IT BEGAN as a partnership. It became poisoned by rancour. And now it has descended into farce.

A dispute between two international telecoms companies, Norway’s Telenor and Altimo, part of Russia’s Alfa Group, has taken a new, surreal twist – and is threatening to spill over into the British courts.

The two groups have been involved in a bitter argument over control of a Ukrainian mobile-phone company, Kyvistar, jointly owned by the Russian and Norwegian groups since 2002.

Telenor has accused Altimo – whose parent, Alfa Group, is headed by the Russian oligarch Mikhail Fridman – of using underhand tactics to try to gain control of Kyvistar.

The dispute went to the International Panel of Arbitration in New York. In August the panel ruled that Altimo’s Ukrainian offshoot had broken its shareholders’ agreement with Telenor and had wrongly tried to wriggle out of an agreement under which disputes would be resolved by arbitration in New York.

But Altimo’s Ukrainian subsidiary, Storm, responded by saying that “according to Ukrainian law, it is impossible to recognise and enforce the arbitration award in Ukraine”. The Altimo-controlled company is refusing to comply with the New York panel ruling.

And now, the focus of the increasingly bizarre tale has been shifted back to Ukraine.

The Pechersk district court of Kiev ruled last month that enforcing the arbitration award “would contradict the public policy of Ukraine”.

That sounds straightforward enough – except that Telenor had not even been informed that the US ruling was being challenged in the Kiev court. The first it knew about the case was when it was told of the result by a Russian journalist. Storm, the Altimo offshoot contesting the US ruling, told the Ukrainian court that Telenor had been served notice that the case was coming up.

But it later transpired that the papers informing Telenor of the hearing had been sent to an office that the Norwegian company had not occupied for months – although its present address is well advertised. The papers were apparently signed for at the former Telenor offices by someone simply calling himself or herself “Kovalenko”. Telenor has never had an employee called Kovalenko.

Nothing about the impending court case had been sent to Telenor’s present Ukraine office, its Norwegian head office, or to its lawyers.

By the time that Telenor was told of the outcome of the case, the company had missed the deadline for appealing against the decision. The ruling by the judge, a Ms Grymych, contained the assertion that “Telenor Communications AS has failed to appear, though it was duly summoned and noticed of the time and place of the consideration of the motion”.

However, as is now clear, Telenor did not have a clue that the case was even taking place.

Sources within the Altimo camp maintain that it was the court that was responsible for handling the paperwork, not Storm.

And in a further strange twist, the judge disappeared – apparently abroad on extended maternity leave – the day after giving her decision.

Even within Ukraine, a country not renowned for the consistency and rigour of its legal system, the Pechersk court chosen by Altimo’s offshoot as the arena for the battle with Telenor has a reputation for making some strange decisions. Earlier this year, Ukrainian president Viktor Yushchenko said: “There are legends about the Pechersk court . . . We’ve already got used to such a court system where, I am sure, even Jesus Christ could lose a good case . . . He would not win in the Pechersk court.”

There is a further strange sub-plot to the dispute. In the argument over Kyvistar, Telenor’s direct legal opponent has been Storm, the company through which Altimo holds its stake in the Ukrainian telecoms business.

Storm is owned by two offshore companies, based in Cyprus, which in turn are owned by Altimo. In late August – after the New York arbitration ruling – the two companies in Cyprus held a shareholders’ meeting at which its Russian owners said that Storm should indeed comply with the New York panel’s decision.

But Storm says it is bound by the Ukrainian court’s ruling that the New York arbitration decision is unenforceable. Storm says it is banned from attending meetings of its Kyvistar joint-venture partner Telenor – although Storm’s parent, Altimo, wants it to do so. Hence now, on the surface at least, Altimo is at loggerheads with a company that it owns. The Russian company can claim that it is trying to comply with an internationally recognised panel’s ruling, while its subsidiary continues to defy it.

Storm and Telenor each signed a shareholders’ agreement covering their Ukrainian joint venture: this explicitly stated that any dispute should be referred to arbitrators in New York. But Storm subsequently argued that the company’s director who signed the agreement didn’t have the authority to do so. The argument was rejected by courts in America.

Altimo said this weekend: “Altimo has always complied with every court ruling in every jurisdiction. We fully respect the laws of every country in which we operate.” Earlier this month an American judge, Gerard Lynch of the southern district of New York, gave his judgment on Storm’s efforts to avoid complying with the arbitration award.

He said Storm had made “repeated efforts to renege on its agreement and to torpedo the proceedings by collusive and vexatious litigation”.

The affair further calls into question the role of Altimo’s six-man “advisory board” that includes Lord Hurd, the former Conservative foreign secretary Douglas Hurd; Sir Roderick Lyne, who was British ambassador to Russia; and Sir Julian Horn-Smith, who was the deputy chief executive of Vodafone until the summer of last year.

Telenor executive vice-president Jan Edvard Thygesen has said that the Norwegian group “will seek to enforce this [New York arbitration] award wherever Alfa has assets”. And sources within Telenor indicate that this could involve action to seize assets in the US and UK.

Alfa has a business, Alfa Capital Holdings (Cyprus), that is regulated by the Financial Services Authority in London. Altimo Holdings is domiciled in the British Virgin Islands, but the company lists its international headquarters as being in London. Peter Aven, head of a private bank within the Alfa empire, has a mansion in Surrey that was bought for £8.5m.

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