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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Public Joint Stock Company Rosneft Oil Company v Harpercollins Publishers Ltd & Anor [2021] EWHC 3141 (QB) (24 November 2021) URL: https://www.bailii.org/ew/cases/EWHC/QB/2021/3141.html Cite as: [2021] EWHC 3141 (QB) |
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QUEEN'S BENCH DIVISION
MEDIA AND COMMUNICATIONS LIST
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
Public Joint Stock Company Rosneft Oil Company |
Claimant |
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- and |
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(1) HarperCollins Publishers Limited(2) Catherine Belton |
Defendants |
____________________
Andrew Caldecott QC and David Hirst (instructed by Wiggin LLP) for the Defendants
Hearing date: 29th July 2021
____________________
VERSION
OF JUDGMENT APPROVED
Crown Copyright ©
The Honourable Mrs Justice Tipples DBE:
INTRODUCTION
HarperCollins
Publishers Limited. The Book was published electronically on 2 April 2020, in audiobook on 11 April 2020 and in hard copy from 16 April 2020. The paperback edition came out on 15 April 2021.
v
(1)
HarperCollins
Publishers Ltd; (2) Catherine Belton, Claim No: QB-2021-001025 ("Abramovich
v
HarperCollins")
which also arises out of publication of the Book. There are common issues as to the natural and ordinary meaning of the Book and, on 9 July 2021, Nicklin J gave case management directions in relation to the claim so that the issues on meaning could be determined by the same judge.
Rosneft
Oil Company ("the claimant" or "
Rosneft"),
was directed by 14 July 2021 to send the defendants written notice of its case, identifying the words complained of, and the natural and ordinary meaning that the claimant contends that the words complained of bear. The defendants were directed to serve their response by 19 July 2021. Nicklin J then directed a trial of the following preliminary issues: (i) the natural and ordinary meaning of the words complained of; (ii) whether the words complained of, in the meaning(s) found, are defamatory of the claimant at common law; (iii) whether the respective statements complained of are (or include) a statement of fact or expression of opinion.
v
HarperCollins
[2021] EWHC 3154 (QB), I read the whole Book in hard copy in advance of the hearing. I knew that the claimant was complaining about the Book, but I did not know what it was complaining about. I was provided with the documents relating to the claim shortly before the hearing and it was only then, when I had read the whole Book, that I read the passages complained of in the context of this claim. I did so without any reference to the parties' rival contentions or submissions on meaning. That was to capture my initial reaction as a reader, which is the accepted general practice in trials of this nature: see, for example, Tinkler
v
Ferguson [2019] EWCA Civ 819 at [9] and [37].
various
passages relied on by the parties must be avoided, and counsel were mindful to avoid this trap (see, for example, Sheikh
v
Associated Newspapers [2019] EWHC 2947 (QB), Warby J at [25]).
RELEVANT LEGAL PRINCIPLES
v
HarperCollins
[2021] EWHC 3154 (QB) at paragraphs 13 to 21, so I do not repeat them here. The law to be applied in determining meaning is set out in Koutsogiannnis
v
The Random House Group Ltd [2020] 4 WLR 25, Nicklin J at [11]-[12] and the repetition rule and Chase levels of meaning are also relevant to the issues in this case. These principles apply, albeit in a slightly modified form, where the claim is brought by a company (see, for example, Triplark Limited
v
Northwood Hall (Freehold) Ltd [2019] EWHC 3494 (QB), Warby J ("Triplark") at [12]).
v
Times Newspapers Ltd [1993] AC 534, HL ("Derbyshire") at 547B-C, per Lord Keith of Kinkel. The editors of Duncan and Neill on Defamation (5th Edition; 2020) ("Duncan & Neill") explain that "an allegation which impugns the honesty or fairness of the business methods employed by the corporation or company may be actionable, as may allegations which reflect adversely on the financial position or the efficiency of the company" (see para. 10.02).
v
Campion [1972] 2 QB 169, Browne J at 175 (cited with approval in Derbyshire at 545E-547A). In cases where the words might be thought to "reflect primarily upon human beings" the court will examine carefully a contention that they are damaging to the company's business reputation: Multigroup Bulgaria Holding AD
v
Oxford Analytica Ltd [2001] EMLR 28 [41], Eady J ("Multigroup").
