In every court room in Russia hangs the Double-Headed Eagle symbolising the power and expanse of the Russian State. The Eagle stares both east and west but for many years the Eagle’s gaze west has had little effect as Russian debtors attempted to escape legitimate judgments handed down by Russian courts by placing themselves or their assets in western jurisdictions.
The Alfa Bank proceedings
In July 2004, Georgiy Trefilov established a joint venture with the German company REWE to develop and operate supermarkets in Russia. This led to the development of a chain of supermarkets under the brand name “Grossmart” which was operated by LLC Elekskor, a new company ultimately owned by Mr Trefilov. Alfa Bank provided loan facilities for LLC Elekskor. In 2008, REWE announced that it was no longer interested in purchasing Grossmart. As a result of this, Alfa Bank informed Mr Trefilov that they would require a personal guarantee in order to extend the term of one of LLC Elekskor’s loans. Mr Trefilov provided the personal guarantee.
LLC Elekskor failed to repay the loan and Alfa Bank claimed the sums due under the personal guarantee that Mr Trefilov had signed. The Meschanskiy District Court in Moscow ruled on 13 October 2008 that Mr Trefilov was liable to pay 371,408,563.97 Roubles (approximately US$10.6 million or £6.3 million)in total to Alfa Bank. Trefilov subsequently left Russia and moved to London.
Alfa Bank sought to enforce the Meschanskiy court judgment in a summary judgment application in England on the basis that it was a final and conclusive judgment of the Russian Court for a debt due from Mr Trefilov and the Russian Court had jurisdiction over Mr Trefilov on a basis recognised by English rules of conflict of laws.
Mr Trefilov resisted the application claiming that he had a realistic prospect of successfully arguing that the Meschanskiy judgment could be impeached on the basis that it was obtained contrary to natural justice and that there was a compelling reason for there to be a trial as the circumstances in which the Meschanskiy judgment were obtained ought to be investigated for the purposes of ascertaining whether the judgment was obtained by fraud.
Colin Edelman QC (sitting as Deputy Judge of the High Court) rejected Mr Trefilov’s arguments “without hesitation” as it was clear that there was “no substance in the factual assertions advanced in the evidence”. Mr Edelman QC described Mr Trefilov’s assertion that he was unaware of various stages of the proceedings against him as “preposterous” and the allegation that another party had issued applications in Trefilov’s name in their own interest “defies belief.” Mr Edelman QC commented that “it makes no sense whatsoever” to attribute a failed appeal to Alfa Bank so that the appeal could fail and undermine Mr Trefilov’s rights of appeal. Mr Trefilov’s claim that the personal guarantee he had signed was not the form of the guarantee that Alfa Bank exhibited in the proceedings was also rejected by Mr Edelman QC and described as “fanciful”.
The VTB Bank proceedings
This success for Alfa Bank follows a similar decision in JSC VTB Bank v Pavel Valerjevich Skurikhin & ors1, in which VTB Bank was successful in its application for summary judgment to enforce Russian judgments against Mr Skurikhin’s assets in England (specifically his interests in two LLPs).
The judgments VTB sought to enforce were also final and conclusive judgments, given by Courts of competent jurisdiction and correctly served on Mr Skurikhin. Mr Skurikhin defended the application for summary judgment by claiming, amongst other things, that the judgments were obtained in a manner contrary to natural justice and it would be contrary to English public policy for these judgments to be enforced.
Mr Justice Simon rejected the defence and stated that Mr Skurikhin had not come close to showing an arguable defence to the enforcement proceedings based on the conscious, deliberate and material dishonesty of VTB in relation to the Russian proceedings, nor in showing an arguable defence based on principles of public policy or natural justice. It was clear to Mr Justice Simon that the proposed defences had been contrived solely for the purposes of resisting enforcement proceedings and were entirely without substance.
The Nine Principles for Summary Judgment
Mr Edelman QC applied the nine principles, summarised by Mr Justice Simon in the VTB Bank proceedings and Lord Hobhouse in the Three Rivers proceedings, to which the Court must have regard when determining a summary judgment application when recognising a foreign judgment at common law:
- The Court must decide whether the Defendant has a “realistic” as opposed to a “fanciful” prospect of success, with a claim being “fanciful” if it is entirely without substance;
- A “realistic” prospect of success is one that carries some degree of conviction and not one that is merely arguable;
- The Court is not obliged to take everything that a party says in his witness statement at face value and without analysis. In some cases it may be clear that there is no real substance in factual assertions which are made, particularly if they are contradicted by contemporaneous documents. Contemporary activity or lack of activity may similarly cast doubt on the substance of factual assertions2 ;
- The Court must avoid conducting a “mini-trial” without disclosure and oral evidence;
- The Court should avoid being drawn into an attempt to resolve those conflicts of fact which are normally resolved by a trial process;
- The Court must take into account not only the evidence actually placed before it on the application for summary judgment, but the evidence that can reasonably be expected to be available at trial;
- Allegations of fraud may pose particular problems in summary disposal but it is important to bear in mind that the fraud exception is a carefully delimited exception and is not to be given an expansive application;
- So far as Part 24.2(b) is concerned, there will be a compelling reason for trial where “there are circumstances that ought to be investigated”3 ; and
- The criterion which the Judge has to apply under CPR Pt 24 is not one of probability; it is the absence of reality4.
Russian debtors can no longer escape the westerly glare of the Russian Double-Headed Eagle by alleging impropriety and procedural unfairness in Russian courts as the English courts have demonstrated that they are perfectly prepared to recognise and enforce Russian judgments in this jurisdiction. Overall, it demonstrates that the English courts will do their best to assist foreign claimants in ensuring that justice is done.