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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Deripaska v Cherney [2009] EWCA Civ 849 (31 July 2009) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2009/849.html Cite as: [2009] EWCA Civ 849, [2009] CP Rep 48 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION, COMMERCIAL COURT
Mr Justice Christopher Clarke
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE MOORE-BICK
and
SIR JOHN CHADWICK
____________________
Deripaska | Appellant |
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| - and - |
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| Cherney |
Respondent |
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Ali Malek QC, Joe Smouha QC, Christopher Harris (instructed by Bryan Cave) for the Appellant
Geoffrey Vos QC, David Foxton QC, David Lord QC and James Weale (instructed by Dechert LLP) for the Respondent
Hearing dates : 20th, 21st July 2009
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Crown Copyright ©
Lord Justice Waller :
Deripaska
had much the better side of the argument [144]; and thus that CPR 6.20(5)(c ) and (d) [now 6BDP.3 -3.1(6)(c ) applicable by virtue of CPR 6.36] were not available to Mr Cherney as a basis for the English court taking jurisdiction; (3) that since it was common ground that if the contracts on which Mr Cherney sued were made, they were made in England, the English court had a basis for exercising its discretion to take jurisdiction under CPR 6.20(5)(a) [now 6BPD.3 -3.1(6)(a)]. In considering whether the English court was the proper place for the proceedings to be brought under CPR 6.21(2A) [now CPR 6.37(3)], having considered a great deal of material, he analysed the question in two stages; at the first stage he found that the "natural forum" was Russia but at the second stage he found that "the risks inherent in a trial in Russia (assassination, arrest on trumped up charges, and lack of a fair trial) are sufficient to make England the forum in which the case can most suitably be tried in the interest of both parties and the ends of justice".
Deripaska
might use his influence, or his ability to orchestrate feelings against Mr Cherney, to encourage the authorities to take that course, and a "distinct possibility that the charges would be trumped up" [201]. As regards the question whether Mr Cherney would receive a fair trial, he directed himself as to the need for circumspection in relation to any assertion that a fair trial could not be obtained in a foreign court and as to the need for "positive and cogent evidence" [237]; he recorded the fact that it was common ground between the experts that, in certain cases, the arbitrazh courts in Russia cannot necessarily be expected to perform their task fairly and impartially – for example where "the outcome will affect the direct and material strategic interest of the Russian state" [239]. He found that the affairs of Rusal and Mr
Deripaska's
group of companies must be of considerable importance, including strategic importance, to the Russian state [243] and there was a close link between the Russian state and Mr
Deripaska
[246] and thus that there was "a significant risk of improper government interference if Mr Cherney were to bring the present claims in Russia" [248]; what he also made clear was that he was not finding that a fair trial could never be obtained in the Russia - on the contrary [247].
Deripaska
appreciated that Mr Cherney would not go to trial in Russia relying on certain correspondence between an English public relations firm Mirepco Limited and a lawyer, or possibly a consultant, who acted for one of Mr
Deripaska's
companies (the Mirepco documents). One of the strategies for dealing with the litigation outlined in the report was in the following terms:-
"5. Russian (or other jurisdiction) judgement offset. A case can be opened against Cherney in Russia, or any other jurisdiction with which the UK has reciprocal enforcement arrangements (under the Hague Convention). Cherney will probably not defend it, as he will not return to Russia to answer any questions. Thus a default judgement can be obtained against him. If the case in the UK is settled or won by Cherney, and an amount paid, the outstanding judgement debt from the Russian case can be used to offset any such liability by using it to impound any money due to Cherney either under a settlement or a judgement."
Deripaska
had not commissioned that report and knew nothing about it, but no evidence was filed which offered any explanation. The judge concluded the report was genuine and a reflection of the assessment of Mr
Deripaska
and his advisers. That finding has not been challenged and there is still no evidence to counter the inference drawn by the judge.
