(Fornebu, Norway and Moscow, Russia) - March 4, 2009. Telenor has filed a cassation appeal of the decision of the Eighth Appellate Arbitrazh Court in Omsk ordering Telenor to pay US$1.7 billion in connection with the claim made by Farimex Products, Inc. Telenor's appeal will be heard by the Federal Arbitrazh Court for the West Siberian District, located in Tyumen. Farimex has alleged that Telenor caused losses to VimpelCom by delaying VimpelCom's acquisition of loss-making Ukrainian mobile operator, Ukrainian Radio Systems (URS), and has demanded the payment to be made.
“The Omsk Court’s decision contains grave substantive and procedural errors, and we have no intention of paying any claimed damages based on this ruling,” said Jan Edvard Thygesen, Executive Vice President and Head of Telenor’s Central and Eastern European operations. “This decision is inconsistent with Russian law, and should be reversed. We are confident of our position and believe Russia’s higher courts will acknowledge the gross violations of law in the decision and the risk of permitting a dangerous precedent to stand, and, following an unbiased and impartial review, will reverse the decision and dismiss Farimex’s claim.”
In its suit, Farimex alleged that Telenor-nominated members of VimpelCom’s Board of Directors delayed VimpelCom’s 2005 acquisition of URS. Telenor says its Board members opposed the acquisition because URS was over-valued and had no credible business plan, and because there was a lack of transparency in the deal, including no information regarding the identity of the beneficial owners of the sellers of URS. To date, the identity of the beneficial owners of the sellers of URS has not been disclosed.
At the time of the proposed acquisition, there was a high level of penetration in the Ukrainian market. Based on the multiples used to value comparable assets, URS’s US$231.3 million purchase price was too high. This information was openly available to all shareholders at the time of decision by the EGM 14 September 2005. URS was acquired in November 2005. Currently, despite investments made by VimpelCom in excess of US$600 million, URS continues to make losses and, as of December 31, 2008, had only a 4 % market share (source: AC&M Consulting).
“We have received the Court’s written decision ordering us to pay US$1,728,297,207 to VimpelCom,” said Thygesen. “We have filed our appeal and will file whatever other documents are necessary to prevent Alfa Group or Farimex, using this illegal decision, from stealing our VimpelCom shares and undermining foreign investments in Russia,” said Thygesen.
“The recent decision of the appellate court in Omsk sets a dangerous precedent, which undermines the foundations of Russian civil law. It is inconceivable to me that this precedent would be allowed to remain by the Supreme Arbitrazh Court. The Russian state has made a public commitment to the anti-corruption agenda. This case will be a litmus test for the world to see,” said Dimitry Afanasiev, a partner in the law firm, Egorov, Puginsky, Afanasiev & Partners
Dag Melgaard, Communications Manager, Telenor ASA
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Anna Ivanova-Galitsina, PR and Communication Director, Telenor Russia
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