Civil conduct | Russian oligarchs, English courts and Boris

“I would never encourage anyone to sue, but if an oligarch feels defamed by another oligarch, it is London’s lawyers who apply the necessary balm to the ego… I have no shame in saying to the injured spouses of the world’s billionaires, if you want to take him to the cleaners, darling, take him to the cleaners in London.”

Boris Johnson’s exhortation to the world’s oligarchs to litigate in London has met with approval and opprobrium in equal measures. Yet, in recent times, it is not just Messrs Abramovich, Berezovsky, Cherney and Deripaska who have litigated in London. The Commercial Court has also heard a number of cases brought by CIS-state corporates, such as Alliance Bank JSC, JSC BTA Bank and VTB Capital.

The English jurisdiction is attractive to these litigants for several reasons. Our judiciary is independent, highly regarded for its integrity and experienced in dealing with substantial commercial cases. Orders of the English courts are readily enforceable in many jurisdictions (although there is no reciprocal enforcement of judgments between Russia and England). The English court also has power to grant worldwide freezing injunctions, unlike most other jurisdictions.

Not straightforward

The recent well-reasoned decision of Deputy Judge Andrew Sutcliffe QC in OJSC TNK-BP Holding v Beppler & Jacobson Limited (in Provisional Liquidation) & Ors [2012] EWHC 3286 (Ch) (20 November 2012), however, is a salutary reminder that bringing proceedings in England involving Russian parties is not that straightforward.

The judgment in OJSC TNK-BP v Beppler & Jacobson & Ors arose from the application of 9 of the 13 Defendants for: (i) a declaration that the English court had no jurisdiction over them; (ii) an order setting aside a worldwide freezing injunction against seven of the defendants; and (iii) an order setting aside service of the claim form and particulars of claim.

The claimant, TNK-BP, is a Russian company. With the exception of the first defendant, none of the other defendants was either English or domiciled in England. TNK-BP brought proceedings on the basis that the second defendant, Igor Lazurenko, a former employee of TNK-BP, along with his wife, business partners and associated companies, solicited payments from suppliers to award them contracts and then channelled those payments into a hotel business of which he was the ultimate owner.

The deputy judge decided the claimant faced three hurdles, to show: (i) a serious issue to be tried on the merits; (ii) a good arguable case that the claim falls within one of the jurisdictional gateways in CPR Practice Direction 6B; and (iii) England is clearly and distinctly the most appropriate forum and it is appropriate in all the circumstances to permit service out.

This case highlights the importance for claimants of instructing a foreign law expert before the ex parte hearing, to analyse the case from the perspective of the applicable foreign law as well from an English law perspective. In particular, it is important to disclose to the court the potential defences available to the defendants. Following the reasoning in Fiona Trust & Holding Corp v Privalov [2010] EWHC 3199, the judge held that Russian law was the applicable law, not English law. From the evidence of the parties’ Russian law experts, he held there was no serious issue to be tried for three of the defendants.

Another tactic commonly employed by claimants is to use a party which is clearly subject to the jurisdiction of the English court as an ‘anchor defendant’ and allege that the real defendants are necessary and proper parties to the claim against the anchor defendant, in order to fall within the jurisdictional gateway at CPR Practice Direction 6B paragraph 3.1. However, the judge found that the anchor defendant had played no part in the events alleged to constitute the fraud of which Mr Lazurenko was accused. Accordingly, the claimant had not established a good arguable case that the claim fell within any of CPR PD 6B gateways.

The judge decided that Russia was the natural forum. The claimant and the main defendants were Russian; all the important witnesses were in Russia (or had promised to return there); most of the documents were in Russian and located in Russia; the key events were in Russia; and there could be criminal proceedings brought in Russia. All these pointed to Russia being the natural forum. There was no reason to find that England was a more appropriate forum. The claim was dismissed against the defendants on this ground alone.

Worldwide freezing order

The worldwide freezing order was discharged for a number of material breaches of the duty of full and frank disclosure. The Russian law defences for the defendants had not been brought to the attention of the judge at the ex parte hearing, and the claimant had not properly explained that the main assets were secure and the others were not easily dissipated.

The English system is undoubtedly attractive to foreign litigants, particularly because in multi-million and billion dollar fraud disputes, the worldwide freezing injunction is a powerful tool. However, keen as Boris and the oligarchs may be to litigate here, the English court will only welcome them if it is satisfied that England is the proper place for their disputes.

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