Deripaska
had a house in London and a house in England outside London and considerable assets here [261].
"In the result, it seems to me that the solution of disputes about the relative merits of trial in England and trial abroad is pre-eminently a matter for the trial judge. Commercial court judges are very experienced in these matters. In nearly every case evidence is on affidavit by witnesses of acknowledged probity. I hope that in future the judge will be allowed to study the evidence and refresh his memory of the speech of my noble and learned friend Lord Goff of Chieveley in this case in the quiet of his room without expense to the parties; that he will not be referred to other decisions on other facts; and that submissions will be measured in hours and not days. An appeal should be rare and the appellate court should be slow to interfere. I agree with my noble and learned friend Lord Goff of Chieveley that there were no grounds for interference in the present case and that the appeal should be allowed."
Deripaska
that, having found Russia to be the natural forum, that was the end of the matter and the court simply had no business going into the question whether a trial would ever take place in Russia or as to whether a fair trial could be obtained in Russia. That second question might be relevant in a stay case, where the English court has jurisdiction and is considering staying the action, but is not (so it is submitted) a question the court considers when leave is being sought to serve out and the court has concluded that the natural forum is not England. In the alternative it is said if that extreme submission is unacceptable, then reasons for giving permission to serve out, even though the natural forum is not England, must be of the most compelling kind.
Deripaska
to ask us to look at the evidence that there was before the judge to support his submission that it was not "cogent" or sufficiently cogent to allow the judge to hold that England was the "proper forum". He submits (rightly) that the judge's ultimate holding was that cumulatively assassination, arrest on trumped up charges and lack of fair trial persuaded him to rule the way he did and thus, if the evidence in relation to any one of the aspects was not there or was not of the "cogency" required, this court would have to re-assess whether the proper forum was England.
(1) If a court has concluded in a leave to serve out case that the natural forum is other than England, is it open to the court still to find England the "proper forum" i.e. the place where in the interests of the parties and the ends of justice the case should be tried?
"Subject to the differences set out below, the criteria that govern the application of the principle of forum conveniens where permission is sought to serve out of the jurisdiction are the same as those that govern the application of the principle of forum non conveniens where a stay is sought in respect of proceedings started within the jurisdiction. Those criteria are set out in The Spiliada, above:
(i) The burden is upon the claimant to persuade the court that England is clearly the appropriate forum for the trial of the action.
(ii) The appropriate forum is that forum where the case may most suitably be tried for the interests of all the parties and the ends of justice.
(iii) One must consider first what is the "natural forum"; namely that with which the action has the most real and substantial connection. Connecting factors will include not only factors concerning convenience and expense (such as the availability of witnesses), but also factors such as the law governing the relevant transaction and the places where the parties reside and respectively carry on business.
(iv) In considering where the case can be tried most "suitably for the interests of all the parties and for the ends of justice" ordinary English procedural advantages such as a power to award interest, are normally irrelevant as are more generous English limitation periods where the claimant has failed to act prudently in respect of a shorter limitation period elsewhere.
(v) If the court concludes at that stage that there is another forum which is apparently as suitable or more suitable than England, it will normally refuse permission unless there are circumstances by reason of which justice requires that permission should nevertheless be granted. In this inquiry the court will consider all the circumstances of the case, including circumstances which go beyond those taken into account when considering connecting factors with other jurisdictions. One such factor can be the fact, if established objectively by cogent evidence, that the claimant will not obtain justice in the foreign jurisdiction. Other factors include the absence of legal aid or the ability to obtain contribution in the foreign jurisdiction.
(vi) Where a party seeks to establish the existence of a matter that will assist him in persuading the court to exercise its discretion in his favour, the evidential burden in respect of that matter will rest upon the party asserting it."
