From Russia with hate: aluminium wars spill over into London court

Russia's notorious aluminium wars of the mid-1990s may have been a long time ago and in a land far, far away, but, on a seemingly Siberian wind, they are blowing through London's Commercial Court.

Although the pistols and snow shovels have long since been downed, the pens of top lawyers have been taken up in their place. The first notable case is the ongoing battle between the Chelsea Football Club owner Roman Abramovich and his former mentor Boris Berezovsky.

The other, which has just got under way, involves two so-called oligarchs who amassed great personal fortunes from Russia's vast aluminium resources. One of them is Russian, one Israeli, and they are slugging it out over the small matter of ?2bn one claims he is owed by the other.

The claimant, the Uzbek-born Israeli billionaire Michael Cherney, 59, fought hard to have his case heard in the UK, where he has no significant links. It is going ahead even though Interpol have issued him with an arrest warrant from Spanish authorities over money laundering allegations, and he is therefore unable to travel here.

The defendant, Oleg Deripaska, 43, is the richest of them all, whose connection to the UK came to the fore in 2008 when details emerged of social engagements on his yacht off the coast of Corfu, attended by Lord Mandelson and the Chancellor George Osborne.

It has predictable though nonetheless extraordinary parallels with the Abramovich-Berezovsky case, which is still playing out in a courtroom on the floor above at the Rolls Building. Mr Cherney claims the two men were business partners, and that he had a legitimate, if unwritten, ownership stake in vastly profitable aluminium assets, for which he never received payment when the business was merged with another.

It is Mr Deripaska's claim that Mr Cherney was never a business partner, rather someone to whom he had to pay protection money, or krysha, the Russian word for roof, and that the relationship was forced upon him, a consequence of attempting to do business in a particular commodity, at a particular time, in a particular place where scores of people were murdered as workers rioted in the streets.

Mr Cherney has also been accused of owing $270m (?174m) to another businessman after signing an agreement for a Russian coal-producing organisation. He claims to have signed mistakenly after "consuming a tremendous amount of vodka" during a drinking session in Vienna in 2003.

At a case-management hearing yesterday, Mr Deripaska's legal team sought to portray Mr Cherney as a notorious figure, well connected to the criminal underworld. Paul Stanley QC described how he was sent back to Switzerland from the UK in 1994, carrying an invalid passport.

When the trial begins next April, leaked US diplomatic cables that describe Mr Cherney as a "notorious Russian crime figure" as well as a "Russian mobster" may feature. Mr Cherney will be likely to appear only via video link from his home in Israel.

The case's only other significant connection to the UK are two dramatically different versions of what happened when the two men met at London's Lanesborough Hotel in March 2001, when what would happen to the assets was supposedly discussed. Almost every fact is disputed.

Mr Deripaska's net worth is estimated at ?11bn. Mr Cherney's wealth is not known.

Oligarchs at war

Michael Cherney: Industrialist now wanted by Interpol

Born in Tashkent, Mr Cherney, together with his brother and other associates, formed TransWorld Group, which held a near monopoly on the Russian aluminium industry in the early 1990s. His close ties with a Yeltsin-era deputy prime minister, Oleg Soskovets, right, gave them the political protection needed during the murderous "aluminium wars".

Little is known about how Mr Cherney operated his businesses and the opaque deals done at the time, and it is expected the court case will shed some light on the most secretive business deals.

Mr Deripaska denies that Mr Cherney was ever his official business partner, and was instead simply someone whom he paid protection money to, given the chaotic state of Russia at the time.

With an Interpol warrant out against him, and multiple allegations of links to organised crime, all of which he denies, Mr Cherney is not able to travel much out of Israel, where he now resides. In May 1994 he was detained at Heathrow Airport and denied entry to Britain after authorities suspected his Polish passport was invalid. In Israel, Mr Cherney has attempted to rebrand himself as a philanthropist.

Oleg Deripaska: Survivor of Russia's brutal 'metal wars'

The 43-year-old is perhaps the archetypal oligarch. He rarely gives interviews, is uncomfortable speaking in public and has a controversial past that has led to his involvement in more than one lawsuit. And he has an enormous amount of money – around $28bn in 2008, according to Forbes magazine.

Mr Deripaska was the big survivor of the ruthless "aluminium wars" of the 1990s, during which several of his rivals were killed. He was the hardest-hit oligarch during the global financial crisis, and in 2009, it looked like his business might disappear. But he restructured around ?10bn of debts with Kremlin help, and an IPO of his Rusal empire. At one stage during the crisis, he was humiliated on state television by Vladimir Putin, who gave him a public dressing down and forced him to sign a contract after workers in a factory controlled by him went on strike. But, in the end, it was the Russian state which bailed out Mr Deripaska with billions of dollars of loans, a reward for his loyalty and abstinence from Russian politics.

Shaun Walker

Litigation capital: Why are so many cases heard here?

It would not be altogether inappropriate to fly the Russian flag over London's Commercial Court these days, where the blacked-out Bentleys of oligarchs are so often parked. Each case has its own reasons for being heard here. In some cases the participants are political exiles; in others parties claim that the disputed assets are governed by English law trusts. But the sympathy of the British judiciary, and its willingness to hear the cases, is on the whole a consequence of a general acceptance that Russia's court system will not offer a fair trial.