07 Mar 2022

Freshfields to pull out of mandate advising Russian bank in $535m High Court 'tuna bonds' dispute

UK Magic Circle firm says it is 'immediately taking steps' to stop advising VTB after facing criticism last week

London's Royal Courts of Justice

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Freshfields Bruckhaus Deringer is pulling out of a mandate advising Russian bank VTB on a long-running $535m dispute in London’s High Court.

Today's decision comes after the UK Magic Circle firm faced criticism last week for continuing to act for the bank in the aftermath of Russia's invasion of Ukraine.

At the time, the firm declined to comment on the case citing ‘stringent client confidentiality’, although it stressed it was acting ‘swiftly and responsibly with regard to ongoing mandates’ in the light of the conflict.

Today, however, the firm confirmed it was ‘immediately taking steps to terminate our litigation mandate with VTB’.

The decision comes as international law firms with significant Russian operations and client rosters scramble to respond to Russia's invasion of Ukraine by calling time on their Russian work, even if it does not directly fall foul of escalating sanctions.

Earlier today, Norton Rose Fulbright said it would close its 50-strong Moscow office and wind down Russian work connected with the Putin regime as soon as possible. It also pledged to donate any profits it makes from ongoing work it cannot immediately extricate itself from 'to appropriate humanitarian and charitable causes'. Linklaters said it was closing its Moscow office on Friday.

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More coverage of the impact of Russia's invasion of Ukraine on the legal profession

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Freshfields' soon-to-be former client, VTB, is suing Mozambique for repayment of a $535m loan in the aftermath of the ‘tuna bonds’ scandal when the government defaulted on $2bn of sovereign bonds issued to support its fishing industry.

Freshfields partners Christopher Pugh and Simon Orton have been advising VTB Capital and VTB Bank (Europe), instructing Fountain Court’s David Railton QC, Timothy Howe QC, Adam Sher and Ian Bergson. 

At a High Court hearing last week, Fountain Court’s Railton told the court the UK government had granted a licence allowing VTB to pay Freshfields' legal fees and expenses and that the legal team considered that it should take part in the hearing ‘as a matter of professional obligation’, Bloomberg reported.

In today’s statement, Freshfields ‘strongly’ condemned the actions of the Russian government and expressed ‘solidarity with all those affected’.

‘From the outset, the firm has acted swiftly and responsibly with regard to both ongoing and new client mandates,’ the statement said. ‘We took immediate steps to terminate, suspend or decline mandates, and we are clear that we will not act for companies or individuals with close ties to the Russian state, with connections to the wider leadership regime, and/or who play a role in supporting or facilitating the current Russian military action.’

The firm said its decision to terminate its VTB litigation mandate was ’in line with this clear position’.

Although the UK government froze the assets of Russia’s second-largest bank on the day of the Ukraine invasion, it granted it a 30-day licence to allow it to wind down transactions and pay staff.

Later this week, however, the bank is due to be excluded from the Swift global payments messaging system and the Financial Times reported on Sunday that it would be withdrawing from Europe in the light of the sanctions. 

A full hearing hearing of the tuna bond litigation is scheduled for next year in London’s commercial court.

Fountain Court declined to comment.

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