A VTB Group unit lost its bid to have a fraud suit connected to a $225 million loan heard in the U.K., in a decision that could deter Russians from using English courts as a primary forum to resolve disputes.
The U.K. Supreme Court threw out VTB’s appeal to bring fraud allegations against Nutritek International Corp.’s Russian shareholders in the U.K. and discharged an order freezing the assets of Konstantin Malofeev, a Russian investor who the bank also sued as part of the case.
“The Russian connection is of such strength and importance in this case that, despite the existence of some factors favoring England,” VTB is unable to prove that the U.K. is the most appropriate forum for a trial, Justice Jonathan Mance said in today’s ruling.
Russia’s richest individuals have flocked to U.K. courts in recent years seeking restitution in fraud cases from a judicial system some deem to be more fair than their own. Boris Berezovsky in August lost a lawsuit in which he was seeking $6.8 billion from another oligarch, Roman Abramovich, over claims Berezovsky was forced to sell stakes in two Russian companies.
VTB Capital, which describes itself on its website as “Russia’s national leader in global investment banking,” loaned $225 million to Russagroprom LLC to fund the purchase of six Russian dairy plants from Nutritek International Corp., a baby food maker that is incorporated in the British Virgin Islands, but owned by Russians. Russagroprom defaulted on the loan and VTB alleged it was induced to enter into the loan by fraudulent representations made by Nutritek.
VTB’s lawyers at Herbert Smith Freehills LLP in London didn’t immediately respond to a call requesting comment.
A London judge in November 2011 ruled that VTB had no right to bring the claims against Nutritek in the U.K., a decision that was upheld by a higher court in June.
Malofeev’s Marshall Capital Partners said in a statement that the ruling ends “over 18 months of spurious legal action by VTB Capital.”
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