s profits, although they did have access to the information publicly available in the company’s published financial statements. Nor was any information given to them about the profits of any of Mr. Abramovich’s Trading Companies. The following passages from Mr. Abramovich’s third witness statement explained the position:

“69.

Mr. Berezovsky was never interested in the activities of my Trading Companies or Sibneft. He was concerned only about my ability to pay and he just assumed that I would pay whatever he asked and that, if I had a cashflow problem, I would let Mr. Patarkatsishvili know there would be a slight delay in making payment.

…

131.

For the larger payments, it was generally Mr. Shvidler who, after discussing them with me, supervised the logistics, often communicating with Mr. Patarkatsishvili to make sure Mr. Berezovsky received them. Mr. Shvidler sought to protract and delay payments where possible, as well as source them from alternating Trading Companies in such a manner that they would not disrupt their cash flows and activities.

132.

Mr. Berezovsky’s demands were not tied to any notion of a ‘share of profits’ - be it of Sibneft or any other company. Mr. Berezovsky never asked me to provide to him any official profit and loss position for either Sibneft or any other company under my control.

133.

He only seemed to be interested in whether I had sufficient cash available to afford his demands for payment. I would sometime refer to limitations in cashflow in different companies as a reason to defer payment or negotiate a proposed amount. By the end of 2000, he and Mr. Patarkatsishvili seemed to have made their own back of the envelope calculations of what I was earning from my different businesses as a basis upon which to suggest that I had enough cash to pay their demands but again this was all about access to cash and not about profit.

134.

For example, when in 1998 the oil prices hit the all-time-low of about $8 per barrel, and I was losing money in the oil business, Mr. Berezovsky still expected me to pay his demands, and I had to do so.

135.

I never got involved in the details of payments and I do not remember the specifics of the 1997-1999 credit agreements alleged by Mr. Berezovsky but from the amounts and the currency, these could relate to the French property he asked me to purchase for him. I have some recollection that the idea for providing Mr. Berezovsky loans instead of cash payments might have originated from his desire to avoid French transaction taxes.”

Mr. Shvidler’s evidence supported that of Mr. Abramovich. I accept their evidence on this point.

Mr. Berezovsky said in his oral evidence that he did not know how much money was paid to him and Mr. Patarkatsishvili, and that the latter was responsible for checking Sibneft’s profits (Footnote: ¹⁸⁶):

“Q. Now, you say that these payments represented your share of Sibneft’s profits. How do you know that?

A. I don’t know that at all. Mr. Abramovich told me that he has obligations to hold my shares and to pay me according of profit which these shares generate finally.

Q. What steps --

A. I didn’t have any idea how much company generate and so. Again, mainly -- not mainly -- Badri was responsible to cooperate with Abramovich for checking how is everything going and time to time Badri put me that, ‘Boris, everything is going well’”.

But Mr. Berezovsky could not identify any steps taken by Mr. Patarkatsishvili to ascertain the figures (Footnote: ¹⁸⁷). The following gives an example of his evidence in this respect:

“MRS JUSTICE GLOSTER: My question for you is this: was there any formal or informal process whereby Badri or you, or staff on your behalf, would audit the profits that were being generated by Sibneft?

A. I don’t know anything about formal process. I just know about regular meetings Badri with Roman and maybe with Shvidler as well, as I understand, when they present him report what happened in the company.

And that is as money is concerned.

MR. SUMPTION: What steps did you understand that Mr. Patarkatsishvili had taken to ascertain what were the profits of Sibneft?

A. I don’t have any idea. I don’t have any idea. I think as we agreed in our agreement as we agreed in ’95, we trust Abramovich and we didn’t have time to manage the company and to send audit and so. It’s not -- already not trust at that time in our understanding.”

If indeed there had been an express agreement that Mr. Berezovsky and Mr. Patarkatsishvili were to be jointly entitled to a 50% share of the net profits after tax of Sibneft and/or Mr. Abramovich’s Trading Companies, one might have expected that at least some sort of informal audit process would have taken place. I find the absence of evidence of any such process (other than Mr. Berezovsky’s vague assertions about Mr. Patarkatsishvili) surprising, if, indeed, Mr. Berezovsky’s case were correct.

Sixth, the process by which the timing, the amounts and the method of the payments were agreed did not support Mr. Berezovsky’s theory that such payments related to, or correlated with, any specified proportion of profits made by Mr. Abramovich, whether directly from Sibneft and/or indirectly through Mr. Abramovich’s Trading Companies, as a result of his involvement with, or control of, Sibneft. The following summary of the evidence in this respect gives a clear flavour of what I find as a fact, was

“… a demand-led system created to satisfy Mr. Berezovsky’s financial whims … [which] had nothing to do with Sibneft profits (Footnote: ¹⁸⁸).”

At about the beginning of each year Mr. Abramovich would discuss with Mr. Patarkatsishvili how much Mr. Berezovsky could expect to receive in that year for his “expenses”. Mr. Abramovich described the process as follows (Footnote: ¹⁸⁹):

“The stronger Mr. Berezovsky became, the more money he required to maintain his position. Typically, around the beginning of each year, we would discuss with Mr. Patarkatsishvili the amount that Mr. Berezovsky expected to receive from me that year given his political expenses, such as the financing of ORT, maintenance of his political image, financing of various mass media, and also his ‘expenses’. In 1996, I recall that I paid him approximately US$80 million (this large amount was attributable to the elections held that year), though that year was difficult for me as considerable funds were spent on privatisation. Then in 1997, I paid around $50 million and around the same amount in 1998, despite the shortage of cash caused by the financial crisis. In 1999, I also paid about US$50 million.”

In cross-examination Mr. Abramovich supported this account:

“A. It’s almost always we had agreed in advance how much would be paid on an annual basis. Sometimes we were not able to pay the whole amount and then there was a spill-over for the next year.

…

A. What I mean is that we never had an arrangement whereby, for instance, we would let them -- all the $50 million -- let them have the 50 million together. The arrangement was that they issued requests and then in response to their requests we made the payments.”

Thereafter payments would be demanded and made in the course of a continuous process of ad hoc negotiation, as Mr. Shvidler and Ms. Goncharova described. Most of the requests were oral. Sometimes Mr. Berezovsky would telephone Mr. Abramovich directly; sometimes Mr. Patarkatsishvili would telephone him and make the request on Mr. Berezovsky’s behalf. Sometimes the request was for hard cash; sometimes it was for payment of particular bills or items of expenditure, whether for ORT, Mr. Berezovsky personally, or otherwise. Mr. Patarkatsishvili would call Ms. Goncharova on a daily basis with instructions for payment. Mr. Abramovich said that Mr. Berezovsky was only concerned about Mr. Abramovich’s ability to pay and just assumed that he would pay whatever he asked. Mr. Berezovsky described the process in his oral evidence, as follows:

“I never calculate numbers and my relations was absolutely simple: I made request directly to Abramovich or Shvidler or indirectly through Badri. If Abramovich was able to pay, calculating what is our interest, Badri and me together he paid that. If he was not able to do, he said ‘Boris, we don’t have money now to spend because we invest if to buy something or because company didn’t generate this money’ (Footnote: ¹⁹⁰).”

“I told Badri, ‘Badri, we need that and that, for reason of ORT or for reason of charity or personal reason to buy jewellery for Elena’, and Badri calculate with Roman what is opportunity to pay or not” (Footnote: ¹⁹¹). [emphasis supplied]

Dr. Nosova’s evidence also emphasised the ad hoc nature of the arrangements:

“My understanding is that the way Boris received this money was very ad hoc. There was no single arrangement by which he would always receive money. Rather, he would identify some personal asset which needed to be paid for and would inform Badri or Mr. Abramovich or his team what it was and who the money needed to be paid to, and they would arrange it. This could, for example, be for jewellery for Elena Gorbunova, for real estate or whatever (Footnote: ¹⁹²).”

Mr. Berezovsky acknowledged this was a partially correct description, but went on to suggest that it did not reflect the fact that Mr. Abramovich and Mr. Patarkatsishvili “calculate[d] the balance all the time”. The cross-examination went as follows:

“Q. That is a correct description, isn’t it, of how this worked?

A. This is partially correct description but it doesn’t mean --

Q. It’s not partially correct --

A. Sorry -- but it doesn’t mean that it’s incorrectly what I said before: that Badri and Roman calculate the balance all the time. This is the point, and this is a key point.” [emphasis supplied]

Mr. Rabinowitz submitted that the point that Mr. Berezovsky was making was that, if Mr. Berezovsky asked for money, Mr. Abramovich would only pay it if Mr. Berezovsky and Mr. Patarkatsishvili were indeed owed that sum “calculating what is our interest.” I do not accept Mr. Berezovsky’s assertion that calculations were made, whether at the time payments were demanded (or at other times), of what, at any given moment in time, Mr. Berezovsky and/or Mr. Patarkatsishvili were entitled to receive by way of their alleged 50% profit share of Sibneft profits, or of the profits of Mr. Abramovich’s Trading Companies. There was no evidence (apart from what Mr. Berezovsky said) that any such calculation process occurred. I accept Mr. Abramovich’s evidence, as described in his witness statement, that he had meetings with Mr. Patarkatsishvili for the purpose of discussing Mr. Berezovsky’s likely future financial requirements, not to calculate any profit share entitlement (Footnote: ¹⁹³). I also conclude that it may well have been, in the context of those discussions, that Mr. Abramovich and Mr. Patarkatsishvili discussed what Mr. Abramovich and his Trading Companies were able to pay, and that this may well have involved a discussion, in general terms, about what Sibneft and Mr. Abramovich’s companies were making, since what Mr. Abramovich could actually afford to pay would necessarily be dependent upon the cash flow of such companies. But I do not accept that, at any time, there were discussions calculating an agreed 50% profit share of the profits being made by Sibneft and/or Mr. Abramovich’s Trading Companies. I do not accept Mr. Rabinowitz’s submission that “… the Le Bourget transcript provides important direct contemporaneous evidence of exactly such discussions (Footnote: ¹⁹⁴)”. I address the transcript in greater detail below, but it provided no such confirmation.

Further evidence of the ad hoc nature of the process of requesting and making payments was found in the evidence relating to payments in connection with Mr. Berezovsky’s French properties in December 1996. Mr. Berezovsky had purchased Chateau de la Garoupe at Cap d’Antibes, France, for FF55 million through a French company controlled by him, Société d’Investissements France Immeubles Sari (“SIFI”). The purchase of the Chateau, and subsequently of the antique furniture in it, and its redecoration, had been funded by payments from Mr. Abramovich’s Trading Companies. These had been purportedly structured as loans, but it was common ground that there was no intention that such so-called loans should be repaid. Subsequently, in July 1997, an adjoining property, Clocher de la Garoupe, was also purchased by SIFI, for FF90 million, and was similarly funded. Mr. Jenni, Mr. Berezovsky’s Swiss lawyer, described the “… rather chaotic system which evolved …” as “… a result of the constant demand for additional monies” to meet Mr. Berezovsky’s expenses associated with his French properties. What happened was that Mr. Berezovsky’s property agent, M. Bordes, would demand some payment from Mr. Jenni or his associate, Mr. Stiefel, who would pass the demand on to Mr. Shvidler. If Mr. Shvidler resisted it, as he sometimes did, Mr. Berezovsky would ring Mr. Patarkatsishvili so that he could contact Mr. Abramovich and demand that it be paid.

