Yugraneft v Abramovich
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CHRISTOPHER CLARKE |
| Judgment Date | 29 October 2008 |
| Neutral Citation | [2008] EWHC 2613 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2007 FOLIO 1545 |
| Date | 29 October 2008 |
[2008] EWHC 2613 (Comm)
Mr Justice Christopher Clarke
Case No: 2007 FOLIO 1545
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Michael Swainston QC, Rupert D'Cruz & Paul Wright (instructed by Clyde & Co LLP) for the Claimant
Mark Howard QC, Daniel Jowell & Stephen Midwinter (instructed by Skadden, Arps, Slate, Meagher & Flom (UK)) for the First and Second Defendants
Barbara Dohmann QC (instructed by Cadwallader) for the Third Defendant
Approved Judgment
Hearing dates: 9 th – 22 nd July 2008
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
In the present action the Claimant —OJSC Oil Company Yugraneft (“Yugraneft”) – claims damages against the first defendant —Roman Arkadievich Abramovich (“Mr Abramovich”), and the second defendant —Millhouse Capital UK Limited (“Millhouse”). I shall refer to these two hereafter as “the defendants”. Yugraneft claims to have been the victim of a massive fraud directed by Mr Abramovich whereby its interest in a joint venture company named Sibneft-Yugra was effectively reduced from 50% to less than 1% as a result of which it has suffered a loss of billions of dollars.
Mr Abramovich is a Russian citizen who made his fortune there and is now one of the world's richest men. From 2000 to July 2008 he was Governor of the Russian province of Chukotka. Millhouse is an English corporation which has been validly served within the jurisdiction. Its exact role in the events which follow is a matter of dispute.
The applications in the Commercial Court
Jurisdiction
Mr Abramovich contests jurisdiction on the grounds that at the time of the issue of the Claim Form he was not resident within the jurisdiction for the purposes of Article 2 of the Judgments Regulation. He applies to have the service of the Claim Form set aside on that account. Yugraneft contends that it is well arguable that he was so resident but, if it is not, seeks permission to serve him out of the jurisdiction.
Merits
Both Mr Abramovich and Millhouse invite the Court to dismiss Yugraneft's claims against them under CPR 24 or 3.4 upon the basis that they have no realistic prospect of success. Mr Abramovich's application is made without prejudice to his application contesting jurisdiction.
The Companies Court application
Yugraneft is a Russian corporation which is now in liquidation in Russia. Its liquidator is Mr Mikhail Kotov, who was appointed as Liquidator on 28 th May 2007. Further details of the history leading to the liquidation are set out in my judgment in respect of the Companies Court application.
On 12 th November 2007 a petition was filed in the Companies Court by Sibir, Yugraneft's parent company, and OAO Moscow Oil and Gas Company (“MOGC”), seeking to wind Yugraneft up in England. The avowed purpose of the petition was to secure the appointment of an English liquidator who would carry forward the Commercial Court action.
On 14 th November 2007 Evans-Lombe, J., appointed Mr Stephen Cork as provisional liquidator of Yugraneft. In addition to their applications to have the claim against them dismissed, Mr Abramovich and Millhouse seek to have the appointment of Mr Cork as provisional liquidator set aside and invite the Court to declare that it declines to exercise its insolvency jurisdiction over Yugraneft. This application is made in the Chancery Division. The Claim Form was issued, and the other applications were made, in the Commercial Court. I have sat as a judge of both the Chancery Division and the Commercial Court.
The current proceedings are a sequel to (i) an unsuccessful attempt by Sibir, Yugraneft's parent company, to launch proceedings in the British Virgin Islands (“BVI”) against six BVI companies, Sibneft, and Mr Abramovich and (ii) a series of ultimately unsuccessful proceedings brought by Yugraneft in Russia.
The application by Mr Abramovich and Millhouse to have the proceedings against them dismissed rests on the basis (i) that the proper law, or one of the proper laws, of any claim that Yugraneft may have against them is the law of Russia, and that by that law Yugraneft has no claim; and/or (ii) that as a result of what has happened in Russia and the BVI no claim is maintainable.
The parties and other relevant companies
Yugraneft is a Russian oil company. Its ultimate parent and controlling shareholder is Sibir Energy Plc (“Sibir”), which currently owns (indirectly) 99.368% of its shares. Sibir is incorporated in England but it carries on business entirely in Russia, where its assets are located. It is managed from Moscow. The principal shareholders of Sibir are Mr Chalva Tchigirinsky and the City of Moscow. The Chief Executive is Mr Henry Cameron. Sibir is the funder of the present proceedings. It procured the consent of Mr Kotov, Yugraneft's liquidator, to the initiation of those proceedings and then petitioned, with MOGC, for the appointment of an English provisional liquidator and the winding up of Yugraneft. Messrs Clyde & Co represented Sibir for the presentation of the petition and now represent Yugraneft.
