Banker had sued Associated Newspapers over what he claimed were sustained and unjustified attacks in a May 2010 story

Nat Rothschild has lost his libel action against the Daily Mail over being portrayed as a "puppet-master" who brought together Lord Mandelson and Russian oligarch Oleg Deripaska.

Rothschild, the Swiss-based financier, had asked for very substantial damages from Daily Mail publisher Associated Newspapers over what he claimed were sustained and unjustified attacks in a May 2010 story.

The newspaper denied libel and pleaded justification.

After the decision was given on Friday by Mr Justice Tugendhat, who heard the case at London's high court without a jury, Rothschild, who was not present, said in a statement that he intended to appeal.

Tugendhat said that it had been established by Associated Newspapers that "the words complained of were substantially true".

He added that even if he had decided in favour of Rothschild over the article, headlined, "Exclusive: Mandelson an oligarch and a £500m deal", he would only have awarded "modest" £3,000 damages. A decision is yet to be made on costs.

Tugendhat said it was for Rothschild, who sued over the whole article, to prove that it was defamatory of him.

He added that when Rothschild flew Mandelson to Russia in his private jet, he must or ought to have foreseen that his attendance at an Alcoa dinner "would and it did, bring Lord Mandelson's public offices and personal integrity into disrepute, and expose him to accusations of conflict between his duties as EU trade commissioner and his private interest and enjoyment of private jets and other luxuries, and thus in pleasing those from who he accepted such generous hospitality".

Regarding the claim that Rothschild's conduct was "inappropriate", the judge said: "In my judgment that conduct foreseeably brought Lord Mandelson's public office and personal integrity into disrepute and exposed him to accusations of conflict of interest , and it gave rise to the reasonable grounds to suspect that Lord Mandelson had engaged in improper discussions with Mr Deripaska about aluminium."

A spokesman for the Daily Mail said:"We are pleased with Mr Justice Tugendhat's judgment which vindicates our reporting of this story.

"He concluded, rightly, that Mr Rothschild placed the reputation of his friend, Mr Mandelson (then the European trade commissioner) at risk by inviting him to meet Mr Deripaska in Russia.

"Mr Justice Tugendhat accepted Mr Rothschild's conduct had been 'inappropriate in a number of respects' and had 'brought Lord Mandelson's public office and personal integrity into disrepute and exposed him to accusations of conflict of interest'.

"This case is a reminder, at a time when newspapers are under attack for invading privacy, that the rich and powerful regularly use the law to prevent legitimate scrutiny of their activities. Had the Mail lost this case, it could have incurred costs of more than £1m.

"Not many news organisations, however committed they are to free speech, can afford to risk a loss of that magnitude.

"As Lord Justice Leveson's inquiry considers the balance between privacy and freedom of expression, the chilling effect on free speech that court cases like this one exert needs to be borne in mind."

Rothschild said after Friday's judgment: "I am disappointed with today's ruling, although I do not regret bringing the action.

"I brought this action seeking an apology for the Daily Mail's utterly false claim that I had arranged for Lord Mandelson to attend a dinner in Moscow to close a deal between Alcoa and Rusal and that this had caused the loss of 300 British jobs," Rothschild added.

"The truth is, as the Daily Mail has now accepted, that I had nothing whatsoever to do with this deal and that it had in any event been completed before Lord Mandelson and I even arrived in Moscow.

"Lord Mandelson's trip to Russia was entirely recreational – as the court has accepted – and Lord Mandelson had obtained clearance for the trip from his office before undertaking it."

Andrew Caldecott QC, for Associated Newspapers, said during the trial that the defence of the Daily Mail's story should succeed as it was "clear beyond doubt" that the article meant there was a "wider malaise".

Caldecott added that Rothschild fostered a relationship between Mandelson and Deripaska that endangered the dignity and reputation of the then EU commissioner.

"It is way beyond the norm for a Russian oligarch to be flying the trade commissioner, who he does not know well at the time, to fly him in his private jet to his private chalet to be wined and dined by him," he told the high court. "It creates the perception that Lord Mandelson may be beholden to his host and also gives Mr Deripaska cachet."

Caldecott said the main purpose of the trip was to allow Deripaska to get to know Mandelson better, and the Daily Mail said that was inappropriate.

The paper accepted that there were recreational moments on the trip, but Caldecott said the court should be wary of the photos it had seen, which Rothschild said showed a "light-hearted and enjoyable visit" by friends.

"Businessmen discuss business on ski lifts – and when they are having banyas [steam baths]. You may have a recreational background to a business discussion," he added.

Rothschild's counsel, Hugh Tomlinson QC, said during last month's trial that the newspaper's case was that the banker took Mandelson, then European Commissioner for Trade, on a January 2005 trip to Siberia in order to impress Deripaska when he knew, or ought to have known, that if anyone found out about it, the former Labour cabinet minister would have been compromised.

Tomlinson added that it was also said there were grounds for believing that Mandelson discussed aluminium tariffs with Deripaska and Rothschild encouraged the inappropriate relationship.

Mandelson and Deripaska were not parties to the action and did not take any part in the trial.

Tomlinson emphasised that the case was not about them and the newspaper made no allegations they had done anything wrong.

"It is not said that Lord Mandelson had in fact a conflict of interest – simply there was an appearance," he told the high court.

"It is not said that Lord Mandelson failed to make any declarations of interest that he ought to have made or anything of that sort."

Giving evidence, Rothschild said he was "incredibly upset and distressed and amazed" when he saw the story, which he dismissed as "fiction".

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