Every New Year’s Eve, a small flotilla of billionaires and movie stars gathers at the idyllic Caribbean island of St Barthélemy, popularly known as St Bart’s. On balmy evenings aboard superyachts the rich and famous party and network away from the public gaze.

Among them are the likes of Paul Allen, co-founder of Microsoft, Catherine Zeta-Jones, the actress, and the rock star Jon Bon Jovi. And on occasion there has also been Peter Mandelson, former young communist recently ennobled as Baron Mandelson of Foy and Hartlepool.

When Mandelson was there some years ago, he was guest at a New Year’s Eve cocktail party on Octopus, the 414ft yacht owned by Allen. At the time the disclosure of his visit caused a minor controversy because Microsoft was in dispute with the European Union over competition issues.

With typical nonchalance Mandelson shrugged it off as “tittle-tattle”. He was on the yacht for only an hour, said an EU spokesman; he was simply on the island because he was on holiday with old friends.

One old friend who has played host to Mandelson at the island more than once, The Sunday Times can now reveal, is Nat Rothschild, a fabulously rich hedge fund manager, who has interests in businesses around the world. A man with money and connections on a rarefied level, Rothschild has proved generous to Mandelson, who was the EU trade commissioner until he became Britain’s secretary of state for business this month.

As well as providing hospitality at St Bart’s, Rothschild is said to have also allowed Mandelson to fly in his private jet on a number of occasions. “He [Mandelson] likes to use other people’s planes and yachts,” said one source who knows Mandelson and Rothschild. “He thinks that for a person of his calibre and experience, he is badly paid. He likes to spend time with people who have considerably more money than him.” Another friend said: “Peter has seniority and status, while Nat has money. Peter likes the comfort of flying on a private jet, staying on a nice yacht and having the odd glass of champagne.”

Rothschild is far from the only member of the super-rich to play host to Mandelson. He is also said to have attended a Christmas party in St Moritz at one of the homes of Lakshmi Mittal, the steel tycoon; and he is said to have recently dined with Mittal in London.

And last week The Sunday Times revealed that Mandelson was a guest this summer on the yacht of Oleg Deripaska, a Russian billionaire whose businesses have benefited from EU trade decisions. Deripaska’s yacht was at Corfu, where Rothschild has a villa. Mandelson has been a guest there, too.

Though there is no suggestion Mandelson or the billionaires who have extended their hospitality have done anything wrong, he now faces questions about his wisdom in accepting such largesse. Norman Baker, the Liberal Democrat MP, said last week: “Lord Mandelson should publish his entire diary for the last 12 months of his tenure as European trade commissioner so we can see who he was meeting and why, to establish whether he was discharging his duties as a commissioner or whether he had one eye on what he might do after he left the EC job.”

Writing in a blog in Mandelson’s defence last week, Benjamin Wegg- Prosser, Mandelson’s former aide now based in Moscow, insisted EU decisions were not made “on gin palaces drinking cocktails overlooking Corfu”. Maybe not, but questions still remain whether Mandelson, by pursuing the high life, opened himself up to possible conflicts of interest.

The Sunday Times has established, for example, that Rothschild’s hedge fund lobbied in 2006 for Mittal Steel to take over a European company; at the time Mandelson spoke out in favour of the deal and open trade. Rothschild and Deripaska also have big interests in Montenegro, the Balkan state that became independent in 2006. Mandelson has played a significant role in nurturing Montenegro towards membership of the Word Trade Organisation; it also wants to join the EU.

Yesterday a spokeswoman for the business, enterprise and regulatory reform department rebutted any criticism. “Peter Mandelson makes a clear distinction between his public role and how he spends his private time,” she said. “No conflict of interest has arisen between the two.”

IN the early days of new Labour Mandelson famously said the party was “intensely relaxed about people getting filthy rich”. And he was relaxed about his dealings with such people. He took a loan of £374,000 from the businessman and ministerial colleague Geoffrey Robinson, which, when it became public, forced Mandelson’s first resignation from cabinet in 1998. He resigned a second time amid claims that he had helped an Indian billionaire who was seeking British citizenship. He was subsequently cleared of improper behaviour.

Among his rich friends one name resonates more than most: Rothschild. Sir Evelyn de Rothschild helped fund the Policy Network, a think tank Mandelson once chaired; and Lord (Jacob) Rothschild got to know Mandelson after joining him at a dinner party held by the Prince of Wales. He has previously provided Mandelson with flights and accommodation at his villa in Corfu.

When that first came to light Jacob Rothschild said: “Peter came over for about three days and stayed at the villa. He is a friend of mine and was interested in the general situation in Albania.”

However, it was Nat, heir to the Rothschild barony, who really hit it off with Mandelson. As a young man, Nat Rothschild seemed unlikely to bolster the fortunes of one of the world’s most famous banking dynasties. Contemporaries recall a somewhat disorganised character, with more of a thirst for partying than business.

He was a member of the notorious Bullingdon drinking club at Oxford University — at the same time as George Osborne, now the Tory shadow chancellor — and graduated to the London party circuit. He eloped in 1995 to Las Vegas to marry the model and socialite Annabelle Neilson, whom he had met on a beach in India.

When his marriage subsequently broke up, Rothschild cut back on the partying — he is now apparently teetotal — and started applying himself to a financial career. After working for Lazards in the City, he moved to New York where he joined a fledgling hedge fund called Atticus Capital. He is now its co-chairman. Thanks to its investment skill and Rothschild’s connections, it rapidly grew into a business controlling $20 billion or more.

