PJSC Tatneft v Gennadiy Bogolyubov and Others

JurisdictionEngland & Wales
JudgeThe Hon. Mr. Justice Picken:
Judgment Date08 November 2016
Neutral Citation[2016] EWHC 2816 (Comm)
CourtQueen's Bench Division (Commercial Court)
Docket NumberCL-2016-000172
Date08 November 2016
Between:
PJSC Tatneft
Claimant
and
(1) Gennadiy Bogolyubov
(2) Igor Kolomoisky
(3) Alexander Yaroslavsky
(4) Pavel Ovcharenko
Defendant

[2016] EWHC 2816 (Comm)

Before:

The Hon. Mr. Justice Picken

CL-2016-000172

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

London WC2A 2LL

Richard Millett QC, Paul McGrath QC, George Hayman and David Davies (instructed by Akin Gump Strauss Hauer & Feld LLP) for the Claimant Claimant

Ali Malek QC, Matthew Parker and Philip Hinks (instructed by Skadden, Arps, Slate, Meagher & Flom (UK) LLP) for the First Defendant

Jonathan Adkin QC, Ruth Den Besten and Tom Ford (instructed by Fieldfisher LLP) for the Second Defendant

Kenneth MacLean QC and Owain Draper (instructed by Mishcon de Reya LLP) for the Third Defendant

Tom Weisselberg QC (instructed by Byrne & Partners LLP) for the Fourth Defendant Defendant

Richard Morgan QC (instructed by Pinsent Masons LLP) for the 'Non-Cause of Action Respondents'

Hearing dates: 7, 10, 11, 12 and 13 October 2016

(Judgment provided in draft to the parties on 2 November 2016).

Judgment Approved

The Hon. Mr. Justice Picken:

Introduction

1

This is a very substantial case involving a significant amount of money. For the hearing which has resulted in this judgment there were over 70 (double-sided) bundles. These included 31 bundles of chronological documents and twelve bundles of authorities, together with many witness statements and experts' reports dealing with Russian and Ukrainian law. The skeleton arguments ran to substantially over 200 pages, and the hearing itself took five days and would have taken longer had it not been for the disciplined way in which submissions were made. This was not, however, the trial of the action. On the contrary, the proceedings having only been commenced in March this year, the action is at an early stage, and it was the Defendants' position at the hearing that it should not be permitted to go further on the basis that the claim advanced by the Claimant ('Tatneft') is lacking in merit. Specifically:

(1) The First Defendant ('Mr Bogolyubov'), who is domiciled in this jurisdiction and so who has been served here without Tatneft having to obtain permission from the Court, seeks summary judgment or an order striking out the claim.

(2) The Second Defendant ('Mr Kolomoisky'), who has been served out of the jurisdiction on the basis that he is a necessary or proper party to the action brought against Mr Bogolyubov, seeks an order setting aside the order permitting service out on him on the basis that there is no 'serious issue to be tried' on the merits of the claim against him.

(3) The Third Defendant ('Mr Yaroslavsky'), in respect of whom Tatneft also obtained permission to serve out of the jurisdiction but who has submitted to the jurisdiction having been served in England, applies, like Mr Bogolyubov, for summary judgment or an order striking out the claim.

(4) The Fourth Defendant ('Mr Ovcharenko') who, like Mr Kolomoisky, has been served out of the jurisdiction, seeks an order, again like Mr Kolomoisky, setting aside the order permitting service out on him on the basis that there is no 'serious issue to be tried' on the merits of the claim against him and/or because the proceedings represent an abuse of process.

In addition, all four of the Defendants seek the discharge of a worldwide freezing order made by Teare J in March this year (the 'Worldwide Freezing Order') on the basis that Tatneft's claim does not amount to a 'good arguable case' and/or on the basis that there is an insufficient risk of dissipation. They also complain that, in obtaining the Worldwide Freezing Order, Tatneft failed properly to discharge its duty of full and frank disclosure.

2

These are all matters which I shall come on to address, after setting out, in some detail, the factual background. I should, first, however, mention there were two other applications which were before me at the hearing: an application by Tatneft to amend its Particulars of Claim (an application which I shall also come on to address), and, in addition, an application to discharge the Worldwide Freezing Order by certain other parties, collectively described as the 'Non-Cause of Action Respondents' (an application which it was agreed should only be considered after this judgment has been handed down and the outcome of the various other applications is known). The Non-Cause of Action Respondents are various companies to which the Worldwide Freezing Order obtained by Tatneft applies under the so-called Chabra jurisdiction, namely on the basis that, so Tatneft alleges, they are parties which hold assets for the benefit of and/or under the effective control of Mr Bogolyubov. Although Mr Richard Morgan QC, on behalf of the Non-Cause of Action Respondents, came to the hearing hoping that there would be time for this further application to be argued, it was clear that this was not going to be possible and, having taken instructions at the end of the first day of the hearing, Mr Morgan QC confirmed that his clients did not oppose their discharge application being deferred. It was agreed by Tatneft that, in the circumstances, no issue estoppel or Henderson v Henderson type arguments would be advanced against the Non-Cause of Action Respondents if and when their discharge application came to be argued post-judgment.