"But allegations about officers of a corporation or company, or even about an individual employee if they relate to their work in their employment, will often reflect on the corporation or company itself, either because the act of the individual or individuals will be identified in the mind of the publishee with the employer, or because the allegations involve some imputation against the methods of selection of staff or their supervision. Similarly, allegations against a corporation or company will often involve by necessary inference imputations against those who are responsible for its direction and control. Such inferences may arise more easily in the case of directors of a small family company than in the case of directors (especially non-executive directors) of a large organisation".
v
Harrow LBC [2017] EMLR 3 ("Undre"), Warby J explained at [21]:
"Cases where individuals and companies are co-claimants can give rise to difficulties when it comes to reference and meaning. A single set of words can defame both a company director or officer and the company itself, particularly if the individual is so closely associated with the company that those who know them will treat one as an alter ego of the other." (underlining added).
v
Times Newspapers Ltd [2004] EMLR 665, CA at [35] by Sedley LJ:
"It has to be kept well in mind that a limited liability company is a distinct legal person, not an extension of its proprietor (if I may adopt an imprecise but useful term). To defame the proprietor, even in an article which identifies the business as his, is not to defame the company unless the article also suggests that the company is itself implicated in the wrongdoing or suspicion of wrongdoing attributed to the individual, or it merits investigation for the same reasons as its proprietor. This article suggests none of those things." (underlining added)
"This could be the case where the allegation is of personal misconduct, such as sexual promiscuity, by an officer of the company Equally, however, a publication might (at least in principle) impute misconduct by a director, for instance bribery, in the course of business activities on behalf of the company but, on a proper analysis, it might nevertheless defame only the individual and not the company for which he or she worked."
v
BBC (25 May 2001, unrep.), Eady J ("Elite"); Al Rajhi Banking & Investment Corporation
v
The Wall Street Journal Europe SPRL [2003] EWHC 1358 (QB), Eady J ("Al Rajhi")).
viable
on its face, a corporate libel claim might represent an abuse of the court's process, if the reality is that the company has been "put up" by individuals who are seeking to use it indirectly to
vindicate
their personal reputations or obtain compensation (see Triplark at [12] and [57], where Warby J identified this as the "third principle" derived from Multigroup, Elite and Al Rajhi). Nevertheless, this is a "more complex issue" which might be the case if, for example, there is material before the court which demonstrates that the company is being used "as some kind of "front" for an individual, seeking to clear his or her name indirectly" (Triplark at [57]). In this case, Mr Caldecott sought to persuade me that the claimant has been "put up" by President Putin or Mr Sechin to
vindicate
their personal reputations. This was a trial of preliminary issues on meaning and fact/opinion and, on the material before me, I am unable to make any determination at this stage on this basis, and do not do so.
THE BOOK: BROAD IMPRESSION
v
HarperCollins
[2021] EWHC 3154 (QB) at paragraphs 23 to 31, so I do not repeat it again here. Likewise, the findings I have made in relation to context at paragraphs 32 to 37 of that judgment are also relevant, and I do not repeat them here.
MEANING
a. Meaning 1: pp. 227-228 of the Book. This concerns the purchase price paid by the claimant for Severnaya Neft.
b. Meaning 2: pp. 281-304 of the Book. This concerns the acquisition of Yukos by the claimant.
c. Meaning 3: pp. 357-359 of the Book. The concerns the initial public offering of the claimant's shares on the London Stock Exchange.
d. Meaning 4: p. 436 of the Book. This concerns the proposed deal to fund Liga Nord.
view
or impression in each case. This was the
view
I noted down before the hearing when having read the Book, I read the words complained of in the particulars of claim, the claimant's meanings and the defendants' meanings, but before I had read the skeleton arguments, or heard any oral argument from Counsel.
Meaning 1: The purchase price paid by the claimant for Severnaya Neft
The parties' meanings (passages (1) and (2))
Rosneft
had paid an inflated price for Severnaya Neft, namely twice the accepted
valuation
of $300 million, with the intention that the overpayment of $300 million should be corruptly paid to President Putin and his associates in the KGB.
Rosneft,
the then Russian state-owned oil giant, had recently paid twice the accepted
valuation
for Severnaya Neft, an oil company with huge reserves, and, in particular, whether it had done so to trump competitive bids from privately owned oil companies (who had been eying the company for months) or with a
view
to Putin's men or state officials taking the excess for themselves.
The parties' submissions
Vavilov,
a former deputy finance minister" (passage (2); p. 228) and that "one person familiar with the deal", described as "a person formerly close to Putin" (footnote 51; p. 545) said that "
Vavilov
had kicked the money back to Putin through
Rosneft's
President, Sergei Bogdanchikov". There is then a formulaic denial of kickbacks or irregularity, but the effect of the repetition rule is that the statement of the "person formerly close to Putin" is to be treated as a straightforward statement that the kickback to Putin of $300 million had been instigated on behalf of
Rosneft
by its President.
Rosneft
had trumped them by paying twice the accepted
valuation".
