Navigator Equities Ltd v Oleg Vladimirovich Deripaska

Hearing dates: 19 and 20 October 2021

Approved Judgment

Introduction

This appeal arises in the wake of a long-running, bitter and high profile dispute between Navigator Equities Limited (“Navigator”) and Mr Vladimir Chernukhin (“Mr Chernukhin”) (as claimants) (“the Appellants”) and Mr Oleg Deripaska (“Mr Deripaska”) (as defendant) concerning valuable real property in Central Moscow owned through a joint venture vehicle, Navio Holdings Limited (“Navio”). Following an unsuccessful jurisdictional challenge by Mr Deripaska, in July 2017 the Appellants obtained an arbitral award against him (and his company Filatona Trading Ltd (“Filatona”)) ordering Mr Deripaska and Filatona to buy out Mr Chernukhin's interest in Navio in the sum of approximately US$95million (“the Award”). Mr Deripaska's subsequent High Court challenge to the Award under ss. 67 and 68 of the Arbitration Act 1996 (“the Arbitration Act proceedings”) failed in February 2019 (see the judgment of Teare J at [2019] EWHC 173 (Comm) 1).

Following the imposition of (and in partial substitution for) a worldwide freezing order in the sum of £87.5million (“the WFO”), Mr Deripaska gave various personal undertakings to the court on 29 June 2018 (signed by him on 28 June 2018) (“the Deripaska Undertakings”). By application notice dated 14 November 2019 the Appellants applied to commit Mr Deripaska for contempt of court on the basis of alleged breaches of the Deripaska Undertakings (“the Contempt Application”); they also contended that the Deripaska Undertakings were of contractual effect such that breach could sound in damages, which they duly sought (“the Contractual Claim”).

On 10 June 2020, after two days of a four-day hearing, Andrew Baker J (“the Judge”) dismissed the Contempt Application as an abuse of process and allowed Mr Deripaska's cross-application to strike out the Contempt Application on that basis (“the Abuse Application”). In a reserved written judgment dated 17 July 2020 (“the Judgment”) he gave full and detailed reasons for that decision and also dismissed the Contractual Claim on the basis that the Deripaska Undertakings were not of contractual effect and, in any event, there had been no breach.

The effect of the Judge's decision was to dismiss what was an otherwise properly arguable application to commit Mr Deripaska for serious (as opposed to merely technical) contempt on the basis:

i) Of the Appellants' subjective motive in bringing the application (which the Judge found to be a desire for revenge and personal animosity towards Mr Deripaska); and

ii) Of a failure on the part of the Appellants (and more particularly their lawyers) to comply with what he found to be the “quasi-prosecutorial” duties owed by them. In his judgment, in circumstances where any private interest in enforcement is spent, such an applicant pursues the matter “as much as quasi-prosecutor serving the public interest as it does as private litigant pursuing its

own interests in the underlying dispute”. It was incumbent on the Appellants, so he held, to “act generally dispassionately” “as guardians of the public interest”.

The Judgment has, perhaps unsurprisingly, attracted attention. It is noted in the White Book 2021 (at CPR3.4.17 and CPR81x.28.2) and Gee on Commercial Injunctions (7 ^th edn) (at 19-007, 20-009, 20-013, 20–021, 20–026, 20–044, 20–049 and 3–014). It has also been referred to judicially in TBD (Owen Holland) Ltd v Simons [2020] EWCA Civ 1182 (“ TBD”) (at [246]) and at first instance in Cole v Carpenter [2020] EWHC 3155 (Ch) (“ Cole”) (at [32] and [85]).

The Appellants now have permission to appeal (granted by Males LJ on 10 November 2020) against the Judge's striking out of the Contempt Application (though not to challenge his dismissal of the Contractual Claim).

The WFO

In the course of the Arbitration Act proceedings and in response to US sanctions imposed on Mr Deripaska (and a number of entities associated with him 2) on 8 April 2018 (“the US Sanctions”), the Appellants sought and obtained the WFO pursuant to s.44 of the Arbitration Act 1996.

