Russian sale ruled illegal by ICC

The sale by LV Finance of its share in Russia’s third-largest mobile phone company has been ruled “illegal” by the International Chamber of Commerce.

Russian private equity fund LV Finance has said that it will appeal against the ruling of the Geneva-based International Chamber of Commerce (ICC) in relation to the sale of a 25.1 percent stake in MegaFon, Russia’s third largest mobile phone provider.

The tribunal ruled that emerging markets fund IPOC, which is based in Bermuda, was the rightful owner of LV Finance’s stake in MegaFon. The ruling indicated that LV Finance’s attempted sale of the stake to Moscow-headquartered financial conglomerate Alfa Group, was therefore illegal.

Alfa is controlled by billionaire Mikhail Fridman who runs a joint venture company TNK-BP, which looks after energy giant BP’s Russian operations.

The dispute had arisen over an option agreement said to have been made between LV Finance and IPOC. IPOC says it exercised the option and therefore paid LV Finance for the 25.1 per cent stake in Megafon.

The ICC tribunal agreed with IPOC’s contention that LV Finance had therefore knowingly sold this stake twice: once to IPOC and again to Alfa.  IPOC also contends that Alfa had bought the LV Finance stake knowing that IPOC had prior legal rights to it, according to a report in the London Times newspaper.

LV Finance said that it was: “actively taking all steps to have the decision set aside, including by way of appeals,” according to a spokesperson.

Alfa said that it had not been a party to the ICC arbitration, saying in a statement: “It is scandalous to accuse Alfa of fraud or collusion with LV Finance.”

While the tribunal’s decision has no legal force, a shareholder that refuses to acknowledge an ICC ruling can be sued for breach of contract under a voluntary agreement by MegaFon shareholders, according to Dow Jones.

Further court cases are scheduled for later in the year on the matter, which is likely to impede any attempt by Alfa Group to engineer a merger between MegaFon and Vimpelcom, Russia’s second largest mobile firm, in which Alfa also has a significant stake.