The claimant had paid $600 million to purchase Severnaya Neft. In his presentation Mr Khodorkovsky suggested the question "where did the $300 million overpayment go?" and then told the President "an investigation should be mounted
to pin down the reason for the overpayment" (underlining added by Mr Caldecott). Mr Caldecott argued that this was a request for an investigation as to whether there was corruption, the author then sets out the rival
views
and, at the time, there was a "whole web of political and commercial agendas in conflict". In that context it is a Chase level 3 allegation.
Conclusion
vast
size and integration in Western markets. Further, its owner, Mr Khodorkovsky, was Russia's richest man. He wanted to develop his oil business in accordance with Western standards and, in addition to his enormous fortune, had political ambitions as well. This put him on a collision course with President Putin and the siloviki. Mr Khodorkovsky was seen as a threat to President Putin.
Rosneft,
and what had happened to the $300 million overpayment. Mr Khodorkovsky raised this in the context that "Whispers had been circulating for weeks that the difference was a kickback pocketed by officials". The reader will understand that, at the
very
least, Mr Khodorkovsky suspected corruption with this overpayment, made by a state company, and he wanted an investigation to expose this. The presentation was, after all, about state corruption in Russia. I do not therefore accept Mr Caldecott's submission about the nature of the investigation sought by Mr Khodorkovsky.
Vavilov
[an initial owner of Severnaya Neft] had kicked the money back to Putin through
Rosneft's
president, Sergei Bogdanchikov" (p.228; passage (2)). The author then records that Mr
Vavilov
denied any kickbacks; the Kremlin hotly denied any irregularity. There is no other information provided to the reader as to where the $300 million overpayment went. I agree with Mr Browne that these denials do not provide any antidote to the information provided by Mr Kondaurov or the anonymous source.
Decision: meaning 1
There is strong reason to suspect that
Rosneft,
then a state-owned Russian oil giant, paid $600 million to purchase Severnaya Neft, being twice the accepted
valuation,
so that the overpayment of $300 million would be paid to President Putin or his associates in the KGB for their own use.
very
substantial amount of money, which there are strong grounds for suspecting ended up in the hands of President Putin or his "KGB men". The claimant was then state-owned, but it is the same corporate entity today as it was then. This imputation is, in my
view,
actionable as it has a tendency to cause a substantial adverse effect on people's attitudes to the company. It is, of course, another matter as to whether the claimant can prove "serious financial loss" or its likelihood in respect of matters which happened a long time ago. That, however, is not an issue before me.
Meaning 2: The acquisition of Yukos by the claimant
The parties' meanings (passages (3) to (17))
Rosneft
amounting to organised theft, the Russian Government:
a. with the connivance of several judges subjected to improper pressure, illicitly expropriated assets formerly held by OAO Yukos Oil Company ("Yukos") and its ultimate owners Mr Khodorkovsky and his associates, and
b. combined with
Rosneft
to allow the latter to purchase the Yukos assets at an unfair price in a farcically rigged auction.
a. The Kremlin and Mr Sechin with 'one of [Mr Sechin's] deputies' wrongfully interfered with the Russian Courts in his capacity as Mr Putin's 'closest associate' and 'deputy chief of staff' in relation to Mr Khodorkovsky's trial, and that Mr Sechin's personal pursuit of power drove many of these events concerned with the bankruptcy of Yukos, confiscation of its assets and imprisonment of Mr Khodorkovsky, and Mr Sechin acted in league with 'Putin and his men' in negotiating with Yukos (implicitly in bad faith) and personally oversaw these
various
outcomes in his own interest, and in the interest of the Kremlin (there being no suggestion of any material input from the rest of
Rosneft's
board).
b. The Russian government used tax claims to undermine Yukos and that the low opening sale price of Yukos' assets was fixed by the justice ministry in an example of 'government-organised theft' and the chief orchestrators of the legal campaign to bring down Yukos' [sic] were the siloviki representing President Putin's inner circle of trusted advisors, being for the most part members or former members of the Russian Security Services.
The parties' submissions
Rosneft"
(p. 284; passage (5)). In his oral submissions Mr Browne explained that it is because the claimant and Mr Sechin are "inextricably intertwined", they are "alter egos" and, as Mr Sechin is the claimant's controlling and directing mind, what he does affects the claimant. Further, once Mr Sechin became the claimant's chairman in July 2004, there is no suggestion anywhere in the Book that he was "on a frolic of his own" in relation to the attack on Yukos.
