Bank St Petersburg & Anor v Savelyev & Anor

By Order dated 15 July 2013 I adjourned for a full day hearing the Defendants’ applications for (1) permission to introduce a counterclaim; (2) fortification of the cross-undertakings in damages given by the Claimants as the price of the freezing injunctions they have previously obtained; (3) a world-wide anti-suit injunction to restrain the Claimants continuing with enforcement in Russia and abroad (including in Bulgaria and France) of the judgments they obtained in Russia in 2009 and 2010.

The Defendants’ application to introduce a counterclaim (and to join two Russian corporations) has been on the stocks since at least February 2013, but the Defendants did not make a formal application until 4 July 2013. They only did so then after proceedings raising the same matters they had commenced in the Commercial Court by claim form issued on 22 December 2011 (under Claim No 2011 FOLIO 1570, “the Commercial Court Claim Form”) had been struck out after the time for its service (after one renewal) had expired.

The order striking out the Commercial Court Claim Form (made by Teare J on the papers and confirmed by HHJ David Mackie at an oral hearing) is presently the subject of an appeal, for which permission has been granted (by order made by Lewison LJ dated 30 July 2013). The Court of Appeal has extended time for further progress of the appeal until after disposal of this application. The Commercial Court claim has the possibly vital advantage to the Defendants in that regard of an earlier date for the purposes of limitation, as I explain below. But subject to that the Defendants are content to proceed in the Chancery Division; their concern is only that they should be able to proceed with the claim they seek to advance, and if they may do so equally well by counterclaim in these proceedings they have indicated that they will withdraw their appeal.

The other two applications were first made as long ago as October 2012, when they were adjourned generally. In April 2013, fresh applications were made with the suggestion that they be dealt with on the papers, but I did not consider that to be an appropriate way forward. They were adjourned into court and first heard in July 2013.

These proceedings have generated more than half a dozen interlocutory applications, at least three of which have gone to the Court of Appeal. This is the more remarkable since on no occasion have the Defendants themselves appeared in person. They are, as it were, marooned in France, to which they fled from the Russia Federation, in fear (so they allege) of the Russian authorities. They dare not leave France (where they have obtained residence rights), lest they be arrested and extradited to Russia at the Russian authorities’ request.

Until January 2013 the Defendants were represented by Mr Paul Diamond of Counsel, acting through direct access. Since then, with my ad hoc permission, they have been represented by an unpaid sympathiser and (and the Defendants would probably say, fellow) political exile with some knowledge and academic training in English law, Mr Pavel Stroilov (“Mr Stroilov”). Although that is unusual, it has not been objected to by the Claimants and it has seemed to me the only realistic manner of enabling the Defendants’ voice to be heard; I am grateful to Mr Stroilov for his polite and (especially given the complexities of the case) skilful assistance.

As may already be apparent, the proceedings are somewhat unusual. I have described in previous judgments how they have arisen. I think the following summary should be sufficient for present purposes.

Subject to the issue as to the proper and permissible parties (and in particular, whether two Russian corporations namely, Oslo Marine Group Ports LLC (“OMG Ports”) and Group Oslo Marine LLC (“GOM”) can and should be joined), the proposed counterclaim concerns substantially the same subject matter as the claim and the defence.

In essence the counterclaim restates claims that the Defendants first brought against the Claimants in proceedings in the BVI in May 2011. The essence of those claims is that the Claimants, allegedly using their political connections at the highest level of the Russian government and in tandem with the police and even the Russian court system, conspired to wrest away from the Defendants the control and majority ownership of a large group of companies known as the Oslo Marine Group (“OMG”).

It is alleged that pursuant to the conspiracy the Claimants, in breach of agreements whereby the substantial debts of the OMG (in the sum of in excess of RUR 3.75 billion as at the end of 2008) were restructured, and in particular in breach of undertakings (a) not to demand repayment prior to the expiry of a six-month moratorium, (b) not to interfere in OMG’s day-to-day commercial activities, (c) not to dispose of the Defendants’ shareholdings in the OMG corporations which were pledged in support of the loan and moratorium arrangements and (d) to return the pledged shareholdings to the Defendants once specified loans were repaid, demanded instant repayment, replaced the management of the OMG corporations and transferred the shareholdings to special purchase vehicles they controlled.

Those claims by the Defendants in the BVI in turn followed (and also sought to re-litigate and overturn) claims brought successfully in the courts of the Russian Federation by the Claimants for recovery of the loans after the demands for their immediate repayment.

The Defendants’ claims in the BVI were at first successful, in that (on appeal) they established jurisdiction, obtained permission to serve the proceedings out of the jurisdiction, and were granted freezing orders against certain of the defendants in those BVI proceedings. Unfortunately from their point of view, however, and they say in consequence of further political pressure, the Defendants were left unable to provide the bank guarantee they had been required to provide to support their cross-undertakings which they had given as the price of the freezing orders they had obtained. Furthermore, it became apparent that a fundamental premise of the Defendants’ jurisdictional case which succeeded in the Eastern Caribbean Court of Appeal, which was that they could not obtain a fair hearing elsewhere in the world, was false, because identical causes of action were being litigated by the Defendants themselves in Cyprus. The Defendants’ BVI proceedings were thus destined for disaster, and in the meantime they were ordered to pay substantial costs.

Faced with these difficulties the Defendants agreed to stay their proceedings both in Cyprus and the BVI on terms set out in an exchange of letters but intended then to be formalised in a formal consent order of the BVI Court (though in the event, no consent order was ever made). The genesis, terms and effect of the agreement reached in correspondence are of some importance, as I shall elaborate later; for the present it is sufficient to say that the agreement provided for such stays, and for the English Court to have exclusive jurisdiction to resolve “all the substantive disputes between the parties.”

As indicated above, on 22 December 2011 the Defendants filed their Claim Form in the Commercial Court. Again unfortunately for them, and again (they say) in consequence of political and/or other improper pressure, the bank (the Vozrozhdenie Bank, “the V Bank”) which was funding the Defendants withdrew its support, leaving the Defendants impecunious and in great difficulty in proceeding.

Then, on 20 February 2012, the Claimants issued these proceedings in the Chancery Division. They also obtained freezing orders from Morgan J which were subsequently confirmed on the return date. The Defendants’ apparent failure to comply with the freezing orders subsequently led to orders for their cross-examination via video link. The expenses, in time and money, have been considerable. I have set out the circumstances more fully in earlier judgments dated 10 July 2012 and 8 August 2012.

