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Law society warning over Russia’s ‘state-sponsored intimidation’

Law society warning over Russia’s ‘state-sponsored intimidation’ 

By Philip Aldrick

Last Updated: 8:53pm BST 10/09/2008

A leading international law society has condemned Russia for the “state-sponsored intimidation” of lawyers representing HSBC and the hedge fund Hermitage Capital Management after they uncovered a large alleged tax fraud. 

In comments that will add to growing unease about operating in Russia, the International Bar Association warned of a “deterioration in the rule of law” after officers at the Interior Ministry raided the offices of lawyers working for Hermitage and HSBC and issued summons for them to appear as witnesses on cases in which they are acting. 

Mark Ellis, executive director of the IBA, said: “Respect for the role of lawyers and the independence of the judiciary represent an essential feature of the rule of law. When government agents interfere with the work of lawyers, it is not only the legal profession that is threatened, but the overall legal order in the state.” 

Hermitage claims to have been under attack by sophisticated criminals with connections in Russia’s Interior Ministry. The Ministry last month raided four law firms in Moscow, including Firestone Duncan of the US.

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  • Hermitage believes the targets were lawyers working to recover three investment companies owned by HSBC on behalf of Hermitage that were allegedly stolen in a complex fraud last year. The stolen companies were used to falsely reclaim from the state $230m of tax paid by Hermitage in 2006.

    William Browder, Hermitage chief executive, said: “These recent acts of egregious intimidation against the four law firms acting for us in Russia underscore the degree to which legal nihilism has now overwhelmed the last vestiges of the rule of law in Russia.”

    Hermitage’s problems are likely to add to pressure on Russia after apparent political interference at TNK-BP and Royal Dutch Shell’s Sakhalin 2 gas project.

    Ministry officers raided the four law firms on August 20, seizing confidential client files and powers of attorney as well as “a suspicious package that had been delivered to one of the offices shortly before the raids”, Hermitage said. Three lawyers were subsequently ordered to appear for questioning over the companies Hermitage alleges were stolen and “used to steal $230m from the Russian government”.

    The Ministry claimed the lawyers needed to be questioned because “they had actively complained about the fraud and had taken legal actions to defend the HSBC companies”, according to Hermitage. However, Hermitage alleged that “the summons were not sanctioned by any Russian court, as required under Russian law”.

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