Other evidence showed that payments from Mr. Abramovich’s Trading Companies, through an offshore corporate vehicle, also funded payment of Mr. Berezovsky’s and his family’s credit card expenditure between 1998 and 2000. Pavel Ivlev (“Mr. Ivlev”), a Russian lawyer, who worked in Moscow, dealt with Mr. Berezovsky’s Russian tax affairs from 1997 onwards and fled Russia in November 2004, described the process. Although he suggested in his written evidence that the payments came from Sibneft, he admitted in cross-examination that he had never made “… any due diligence or any analysis of the source of funds”. His concern was simply to ensure that the bills were paid (Footnote: ¹⁹⁵).

It was common ground that, at the Dorchester Hotel meeting in March 2000, Mr. Deripaska asked Mr. Berezovsky to repay a debt that the latter owed him and that Mr. Berezovsky turned round to Mr. Abramovich and asked him to pay off the debt. It was duly paid. Mr. Berezovsky claimed that the funds to pay came out of his profit share entitlement, which was disputed by Mr. Abramovich. What is instructive, however, for the issue presently under consideration, is the manner in which an ad hoc demand was made by Mr. Berezovsky, and complied with by Mr. Abramovich without, it would appear, any discussion as to what at that particular moment in time was either side’s profit share.

Seventh, I do not accept the submission made by Mr. Rabinowitz that the figures shown in the Bolshoi Balance for the payments made in 2000 to Mr. Berezovsky and Mr. Patarkatsishvili demonstrate a correlation between such payments and the financial performance of Sibneft and Mr. Abramovich’s Trading Companies, thereby supporting Mr. Berezovsky’s case that it was agreed that he and Mr. Patarkatsishvili should have a 50% profit share in the profits of Sibneft and those generated Mr. Abramovich’s Trading Companies, as a result of Mr. Abramovich’s involvement with, or acquisition of control of, Sibneft.

The FOM table of the Bolshoi Balance recorded the payments to Mr. Berezovsky or Mr. Patarkatsishvili in 2000. The Bolshoi Balance also included details of the payments received or made month by month by Mr. Abramovich’s companies from the whole of his investments, including but not limited to the oil and aluminium businesses. In his witness statement Mr. Shvidler explained that he was never asked by Mr. Abramovich, Mr. Berezovsky or Mr. Patarkatsishvili at any time to provide them with a summary of Sibneft profits or trading group profits belonging to Mr. Abramovich, for the purpose of calculating what Mr. Berezovsky should be paid. He described the function of the Bolshoi Balance in the following terms:

“131.

As I have already explained, one of my key roles was to monitor the cashflow position in Mr. Abramovich’s various businesses. I needed to know the state of our cash flow online. I recall that I asked Ms. Panchenko at the end of 1999, to have her team prepare for me a global cashflow balance and have it updated monthly. I wanted to be able to see at a glance the cash position of all the various projects. I remember explaining how I wanted the information presented. This cashflow information was known as the ‘Bolshoi Balance’ (literally the ‘big’ balance). I am aware that Ms. Panchenko regarded the presentation of the information in this way as ‘accounting heresy’ but it was a management and not an accounting tool. The Bolshoi Balance was not intended to provide information on profits and losses relating to specific projects but it did enable me to track cash effectively.

132.

I understand that in the course of reviewing computers for the purposes of disclosure in this action, the Bolshoi Balance for 2000 plus similar information produced in 2001 and 2002 were located. As the Bolshoi Balance also contains a complete record of the payments made to Mr. Berezovsky and Mr. Patarkatsishvili in 2000-2002, we have disclosed the entirety of the documents, even though much of the information is unrelated to Mr. Berezovsky. This was not a document prepared for him. We did, however, extract some of the information on this Bolshoi Balance into a separate table called the Fom table (short for ‘Fomichev’, a reference to Mr. Ruslan Fomichev) which summarised the payments made to Mr. Berezovsky and Mr. Patarkatsishvili. The Bolshoi Balance does not explain the sources of payments to Mr. Berezovsky and/or Mr. Patarkatsishvili but shows the availability of funds at a specific point in time within the companies relating to a given project.

…

146.

It can be seen from the Fom table that in 2000, Mr. Berezovsky and Mr. Patarkatsishvili were paid a total of $491 million. This was a vastly different level of payments to that made in previous years but the year 2000 was different in a number of key respects. In previous years, Mr. Berezovsky was paid around $50 million each year (although in 1996 it was around $80 million). In 2000, I recall that the intention was to pay Mr. Berezovsky around $50 million but, as matters developed through the year, this amount increased. To the best of my knowledge, Mr. Abramovich did not fix the annual amounts according to any partnership share or accounting process because I am certain that he would have been asked me to obtain the relevant figures. I was never asked by Mr. Abramovich or Mr. Berezovsky/Patarkatsishvili at any time to provide them with a summary of Sibneft profits or trading group profits or profit from any other ‘situation’, project or group of assets belonging to Mr. Abramovich for the purpose of calculating what Mr. Berezovsky should be paid. My understanding was that from 1995 to 1999 all agreements regarding payment totals were made by reference to what Mr. Berezovsky needed to maintain ORT and his own status.

147.

Things were different in 2000. At the beginning of 2000, Mr. Berezovsky was one of the most powerful men in Russia. His close friend Mr. Putin was the new President. By June/July 2000, however, I recall that Mr. Abramovich indicated that Mr. Berezovsky was going to need around $150 million for the year as I was asked to review whether we had available cash. I was not, however, asked by Mr. Abramovich or anyone else to ‘account’ for profits or provide any financial information for any other company or business owned or controlled by Mr. Abramovich in agreeing any increase in the figure.

148.

Around September/October 2000, things changed again with respect to Mr. Berezovsky’s position following his public reaction to the Kursk submarine tragedy and I discuss this further below.”

I accept Mr. Shvidler’s evidence as set out in these paragraphs.

Mr. Rabinowitz submitted (Footnote: ¹⁹⁶) that, in relation to the year 2000, there was clearly a correlation, between the amounts paid to Mr. Berezovsky and Mr. Patarkatsishvili, as shown in the Bolshoi Balance, and an amount of $900 million which (on Mr. Berezovsky’s reading of the transcript of the recording of the discussion at the meeting at Le Bourget) was the approximate amount which Mr. Patarkatsishvili said had been made from Sibneft that year. Mr. Rabinowitz submitted that, accordingly, on Mr. Berezovsky’s case, the amount paid to Mr. Berezovsky and Mr. Patarkatsishvili as a consequence should have been 50% of that – in the order of $450 million; and that the evidence demonstrated that they were paid a figure close to this sum. He relied upon:

I deal below with the submissions made in relation to the Le Bourget transcript, but I do not accept the submission made by Mr. Rabinowitz that the figures shown in the Bolshoi Balance for the payments made in 2000 to Mr. Berezovsky and Mr. Patarkatsishvili demonstrate the correlation for which he contends. First, wherever Mr. Patarkatsishvili obtained the $900 million figure from, it bore no relation either to Sibneft’s actual profits in 2000 ($675 million), or the net cash flow sums which the Bolshoi Balance records as having been received by Mr. Abramovich’s oil-related businesses including ZATOs in 2000 (Footnote: ¹⁹⁹). Indeed the commentary at paragraph 56 of the First Schedule to Mr. Berezovsky’s written closing submissions specifically made the point that the

“… [gross] receipts from oil trading companies and ZATOs in the year 2000 were just under $1.4536 billion. Payments to Mr. Berezovsky and Mr. Patarkatsishvili totalling approximated $490 million are less than half of that sum.”

Second, the FOM table in the Bolshoi Balance shows that the pattern of payments to Mr. Berezovsky and Mr. Patarkatsishvili was erratic, in the sense that their timing and quantum bore no relation to the timing and quantum of the sums received by Mr. Abramovich’s companies. Third, the figures in the Bolshoi Balance were cashflow figures, as Mr. Shvidler described. They were not sufficiently transparent to support Mr. Berezovsky’s contention.

Accordingly, I do not accept Mr. Rabinowitz’s submission that the payments made to Mr. Berezovsky and/or Mr. Patarkatsishvili were either actually calculated as 50%, or correlated to 50%, of Sibneft’s profits and/or those generated indirectly from Mr. Abramovich’s acquisition of influence and control of Sibneft, through his own Trading Companies.

My eighth reason for rejecting Mr. Rabinowitz’s arguments under this head is that I do not accept that the fact that payments were made to both Mr. Berezovsky and Mr. Patarkatsishvili was persuasive support for Mr. Berezovsky’s case. It was common ground on the evidence that it was Mr. Patarkatsishvili who controlled the payments and generally handled the “commercial side” of Mr. Berezovsky’s affairs. It was also common ground that both Mr. Patarkatsishvili and Mr. Berezovsky would make requests for payments and that payments were made to one or other or both of them (whether in cash or otherwise, and whether directly or indirectly to entities or persons associated with them) pursuant to Mr. Abramovich’s arrangements with Mr. Berezovsky.

However, on the evidence before the Court, a precise breakdown of the distribution of the payments as between Mr. Berezovsky and Mr. Patarkatsishvili was not possible. This was because payments were generally made to accounts designated on Mr. Berezovsky’s behalf, which were either those of nominee companies whose exact beneficial ownership was not apparent, or else those of third party payees who had provided goods or services to Mr. Berezovsky or Mr. Patarkatsishvili or to ORT. Even in 2000, when some payments were, possibly, allocated in the Bolshoi Balance to either Mr. Berezovsky or Mr. Patarkatsishvili (although even this was unclear on the evidence before me), it was possible that amounts were redistributed between the two of them after receipt.

In the circumstances, I am not persuaded by Mr. Berezovsky’s argument that the fact that payments were made to both Mr. Berezovsky and Mr. Patarkatsishvili is inconsistent with Mr. Abramovich’s krysha allegation and supports Mr. Berezovsky’s partnership allegation. Mr. Abramovich’s evidence explained Mr. Patarkatsishvili’s role and involvement, and Mr. Abramovich’s (limited) understanding of the association between him and Mr. Berezovsky. I accept Mr. Abramovich’s evidence that Mr. Patarkatsishvili clearly did provide krysha type services, not only in relation to RusAL but also in relation to Sibneft – for example “persuading” Mr. Ovodenko to withdraw Sameko’s bid in the loans-for-shares auction. If there had been any evidence of periodic, or indeed any, calculations as to what was due in respect of “the partners’” alleged 50% or calculation of what was each of their respective profit shares, the submission might have had more force. But the reality was that the manner in which monies required by Mr. Berezovsky were demanded, negotiated and paid had all the hallmarks of krysha type payments, and not payments of a specific profit share to either man.

