Renationalized Bolshevichka Textile Factory May Stay in State Hands

Russia and Commonwealth Business Law Report July 29, 1996Vol. 7, No. 8

The British textile firm Illingworth, Morris Ltd. (IML) has suffered a setback in its efforts to overturn the Moscow arbitrazh court decision renationalizing AO Bolshevichka, in which IML had obtained a 49 percent share (see the Russia & Commonwealth issue of May 29, 1996 at p. 1).

The appellate arbitrazh court rejected IML's appeal on a technicality, i.e., because it was signed by the wrong person under the Arbitrazh Court Procedural Code. The signatory apparently lacked the proper power of attorney [doverennost']. Since the appeal was filed on the last day of the filing period, there was not enough time to cure the defect and refile. Sue Doust, the IML representative whose signature was challenged, said she found the court's action "very strange" since her signature had been accepted earlier in the case.

Mikhail Galyatin of Galyatin & Associates (tel.: +7095-181-2313), who says he advised Bolshevichka Director Vladimir Gurov to initiate renationalization proceedings before the Moscow prosecutor and that he provided the winning arguments, stated that the Court of Appeal, which rejected IML's request for review, has the authority to give "full and new consideration to the case. The sole exception is that new evidence may not be presented."

The Court of Cassation, which remains open to IML, says Galyatin, "has a narrower jurisdiction. It examines the legality and substantiation of the decision or resolution disposing of the complaint. In practice, this means that a Cassation Court will consider only questions of the violation of procedural rights and the incorrect application of material rights. New evidence or arguments to substantiate one's position will not be allowed. Also disallowed are references to the actual conduct of the parties and to the failure to prove the circumstances of the case. The burden of proof will be on Illingworth Morris.

"In my opinion," continued Galyatin, "the lower court decision was made without violation of procedural law, and the norms of material law were properly applied. You have to remember that instructions on the use of legal norms were given to the court by the Moscow procurator, the State Property Committee of the RF and the Russian Anti-Monopoly Committee.

"Thus the IML's chances to prevail have become a lot slimmer. But everything is possible in this world."

IML's chances to regain its 49 percent share in the Bolshevichka textile factory have been dimmed by an appeals court ruling on a technicality.

Sue Doust confirmed that IML has filed an appeal in the Cassation Court and said that her legal representative, White & Case, will argue that there were many technical breaches made by the lower court. IML's goal is to overturn the lower court's decision entirely or to at least win a remand. She said IML has no intention of walking away from the situation. It is a "long-term player" in Russia.

The Moscow Arbitrazh Court had nullified the sale of 49 percent of the shares in AO Bolsehvichka to IML based on its finding that IML had not complied with the privatization plan, which called for its investment to be made in no more than three years. IML worked out an agreement with Bolshevichka under which its investment would be made in five years, a condition less favorable to the seller. This was the primary ground cited by the court for declaring the privatization null and void.

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British Investor Fails To Regain Stake in Bolshevichka

Russia and Commonwealth Business Law Report, August 27, 1997, Vol. 8, No. 10

In a case that has been proceeding through the Russian judicial system for a year and a half, Illingworth Morris, Ltd. has lost another round in its bid to regain its 49 percent stake in Russian clothing factory AO Bolshevichka.

In early 1996, a Moscow arbitrazh court nullified the sale of 49 percent of the shares in Bolshevichka to IML, one of the largest producers of woolen products in Europe. The court ruled that IML had not complied with the state's privatization plan, which called for the company to make its investment in no more than three years. IML had worked out an agreement with the management of Bolshevichka under which its investment would be stretched out over five years, a condition less favorable to the seller. This was the primary ground cited by the court for declaring the sale of shares null and void.

The genesis of the dispute, according to IML, was the refusal of Bolshevichka's Russian manager to allow changes to the company charter. IML wanted its holdings recognized so that it could gain a seat on the board of directors.

The Russian press, however, has carried the charges of company manager Vladimir Gurov that IML refused to provide him with the technical documentation necessary to produce "Crombie" and "Dior" suits and that IML improperly denied Bolshevichka the right to export suits made under IML's license for sale on the lucrative European market.

The case has proceeded from the Moscow arbitrazh court to an appellate arbitrazh court to the court of cassation and finally to the High Arbitrazh Court. In July, Judge Yakovlev of the High Arbitrazh Court refused to allow IML to make a protest to the court Presidium, which could have reviewed the case fully.

Mikhail Galyatin, a Russian attorney who has been involved in the case, said:"In my opinion, the case is completely finished. You can say that the final period has been written in this case."

Sue Doust, an IML spokesperson in London, maintained that there are other options open and that they will consider them. "IML has spent 2 million to pursue this case," she said. "We have invested in other parts of Russia. We are long-term investors. We won't go away easily. We believe right is on our side."

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Kelly's Almost Coup

The Connecticut Law Tribune. August 26, 1991 / September 2, 1991.BEHIND THE BAR; Pg. 8

Rosemary P. McNicholas

The Center for Democracy, a Washington, D.C.-based pro-democracy group chaired by Updike, Kelly & Spellacy name partner Peter Kelly, last week scored a coup of its own when it became the only source of uncensored news emanating from the Soviet Union during the Kremlin's attempt to depose Mikhail Gorbachev.

Mikhail Galyatin, an assistant in Russian Federation President Boris Yeltsin's offices (known as the White House), sent minute-by-minute reports of the coup attempt and the Yeltsin-led resistance movement to the non-partisan Center for Democracy using one of the only electronic mail hookups in the Soviet Union. The center then sent the reports along to "The Voice of America," "Nightline" and The Washington Post.

But as his center took center stage, Kelly, a prominent lobbyist and Democratic heavyweight, was as far from breaking events as could be -- deep in the heart of the African bush on a safari.

"He'll sure be burned up that he missed this," notes Center for Democracy program director Paul Nathanson, adding that Kelly was recently in Moscow coordinating a center seminar on federalism, economics and the environment for Yeltsin and other Soviet republic leaders.

Kelly, like Gorbachev, may decide never to take a vacation again.

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