Lawyer Monthly Magazine - June 2019 Edition

Russian citizens accused of “economic crimes” due to concerns over human rights abuses within the Russian criminal justice system. Russian law does not recognise civil fraud. Therefore in order to recover loss arising from fraud and/or white-collar crime in Russia, it is necessary to file a complaint with the police seeking the instigation of criminal investigations. Once the investigating office issues a resolution to treat the victim of the fraud as the injured party, that person or legal entity can issue a claim within criminal proceedings to recover the loss. If a judgment is obtained and the person against whom it could be enforced is in England, the next step would be to pursue enforcement proceedings in England. The alternative to enforcement proceedings is to pursue a civil fraud action through the English courts if the wrongdoer is resident in England. Current trends We still see many enquiries from Russian and other former Soviet Union Countries looking to pursue legal proceedings, whether in relation to a region when restructuring ownership of their assets. In my view, English law is likely to continue to be used by Russian companies engaged in international trade. Many Russian business people continue to utilise off-shore companies to hold their assets based in jurisdictions where legal systems are based on English law. The result is that shareholders agreements are frequently based on English law and provide for any disputes arising from these agreements to be determined by the English courts. Fraud and white-collar crime Many Russians have made England their home in the last 20 years or more. Some of them have moved to England in order to avoid criminal proceedings in Russia. There is no formal agreement between Russia and the UK which would require the UK to extradite those pursued by the Russian justice system. Equally, the English courts have shown some reluctance to extradite Russian litigation in London In the last 15 years, English courts have been flooded with cases originating from the former Soviet Union. By way of example, Berezovsky v Abramovich [2012] EWHC 2463 (Comm), Aeroflot v Berezovsky and others (a case I acted on for some 9 years), VTB Capital Plc v. Nutritek International Corp and Others [2013] UKSC 5 and most recently, JSC BTA Bank v Ablyazov and JSC Mezhdunarodniy Promyshlenniy Bank & Anor v Pugachev & Ors [2017] EWHC 2426 (Ch). This article seeks to identify the reasons why this trend has evolved. The most prevalent reason why the UK has been the favoured centre for global disputes is the fact that the English courts have a long-established reputation for being independent and objective. However, there are additional commercial, practical and other reasons as outlined below that have been the main causes of Russian cases (and cases originating from other Former Soviet Union countries) being heard by the English courts. In my experience, most Russian related litigation in London could fall into one of the following three categories: commercial disputes, fraud (including white-collar crime) and family disputes. The latter is not covered in this article. However, the reasons for Russian high-value matrimonial disputes being heard in London are similar to the reasons for Russian fraud and white-collar crime cases being frequently litigated in London. Commercial disputes English law has been the worldwide favoured jurisdiction when it comes to settlements and arbitration of international trade disputes. Russia is no exception to this. Following the collapse of the Soviet Union and privatisation of Russian economy, Russian companies started trading internationally and soon realised that it was (and still is) common for commercial agreements to be subject to English law and/ or to the jurisdiction of English courts. At the same time, it was recognised that Russian law and its legal system were underdeveloped and outdated. For example, warranties and representations were non-existent in Russian law. Therefore, it is unsurprising that English law became first choice for companies in the former Soviet Union countries when entering into international transactions or for business people from the COMMERCIAL LITIGATION Russian Litigation in London by Sergey Litovchenko, Partner, Bivonas Law, London "Many Russians have made England their home in the last 20 years or more. Some of them have moved to England in order to avoid criminal proceedings in Russia." JUN 2019 22 Expert Insight