Dmitry Kosarev: The court will decide which one of us is right

Originally published by Prime News Agency (Russia) on April 6, 2016

MOSCOW, April 6 PRIME. The trial between Dmitry Kosarev and VTB Capital Plc continues in London. The businessman, who owns through Empreno Ventures Limited76% of the shares in one of the largest telecom operators Vivacom ( "VIVACOM") thinks that the investment bank and several of its top manager tried to sell the shares of the telecom at a tender for a much lower price to a related party. Dmitry Kosarev tells about the prospects of litigation and strategies of Vivacom for protection against appropriation.

- What about the tender for the sale of Vivacom at this moment?

- In principle I consider this auction as illegal and the fact that all almost serious buyers refused to participate in it or were excluded from the procedure for formal reasons, only confirms my point of view. I know for example that the American media mogul Mark Snyder expressed willingness to participate together with the investment company CVC. The partners were planning to invest 300 million Euros in company shares plus 180 million for repayment of the loan from VTB. But as the buyer requested to be given the opportunity for due diligence analysis of the company, he received a refusal.

As a result, only two candidates take part in the tender and even, as far as I know, one partner is VTB, and the second - the subsidiary bank of VTB. As you know Spas Rusev was announced to be the winner who, you see, had offered the highest price - 150 milion Euros plus 180 million to repay the loan. In fact he agreed to buy the company without due diligence. This fact reinforces my opinion that Rusev is conspiring with the managers of the Bulgarian office of VTB Capital and his purpose is to acquire the asset at a lower price, then sell it. Judging by the independent evaluation of the company, my losses of the deal of VTB with Rusev totaled at least 250 million Euros, as I am the largest stakeholder of Vivacom. In his interview for the Bulgarian edition of "Capital" Mark Schneider gave a very accurate evaluation of the tender saying that VTB was both a seller and a buyer, describing it mildly, as opaque.

- Since the auction ended a few months ago, why do you think the deal with Spas Rusev is not closed yet?

- First of all, because of the efforts made by my lawyers to protect my interests as a stakeholder of the company. However, as the representatives of the bank repeatedly stated, they still plan to finalize the deal. I think they are forced to do so because of personal interests, without worrying what will be the consequences for the bank.

But I also think that senior management of the bank realizes the consequences which will be faced in the event that the decision for the deal with Rusev is approved. If this happens, the bank will be forced to take excessive risks which significantly exceed the amount of the credit given ever to Vivacom.

- Tell us in more detail what efforts by your lawyers are you talking about?

- We made a number of claims against the structures of VTB and Spas Rusev in various jurisdictions. Moreover we filed a complaint with the British Serious Fraud Office with a request to check for signs of corpus delicti in the actions of the bank and its top executives - key figures in the group VTB Capital: Yuri Soloviev, Alexey Yakovitski and Nick Hat. My lawyers did a tremendous job of collecting evidence of illegal actions of VTB Capital, which were already presented during the trial.

Moreover, I made a claim in London's High Court in connection with the attempted sale of shares of Vivacom at a lower price as a result of an illegally held opaque tender.

I also filed a complaint to the British financial regulators (Prudential Regulation Authority and the Financial Conduct Authority) and the prosecution of Luxembourg about the attempted sale of impounded shares. Finally, I turned to the European Commission regarding the rude violation by VTB of the competition rules of the European market. Moreover, my subsidiary company filed a claim for recovery of the unlawfully possessed by Crusher (100% subsidiary of VTB) 33% of Vivacom, paid still in 2013, but still illegally held by VTB. The claim was filed at the International Commercial Arbitration of the International Chamber of Commerce (ICC) last November. In supportof the claim we turned to the courts in Luxembourg for a protective measure for these 33% shares.

In fact representatives of VTB in comments to an article in a Russian newspaper some time ago said that the European Commission knows nothing about the shares I acquired in Vivacom, therefore they are illegal. This is a lie! The European Commission was notified and did not have any questions for me, and no one questioned my deal.

Moreover, if "there were questions" and the deal was void as they are trying to present things from VTB, would my lawyers complain in the Serious Fraud Office? Nobody would deal with that, no any lawyer in London, especially the firm Fried Frank, representing my interests.

- Tell us more about what happens in the courts of Great Britain and Luxembourg?

- The case in Luxembourg is closely associated with the decision of the International Arbitration of the ICC, so one cannot expect rapid development of events. The representatives of VTB probably understand that their position in the Arbitration for the case of restoring my 33% of Vivacom is weak as these 33% were paid as early as in 2013 and no one disputes that the shares must be returned to my subsidiary company, so the only thing they can do is to drag the case indefinitely. I think we will have to spend some time in the Arbitration.

As far as London is concerned, the lawyers of VTB finally recognized the jurisdiction of the British courts over the English VTB Capital.

- What does it mean for you and for VTB – the recognition of the jurisdiction of the London court?

- In terms of the schedule of the trial it significantly shortens the case. That is, the faster we will get to consideration of the actual matter. The faster the problem is solved, the less likely the current management is to materially affect the value of the company. The second and very important thing, I think, is that the fast recognition of jurisdiction by VTB, i.e. fast transition to examining the actual dispute suggests that the bank will not fulfill the deal with Rusev.

- Why are you so sure that the bank will not fulfill the deal with Rusev?

- I judge from my experience in the financial circles. I know how the largest financial institutions work and I am aware of the intricacies of the legal organization of the process. But after claiming that everything is done according to the rules, let them close the deal with Rusev and not worry about anything. The British court will decide which of us is right. But I think they will not dare to fulfill the transaction, anyway.

- Let's for a moment imagine that you and the bank withdraw the counterparty claims, what do you think is the ideal solution in this situation?

- First, there is no any "counter-claims." There are complaints to state and international authorities and claims against VTB and its affiliates on behalf of my structures in connection with the all-known fact that Schneider has already mentioned. There are no claims against me. I legitimately acquired 76%, 33% of which I hope sooner or later will be returned from their illegitimate holder – the subsidiary of VTB. So now we look at some hypothetical situation. In this hypothetical situation, the bank can arrange a new, truly transparent tender, as it invites all interested investors. Also, I am still ready to organize the refinancing of the loan of 180 million Euros, but this bank must stop trying to seize the company and give me back my 33% shares. However, this requires the bank to take certain internal decisions, which I think will be very difficult, given everything done and spoken so far.