This defeat follows hours after Russia’s Supreme Court ruled in Telenor’s favour in another dispute over the validity of a foreign shareholders’ agreement in Russia. The decision from the Federal Arbitration Court will provide another boost to Russian companies, like Vimplecom, facing similar challenges to shareholder agreements made under foreign law. The decision of the Federal Arbitration Court, which will be welcomed by the other parties to the MegaFon shareholders agreement, TeliaSonnera and Telecominvest, underlines the validity of the MegaFon shareholders’ agreement in Russia. It confirms the court’s earlier ruling that any challenge to the agreement should be made under Swedish Law, which governs the shareholder agreement.

In October 2003, IPOC initiated proceedings against all the shareholders of MegaFon, including CT-Mobile, which Alfa Group controls, in the St Petersburg Court to prohibit representatives of competitors of MegaFon being elected to the management and executive bodies of management. The court granted IPOC’s request for these preliminary measures. However, at the substantive hearing, the court held that Stockholm was the correct place for the dispute to be resolved in light of the MegaFon shareholders’ agreement.

Alfa somewhat farcically then decided to appeal a ruling in its own favour, lost and appealed yet again. The decision of the Appeal Court was upheld this week by the Federal Arbitration Court, where Alfa lost its last right to challenge the ruling. The Federal Arbitration Court upheld the original judgement and confirmed that IPOC’s claim should be decided in Stockholm.

In light of Alfa’s initial failure to convince the St Petersburg Court that it should be allowed to ride roughshod over the MegaFon shareholders’ agreement, Alfa then sought to overturn the agreement in the Moscow Arbitrazh Court. The Moscow Court also dismissed Alfa’s case.

Following defeats in both Moscow and St Petersburg, Alfa moved the corporate seat of CT-Mobile to the site of Alfa’s TNK oil affiliate thousands of miles away in the remote Russian region of Khanti-Mansisk, whose economy is heavily dependent on Alfa related investment, and successfully persuaded its courts to overturn the MegaFon shareholders’ agreement on the basis it conflicts with Russian Joint Stock Law. IPOC, TCI and TeliaSonera have appealed this ruling.

IPOC has already won an arbitration ruling, upheld by the Swiss Supreme Court, which found that Alfa had knowingly engaged in an illegal scheme to deprive IPOC of its rightful ownership of part of the disputed MegaFon shareholding and has received preliminary measures in the Stockholm Arbitration barring anyone connected to Alfa Group or Vimplecom from being nominated, voted on to, or remaining on, the MegaFon Board of Directors. Commenting, Roland Bopp, General Manager of IPOC Capital Partners Ltd, said:

“We welcome this decision. Throughout this dispute, Alfa has shown it is incapable of respecting the integrity of contracts for investment in Russian businesses and seems perfectly willing to launch an assault on the sound corporate governance of any business it’s involved in if it suits its purpose.

“It is quite clear that despite all Mikhail Fridman’s attempts to clean up the image of the Alfa Group, the leopard hasn’t changed its spots. Potential and existing investment partners have been well warned.”

© IPOC International Growth Fund Ltd., Media Strategy agency