In the meantime, the Claimants have persisted in their efforts to enforce the judgments they obtained in Russia in any jurisdiction that will recognise them. The Defendants say that the Claimants, in pursuing “almost thirty parallel proceedings in Russian, French and Bulgarian Courts duplicating various parts of this claim” have acted and are acting vexatiously and oppressively, and with the intention of so weakening the Defendants that they are forced to capitulate.

The Defendants are now faced with a trial in England with a trial window fixed to open on 27 January 2014. In addition to the applications the subject of this judgment, the Defendants have now issued an application to adjourn that trial. The adjudication of these applications, and especially the application for permission to bring a counterclaim, is obviously relevant to that latest application, which I have now heard and which I deal with by way of postscript to this judgment.

I deal below with each application in turn.

The Defendants seek an order for the fortification of the Claimants’ cross-undertaking in damages, given to the Court first on 15 March 2012 and then repeated on 29 March 2012, on the grounds that the imposition of the freezing order made by Morgan J in March 2012 and thereafter continued (and continuing) caused them substantial loss, comprising

The Defendants seek fortification in the sum of £300 million, or alternatively a bank guarantee of the same amount. That is a large sum by any standards, but especially by what I perceive to be the ordinary standard of what is within the bounds of experience and reasonableness in the context of an application for fortification of a cross undertaking. Mr Stroilov nevertheless urged that it is quite justified by the unusual circumstances of the case, and soundly based on an “intelligent estimate of the likely loss.”

The Claimants oppose the application on the basis that:

As to the alleged loss of a potential sale of Vyborg Port, and the erosion of its value, the First Defendant explains (in his Fourth Witness Statement made on 4 April 2013) that by the time he left Russia in July 2009 Vyborg Port had become the only major asset of OMG “which still remained in our possession. All other assets of value had unlawfully been taken over by the Claimants.”

He explains further that in view of what he regards as political pressures designed to hinder any modernisation of the port, he recognised that there was little alternative than to seek a sale; and that towards the end of 2011 (and thus before the freezing order) he found a buyer willing to offer some 390 million Euros, namely a Mr Sharifulin.

A problem, he explains, is that Mr Sharifulin was also a “political exile who has powerful enemies”, though “not as high-ranking as mine”. In consequence, he says, both of them realised that any sale of the Vyborg Port to him “would have to take place in secret, and his ownership of the Port in the future would need to be concealed through a complex structure of various offshore entities” lest it fell prey to other “raiders” with political and institutional support.

Mr Sharifulin provided an Affidavit dated 22 October 2012 and made in France (where he lives in exile), stating that he had indeed considered “the possibility to buy the port”, and that he had “collected necessary information and discussed this issue in details with [the First Defendant], and we reached a principle agreement with regards to the price which was agreed at the amount of 390 million Euros”. He envisaged that modernisation of the port would cause a substantial increase in its value and he states that he “was very much interested in executing this transaction”. He then goes on to say, however, that the grant of the freezing order put a stop to any such transaction. He explains:

“Regretfully, the procedure for preparing the transaction was stopped on March 15, 2012, when the British Court issued a Freezing Order with regard to [the First Defendant’s] assets. Moreover, the Order was largely covered in Russian press from a very disadvantageous for Vyborg Port viewpoint [sic]. As far as I understand, at present, the Port is at the edge of bankruptcy and the modernisation project appears less and less real. Naturally, in these circumstances, the purchase of the Port makes no more sense for me.”

The Defendants rely also on evidence from Ms Olga Lukina, a Russian citizen and (at least at the time of her affidavit dated 5 April 2013) the Director General of Port of Vyborg LLC and Port Equipment LLC (collectively known as “Vyborg Port”). She confirms (and she emphasises the risks to her and her family in giving such evidence) that the First Defendant had actively been seeking the sale of Vyborg Port in late 2011 and early 2012, with the active support of Vyborg Port’s bankers, the V Bank. But she goes on to explain this:

“However, since, in April 2012, the Freezing Order…began to be actively discussed in the media and, in particular, since Vozrojdnie Bank’s management in Moscow received a letter from Baker and McKenzie containing the Order and its translation, which caused a great shock and terror (which clearly did not correspond to the importance of the decision), any negotiations about the sale stopped, and all state-owned and commercial organizations stopped discussing with me the development of projects of Vyborg Port development…”

She also adds that the top manager of the V Bank who had been in charge of development of Vyborg Port was forced to leave the V Bank “soon after publications about the crucial and important decision of the English court” and “punished for his support of [the First Defendant in his struggle against Bank St Petersburg]”.

The Defendants’ French attorney, Mr Francois Ameli, also gave evidence of discussions with representatives of the V Bank regarding the sale of Vyborg Port, and their collapse after the publication of the freezing order.

This evidence is unsettling, and suggests that the freezing order may well have been misunderstood and/or deployed in a damaging way within the Russian Federation. However, what to my mind it does not show is a sufficient causative link between the freezing order and the frustration of the sales to support the conclusion that one was the consequence of the other.

Similarly, although Ms Lukina’s evidence supports the contention that, after the freezing order, the V Bank took fright and refused to continue funding Vyborg Port, causing very considerable losses and prejudicing materially its future, that evidence falls short of showing that it was the freezing order that caused its loss. Indeed, what appears to emerge is that it was the appreciation on the part of the V Bank that its continuing support would lead it into a political conflict that caused it to withdraw funding, even at the risk of very substantial losses. In her words (and of course I reach no conclusion at this stage on its veracity):

“…it was easier for the bank to accept the loss of Euro 120 million than to lose THE WHOLE bank by entering into a political conflict the meaning of which they could not even have imagined when they supported [the first defendant’s] judicial struggle.”

Put shortly, the evidence advanced, even if it were to be accepted (and I stress that I make no findings), appears to show that the loss of the prospect of a sale of Vyborg Port was the consequence, not of the freezing order, but of the fact that it became too hot to handle: and likewise the erosion of its value had deeper political causes.

In my judgment, the prospect of recovery under the cross-undertaking by reference to this argument is not such as to warrant further fortification.

Turning to the second basis advanced by the Defendants as justifying fortification, that is the alleged damage to their reputations and earning power as a result of the freezing order (see paragraph 19(2) above), the Defendants maintain that in addition to scuppering the sale of Vyborg Port and materially diminishing its value, the deterioration of the Defendants' relationship with V Bank following the publication of the freezing order led directly to the loss of the Defendants' appointments with entities controlled by V Bank. The Defendants contend further that it also led to V Bank's decision to place Rusiv LLC, a company heavily indebted to Vyborg Port, into insolvency, causing loss to the Defendants.