The Le Bourget transcript

Unknown to both Mr. Berezovsky and Mr. Abramovich, Mr. Patarkatsishvili recorded the meeting attended by all three men at Le Bourget on 6 December 2000. In December 2009 Mr. Berezovsky purchased the audio recording from an intermediary, whose identity he was unwilling to disclose on grounds of concern for the physical safety of such person. Under the terms of Mr. Berezovsky’s agreement with the intermediary, the latter stands to make an enormous financial gain in the event that Mr. Berezovsky were to win this litigation; the deal gives the intermediary 5% of Mr. Berezovsky’s winnings. A transcript of the recording was first disclosed by Mr. Berezovsky on 3 December 2010; the audio recording was first provided on 5 January 2011. The original transcript, which was wrongly dated, contained errors of transcription and translation (which have since been corrected). The recording itself contains gaps and sound distortions. Mr. Rabinowitz criticised Mr. Abramovich for not admitting the authenticity of the recording or transcript, or even that the Le Bourget meeting had taken place, until his third statement served on 31 May 2011. I do not consider that, in the circumstances surrounding the production of the recording, such criticism was well-founded.

The meeting took place over ten years ago and, accordingly, actual recollections of the content of the meeting (and its date) were bound to be limited, as both Mr. Berezovsky and Mr. Abramovich acknowledged in their evidence. Indeed Mr. Berezovsky said that he did not remember the meeting at all before receiving the recording. I do not find it surprising that Mr. Abramovich (or his legal team) considered it necessary to subject the recording to forensic examination and consideration of its contents before accepting it as authentic, nor that it took them five months to do so.

Before I consider the respective submissions of the parties as to what the Le Bourget transcript shows, it is necessary to say something about the transcript itself and the factual context in which the meeting took place. A transcript of the recording, in translation, together with Mr. Berezovsky’s and Mr. Abramovich’s respective commentary on each statement made, was supplied to me (Footnote: ²⁰⁰). Necessarily both men’s commentary was ex post facto reconstruction – no doubt with the benefit of assistance from their respective lawyers. The transcript is difficult to follow. Much of it is rambling and obscure, and its meaning depends critically on the context. One cannot construe the discussion in the way that one might construe a series of e-mails or a commercial document. One suspects that many contemporary nuances of the conversation may well have been lost in translation.

Many of the exchanges are incomprehensible, unless one had an understanding of the previous discussions between Mr. Abramovich and Mr. Patarkatsishvili (or in some cases Mr. Ruslan Fomichev). Moreover, as he acknowledged in his cross-examination, Mr. Berezovsky’s understanding of the context of the discussion was very limited at the time, because he left the management of his financial affairs to others (i.e. Mr. Patarkatsishvili and Mr. Fomichev) and knew little or nothing about recent discussions between Mr. Abramovich and Mr. Patarkatsishvili. It was therefore difficult, as he acknowledged, for him to follow what Mr. Abramovich and Mr. Patarkatsishvili were talking about (Footnote: ²⁰¹). His assertions as to what particular passages in the transcript meant had therefore to be treated with particular caution. Mr. Abramovich’s comments were also, to a certain extent, reconstructional, as he accepted. I approached his commentary with similar caution, but he at least was directly involved in the financial discussions with Mr. Patarkatsishvili both before and during the meeting.

By the time of the Le Bourget meeting, Mr. Berezovsky was an exiled fugitive living in France; Mr. Patarkatsishvili in his turn was to become an exile in April 2001, when he left Russia and went to live in Georgia, although his relations with Mr. Putin in December 2000 were apparently still amicable. Mr. Abramovich explained that his relationship with Mr. Berezovsky changed after the Kursk tragedy of August 2000. Mr. Abramovich took the view that the former had taken an overtly hostile and one-sided stance in using the media which he controlled, to exploit a public tragedy of that sort to further his own political agenda against the government. Mr. Abramovich had made clear to Mr. Berezovsky what his views were. As he did not openly disagree with Mr. Berezovsky very often, this fact had adversely affected their relationship, and thereafter they almost stopped meeting in person and Mr. Abramovich increasingly dealt with Mr. Berezovsky through Mr. Patarkatsishvili.

The principal purpose of the meeting was to discuss the mechanics of how to structure the ORT share sale and the state of the mutual accounting as between Mr. Abramovich on the one hand and Mr. Berezovsky and Mr. Patarkatsishvili on the other. Both Mr. Berezovsky and Mr. Patarkatsishvili were concerned by this stage that the vast sums of money that were required to fund their lifestyles should be received by them out of Russia. They were concerned, for example, as to whether exchange control would be given to remit the proceeds of the sale of their ORT shares outside Russia. Previously, Mr. Berezovsky and Mr. Patarkatsishvili had received an income stream from two non-Russian sources. One was Andava SA, which from 1996 had taken on the role of a treasury vehicle for Aeroflot. As I have already described, Andava produced an income stream for Mr. Berezovsky which was derived from Aeroflot’s dealings with Andava in Switzerland. But, by 2000, that income stream had dried up, not least because of the allegations by the Russian public prosecutors that the Andava monies had been misappropriated by Mr. Berezovsky from Aeroflot, and the charges against Mr. Berezovsky which had led to his flight from Russia in October 2000. The other providers of funds to Mr. Berezovsky outside Russia were the Runicom companies, which had been used to pay most of the sums which Mr. Berezovsky had received from Mr. Abramovich, including in particular the sums he received for buying and doing up the properties on the Cote d’Azur.

But, as Mr. Abramovich explained at the Le Bourget meeting, the Russian government had announced certain changes to the Russian tax system, as a consequence of which, the oil businesses of his Trading Companies (through which he had previously made most of the payments to Mr. Berezovsky and Mr. Patarkatsishvili) were going to be consolidated into Sibneft; in future, therefore, Mr. Abramovich’s main source of income would be dividends declared by Sibneft. These could be paid only twice a year and would be subject to Russian tax, making it more difficult for him to pay Mr. Berezovsky and Mr. Patarkatsishvili. Payments would also be visible to the Russian authorities, a potential problem now that Mr. Berezovsky was a fugitive from Russia (Footnote: ²⁰²).

From the beginning of 2000, and well before Mr. Berezovsky left Russia in October 2000, he and Mr. Patarkatsishvili had been trying to transfer their assets into offshore structures in the West. As he accepted in his evidence, by December 2000 he and Mr. Patarkatsishvili were certainly aware of the money-laundering regulations in force in most Western jurisdictions, and the consequent need to obtain documentary explanation of the origins of any payment in order to satisfy money-laundering enquiries from transferee banks or asset managers. Indeed the evidence of Mr. Ivlev (one of Mr. Berezovsky’s witnesses) was to the effect that Western financial institutions were, at that time, more than usually sensitive in relation to the transfer of substantial monies from wealthy Russians, because of the scale on which such Russians were attempting to transfer monies out of Russia. They were particularly so in relation to Mr. Berezovsky. Mr. Ivlev said:

“I mean, at that time again these issues of suspicion on the side of the foreign banks towards money-laundering operations of Russians was really widespread, so every time we were facing extreme level of control from the banks. So they had to be really satisfied in order to proceed with the money originated or belonged to wealthy Russians. And, you know, Berezovsky was an extreme case. Everybody knew that he is a - he just became an enemy of the state, left the country. So it was in the air, it was in the media at that time.”

Thus, it was critical that any future payments made to Mr. Berezovsky and Mr. Patarkatsishvili (whether, as Mr. Berezovsky contended, in respect of their interest in Sibneft, or as Mr. Abramovich contended, by way of krysha payments), should be documented and capable of satisfying the stringent money-laundering enquiries that they knew they would be bound to face from recipient financial institutions.

So any analysis of what the Le Bourget transcript establishes has to be conducted against the fact that, at the time, Mr. Berezovsky and Mr. Patarkatsishvili would have been particularly concerned to ensure that the necessary documents were generated to “legalise” (which was the word they used) their receipts of payments from Mr. Abramovich’s companies. Indeed their concern was borne out by the fact that subsequently there were official or judicial enquiries into allegations of money-laundering by Mr. Berezovsky and/or Mr. Patarkatsishvili in Switzerland, The Netherlands, France and Brazil, in addition to Russia itself.

Mr. Rabinowitz submitted that the Le Bourget transcript was:

“… plainly a key if not the key piece of evidence before the court in relation to a number of issues”

including the alleged 1995 Agreement. He and his team conducted a microanalysis of the transcript and submitted that it provided very valuable assistance in assessing where the truth lay as regards the 1995 and 1996 Agreements and the ownership of Sibneft. He submitted that the transcript demonstrated:

A number of evidential points were relied upon by Mr. Rabinowitz. It is not necessary or feasible for me to deal with them all. In my judgment the transcript did not provide the support for his case which Mr. Berezovsky contended.

The beginning of the meeting was spent discussing the sums which Mr. Abramovich owed to Mr. Berezovsky and Mr. Patarkatsishvili. Mr. Abramovich came to the meeting with a spreadsheet (which no longer survives) which set out what had been paid, and what was still owing. In his third witness statement and in his commentary to the transcript, Mr. Abramovich gave evidence to the effect that there had previously been an agreement between Mr. Abramovich and Mr. Patarkatsishvili in September or October 2000 that Mr. Abramovich would pay Mr. Berezovsky a sum of $305 million. Mr. Abramovich’s evidence was that this agreement had been made in October, when Mr. Berezovsky’s position in Russia was becoming increasingly difficult and his finances were strained. Mr. Patarkatsishvili asked for a large payment to keep “for a rainy day” (Footnote: ²⁰³).

Mr. Rabinowitz attacked this evidence on the grounds that, in cross-examination, “extraordinarily” Mr. Abramovich had admitted that he had no actual recollection of any agreement to pay $305 million and that, in re-examination, he was asked for further details of the proposal and purported to provide them, despite the fact that he said he could not remember. I do not accept this criticism. First of all, it was clear from Mr. Abramovich’s evidence and his reference to reconstruction, that his memory had been jogged by what he had read in the Le Bourget transcript. Second, Mr. Abramovich’s evidence about the amount and the timing was borne out by the Bolshoi Balance, which shows a significance increase in the payments made to Mr. Berezovsky from October 2000. Although the transcript records Mr. Patarkatsishvili initially complaining that he and Mr. Berezovsky had at that stage received only $100 million out of the $305 million, subsequently the transcript shows that he accepted that in fact only $85 million was outstanding. Third, Mr. Rabinowitz’s reference (Footnote: ²⁰⁴) to Mr. Abramovich’s re-examination was an error; the passage quoted was dealing with a different matter.

Moreover, in cross-examination (Footnote: ²⁰⁵) Mr. Berezovsky accepted that, prior to the Le Bourget meeting, Mr. Abramovich and Mr. Patarkatsishvili had “definitely discussed” and agreed that Mr. Berezovsky and Mr. Patarkatsishvili were going to be paid the sum of $305 million, although Mr. Berezovsky did not accept that the reason for the breakdown of the figure into $275 million and $30 million was that $275 million was going to be funded from Mr. Abramovich’s oil trading operations and $30 million from his aluminium operations. He asserted that the two figures represented his and Mr. Patarkatsishvili’s profit share from the two businesses.