Background and Tatneft's case

3

A number of matters are not in dispute. What follows is derived from a Case Memorandum which has been agreed between the Defendants as well as from the skeleton argument which Mr Richard Millett QC and Mr Paul McGrath QC and their juniors submitted on Tatneft's behalf. For the present, I propose to keep the description of the background relatively brief. I shall expand on particular matters to the extent necessary when, later on, addressing the submissions which the parties have made.

4

Tatneft is one of the largest oil producers in Russia and is approximately 33.6% owned by the Government of Tatarstan, Russia, where its registered office is to be found. Tatneft brings the present claim as assignee, or purported assignee since the scope of the assignment (contained in a contract described as a 'Compensation Agreement' dated 22 October 2015: the '2015 Compensation Agreement') is in issue, of another Russian company, Kompaniya Suvar-Kazan LLC ('S-K'), Tatneft's 'commission agent' under a contract dated 26 January 2007 (the 'Suvar-Tatneft Commission Agreement'). It is Tatneft's case that the Defendants each took part in a dishonest scheme to misappropriate very substantial sums which should have been paid to Tatneft in respect of oil which it delivered to the Kremenchug oil refinery in Ukraine during 2007. This is a refinery which is owned by a Ukrainian company called PJSC Transnational Financial and Industrial Company 'Ukrtatnafta' ('UTN'). Specifically, although the oil was delivered to UTN's refinery by pipeline, it was not sold directly by Tatneft to UTN since there were four intermediate companies involved in what was a chain of contracts. The first such intermediate company was S-K, which contracted to on-sell the oil in its own name to a Ukrainian company, Private Multi-Sector Production-Commercial Enterprise AVTO ('Avto'). The relevant contract was entered into on 23 April 2007 (the 'Suvar-Avto Framework Contract'). In this role and as Tatneft's 'commission agent', S-K had responsibility for the logistics involved in exporting the oil from Russia, meaning that Tatneft protected itself against the legal risks associated with being responsible for bringing foreign currency into Russia. The next company in the contractual chain, Avto, itself acted as a 'commission agent'. This was for another Ukrainian company, Taiz LLC ('Taiz'), the relevant contract being dated 19 April 2007 (the 'Taiz-Avto Commission Agreement'). Taiz was party to a number of contracts with UTN, under which it agreed to sell oil to UTN (the 'Taiz-UTN Contracts), as well as being party to other sale contracts (the 'Taiz-Tekhnoprogress Contracts') with Tekhno-Progress Scientific and Production LLC ('Tekhnoprogress'), a company which on-sold to UTN under its own sale contracts with UTN (the 'Tekhnoprogress-UTN Contracts').

5

Before outlining the essentials of the dishonest scheme which Tatneft has alleged, it is necessary, first, to say something about the Defendants. Mr Bogolyubov is a Ukrainian businessman who has, since 2009, resided in London. Mr Kolomoisky is a Ukrainian-Israeli businessman, and formerly the governor of Dnipropetrovsk Oblast, an area of south eastern Ukraine. Together, they hold a majority stake in, and Tatneft would say control, JSC CB PrivatBank ('PrivatBank'), Ukraine's largest commercial bank, along with a diverse array of companies generally referred to, for convenience only and not in a technical sense, as the 'Privat Group'. Tatneft alleges that both Mr Bogolyubov and Mr Kolomoisky have had at least some ownership interest in UTN since December 2006. Tatneft further alleges that they substantially increased that interest in mid-2009 when, through a Ukrainian company called Korsan LLC ('Korsan'), they used the proceeds of the dishonest scheme described below to fund that increase. In this regard, Tatneft relies on the fact that early the following year, in February 2010, Mr Bogolyubov and Mr Kolomoisky were elected to UTN's Supervisory Board. This was at the same time as Mr Yaroslavsky also joined UTN's Supervisory Board. Mr Yaroslavsky, another wealthy Ukrainian businessman, admits to having worked with Mr Bogolyubov and Mr Kolomoisky in relation to UTN as well as other interests. Indeed, he admits in the Defence which he has served that he acquired a 25% interest in Korsan, and thereby a substantial indirect interest in UTN, in June 2009.

6

As for Mr Ovcharenko, Tatneft's...

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