The Defendants also relied on an affidavit made on 1 May 2013 by a Mr Pasko Grigory Mikhailovitch (“Mr Pasko”), who (I am told) is a well known Russian investigative journalist. In that affidavit Mr Pasko speaks of the history of takeovers of companies orchestrated by the authorities, and his conviction that “there is absolutely no independent justice in Russia, since justice is completely subordinated to the executive power agencies”. He goes on to make the point that in Russia:

“because of the absence of independent justice, people are very respectful and admirable [sic] to information about foreign court decisions. In particular, those concerning Russian businessmen… Lack of confidence in domestic justice results in unconditional confidence in foreign courts. English justice is particularly esteemed since it is known for its independence and impossibility to exercise any pressure on a judge to obtain an unfair judgment. That is why a foreign court decision is, de facto, an objective measure of who is right and who is wrong in a conflict.

That is why the media campaign initiated by [the Claimant Bank] when it obtains a freezing order against [the First Defendant’s] supposed assets caused immeasurable damage to his reputation. Ordinary people and businessmen in Russia know nothing of about specific provisions of English procedure and so-called “freezing orders”. They have absolutely no idea of the reasons for which such an order may be issued. However, due to the powerful media campaign against [the First Defendant] they had an impression that his fault had been proved and he has been already declared guilty by the court…”

Mr Pasko ascribes the collapse of the Defendants’ previously good reputation to a media campaign which he says was orchestrated by the First Claimant: “This powerful campaign manifestly was fruitful. [The First Defendant’s] business has been practically destroyed”.

The fact that both Mr Pasko and Ms Lukina were prepared to speak in such terms is obviously unsettling and of real concern. But again the question is whether the link is sufficient such that, if the evidence is ultimately accepted (and once again I stress I make no findings now) there is a real prospect of the Court making an order for payment of the sums suggested under or pursuant to the cross-undertaking.

I cannot say there is no prospect of some such sums being ordered to be paid; but not in the sort of amounts claimed, which represent losses in respect of a number of events for which the link is both too long and too weak, and where other factors are likely to have been of more causative potency. As Leading Counsel for the Claimants (Mr Philip Marshall QC) submitted, the Russian Judgments against the Defendants must have affected and damaged their reputations, as must the existence of criminal proceedings there; and the collapse of their litigation in the BVI is also likely to have coloured perceptions.

Moreover, even if “stigma” damages or compensation where a cross-undertaking is enforced may in principle be recoverable, the Court is likely to be very conservative in its assessment (in the case on which the Defendants relied, Al-Rawas v Pegasus Energy Limited [2008] EWHC 617 (QB) the award was £10,000). The reluctance of the Court to make any award in respect of purely reputational consequences is illustrated by the dearth or even absence of other examples in which it has done so: and see Harley Street Capital Limited v Tchigirinski & Others [2005] EWHC 2471 (Ch) at paragraphs 34 to 36.

In my judgment, the figures suggested by the Defendants are unrealistic by many factors. I consider the sort of figures that might be appropriate are well covered by the security already in effect available. Their application for fortification must be dismissed.

By their application issued on 4 July 2013 the Defendants seek a worldwide anti-suit injunction to prevent the Claimants from enforcing any of the judgments which they have obtained against the Defendants, whether in the BVI and this jurisdiction or in the Russian Federation.

The Defendants’ basic complaint and contention is that the Claimants, having agreed with the Defendants that England should be the exclusive jurisdiction for the resolution of their disputes, having brought claims here to re-litigate the claims they made in Russia, and having in that context necessarily foresworn any reliance in this jurisdiction on the judgments they have obtained in Russia, are seeking to rely upon and enforce abroad those same Russian judgments: and they should be prevented from doing so. They also contend that orders for the payment of costs made against them by the BVI Court, which have been recognised in England, should not be enforced either, pending resolution of the claims here.

As it seems to me, rather different considerations affect the Russian Judgments than the BVI/English judgments and I consider them separately.

The Defendants submit that the proceedings brought and persisted in by the Claimants to enforce the judgments they obtained in Russia are oppressive and/or vexatious and should be restrained by an anti-suit injunction and/or an extension of the cross-undertaking in the Freezing Order. They rely principally on the following submissions:

As to (1), the argument based on the Exclusive Jurisdiction Agreement largely depends upon (a) the true construction and effect of that agreement and (b) the application of relevant Conventions. I accept that the power of the Court to enforce such an agreement outside the European regime of the Brussels Regulation (EC) No 44/2001 and the Lugano Convention is well-established. This has recently been re-affirmed by the UK Supreme Court in Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant LLP [2013] UKSC 35, where the Court made clear that the old incantation that the jurisdiction to do so should be exercised sparingly was outdated in circumstances where there was no Convention or Treaty precluding or controlling its exercise, and should be set aside: an injunction should be granted “on the simple and clear grounds that the defendant has promised not to bring them”.

It became common ground at the hearing that neither the Brussels Convention nor the Lugano Convention applies to recognition and enforcement proceedings in respect of a judgment of a court outside the Brussels/Lugano space. So the question really is as to the true construction of the Exclusive Jurisdiction Agreement. If on its true construction the Exclusive Jurisdiction Agreement selected England as the only forum in which the parties would bring or seek determination and enforcement of their claims, or otherwise binds the Claimants not to seek enforcement of the judgments they obtained in Russia, the power of the Court to injunct foreign enforcement proceedings so as to hold the parties to their bargain is clear and not disputed.

The Exclusive Jurisdiction Agreement, however, is not clear; and its terms and their true meaning and effect are all disputed. The Claimants contend that none of its terms, whether express or by necessary implication, applies to either recognition or enforcement of the judgments they had already by then obtained in Russia; the Defendants contend, to the contrary, that the intention of all was that all the matters in dispute should be adjudicated in England, with there being no question of enforcement of other judgments on the same subject matter being relied on and enforced at the same time.

The first difficulty is that, contrary to the original intentions of the parties, no final Tomlin Order with agreed terms attached was ever made. Although it was not contended by either side that there was no agreement at all, its terms fall to be ascertained from the correspondence between the parties by which their agreement was formed. A draft proposed Tomlin Order was exhibited: but its admissibility (it being accepted to be no more than a draft) is in dispute.

