TeliaSonera AB, Sweden’s largest phone operator, was barred from enforcing a $932 million Swiss arbitration award in the U.S. over a botched sale of a stake in Turkcell Holding AS, which controls Turkey’s biggest mobile-phone service.
Cukurova Holding AS, the Istanbul-based company that negotiated the sale of its Turkcell stake in 2005 and then failed to deliver the shares, has insufficient ties to the U.S. to establish legal jurisdiction, a federal appeals court in Manhattan ruled today, overturning a lower court.
“It’s a big victory for Cukurova that frees it from an existing U.S. injunction so it can proceed to reacquire control of Turkcell if it so chooses,” Richard Holwell of Holwell Shuster & Goldberg LLP in New York, Cukurova’s lawyer, said in a phone interview.
Stockholm-based TeliaSonera has been seeking to expand beyond the Nordic region to boost revenue in response to falling prices and saturation in its home markets. The government-controlled company has cut jobs and is focusing more on data revenue to boost profit.
Turkcell has been at the center of a dispute among founder Mehmet Emin Karamehmet, who also owns Cukurova, TeliaSonera and Mikhail Fridman, the Russian billionaire. Fridman’s Alfa Group seized the 13.7 percent Turkcell stake through its Altimo unit when, it said, Cukurova defaulted on a 2005 loan agreement for which the shares were pledged as collateral.
When Cukurova’s share sale to a Dutch unit of TeliaSonera didn’t go through, a Geneva-based arbitration tribunal found the parties had reached a purchase agreement and ordered Cukurova to pay $932 million in damages.
Sonera Holding, the Dutch entity, filed applications for enforcement of the arbitration in jurisdictions “across the world,” including the British Virgin Islands, Switzerland, the Netherlands and the U.S., according to the appeals court ruling.
Sonera sued Cukurova in federal court in Manhattan in December 2011, seeking to confirm the arbitration award over the sale of the stake in Turkcell Holding, which owns 51 percent of mobile-phone operator Turkcell Iletisim Hizmetleri AS, for a provisional price of $3.1 billion, court papers show.
If the award had been affirmed, the company could have used the U.S. courts to force Cukurova to reveal its assets or to attempt to seize Cukurova’s money being wired through New York, Holwell said.
A lower U.S. court had confirmed the arbitration award in favor of Sonera and barred Cukurova from engaging in transactions to shield its assets. Today’s decision overturned that finding.
While Cukurova has no operations and owns no property in New York or anywhere in the U.S., Sonera claimed the Turkish company established jurisdiction there through business dealings including a failed bid to sell a Turkish broadcaster to two private-equity funds based in New York, according to the appeals court.
The case is Sonera Holding BV v. Cukurova Holding AS, 12-4280, U.S. Court of Appeals for the Second Circuit (New York).