Shareholders of Norilsk Nickel switched to sanctions

“Kommersant” became aware of the first decisions of the High Court of London on the suit of Rusal against the head and largest shareholder of MMC Norilsk Nickel Vladimir Potanin. The court, in particular, ordered the businessman to notify Rusal of his intention to reduce his stake in Norilsk Nickel to less than 11.25%. Also, Mr. Potanin must, within three months, find lawyers who could represent him, given the UK sanctions imposed against the businessman. Lawyers interpret the situation in favor of Rusal.

The London High Court made the first decisions on Rusal’s lawsuit against Vladimir Potanin and Whiteleave Holdings Limited (a structure of the Interros holding controlled by the businessman). The plaintiff and the defendant are the largest shareholders of Norilsk Nickel. Mr. Potanin owns 35.95% of the MMC through Interros, while Rusal owns 26.25%.

According to the lawsuit filed in October 2022, under the management of Vladimir Potanin, the MMC lost a number of key assets, which led to losses for Norilsk Nickel and its shareholders. In particular, according to Kommersant’s sources, the NordStar airline, the Industrial Construction and Installation Company and the Logistic Center transport and logistics services operator are mentioned. Rusal demands the resignation of Vladimir Potanin from the position of the managing partner of Norilsk Nickel, as well as compensation for losses. Participants of the process did not provide comments.

As follows from the documents that Kommersant has read, in November 2022, a British court suspended the process for 90 days, until February 22, so that the defendants could hire lawyers who received special licenses from the UK Financial Sanctions Administration (OFSI). Vladimir Potanin was blacklisted by the UK in June 2022, and in December he and Interros were included in the US SDN list. Rusal was subject to US sanctions in 2018. However, in the end, the company was withdrawn from them as a result of a deal on the refusal of the founder of the company, Oleg Deripaska, from control.

Secondly, the defendants are obliged not to reduce the direct or indirect share in the capital of Norilsk Nickel below 11.25% without prior (30 days) notice to Rusal. According to A1 partner Dmitry Chernenko, the reason is that Rusal in the lawsuit, among other things, requires a forced buyout of MMC shares in accordance with the shareholder agreement concluded in 2012. “To ensure such an opportunity in the future, Rusal insisted on the refusal of the defendants to reduce their stake in Norilsk Nickel to less than 11.25%. But the obligation does not mean that the defendants cannot reduce the share at all, they are only obliged to notify Rusal in advance. Having received such a notification, Rusal will have the right to apply to the English court to block the deal,” the lawyer notes. According to the shareholder agreement, in case of material violations, a 1.875% stake in Norilsk Nickel can be redeemed from the offending party for $1, or 7.5% of shares at a 25% discount.

Defendants also agreed that Whiteleave Holdings Limited’s address in Cyprus could be used for notification of the claim. As Mr. Chernenko explains, otherwise, the defendants could delay the process, insisting that the notification of Vladimir Potanin in the Russian Federation be carried out in accordance with the Hague Convention (through the Ministry of Justice of the Russian Federation).

More interesting is the question of how to prove losses to the plaintiff, says Dmitry Dedov, senior adviser at the law firm Ingvarr. “First, you need to prove the existence of losses for Norilsk Nickel, and then for Rusal as its shareholder. But even in this case, management can be protected (that is, it will not be held liable) if it has exercised the due degree of caution and prudence. In addition, even if the court recognizes the existence of losses, they will be compensated to the company itself, that is, Norilsk Nickel, ”explains the lawyer.

Dmitry Chernenko interprets the court’s decisions as the success of Rusal and “an example of how sanctions affect the ability of the parties to defend their rights in foreign courts.” “As far as I know, OFSI is very slow in issuing licenses. And now there are not so many English firms ready to work with sanctioned clients even under a license,” the lawyer adds. The plaintiff is represented by PCB Byrne LLP, a strong firm.

Evgeny Zainullin, Anna Zanina