Sibir did not always own most of Yugraneft. In 2002 and 2003, at the time of the wrongs that are complained of, Sibir was, either directly or indirectly, the 99% shareholder in Yugraneft. At the time of the proceedings in the BVI in 2005, Sibir had a total indirect interest in Yugraneft of about some 61%. Some of that interest was held through MOGC of which the City of Moscow held, through Central Fuel Company (“CFC)”), 55% of the shares. In 2007 the CFC exchanged its shares in MOGC for shares in Sibir, the result of which was that Sibir became again virtually the sole owner of Yugraneft. The details are set out in Appendix 4.
OAO Siberian Oil Company (“Sibneft”) is a giant Russian oil company. Until its sale to Gazprom in 2005, Sibneft was beneficially owned, at least in large part, by Mr Abramovich. There is a dispute as to whether Mr Berezovsky also owned an interest in Sibneft to which I refer in paragraph 166 below. The President of Sibneft at the material time was Mr Eugene Shvidler and its General Manager was Mr Alexander Korsik. Mr Abramovich's interest in Sibneft was held by 5 Cypriot companies (i) White Pearl Investments Ltd; (ii) Heflinham Holdings Ltd (iii) N.P. Gemini Holdings Ltd; (iv) Marthacello Co Ltd; and (v) Kindselia Holdings Ltd. Yugraneft alleges that all of these entities were under the control of Millhouse.
The history
I set out below such of the history, which extends over 8 years and involves litigation in three jurisdictions, as I take to be necessary in order to address the issues. In doing so I acknowledge the assistance provided by the summaries of the parties, much of which I have adopted.
In 2000 Yugraneft held licences for the development of certain oil fields, including, in particular, the South Priobskoye & Palyanovskoye oil fields in the Khanty Mansiysk region of Russia. It had, however, lost its previous financial backer and did not have sufficient funds to exploit those fields as required by the licences and had urgent need of new financing.
In or about the late summer of 2000 negotiations took place in Russia between representatives of Sibir and Sibneft. Mr Alexander Tchigirinsky, the brother of Mr Chalva Tchigirinsky, represented Sibir and Mr Shvidler represented Sibneft. There is a dispute as to whether the negotiations then included Mr Abramovich and Mr Luzkhov, the Mayor of Moscow. Further negotiations took place in Russia principally between Mr Korsik, the general manager of Sibneft and Mr Cameron, the Chief Executive Officer of Sibir together with Mr Sergei Demine, one of Mr Cameron's deputies at Sibir's representative office in Moscow.
The Co-operation Agreement1
Sibneft agrees to lend to Sibneft-Yugra
On 23 rd November 2000 Mr Cameron for Sibir and Mr Korsik for Sibneft executed in Russia a document in Russian headed (in translation) “Principles of cooperation between [Sibir] and [Sibneft]”. Under this document Sibir was to set up a company, eventually called Sibneft-Yugra, to which Yugraneft was to transfer the licences for the South Priobskoye, Palyanovskoye and Kamennoye oil fields. Sibneft was to purchase 50% of the company at nominal value and was to finance its activities “to the full”. The financing was to take the form of a loan to the joint venture company at 17% per annum. Repayment of the loan was to start as soon as the company had positive cash flows. In the event that Sibneft-Yugra could obtain a cheaper loan, the credit granted by Sibneft was to be replaced with a cheaper loan. Once the loan was repaid the positive cash flow of the company was to be shared equally between Yugraneft and Sibneft.
The new company was to be managed by a board with equal representation from Sibir and Sibneft. The Chairman was to be nominated by Sibneft and the company was to be under Sibneft's operational management. The executive officer of the company was to be nominated by Sibneft. In the event that the new company was not set up, or the licences were not transferred to it, or Sibneft did not obtain 50% of its shares, Sibneft would obtain half of Sibir's shares in Yugraneft and Yugraneft would be obliged to repay the loan provided by Sibneft to the new company.
On 10 th January 2001 LLC Oil Company Sibneft-Yugra (“Sibneft-Yugra”) was established. It was officially incorporated on 6 th February 2001. Sibneft-Yugra is a company of the OOO type. Such companies do not have shares but what are called...
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