Bank of New York Mellon deputy general counsel Matthew Biben tells Sue Reisinger how the bank prevailed in a Moscow court against a $23bn tax claim by the Russian Government

Matthew Biben works out of a Manhattan office, but for the past two-and-a-half years has spent much of his time in Moscow. As deputy general counsel of Bank of New York Mellon (BNYM), Biben oversaw the bank's defence of a potentially huge tax claim by the Russian Government.

The case came with many challenges, including sparse courtrooms, possible eavesdropping and foreign policy crises. Throughout the legal battle, which heated up during the US financial crisis of 2008, the bank had to keep investors calm. But BNYM's efforts paid off last autumn when Russia dropped its original claim of almost $23bn (£14.6bn) and agreed to settle for $14m (£8.9m).

Russia had maintained that BNYM was liable for unpaid Russian taxes on billions of dollars. The Russian Government claimed the funds were illegally transferred out of the country in a 1990s money laundering scandal involving bank employees and a Russian corporation. In 2005 BNYM signed a non-prosecution agreement with a US attorney in Manhattan in which it accepted responsibility for its employees' actions and agreed to certain reforms, but admitted no liability on its part. The Russian Government tried to hold BNYM liable by filing a suit in a Russian court in 2007, but finally gave up.

Sue Reisinger: It seemed like BNYM didn't take the Russian claim seriously at first.
Matthew Biben: It's fair to say that a legal analysis of the case led us to the conclusion that it was meritless and untenable. But once the suit was filed in Russia – with its political dynamic, and a less mature legal system – we took it quite seriously.

SR: What were the best and worst moments of the case?
MB: The worst was bringing former US attorney general Richard Thornburgh and three other distinguished experts to Moscow to testify on our behalf in July 2008, to then have them sitting for seven hours on a bench made of a couple of two-by-fours in an un-air-conditioned courtroom with pneumatic drills pounding outside, and then having the court adjourn for 10 days and not take their testimony. I had to bring all of them back. The high point, of course, was the day the court came in and accepted the resolution of the case. I was impressed because [it required Russian Government officials] to understand the broader issues involved.

SR: The Russian Government's counsel [Miami-based law firm Podhurst Orseck] tried to apply the US Racketeer Influenced and Corrupt Organisations (RICO) Act in Russian court. How did that complicate things?
MB: The RICO theory was novel and legally untenable, but it made the case enormously challenging. The Russian Government's lawyers enlisted highly credible US experts in their cause, including [Harvard law professor] Alan Dershowitz. [They were asking] a foreign court to interpret one of the most complex and poorly-drafted US statutes. Plus, Russian jurists do not have US legal training on what a statute means, what dicta means or what a legal precedent is. By pulling out name-brand experts, the plaintiff's lawyers created confusion and uncertainty. They tried to leverage Russia's less-mature legal system and the fears that investors and others have about the Russian system with an unprecedented public relations campaign. All of it was designed to put pressure on our share price, and therefore get our management and board to settle. Fortunately, I had the confidence and full support of general counsel Carl Krasik and chief executive Bob Kelly. Bob had his own analyst call to address the noise and misinformation out there. He then turned the call over to me to explain the case and answer questions. It worked, and had a meaningful effect on our stock price.

SR: Was it difficult to manage outside counsel in a foreign country?
MB: It was uniquely challenging from my perspective because it required internal and external teamwork, with someone to quarterback that team in a lot of different jurisdictions. We had Clifford Chance in London as our courtroom counsel, Jonathan Schiller [the managing partner of Boies Schiller & Flexner] in the US, Russian counsel and others. Carl and I had to make about 10 trips to Moscow and 15 trips to London.

SR: Why London?
MB: For important strategic decisions and reviews, we met in London. It was a central location where we could bring the US lawyers and the Russian lawyers together. And it was a place where we knew our discussions would be safe from electronic surveillance. We were very concerned about the extent we might be under surveillance in Russia.

SR: How did politics affect the case?
MB: In the summer of 2008, we felt like we were going to get somewhere – and then that August, Georgia happened. [Russia invaded the former Soviet republic in a dispute over two separatist movements in Georgia]. I'll never forget the phone call telling me that Georgian soldiers wearing American-made uniforms were shooting American-made bullets at Russian soldiers. It changed the climate to one in which there was no chance the Russian Government would reconsider its case.

SR: After Russia agreed to settle, how did you react?
MB: Even when I executed the settlement agreement in duplicate and got back the signed copy at 1:44am on the day of the hearing, I still thought something could come undone. I was not completely confident until we were in the courtroom and it was dismissed.

SR: How did you celebrate?
MB: The legal team went to dinner and then drinking. Some of our younger members – but not me – didn't make it to bed before their 7am flight out the next day.

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