Posts Tagged ‘FT’
Ukraine crisis: Russia is in no position to fight a new cold war
Putin and his allies have talked tough while enjoying the comforts of globalisation.
When the Soviet Union invaded Czechoslovakia in 1968, the Moscow stock market did not crash. That is because there was no Moscow stock market. By contrast, the news that Russian troops have taken effective control of Crimea was greeted, on Monday, by a 10 per cent collapse in shares on the Russian market.
This contrast between 1968 and now underlines why talk of a new cold war is misleading. The economic and political context of Crimea in 2014 is entirely different from Czechoslovakia in 1968. Russia no longer has an empire extending all the way to Berlin. The pain of that territorial loss is part of the reason why President Vladimir Putin is fighting so hard to keep Ukraine in Moscow’s much-diminished sphere of influence.
Just as important, the world is no longer divided into two mutually exclusive, and hostile, political and economic systems – a capitalist west and a communist east. After the collapse of the Soviet system, Russia joined the global, capitalist order. The financial, business and social systems of Russia and the west are now deeply intertwined. A new east-west struggle is certainly under way today but it is being fought on entirely different terrain from the cold war – and under different rules.
The Kremlin may assume that the west’s business dealings with Russia work in its favour. President Putin, the former KGB agent, probably still believes the old Soviet maxim that western foreign policy is dictated by capitalists – who will not allow their financial interests in Russia to be endangered. The west’s supine reaction to the Russian military intervention in Georgia in 2008 may have strengthened this impression. Ben Judah, author of a recent book on Russia, argues that the eagerness of western business people and former politicians to do business with Russia has made Mr Putin “very confident that European elites are more concerned about making money than standing up to him”.
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US considers sanctions on Russian banks
The Obama administration is considering placing Iran-style banking sanctions on selected Russian financial institutions if Moscow were to send troops into eastern Ukraine.
The banking sanctions are one of a series of measures that the administration has been discussing with Congress in recent days as it seeks to find ways to isolate Moscow diplomatically and economically, according to congressional aides and officials.
Banking sanctions are a powerful tool which take advantage of the US’s central role in the international financial system and which have helped place considerable pressure on the Iranian economy over the past two years. If a Russian bank were targeted, then any bank in the world that continues to do business with it can be cut off from the US financial system.
The banking sanctions are being examined as secondary series of measures, which are aimed more at deterring Russia from taking military action in eastern Ukraine. In response to the immediate crisis in Crimea, the administration is considering placing senior Russian officials on a visa ban and asset freeze list. The idea of broader trade and investment sanctions, which secretary of state John Kerry alluded to at the weekend, is only being analysed as a much more distant prospect.
The debate in Washington over what sort of economic tools to use against Russia comes amid some signs of friction between the US and Europe over how quickly – and how aggressively – to apply economic pressure.
European diplomats have expressed frustration that they are portrayed as dithering while the US is seen as decisive, when the stakes are far higher on their side.
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Magnitsky, the libel courts, and sanctions
On 16 November 2009 Sergei Magnitsky died in prison in Russia. Shortly before his arrest and imprisonment he had been investigating a substantial tax fraud committed against the Russian Federation by a criminal gang. I shall refer to this tax fraud as the Hermitage Fund fraud.
Beyond this short summary, many of the facts in issue between the parties are unknown or controversial, and are subject to stark divisions of opinion…
So began Mr Justice Simon’s judgment in Pavel Karpov v William Felix Browder & Hermitage Capital Management Limited & others on Monday. And the rest is very much worth reading.
The High Court judge ultimately threw out the libel claim made by Karpov (a Russian ex-cop and Magnitsky List member) against Browder — largely because of “exiguous” grounds to link the case to the UK. Simultaneously, Mr Justice Simon said that there were “inadequate particulars to justify the charge that the claimant was a primary or secondary party to Sergei Magnitsky’s torture and murder”.
The “exiguous” point alone will probably see the case feted as a turning point for ‘libel tourism’, even beyond the Defamation Act which is just coming into force in the UK. Perhaps even for overseas litigants making use of English courts in general. So, here are key bits of the judgment on this stuff:
For these reasons, I am satisfied that the Claimant had no connection with, and had no reputation to protect within, the jurisdiction; and therefore cannot establish a real and substantial tort within the jurisdiction. His reputation exists in Russia and the damage to his reputation (which is presumed as a matter of English law) is in Russia. The contrast with the facts of Berezovsky v. Michaels (see above) is stark…
His connection with this country is exiguous and, although he can point to the continuing publication in this country, there is ‘a degree of artificiality’ about his seeking to protect his reputation in this country. This is an important, but not determinative, consideration on the Defendants’ application to strike out the claim…
But there’s more to it. For one thing, an end to libel tourism or not, the case’s legal bill sounds pretty big: Monday’s ruling refers to the “substantial costs” if Karpov’s claim had reached a full trial.