Thus Mr. Berezovsky contended that the references in the Le Bourget transcript to $30 million being described as coming from “aluminium” demonstrated that what was being discussed was his and Mr. Patarkatsishvili’s entitlement to $30 million of profits from their investment in RusAl and $275 million of profits from their investment in Sibneft, which supported his case. Mr. Abramovich was cross-examined to that effect. In support of this contention Mr. Rabinowitz submitted that, whilst it made perfect sense for Mr. Abramovich to have identified how much money was due from each of the oil and aluminium investments, if the other two men were indeed his partners, it was impossible to see why Mr. Abramovich should have identified the source of the money, if there was really just an agreement to make a krysha payment of $305 million.

I do not agree that the passages relating to this discussion in the Le Bourget transcript demonstrate that Mr. Abramovich was referring to, or recognising, any contractual entitlement of Mr. Berezovsky’s and Mr. Patarkatsishvili’s part to share in Sibneft’s or RusAl’s profits. The wording in the transcript, neither in itself, nor in context, is sufficiently clear to support such an interpretation. Moreover, I accept Mr. Abramovich’s evidence, as given in his commentary on the transcript and in cross examination (Footnote: ²⁰⁶), that, when he had agreed with Mr. Patarkatsishvili earlier in the year to pay $305 million, Mr. Abramovich had indicated that it would be difficult to find such a large sum and Mr. Patarkatsishvili had asked where the money was going to be coming from, as he wanted to satisfy himself that the money would indeed be paid. In the circumstances, such a question was not a surprising one (although Mr. Rabinowitz described it as a “ludicrous suggestion”), since the sum was far larger than any which Mr. Berezovsky and Mr. Patarkatsishvili had previously been paid. Mr. Abramovich’s evidence was that he mentioned the $275 million and $30 million as being respectively sourced from his oil trading businesses and his aluminium businesses, and that the spreadsheet which he had brought to the meeting recorded the internal breakdown as to the source from which the funds derived. I do not find it in the least surprising that Mr. Patarkatsishvili might have been interested in the cash flows of the oil and aluminium operations; in making his demands for krysha payments, he might well have been assisted in pitching the demand at the right level, if he knew what quantum of payment the businesses could service. As indicated above Mr. Rabinowitz could not demonstrate any correlation between the cash flow figures for the oil and aluminium operations as contained in the Bolshoi Balance and the $305 million as representing 50% of such profits for the year 2000.

Accordingly I reject Mr. Rabinowitz’s submission in this respect.

Mr. Rabinowitz submitted that the discussion in the Le Bourget transcript relating to the possibility of Mr. Berezovsky and Mr. Patarkatsishvili being registered as shareholders in Sibneft and receiving payment of dividends strongly supported Mr. Berezovsky’s case.

From Box 450 there was a section of the discussion which addressed a question raised by Mr. Patarkatsishvili about how he and Mr. Berezovsky should plan for the next year. As explained by Mr. Abramovich, the government had announced the withdrawal of certain tax reliefs from oil companies, which would result in additional tax liabilities for his companies. In consequence, the oil businesses of his Trading Companies (through which he had previously made most of the payments to Mr. Berezovsky and Mr. Patarkatsishvili) were going to be consolidated into Sibneft; in future, therefore, Mr. Abramovich’s main source of income would be dividends declared by Sibneft. These could be paid only twice a year and would be subject to Russian tax, making it more difficult for him to pay Mr. Berezovsky and Mr. Patarkatsishvili.

The passages upon which Mr. Rabinowitz relied in this context ran from Box 458 and following. The transcript records the discussion between Mr. Abramovich, Mr. Berezovsky and Mr. Patarkatsishvili as follows:

“Box 458: A. So, nevertheless, next year there’ll be only one way for us to get the money: legally, through paying taxes, dividends. We’ll be able do it twice a year. During the first six months, and then in the course of the second half of the year. And all shareholders who are also commercial directors, will receive it. Nnn... and all the other, minority shareholders. Absolutely everyone will receive it, based on the portfolio.

Box 459: P: (So shall we legalise our income then?)

Box 460: A. the idea is that we should legalise this process, that’s the idea. To say that this portfolio belongs to so-and-so, this one -- to so and so ... and if you trust me, I shall do it in such a way so as not to have few visible ... if you don’t trust [me], then you need to (get some valuations, some prices). There can be no official agreements between us. Well, first of all, it is forbidden. Secondly, there is no way not to break these agreements. In other words, the moment you decide you want to break them, you have the right to break them, and legally you ... all this is (nothing).

Box 461: P: I am trying to ... nnn.

Box 462: A. Well, then everyone will achieve the result for the sake of which all this was done, except for us. Because the shares ... nnn. (wanted to) make your participation that. nnn.

Box 463: B: Nnn ... (not like that now).

Box 464: A. Borya, what is not like now?

Box 465: B: Well, it wasn’t like that we (used to do it).

Box 466: A. Borya, yes, exactly like that. Well, now we shall once again be arguing over ... nnn.

Box 467: B: Nnn...

Box 468: P: We can suggest another, we can suggest another option ... nnn ... yes. Another option, whereby a bank would participate instead of us. “

Mr. Berezovsky’s case (Footnote: ²⁰⁷) was that in 2000 he wished to have his existing interest in Sibneft formalised. Mr. Berezovsky contended (Footnote: ²⁰⁸) that in the above passage Mr. Abramovich was talking about how the various portfolios of shares in Sibneft would have to be held in the future, and that Mr. Abramovich was saying that, if they trust him, he will front Mr. Berezovsky and Mr. Patarkatsishvili’s shares so as not to have them visible as shareholders in Sibneft; if they do not trust him and insist on becoming visible shareholders, Mr. Berezovsky and Mr. Patarkatsishvili would have to buy him out of Sibneft - since (as he explained later, in Box 496), if their shareholdings in Sibneft were to become visible, Sibneft would be destroyed. But Mr. Berezovsky’s case in relation to Sibneft was premised on the assertion that Mr. Abramovich had been “fronting” his and Mr. Patarkatsishvili’s interests since 1996; the suggestion that in this part of the conversation Mr. Abramovich was only now offering to front their shareholding for them in future (Footnote: ²⁰⁹), was inconsistent with such a case. It was put to Mr. Abramovich that Box 460 showed that he was unwilling to arrange for Messrs. Berezovsky and Patarkatsishvili formally to be shown as shareholders. But, as Mr. Abramovich explained in cross-examination, what he was saying was that only shareholders would be entitled to dividends, and that, because he was a shareholder, he would continue to make the krysha payments to them but only out of the dividends which he received. As he also pointed out in cross-examination, he referred to the fact that their krysha relationship was prohibited (Footnote: ²¹⁰). It was also worthy of note that nowhere in the transcript do either Mr. Berezovsky or Mr. Patarkatsishvili assert that they had previously agreed with Mr. Abramovich that he would transfer shares in Sibneft to them upon their request, as Mr. Berezovsky alleged had been agreed in 1996.

In relation to what was a partially inaudible Box 462, Mr. Abramovich’s evidence was that he was referring to a previous proposal made by Mr. Fomichev for legalising Mr. Berezovsky’s and Mr. Patarkatsishvili’s receipts from Mr. Abramovich, by transferring Sibneft shares to them, or to a bank acting as their nominee, so that they could have a documented right to receive dividends by way of cover for the payments that Mr. Abramovich was making to them; this proposal was unacceptable to Mr. Abramovich not only because it would have made them owners of a substantial proportion of Sibneft which, according to him, they had no right to be, but also that, by this date, he had no wish to increase Sibneft’s association with Mr. Berezovsky, by now a fugitive from Russian justice.

Mr. Rabinowitz submitted that Mr. Abramovich’s evidence about the alleged Fomichev proposal was incredible and

“… no more than an attempt to deny the clear evidence to be taken from the Le Bourget transcript: that Mr. Berezovsky and Mr. Patarkatsishvili were already entitled to 50% of Mr. Abramovich’s stake in Sibneft, and simply wanted to formalise that entitlement.” [Emphasis in original]

He subjected the evidence to a detailed critique as to the manner in which he alleged that Mr. Abramovich had changed his case in this respect. Mr. Berezovsky also apparently relied (Footnote: ²¹¹), in this context, on Mr. Fomichev’s evidence in what was referred to as the North Shore litigation (Footnote: ²¹²), to the effect that he understood Mr. Berezovsky and Mr. Patarkatsishvili to have an unregistered interest in Sibneft. That was, however, a different point, which I address below. At Le Bourget, Mr. Abramovich was addressing a proposal that Mr. Berezovsky and Mr. Patarkatsishvili should become registered shareholders of Sibneft. Mr. Berezovsky did not call Mr. Fomichev, not only because he said that he could not rely on him to tell the truth, but also because the judgment debt to Mr. Berezovsky’s company owed by Mr. Fomichev remained outstanding.

I reject Mr. Rabinowitz’s submission on this point and accept Mr. Abramovich’s evidence about Mr. Fomichev’s proposal and the subject matter of the discussion. But in any event, the passages relied upon in the transcript simply are not clear enough to support Mr. Berezovsky’s case that these passages demonstrate an acceptance or recognition on Mr. Abramovich’s part of an existing, albeit unregistered, 50% interest, or entitlement to such an interest, in Sibneft vested in Mr. Berezovsky and Mr. Patarkatsishvili.

There then follows from Box 468 onwards various discussions about Mr. Berezovsky and Mr. Patarkatsishvili becoming registered shareholders in Sibneft, whether through the nomineeship of a Western bank or otherwise. Mr. Abramovich was clearly reluctant for this to occur because of the adverse effect that any public association of the two men as registered shareholders of Sibneft would have on the company. Mr. Berezovsky contended that these passages were only consistent with him and Mr. Patarkatsishvili having existing interests in Sibneft. For example, he referred to Box 495, where he said “… but this does not mean my legalisation, and this is the heart of the problem”. He relied on this as demonstrating that he wanted his existing stake in Sibneft formally recognised. I am unable to accept this analysis of the transcript. In so far as anything is clear from what (at least in translation) appears to be a disjointed and incompletely recorded conversation, that is difficult to follow, Mr. Berezovsky and Mr. Patarkatsishvili’s concerns appear to be centred on the “legalisation” of their income stream; in other words their need to receive future funds from Mr. Abramovich legally in Western bank accounts with some plausible and innocent explanation of their origins. It is in that context that the men were discussing the possibility of Mr. Berezovsky and Mr. Patarkatsishvili becoming registered shareholders. Whilst the transcript shows that Mr. Berezovsky and Mr. Patarkatsishvili considered they had an entitlement to receive future payments from Mr. Abramovich and every expectation of doing so, the language used goes nowhere near to recognising some existing contractual or beneficial entitlement to a 50% shareholding interest in Sibneft.

