More Russian Cases to Be Arbitrated Outside Russia

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May 12 – More than half of all cases in the British High Court commercial division are related to Russia or other CIS countries, media reports citing leading law firm employees as saying.

Since January 2011, 17 cases involving Russia and the CIS were filed with the London Court of International Arbitration. In 2000, that number was seven.

“It has become a trend … as Russian businesses have become more integrated into international trade where the use of English law is commonplace,” said Rupert D’Cruz, secretary of the Russian-British Law Association. “A significant proportion of high-profile, high-value disputes involves a Russian-speaking party.”

“The caseload from Russia and the CIS is increasing all the time,” said Steven Philippsohn of leading London anti-fraud law firm PCB Litigation. “Last year was more substantial than the year before.”

As many Russian and CIS businessmen don’t trust local judicial systems, fraud and other complex business disputes involving the former USSR are becoming more commonplace in British courtrooms and arbitration tribunals.

BTA Bank of Kazakhstan vs. former board of directors chair Mukhtar Ablyazov is one of the top fraud cases pending at the British Commercial Court for 2011 and involves claims of more than US$4 billion and a team of more than 50 lawyers. Usually five or six lawyers work on a case.

Kazakh government officials claim Ablyazov and his associates embezzled around US$10 billion from BTA, which was nationalized in February 2009.

Kazakhstan’s General Prosecutor’s Office announced it had filed an extradition request for Ablyazov, who fled Kazakhstan in March 2009, so that he can stand trial in Kazakhstan. The British authorities have not yet replied to the request.

The case of Tadaz v. Ansol Ltd & Others relating to the alleged corruption of a plant manager is still being heard before the Commercial Court of London. This is a US$500 million dispute and is one of the largest disputes (measured by length of trial and fees) in the UK. Tadaz is the largest aluminum manufacturing plant in Central Asia, headquartered in Tursunzoda, Tajikistan.

“The English courts are practically flawless,” exiled billionaire Boris Berezovsky, who has lived in London since 2000 and has been involved in more than 20 legal disputes in Russia and Britain, told The Moscow Times. In Russia, “Putin decides what happens,” he said.

Last March Berezovsky won 150,000 pounds (US$225,000) libel damages at London’s High Court after claims on a Russian TV channel that he was connected with the poisoning of Alexander Litvinenko, a former Russian state security officer and Kremlin critic.

Every significant law firm now has a Russia expert, D’Cruz said. Four of the eight lawyers on PCB Litigation’s fraud team are focused on Russia and the CIS. Six years ago it was only two.

In 2008, there were 17 members of the Russian-British Law Association, the successor to the Soviet-British Law Association. Now the organization has 350 lawyers, forensic investigators, and other professionals participating.

The parties usually stipulate arbitration rather than litigation, principally because an arbitrary award is widely enforceable around the world, under the New York Convention of the Recognition and Enforcement of Foreign Arbitral Awards of 1958.

Russia succeeded the USSR as a contracting state to the Convention, so Russian courts are obligated to recognize and enforce international arbitration tribunal rulings.

While most of these cases are heard in London, the phenomenon is worldwide. Russian and CIS cases are being heard in Stockholm, New York, Geneva and Paris. Generally, these cases involve allegations of fraud, multiple jurisdictions and numerous parties.

“Russian-speaking clients are a big pie for English lawyers,” said Sergei Sokolov, founder of the Marks and Sokolov international law firm. “And it’s happening everywhere, in all countries.”

Litigation proceedings over Novokuznetsk Aluminum Plant (NKAZ) involved a sham bankruptcy perpetrated under the instructions of RUSAL Company followed in New York and the BVI and arbitration proceedings took place in Stockholm, Zurich and Cyprus until this matter was finally resolved by means of a settlement agreement in March 2005.

The well reported case of Megafon, Russian telecommunications giant, is another good example of a complex Russian fraud case being litigated and arbitrated in Switzerland, England, Sweden, Bermuda and BVI.

Although there are specialized commercial courts in Russia, the Russian Court system is still perceived by both foreign and domestic investors as being subject to political interference from the Kremlin. The judiciary is also still reported to be corruptible and therefore justice can appear to be unpredictable for those who do not have political influence or are not prepared to pay bribes.

“Nobody can trust the [Russian] courts to be independent from corruption or influence by the executive branch,” Timothy Stubbs, head of CIS banking and finance practice at Salans international law firm said, citing the trial of former Yukos CEO Mikhail Khodorkovsky.

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