It was the Claimants who by their attorneys (Maples and Calder) in the BVI first proposed that the parties’ disputes be removed to England and that the Defendants’ actions in Cyprus and the BVI be stayed. In relevant part Maples and Calder’s letter to the Defendants’ attorneys in the BVI (Conyers Dill & Pearman) dated 12 December 2011 reads as follows (having first rehearsed why they consider BVI not to be a convenient forum, and referred to the Defendants’ proceedings in Cyprus and their case that they could not obtain an effective trial in Russia):

“Our clients consider that England would be a more convenient and inexpensive forum to resolve the substantive dispute than either the BVI or Cyprus. If all the disputes between the parties were to be resolved in England this would prevent a multiplicity of proceedings and would involve a substantial saving in expense, specifically additional and potentially irrecoverable legal fees, further translations in Cyprus and travel costs (a particular problem in the BVI). Please confirm that your clients are prepared to agree that the English court should have exclusive jurisdiction and that they would agree to discontinue or stay their proceedings in the BVI and Cyprus to ensure the agreement was implemented.”

To this Conyers Dill & Pearman replied by letter dated 14 December 2011 as follows (in relevant part):

“Having taken our clients [sic] instructions on your proposal our clients agree that the English court shall have exclusive jurisdiction to hear the substantive dispute and agree to stay the proceedings in the BVI and Cyprus in order, as you say, to ensure the agreement is implemented.”

As mentioned above, the parties intended that the BVI proceedings should be stayed on the terms of an agreed Tomlin Order (with their agreement set out in a schedule in the usual way); but in the event, the parties were not able to agree all the terms of the stay, and especially were disagreed on the issues of (a) costs; (b) an inquiry as to damages payable under the cross-undertaking given by the Defendants as the price of the freezing order they obtained in the BVI; and (c) (most relevantly for present purposes) whether the stay should affect other pending proceedings instigated by the Defendants in France.

Although the parties were unable to agree a Tomlin Order, the proceedings were eventually stayed by order of the BVI court (Bannister J) made on 2 February 2012, in accordance with the agreement reached between the parties in their exchange of letters in December 2011. That order also provided for the Defendants to pay the Claimants’ costs and for there to be an inquiry as to the loss (if any) the Claimants suffered in consequence of the grant of the freezing order.

It is, of course, well established (though sometimes still the subject of debate) that an agreement which does not represent the final consensus between the parties is not generally taken into account in considering the concluded agreement. In the case of drafts, which do not represent a final consensus, the common law is clear: evidence of drafts is not admissible: see Lewison ‘The Interpretation of Contracts’ 5^th ed. at 3.07 and the cases there cited.

As HHJ Mackie put it in dealing with the Commercial Court Claim Form, the draft Tomlin Order and the agreement annexed to it (“the draft Tomlin Order”), as well as the parties’ exchanges about it, were “part of a deal which never took effect.” The agreement given effect by the order eventually made was the agreement struck (as all parties agree it was struck) in the December correspondence. The subsequent correspondence and subsequent drafts cannot, therefore, constitute part of the admissible background: they were after the event.

Furthermore, although the English court will always take the background circumstances and context into account, including anything which would have affected the way in which the language of the document would have been understood by the reasonable man (see Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896), the House of Lords has recently confirmed that this is still subject to the important exception that it would not be consistent with the English objective theory of contractual interpretation to admit evidence of previous communications as part of the background otherwise than in rectification proceedings (or possibly to establish an estoppel by convention (see per Lord Hoffmann in Chartbrook Homes Ltd v Persimmon Homes Ltd [2009] 1 AC 1101, at para 33).

Lord Hoffmann confirmed in Chartbrook [supra] that the exclusionary rule is subject to

“two legitimate safety devices which will in most cases prevent the exclusionary rule from causing injustice. But they have to be specifically pleaded and clearly established. One is rectification. The other is estoppel by convention, which has been developed since the decision in The Karen Oltmann [1976] 2 Ll Rep 708. If the parties have negotiated an agreement upon some common assumption that certain words will bear a certain meaning, they may be estopped from contending that the words should be given a different meaning. Both of these remedies lie outside the exclusionary rule, since they start from the premise that, as a matter of construction, the agreement does not have the meaning for which the party seeking rectification or raising an estoppel contends.”

For similar reasons, English courts will not generally look at the subsequent conduct of the parties in construing an agreement which has been reduced to or is evidenced by writing, and where the terms are not in doubt though their interpretation is (James Miller and Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 and Schuler (L.) A.G. V Wickham Machine Tool Sales Ltd [1974] A.C. 235).

In the case of subsequent conduct there are, however, certain exceptions to the exclusionary rule:

The question arises in this case whether the conduct of the parties and any correspondence between them following the agreement evidenced by the exchange in December 2012 are admissible on the basis of any of those exceptions.

Of special interest in this regard, as it seems to me, are (1) the Tomlin Order itself; (2) the fact that (according to a letter from Maples and Calder to Conyers Dill & Pearman dated 13 January 2012) the Claimants gave instructions for the suspension of their proceedings in Bulgaria on the basis of their understanding of the agreement reached; and (3) the fact that in that same letter Maples and Calder set out the Claimants’ perception of the mutually intended meaning of “all the disputes between the parties” at that time (which was that the (pending, then, as now) enforcement proceedings in relation to the Russian judgments in Bulgaria and France would be within the phrase).

As mentioned above, the Defendants have not sought rectification, nor have they mentioned estoppel; and I am conscious of Lord Hoffmann’s injunction that the material facts supporting such pleas must be pleaded and proved. There is a further complication in that it may well be that the Exclusive Jurisdiction Agreement may be governed by the laws of BVI (though I suspect that the BVI court adopts English rules as to contractual construction). Nevertheless, at this interlocutory stage, it seems to me that I should assess whether, on the customary assumption that, absent contrary evidence, the principles of English law are to be applied, and by reference to the exceptions in English law to the exclusionary rule, (a) the relevant parts of the draft Tomlin Order and/or (b) the subsequent letters (including that dated 13 January 2012) and the conduct revealed or referred to would be likely to be admissible, and if so, whether and how in each or either case, it would be likely to affect the construction of the Exclusive Jurisdiction Agreement.

In my view, under English law, neither the draft Tomlin Order nor the subsequent letters would be admissible.

