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    Central Asia
     Apr 30, 2008
Page 1 of 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

Continued 1 2 

IMF blows whistle on Tajik corruption
(Mar 26, '08)

Cover off Tajikistan's missing millions (Jan 11, '08)

Global tizz over Tajik aluminum deal
(Nov 21, '07)

1. Doubting Obama

2. Iran steps into enemy's territory

3. Taliban bitten by a snake in the grass

4. Brains, not brawn, in Afghanistan

5. Syria bristles at US charges

6. India, China hold G8 options

7. Selling the president's general

8. The meaning of stage II

9. Big, bad, and the bill is rising

(24 hours to 11:59 pm ET, Apr 28, 2008)


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