The US consultancy that oversees Israeli spyware maker NSO Group risks being forced out of the role after a London judge ruled that a legal bid to oust it can go to trial.
Judge Joanna Smith on Monday rejected a case brought by Berkeley Research Group, the California firm brought in last year to manage the €1bn private equity fund that owns the blacklisted cyber group. BRG was seeking an urgent injunction to block an attempt to remove it from the role.
It is the latest sign of turbulence for the buyout fund raised by Novalpina Capital, whose equity investment in NSO has been deemed “valueless” and which was plunged into turmoil last year.
BRG was brought in last summer to replace the fund’s original founders — a trio of dealmakers at Novalpina Capital — who were ousted because they had fallen out so badly that investors decided they could no longer operate the fund together.
BRG said in the London court case that two of the ousted Novalpina founders, Stefan Kowski and Bastian Lueken, were trying to remove it and take back control of the fund using Luxembourg lawsuits. It asked the London court to “restrain” what it called a “malign and unpredictable campaign”.
Smith rejected BRG’s case, however, saying in a judgment on Monday that the claims should be allowed to proceed in Luxembourg. She refused to give BRG permission to appeal, meaning it must now approach the Court of Appeal directly to seek permission if it wants to challenge the decision.
“We were seeking an injunction to prevent the Novalpina founders from taking actions that we consider both illegitimate and damaging,” a BRG spokesman said.
It is considering an appeal, he said. “Otherwise, we will have the opportunity to defend ourselves and our investors against this abusive, destructive and brazenly self-interested claim in Luxembourg later this month,” he added.
Kowski and Lueken both deny that they gave instructions to start the Luxembourg cases.
Kowski said he was “grateful” that the judge “delivered a clear and considered judgment, dismissing BRG’s application for an anti-suit injunction entirely and halting all proceedings BRG had commenced against me.” He called BRG’s claims “unwarranted”.
Lueken said: “The claims made against me by BRG were completely baseless, which was confirmed by today’s court ruling.”
Smith said in her ruling that there was a “serious issue to be tried” on the question of whether Kowski was behind the Luxembourg cases, but that she “cannot be so satisfied” in relation to Lueken.
The judge said there was not “a high probability” that the two co-founders had made a valid agreement with BRG not to sue.
In a court filing outlining his case, Kowski said BRG was “mismanaging the fund and causing it to lose value”. He said it had “refused” to appoint a valuer to carry out a valuation of the fund, which would be needed to determine how much money the founding partners should receive.
The lawsuit casts fresh uncertainty over the future of the companies that the fund owns, which include Estonian gambling business Olympic Entertainment Group and the French pharmaceutical group Laboratoire XO as well as NSO.