This is a case about the interpretation of agreed terms: there is no disagreement as to what the terms were: only as to what the agreed terms mean. The draft Tomlin Order introduced further draft terms: but these terms were never agreed, and indeed the suggestion of them was the cause and occasion of substantial disagreement between the parties. In my view, such terms cannot be admissible as a guide to interpretation of the agreement reached in earlier correspondence. In light of the disagreement recorded there would be little or no prospect of establishing a special and agreed meaning of an ambiguous phrase by estoppel (an idea floated but not elaborated, perhaps unsurprisingly given the Defendants’ lack of legal representation). Similarly, though rectification was mentioned, no claim is made: and such a claim would in my view face insuperable problems given the recorded disagreement between the parties on the effect of their agreement.

Likewise, the conduct of the First Claimant in giving instructions for the suspension of its enforcement proceedings (in relation to its Russian judgments) in Bulgaria on the basis of its understanding of the agreement reached in correspondence, is not admissible either. I have considered whether, though (being unilateral) it could not give rise to an estoppel by convention, it might give rise to some from of estoppel by representation. But I have concluded that it could not: first, because there is no evidence that the Defendants relied on that conduct and secondly because the conduct was equivocal (the First Claimant having expressly stated that the suspension would or might be lifted if the further terms were not agreed).

For substantially the same reasons, the exegesis of the Claimants’ understanding of the phrase (“all the [substantive] disputes between the parties”)in Maples and Calders’ letters, though (ironically, in light of Conyers Dill & Pearman’s rejection of the exegesis at the time, consistent with the Respondents’ case now) is not admissible either.

It follows, in my judgment, that the disputed phrase in the agreement reached, being that established by the December correspondence, must be interpreted without recourse to the subsequent draft Tomin Order, or the correspondence that it later engendered.

In that regard, and generally, the Claimants contended that the issue of the scope of the agreement had already been determined by Bannister J in the BVI court and is now, here as there, res judicata. Bannister J held

“that correspondence did no more than bring into being an agreement that if the matter was to be litigated further, it would be litigated in England. It did not put an end to unfinished business in the BVI. To put it another way, accrued rights and liabilities were unaffected by the stay agreement. The [Defendants, who were claimants in the BVI proceedings] accepted this when they consented to the order of 11 January 2012 discharging the injunction, which expressly reserved the [Claimant’s] rights to claim compensation and costs.”

I agree that as regards the issue before Bannister J, which was (to quote from a preceding sentence in his judgment) “whether the exchange of correspondence was dispositive of the entirety of the proceedings in this jurisdiction” [ie the BVI Procedings], his judgment is conclusive. I do not, however, accept that his judgment concludes the issue as to enforcement proceedings in relation to the judgments in Russia presently in contention. That was not argued before him; and I do not think the sentence in his judgment quoted above beginning “To put it another way” can fairly be read as meaning that all accrued rights and liabilities, even those arising out of the very Russian judgments in dispute, should be treated as unaffected. The purpose of that sentence, as it seems to me, was to clarify the meaning of the previous sentence, not to extend it so materially.

So it remains open and incumbent on this Court to determine whether it is sufficiently arguable for the purposes of granting interlocutory relief that, on its true and fair construction, the agreement reached in December extends to preclude enforcement of the Russian judgments, whether in Bulgaria or elsewhere (save Russia, as to which see below), as being inconsistent with the commitment to carry on any further litigation to resolve their disputes in England.

I have not found this an easy issue to determine. A number of background (and admissible) facts seem to me to militate against the construction now urged by the Defendants. These include, in particular:

Those background facts all appear to me to support the construction (which would also be consistent with Bannister J’s judgment) that the only purpose and effect of the agreement was to remove or translate to the English forum the Defendants’ parallel proceedings in the BVI and Cyprus, so as to avoid multiplicity of proceedings and any further jurisdictional arguments as to the appropriate forum for their resolution.

Against that, the whole nature and purpose of the proceedings instigated by the Defendants, first in the BVI and Cyprus and then (albeit by way of the Commercial Court Claim Form and now their Defence and draft Counterclaim in this court) was and is to disprove the fundamental premises of the Russian judgments (the loan agreements and guarantees, several of which the Defendants maintain are forgeries) and to demonstrate conspiracy and fraud on the part of the Claimants and the Russian authorities, which extended (so it is alleged) to the manner in which the judgments themselves were obtained. It would seem at odds with the achievement of that purpose if, whatever success the Defendants might have in the proceedings in England (where the Defendants have no assets), the Claimant continued, and even after judgment in England could still continue, to be at liberty to seek enforcement of its Russian judgments elsewhere (and especially in jurisdictions such as Bulgaria where the Defendants do have assets).

It is a not unfamiliar contest between (a) a construction which appears to fit with the words used and the background fact and (b) an assessment of what, having regard to the overall purpose of the agreement, the parties seem most likely to have intended.

I have concluded that it is the words actually used, set against the admissible background facts which must control construction, even though the result is to undermine the utility of the agreement, measured against what in the event has transpired. To favour a construction which fits the likely purpose, influenced by knowledge of what has happened after the event, and forgetting other factors that may have influenced the parties at the time, would, I have concluded, be to seek to mend or improve the bargain actually made. The agreement must be construed as it was, and not as subsequent events might suggest would have been wise to have made it.

Finally under this heading, I turn to consider whether it is within my jurisdiction conferred by section 37 of the Senior Courts Act 1981, as being just and convenient, to restrain the Claimants from taking steps which would render this court’s exercise of jurisdiction, which the Claimants have themselves invoked, futile or at least to no practical effect, or its process oppressive or unfair, and if so, whether I should exercise that jurisdiction.

I do not doubt that the court has jurisdiction in this regard. I do not accept Mr Marshall’s submission that the jurisdiction should only be exercised where there has been a clear breach of contract in proceeding in the other court, or the foreign judgment has been established to have been obtained by fraud. Albeit with circumspection and sparingly it may, in my view, be available whenever the court is persuaded that it is necessary to ensure that its own jurisdiction and the basis on which it has been invoked is not negated or rendered nugatory.

Of course, and as Mr Marshall QC submitted with emphasis, it is not unusual for a party to seek to establish its right, as a necessary prelude to its enforcement, in a jurisdiction which does not recognise or enforce a prior adjudication by a foreign court. But that is not, in my view, in reality what is here being done.

The difference, as it seems to me, is obvious: all parties specifically agreed that the issues should be determined on the merits, and determined exclusively, by the English court. It seems to me inherently oppressive for a claimant to invoke the substantive jurisdiction of the English Court to determine a dispute, agree with the other side that its exercise of jurisdiction should be exclusive, and yet at the same time and in a different country rely on some other court’s prior adjudication in his favour of the very same dispute or issues which may be decided against him on the merits in the forum which he has agreed should be the exclusive forum for a determination of that dispute.

