Bank ST Petersburg and Another (Applicants/Claimants) v Vitaly Arkhangelsky and Another (Respondents/Defendants)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hildyard |
| Judgment Date | 14 November 2013 |
| Neutral Citation | [2013] EWHC 3529 (Ch) |
| Court | Chancery Division |
| Date | 14 November 2013 |
| Docket Number | Case No: HC12C00643 |
[2013] EWHC 3529 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon Mr Justice Hildyard
Case No: HC12C00643
R Philip Marshall QC and Mr Justin Higgo (instructed by Baker & McKenzie LLP) appeared on behalf of the CLAIMANTS
The DEFENDANTS appeared by their McKenzie friend, Mr Pavel Stroilov
By Order dated 15 July 2013 I adjourned for a full day hearing the Defendants' applications for (1) permission to introduce a counterclaim; (2) fortification of the cross-undertakings in damages given by the Claimants as the price of the freezing injunctions they have previously obtained; (3) a world-wide anti-suit injunction to restrain the Claimants continuing with enforcement in Russia and abroad (including in Bulgaria and France) of the judgments they obtained in Russia in 2009 and 2010.
The Defendants' application to introduce a counterclaim (and to join two Russian corporations) has been on the stocks since at least February 2013, but the Defendants did not make a formal application until 4 July 2013. They only did so then after proceedings raising the same matters they had commenced in the Commercial Court by claim form issued on 22 December 2011 (under Claim No 2011 FOLIO 1570, "the Commercial Court Claim Form") had been struck out after the time for its service (after one renewal) had expired.
The order striking out the Commercial Court Claim Form (made by Teare J on the papers and confirmed by HHJ David Mackie at an oral hearing) is presently the subject of an appeal, for which permission has been granted (by order made by Lewison LJ dated 30 July 2013). The Court of Appeal has extended time for further progress of the appeal until after disposal of this application. The Commercial Court claim has the possibly vital advantage to the Defendants in that regard of an earlier date for the purposes of limitation, as I explain below. But subject to that the Defendants are content to proceed in the Chancery Division; their concern is only that they should be able to proceed with the claim they seek to advance, and if they may do so equally well by counterclaim in these proceedings they have indicated that they will withdraw their appeal.
The other two applications were first made as long ago as October 2012, when they were adjourned generally. In April 2013, fresh applications were made with the suggestion that they be dealt with on the papers, but I did not consider that to be an appropriate way forward. They were adjourned into court and first heard in July 2013.
These proceedings have generated more than half a dozen interlocutory applications, at least three of which have gone to the Court of Appeal. This is the more remarkable since on no occasion have the Defendants themselves appeared in person. They are, as it were, marooned in France, to which they fled from the Russia Federation, in fear (so they allege) of the Russian authorities. They dare not leave France (where they have obtained residence rights), lest they be arrested and extradited to Russia at the Russian authorities' request.
Until January 2013 the Defendants were represented by Mr Paul Diamond of Counsel, acting through direct access. Since then, with my ad hoc permission, they have been represented by an unpaid sympathiser and (and the Defendants would probably say, fellow) political exile with some knowledge and academic training in English law, Mr Pavel Stroilov ("Mr Stroilov"). Although that is unusual, it has not been objected to by the Claimants and it has seemed to me the only realistic manner of enabling the Defendants' voice to be heard; I am grateful to Mr Stroilov for his polite and (especially given the complexities of the case) skilful assistance.
As may already be apparent, the proceedings are somewhat unusual. I have described in previous judgments how they have arisen. I think the following summary should be sufficient for present purposes.
Subject to the issue as to the proper and permissible parties (and in particular, whether two Russian corporations namely, Oslo Marine Group Ports LLC ("OMG Ports") and Group Oslo Marine LLC ("GOM") can and should be joined), the proposed counterclaim concerns substantially the same subject matter as the claim and the defence.
In essence the counterclaim restates claims that the Defendants first brought against the Claimants in proceedings in the BVI in May 2011. The essence of those claims is that the Claimants, allegedly using their political connections at the highest level of the Russian government and in tandem with the police and even the Russian court system, conspired to wrest away from the Defendants the control and majority ownership of a large group of companies known as the Oslo Marine Group ("OMG").