"(f) If however the court concludes at that stage that there is some other available forum which prima facie is clearly more appropriate for the trial of the action, it will ordinarily grant a stay unless there are circumstances by reason of which justice requires that a stay should nevertheless not be granted. In this inquiry, the court will consider all the circumstances of the case, including circumstances which go beyond those taken into account when considering connecting factors with other jurisdictions. One such factor can be the fact, if established objectively by cogent evidence, that the plaintiff will not obtain justice in the foreign jurisdiction; see the The Abidin Daver [1984] AC 398, 411, per Lord Diplock, a passage which now makes plain that, on this inquiry, the burden of proof shifts to the plaintiff. How far other advantages to the plaintiff in proceeding in this country may be relevant in this connection, I shall have to consider at a later stage."
"The possibility cannot be excluded that there are still some countries in whose courts there is a risk that justice will not be obtained by a foreign litigant in particular kinds of suits whether for ideological or political reasons, or because of inexperience or inefficiency of the judiciary or excessive delay in the conduct of the business of the courts, or the unavailability of appropriate remedies. But where there is already a lis alibi pendens in a foreign jurisdiction which constitutes a natural and appropriate forum for the resolution of the dispute, a plaintiff in an English action, if he wishes to resist a stay upon the ground that even-handed justice may not be done to him in that particular foreign jurisdiction, must assert this candidly and support his allegations with positive and cogent evidence."
"255. I turn then to the second stage. If the claim is not permitted to continue in England, it will almost certainly not be pursued in Russia or elsewhere. It has not been suggested that, if the case is not heard in either Russia or England, there is some other jurisdiction to which MrDeripaska
is subject where the case can appropriately be tried.
256. The fact that the claimant may face difficulties or obstacles in proceeding in what is, prima facie, the natural forum does not necessarily entitle him to trial in England. Nor can the English courts, whatever their merits, be the default home for every claimant who asserts that he will not venture abroad for his litigation or receive a fair trial there, provided only that he can bring himself within the letter of CPR 6.3. But the fact that the effective choice is between trial in England and no trial at all is a material factor in any determination of the appropriate forum. The extent to which it is material will depend on the reasons for that being the effective choice.
257. In the present case I am satisfied that two of the reasons are that Mr Cherney has a well founded fear that, if he proceeds in Russia, he will (a) be at greater risk of assassination, and (b) face criminal prosecution for what, on his evidence, and the reported remarks of MrDeripaska's
lawyer, would be a trumped up charge. Those fears cannot be discounted or disregarded on the footing that he runs no greater risk of assassination in Russia than in Israel or that there is no real possibility of any trumped up charge being brought.
. . .
260. In addition, whatever the position in other cases may be, I am, as I have said, satisfied that, in this particular case, there is a significant risk that Mr Cherney will not obtain in Russia a trial unaffected by improper interference by State actors and that substantial justice may not be done.
261. So far as general discretionary considerations are concerned, the parties are not strangers to England. MrDeripaska
has a house in London and another in the country. His group has substantial assets within the jurisdiction. The parties met and made whatever agreement they did make in London. The rules contemplate that there may be circumstances in which the only basis for jurisdiction lies in the fact that the agreement was made in this country. The fact that that is the only ground for jurisdiction may militate against exercising discretion in the claimant's favour. But in this case London was not a fortuitous meeting place. It was somewhere readily accessible to both parties and may properly be regarded as neutral ground. Both parties have confidence in English law and the English courts.
262. It does not seem to me that any need to call Russian or other non-English witnesses would give rise to unacceptable difficulties. The two most important witnesses are the parties themselves. A substantial proportion of the relevant material (e.g. as to company structures, instructions to lawyers and accountants and movement of funds) must be in writing. Several witnesses, such as the representatives of Syndikus and Mr Philipides, Mr Mishakov and others are likely to be seasoned travellers. Neither party has suggested that they will suffer significant prejudice if the trial takes place here.
263. Lastly, I take into account the fact that Mr Cherney delayed until December 2007 making the application that Tomlinson, J had contemplated would be heard (after it had been made) in June. There appears to me no satisfactory justification for this delay. I do not, however, regard that delay as a sufficient reason to deny Mr Cherney the order that I would otherwise make.