Rosneft
grew from being a minnow worth no more than $6 billion to an oil giant of global stature with assets worth nearly $30 billion, strengthening Sechin's hand along the way" (p. 292; passage (11)); and that the claimant's active participation in the strategy used to acquire Yukos' assets is further underlined by the mention of the bankruptcy auctions in 2007 when "though the Western banks had filed the bankruptcy petition, it was
Rosneft
and the Kremlin that was in the driving seat" (p. 297; passage (13)).
very
specifically targeted at the Russian government/Kremlin and Mr Sechin in his capacity as Mr Putin's "closest associate" and "deputy chief of staff" (ie as agent for the Kremlin, not as chairman of the claimant) (see, for example, pp. 275, 279, 281 (passage (3), 292 (passage 11)). Further, Mr Caldecott submitted that the siloviki's plan to seize Yukos for the Russian state started well before Mr Sechin became the chairman of the claimant and, in the context of the Book, it was an "astonishing" proposition to argue that the passages complained of meant that this was a plan which had been "engineered" by the claimant who was then telling the Russian government what to do.
Conclusion
valuable
Yugansk plant ending up in the hands of the claimant. My initial impression was that these events were masterminded by the siloviki and, in particular, Mr Sechin as part of President Putin's inner circle. I did not form the impression that it was the consequence of any strategy devised or pursued by the claimant, in conjunction with the Russian government.
Vader'
for his ruthless propensity for plots". The reader knows that Mr Sechin is the closest person to President Putin from the memorable description provided of him, and his relationship with President Putin, in chapter 6 (pp. 184-186). The impression on the reader is that Mr Sechin is President Putin's gatekeeper, and that he has a
very
close and long-standing relationship with him. That impression will not have been lost by the time the reader gets to chapter 9 and the story of Mr Khodorkovsky's trial and the break-up of Yukos.
vast
quantities of oil. Two state-owned purchasers were lined up, Gazprom and
Rosneft.
However, Gazprom was ruled out as a purchaser as a result of Yukos filing for bankruptcy in a Houston court. This was because Gazprom owned assets outside Russia, and these assets were at risk of being seized if it purchased Yugansk in breach of an order of the American court. When the Yugansk plant was auctioned, there was only one purchaser, Baikal, which no one had heard of. The price paid was much less than the plant had been
valued
at and, within days, it was in the ownership of the claimant. The reader is provided with a
vivid
description of Mr Khordorkovsky's trial, and his subsequent appeal. Further, the reader is left in no doubt that it is Mr Sechin who was responsible for putting pressure on the judges to reach a
verdict
against Mr Khodorkovsky at trial and to dismiss his appeal.
Decision: meaning 2
The campaign to bring down Mr Khodorkovsky and Yukos was driven by the Kremlin and, in particular, Mr Sechin and the siloviki (President Putin's inner circle). That campaign resulted in the imprisonment of Mr Khodorkovsky and the break-up of Yukos, with the extremely
valuable
Yugansk plant ending up in the ownership of the claimant. The Kremlin, through Mr Sechin and one of his deputies, wrongly interfered with the Russian court which heard Mr Khodorkovsky's trial, and subsequent appeal, to ensure that Mr Khodorkovsky could not win and would remain in prison.
Meaning 3: IPO of the claimant's shares on the London Stock Exchange
The parties' meanings (passage (18))
Rosneft
conducted an Initial Public Offering ("IPO") which in reality was not an IPO at all, since it was based on an inflated
valuation
of the company, and the overpriced shares were only sold as a result of KGB operatives on behalf of
Rosneft
putting illicit pressure on potential investors.
Rosneft
IPO in 2006 had less resembled a normal initial public offering than an overpriced private placement based on coerced participation of investors in order to satisfy the KGB men and Kremlin financial interests that lay behind and shaped it for the following reasons:
a. Foreign or state-controlled international oil majors keen to curry favour with the Kremlin had bought up almost half of the shares whilst US companies (and impliedly funds and retail investors) generally stayed away;
b. KGB-connected Gazprombank bought $2.5 billion worth of shares;
c. The Kremlin pressed Russian tycoons like Roman Abramovich to make
very
substantial purchases of shares;
d. Contrary to what might have been expected, there were no contemporary investor concerns that the funds raised by the IPO would bypass the Russian budget, going instead towards paying down the $7 billion loan that a state special-purpose
vehicle
called
Rosneftegaz
had taken on from international banks when the state increased its stake in Gazprom the previous year.
The parties' submissions
valuation
is not the result of any wrongdoing on the part of the claimant and it was the Kremlin, and not the claimant, who was responsible for leaning on investors to purchase shares. The criticism of the KGB cohort and the Kremlin is not a criticism of the claimant and is not defamatory of the claimant. In this context, Mr Caldecott referred to Sharif
v
Associated Newspapers Ltd [2021] EWHC 343 (QB) in which Nicklin J emphasised that, given the inter-relationship with truth defences, the meaning identified must focus on the conduct of the claimant and not third parties (see para. [33]).
