A British investment group has demanded $500m from Russia and accused the country of state-sponsored corporate theft in a battle for control of a Siberian coal mine.
Lawyers for Lehram Capital Investments, which specialises in buying distressed assets, claim that the coal mine was illegally seized with the assistance of local government officials after the company’s representative was arrested and detained in jail.
Foreign investors often cite fears over protection of private property as a significant risk factor regarding potential investments in Russia, which has a colourful history of high-profile moves by state-controlled companies to take control of corporate assets, particularly in the energy sector.
Lehram Capital Investments said one of its directors was unlawfully imprisoned in 2013 after the intervention of regional administrators and compelled with threats to his safety to sign over control of the Gramoteinskaya mine and all its assets to a local business, using illegally-procured company seals.
According to documents seen by the Financial Times, lawyers for Lehram wrote to Russia’s justice minister last week demanding damages of $500m, and threatening to begin international arbitration proceedings if an agreement is not reached within three months. This would use a bilateral treaty signed by Russia and the UK covering protection of foreign investments.
“We are confident the Russian Federation will put right the serious injustice perpetrated against the company,” said Daniel Rodriguez, Lehram’s controlling shareholder, who called on Russia to “reassure international investors that such conduct from regional participants is not the norm [and] will not be tolerated”.
“The outcome of this affair will be an important indication to other foreign investors of how seriously Russia takes the rule of law, its fight against corruption and the steps it is taking to provide a safer and a more transparent environment for foreign investors,” said Mr Rodriguez.
Lehram purchased the mine in Russia’s coal-producing heartland of Kemerovo in southern Siberia, in October 2013. Two months later, company director Igor Rudyk was detained by local law enforcement and — Lehram alleges — was placed under duress and forced to sign a document transferring the mine to a company controlled by Alexander Shchukin, a Siberian industrial magnate. Mr Shchukin’s company did not respond to request for comments.
Lehram said Mr Rudyk was not legally capable of performing the asset transfer and that company seals required to authenticate such a document were illegally procured by authorities without the company’s knowledge. The legal claim alleges that Kemerovo’s governor and deputy governor played a role in orchestrating the asset seizure.
A spokesperson for the Kemerovo administration did not respond to requests for comment. Legal claims by Lehram in the region’s courts to have the transaction annulled have been dismissed.
According to documents submitted to the justice ministry, local officials had raised concerns regarding the late payment of some salaries to the mine’s workers in the first few weeks following its acquisition by Lehram, and used this is as a reason to suggest the British company was an unfit owner. Mr Rudyk was initially arrested on charges of breaching Russian immigration law as his passport had expired.
Shai Wade, partner at international law firm Stephenson Harwood, which is representing Lehram, described the case as “one of the most blatant cases of unlawful state expropriation that have arisen in recent years”.
“The conduct of the Kemerovo region officials in this case showed just the sort of disregard for fairness and the rule of law that the investment treaty arbitration system is designed to protect against,” he added.