Conclusion
264. Taking all those considerations into account, I am persuaded that the risks inherent in a trial in Russia (assassination, arrest on trumped up charges and lack of a fair trial) are sufficient to make England the forum in which the case can most suitably be tried in the interests of both parties and the ends of justice and, accordingly, the proper place for the determination of this claim."
"199. As to the first of Mr Cherney's concerns, Mr Stewart submitted that Mr Cherney is no more likely to be the subject of an assassination attempt in Russia than he was in Israel or is anywhere else. I do not accept that. Whoever tried to have him killed in Israel was almost certainly Russian based. The risk of a successful assassination seems to me likely to be greater in the place where the person or persons who might wish to have him killed reside and where the requisite personnel and materiel are likely to be more readily available. This is particularly so if Mr Cherney is engaged in a public trial. I cannot tell whether any threat to Mr Cherney is likely to come from a figure from his supposed criminal past or a former business rival (or someone who falls into both categories) or neither. I do, however, consider that Mr Cherney has a well founded fear for his safety and that he will be more at risk in Russia than England."
"213. The use of criminal prosecutions (or the threat of them) as tools in a power struggle with rivals was a feature of Soviet Russia. The pattern has continued and has a new name: "zakaznye dela " ("prosecutions to order"). In 2004 the ECHR in Gusinsky v Russia found that the Russian authorities had, in violation of Article 18 and 5, commenced a criminal investigation and deprived Mr Gusinsky of his liberty, not on suspicion that he had committed a criminal offence, but in order to intimidate him as part of a commercial bargaining strategy, namely to induce him to sell his media business to Gazprom on unfavourable terms. The Central Magistrates Court in Madrid refused the Russia Government's attempt to extradite Mr Gusinsky from Spain on a similar basis.
214. There is force in Professor Bowring's opinion that a State capable of such conduct on one occasion is perfectly capable of doing so again.. His view is that Mr Cherney is an obvious candidate for false charges because Mr Cherney's action poses a real threat to Rusal and to MrDeripaska's
most fundamental interests. The likelihood of this is increased because of Mr Cherney's link with Mr Berezovsky, who has been tried and sentenced in absentia, and is a well known enemy of Mr Putin, his former protégé."
Deripaska
was capable of making allegations to denigrate Mr Cherney, and the judge thus reached this conclusion at paragraph 201:-
"It seems to me that there is a significant likelihood of Mr Cherney being prosecuted if he returns and a real possibility that MrDeripaska
might use his influence, or his ability to orchestrate feeling against Mr Cherney, to encourage the authorities to take that course. I refer below to the evidence of Professor Bowring (see paragraphs 213-4 below) which appears to me to lend substantial support to that conclusion. There is reason to suppose that Mr
Deripaska
or his advisers have already conceived a plan to denigrate Mr Cherney in this country (see paragraph 249 below) and in Israel (see paragraph 153 above); and there appears to be far more scope for such a plan and for a prosecution in Russia. Further there is a distinct possibility that any charges would be trumped up."
Deripaska's
expert] characterises that as only applicable in a case whose outcome will affect the direct and material strategic interest of the state." The judge however pointed out that, in what was termed the Films by Jove case, it appeared that the Russian State had intervened in a dispute which did not affect its vital interests [see paragraph 242 of the judgment, which Mr Malek did not criticise, as an accurate summary of the evidence relating to that case]. The judge then examined the position of Rusal [the company whose shares are the subject of the contracts sued on by Mr Cherney], and Mr
Deripaska's
companies in Russia in paragraph 243. I do not understand the facts there summarised to be disputed, although the conclusion which the judge reached must have been in issue before him. His conclusion was that "The affairs of Rusal and Mr Derispaska's group must be of considerable importance, including strategic importance, to the Russian State."