At the forefront of the Appellants' application was the fear of difficulties in enforcement against Mr Deripaska's assets in Russia. Thus, by way of example, the Appellants' solicitor, Ms Marie Berard (“Ms Berard”) of Clifford Chance LLP (“Clifford Chance”), stated in her supporting (first) affidavit (“Berard 1”) (at [9]) that:

“…the [Appellants] are concerned that the wider effect of the sanctions is to encourage Mr Deripaska to repatriate his assets to Russia, where for the reasons set out below I believe he retains substantial influence, and/or otherwise take unjustifiable steps to restructure his assets in a way which will make it more difficult for third parties to enforce against them.”

In the same vein, Ms Berard deposed (at [89]) to her belief that, in the light of the deterioration in Mr Deripaska's international business interests and his ability to conduct business internationally, there was a real risk that he would take steps to repatriate assets to Russia. She identified (at [90]) the “substantial” legal and practical obstacles to enforcing a London arbitral award and/or an order of the English High Court in the Russian Federation, summarised as follows:

i) Although English judgments may be recognised and enforced in Russia on the basis of reciprocity, the standards for establishing reciprocity vary;

ii) There are a number of grounds to deny recognition and enforcement irrespective of reciprocity (including violation of Russian public policy, service issues, and jurisdictional issues);

iii) Proceedings for recognition and enforcement may take a long time, especially if non-Russian entities are involved in foreign proceedings, amongst other things because of requirements that they should be involved in and served with any Russian proceedings on recognition and enforcement; and

iv) Execution of a foreign judgment will, even if recognised, require execution proceedings to be initiated before a court; and different courts may be involved, depending on where assets are located. This may significantly add to the time and costs necessary for effective execution of the foreign judgment.

Consistent with these concerns, the WFO (at paragraph 7c) expressly discounted the value of any of Mr Deripaska's “assets based in Russia regardless of whether such assets are held through shares in companies outside of Russia (save for [Mr Deripaska's] interest in shares in companies quoted on the London or Hong Kong Stock exchange)”.

At the return date fixed for the WFO (on 19 June 2018), whilst not conceding in any way that the WFO had been properly granted 3 or that it should be continued, Mr Deripaska (through his lawyers) proposed a package of three sets of undertakings in exchange for withdrawal by the Appellants of their application to continue the WFO. This offer had been foreshadowed in earlier correspondence, including in a letter from Mr Deripaska's then solicitors, Bryan Cave Leighton Paisner LLP (“BCLP”) dated 23 May 2018. Referring to the three sets of proposed undertakings, BCLP there stated:

“The effect of these arrangements will be that Mr Deripaska will have made arrangements for assets with a value of well in excess of £125 million, of which he is the ultimate beneficial owner but not direct owner, to made available in London to be held pursuant to [the WFO] and offered as security for the purposes of paragraph 9e.ii of [the WFO].”

The reference to paragraph 9e.ii of the WFO was a reference to the provision under which the WFO would cease to have effect if Mr Deripaska made provision for security to be provided for the £87.5 million the target of the WFO.

The precise terms of this “suite of documents” (as Mr Deripaska's (subsequent) solicitor, Mr Andrew McGregor (“Mr McGregor”) of Reynolds Porter Chamberlain LLP (“RPC”), later accurately described them 4) were then the subject of detailed negotiation before being accepted by the Appellants in return for discharge of the WFO.

The Undertakings

The subject matter of each undertaking was 45,500,000 certificated shares in a Jersey-registered company, EN+ Group plc (“EN+ Jersey”) (“the Jersey shares”) held through a British Virgin Islands nominee, B-Finance Ltd (“B-Finance”), of which Mr Deripaska was the ultimate beneficial owner. That figure represented only a proportion — just under a third — of Mr Deripaska's total interest (of more than 150

The precise wording of the three sets of linked undertakings can be found in Annex A to this judgment. Each of the undertakings was expressly governed “in all respects” by English law. In overview:

i) RPC gave an undertaking to the court dated 29 June 2018 to hold the share certificates for the Jersey shares and not to dispose of or otherwise deal with the Jersey shares in any way pending the final outcome of the proceedings between the parties or further order of the...