I agree with the submission on behalf of the Defendants to the effect that that is especially so where the premise on which the English Court is invited to exercise its jurisdiction (and which is a necessary precondition of its doing so) is that the judgments obtained elsewhere are unenforceable, or not sought to be given recognition, here.

However, although personal in theory, the exercise of the jurisdiction inevitably, though indirectly, involves an interference in the process (actual or prospective) of a foreign court. It is by its nature potentially exorbitant, especially where the foreign proceedings are already pending; and the jurisdiction is to be carefully and sparingly exercised, as emphasised in the cases relied on by the Claimants, Masri v Consolidated Contractor International (UK) Ltd and others (No 3) [2008] EWCA Civ 625 and Mamidoil-Jetoil Greek Petroleum Company SA v Okta Crude Refinery A.D. [2003] 1 Ll Rep 1.

In this case, I have concluded that it would not be right to exercise this jurisdiction, and indeed that to do so would be an unwarranted interference with the process of the foreign courts in which the proceedings sought to be restrained have been pending since before the jurisdiction of the English Court was invoked.

It seems to me relevant in that regard that:

I should add that it would be a pre-condition of any injunction that the Defendants should provide a cross-undertaking in damages. In that regard, Mr Marshall submitted that an injunction should be refused in any event since the Defendants have acknowledged that they have very little in terms of funds to support a cross-undertaking. If this were a case of holding the parties to their undisputed or at the very least strongly arguable contractual commitments, contract, justice, convenience and fairness might well justify an injunction even where the cross-undertaking is frail: see Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] QB 609 at 626. But on the view I have formed, that is not the case here; and the lack of any support for any cross-undertaking further militates against the grant of relief which is by its nature unusual in its effect.

Accordingly, I have reached the firm conclusion that although it is within my jurisdiction to restrain enforcement by the Claimants of the Russian judgments they obtained elsewhere than in Russia pending conclusion of the trial or further order, as a matter of discretion I should not do so.

As indicated above, rather different considerations affect the enforcement of the costs orders of the BVI court which have been recognised in England. That is not because of any convention or treaty or other European impediment. Mr Marshall accepts on behalf of the Claimants that neither the Brussels Regulations nor the Lugano Convention applies.

Rather it is because (a) there is no dispute as to the merits of the BVI judgments and orders on costs, (b) they are not covered and are unaffected by the Exclusive Jurisdiction Agreement and (c) it would be curious of the English Court to injunct the enforcement of a judgment that it has recognised and adopted particularly with a view to its enforcement. An injunction would undermine the utility of the BVI Orders and amount to a substantial interference with the BVI Court’s decisions. Indeed, I think it would raise issues already decided by the BVI court and thus res judicata.

In my judgment, it would not be right to restrain the enforcement of the BVI Orders recognised by the English Court, and I refuse to do so.

I turn to the application for permission to bring a counterclaim and to add two more parties (OMG Ports and GOM). This is now opposed by the Claimants on three main grounds:

For completeness I should record that initially the Claimants also contended that there was no evidence that OMG Ports had authorised its joinder as a claimant by counterclaim; but, after further evidence had been obtained by the Defendants, that contention has since been dropped.

It is common ground that the date on which proceedings in England are to be treated as commenced is a matter to be determined according to English law; but that the question whether a claim governed by Russian law and commenced on that date would be time-barred is a matter to be determined according to Russian law.

The first question under this head, therefore, is as to the date when the counterclaim should be treated as having commenced under the laws of this jurisdiction, no counterclaim having yet in fact been permitted. Different considerations apply according to whether the claim is maintained by an existing party or a person who is not yet a party to the proceedings.

In the case of a counterclaim by an existing party, section 35 of the Limitation Act 1980 (“section 35”) provides in effect that a defendant may always make one counterclaim against the claimant(s). Such a counterclaim is deemed to be a new claim (see section 35(2)) and a separate action (see section 35(1)); but (being a claim made against an existing party) it is deemed nevertheless to have commenced on the same date as the original action (see section 35(1)(b)). Accordingly, the proposed counterclaim by the Defendants against the Claimants, being a claim by a party who has not previously made any claim in the action, would be deemed to commence on 20 February 2012.

Any further claim by them would fall within section 35(3) and thus no longer within section 35(1)(b); the Court would be required to refuse its addition after the expiry of any time limit which would affect a new action to enforce that claim, except as provided in sections 35(4) and (5), and rules of court. In essence, those subsections permit a new claim to be added notwithstanding the expiry of a time bar provided (a) it would otherwise fall within section 35(1)(b) and is not made in or by way of third party proceedings such as to fall within section 35(1)(a); and (b) either (i) if the claim involves a new cause of action but not a new party, it arises out of substantially the same facts as are already in issue in a claim made in the original action, or (ii) if the claim involves a new party, the addition or substitution of that party is “necessary for the determination of the original action”.

A counterclaim made in or by way of “third party proceedings” is deemed to have been commenced on the date on which such counterclaim is actually commenced. By section 35(2), “third party proceedings” means “any proceedings brought in the course of any action by any party to the action against a party not previously a party to the action, other than proceedings by joining any such person as defendant to any claim already made in the original action by the party bringing the proceedings”. Thus, a claim by the Defendants against any person not already a party would be treated as a third party proceeding.

Further, a claim by a person which is not already a party, and thus involves the addition of a new party, is treated as commenced when actually made (with no relation back to the date of the commencement of the original action), and cannot be permitted (see section 35(3)) unless the conditions set out in sections 35(5) and (6) are satisfied. Relevantly, section 35(5) stipulates as a condition that “the addition or substitution of the new party is necessary for the determination of the original action”; and section 35(6) provides that the test of necessity in the case of the addition of a new party cannot be satisfied unless “any claim already made in the original action cannot be maintained by or against an existing party unless the new party is joined or substituted as plaintiff or defendant in that action”.

As it seems to me, the joinder of OMG Ports as a counterclaimant is not necessary for that purpose, albeit that its joinder as a defendant might be (though it is not sought presently) insofar as the Defendants are proceeding not personally but in a derivative capacity.

Accordingly, in my judgment, (a) the Defendants’ counterclaim should be treated as having commenced on 20 February 2012 and may be permitted if by then their claim is otherwise maintainable and not or not to be treated as time-barred under Russian law and otherwise maintainable but (b) any claim by OMG Ports cannot be permitted if by now its claim would be time-barred under Russian law unless this court is persuaded that such time bar is contrary to public policy or otherwise not to be honoured. I address first the issue of time barring; and thereafter with the application of Russian law to the counterclaims that the Claimants seek to introduce.