Deripaska
and the Russian State which he suggested bordered on the "umbilical" [244] and as to which he had the evidence of Professor Bowring to support him.
"246. Given the closeness of the link between the Russian State and MrDeripaska,
the alignment of his interests with those of the State, and the size and importance of Rusal, it seems to me that the Russian State may well regard the question as to who was beneficially entitled to 20% of Rusal and is beneficially entitled to a 13.2% interest in UCR (even if the interest is held on trust for sale), as sufficiently important to justify encouraging the courts to see their way to rejecting Mr Cherney's claims, if he were to present them in a Russian Court. The same applies to the question whether any part of that interest has to be sold to honour obligations to Mr Cherney (no friend of the Russian State). Sual and Glencore have a 33 1/3% interest in UCR. A sale of Mr Cherney's alleged 13.2% beneficial interest would increase the minority interests to just over 46%, which might be a matter of concern (even if Mr Cherney were to sell to a loyal Russian). The apparent need to keep Mr Cherney's name off the face of the documents suggests a considerable sensitivity on the part of Mr
Deripaska
or the Russian State about Mr Cherney having any link with Rusal or UCR. The prospect of this is enhanced if, as also seems very possible, the State took, or was persuaded to take, the view, whether by a public campaign or by private representation, that Mr Cherney's interests had been obtained by the illicit acquisition of State property, as has been alleged in various publicity campaigns in Russia and elsewhere. This was a consideration that Judge Trager thought may well have influenced state officials in the Films by Jove case: see page 53 (RHC) of his 2003 decision. The fact that Mr
Deripaska
is reported to have owed his expansion to strong support from the Russian authorities also provides ground for believing that he may benefit from such support in the future."
"247. I should make it clear what I am not deciding. I am not deciding that a fair trial can never be obtained in the Russian arbitrazh system. On the contrary I do not doubt that there are many honest and good judges in the system at every level, who conscientiously seek to do justice according to the relevant legal principles and procedures, who are developing the arbitrazh system to relate to the commerce of the new Russia, and who do so without improper interference. Nor is it the case that in the arbitrazh courts the State is practically bound to succeed, as appears from the two examples cited by Mr Dmitry Dyakin of the Magisters Law firm in his witness statement.
248. I do however regard there as being a significant risk of improper government interference if Mr Cherney were to bring the present claims in Russia, where they would be very high profile proceedings indeed, such that substantial justice may not be done to him if he is required to proceed there. I am not satisfied that, if he is so required, justice will be done. I find support for this conclusion from the observations of Professor Hendley, upon whom Professor Stephan relies, in a chapter headed "Putin and the Law" in her book "Putin's Russia" where she concluded:
"But the continued willingness of those with political power to use law in an instrumental fashion to achieve their short term goals means justice can sometimes be out of reach. It also means that the commitment to the basic principle of the rule of law, namely that law applies equally to all, irrespective of their power or connections, is not yet complete. A gap between the law on the books and the law in practice exists in Russia, as in all countries. Surely it has receded from the chasm it was during the Soviet era. But whether it will increase or decrease as time goes by remains to be seen"."
Deripaska
and taking account of the Mirepco documents, that Mr Cherney would not get a fair trial in Russia of a dispute between him and Mr
Deripaska
over shares in Rusal. I emphasise this particular case because it would be quite wrong for it to be suggested that the English court is saying that a fair trial cannot be obtained in Russia in all normal cases. This is not a normal case and it has particular features from which the judge was entitled to reach the conclusion he did.
Deripaska
and Mr Cherney were beneficial owners of Radom Foundation which controlled Sibal; that what was contemplated was a merger of Sibal with other entities into a vehicle, Rusal, of which the owners of Radom and the other entities would have a 50% shareholding. The pleading then asserted the existence of an agreement dated 10th March 2001 under which it was recognised that Mr Cherney would be entitled to 20% of Rusal and by which it was agreed that Mr
Deripaska
would pay the value of that 20%, following in particular realisation of the 20%, and that Mr
Deripaska
would hold the 20% for Mr Cherney in the meanwhile. Mr
Deripaska
was to pay $250 million as a first instalment within a year, that amount to be deducted from the ultimate sum realised.
