LetterOne loses legal battle over enforced sale of broadband provider

Russian oligarch-backed investment firm LetterOne lost its challenge to the enforced sale of a broadband provider on Wednesday, in the first challenge under Britain’s recent national security law to reach London’s High Court.

LetterOne, whose owners include sanctioned oligarchs Mikhail Fridman and Petr Aven, was made to sell regional provider Upp in December 2022 over fears Upp’s ultimate owners were vulnerable to “leverage by the Russian state”.

The intervention was one of the first under Britain’s National Security and Investment Act, which allows the government to scrutinise and potentially block acquisitions and investments in sensitive sectors.

LetterOne – which owns health food retailer Holland & Barrett and other businesses – challenged its enforced divestment of Upp, which was rejected by Judge Judith Farbey.

The firm said it sold Upp for less than it had invested in the company. Farbey said in her ruling that Upp was sold to Virgin Media O2 in 2023 “for less than the 143.7 million pounds that (LetterOne) had by then invested”.

“This is a disappointing decision, given the swift, robust and decisive action LetterOne undertook in the aftermath of Russia’s illegal invasion of Ukraine,” a LetterOne spokesperson said, adding the firm was “considering whether to appeal”.

Britain’s Cabinet Office did not immediately respond to a request for comment.

LetterOne had argued its proposals to prevent Upp’s ultimate beneficial owners, including Fridman and Aven, from exerting any improper influence over Upp were wrongly rejected.

The firm’s lawyer, Tom Hickman, said at a hearing in July that British government officials wrongly took into account a potential risk that Britain’s allies might perceive its response as too soft on Russia.

But Farbey said in her ruling that the suggestion that LetterOne’s proposal was rejected “for diplomatic rather than national security reasons” was not correct.

Fridman and Aven stepped down from LetterOne’s board and their shareholdings were frozen indefinitely after they were sanctioned following Russia’s invasion of Ukraine in 2022.

LetterOne said in its annual review for 2023 that the pair “are not involved in any way, directly or indirectly” in the management of LetterOne. Reuters