It is alleged that pursuant to the conspiracy the Claimants, in breach of agreements whereby the substantial debts of the OMG (in the sum of in excess of RUR 3.75 billion as at the end of 2008) were restructured, and in particular in breach of undertakings (a) not to demand repayment prior to the expiry of a six-month moratorium, (b) not to interfere in OMG's day-to-day commercial activities, (c) not to dispose of the Defendants' shareholdings in the OMG corporations which were pledged in support of the loan and moratorium arrangements and (d) to return the pledged shareholdings to the Defendants once specified loans were repaid, demanded instant repayment, replaced the management of the OMG corporations and transferred the shareholdings to special purchase vehicles they controlled.
Those claims by the Defendants in the BVI in turn followed (and also sought to re-litigate and overturn) claims brought successfully in the courts of the Russian Federation by the Claimants for recovery of the loans after the demands for their immediate repayment.
The Defendants' claims in the BVI were at first successful, in that (on appeal) they established jurisdiction, obtained permission to serve the proceedings out of the jurisdiction, and were granted freezing orders against certain of the defendants in those BVI proceedings. Unfortunately from their point of view, however, and they say in consequence of further political pressure, the Defendants were left unable to provide the bank guarantee they had been required to provide to support their cross-undertakings which they had given as the price of the freezing orders they had obtained. Furthermore, it became apparent that a fundamental premise of the Defendants' jurisdictional case which succeeded in the Eastern Caribbean Court of Appeal, which was that they could not obtain a fair hearing elsewhere in the world, was false, because identical causes of action were being litigated by the Defendants themselves in Cyprus. The Defendants' BVI proceedings were thus destined for disaster, and in the meantime they were ordered to pay substantial costs.
Faced with these difficulties the Defendants agreed to stay their proceedings both in Cyprus and the BVI on terms set out in an exchange of letters but intended then to be formalised in a formal consent order of the BVI Court (though in the event, no consent order was ever made). The genesis, terms and effect of the agreement reached in correspondence are of some importance, as I shall elaborate later; for the present it is sufficient to say that the agreement provided for such stays, and for the English Court to have exclusive jurisdiction to resolve "all the substantive disputes between the parties."
As indicated above, on 22 December 2011 the Defendants filed their Claim Form in the Commercial Court. Again unfortunately for them, and again (they say) in consequence of political and/or other improper pressure, the bank (the Vozrozhdenie Bank, "the V Bank") which was funding the Defendants withdrew its support, leaving the Defendants impecunious and in great difficulty in proceeding.
Then, on 20 February 2012, the Claimants issued these proceedings in the Chancery Division. They also obtained freezing orders from Morgan J which were subsequently confirmed on the return date. The Defendants' apparent failure to comply with the freezing orders subsequently led to orders for their cross-examination via video link. The expenses, in time and money, have been considerable. I have set out the circumstances more fully in earlier judgments dated 10 July 2012 and 8 August 2012.
In the meantime, the Claimants have persisted in their efforts to enforce the judgments they obtained in Russia in any jurisdiction that will recognise them. The Defendants say that the Claimants, in pursuing "almost thirty parallel proceedings in Russian, French and Bulgarian Courts duplicating various parts of this claim" have acted and are acting vexatiously and oppressively, and with the intention of so weakening the Defendants that they are forced to capitulate.
The Defendants are now faced with a trial in England with a trial window fixed to open on 27 January 2014. In addition to the applications the subject of this judgment, the Defendants have now issued an application to adjourn that trial. The adjudication of these applications, and especially the application for permission to bring a counterclaim, is obviously relevant to that latest application, which I have now heard and which I deal with by way of postscript to this judgment.
I deal below with each application in turn.
Application for fortification of Claimants' cross-undertaking
The Defendants seek an order for the fortification of the Claimants' cross-undertaking in damages, given to the Court first on 15 March 2012 and then repeated on 29 March 2012, on the grounds that the imposition of...
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