The long arm of the English courts
A dispute between oligarchs leads to questions over how far the courts are willing to go in passing judgment over another jurisdiction
Law is about delivering justice, but what happens when rival views of justice collide? Is it for one country to pass judgment over another? When should a court decide that another state cannot or will not do justice? This was the dilemma faced by Mr Justice Christopher Clarke in the recent High Court case of Cherney v Deripaska.
The case gives a rare peek into the world of Russian oligarchs. At its centre is a dispute over control of a $4 billion (£2 billion) stake in Rusal, the world’s largest aluminium company.
The claimant, Michael Cherney, was a powerful figure in Russia in the early 1990s but now lives in Israel. He claims that his former protégé, Oleg Deripaska, seized a 20 per cent stake of Rusal that he was holding in trust for Mr Cherney and pushed him out of the company. Mr Deripaska is now reportedly the richest man in Russia and the ninth-richest in the world, with a fortune estimated by Forbes magazine of $28 billion (£14 billion).
In a forerunner to the broader legal action, Mr Justice Christopher Clarke had to decide whether to keep the case in England or to send it to Russia. Keeping the case here would mean the courts deciding a claim with only a tenuous connection to the UK. Sending it to Russia, it was argued, put justice — and potentially Mr Cherney — at risk.
There was little doubt, given the nature of the claim and the parties, that the jurisdiction most closely connected to the claim was Russia. However, Mr Cherney argued that he should not be forced to litigate there, partly based on fears for his personal safety and criminal prosecution. But he also challenged the influence of the Russian state over the courts and alleged that there was widespread corruption in the Russian courts.
The judge decided that Mr Cherney’s fears over returning to Russia were justified and that the case should be tried in London. He thought Mr Cherney might well be prosecuted and that his safety would be at risk. This would have been enough on its own to justify a decision to keep the claim in England, but the judge went further. While he made it clear that he was not deciding a fair trial could never be obtained in Russia, he thought that there was a significant risk of “improper government influence” in this particular case.
In making his decision, Mr Justice Christopher Clarke rubbed salt into what is already a raw diplomatic relationship between Britain and Russia. Moreover, there is a real concern that in doing so the court has crossed the boundary of what is acceptable under English law, never mind the principles of international comity. His decision is highly controversial despite his effort to limit the scope of it.
The key authority in any case about the proper forum for a dispute, when when European Union and European Free Trade Association treaties do not apply, is The Spiliada, a 1987 dispute involving a Liberian-owned ship. This sets out a two-part test: first, the defendant must show that there is another jurisdiction that is clearly more appropriate for the case. Then the claimant must establish that justice requires the claim to be heard in England. This may be done on the basis that he will not obtain justice in the other jurisdiction. To do so will require cogent evidence, but cogent evidence of state interference and corruption — the basis of Mr Cherney’s claim — is by its nature hard to come by; most of the available evidence will be rumour and opinion. Proving there is no state interference is even harder.
Most courts have in the past fought shy of condemning another jurisdiction. In Norex Petroleum Ltd v Access Industries Inc, for example, a New York court dismissed an attack on the Russian courts and found that an adequate alternative forum existed in Russia. Similarly in Base Metal Trading SA v Russian Aluminium, allegations against the Russian courts were disregarded and the US court decided that the case could proceed in Russia.
Nevertheless, disputes of this sort are becoming more common and the Cherney v Deripaska judgment may set a new pattern. But its shape remains unclear. Will English courts, for instance, now be more willing to judge other states? How many other countries would fail Mr Justice Christopher Clarke's standards? And how are the courts to take realpolitik into account?
This was not, after all, a claim involving a banana republic dictatorship, but a public slap in the face for a world power on whom the UK depends to a significant extent for its energy supplies.
Justice exported is rarely popular anywhere. Any finding that justice cannot be guaranteed in another jurisdiction could be seen as a serious affront to national pride. Indeed, UK lawyers themselves have often criticised the long arm of other jurisdictions, particularly the US.
In this case, it appears that English courts are developing the same habit, going where even Americans fear to tread. If we adopt the mantle of the world’s policeman, will we be willing to pay the political bill?
Andrew Wigston is a solicitor at Finers Stephens Innocent LLP
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