Ms Baturina, the claimant/appellant, wanted her claims in contract and tort to be heard in England (& Wales) as opposed to Russia. The grounds of the appeal are explored in more detail below but essentially the issue in the case was whether the High Court was right to stay the claims in favour of the Russian courts.
Ms Baturina is of Russian nationality and is Russia’s wealthiest woman and, arguably, most powerful female oligarch. However, Ms Baturina lives in London and is said to have anxiety at the prospect of retuning to Russia. Mr Chistyakov, the defendant/respondent, is also of Russian nationality and resides in Russia. They had previously both been involved in a real estate project in St Petersburg.
Following this, Mr Chistyakov approached Ms Baturina about working together on projects in Morocco. This resulted in a Project Implementation Agreement (“the Agreement”) on 28 February 2008. The Agreement included the following term:
“12 Applicable Law
The Parties have agreed that these Principle Provisions, and also the Shareholders’ Agreement shall be governed by English law, regardless of any conflict between its provisions and the law.”
Moreover, for the purposes of project implementation, Ms Baturina and Mr Chistyakov founded a joint company in accordance with Moroccan law, the HoldCo. The HoldCo was intended to be Andros Bay Holding Offshore SARL (“Andros”) with a Mr Assad Bargaz as local director.
Inteco CJSC (“Inteco”) was a Russian construction company of which Ms Baturina owned 99 out of 100 shares. Whilst Inteco was sold, Ms Baturina remains the owner of the Austrian company, Inteco Beteiligungs AG (“Inteco Austria”).
Finally, Sylmord Trade Inc (“Sylmord”), a BVI company now in liquidation, is said to be beneficially owned/controlled by Mr Chistyakov. In addition, Sylmord is said to have become the 100% owner of Andros.
Inteco made two loans to Sylmord:
1) Agreement of 29 February 2008 – €36,755,000 “for financial support of the Andros Bay Holding Offshore SARL Company subscriber within Morocco development projects” of which €33,220,000 remains outstanding;
2) Agreement of 15 April 2008 – €57,790,000 “for rendering the financial help for the founder of company Andros Bay Holding Offshore SARL within the limits of realisation development projects in Morocco” of which €38,062,500 remains outstanding.
The agreements were governed by Russian law, Andros was a guarantor of both and repayment dates were extended by additional agreements to 31 December 2010.
However, Ms Baturina discovered that only €9,663,000, of the €71,822,500 total outstanding, had been repaid to Andros. Whilst the money was loaned by Inteco to Sylmord, monies were paid to several other companies.
On 29 February 2010 the two loans made by Inteco to Sylmord were assigned to Ms Baturina for full value and Inteco was then sold.
1) The claim was issued on 22 January 2013. Ms Baturina claimed rescission and damages for breach of contract and deceit/misrepresentation.
2) On 24 April 2013, Mr Chistyakov filed an application notice seeking a stay of the proceedings based on Russia being the appropriate forum.
3) The case was later heard by Mr Justice Walker ( EWHC 3537 (Comm)). On 14 November 2013, Mr Justice Walker concluded that Russia was the more appropriate forum than England and stayed proceedings.
4) Ms Baturina appealed.
Lord Justice Christopher Clarke stated that the claim form and particulars of claim “…have certain curious features” . As a result of how the claim was pleaded, experts on either side were instructed to consider whether the claim for damages could be maintained in Russia.
The appeal was based on four grounds including:
1) There were complex issues of English law involved and so England & Wales was the appropriate forum;
2) The judge did not consider “…the international character of the project” or appreciate that there was no forum that “…could be shown to be the natural forum” ;
4) The judge was wrong to conclude, applying English rules on conflict of law, that the misrepresentation claim was governed by Russian law.
Lord Justice Christopher Clarke came to the following conclusions in relation to the above grounds:
1) “…I would not anticipate a Russian court having any difficulty in applying English law” ;
2) “With the exception of…(the law governing the misrepresentation) it seems to me that the judge was entitled to come to the conclusion that the factors to which he refers established a strong case for saying that Russia was the distinctly more appropriate forum” ;
4) “In my view Ms Baturina has much the better side of the argument that the applicable law of the tort is that of England” .
As for the third ground, in Russia there would be “…no possibility of a claim for the losses” , it was held that Ms Baturina’s monetary claim could not be sustained. Ms Baturina’s counsel, Ms Dohmann QC, had accepted that the pleading was defective. Lord Justice Christopher Clarke came to the view that “Since the monetary claim set out in the Particulars of Claim is unsustainable as it stands there seems to me no point in granting a stay in favour of Russia. We should not export to a foreign jurisdiction…For such a claim there is no natural forum, not because several factors point to different jurisdictions but because the claim itself is bad” .
Having discussed the experts’ reports, Lord Justice Christopher Clarke concluded that he would allow the appeal, set aside the order staying the action and remit the case to the Commercial Court.
Lord Justice Lewison and Lord Justice Rimer agreed.
Ms Baturina may make an application to amend her claim and/or Mr Chistyakov may apply for strike out in relation to the existing claim or the amended claim.
Whilst Ms Baturina is the wealthiest woman in Russia, the extra cost and time spent due to an unsustainable claim having been pleaded must be very frustrating. The Court of Appeal’s decision highlights the importance of exercising precision when drafting.
References in square brackets are to paragraphs in the judgment.
© 2014 Chambers of Lawrence Power, 4 King’s Bench Walk, Temple, London, EC4Y 7DL. Tel: 020 7822 8822. www.4kbw.net.