Conflict between shareholders of UC Rusal

A conflict has broken out between the shareholders of UC Rusal. The formal reason was the contract with Glencore (one of the shareholders of Rusal) for the sale of more than half of Rusal’s aluminium. Renova of V. Vekselberg set a veto that was ignored by the main owner of UC Rusal, O. Deripaska. As a result the shareholders agreement was violated and Renova, that has a different position with O. Deripaska on a number of issues, has gained an opportunity to press the partners by means of the Court.
Two sources of Kommersant familiar with the situation in UC Rusal said that in November the Board of Directors considered the issue of the signing of a long-term contract (for 70 years) with Glencore (holds 8.75% of Rusal’s shares) on the purchase of 80% of aluminium that is exported by the company. Rusal exports about 70% of its aluminium production, i.e. Glencore was supposed to gain control over a half of the company’s sales. According to Rusal, the stake of global traders is about 30% of its sales in monetary terms, the rest is realized by direct contracts. In Jan-September Rusal sold aluminium and alloys for $8 bln.
One of Rusal’s shareholders - SUAL Partners of V. Vekselberg and L. Blavatnik (15.8%) – were against the contract with Glencore and set a veto against it. The reason was that the management of Rusal (headed by O. Deripaska, holds 47.41%) suggested a contract without holding any tender or auction among other traders.
Sources of Kommersant say, according to the shareholders agreement of UC Rusal, a veto set by one of the shareholders for this or that issue, obliges the rest to vote against. Glencore didn’t participate in the voting for the contract as an interested party, Onexim Group of M. Prokhorov (17.02%) was ready to support the contract but voted against because of the shareholders agreement.
O. Deripaska (47.41%) ignored the veto having violated the shareholders agreement, sources of Kommersant say, and the contract was approved. However, the document hasn’t been signed as yet, i.e. in fact the violation of the agreement hasn’t in fact caused any damage as yet.
Nevertheless SUAL Partners has already made a claim against O. Deripaska. It is about the corporate procedure of the settlement of conflict issues in the framework of the shareholders agreement. One month is given for that, the deadline is in the 20s of December. If the conflict is not settled, SUAL Partners will have the grounds for the Arbitration proceedings. En+ of O. Deripaska and Glencore don’t comment. SUAL Partners refused to discuss the issues concerning the meetings of the Board of Rusal saying that they should be settled in conformity with the corporate procedures and the current shareholders agreement of the company. Rusal has confirmed to Kommersant that the Board of Directors approved the deal by the majority of votes and the deal fully meets the company’s interests.
One of the interlocutors of Kommersant well familiar with the situation in Rusal thinks that the contract with Glencore was mainly a reason for the direct conflict of O. Deripaska and V. Vekselberg. The contract raises questions. It is for a long-term and for large volumes, and Glencore is an interested party. But it is one of the largest world traders and it can sell aluminium better than Rusal. Meanwhile the relationships of O. Deripaska and V. Vekselberg have recently been quite tense.
The thing is that O. Deripaska mainly ignores the minority shareholders of Rusal and their opinion, interlocutors of Kommersant say. He is in fact a single manager in the company. The positions of the parties vary by a number of issues. First, it is a possible sale of Rusal’s stake in GMK Norilsk Nickel (25%) where O. Deripaska was also engaged in the shareholders’ conflict – with the company’s management and Interros holding of V. Potanin. In the spring it became clear the minority shareholders of Rusal wanted to sell the package of Norilsk Nickel but O. Deripaska was against it. As a result in September V. Vekselberg was in a tough situation. As the chairman of UC Rusal’s Board he was officially selected for the negotiations with the management of Norilsk Nickel that made another offer on the purchase of shares. But at the start of the negotiations Rusal informed of its refusal from the deal, sources of Kommersant say.
Another issue that caused a conflict between the parties was the fate of UC Rusal’s plants in the Urals that used to be SUAL Partners’ property. UC Rusal wanted to shut down the aluminium production at these enterprises as it is unprofitable due to high prices for electric energy. KES holding supplies the major part of it (in the structure of Renova group of V. Vekselberg). As a result, UC Rusal accused Renova of not granting a discount to its plants, and Renova, in its turn, accused UC Rusal of not having modernized the enterprises to raise their efficiency. The Prime Minister V. Putin had finally to settle the conflict.
Moreover, SUAL Partners wanted to receive dividends from UC Rusal – the financial situation of the company has improved and the covenants are close to those that allow to make payments. However, the management of Rusal headed by O. Deripaska prefers to leave funds at the company. The CEO of Onexim group, D. Razumov, recently confirmed that one of the reasons O. Deripaska doesn’t sell Norilsk Nickel is the threat that the minority shareholders will at once want to take the obtained funds out of UC Rusal.
The situation with the contract with Glencore is a means to show O. Deripaska that the minority shareholders can influence UC Rusal, attract the attention to their position, one of the interlocutors of Kommersant says. Meanwhile, Onexim group, the second largest shareholder of Rusal, doesn’t plan to participate in the conflict between O. Deripaska and V. Vekselberg.
The head of the practice for settlement of disputes of the Moscow office of Freshfields Bruckhaus Deringer LLP, M. Kulkov, says that in the world practice of the shareholders agreements two ways of ore-trial settlement of disputes are used. The first presupposes the attraction of the intermediary – it is determined beforehand and stipulates the process of selection. The second – parties exchange the claims and then negotiate for the possible agreement of their positions. Overseas about 80% of conflicts in the framework of the shareholders agreements are settled by negotiations, M. Kulkov says. However, in Russia this level is quite lower. En+ assured that they are interested in the amicable settlement of all the disputes.
If the conflict reaches the court, it might be the international commercial Arbitration courts in London, Paris and Stockholm or in England. It usually takes about 2 years to consider such issues, M. Kulkov says. In the process of the court hearings the courts might, for example, ban the execution of the decisions of the shareholders’ meetings. Sources of Kommersant say that in the case of the conflict between Rusal and SUAL Partners, that concerns the sale of the products of the aluminium company, the claimant might try to use quite strict interim measures, block some export flows.
Translated by Galiya Musabekova

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