Conclusion
valuable
Yugansk plant. The passages complained of appear in chapter 11, which is entitled "Londongrad" and the reader has been told that Russian money is flooding into London and Russian companies wanted to be listed on the London Stock Exchange. The story then turns to how this happened in the case of the claimant, and the claimant's shares were floated on the London Stock Exchange.
vast
scale of the IPO as it was "the third-biggest in the world that year" (p.357); there had been opposition to the IPO and the threat of lawsuits (pp. 357-8); that the sale nevertheless went ahead; and the sale was "presented as a triumph for Putin" (p. 358). The reader is then told that, at the time of the IPO, the claimant was
valued
at $80 billion, which was "an enormous transformation" since it had acquired the Yugansk plant for $9.4 billion, and was worth no more than $6 billion. This "
vaulting
valuation"
is described as "testimony to the power of Putin's KGB cohort, and the knowledge that their backing for
Rosneft
was a guarantee of its future expansion" the Kremlin's support for the claimant meant it would be able to buy up the rest of Yukos' assets cheaply in the future.
view
was not changed by Mr Browne's submissions. This is because this statement is a deduction or inference by the author as to what actually happened in relation to the events surrounding the claimant's IPO and it is based on those events that the author has concluded that "it was more like a private placement". Further, my initial impression on reading the text was that responsibility for this, and the success of the IPO, lay with the Kremlin, as the reader is told that it is the Kremlin that "couldn't allow the sale to fail" and had "pressed tycoons like Abramovich to take part in it" (p. 358). I did not read the narrative as meaning that the KGB or the Kremlin were acting on behalf of the claimant.
Rosneft
conducted an [IPO] which in reality was not an IPO at all
", which is an allegation levelled directly against it as a result of its inflated
valuation,
and KGB operatives acting on its behalf to put illicit pressure on potential investors to buy overpriced shares. I do not agree that this is what the words complained of mean. That was not my impression when I first read them, and my initial impression was not changed by Mr Browne's eloquent submissions.
very
substantial increase in the claimant's
value
to $80 billion and that this was "testimony to the power of Putin's KGB cohort". The reader is told that one fund manager said the sale was "way over-priced", but other investors were prepared to pay the price asked. The reader is not told that the claimant was responsible for inflating its
value,
rather the reader is told why it is that the
valuation
of the company had "
vaulted"
to $80 billion. Second, the reader is told that "foreign oil majors", such as BP, bought shares as they saw it as good for their business in Russia and they were "anxious to curry favour with the Kremlin". There is no suggestion that these investors considered the shares to be overpriced or that they had been pressed by the Kremlin to buy shares. Third, the reader is told that the Kremlin could not allow the sale to fail, and had pressed tycoons, such as Mr Abramovich, to take part. There is no suggestion that this was done on behalf of the claimant. Fourth, it was investors who did not participate in the share sale who complained that it was "a typical KGB operation" with one fund manager describing it as "a major extortion exercise". Further, the reader would understand that it was the KGB, and not the claimant, who were said to have leant on investors "in true KGB fashion to make sure the offering was successful". Fifth, the reference to the share sale being "more like a private placement" is because, rather than a large number of investors participating, the shares were purchased by a small number of investors, some of whom had been pressed by the Kremlin or KGB to participate or, in the case of Gazprombank, was connected with the KGB.
Decision: meaning 3
The claimant conducted an initial public offering ("the IPO") of shares on the London Stock Exchange which went ahead in the summer of 2006. The IPO was, in reality, not an initial public offering of the claimant's shares at all. It was successful because of the involvement of the Kremlin or the KGB, which meant the IPO was more like a private placement of the claimant's shares for the following reasons:
i. Half the shares on offer were bought by foreign oil majors including BP, Petronas (Malaysia's state oil company) and China National Petroleum Corporation, who were anxious to find favour with the Kremlin. BP said it was a good strategic investment for its position in Russia and its relationship with the Russian oil industry.
ii. Gazprombank, which was connected to the KGB, bought $2.5 billion in shares.
iii. The Kremlin pressed tycoons, like Mr Abramovich, to purchase shares, and he bought as much as $300 million worth of shares. The Kremlin did so as it could not allow the sale to fail.
iv. US investors and oil companies did not participate out of fear over legal risks. Other investors did not participate because they complained that the sale was a typical KGB operation, which was a major extortion exercise, with the sale of shares beingvery
overpriced, with the KGB leaning on investors to make sure the offering was successful.
Meaning 4: Proposed deal to fund Liga Nord
The parties' meanings (passage (19))
Rosneft
was willing to discuss participation in a corrupt proposal whereby tens of millions of Euros (at least $65m) would be channelled to the Liga Nord in Italy by selling the company's oil at an artificially discounted price to an intermediary who would pay the difference between the discounted price and its true
value
to the Liga Nord.
via
oil sales from
Rosneft
(which was not or at least was not said to have been party to the negotiations), to an intermediary at a discounted price (so enabling the intermediary to funnel the difference to Liga Nord).
