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2 Legal bills leave Tajikistan in the
cold By John Helmer
MOSCOW - In the good old days, when
intrepid Englishmen competed with Russians for
commercial and military footholds in Central Asia,
the object of their great game was to fill the
local bazaars with English-manufactured goods and
extract in exchange as much treasure as the locals
could be gulled into giving up.
Never in
two centuries, however, was there ever an
Englishmen (or Russian), who played this game as a
practicing lawyer. So, who could have imagined
that what moves today along the old Silk Road to
Dushanbe are invoices for legal services,
performed in the London courts, for the price of
which the great despot of the Pamirs is prepared
to let his country's children freeze to death for
lack of money to pay for
heat.
In London, meanwhile...
Herbert Smith, one of the largest-billing
of British law firms, has been forced to reveal
this month in the High Court in London that it is
charging the Tajikistan government more than
US$100 million for a three-year court claim
ordered by Tajik President Imomali Rakhmonov
(Rahmon). Rahmon's targets are a group of aluminum
traders and managers, now based in London, who
were ousted from the Tajikistan Aluminum Plant
(TadAZ, Talco) after getting too close to the
president's interest in Tajikistan's principal
industry.
The fee numbers and estimates
were part of the disclosures that were tabled in a
High Court hearing on April 15 before Mr Justice
Tomlinson. Herbert Smith is the law firm acting
for the Tajik smelter (Talco), which is wholly
owned by the Tajikistan government and directly
supervised by Rahmon. The estimate of costs from
Herbert Smith (aka Herbies in London legal slang)
also covers barristers' fees, which include those
of Murray Rosen QC, who is acting for Talco on
Herbies' instructions.
Additional case-fee
charges of 10 million pounds (US$20 million) have
also been revealed. These are being run up by a
British Virgin Islands-registered company called
CDH, which is a cutout in the complex aluminum
trading arrangements devised by Rahmon's
government between Talco and its Norwegian
supplier and partner, Hydro Aluminum. CDH is being
represented in the High Court by Osborne Clarke.
The total of $120 million represents 5.2%
of the gross domestic product of Tajikistan, the
poorest of the former Soviet Union member states,
in 2005. That was when Rahmon and the aluminum
plant launched the court case against Avaz
Nazarov, a Tajik national, who had traded with the
plant until Rahmon ousted him in late 2004.
After Rahmon's plant sued Nazarov and the
Ansol group of companies, and several others
associated with their business, Ansol
counter-sued, charging that the plant had
defrauded the Nazarov group. Also included at the
time in the counter-claim were Oleg Deripaska and
Alexander Bulygin, who controlled Russian Aluminum
(Rusal), when it persuaded Rahmon to oust Nazarov
and Ansol, replacing them with Rusal. Also accused
in the counter-claim was Rahmon's brother-in-law,
Hassan Saduloev, Tajikistan's most powerful
banker.
That action also triggered a
contract violation claim by Hydro Aluminum, which
took its case to the London Court of Arbitration,
claiming a total of $150 million in costs and
losses. Herbies represented Talco in that
litigation, which ended in a ruling in favor of
Hydro. Herbies then represented the plant before
the High Court and an appeals court in trying to
keep the arbitration judgement against Talco from
being published.
Not victims but
perpetrators of fraud Ruling in that case,
Justice Morison of the High Court's Queens Bench
Division wrote, in an opinion dated May 18, 2006,
that Talco/TadAZ "are not the victims of fraud,
they have been the perpetrators of it in this
litigation ... [Talco] has been involved in
deliberate attempts to mislead the [Arbitration]
Tribunal and have committed acts which in this
jurisdiction are serious crimes [forgery and
attempting to gain a pecuniary advantage by
fraud]".
Herbies declines to say how much
they billed the Tajiks for that case. The judge
was especially critical in his ruling of Simon
Bushell, one of the Herbies lawyers involved in
the case. "I regret to note," Morison wrote in his
opinion, "that his [Bushell's] witness statements
do not properly disclose who told him various
things which he appears to assert are within his
own knowledge. It is especially important ... that
Mr Bushell properly complies with the rules when
making his statements ... If ever there was a
flimsy case, this is it ..."
