By KYIV. Nov 8 (Interfax-Ukraine) – The dispute between the management of Carlsberg Group and Russian officials, who have lashed out at one another over the Danish brewer’s Russian division Baltika, has not only been playing out in public.
The parties have also been carrying on a correspondence since August, in which Carlsberg accused Russia of violating international agreements and threatened to take legal action.
Carlsberg announced plans to leave the country in March 2022. The company said in late June 2023 that it had signed an agreement to sell its Russian business, but did not name the prospective buyer or specify the details of the deal.
However, the sale was derailed, as on July 16 President Vladimir Putin signed a decree to put 100% of Baltika, which is 98.56% owned by Carlsberg’s Swedish legal entity, 0.09% by Carlsberg’s German entity and 1.35% by Hoppy Union LLC, under the management of Russia’s Federal Property Agency.
Carlsberg said at the time that the decree made the prospect of selling Baltika extremely uncertain and at the end of October, commenting on the group’s quarterly results, the company condemned what it said was the “illegitimate takeover of our business in Russia” and said it was taking action to protect its assets, the impairment of which it estimated at almost $1 billion.
Carlsberg CEO Jacob Aarup-Andersen, who took over this position in September, went further, accusing the Russian authorities of stealing the group’s business. “There is no way around the fact that they have stolen our business in Russia, and we are not going to help them make that look legitimate,” he was quoted as saying by Reuters at the end of October.
The official response to this statement was fairly muted. Russia’s Finance Ministry said Baltika “is not owned by the state,” the Property Fund has been appointed its temporary manager and exercises the authority of the owner with the exception of the authority to sell assets. “The imposition of temporary administration does not lead to changes in the ownership structure,” the ministry said in response to Aarup-Andersen’s statement.
By then Carlsberg was known to have made one legal move, announcing the termination of licensing agreements with Baltika for the production and sale of all Carlsberg Group products, including international and regional brands. The company said this was a response to the presidential decree to transfer management of Baltika to the Russian authorities. Baltika has until April 1, 2024 to use up existing stock and materials.
Baltika is challenging this decision in the Arbitration Court of St. Petersburg and Leningrad Region. A preliminary hearing is scheduled for November 15.
However, an Interfax source familiar with the situation said that back in early August Carlsberg sent the Russian authorities a letter in which it categorized Russia’s actions as a violation of obligations under a bilateral investment agreement and international public law, and demand that they immediately state whether or not Russia intends to pay compensation for the losses and damages suffered by the company, including due to its inability to secure the necessary permits and close the already prepared deal to sell Baltika.
Carlsberg named Arnest Group as the company that was supposed to buy Baltika, the source reported. A little later, at the end of August, Arnest announced the acquisition of the Russian assets of another European brewer, Heineken. However, Arnest paid only a symbolic EUR 1 for these assets and assumed obligations to pay off EUR 100 million in debts owed by Heineken’s Russian business.
The price for Baltika, even with the mandatory 50% discount for “exit deals,” was set far higher, at more than 71 billion rubles, the source said. The framework agreement with Arnest Group was terminated at the end of August because Baltika was put under the management of the Property Fund.
The Finance Ministry sent Carlsberg a letter in response in late September, stating that the presidential decree is based on current Russian law and that there were no grounds for compensation of losses, the source said.
Another source told Interfax that in mid-October Carlsberg sent Russian government agencies, including the Finance Ministry and Economic Development Ministry, official notices of dispute under three international agreements – Russia’s 1993 and 1995 investment promotion and protection agreements with Denmark and Sweden, respectively, and the Soviet agreement with Germany of 1989. The group proposed a resolution through negotiations.
Calling Russia’s actions illegal expropriation of Carlsberg Breweries’ investment in Baltika, the company proposed to resolve the dispute within six months. If negotiations do not yield results within six months of the date of the letter, October 13, the investor can take the dispute to international arbitration court, the source reported the letter as saying.