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UK judge throws out libel case against Bill Browder
A High Court judge has thrown out a libel lawsuit brought by a Russian former policeman against Bill Browder, the UK-based fund manager behind the US Magnitsky Act.
Mr Browder had become a hate figure for the Russian leadership after lobbying Congress to adopt the Magnitsky law last year. The law imposed sanctions on Russians allegedly involved in a $230m fraud and the death in custody of Sergei Magnitsky, a lawyer Mr Browder had employed to investigate it.
The defamation case had been brought in London by ex-policeman Pavel Karpov, who was attempting to sue over allegations on a campaigning website run by Mr Browder.
Magnitsky died in a Russian jail four years ago but he was convicted of tax evasion this year in a posthumous trial in Russia that drew widespread criticism in the west.
Mr Browder’s lawyers had applied to the High Court to have Mr Karpov’s lawsuit struck out before trial.
On Monday Mr Justice Simon did just that, ruling Mr Karpov “cannot establish a reputation within this jurisdiction” to bring the lawsuit.
The judge said Mr Karpov’s connection with Britain is “exiguous” and Russia rather was “the natural forum” to bring the lawsuit as the “connection with [the UK] is limited”.
Mr Browder’s campaign had accused Mr Karpov of being involved both in the fraud and of being among police who arranged for Magnitsky’s arrest and alleged torture in jail. Mr Karpov’s libel writ said those claims were false.
The judge’s decision is significant because it underscores the growing challenge to people with only a weak link to London bringing libel claims there.
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US seeks to seize Russian criminal group’s real estate
US prosecutors are looking to seize New York property used by a Russian criminal organisation to launder funds derived from an elaborate $230m tax fraud, according to a complaint filed in a Manhattan court.
The civil action also seeks to impose money-laundering penalties on the companies set up by the organisation, whose members allegedly included corrupt Russian government officials, US Attorney Preet Bharara said.
“Today’s forfeiture action is a significant step towards uncovering and unwinding a complex money laundering scheme arising from a notorious foreign fraud,” Mr Bharara said on Tuesday in a statement.
“As alleged, a Russian criminal enterprise sought to launder some of its billions in ill-gotten roubles through the purchase of pricey Manhattan real estate. While New York is a world financial capital, it is not a safe haven for criminals seeking to hide their loot, no matter how and where their fraud took place.”
The $230m fraud was first uncovered by the late Sergei Magnitsky, a respected Russian lawyer who died in pre-trial detention in Moscow in 2009 shortly after making his whistleblowing allegations.
Prosecutors claim that members of the organisation stole the corporate identities of portfolio companies of the Hermitage Fund, a foreign investment fund operating in Russia, which were then used to make fraudulent claims for tax refunds through sham lawsuits. Officials at two Russian tax offices who were members of the organisation approved the disbursements.
Through a complex series of transfers through shell companies, $230m was laundered into numerous bank accounts in Russia and elsewhere, according to the civil complaint. A portion of the funds stolen from the Russian Treasury passed through a Cyprus-based property company Prevezon Holdings, which laundered the proceeds into Manhattan property including four luxury apartments and two high end commercial spaces, it is alleged.
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Browder asks court to throw out Magnitsky libel lawsuit
Bill Browder, the UK-based fund manager behind the US Magnitsky Act, is asking the High Court to throw out an extraordinary libel lawsuit brought against him by a Russian he accused of being involved in Russia’s biggest tax fraud.
Mr Browder has become a hate figure for the Russian leadership after lobbying Congress to adopt the Magnitsky law last year. The law imposed sanctions on Russians allegedly involved in the $230m fraud and the death in custody of Sergei Magnitsky, a lawyer Mr Browder employed to investigate it.
The defamation case has been brought by Russian-based Pavel Karpov, a former policeman who is suing over allegations on a campaigning website run by Mr Browder.
Magnitsky died in a Russian jail four years ago but he was convicted of tax evasion this month in a posthumous Russian trial that drew widespread criticism in the west.
Mr Browder’s campaign has accused Mr Karpov of being involved both in the fraud and of being among police who arranged for Magnitsky’s arrest and torture in jail. Mr Karpov’s libel writ says those claims are false.
