It is Britain’s most colourful legal battle. On one side is Roman Abramovich, the billionaire owner of Chelsea FC. On the other is Boris Berezovsky, the former Kremlin insider turned political exile who is now Moscow’s biggest headache. Over the past month the two oligarchs have been slugging it out in London’s high court.
Berezovsky says Abramovich, his former friend, cheated him out of more than $5bn. Abramovich denies this. Both men have faced hours of gruelling cross-examination, and accusations that they have lied about – or conveniently forgotten – what happened when they made their fortunes in the murky Russia of the mid-1990s. Abramovich is likely to finish his stint in the witness box on Tuesday. The case will continue for several more weeks.
The legal drama has opened a tantalising window into the secretive world of Russia’s mega-rich. It’s a place of off-shore bank accounts, luxury cruises in the Caribbean and business deals done in five-star London hotels. Its cast is equalling fascinating: the best QCs money can buy, bodyguards in dark shades who silently patrol the corridors like silent trolls, blonde Russian women, journalists who have flown in from Moscow and PR consultants.
But what have we actually learned so far?
1 Abramovich can’t speak English
Despite buying Chelsea FC in 2003, the oligarch’s knowledge of the language is rudimentary. He has given evidence in Russian. This has forced the judge, Dame Elizabeth Gloster, and both legal teams to listen to translation via headphones. Abramovich can say a few words, apparently. But he can’t read English at all. Consequently, the case is often lost in translation. (One area of dispute involves something called the “bolshoi balance”. This came out as “bolshoi ballet”.)
Abramovich’s aides stress their man’s educational disadvantages. He grew up in 1980s Soviet Moscow. Abramovich wasn’t able to study English at school. His teachers remember him as a friendly and popular boy, but no great scholar. His lawyers say he has a keen strategic mind, and a quick if non-verbal brain. Abramovich’s deadpan style and delivery recall Vladimir Putin, whose uncompromising answers radiate a hidden menace.
Boris Berezovsky, by contrast, speaks fluent English, delivering long, florid sentences. He attributed Abramovich’s success not to “intellectual capacity” but to his talent for getting on with people.
And then there is the vexed question of how you pronounce the oligarch’s name. The correct Russian stress is AbramOvich, not AbrAmovich. The lawyers have now got this right, just about. But everyone is still struggling with the name of Berezovsky’s Georgian business partner, the fiendishly monikered Badri Patarkashshivili.
2 Vladimir Putin is in court too
Russia’s once and future president is the third unacknowledged party in this dispute. He hovers over the proceedings like a scowling ghost. Berezovsky’s feud with Putin is well known. They fell out in 2000, and he decamped to Britain to become the Kremlin’s most fervent critic.
But it wasn’t always like this. Berezovsky’s witness statement recalls how they were once close; its tone is that of a jilted teenager’s diary. They met in 1991 in St Petersburg; Putin was head of the committee for external relations in the mayor’s office. “During this time we became friends. We met frequently and sometimes spent holidays together in Russia and abroad. He even stayed with me at my chalet in Gstaad, for several days in the early 1990s,” Berezovsky writes.
This friendship continued throughout the 1990s. Berezovsky supported the upwardly mobile Putin when he became head of Russia’s FSB spy agency – then prime minister, and then president.
There were, however, dark signs. “I was astonished to see that he [Putin] had a statuette of Felix Dzerzhinsky – the notorious and hated founder of the Cheka, the predecessor of the KGB – in his office,” Berezovsky told the court.
Their feud began when Berezovsky’s ORT TV station criticised Putin for his indifference during the sinking of the Russian submarine Kursk. During their last stormy meeting in August 2000, Putin told Berezovsky to sell ORT or go to jail. Putin’s parting words were stiff: “Goodbye, Boris Abramovich”, he said, using the formal patronymic. Berezovsky’s sorrowful reply used his affectionate diminutive: “Goodbye Volodya.”
But Berezovsky’s fall coincided with Abramovich’s rise. By the late 1990s Abramovich was a Kremlin insider in his own right. By 2000 – according to Berezovsky – he “played a central role in the selection of members of President Putin’s cabinet”, and had the power to open and shut criminal cases.
While Berezovsky plotted in exile, Abramovich served loyally and patriotically as governor of Chukotka, a frozen province in Russia’s remote far east. Abramovich admits he has a “good relationship” with Putin.
Britain may know Abramovich as the smiley guy who watches Chelsea from the VIP box. In reality, however, he is a consummate, steely backroom Kremlin operator. Sure, Berezovsky is suing Abramovich because he wants the money. But his secondary goal is to humiliate Putin.
3 Oligarchs love offshore companies
After acquiring an oil company and refinery Abramovich immediately “inserted” opaque intermediary entities between the two, the high court has heard. (Previously the oil company sold oil directly to the refinery.)
