JSC Commercial Bank Privatbank v Igor Valeryevich Kolomoisky
| Jurisdiction | England & Wales |
| Judge | Mr Justice Trower |
| Judgment Date | 08 July 2021 |
| Neutral Citation | [2021] EWHC 1910 (Ch) |
| Docket Number | Case No: BL-2017-000665 |
| Court | Chancery Division |
[2021] EWHC 1910 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
THE HONOURABLE Mr Justice Trower
Case No: BL-2017-000665
Andrew Hunter QC and Celia Rooney (instructed by Hogan Lovells International LLP) for the Claimant
Charles Hollander QC and Ben Woolgar (instructed by Fieldfisher LLP) for the First Defendant
Matthew Parker QC and Richard Eschwege (instructed by Enyo Law LLP) for the Second Defendant
Hearing dated 25 June 2021
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HONOURABLE Mr Justice Trower
Introduction: the freezing and confidentiality club orders
On 19 December 2017, the claimant sought and obtained from Nugee J a worldwide freezing order (the “WFO”) against the defendants. The WFO contained provision for the disclosure by the defendants of all of their assets worldwide exceeding £25,000 in value, giving the value, location and details of all such assets.
On 8 January 2018, the first and second defendants each applied for an order to vary paragraph 8 of the WFO so as to stay their obligations to disclose their assets located in Ukraine and/or Russia. The evidence the first defendant adduced in support of this application made clear that the relief was sought in the first instance pending determination of his challenge to the WFO.
In summary it was said that these proceedings formed part of a campaign of persecution orchestrated by the then president of Ukraine, Petro Poroshenko. It was said that there was a very significant risk that asset disclosure given to the claimant would find its way to the National Bank of Ukraine and Mr Poroshenko, and thereafter be used by him to take steps to expropriate, seize or otherwise damage the first defendant's assets and business. The second defendant's evidence explained that his assets too were vulnerable for the same reasons and because of the perceived alignment and proximity of his business interests to those of the first defendant.
The first defendant also contended that he is a political enemy of Vladimir Putin and the Russian state as a result of his activities defending the Crimea in 2014 whilst acting as the governor of Dnepropetrovsk. He said that he was further concerned that any asset disclosure would make its way to the Russian state and thereafter be used to seize his assets there.
The WFO as it applied to the first and second defendants was varied by Snowden J on 9 January 2018. He increased the minimum value of assets to be disclosed to £1 million and inserted special provision for the means by which each of them was to disclose assets (a) located in Ukraine and/or Russia and (b) in the form of shares in companies or entities which own or whose subsidiaries own assets in Ukraine and/or Russia (together the “U/R Assets”). This special provision required the first and second defendants to produce what was called the U/R List to be prepared and verified, but then held by their respective solicitors to the order of the court.
The Snowden order was itself varied by order of Roth J on 15 January 2018 in a manner that is not relevant for present purposes. On the same day the claimant cross-applied for a confidentiality club order pursuant to which circulation of the first and second defendants' U/R Assets disclosure would be limited to partners and employees at the claimant's English solicitors, Hogan Lovells, and would not be shared with their client. In the correspondence which preceded this application, Hogan Lovells made clear that this proposal was to deal with the position on an interim basis and that it was Hogan Lovells' intention that the U/R Assets disclosure would not be shared with their clients “at this time”.
Four days later on 19 January 2018, Nugee J made a further order (the “confidentiality club order”). Paragraph 1 of this order provided that:
“Until the sealing of any order following the determination of the First and Second Defendants' applications to set aside the WFO, any document or information disclosed by the First Defendant or Second Defendant pursuant to the WFO and/or this order which relates to an asset (i) located in Ukraine and/or Russia or (ii) shares in companies or entities which own, or whose subsidiaries own, assets in Ukraine and/or Russia shall not be disclosed to any person other than:
a. The qualified solicitors of England and Wales at the London office of Hogan Lovells International LLP (“Hogan Lovells”) directly engaged in the conduct of these proceedings on behalf of the claimant and
b. counsel retained by the claimant in connection with these proceedings (the “confidentiality club”).”
The confidentiality club order also made provision for the names of individuals entitled to receive the information to be provided in advance to the first and second defendants' solicitors and gave further directions for the way in which the confidentiality club was to be operated and enforced. It was expressly recorded on the face of the order that the claimant agreed through its counsel that CPR rule 31.22(1) applies to the information disclosed by the defendants pursuant to the WFO as varied.
It follows that the effect of the confidentiality club order was to prevent the claimant (including its in-house lawyers and other instructing officers and employees) from seeing any documents or information relating to the U/R Assets disclosed as part of the first and second defendants' compliance with the WFO. The definition of U/R Assets was quite wide in its impact because it extended to any entity, and the shares in any entity, which itself held any assets in Ukraine or Russia. This type of order is what has been called in the authorities an external eyes only order.
It appears from the judgment that Nugee J gave at the time he made the confidentiality club order that he intended that the regime would “last for a limited period, until the discharge application can be determined”. This reference to a discharge application was a reference to the first and second defendants' applications to set aside the WFO referred to in the opening lines of paragraph 1 of the confidentiality club order. He also said in the course of his judgment, albeit in relation to the different question of disclosure of assets worth less than £1 million, that “Everything may change after the discharge application, because either the proceedings will come to a halt or the freezing order will be discharged or matters will proceed with a view to a trial, at which point matters can be revisited.”
On 4 December 2018, the first and second defendants' applications to set aside the WFO succeeded before Fancourt J ( [2018] EWHC 3308 (Ch)). He also set aside service and stayed the proceedings on jurisdiction grounds. Fancourt J's decision was overturned by the Court of Appeal on 15 October 2019 ( PJSC Commercial Bank Privatbank v Kolomoisky and others [2020] Ch 783, [2019] EWCA Civ 1708). Permission to appeal to the Supreme Court was refused on 6 April 2020. The claimant contends that paragraph 1 of the confidentiality club order terminated by no later than the refusal by the Supreme Court of permission to appeal.
The claims in these proceedings
An outline of the case advanced by the claimant in support of which the WFO was granted is given in the judgment of the Court of Appeal ( [2020] Ch 783 at paragraphs [15] to [22]). For the purposes of this application, I can summarise the position more shortly, drawing on that judgment and the current versions of the parties' case summary and list of common grounds and contested issues.
The first and second defendants were amongst the founders of the claimant, a bank incorporated in Ukraine in 1992. Prior to the nationalisation of the claimant in December 2016, they were the ultimate beneficial owners of more than 80% of its shares. The extent of their control over any material decisions made by the claimant is an issue in the proceedings.
The claimant alleges that the first and second defendants orchestrated the fraudulent misappropriation of over US$1.9 billion. The misappropriation is said to have been achieved through loans made by the claimant to 47 Ukrainian and 3 Cypriot borrowers between April 2013 and August 2014. These borrowers then entered into supply agreements with supplier companies including the third to eighth defendants (the “corporate defendants”). The supply agreements, said by the claimant to be shams, were for the supply of quantities of commodities and industrial equipment and provided for the pre-payment of the entire purchase price before the time for delivery of the commodities or equipment had arrived.
The claimant alleges that, in respect of pre-payments totalling US$1.9 billion, no goods or commodities were supplied, and the pre-payments were not repaid by the suppliers to the borrowers. It also claims that loans in that amount have not been repaid to it by the borrowers and claims US$1.9 billion as loss from the first and second defendants.
The claimant contends that the misappropriation was disguised by, amongst other things, the grant of sham...
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