Page 2 of
2 Legal bills leave Tajikistan in the
cold By John
Helmer
opened separate forensic
investigations, looking for $500 million in loans
intended to be channeled through the commercial
banking system to the cotton sector - next to
aluminum, Tajikistan's main line of business.
In an unusual acknowledgement, the World
Bank has admitted to Asia Times Online that the
bank has opened its own anti-corruption
investigation. Annette Dixon, the bank's director
for Central Asia, was asked if she and her
colleagues had been aware at the time of their
most recent loan to Tajikistan that the IMF was
having the problems that led to the default
announcement of March 5.
Sidestepping what
exactly the bank knew, and when, Dixon
conceded that "we are
working closely with the government of Tajikistan
to strengthen governance and address fiduciary
concerns". She also acknowledged that "analytic
work has been directed to areas that identify and
mitigate the risks of funds' mismanagement".
According to Dixon, the World Bank is backing
"Tajikistan's first public expenditure and
financial accountability review".
Dixon
admitted that the IMF discoveries have been a
major concern. "At the time that the Cotton Sector
Recovery Project was approved by the World Bank
board of directors [May 2007], the IMF and the
World Bank were not aware of the issues related to
the provision of inaccurate information by the
National Bank of Tajikistan (NBT) under the IMF
Poverty Reduction and Growth Facility. We strongly
support the IMF in requiring a comprehensive audit
of the operations of the NBT [National Bank of
Tajikistan]".
Multilateral bankers to
Tajikistan have been aware of the ongoing court
litigation in London, and statements by the
European Bank for Reconstruction and World Bank
have referred to the first of the cases - an
arbitration proceeding, launched by Hydro against
the Tajikistan aluminum plant for contract
violations costing $150 million. Hydro won its
claim in November 2005.
Dixon appears not
to have known that the court costs for Tajikistan
will amount to more than $120 million. This is
one-third of Tajikistan's outstanding debt to the
World Bank, as of February 29, 2008, totaling
$367.7 million. Dixon told Mineweb that in 2007
the government repaid the World Bank $1.28
million; this year, it is due to repay another
$1.64 million. According to the World Bank
director, Tajikistan's impoverishment has
qualified the government to receive World Bank
cash grants instead of loans "due to its high risk
of debt distress".
This month's High Court
hearing also revealed more details of what the
judge in the case is calling the "Hydro scheme".
Asia Times Online has earlier reported the scheme
as designed to transfer profits from Tajikistan's
aluminum production - the principal industry and
export of the country - to BVI havens, and
implicating the Norwegian firm in what critics in
Oslo have publicly called questionable business.
Sounds like corruption Ingvild
Vaggen Malvik, a member of the Norwegian
parliament's commerce committee, told the Oslo
newspaper NA24 late last year that the record of
Hydro's dealings in Tajikistan, "sounds like a
story about corruption from the beginning ... I
get the feeling that this is a company that needs
to do some housecleaning. Several things point in
the same direction and there are indications that
procedures must improve. It is clear that there
are many challenges when doing business abroad,
especially in regimes such as Tajikistan".
Hydro spokesman Halvor Molland told Asia
Times Online: "We have seen the press reports
about IMF's findings and actions in Tajikistan.
This information will be taken into account by
Hydro when assessing our engagement in
Tajikistan."
Oslo information suggests
there are growing differences between executives
inside Hydro over how to handle the problems in
Tajikistan and BVI. Last November, Hydro told Asia
Times Online it was clean. "Hydro has a zero
tolerance towards corruption and we are following
Hydro's guidelines in all parts of the world where
we are doing business. We have spent a lot of time
discussing issues concerning transparency and
corporate governance with the World Bank and EBRD
[European Bank for Reconstruction and Development]
and other NGOs."
In this month's High
Court proceeding, Justice Tomlinson went on record
with his concern that details of what he called
the Hydro scheme, linking Hydro to Talco, CDH and
another BVI cutout, Talco Management Ltd, may have
been intentionally wiped from computer records and
related evidence, sought for the court to review.
Testimony in the April 15 hearing in
London described the Hydro scheme as designed to
be loss-making for Tajikistan. "The Hydro
settlement agreement," counsel for the Nazarov
group told the court, "meant that Hydro supplied
alumina to TadAZ, which then supplied it to CDH,
which then supplied it back to TadAZ, and then the
aluminum did the same thing … this caused an
inevitable loss to TadAZ of, I believe, $27 per
ton because there was a discount one way and a
premium the other".
Judge Tomlinson
ordered that Herbies conduct a more comprehensive
search for documents, substantiating how the
scheme was operated. He gave the law firm just one
month to produce. "The principal basis is there is
a scheme. Plainly there is a document somewhere
that sets out a scheme and you have not produced
it," Tomlinson told the lawyers for the Tajikistan
plant. He was also critical of Herbies for its
conduct in the alleged computer wiping by software
identified in court, and admitted by Herbies, as
Acronis Privacy Export Suite 9.
Question mark over
integrity "The criticism which is made
against you," Tomlinson said, according to the
court transcript, "with which I have some
sympathy, at an interlocutory stage is the search
for documents has been unduly influenced by
persons in respect of whose integrity there is a
question-mark ... the criticism that is made is
that Herbert Smith have not necessarily - I am not
saying they have not, but they have not
necessarily gone as far as they ought to have done
within the bounds of what is possible to satisfy
themselves that they have discharged their own
duty."
Tomlinson is the second High Court
judge to register criticism over the Talco case.
"Tajik's approach to litigation," Justice Morison
wrote in his ruling of May 2006, "demonstrates a
contempt for the normal constraints which control
parties' conduct in highly charged adversarial
proceedings."
Testimony in the latest
hearing indicates that Hydro may be called to give
evidence, since it had made claims of fraud
against the Tajik plant in the arbitration
proceeding in 2005, and since it is party to the
new scheme.
Counsel for the Nazarov group
told Justice Tomlinson that Hydro's direct
evidence should be required for the trial. "You
have to look not at the Hydro contract award,
which was the award in the arbitration with Hydro
1, and not just at the settlement agreement which
has been disclosed, which amended the effect of
the award, but we have to look at the scheme
documents as well to know precisely how TadAZ's
loss interacted with Hydro's loss or claim and how
CDH benefited or not from that. So, in order to
understand the quantum of their claim, it's
relevant to that as well."
Hydro
management might rather trek to Dushanbe in the
cold than accept a summons to testify in London.
Spokesman Molland told Asia Times Online: "Hydro
is not a party to the UK High Court proceedings to
which you refer and Hydro has not in any way been
involved in such proceedings. As such, we are in
no position to comment on these proceedings."
John Helmer has been a
Moscow-based correspondent since 1989,
specializing in the coverage of Russian business.
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