The parties' submissions
Conclusion
vast
slush funds abroad, to be used to influence and destabilise Western democracies. This chapter tells the reader about Russia's influence operations in the West, including funding the war in Ukraine, making payments to far-right political parties in Italy, France, Greece and Hungary, and it is suggested that Russia had a hand in funding the Leave campaign in Britain. The reader is told that one of the people at the heart of this is an oligarch called Konstantin Malofeyev, who has direct links with Putin and his inner circle of KGB men, and was promoter of Russian Orthodoxy through a charity called the Foundation of Saint
Vasily
the Great.
views".
Footnote 79 (p. 583) explains that the Malofeyev associate is Alexei Komov "Russia's representative to the US 'pro-family' conservative movement, the World Congress of Families, and Malofeyev's right-hand man in his
Vasily
the Great charitable foundation".
via
a little-known oil company, Avangard" and, second, "a deal to channel tens of millions of euros to the party through oil sales from
Rosneft,
via
an intermediary to Italy's Eni" (p. 436). Footnote 82 (p. 583) tells the reader that Mr Savoini's conversation was tape recorded and was published by BuzzFeed in October 2018.
view,
is entirely unrealistic. I do not consider there is any basis on which the reasonable reader would make any connection between the proposed deals set out here in the context of funding Liga Nord, and what he or she was told on pp. 227-228 in relation to Severnaya Neft.
Decision: meaning 4
In 2014 Mr Savoini, an aide to the head of the Italian far-right Liga Nord party, proposed to Mr Komov, an associate of Mr Malofeyev a possible deal, which did not go ahead, whereby about $65 million would be channelled to the Liga Nord partyvia
oil sales from
Rosneft
(which was not or at least was not said to have been party to the negotiations), to an intermediary at a discounted price (so enabling the intermediary to funnel the different to Liga Nord).
The specific passages of the Book of which the Claimant complains are set out below.
Meaning 1
The passages complained of are as follows:
Part Two, Chapter 7: 'Operation Energy'
(1) "Then he [Mr Khodorkovsky] raised the issue more pointedly still, turning his attention to a deal in which the state-owned oil giant
Rosneft
had made its first big acquisition of recent years, paying $600 million to acquire an oil company, Severnaya Neft, which sat on huge reserves in Russia's far north. The privately-owned oil companies had been eyeing it for months, but
Rosneft
had trumped them, paying twice the accepted
valuation.
The question was, Khodorkovsky suggested, where did the $300 million in overpayment go? An investigation should be mounted, he told the president, to pin down the reason for the overpayment.48 Whispers had been circulating for weeks that the difference was a kickback pocketed by officials." [Page 227]
(2) "'When I saw this on TV I realised this was the end for us,' said Khodorkovsky's chief of analysis, former KGB general Alexei Kondaurov. 'We hadn't discussed it before. When he came out after the meeting, I said, "Mikhail Borisovich, why couldn't you give the corruption presentation to someone else?" He said, "How could I give this to someone else? There are so few fighters among us." And so we began to have problems. I knew he [Putin] would never forgive him for this. Putin's men had taken $300 million for themselves'.50
If Putin's KGB men had pocketed a $300 million kickback, it was the first major deal since he took the presidency in which they'd been able to enrich themselves. The deal had been structured through one of the initial owners of Severnaya Neft, Andrei
Vavilov,
a former deputy finance minister, who conceded he did not own all of it. (On paper, Severnaya Neft was owned by six obscure companies.) According to one person familiar with the deal,
Vavilov
had kicked the money back to Putin through
Rosneft's
president, Sergei Bogdanchikov.51 When we spoke,
Vavilov
denied that any kickbacks were involved,52 and the Kremlin hotly denied any irregularity too." [Pages 227-228]
Meaning 2
The passages complained of are as follows:
Part Two, Chapter 9: 'Appetite Comes During Eating'
(3) "He didn't mention, of course, that everything that happened in the courts was by then directly under the control of his closest associate, Igor Sechin, his deputy chief of staff, who had overseen and propelled the legal attack on Khodorkovsky since its start." [Page 281]
(4) "With the Yukos case, Sechin had an opportunity to expand his power base and create a fiefdom of his own. 'He understood that it was a chance for him to kill two birds with one stone,' said Alexander Temerko, one of Yukos's former [print editions: significant] [audiobook edition: main] shareholders. 'To take the asset and to use the case to take control of law enforcement.'" [Page 282]
(5) "Just days after the announcement, Sechin, who was coordinating the attack behind the scenes, tipped his hand. He'd been appointed chairman of the state-owned oil company,
Rosneft,31
and rumours that
Rosneft
was pursuing Yukos's assets for itself suddenly gained weight.