Deripaska
directly or indirectly) is held on trust for Mr Cherney" and a declaration is claimed to that effect.
Deripaska
has the better of the argument on proper law and, since Russian law knows no concept of trust, there is not a sufficiently arguable case to permit service out of the jurisdiction.
Deripaska.
Previous dealings were matters of background only against which obligations under the alleged contracts were said to arise.
Deripaska's
argument that Russian law applied.
Deripaska
to raise by way of defence. I accept that if he could raise by way of defence something amounting to a knockout blow that would obviously have to be taken into account and would mean that a sufficiently arguable case would not be established. But in this case he would not (for example) be entitled to summary judgment that Russian law applied, and thus it is on any view not a knockout blow.
Lord Justice Moore-Bick :
Deripaska
said that if Mr Cherney feared prosecution it was because he had been accused of a number of serious crimes; Mr Cherney says that false charges would be made against him to justify his arrest, and perhaps subsequent imprisonment, in order to prevent him form pursuing his claim. The judge held that there was no evidence that Mr. Cherney had been involved in criminal activities and Mr. Malek did not seek to challenge that finding. It follows, therefore, that there is a real possibility that any charges brought against him would not be well-founded. However, the matter does not end there because there was evidence before the judge, not least in the form of Professor Bowring's report, the decision of the European Court of Human Rights in Gusinsky v Russia and the well-known proceedings against Mr. Khordorkovsky of Yukos, that tended to support the conclusion that the criminal justice system has been used, and from time to time is still used, as an instrument of government policy, a conclusion that was further supported by the writings of an acknowledged expert on the Russian judicial system, Professor Kathryn Hendley. Even Mr.
Deripaska's
expert, Professor Paul Stephan, cast a degree of doubt on the integrity of the criminal justice system when he stated that the inadequacies in the judicial system were limited to the courts of general jurisdiction rather than the arbitrazh courts.
Deripaska
or those supporting him thought it might be worthwhile to do so. I shall come in a moment to the question whether the judge was entitled to find that the Russian government would be likely to take an interest in this dispute, but the Mirepco documents, to which Waller L.J. has referred, give one an insight into the methods which Mr.
Deripaska
or his supporters had in mind to use in order to discredit Mr. Cherney and undermine his position. As such they provide some additional grounds for thinking that, if the government were minded to exert pressure on Mr. Cherney, the initiation of criminal proceedings, whether on a speculative or knowingly false basis, could not be ruled out. The extradition cases to which the judge was referred provide additional support for this part of Mr. Cherney's case. If, as I think, there was cogent evidence before the judge that the system is capable of being manipulated in that way, albeit in relatively rare cases, it was for him to assess the degree of risk that Mr. Cherney would run if he were to travel to Russia in order to pursue the action.
Deripaska,
who currently remains in control of the company. Moreover, there was some evidence before the judge that Mr.
Deripaska
enjoyed the support of the government.
Deripaska
and those in government, I think that there was ample evidence on which the judge could find that there was a risk of government interference in the judicial process if the present action were tried in Russia. Again, it was for him to assess the extent of that risk; this court could interfere with his assessment only if it were satisfied that the evidence was not capable of supporting his conclusion. In my view that is not the case.
Deripaska
will succeed in establishing that the contract is governed by Russian law and that Russian law does not recognise rights of the kind asserted by Mr. Cherney. However, that is for the trial. The fact that, as the judge held, Mr.
Deripaska has the better of the argument at this stage in relation to proper law does not mean that Mr. Cherney's case is so weak that it does not give rise to a serious issue to be tried.
Sir John Chadwick :