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King & Spalding lands $12bn arbitration case against Russia for Pugachev

King & Spalding’s London office has been instructed on a $12bn arbitration brought against the Russian government by Sergei Pugachev, a tycoon once dubbed ‘Putin’s banker.’

The founder of Mezhprombank, Pugachev is taking Russia to arbitration after his business empire was carved up after falling out of favour with the country’s president Vladimir Putin. He alleges that government investigations against the bank were constructed because of ‘political motivations’.

Pugachev, who struck up a close friendship with Putin during his early years as president, was accused of embezzlement and fraud by Russian authorities and later fled to London. An English court has since ordered Pugachev to give up his Russian and French passports and remain in the UK while the Russian government’s Deposit Insurance Agency case against him continues. Pugachev, who lives in Battersea with his socialite partner Alexandra Tolstoy, a descendent of the novelist Leo Tolstoy, has had his assets frozen.

Arbitration partner Nick Cherryman, who joined King & Spalding’s London office from Fried, Frank, Harris, Shriver & Jacobson in April, is leading Pugachev’s $12bn claim. Fried Frank were acting for Pugachev in litigation brought in the English courts by the Deposit Insurance Agency but stopped after Pugachev could no longer pay for the work.

The case has been filed the Permanent Court of Arbitration in The Hague, the Netherlands, where Shearman & Sterling won Yukos shareholders a $50bn arbitration award in July 2014 after the Russian government systematically destroyed the energy company after its chief Mikhail Khodorkovsky became a political rival. Cherryman is being supported by Tom Sprange QC, who is also based in London. It is likely that the case will be filed for arbitration through Russia’s bilateral investment treaty with France, given Pugachev has a French passport.