Mr. Rabinowitz pointed to the various references to dividends in the discussions between Mr. Abramovich and Mr. Patarkatsishvili, particularly at Box 519 to 541 and then from Boxes of 587 to 592. He submitted that these discussions were only consistent with word “dividends” being used in the conventional sense and that Mr. Abramovich’s attempt in his commentary on the transcript to characterise Mr. Patarkatsishvili’s use of the word as a reference to krysha payments was “utterly implausible.” Mr. Rabinowitz submitted that the only analysis of the transcript in these passages was that this was a discussion between shareholders as to the dividends that “we” (i.e. the three men) would be entitled to receive, and would be receiving, from Sibneft.

But my reading of the transcript, coupled with the evidence from Mr. Berezovsky and Mr. Abramovich, leads me to no such conclusion. It was not surprising that Mr. Patarkatsishvili was interested in the likely quantum of Sibneft dividends, and in the manner in which they would be paid, given that Mr. Abramovich had previously explained that the only way of his (i.e. Mr. Abramovich) deriving revenue in 2001, and consequently paying Mr. Berezovsky and Mr. Patarkatsishvili their required income stream, would be out of dividends declared to him by Sibneft. Nor, on Mr. Abramovich’s case, would it have been at all surprising for Mr. Patarkatsishvili to have been keenly interested in how much Sibneft would be declaring by way of dividends, since not only would they have provided the means by which he and Mr. Berezovsky would be paid, but also, no doubt, would have determined how much Mr. Patarkatsishvili could demand and expect Mr. Abramovich to agree to pay. Indeed Mr. Abramovich said as much when accepting in cross-examination that, at least to some extent, the amount of Sibneft dividends would determine how much Mr. Berezovsky and Mr. Patarkatsishvili would receive in the year; he said (Footnote: ²¹³):

“… one could say that they can’t demand from me more than the company can make. To some extent, yes, you can make this conclusion …”

When reading the transcript one also has to remember that, at various stages, the parties go back to discussing what, at that stage, was only a proposal that the two men might become formally registered as shareholders, as well as other alternative mechanisms for paying monies to them. The fact that Mr. Patarkatsishvili refers, for example, at Box 540 to dividends in the following way:

“… how will it work out that we will be able to receive dividends? If we are not shareholders?”

is not surprising in the context of the preceding discussions. Although on one view his reference to “[how]we will be able to receive dividends?” could be read as a reference to a “beneficial” entitlement to dividends, I conclude that in context the language used is equivocal; it is just as likely that he was simply referring to how he and Mr. Berezovsky were going to get their regular krysha payments. Similar comments may be made about other passages relied upon by Mr. Rabinowitz. The whole tenor of the transcript is far too vague to bear the evidential weight which Mr. Rabinowitz seeks to place upon it, as supporting Mr. Berezovsky’s case.

Likewise, I was not persuaded that Mr. Patarkatsishvili’s (or indeed Mr. Abramovich’s) use of the pronoun “we” in various passages in the transcript went anywhere near demonstrating unequivocal, or indeed any real, support for Mr. Berezovsky’s case. Mr. Abramovich’s evidence was that Mr. Patarkatsishvili mixed up the singular and plural pronouns (Footnote: ²¹⁴), and that both Mr. Abramovich and Mr. Patarkatsishvili used the pronoun with different meanings (Footnote: ²¹⁵). Even if one can infer from the transcript some sort of proprietorial attitude displayed by Mr. Patarkatsishvili and Mr. Berezovsky to the oil operations, that is not inconsistent with Mr. Abramovich’s case. As Mr. Sumption submitted, it is in the nature of the concept of krysha, that both Mr. Berezovsky and Mr. Patarkatsishvili might have regarded Sibneft as “theirs” in the sense that the company could not have been created or prospered without the protection that they provided. As Mr. Sumption accepted, some of Mr. Patarkatsishvili’s statements in the transcript, certainly suggest not only a sense of entitlement on his part to participate in the profits being generated by Sibneft, but also a feeling that the more money Mr. Abramovich was making, the more he could be required to pay to Mr. Berezovsky and Mr. Patarkatsishvili. However, in my judgment, the transcript itself does not in any way reveal whether such apparent feeling of entitlement was based on a krysha type relationship, some other deal or arrangement between the three men, or a contractual entitlement to an ownership interest in shares in Sibneft and/or to a participation in its profits or those made by Mr. Abramovich’s Trading Companies as a result of Mr. Abramovich’s acquisition of control of Sibneft.

In the Le Bourget transcript various references were made by Mr. Abramovich to 44% of the Sibneft shares being held “in trust with the management”. Thus for example, at Boxes 468 to 470 there is the following passage, starting with a proposal by Mr. Patarkatsishvili that a bank should become a shareholder in Sibneft as Mr. Berezovsky’s and his nominee:

“Box 468: P: We can suggest another, we can suggest another option ... nnn ... yes. Another option, whereby a bank would participate instead of us. “

Box 469: B: To which we shall entrust management. Nnn ... (a small country)... (so that) a bank participated ... nnn ...

Box 470: A. now you are willing to say, that... nnn... I am saying that... nnn... holding... 44 holding, there are 40 percent, which I once talked about (myself), are under my control, but I don’t own it. And the other holding there, about 90 percent, it is in trust with management. Are you happy with such a set up? Then you can... nnn...

And at Box 540-541, the three men returned to the question how, if Mr. Berezovsky and Mr. Patarkatsishvili were not to become Sibneft shareholders, they might be able to receive money from Mr. Abramovich in the future, given the changes that the latter had explained earlier:

“Box 540: P: And how will it work out, if at the moment it’s ... how will it work out that we’ll be able to receive dividends? If we’re not shareholders?

Box 541: A. Why? We can take these dividends out assigning them to a company, and later we can disperse them very thinly. Pay taxes... nnn... management, 44 per cent is in a management-controlled trust. [The dividends] are taken out, taxes are paid, after that they [the dividends] are dispersed through different routes.

Mr. Rabinowitz submitted that these passages clearly showed that Mr. Abramovich was explaining to Mr. Berezovsky and Mr. Patarkatsishvili that their 44% interest in Sibneft (namely half of the total of 88% of the share capital of Sibneft, which Mr. Abramovich directly or indirectly held at the time), which they then owned under the terms of the alleged 1995 Agreement and the alleged 1996 Agreement, was held in a trust; and that the 44% described as being held in trust “in a management-controlled trust” was the half that was being held for Mr. Berezovsky and Mr. Patarkatsishvili. He submitted that when Mr. Abramovich, as recorded in Box 470, even went so far as to ask Mr. Berezovsky: “are you happy with such a setup?”, that could only make sense where the manner of how shares were held was relevant to Mr. Berezovsky, which could not have been true of a krysha relationship. Mr. Rabinowitz also submitted that Mr. Abramovich gave misleading evidence to the court, both in his commentary on the Le Bourget transcript and in his cross-examination, for the specific purpose of obscuring the real position relating to Mr. Berezovsky’s and Mr. Patarkatsishvili’s ownership of their 44% interest.

Mr. Abramovich was cross-examined at considerable length about this matter. Mr. Shvidler and Ms. Panchenko also gave extensive evidence about the trust structures which (at this time) held, directly or indirectly, effectively 88% of Sibneft, through intermediate holding companies. The position was confirmed by a statement made by Mr. Sumption on instructions, which was not challenged. There were two successive trusts: a Liechtenstein foundation operative between 1999 and 2001; and a Cyprus trust operative from 1 March 2001. The beneficiaries of the Liechtenstein foundation were Mr. Abramovich and, on his death, his children. The foundation had the power to add Mr. Abramovich’s relatives to the list of beneficiaries, provided that there was the consent of the protector, Mr. Shvidler. There was also power to alter the regulations governing the foundation to change the beneficiaries, provided Mr. Abramovich consented. The beneficiaries of the Cypriot trust were Mr. Abramovich, and, on his death, his children. The trustees had power to add anybody as a beneficiary provided the protector, Mr. Shvidler, consented. The trustees were Ms. Panchenko, Mr. Tenenbaum and a lawyer, Mr. Demetris Ioannides. The trust arrangements covered the whole of Mr. Abramovich’s Sibneft holding. I was not however provided with the relevant trust deeds.

It was clear from the evidence given by both Mr. Abramovich and Mr. Shvidler that in public statements at the time Mr. Abramovich was keen to disguise the fact that (according to him) he was the ultimate sole beneficial owner of 88% of the shares in Sibneft. In order to do so, Mr. Abramovich and Mr. Shvidler adopted a standard formula, namely that Mr. Abramovich controlled half of the 80% shareholding, and that the other half was controlled by “a management trust”. Both Mr. Abramovich and Mr. Shvidler said that, for security reasons, Mr. Abramovich never wanted to say publicly that he owned all the shares in Sibneft; so he always said that he controlled half, with half being controlled by “the management”. This misleading stance was also adopted in contemporaneous press interviews; see for example an interview with Mr. Shvidler published in Petroleum Intelligence is Weekly in November 2000, where he was quoted as saying

“First, I would like to say that Sibneft is a separate oil company not mixed up with the aluminium interests with our shareholders. As for the list of shareholders, Roman Abramovich controls about a 40% stake, a similar amount is controlled by the company’s top management, while the rest is in free float.”

I have no doubt that Mr. Abramovich’s security concerns were genuine. They were supported by the evidence of Mr. Anisimov, who explained in his evidence that, given the prevailing circumstances in Russia at the time, he too had concerns about publicly disclosing his control of his businesses.

The euphemism about half of the Sibneft stake being controlled by “management” was untrue in the sense that, in reality:

Whilst the fact that Mr. Abramovich and Mr. Shvidler were prepared to misrepresent the position to the Press has some adverse effect on their credibility, I do not, in the circumstances, regard the effect as so serious that I should disregard their evidence in relation to this issue.

It is against that background that I have to consider Mr. Rabinowitz’s submission that Mr. Abramovich’s comments in the transcript suggest or support the proposition that 44% of the Sibneft shares, or an interest in 44% of the Sibneft shares, were held, whether in a “management trust”, or otherwise, for the benefit of Mr. Berezovsky and Mr. Patarkatsishvili pursuant to the alleged 1995 and 1996 Agreements.

I do not read, in the manner suggested by Mr. Rabinowitz ,what, on any basis, are Delphic comments made by Mr. Abramovich at the meeting. Having heard the evidence, I do not accept that Mr. Abramovich’s comments as recorded in the transcript (or indeed his commentary), support the analysis that he was referring to a 44% entitlement being held on trust for Mr. Berezovsky and Mr. Patarkatsishvili, despite the fact that they are in some respects untrue or misleading as to the precise trust structures. Thus in my view both Boxes 468 and 541 were referring to Mr. Abramovich’s existing arrangements for ownership of Sibneft shares, and Box 541 was explaining the mechanisms by which payments could continue to be made to Mr. Berezovsky and Mr. Patarkatsishvili. Nor does Mr. Rabinowitz’s criticism of the evidence given by Mr. Abramovich in his commentary at Box 470 take the matter any further. Whilst the statement was not true, I do not accept that it was being made “to obscure the true position” that he was explaining to the other two men that “their 44% of Sibneft -the half of his holding in which he held for them under the 1995 Agreement and the 1996 Agreement-was held in trust.” There is no warrant for such a conclusion; Mr. Abramovich said that at the time he did not recall the details about the trust arrangements, even if he had once known them, and in any event he was perpetuating the myth about the “management trust”.