As to the possible time bar under the Russian law, it seems clear that the general limitation period is three years after the injured party becomes aware of the violation of his rights. A limitation period must be pleaded, and bars the remedy and not the right. It is common ground that the Defendants knew or should have known of the (alleged) violation of their rights by no later than March 2009.

The expert witnesses on Russian law (Ms Natalia Kantovich for the Defendants and Professor Maggs for the Claimants) are agreed that:

The experts disagree on the following issues in that context:

As to (1) in paragraph [99] above, the Defendants contend that in the circumstances of this case, the filing of the Commercial Court claim would be deemed sufficient to interrupt the running of limitations under Russian law and that service was not requisite or material for limitation purposes because (to quote their Skeleton Argument) “in this case the Claimants have themselves invoked the jurisdiction of this Court, on the basis of the same jurisdiction agreement on which both parties rely”. In other words, unlike the position in the BVI, there could be no doubt as to the jurisdiction of the English Court, and the filing of a claim in a court with admitted jurisdiction is sufficient.

However, their expert, Ms Kantovich, appears to recognise in her report that to interrupt the limitation period for the purposes of Russian law the proceedings must have been filed in accordance with “established procedure” and only if “all the procedural rules, including the rules in relation to the jurisdiction and cognizance of the case, have been complied with”. It was not disputed that under English procedural rules, though the Court is seised on issue, the procedural rules require service to ensure its continuing effect, for unless served, the claim form expires (and see Grupo Torras SA v Sheikh Fahad Al-Sabah [1996] 1 Ll Rep 7, 18, 21-22).

What I have not found easy, or even possible, to determine from her report is whether Ms Kantovich’s evidence is that compliance with the procedural rules as to filing in a court with admitted jurisdiction suffices, or whether it is that service is also required. Professor Maggs assumes the latter; and his evidence is that service is indeed required; but I think he may go too far in assuming that to be common ground. Indeed, given that Ms Kantovich was well aware that the Commercial Court claim was never served, her conclusions that the claim would be treated as having effectively interrupted the limitation period within the meaning of Article 203 of the RCC provided (only) it had been “filed…in compliance with the established procedure” seems to me to indicate that she does not regard the failure to serve as fatal. I shall return to this awkward uncertainty later.

As to (2) in paragraph [99] above, I can be briefer. I cannot accept the suggestion that the Russian courts would suspend the limitation period indefinitely on the grounds of the impossibility of a particular party receiving a fair trial in those same Russian courts.

I had wondered whether an alternative basis for relying on a “force majeure circumstance” such as to suspend the limitation period under the Russian law might be suggested to be the Defendants’ acute predicament, and lack of funds. ButMs Kantovich does not suggest that; and I do not therefore consider it further.

The Defendants advanced also the argument that if OMG Ports’ claims are time barred under Russian law, this Court should exercise its jurisdiction under section 2 of the Foreign Limitation Periods Act 1984 (“the FLPA”) not to apply section 1 of the FLPA (and thus the Russian law of limitation) but instead proceed by application of or analogy with English limitations law.

Section 1 of the FLPA in effect mandates the application of the limitation law of Russia as the law governing the relevant (counter)claims; but section 2 of the FLPA provides as follows:

“(1)

In any case in which the application of section 1 above would to any extent conflict (whether under subsection (2) below or otherwise) with public policy, that section shall not apply to the extent that its application would so conflict.

(2)

The application of section 1 above in relation to any action or proceedings shall conflict with public policy to the extent that its application would cause undue hardship to a person who is, or might be made, a party to the action or proceedings.”

Although Mr Marshall urged the contrary, I think it clear that “undue hardship” is, for these particular purposes, deemed to be contrary to public policy, but neither is definitive of the other. I do not consider that it could be right to treat the Russian limitation period of 3 years as contrary to English public policy simply because it is less generous than the comparable English provision (and see Durham v T&N Plc May 1, 1996, CA, Unreported). That would be parochial and misplaced. However, I do consider that “undue hardship” may permit a broader assessment and application of section 2(1) by reference to personal circumstances even where it cannot be said that the foreign limitation law is as such contrary to English precepts of fundamental principles of justice or such as to outrage any sense of justice or decency (as to which see Arab Monetary Fund v Hashim [1993] 1 Ll Rep 543 at 592 and The Estate of Fuld (Deceased) (No.3) [1965] 3 All ER 776).

There is some guidance in the authorities on the rather nebulous notion of “undue hardship”, though (unsurprisingly) none attempts a composite definition. In Frances Jones v Trollope Collis Cementation Overseas Limited and another (The Times, January 26, 1990, CA), where the relevant time limit under Pakistani law was just 12 months, Farquharson LJ (with whom Neill LJ and Sir John Megaw agreed) offered the following guidance:

I think it is also clear that the intention of the FLPA is to defer in most cases to the foreign limitation period to the exclusion of its English law counterpart; and that exceptional circumstances are required to disapply section 1. I think that the circumstances must be clearly demonstrated to be such that the consequences would be out of all proportion to the fault. It is, as it were, an emergency jurisdiction, to be exercised with very considerable caution.

However, in this exceptional case, I consider that the application of the Russian limitation period (if indeed it has not been interrupted, which is not clear) would result in excessive/undue hardship to the Defendants and OMG Ports. The following facts and matters have especially weighed with me:

I think I should also acknowledge that I am not unhappy to reach this conclusion given what to my mind is the uncertainty in the expert evidence as to whether the issue of the Claim Form was of itself sufficient to interrupt the limitation period for the purposes of Russian law. Further, this is not a case where either party can complain that the claims are too stale safely and fairly to litigate: for Mr Marshall conceded and indeed submitted that the counterclaim was substantively the other side of the same coin as the Claimants’ own claim.

I can deal briefly with and would dismiss the application (in the end advanced with some diffidence or equivocation) to join GOM as an “interested party”.

GOM is in liquidation (or an equivalent insolvency process in Russia); and its affairs are thus in the hands of its liquidator. The Defendants do not profess to be making a derivative claim on its behalf; and Professor Maggs’s evidence that as a matter of Russian law they would not be able to do so is not seriously contested (and is unsurprising to an English tribunal, since that would also be the case here).

I do not see any basis for joining GOM as an “interested party”: I decline to permit it.