With each coordinated blow against Yukos, Sechin had been growing in power." [Page 284]
(6) "A leaked report said Dresdner Bank had
valued
the production unit at between $15.7 billion and $17.3 billion, which seemed in line with what the market believed was a fair price,39 and led Yukos's Western managers to believe that there would be cash available to keep the rest of the company together after the sale of Yugansk. But at the end of November that year, any hope of that was irretrievably dashed when the justice ministry not only announced an opening price for the government auction of Yugansk of $8.65 billion, well below the Dresdner range, but also presented Yukos with two more enormous tax claims for 2002 and 2003.40" [Page 287]
(7) "The low sale price announced by the government for Yugansk, he said, represented 'government-organised theft to settle a political score'.43" [Page 287]
(8) "For Alexander Temerko too, it was finally apparent that the negotiations had been a road to nowhere, that Sechin, Putin and his men had been using them as cover for the takeover, as they'd needed to lull the market and foreign leaders into a belief that due process was being observed." [Page 288]
(9) "It had the backing of the more liberal-leaning technocrats in Putin's government, led by Alexei Kudrin, the finance minister, who were keen to ensure that the power of Sechin, as chairman of
Rosneft
and their biggest rival and the leading and most hawkish member of the security bloc, increased no further." [Page 289]
(10) "But the last-minute bankruptcy filing in the Houston court meant the sale ended in farce." [Page 290]
(11) "Putin's KGB allies had finally taken revenge on Khodorkovsky for squeezing them out of
VNK
They seem to have hastily cobbled together Baikal Finance Group as a front company to minimise transparency over its participation in the sale and avoid legal consequences from the US court order. Within four days of the sale, Baikal Finance Group sold Yugansk on to Sechin's
Rosneft.59
Overnight,
Rosneft
grew from being a minnow worth no more than $6 billion to an oil giant of global stature with assets worth nearly $30 billion, strengthening Sechin's hand along the way. Instead of bringing a halt to the sell-off, Yukos's bankruptcy suit had resulted in creating a new powerhouse for the silovik who'd orchestrated much of the legal campaign to bring down Yukos." [Page 292]
(12) "For transparency and for the Russian budget it was undoubtedly a further loss. The sale that was to be financed by Western banks ended up being paid for through a murky deal that involved funding from the Russian budget. Although the Yugansk sale had ostensibly been forced through to pay off billions of dollars in back taxes to the Russian budget, central bank data showed that the federal treasury ended up transferring $5.3 billion through the state-owned
Vneshekonombank
to
Rosneft
to help pay for the purchase.61 One of the biggest scandals of the loans-for-shares sales of the nineties was the widespread belief that the oligarchs had dipped into federal treasury funds held in accounts in their banks to finance them. Now it appeared that
Rosneft
had done almost exactly the same. But this time there was barely the whiff of a scandal. Only one newspaper, the business daily
Vedomosti,
reported the scheme, and only one state official raised his
voice.
The funds were only paid back to the treasury in 2005, when
Rosneft
and
Vneshekonombank
clinched an emergency funding deal for $6 billion from Chinese banks as part of an oil-supply deal whose terms were never disclosed.62
The sole official within the Kremlin to protest against the sale, which he described as 'daylight robbery',63 was Andrei Illarionov " [Page 293]
(13) "When the rest of Yukos went under the hammer in a series of bankruptcy auctions in 2007, Western oil majors and financial institutions facilitated the process. In fact, they provided convenient cover for Putin's men. First, a consortium of Western banks led by France's Soci้t้ G้n้rale and not the Russian state filed a petition for bankruptcy on Yukos in 2006, over $482 million in outstanding loans.73 Though the Western banks had filed the bankruptcy petition, it was
Rosneft
and the Kremlin that was in the driving seat. The London lawyer representing the interests of the beleaguered Menatep Group, Tim Osborne, said he believed the Western banks were acting at
Rosneft's
behest.74 Sure enough, three days after they filed the suit,
Rosneft
bought out the Western banks' outstanding debt.75" [Page 297]
(14) "But though the trio of judges appeared to listen intently, scribbling down notes as he spoke,83 their
verdict
had already been determined. An eyewitness account has emerged that details for the first time how Sechin and one of his deputies had tightly controlled the process every step of the way.84 To remove any doubt about how the judges would rule, the Kremlin had arranged for them to be put up in a sanatorium fifty kilometres outside Moscow, all expenses paid, while they wrote their
verdict.