I do not find that a close analysis of the Le Bourget transcript supports Mr. Berezovsky’s case as to the alleged 1995 and 1996 Agreements relating to Sibneft. Even if I were to be wrong in this conclusion, such passages as Mr. Rabinowitz suggests do support Mr. Berezovsky’s case are so equivocal when placed in the full evidential context, that on any basis they would carry little weight in my final assessment of where the probabilities lie.

The belief of Mr. Berezovsky and others as to his entitlement to an interest in Sibneft; Mr. Berezovsky’s asserted belief; his public statements and private statements about his connection with Sibneft; materials showing the belief of Mr. Patarkatsishvili and others in relation to Mr. Berezovsky’s and Mr. Patarkatsishvili’s entitlement to an interest in Sibneft

In addition to relying upon the Le Bourget transcript, Mr. Berezovsky contended that his case was supported, and Mr. Abramovich’s shown to be untrue, by what Mr. Rabinowitz referred to as a substantial body of contemporaneous and near contemporaneous oral and documentary evidence showing that it was the belief of Mr. Berezovsky, Mr. Patarkatsishvili, Mr. Abramovich and a significant number of their friends, employees and associates that Mr. Berezovsky and Mr. Patarkatsishvili did indeed have a shareholding interest in Sibneft, and not merely an entitlement to indeterminate payments (Footnote: ²¹⁶). Mr. Rabinowitz pointed to various contemporaneous statements in the press and in books to the effect that Mr. Berezovsky was a substantial shareholder in Sibneft; he submitted that Mr. Berezovsky’s case on the alleged 1995 and 1996 agreements was also supported and corroborated in particular by statements made in the following documents: the Curtis notes; the proofs of Mr. Patarkatsishvili; evidence from other proceedings; the French Documents; the instructions to Valmet; evidence from the Sheikh; affidavits of Mr. Fomichev and Mr. Kay. He also referred to evidence given by various friends or associates of Mr. Berezovsky. I address the submissions in relation to these materials below.

Mr. Rabinowitz submitted that Mr. Berezovsky and Mr. Patarkatsishvili’s belief that they did have an interest in Sibneft was also a powerful indicator:

Relying on this, Mr. Rabinowitz submitted that:

Mr. Sumption, on the other hand, submitted that the available materials provided support for Mr. Abramovich’s case.

Mr. Rabinowitz also sought to rely (Footnote: ²¹⁸) upon what he referred to as a “concession” made in Mr. Abramovich’s written closing submissions (Footnote: ²¹⁹) that both Mr. Berezovsky and Mr. Patarkatsishvili “may have genuinely believed that they had an interest in Sibneft”. He submitted that once it was conceded that Mr. Berezovsky had an “honest recollection” of having an interest in Sibneft, that recollection was evidence which strongly supported Mr. Berezovsky’s case.

However that in my judgment is not a correct reading of the relevant paragraphs in Mr. Abramovich’s written closing submissions - namely both paragraphs 61 and 62. I quote them below (without footnotes), to demonstrate what the point was that was there being made:

“60.

It is fair to say about the Le Bourget transcript that parts of it suggest a sense of entitlement on the part of Mr. Berezovsky and Mr. Patarkatsishvili, which is also apparent from some of Mr. Berezovsky’s public and private statements. These statements raise the question whether Mr. Berezovsky really believed that he had an interest in Sibneft, and whether he could have believed that if it was not true.

61.

It is possible that Mr. Berezovsky may have persuaded himself that in some sense Sibneft was ‘his’ company. If so, the reasons became increasingly clear as he disclosed his mindset in the course of his evidence. There seem to have been two related factors at work in his mind:

(1)

By persuading President Yeltsin (through members of his circle) first to create Sibneft, and then to privatise part of the state’s holding in it and to include the rest in the loans-for-shares scheme, Mr. Berezovsky had made it possible for Mr. Abramovich to acquire management control in 1996 and almost all of the shares in the course of 1996 and 1997. It is plain that Mr. Berezovsky appears really to have believed that this was all that really mattered and that all that Mr. Abramovich later achieved was due to him. In keeping with his whole approach to this transaction, Mr. Berezovsky regarded Mr. Abramovich as a subordinate, a functionary, whom he had installed as ‘his’ manager, generously incentivising him by allowing him to take a proportion of the profits far in excess of the real value of his contribution to the outcome. It is clear that he had no knowledge or understanding of Mr. Abramovich’s achievement in integrating the two Siberian businesses into one organisation and transforming old-style Soviet state enterprises carrying a billion dollars of accumulated historic debt into a modern and highly profitable capitalist organisation. Mr. Berezovsky’s evidence is that he regarded this as straightforward, and that one had only to acquire control for the money to come pouring in. This presumably explains why he regarded shares which he had not bought or paid for as ‘his’, and payments for krysha which were plainly unrelated to Sibneft’s profits, as nothing less than his due if Mr. Abramovich could afford to make them.

(2)

Mr. Berezovsky’s apparent belief that he was part owner of Sibneft appears to have been reflected in his attitude to NFK, the vehicle company which was the successful bidder in the loans-for-shares auction. NFK acquired a pledge of the state’s 51% retained shareholding and effective management control over Sibneft, but it never owned any Sibneft shares. Mr. Berezovsky controlled (but did not own) Consolidated Bank, which in turn owned half of NFK: … Mr. Berezovsky may have believed that in some way this made him a part-owner of Sibneft. This belief was mistaken, and in cross-examination Mr. Berezovsky denied that he held it. But the evidence demonstrates that he may well have done:

(a)

As recently as June 2011, Mr. Berezovsky told the French investigating magistrate that he could demonstrate his 50% share in Sibneft because ‘I represented my interest with B[adri] P[atarkatsishvili] by so-called Consolidated Bank. It is clear evidence that I was formally shareholder of Sibneft.’

(b)

In his fourth witness statement, Mr. Berezovsky described his interest in Sibneft as arising from a ‘transfer’ of NFK’s rights in respect of Sibneft to FNK, the company that acquired the state’s 51% retained holding when it was sold in May 1997 on the state’s default on the loan. In fact there was no such transfer. But Mr. Berezovsky continued to assert that there was. His evidence in cross-examination was that he regarded his control over Consolidated Bank’s 50% stake in NFK as giving him and Mr. Patarkatsishvili a 50% holding in FNK. According to him, this was because by some mechanism which he was unable to explain, the 50% interest of Consolidated Bank in NFK had been transmuted into an interest of himself and Mr. Patarkatsishvili in FNK.

(c)

Mr. Berezovsky’s persistent inability to distinguish between Consolidated Bank’s interest in NFK and his and Mr. Patarkatsishvili’s personal interest in Sibneft is reflected in his rather muddled answer … in a newspaper interview in 2000. Asked what percentage he held of Sibneft stock, Mr. Berezovsky replied that he had once held about 7% through ‘some LogoVAZ structures.’ In fact, 7% was approximately the proportion that he had held in NFK at the time of the loans-for-shares auction.

(d)

In the same vein Mr. Jenni said that he understood that ‘NFK was the vehicle by which Sibneft - participation to Sibneft was held.’ Mr. Jenni managed Mr. Berezovsky’s affairs in Switzerland, but was not involved in the creation or acquisition of Sibneft. His information must have come directly or indirectly from Mr. Berezovsky or Mr. Patarkatsish-vili.

(e)

All of this is consistent with Mr. Berezovsky’s complete indifference at the time to the successive sales in which the state sold the privatised 49% of Sibneft and the pledged 51% in the course of 1996 and 1997. What it suggests is that Mr. Berezovsky felt that he was entitled to half of what Mr. Abramovich had, because he had enabled him to acquire practical control of Sibneft and its cash-flows, but not because he himself owned anything. This would be characteristic of a relationship founded on krysha.

(3)

Mr. Patarkatsishvili seems likely to have shared Mr. Berezovsky’s views on these matters. The interview notes and draft proofs of Mr. Berezovsky’s solicitors certainly show that he also regarded himself, at any rate by 2005, as having an interest in Sibneft jointly with Mr. Berezovsky. They also tend to suggest, although the point was never explored with him, (i) that he believed that this arose from the fact that Mr. Berezovsky was solely responsible for the acquisition of Sibneft (‘It is important to remember that BB made it happen. He was the one who persuaded Boris Yeltsin to transfer the various enterprises to Sibneft’); and (ii) that he thought that this had been achieved by way of his original participation in the loans-for-shares auction.

62.

There is a world of difference between (i) a feeling on the part of Mr. Berezovsky and Mr. Patarkatsishvili that Mr. Abramovich only owned Sibneft because of them, and (ii) a legal right to treat Mr. Abramovich as owning Sibneft in a representative capacity. The distance between an inchoate sense of entitlement and a legal right is immense. Of course, the difference hardly mattered while Mr. Berezovsky remained a power to be reckoned with in Russia. It only mattered once (i) Mr. Berezovsky started trying to move his assets out of Russia and found himself having to satisfy Western money-laundering regulations, and (ii) he very shortly afterwards lost his political influence and his ability to provide krysha. Suddenly, the ownership of assets became important to him in a way that it had never been in the prime of his power. Mr. Patarkatsishvili said nothing about the auctions at which the shares in Sibneft were actually acquired.”

But, as was pointed out in Mr. Sumption’s closing submissions (Footnote: ²²⁰), and in Mr. Abramovich’s Errata Schedule (Footnote: ²²¹), and as I find, the acceptance on Mr. Abramovich’s part was not a concession as to “… the honesty of Mr. Berezovsky’s recollection …” as to the alleged 1995 and 1996 Agreements as to whether he and Mr. Patarkatsishvili had any interest in Sibneft under such agreements. Rather, the point being made in Mr. Abramovich’s written closing submissions was that it was accepted that they believed they had some sort of entitlement as a result of their efforts to help create Sibneft and the involvement of NFK in the loans-for-shares auction. But that was not a concession on Mr. Abramovich’s part that Mr. Berezovsky and Mr. Patarkatsishvili honestly believed that their relationship was one of contractual partnership, rather than krysha. On the contrary, the point being made was that it was precisely because of the krysha relationship that Mr. Berezovsky might have persuaded himself that he had an inchoate entitlement to Sibneft, as distinct from any legal right.

