Russian activity in City of London faces further scrutiny by MPs

Dan Sabbagh
Oleg Deripaska has said he will resign from his company’s board in a bid to get US sanctions on his company removed. Photograph: Sergei Karpukhin/Reuters

A second select committee of MPs is expected to examine how Russian companies use the City of London after the foreign affairs committee singled out the corporate law firm Linklaters for its role in advising on last year’s flotation of Oleg Deripaska’s En+.

Parliamentary sources indicated that the Treasury select committee would take up the subject as part of its inquiry into economic crime and that Linklaters could again be asked to appear, potentially creating a confrontation with a law firm that has so far refused to give evidence.

Linklaters turned down more than one request to explain its involvement as the principal lawyers in the £5bn flotation of En+ in November 2017, which has become controversial as Anglo-Russian relations have deteriorated and Deripaska was placed on a US economic sanctions list.

The foreign affairs select committee said of Linklaters: “We regret their unwillingness to engage with our inquiry and must leave others to judge whether their work ‘at the forefront of financial, corporate and commercial developments in Russia’ has left them so entwined in the corruption of the Kremlin and its supporters that they are no longer able to meet the standards expected of a UK-regulated law firm.”

Linklaters did not explain why it had not wanted to give evidence but released a statement saying it was “surprised and concerned at the passing criticism” contained in the MPs’ report. “We reject any suggestion based solely on the fact that we – like dozens of other international firms – operate in a particular market that our services may somehow involve the firm in corruption, state-related or otherwise.”

Linklaters shared $35m (£25m) in fees from the lucrative float with US law firm White & Case as well as Bank of America Merrill Lynch, Citigroup, Credit Suisse and JP Morgan. Typically, lawyers tend to share about half of the total pot of fees.

Senior backbench MPs are coordinating their inquiries into Russia and have set up a steering group designed to ensure that select committees do not overlap. It is chaired by Tom Tugendhat, the chair of the foreign affairs committee, and includes Nicky Morgan’s Treasury committee, as well as the digital, culture, media and sport committee which is inquiring into fake news.

The foreign affairs committee complained that the successful listing of En+ and sales of Russian sovereign debt in London sent out a mixed message that was “encouraging President Putin and his associates” to conclude that their money “is safe and welcome in London”. But shares in the company tumbled after the US placed Deripaska on a sanctions blacklist in April.

En+, which owns a controlling stake in the aluminium firm Rusal, is chaired by the former Conservative energy minister Greg Barker, who is trying to get US sanctions removed from the company. On Friday, Deripaska announced he would resign from the board as part of Lord Barker’s plan, which would see him reduce his shareholding below 50% in return for the removal of sanctions.