The case is bound to reignite concerns around libel tourism and that London’s courts are being used by the rich and powerful who have tenuous links with the UK but want to exploit its claimant-friendly rules.
Mr Browder alleges the Russian government is ultimately behind the case and is using it to attempt to force him to take down videos on his website.
Antony White QC, Mr Browder’s barrister, claims in court papers that Mr Karpov “does not have the means to pay for this litigation himself” and is relying on an unidentified friend.
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US lawyer expelled from Russia over fresh spy allegations
A US lawyer and former Justice Department official was expelled from Russia earlier this month after he apparently refused to co-operate with Russia’s domestic spy agency, it has emerged.
Thomas Firestone was posted to the US embassy in Moscow by the Justice Department but had left the US government to work at private law firm Baker & Mackenzie. On May 5, according to an acquaintance who requested anonymity, he was returning to Russia from a trip abroad when he was detained and interrogated at Moscow’s Sheremetyevo airport for 15 hours and then declared persona non grata.
The acquaintance of Mr Firestone said he had been the target of a recruitment attempt by Russia’s Federal Security Service, or FSB, in March, but had refused to co-operate, and the person speculated that Mr Firestone’s expulsion was a consequence of that encounter.
Russian officials declined to comment, saying they had no information on the matter.
The case comes amid a shadowy struggle between US and Russian spy agencies that spilled over into the press this month following the arrest and expulsion of Ryan Fogle, a third political secretary at the US embassy whom the FSB detained and accused of having tried to recruit a senior Russian counterintelligence official. Mr Fogle was apparently arrested wearing a blond wig and carrying a street atlas and a compass; a videotape of his detention was broadcast on Russian television.
Russian officials told state television that they had been monitoring an increase in spy recruitments by the US over the past two years, and had previously complained to the CIA station chief in Moscow about tactics that they said “went beyond the ethical lines that exist within the security service”. They also said they had quietly expelled another US diplomat in January after a similar failed attempt to recruit a spy.
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Moscow uses Irish adoption threat to block use of Magnitsky list
Russia has threatened to block Irish adoptions of Russian children if the Dublin parliament adopts a US-style “Magnitsky List” imposing sanctions on Russian officials.
Moscow barred US citizens from adopting Russians in retaliation for the US Congress passing the Magnitsky Act last December, marking a chill in transatlantic relations. The act imposed visa bans and asset freezes on officials allegedly connected with the 2009 death in jail of the anti-corruption lawyer Sergei Magnitsky.
The warning to Ireland, in a letter from Russia’s ambassador to the parliament’s foreign affairs and trade committee, is the first time Moscow has threatened similar action against another country.
It appears designed to head off attempts to persuade other EU states to adopt Magnitsky measures. Ireland holds the EU presidency, and a draft motion before the committee last month called on the government to use that role “to impose EU-wide visa sanctions”.
The March 11 letter from Maxim Peshkov, a career diplomat, warns that steps by Ireland towards adopting such sanctions “can have negative influence on the negotiations on the Adoption Agreement between Russia and Ireland being proceeded”.
The Russian embassy in Dublin on Thursday declined to connect calls to Mr Peshkov, saying the embassy was “closed for technical reasons”.
Bill Browder, the formerly Russian-based fund manager who employed Magnitsky and has led the campaign to bring those linked to his death to justice, said the letter was an “attack on Irish democracy”.
“Even though Ireland is a small country, the fact that they are [EU] president means they have a hugely disproportionate voice, for a fixed period,” he said. “The Irish parliamentarians have interpreted this as a threat to their adoptions.”
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Elite Russians adopt the staycation habit
Annette Loftus, owner of a high-end Moscow travel agency, gets plenty of odd holiday requests from plenty of exotic people. She has had to organise a golf tournament at the North Pole, a buggy race on Bolivia’s salt flats and a getaway with an ice bar in the middle of a frozen Siberian lake.
Then, there was the mysterious caller who asked for “a holiday in a non-Interpol country” on behalf of his boss, who he would not name. She turned the last one down – first of all, she said, non-Interpol countries are very few, “and I would not be willing to run a trip in any of them”. Second, there was “the moral issue . . .”.
Recently Ms Loftus has seen more requests like the last one – clients with, as she puts it, “jurisdictional issues”. For a small but growing number of elite Russians, travel opportunities are increasingly limited. The trend was epitomised by the US Magnitsky act, which late last year imposed a US visa blacklist and asset freezes on roughly 60 Russians suspected of human rights violations. Its open-ended wording leaves open the possibility that the list of names will lengthen. The E U looks set to eventually pass similar legislation.
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