Bushell
reports on the Herbies website that his
"credentials" include representation of "Tajik
Aluminum Plant in English High Court and BVI High
Court proceedings alleging fraud and seeking the
recovery of damages in excess of US$485m".
Rusal agreed to settle out of court with
Nazarov in 2007. After that, Rahmon and his
government instructed Herbies to launch a new suit
accusing Rusal of fraud. This was dismissed by the
High Court; but as Bushell points out himself, it
is currently being pursued in the British Virgin
Islands. The costs of this ancillary case were not
revealed in the High Court this month, but they
are believed to take Herbies' stake in
Tajikistan's treasury several million dollars
beyond the $100 million estimate disclosed on
April 15.
The involvement of the London
law firm follows the revelation in a February
hearing in the High Court that Herbies has been
billing its Tajik clients $11 million per month
this year.
According to the latest data
available and published by Legal Week, in the
first half of 2007, Herbies billed a total of $381
million. This placed the firm fifth in rankings of
the largest revenue English law firms, but it was
also the fastest growing, with fees jumping 26%
for the period, compared with the same time in
2006.
For all of 2006, Herbies ranked
ninth in the UK lawfirm listings with 296 million
pounds in billings. The firm identified its
biggest clients as BP, Credit Suisse, Fortune
Brands, Royal & Sun Alliance, Standard Life,
and Sumitomo Corporation. There has been little
public reference to the Tajik aluminum retainer,
and Herbies' spokesman Sarah Freeman was reluctant
to answer Asia Times Online questions about the
case. Asked if Talco is Herbies' largest client,
and what fees were earned in the ancillary cases,
the spokesman replied: "Our client has asked us
not to make any comment on this matter."
Bushell declined to say how much Herbies
charged Talco in the losing defense against
Hydro's claims in 2005-2006. He was also asked to
respond to the criticism made of his litigation
conduct by Justice Morison; he did not reply.
London sources believe Herbies'
involvement in the Tajik aluminum case may be
setting a UK, if not a world, record. Alex
Novarese, editor of Legal Week, said: "The largest
legal fee that I know of for a London-based piece
of litigation is the Bank of England's costs for
defending a long-running action related to the
collapse of the bank BCCI. The total bill over a
period of more than a decade was in the region of
75 million pounds for defense counsel
[Freshfields]. Anything over 20 million is very
unusual in the UK."
The revelation of the
enormous legal fees Herbies has been earning from
Rahmon's administration contrasts with the
desperate poverty the Tajik government has pleaded
over the winter months, when electricity supplies
to hospitals failed. During this period, Herbies
told the High Court it was unsafe for its lawyers
to go to Tajikistan.
Alleged
impecuniosity In his May 2006 judgement,
Justice Morison reviewed claims by Herbies that
the aluminum plant lacked money to meet the Hydro
claims. "The case for alleged impecuniosity is not
made out," the judge wrote. "If the Tajiks
themselves do not have the funds, then that may be
because, as was suggested in argument, [CDH] has
been creaming off the profits for the benefit of
people whose identities are as yet unknown".
Paying out money to London lawyers is not
the only record Rahmon has been setting. As Asia
Times Online reported last month ( IMF blows whistle on Tajik
corruption) , on March 5 the
International Monetary Fund (IMF) took the
unprecedented step of announcing that the
Tajikistan government and central bank have
defaulted on their IMF loan agreements. According
to the IMF, at least $79 million had been
improperly diverted from a loan for poverty
reduction. The IMF said it was calling in
repayment of $47.4 million.
In addition,
the IMF acknowledged to Asia Times Online it had
opened a new investigation into the diversion,
misreporting or possible fraud relating to other
loan funds. The Asian Development Bank and other
multilateral lenders to Tajikistan have reportedly
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