“This is the story of Prince Hal turning into Henry V,” said Charles G Phillips, a fellow investment manager, in a profile last year. “He [Nat] is one of the few sons of great men who has enhanced the family stature and created his own wealth.” Mandelson recently eulogised Rothschild, saying: “Nothing fazes him. If his plan receives knocks and setbacks he revises, adapts and moves forward. He’s unflappable.”

Like his eminent ancestors, Rothchild appreciates the value of political connections. “Rothschild has got the money and Mandelson has got the power,” said one source. “There’s an obvious attraction.”

While those who know Rothschild insist there is no ulterior motive in his friendship with Mandelson, their interaction does raise possible conflicts of interest for Mandelson. While Mandelson was an EU commissioner, Rothschild’s hedge fund held stakes worth hundreds of millions of dollars in businesses that could be affected by EU trade decisions.

One instance involved Mittal Steel, the giant company run by Mittal, who gave £2m to Labour in 2005. In 2006 Mittal mounted a £12.8 billion hostile bid for its nearest rival Arcelor, which was based in Luxembourg and had big operations in France. Atticus Capital had holdings in both Arcelor and Mittal Steel, and was keen for the deal to go ahead.

In Luxembourg and France, however, there was strong political opposition to the deal. Mandelson was lobbied by the Indian government to intervene and spoke out in favour of open trade and against the French opposition.

“We will determine it on its commercial and not its political merits — and not the personal views of the individuals concerned,” he said. He said the European commission would resist the “emotion of economic nationalism”.

The EU competition commission eventually approved the deal. Though Mandelson was not involved in that decision, one highly placed Indian source said last week that he believed Mandelson was helpful to Mittal’s success. He claimed: “Mandelson worked hard to support the Mittal bid for the acquisition of Arcelor. He gave it support in Luxembourg and in Paris . . . Mittal was able to do it because the trade minister of the EU was enthusiastic [about open trade].”

Nat Rothschild’s business interests also encompass Montenegro, where he is investing in a yacht marina with Deripaska and Peter Munk, a Canadian billionaire. Other Russians have been buying property and developers envisage turning one area into a resort along the lines of Monaco.

Deripaska owns an aluminium plant in Montenegro, which is one of the biggest industrial concerns in the country.

If these ambitious plans to turn Montenegro into the Monaco of the Adriatic are to come to fruition, the country’s potholed roads and meagre infrastructure will need massive investment. Again, Mandelson’s role as EU commissioner could, however indirectly, have helped boost such business ventures. He supported Montenegro’s application for membership of the World Trade Organisation (WTO), which will help pave the way to EU membership and further investment in the country.

“Montenegro has made remarkable progress in preparing for WTO entry,” said Mandelson, after an agreement was signed last April. “The EU is a strong supporter of Montenegro’s entry into the WTO, and is proud to be the first partner to conclude bilateral accession talks.”

A third possible conflict of interest was Rothschild’s links with Deripaska. As The Sunday Times reported last week, Mandelson’s trade department twice made decisions that worked in the Russian businessman’s favour, although there is no suggestion Mandelson acted improperly.

The EU reduced tariffs on aluminium — a move that was worth £50m a year to Deripaska’s business. Though Mandelson denied discussing EU business while he was on Deripaska’s yacht in the summer, he has on other occasions talked about business with the billionaire.

Wegg-Prosser has revealed how the two, and Nat Rothschild, met in Moscow. “He [Mandelson] dined with Deripaska, German Gref \ and Nat Rothschild at a neighbouring table to our own in Moscow’s Pushkin cafe. . .”

On another occasion Mandelson visited Wegg-Prosser’s dacha and they went into Moscow where they “ended up” having dinner with Deripaska. During the course of the meal Mandelson and Deripaska argued over Russia’s entry to the WTO and tariffs the Russians were imposing on Finnish timber imports.

Last night Diego Della Valle, a jet-set Italian businessman who owns Tod’s, the luxury handbag and shoe company, was also reported to have entertained Mandelson at an exclusive restaurant on Capri, and on his motoryacht Marlin, once owned by US president John F Kennedy. Mandelson first visited Della Valle in August 2006, the report said. At the end of that month Mandelson proposed a five-year campaign aimed at protecting European shoe manufacturers from cheap Chinese imports.

The EU’s code of conduct for commissioners says they should rule out “all risks of a conflict of interests” to help “guarantee their independence”. “MEPs must declare hospitality and benefits received,” said Syed Kamall, the Conservative MEP. “I find it astonishing that the same code of conduct does not appear to apply for commissioners.”

As far as the commission in Brussels — which has resisted calls for a public register of hospitality — is concerned, Mandelson has done nothing wrong. But there is unlikely to be such sang-froid in Downing Street. Mandelson prefers to keep his own counsel about his excursions. In a statement this weekend, his spokesman said: “He is not going to offer a commentary on how he has spent his private time during the last four years when he was away from British politics. In relation to your questions, no inference should be drawn from his decision to keep information about his private time to himself.”

Additional reporting: Dean Nelson, Delhi

CAMPBELL ON MANDELSON

"He saw politics as a vocation. He could not see himself doing anything else... He said he was confident party and public felt he was different and special... He denied leading the glamorous social life the press chronicled and of which we so obviously disapproved"

Alastair Campbell, writing in his diary about having dinner with Mandelson after he had resigned in 1998

OTHER FIGURES IN MANDY’S MAGIC CIRCLE

ROLAND RUDD
Founder of Finsbury, a leading financial and political communications agency, and chairman of Business for New Europe.

ROBERT BOURNE
Multi-millionaire property tycoon who co-founded the Local London Group and owns the Rosewheel company, which is behind plans to develop London’s Chinatown

ROBERT HARRIS
Bestselling British novelist famous for historical thrillers and a former political journalist

SALLY GREENE
Chief executive of the Old Vic theatre trust, restorer of old theatres and former actress

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