An investment fund set up by a sanctioned oligarch has launched a legal challenge after the Government ordered it to sell its UK broadband business due to national security concerns.
LetterOne, which was founded by the Ukrainian‐born billionaire Mikhail Fridman in 2013, is seeking a judicial review of the order to sell Upp, arguing that its ownership does not pose a security risk.
The Government ordered LetterOne to sell Upp, the company behind a £1bn project to roll out full‐fibre broadband in East Anglia, in December.
Grant Shapps, then Business Secretary, said the move was necessary to prevent, remedy, or mitigate a risk to national security. Upp will also be required to complete a security audit of its network prior to the sale.
In a statement LetterOne said: “L1 is not sanctioned and has taken fast, decisive action to put in place strong measures to distance itself from its sanctioned shareholders. They have no role in L1, no access to premises, infrastructure, people and funds or benefits of any description.”
The company said it was also subject to regulation by Ofcom and had measures in place to “remove any perceived threat to national security”.
These include a UK leadership, only UK, US and EU staff on the board and clear protocols about access to information, data and any key infrastructure sites.
LetterOne added: “L1 believes it is essential that this decision is reconsidered so that Upp can continue to deliver vital next generation broadband to eastern England and the East Midlands, with the significant social and economic benefits that brings to the regions.”
It is understood that LetterOne will comply with the order while its claim is ongoing.
A Government spokesman said: “The Energy Secretary made a Final Order in December under the National Security and Investment Act, requiring LetterOne to divest Upp.”
If granted, the judicial review will be the first major test of strict new national security laws that came into force at the start of last year.
The National Security and Investment Act 2021 has been used to block five acquisitions so far, four of which involved Chinese companies.
But the order to sell Upp marked the first time the new laws have been used to target Russian oligarchs.
Mr Fridman and fellow oligarch Petr Aven were forced to step down from LetterOne after they were hit by EU sanctions following Russia’s invasion of Ukraine last year.
The EU said Mr Fridman “actively supported materially or financially and benefited from Russian decision‐makers responsible for the annexation of Crimea and the destabilisation of Ukraine”.
The pair have had their stakes in LetterOne frozen and are unable to sell their shares or receive any financial benefit while under sanctions.
Mr Fridman has denied links to the Kremlin and branded sanctions “unfair”. The judicial review was first reported by the Financial Times.
LetterOne bought Upp, formerly known as Fibre Me, in June 2021 and set out aims to reach one million premises with full-fibre broadband by 2025.
The fund, which also owns Holland & Barrett, is not under sanctions itself but has rushed to distance itself from Russia.
In October it inked a deal to buy back almost £900m of debt from Holland & Barrett’s lenders amid concerns about possible exposure to sanctions.
