#16 - JRL 7126
New York Times
April 1, 2003
Russian Suit Dismissed in U.S.
By SABRINA TAVERNISE

MOSCOW, March 31 — Corruption and racketeering may have built some of Russia's post-Communist business empires, but that does not necessarily make them accountable under the American Racketeer Influenced and Corrupt Organizations Act, as some lawyers and investors have hoped.

Late Friday, a Federal court in New York threw out a $3 billion civil suit filed under the RICO law against Russian Aluminum, the country's biggest aluminum producer; the suit was filed by three small Russian metal-trading companies. The ruling said the dispute did not belong in an American court.

The decision further undermined efforts by Russian companies to use the racketeering law, which allows foreign companies to sue in the United States if at least some of the actions mentioned in the suit took place on American soil. A similar Russian case was thrown out by a court in Colorado last fall.

The aluminum suit claimed that Russian Aluminum had illegally seized the Novokuznetsk Aluminum Plant in Siberia.

When they began the case in 2000, the Russian traders said that they had filed in the United States because they believed that they could not get a fair trial in Russia, where powerful executives like Oleg Deripaska, the politically connected part-owner of Russian Aluminum, wield great influence in the legal system.

Russian Aluminum officials held a news conference today in Moscow to publicize the decision of the American court that it was an "inconvenient forum" in which to try the case, meaning that it would not be reasonable to expect witnesses and the defendant in a Russian case to travel to a court in the United States. Bruce Marks, the lawyer for the companies that brought the suit, said today in a telephone interview that he expected his clients to appeal the ruling.

The RICO statute, enacted in 1970 in a drive against organized crime, was written so broadly and provides for such severe penalties that lawyers have tried to use it in a wide range of disputes. A series of recent rulings by the United States Supreme Court has reined in use of the statute somewhat, but it remains one of the most powerful legal weapons available in the United States.

Experts on the Russian legal system say ownership can be a fuzzy concept in Russia, where significant assets are rarely bought or sold in an entirely straightforward way. It may not be possible for either side in the fight over the Siberian aluminum plant to establish what an American court would recognize as clear title to it, they say.

Glenn Kolleeny, managing partner in St. Petersburg of Salans, an international law firm, said that while the Russian legal system is clearly imperfect, it needs to be used so that improvements can take hold.

"There is a certain legitimacy to the argument that Russian courts are still subject to improper influence," Mr. Kolleeny said. "But if we don't force those disputes to be litigated in Russia, courts here will never become modern tribunals. You wouldn't try a dispute over an Ohio steel company in Mexico or England."

At least one more similar Russian case is pending in an American court: Norex Petroleum, a Cyprus-registered oil services company, filed suit in New York last year against the owners, managers and affiliates of the Tyumen Oil Company, a major Russian producer.