The Commercial Court in Navigator Equities Limited and Chernukhin v Deripaska [2023] EWHC 788 (Comm) has dismissed long-running committal proceedings brought against Oleg Deripaska, and has ordered indemnity costs in relation to the contents of the affidavit evidence filed in support of the committal application.
The matter has a long history: the committal application was originally struck out by Andrew Baker J in 2020 as an abuse of process and on the basis that the Claimants had brought it in an aggressive and partisan fashion (see here). That order was overturned by the Court of Appeal in 2021, which concluded that a claimant’s subjective intention was irrelevant to the question of whether an application to commit was an abuse. The Court of Appeal remitted the matter back to the Commercial Court for trial, which trial was heard in March 2023.
The background to the committal application was the imposition of sanctions by the US Treasury in April 2018 on Mr Deripaska and a number of his companies, including En+ Plc (“En+”) and Rusal. The US Sanctions severely compromised En+’s business and gave rise to a real concern that unless the sanctions were lifted, the continued existence of the company was at risk and with it the livelihood of its many direct and indirect employees in the states where its subsidiaries carried on business. Consequently the En+ chairman, Lord Barker the former Conservative MP, developed a scheme that was designed to persuade OFAC and the US Senate to revoke the sanctions imposed on En+. One aspect of that plan was for the Russian bank, VTB, to enter into a debt-for-equity swap, a key condition of which was that En+ was re-domiciled from Jersey to Russia.
In the meantime, and in light of the US sanctions, the Claimants, who had an arbitral award in their favour, sought a worldwide freezing order against Mr Deripaska. In June 2018 Mr Deripaska gave undertakings in place of the WFO over a parcel of 45.5m shares in En+ owned by a BVI-registered company called B-Finance Limited. Undertakings were also given by B-Finance (to sell the shares if Mr Deripaska failed to meet the Award) and by Mr Deripaska’s then solicitors, RPC.
Broadly speaking, Mr Deripaska agreed to ensure the shares in En+ remained available for enforcement and not to inhibit B-Finance in performing its undertakings.
The proposed re-domiciliation was approved by En+’s board in November 2018 and by En+’s shareholders in December 2018. The re-domiciliation was then completed on 9 July 2019.
In November 2019, 45 days after Mr Deripaska had paid the arbitral award, the Claimants issued the contempt application. The Claimants sought the committal of Mr Deripaska to prison on the basis that, so they alleged, Mr Deripaska had voted his indirect shareholding in En+ in favour of the resolution for re-domicilation, the effect of which was that the shares in En+ which were the subject of B-Finance’s undertaking were ‘automatically cancelled and replaced with new shares in a new company’.
HHJ Pelling KC held, among other things, that that the Claimants needed to prove to the criminal standard that the effect of re-domiciliation, as a matter of Jersey and/or Russian law, was to cancel the shares the subject of the B-Finance undertaking. HHJ Pelling KC found that the claimants had failed to do so:
- First, if, as appeared to be the case, any automatic cancellation must have occurred as a matter of Russian as opposed to Jersey law, the Claimants were not entitled to rely on any propositions of Russian law without having set out succinctly in the amended application notice what law was relied upon and what its effect was alleged to be. The Claimants had not done so. Therefore if and to the extent that the Claimants had to rely upon Russian law to make good their assertion that the En+ shares were cancelled upon re-domiciliation of that company to Russia, then the Claimants case necessarily had to fail (at [45]). HHJ Pelling KC therefore declined to follow the modern potential approach to proving foreign law suggested by the Supreme Court in FS Cairo (Nile Plaza) LLC v Lady Brownlie [2021] UKSC 45; [2022] AC 995 at [148].
- Second, given this was a committal where heightened standards of procedural fairness are required to be observed and where a court must be satisfied to the criminal standard that the case advanced against the respondent has been made out, if foreign law was to be relied on to make good the central assertion in the claimants’ case that the Shares were automatically cancelled, then that required expert evidence (at [46]). No such evidence had been filed.
- Third, and in any event, it was at least realistically arguable that as a matter of Russian law the effect of re-domiciling a company to Russia was not either to dissolve the existing entity and replace it with a new company or to automatically cancel existing shares in the re-domiciling entity, but merely to recognise them as the shares in the re-domiciling entity following the change of its governing law and name (at [56] and [59]).
HHJ Pelling KC therefore held that the Claimants had failed to prove to the criminal standard any of the three alleged breaches, each of which was premised on the proposition that the shares in En+ the subject of the undertakings had been cancelled.
The Court dismissed the committal application.
A link to the judgment will be provided once available.
Anna Dilnot KC and Katherine Ratcliffe represented Mr Deripaska, together with Thomas Grant KC at Wilberforce Chambers, instructed by Mark Hastings and Abigail Healey of Quillon Law LLP.