Abramovich’s new oil company Sibneft sold oil to these mysterious companies, which then sold the oil back to Sibneft for “two or three” times the price. The ruse – perfectly legal – saved Sibneft millions of dollars in tax, and reduced its tax liabilities from 35% to 5.5%.
One of these third-party entities was registered in Kalmikia, a small Buddhist republic in southern Russia. (The entity employed disabled people to qualify for tax exemptions. Asked about this, Abramovich said: “I don’t recall why this was done. But these were real people. We paid them salaries.”) Others were registered in tax havens around the world – Panama, Gibraltar, British Virgin Islands, Cyprus, and other balmy destinations. The company names, too, are mysteriously alluring – Hotspur, Octopus (used by Berezovsky), Olivesta (used by Abramovich). Berezovsky says he used these offshore havens not to avoid tax but to stop his assets being stolen.
Britain’s Clydesdale bank has a walk on role in the drama. In 2002 Abramovich paid Berezovsky and Patarkashshivili $1.3bn — in exchange, Berezovsky says, for their interest in Sibneft. Clydesdale accepted hundreds of millions of dollars of this cash. The bank then, however, got cold feet and told Berezovsky to take his money elsewhere.
4 Oligarchs adore British courts
Rich Russians don’t trust their own legal system. It is too susceptible to political influence, too corrupt, too fundamentally lacking in transparency. Instead they sue each other in London. English courts have become the place where wealthy Russians settle their feuds, unhappy marital disputes and libel actions. Berezovsky v Abramovich is now the world’s biggest private litigation battle. But the case is a uniquely Russian one – a tale of greed, political manipulation and deceit in the murky years of Boris Yeltsin’s presidency. Abramovich’s QC Jonathan Sumption compared 1990s Russia to “medieval England”.
A couple of doors down from court 26, where this case is being heard, Berezovsky is involved in another case against Vladimir Terluk. Terluk appeared on Russian TV and claimed that Berezovsky killed Alexander Litvinenko. Berezovsky sued him for libel and won. Terluk (with the assistance of the Kremlin) is appealing. The libel lawyers, Carter-Ruck, meanwhile, are involved in another case, involving Alexander Lebedev, the ex-KGB officer and now owner of the Evening Standard and Independent. Lebedev recently punched a construction maganate, Sergei Polonsky, on Russian TV. Polonsky has sued him in London after he allegedly bragged about it afterwards. And then there is Yelena Baturina, the wife of Moscow’s sacked mayor Yuri Luzhkov. She has just successfully sued the Sunday Times for libel after it wrongly alleged she was the owner of a 65-room mansion in Highgate, north London.
All this is good news for London’s eager barristers and translators – not to mention its security guards and deliverers of sushi. (Berezovsky and his team take lunch in a consultation room.) Sumption has even delayed his elevation as a supreme court judge to act as Abramovich’s lead counsel. There is speculation his fee for the case is between £3m and £10m. As well as London, Russian companies are also slugging it out in New York and Cyprus.
5 The meaning of krysha
The word of the trial. Literally, it means “roof” in Russian. But it carries a kaleidoscope of other associations: an arrangement; lobbying; political services; icebreaking; protection from murder by Chechen terrorists and bandits; fixing; and a long-term relationship with more or less regular payments.
Abramovich’s case is that he hired Berezovsky – a figure with svengali-like influence over Yeltsin – to give him krysha. In 1994 Abramovich was a relatively small-scale oil trader keen to profit from the opportunities offered by privatisation. Berezovsky, at this stage, was an unofficial member of Yeltsin’s entourage and the president’s tennis partner. In 1995, with Berezovsky’s help, Abramovich’s Sibneft in 1995 won a rigged auction for an oil company and refinery – a step that made him very rich indeed. In return Abramovich made regular under-the-table payments to Berezovsky. These totalled several hundred million dollars – with sums of up to $5m handed over in cash.
Abramovich says he also coughed up for Berezovsky’s private jet travel, bought him a chateau in France, and paid for jewellery for his girlfriend.
Berezovsky doesn’t deny the payments. But he says that they were simply his rightful share of his profits accruing from Sibneft, in which he and Patarkashshivili were each 25% partners. There was no krysha arrangement, he insists. Berezovsky says Abramovich screwed him over after he fell out with Putin, forcing him to sell his interests in Sibneft at a knockdown price of — well — $1.3bn.
Abramovich says he paid this enormous sum for krysha. This is surely the most expensive roof in the world.
One footnote. The word krysha features in the WikiLeaks documents released last year. In a cable describing corruption in Moscow, US diplomats note that Russia’s FSB spy agency – former boss Vladimir Putin – offers the best krysha of all, extending its protective arm to Moscow’s biggest mafia gang.