In those days, the Kremlin could still not be completely sure of the judges' loyalty, but this was the moment when the Russian court system fell under the Kremlin's sway. The Kremlin had been anxious to ensure that Khodorkovsky's business partners could not bribe the judges to rule in his favour. And at the sanatorium, security service agents could keep a close eye on them." [Page 299-300]
(15) "Sechin had piled the pressure on Yegorova to rush through the appeal, as the Kremlin was worried that the statute of limitations on the remaining fraud charge related to the privatisation of the Apatit research institute, which carried a maximum sentence of seven years, was about to run out. The other charges related to tax fraud carried sentences of only four, three, and one and a half years, and although there was one more fraud charge, with a seven-year sentence, related to the use of promissory notes in one of the tax schemes, the Kremlin which in those days still worried about the appearance of due process was concerned that it was far from solid.92 The case against Khodorkovsky had to look legitimate, to strengthen
Rosneft's
takeover of Yugansk
Once the appeal trial started, Sechin called Yegorova to his Kremlin office every day she went there so often the guards knew her by sight.93" [Page 301]
(16) "A furious Sechin called her in to the Kremlin and ordered her to begin the trial without the defence." [Page 302]
(17) "The pressure Sechin had brought to bear on the judges, the speed of the appeal process, the lack of substance to the charges, had brought the court system irrevocably under the siloviki. If, previously, the judges' pitifully low wages had left them open to bribery by powerful oligarchs, now the Kremlin was taking over." [Pages 303-304]
Meaning 3
The passages complained of are as follows:
Part Three, Chapter 11: Londongrad
(18) "For those who'd watched in horror as Putin's KGB men had subverted the legal process to seize control of Yugansk just over a year before, the listing raised deep moral and ethical questions
For other defenders of Yukos, it seemed that a successful IPO would be seen by the Kremlin as a seal of market approval. 'Western leaders must take a realistic and long-term
view
of the implications of appeasing the Russians on such issues of fundamental human rights and the rule of law,' wrote Robert Amsterdam, an attorney for Khodorkovsky, by then well into his first year in prison camp in Russia's far east. 'If not, those presently in power in Russia will take Western double-standards as a licence for impunity. To deny, dismiss or discount the gravity of the consequences is to turn a blind eye to the lessons of history.'54
Despite all the protests and the threat of lawsuits, the IPO went ahead, presented as a triumph for Putin as he played host to the G8 group of developed nations in St Petersburg that summer.
Rosneft
was
valued
at $80 billion,56 an enormous transformation since before its acquisition of Yugansk for a mere $9.4 billion, when
Rosneft
was estimated to be worth no more than $6 billion. The
vaulting
valuation
was testimony to the power of Putin's KGB cohort, and the knowledge that their backing for
Rosneft
was a guarantee of its future expansion: the Kremlin's support meant it was certain to pick up the rest of Yukos's assets for a song in bankruptcy auctions to come.
But the IPO had in fact not really been an IPO at all. Instead, it was more like a private placement. Foreign oil majors including BP, Malaysia's state oil company Petronas, and China National Petroleum Corporation, anxious to curry favour with the Kremlin, had bought up almost half the total offering, while KGB-connected Gazprombank bought $2.5 billion in shares.57 It was widely reported that the Kremlin, which couldn't allow the sale to fail, had pressed tycoons like Abramovich to take part in it. Abramovich was reported to have bought as much as $300 million worth of shares, a further indication that he was operating at the Kremlin's behest.58
But other investors complained that the sale was a typical KGB operation, while US investors and oil companies stayed away out of fear over the legal risks. 'This was a major extortion exercise,' said one fund manager, claiming that the sale was way overpriced. 'They leant on investors in true KGB fashion to make sure the offering was successful.'60
But it seemed to matter little to investors that they were legitimising the state takeover by Putin's KGB men. Nor did they appear concerned that the funds raised would bypass the Russian budget, going instead towards paying down the $7 billion loan a murky state special-purpose
vehicle
called
Rosneftegaz
had taken on from international banks when the state increased its stake in Gazprom the previous year." [Pages 357-359]
Meaning 4
The passage complained of is as follows:
Part Three, Chapter 14: Soft Power in an Iron Fist 'I call them the Orthodox Taliban'
(19) "Savoini then discussed a deal to channel tens of millions of euros to the party through oil sales from
Rosneft,
via an intermediary, to Italy's Eni.82 These deals were to be structured in the same way as the KGB-led Communist Party foreign financing deals of old. The oil was to be sold through a middleman at a discounted price, allowing the intermediary to keep the difference and funnel the proceeds (about $65 million over the course of a year) into the coffers of Liga Nord, BuzzFeed reported." [Page 436]