I agree with the analysis made in paragraphs 61 and 62 of Mr. Abramovich’s written closing submissions, as amplified in Mr. Sumption’s oral submissions, save possibly in one respect. I do not consider that Mr. Berezovsky genuinely believed that, because of his indirect control of a 50% shareholding in NFK, he was in some way entitled to be an owner of 50% of the share capital of Sibneft. I do not think that Mr. Berezovsky held any such belief. In Mr. Berezovsky’s second Particulars of Claim, it was originally pleaded that the “ownership interest” in Sibneft was “acquired” by NFK (Footnote: ²²²). It was further pleaded that “[i]nitially” before 1996 Mr. Berezovsky and Mr. Patarkatsishvili “… legally owned or controlled companies which controlled and legally owned their proportions of Sibneft shares” (Footnote: ²²³). That allegation was subsequently deleted by amendment. In cross-examination Mr. Berezovsky denied that he held such a belief (Footnote: ²²⁴). My conclusion on the evidence in relation to this point is:

In a fact-heavy case, it is vital to be able to discern the pattern in the carpet. The pattern in this case (as was manifestly clear from Mr. Berezovsky’s own evidence) was that Mr. Berezovsky regarded Mr. Abramovich’s successes in relation to Sibneft as achieved directly as a result of Mr. Berezovsky’s (and Mr. Patarkatsishvili’s) own political and other efforts in ensuring the privatisation of Sibneft. Mr. Berezovsky also regarded Mr. Abramovich as a subordinate, whom he had made, put in place and, as Mr. Sumption put it, “owned”. I have no doubt that Mr. Berezovsky, and probably also Mr. Patarkatsishvili, considered that, as a result, they were entitled to a substantial piece of the Sibneft action (Footnote: ²²⁵), and on a continuing basis. But in my judgment that “inchoate sense of entitlement” was entirely different from a genuine belief in an actual legal entitlement under a contractual, albeit oral, agreement; it was also entirely different from an honest recollection of what occurred at the date of the alleged 1995 and 1996 Agreements. But, as was submitted on behalf of Mr. Abramovich, an “inchoate sense of entitlement” was entirely consistent with an arrangement between the three men based on protection or krysha.

I turn now to consider some of the documentary materials upon which Mr. Berezovsky and Mr. Abramovich respectively relied in this context.

The formal position, so far as directorships were concerned, was that Mr. Berezovsky had been elected to Sibneft’s Board of Directors on 26 September 1996. He resigned in December 1996, having become the Deputy Secretary of the Russian Security Council on 29 October 1996 (a body of which he remained a member until November 1997). Mr. Abramovich’s evidence was that he supported Mr. Berezovsky’s appointment as a director of Sibneft, because it continued the public association between Mr. Berezovsky and Sibneft, which was valuable to Mr. Abramovich. Mr. Berezovsky on the other hand, suggested that Mr. Abramovich had said that such appointment would give the impression that Mr. Berezovsky had no shareholding interest in Sibneft. I consider this to have been an unlikely reason. Mr. Abramovich was appointed to the Board of Directors of Sibneft in September 1996, and remained a director until December 1999. Mr. Shvidler became the CFO and Vice President of Sibneft in 1996. In June 1997, Mr. Patarkatsishvili joined the Sibneft board. He remained a director until mid 1999.

Mr. Berezovsky never publicly claimed to have had any substantial interest in Sibneft until June 2001. From an early stage, however, it was widely assumed in the media that Mr. Berezovsky was a substantial shareholder in Sibneft. There were regular statements in the press and in books to that effect, which are now relied upon by Mr. Berezovsky as evidence supporting his case. However, whilst he was still living in Russia, when questions were asked of him in press interviews on the assumed basis that he was a shareholder, he neither confirmed nor denied the assumption, but simply did not engage with it. Mr. Abramovich’s evidence was that, at the time, he had no problem whatsoever with the public assumption that Mr. Berezovsky was a shareholder, because, within Russia, Mr. Abramovich was anxious that he should indeed be publicly associated with a protector as influential as Mr. Berezovsky. As Mr. Abramovich said in his oral evidence :

“Now, so far as Berezovsky is concerned and the mention of Berezovsky, the market has always believed that Sibneft belongs to Mr. Berezovsky and we have never tried to fight against those rumours inside Russia. The concept of krysha presupposed that it looked like the whole thing belonged to Berezovsky one way or another, in different shapes or forms That was the whole point of this arrangement. He was the ice-breaker who removed all problems, resolved all problems, and that’s what he was being paid for.”

However, I was referred to a number of Press and other public statements where the journalist speculated that Mr. Berezovsky was a shareholder in Sibneft. In my judgment, they cannot be regarded as evidentially reliable for the purposes of this trial. As the evidence showed, holdings in Russian companies were frequently opaque, as a result of the interposition of complex networks of holding companies whose ownership was unclear other than to the ultimate beneficial owners and their lawyers. There was nothing to suggest that the press statements were anything more than speculation and gossip by journalists and others with no means of actual knowledge.

Importantly, as and when formal statements were required as to whether he had an interest in Sibneft, Mr. Berezovsky himself expressly denied to the media that he had such an interest. For example:

However, the most significant piece of evidence in this context was not press reportage, but a statement included in an offering circular (“the Offering Circular”) issued by Salomon Brothers AG on 14 August 1997. The circular related to a proposed Eurobond issue of $150 million Floating Loan Participation Certificates and Loan Sub-Participations for the purpose of financing a loan to Sibneft. The Eurobond issue was traded on the New York Stock Exchange and was marketed in the West. It therefore had to satisfy standards of due diligence prevailing in Western capital markets. The Offering Circular set out a list of the registered shareholdings in Sibneft, immediately followed by the following statement (Footnote: ²²⁶):

“FNK, SINS, Refine Oil and RUNICOM Ltd are all privately held companies and have close connections with the current management of Sibneft. As such, more than 97% of the Company [Sibneft] is currently controlled by the Company’s managers and a small group of private Russian investors. An influential Russian figure, Boris Berezovsky, who is currently the Deputy Secretary of the Security Council of the Russian Federation, served on Sibneft’s Board of Directors until October 1996 and was chairman of NFK when it won the right to manage 51% of Sibneft’s shares in the loan-for-shares programme. Mr. Berezovsky does not own or control, or have any other interest in, any shares in Sibneft, directly or indirectly. He does, however, maintain a close relationship with certain members of the senior management and the Board of Directors of the Company.” [Emphasis supplied.]

The evidence demonstrated that the American lawyers, Cleary, Gottlieb, Steen & Hamilton, as well as Salomon Brothers, had performed due diligence on matters such as share ownership prior to the issue of the Offering Circular (Footnote: ²²⁷). Moreover, at the time the statement was made, Mr. Patarkatsishvili and Mr. Smolensky (of SBS) were both directors of Sibneft (Footnote: ²²⁸), and were accordingly among those who assumed responsibility for the Offering Circular.

The evidence about the extent to which Mr. Berezovsky was consulted about this statement was disputed. I summarise it as follows:

Dr. Nosova had been sitting in court when Mr. Berezovsky gave his evidence. When she came to be cross-examined about the relevant passage in her witness statement, she attempted to put a gloss on what she had said in her witness statement in a number of inconsistent and confusing ways. At one stage she appeared to suggest that what she was referring to in her statement as “technically correct”, was another draft of the statement, which only related to legal interests in the shares; at another stage she seemed to be suggesting that what had been agreed with Mr. Abramovich and Mr. Shvidler, who were instructing the lawyers and the investment advisers on this circular, was that a statement which only referred to the legal interests in the shares would go into the circular, but this they had failed to do; at a yet further stage, she said that what had been agreed was that they would explain the real position to the lawyers and the investment advisers and get their advice as to whether or not it was possible to include a statement that covered only legal interests in the shares. What was clear however (from its reference number) was that the document which she had referred to in her witness statement was indeed the final version of the statement as it appeared in the circular, which was produced from Mr. Berezovsky’s own disclosure. I found Dr. Nosova’s evidence on this point unclear and unsatisfactory.

In his principal (third) witness statement, Mr. Abramovich referred to the statement in the Offering Circular as follows:

“Although some of my colleagues had reservations about Mr. Berezovsky, at this early stage I considered my association with him to be an asset. For example, the offering circular for Sibneft’s $150 million Floating Rate Loan Participation Certificates in August 1997 stated that although Mr. Berezovsky did not have an ownership interest in Sibneft, ‘He does, however, maintain a close relationship with certain members of the senior management and the Board of Directors of the Company.’ This reflected my desire to keep my association with Mr. Berezovsky public at that time.”

In his fourth witness statement, Mr. Abramovich said:

“54.

Contrary to what Ms. Nosova suggests (Nosova 2, paragraph 195-96), I did not discuss with Messrs Berezovsky and Patarkatsishvili the prospectus for the issue of Eurobonds prior to its publication. I also did not clear with Mr. Berezovsky the statement in that document confirming that Mr. Berezovsky did not have any interest in the company. This statement was not a deliberate act to distance Mr. Berezovsky from Sibneft. It was rather a true statement designed to clarify any false perception in the minds of potential investors that Mr. Berezovsky had any ownership or control over Sibneft. The statement was unrelated to any alleged 1996 Agreement. It may be that Mr. Berezovsky read the relevant part of the prospectus and agreed with its contents but, if so, he and I did not discuss it. I would have had no reason to discuss with him a statement which we both knew was true - Mr. Berezovsky was not a Sibneft shareholder and he did not exercise any control over Sibneft. I do not know if anyone in the Salomon team responsible for the drafting of the prospectus discussed it with Mr. Berezovsky.”

Mr. Abramovich was not cross-examined about whether any discussion had, or had not, taken place with Mr. Berezovsky about the wording in the circular. In the wholly different context of cross-examination about his education he said that, although he did not remember, it was most likely that he had indeed read the Offering Circular, before it went out, although he had had difficulties with it, as it had been in English. Mr. Rabinowitz submitted that this meant “he could not, therefore, have discussed the precise wording with Mr. Berezovsky (and did not claim that he had done so).” If indeed it was Mr. Berezovsky’s case that (irrespective of any specific discussion about the precise wording of the statement), he and Mr. Abramovich had agreed that a misleading statement was to go in the Offering Circular concealing the true facts about Mr. Berezovsky’s direct or indirect interests in, or entitlement to, Sibneft shares, because of Mr. Abramovich’s, or potential investors’, concerns about public association with Mr. Berezovsky, Mr. Abramovich should have been cross-examined directly on the point.

In his witness statement in relation to the offering circular Mr. Shvidler said as follows:

“I would have been very surprised if there were any discussions about Mr. Berezovsky owning interests in Sibneft around the time of the auction in 1997 because I was involved with the making of public statements at that time which said the opposite. … Apart from the fact that Salomon Brothers and the lawyers, Cleary Gottlieb, had to satisfy themselves of this issue, Mr. Patarkatsishvili was a director of Sibneft at that time, as was Mr. Smolensky. It is difficult to see how either of them could have allowed that statement to go out if they also had not believed it to be true. I also do not believe that Mr. Abramovich would have allowed that statement to be included if he knew it was not true. There had been press comment to the contrary by that stage and this was an important statement in the context of the offering.”

The reason why it was necessary to make a statement about Mr. Berezovsky in the Offering Circular was described by Mr. Tenenbaum. At the time, he was a director of Salomon Brothers, in London, and was part of the team working on the bid, although he himself was not directly involved in the due diligence exercise into share ownership. Subsequently he joined Sibneft in 1998 and thereafter became a close business associate and colleague of Mr. Abramovich. In his written evidence he gave the following explanation as to why Salomon Brothers and Cleary Gottlieb perceived it necessary for there to have been a specific statement about Mr. Berezovsky’s position:

“10.

The reason why this particular statement was contained in the Offering Circular was, as I recall, because Mr. Berezovsky’s association with Sibneft was one of the issues raised by investors. In particular, I recall being made aware of the reluctance of many in the market to be associated with any company which Mr. Berezovsky owned or part owned. I understood that the negative reaction of some investors to any sign of Mr. Berezovsky’s ownership was due to his well-known association with criminal elements and what investors described to me as his ‘Godfather’ like figure (with all the mafia related connotations of that term, including treating people and businesses as personal property). Indeed, by that time, there had been consistent media reports concerning Mr. Berezovsky’s alleged ordering of contract killings of various well-known Russian politicians and journalists. The most well-known of these was the 1996 Forbes article accusing Mr. Berezovsky of masterminding the March 1995 murder of Vladislav Listiev, a Russian journalist who at the time served as the General Director of OAO Obshestvennoye Rossiyskoe Televidenie (“ORT”). Investors are inherently conservative and, in my experience, generally react negatively if a company is too strongly associated with figures who have anything other than a business focus. In the case of Mr. Berezovsky, there was not only his reported connections with organised crime and the Chechen rebels, but also his strong political agenda, all of which gave rise to the perceived risk that he was not interested in the long term strategic vision of Sibneft. Rather, he was seen as someone who might potentially loot any company with which he was associated to satisfy his own personal agenda, as was suggested by the same 1996 Forbes article. Unsurprisingly, investors usually prefer business people who are clearly focused on introducing cost efficiencies and building a serious and profitable company. In fact, this is exactly why Mr. Abramovich’s ultimate ownership of the company was by 1999 generally perceived as an attractive factor by the investment community, as by that time Mr. Abramovich had already become known as a strategically minded and principled businessman, which tremendously enhanced investors’ confidence in the company.

11.

Given the concerns of some investors, therefore, it was necessary for the Offering Circular to make a specific disclosure reference to Mr. Berezovsky and make it clear that, although he did maintain a relationship with Sibneft’s owners and managers (as had been already reported in the media), that relationship was not based on any actual ownership in the company. This was done to assure investors that Mr. Berezovsky had no right to influence the company’s affairs. On the other hand, the realities of Russian oil business at the time necessitated an association with people like Mr. Berezovsky because of the need for a strong ‘krysha’ (‘krysha’, meaning literally ‘roof’ in Russian, in this context means political support and physical protection). Investors would have been aware that the fortunes of an oil company are entirely reliant on its ability to replenish its reserves, which is achieved both through obtaining new licenses from the government (usually at auction) and by buying existing oil concerns (which, at the time, were almost all government owned). Political support is therefore essential to an oil company and, at that time, Mr. Berezovsky was a prominent political figure. The oil business had also been (and still was at that time) plagued by violence and organised crime connections. The fact that there was someone like Mr. Berezovsky associated with the owners also gave at least some investors a positive signal that to some extent, and at least temporarily, the company had some protection against a certain kind of interference. At Salomon Brothers, we had dealt with the Russian oil business on prior occasions and, as such, were well versed in these realities.”

On the basis of this and other relevant evidence, I conclude that, despite his denial, the probability is that Mr. Berezovsky and Dr. Nosova, or at least someone in Mr. Berezovsky’s team, probably did see the statement in the Offering Circular before it was published, but did not discuss its wording with Mr. Abramovich. Although there was no direct evidence on the point, the strong inference must be that someone from the due diligence team at Salomon Brothers and Cleary Gottlieb, or from Sibneft’s own English lawyers, Frere Cholmeley Bischoff, would have confirmed the statement with him, with Mr. Patarkatsishvili, and/or with someone in Mr. Berezovsky’s office, before its inclusion. This was clearly a material statement in the context of this offering, for which the company and its directors would have taken responsibility, and one in respect of which a high degree of due diligence was, in the circumstances, necessary, given the structure of the registered shareholdings and the adverse, and in certain cases, defamatory, press reports about Mr. Berezovsky, such as the 1996 Forbes article which were in the public domain at the time.

If Mr. Berezovsky did not see the statement in the Circular, or a draft, at the time, then it is difficult to see how his statement to Ms. Duncan and the evidence of Dr. Nosova could have been anything other than wholly fabricated. But on either basis, I do not accept Mr. Berezovsky’s evidence that he and Mr. Abramovich agreed that a false statement should be included in the Offering Circular to conceal the true nature of his interest in Sibneft, whether because of investors’ concerns or for some other reason. I find that he and Dr. Nosova appreciated that the statement in the Offering Circular (whether or not he saw it) presented real difficulties in the way of his case and that it was accordingly necessary for a story to be concocted that laid the blame for the inclusion of such statement in the Offering Circular on Mr. Abramovich.

In 1998, Mr. Berezovsky brought a libel action in the English High Court, Queen’s Bench Division, 1997 B No. 240, against Forbes Inc in respect of the 1996 Forbes magazine article referred to above. The defendants made an application to strike out the claim on the grounds that Mr. Berezovsky had no sufficient reputation in England to protect. In opposition to the application, Mr. Berezovsky relied upon an affidavit from Mr. Shvidler dated 11 September 1998, which he had asked Mr. Shvidler to supply. The affidavit was drafted by solicitors at Carter Ruck, the firm acting for Mr. Berezovsky’s in the libel action. The affidavit expressly referred to the 1997 Offering Circular and exhibited it. Mr. Shvidler said as follows:

“1.

I am Vice President of Sibneft, which is one of the largest oil companies in Russia; in 1996 the company produced approximately 6.2% of the Russian crude oil, and refined approximately 9.1% of the total Russian throughput; the company’s total sales in 1996 were $3.1 billion. Boris Berezovsky was involved in establishing Sibneft when it first came into partly private ownership in 1996; the company is now entirely privately owned. Mr. Berezovsky served on Sibneft’s Board of Directors until October 1996; whilst he no longer has any role in the management of the company nor any shareholding, he tends still to be publicly identified with the company.

2.

As a senior executive officer of Sibneft, I have been personally involved in the company’s efforts to raise capital for its business; I have had frequent dealings with people in London, because of the City’s importance as a major financial centre. Because of the association of his name with Sibneft, I have often been asked to explain Mr. Berezovsky’s connections with the company; in my experience, financial analysts at reputable broking firms, banks and financial institutions in London, conducting due diligence on behalf of potential investors will make enquiries concerning Mr. Berezovsky as part of the process. It is apparent to me that Mr. Berezovsky’s name is well known within the City of London.

3.

During the course of my dealings with London based financial institutions, the article written about Boris Berezovsky by Forbes magazine, entitled ‘Godfather of the Kremlin’ has frequently been mentioned to me. It is stated in the article, wrongly, that Mr. Berezovsky ‘has acquired at least 80% of Sibneft, one of Russia’s largest oil companies;’ anyone therefore who checks will automatically be able to access the article on the Internet. Not surprisingly, I have received a great deal of negative feedback from investors, including those in the UK, who have expressed concern about Mr. Berezovsky’s role in the company and, in the light of the Forbes article, how that may affect their shareholding. This leaves me in no doubt about the detrimental effect of the Forbes article upon Mr. Berezovsky’s reputation and upon the reputation of companies with which his name is associated amongst the financial community in London.

4.

By way of example, individuals at Salomon Brothers expressed directly to me their concern about the allegations made against Mr. Berezovsky. This occurred during the summer of 1997, when Sibneft became the first Russian company to place a corporate Eurobond on the market, to the value of $150m. Seventy percent of that bond was eventually placed in London. A copy of the prospectus is now produced and shown to me marked “ES1”

In his oral evidence, Mr. Berezovsky claimed that he had been extremely cross when he read Mr. Shvidler’s affidavit, not only because he saw the Offering Circular for the first time, and what had been said in that document, but also because he had wanted Mr. Shvidler to describe in the affidavit “… in terms which coincide with reality”, the nature of his interest in Sibneft, whereas Mr. Shvidler had effectively put it more strongly than that. He claimed that Mr. Shvidler had:

“… accept[ed] this position but on the other hand he present me Eurobonds certificate where it was written that I never had - in very strong terms, that I never had any connection, which definitely could be helpful for me for Forbes case but was not true at all (Footnote: ²³⁰).”

Subsequently he said:

“For me it was the best if this certificate in this way was presented to Forbes magazine. It stressed that I don’t have any connection to Sibneft at all and it’s very -- it could be very useful for me. But I insist when I have seen this certificate that Mr. Shvidler put in his witness statement the reality and not dream, yes?” (Footnote: ²³¹)

He then sought to suggest that Mr. Shvidler’s statement in his affidavit was technically true on the grounds that it was not inconsistent with his case in this action because his alleged shareholding was unregistered (Footnote: ²³²).

In Mr. Abramovich’s written closing submissions, it was submitted that the statements made by Mr. Shvidler in his Forbes affidavit were, as Mr. Berezovsky must have appreciated at the time, wholly misleading if what he said about the terms of the alleged 1995 and 1996 Agreements were true. Mr. Rabinowitz on the other hand submitted that such criticism was unjustified because:

Having heard Mr. Berezovsky’s evidence on the matter, I conclude that these statements in Mr. Shvidler’s affidavit, taken in their context, would indeed have been highly misleading statements, if Mr. Berezovsky’s case about the alleged 1995 and 1996 Agreements had been true. That was particularly so in circumstances where the Offering Circular was also put in evidence in the Forbes litigation, albeit with no direct reference to the statement contained in it. If Mr. Berezovsky were really angry, as he suggested, with Mr. Shvidler when he first saw the content of the Offering Circular, and Mr. Shvidler had accepted that criticism, as Mr. Berezovsky also suggested, it is highly unlikely that Mr. Shvidler would have expressed himself in his affidavit in the way that he did, or have exhibited the Offering Circular, without explaining that, although Mr. Berezovsky was not a registered shareholder, and contrary to what was expressly stated in the Offering Circular, Mr. Berezovsky did indeed have an enforceable interest or entitlement to Sibneft shares and to participate in its profits. If Mr. Berezovsky, by his reference to the fact that the statement in the Offering Circular “could be very useful for me” was suggesting that he and Mr. Shvidler had deliberately agreed to deploy the statement in the Forbes litigation, notwithstanding that it was untrue, that was an allegation of dishonesty that should have been expressly put to Mr. Shvidler in cross-examination and was not.

Nor was the suggestion put to Mr. Shvidler that the statement in paragraph 1 of his Forbes affidavit (“… whilst he no longer has any role in the management of the company nor any shareholding …”) [Emphasis supplied] contradicted Mr. Abramovich’s case in this action: that Mr. Berezovsky had never had a shareholding in Sibneft. There was nothing in the other points made by Mr. Rabinowitz but it is not necessary for me to deal with them in detail.

Other public statements made by Mr. Berezovsky were similarly misleading if indeed he had had a contractual entitlement, together with Mr. Patarkatsishvili, to a 50% interest in such shares, or to have Sibneft shares transferred to him. For example, in an interview in July 1999, when he held no public office, Mr. Berezovsky was reported as saying in an interview with Vremya MN:

“I am not a Sibneft stockholder, and I have said that many times, although I was lobbying [for] the creation of this company and I have strategic interests within this company and in relation to it.”