There was considerable debate, and disagreement between the Russian law experts, as to whether the Defendants’ claims, so far as ultimately dependent upon establishing a diminution in the value of shares which they own (directly or indirectly) or control, would be impermissible under the governing law (Russian law).

The Defendants need to demonstrate, eventually at least, both that (a) it is permissible for them to advance claims for reflective loss and (b) that such claims are in fact vested in them.

Three issues arise:

As to (1) in paragraph [117] above, and the issue of standing of an indirect beneficial owner, the Claimant’s expert on Russian law, Professor Maggs, states that trusts do not exist under Russian law, and that in general Russian law treats the legal owner of property as the only person who can bring an action for recovery of loss. The Defendants’ expert on this aspect of Russian law, Dr Vladimir Gladyshev, disputes this, as follows:

“…I do not hesitate to conclude that the claimants in this case, as a matter of Russian law, have the right to present a claim against thirds parties for a loss suffered by a company (derivative claim), as pleased in the present case. There is no material difference between an owner or ultimate beneficiary, provided the chain of causality and entitlements are properly established.”

There are a number of problems with Dr Gladyshev’s evidence, not least (a) his apparent false assumption that the claims sought to be brought are derivative in nature (which introduces other difficulties of Russian law) and (b) the lack of any real analysis in support of his conclusion.

These are deep waters. There may be issues as to the interplay between (a) the laws of the forum and the law of incorporation on issues of the standing and rights of a shareholder (see, for example, Konamaneni v Rolls Royce Industrial Power (India) Ltd [2002] 1 WLR 1269 at [45] – [50]); (b) the law of the settlement (it would appear, BVI law), the law of the forum and the law of incorporation); (c) personal and derivative claims. In any event, the state of the expert evidence does not permit an interlocutory conclusion. Furthermore, the nature of the interests of the beneficiaries under the Acorn Trust (which, for example, is revocable in whole or in part by the First Defendant as settlor) will probably need to be explored too.

These matters require fuller analysis, either at trial, or possibly as preliminary issues (though cross-examination is likely to be necessary, and a preliminary issue may well be a short cut leading to a longer and more difficult journey). They cannot fairly be dealt with now. I would propose to allow the claims, but without prejudice to their sustainability on this ground.

As to (2), and the relevance and effect of the liquidation of GOM, the appointment of a liquidator would seem likely to preclude any derivative claim, but the experts are at odds as to whether it precludes a personal claim.

Again, and especially given that all these issues, though separated for the purpose of analysis, are closely inter-related and may be inter-dependent, require full argument on full evidence, I do not consider that I should at this stage preclude a claim on this basis.

As to (3), and the issue of reflective loss, which has been the subject of much decision and debate in England recently and following the decision in Johnson v Gore Wood & Co (No. 1) [2002] 2 AC 1, I consider the present expert evidence and argument to be too little developed and too much in dispute to warrant precluding the claims.

I acknowledge in this context that Professor Maggs has put forward detailed and prima facie compelling evidence to the effect (as summarised by Counsel) that

Dr Gladyshev’s evidence is less detailed, and is perhaps liable to be criticised on the basis of his apparent confusion between a derivative and a personal claim (although I am conscious that that of itself is to view the issues through English law spectacles). But he considers that a reflective loss claim is permissible under Russian law on the basis of (to adopt Mr Stroilov’s summary for the purposes of illustration and not so as to be binding):

In my judgment, these differences require further analysis and proper testing. I do not consider that there is a sufficient basis now to preclude at this interlocutory stage this basis of claim.

In the round, and even taking into account the illumination provided by the decision of Andrew Smith J in Fiona Trust v Privalov & Ors which helpfully deals with some of these issues (but which being a decision on foreign law is not in any way binding), I consider that these issues can only fairly and properly be determined at a trial (whether at the final trial or at the hearing of a preliminary issue). The claims should not in the meantime be precluded, though I suspect they may require reformulation in the light of the difficulties highlighted.

All this said, there are aspects of the draft counterclaim that I do not consider should be permitted to proceed.

The Defendants seek to allege that the Exclusive Jurisdiction Agreement precluded (a) an application for costs in the BVI and (b) enforcement of the costs awards obtained in the BVI.

I agree that those allegations are misconceived: the BVI court has conclusively determined them and they are res judicata, all appellate process having been exhausted.

Accordingly, those claims should not proceed.

In paragraphs 191 to 199 of their proposed counterclaim the Defendants seek to advance claims that the Claimants subjected the bank that was funding the Defendants’ litigation in the BVI, the V Bank, and its senior managers to intimidation “by the officers of the Russian political secret police” and by this method persuaded the V Bank to refuse to provide the bank guarantee that (it will be recalled) the Defendants had been required to provide to support their cross-undertaking given as the price of the freezing orders they obtained.

The Claimants submit that the claims do not disclose any identified cause of action under the law said by the Defendants to be applicable, that is to say the Russian Civil Code, nor why it is that such law is the relevant law. They submit further that, even with a margin of appreciation, the pleading is unsustainable in its present form, lacks any proper particularisation, would be liable to be struck out as vexatious and embarrassing, and should therefore not be permitted now.

I would be inclined to accept those submissions. With some misgivings, since the Defendants have been aware for some time of these criticisms and have ignored my promptings to them to review these claims and provide proper particulars, I am prepared to allow the Defendants one further chance to plead the claims with particularity.

I shall hear submissions as to what time limit should be imposed after delivering this judgment. Unless I am satisfied that the new draft puts forward a sustainable and properly particularised claim under the law by which it is said to be governed, these parts of the counterclaim must be deleted.

I need to deal with two matters by way of postscript. That is by no means intended to suggest either is relatively unimportant. The reason for dealing with both in this way is because they have either arisen or developed in importance since I had completed most of this judgment.

The first matter is an application by the Defendants, long trailed, for the trial to be adjourned: it is presently due to start at the end of January 2014.

The second issue arises out of a dispute between the parties, of which I have only recently become aware from correspondence between them, and which is not yet the subject of any formal application, as to whether the Second Defendant should be precluded from cashing in a life assurance policy which is subject to the freezing orders made in this court.

The Defendants’ application is to adjourn the trial date to the first available date after 1 October 2014, and for further directions to replace those presently in place and which are, of course, geared to the present trial date. They say such an adjournment is necessary because the three months remaining before trial under the existing arrangements would be manifestly insufficient to enable the fair trial which is their right under article 6 ECHR, and to ensure a reasonably level playing field.

The Claimants vehemently oppose the application, which they depict as remarkable, extravagant and without justification. The Claimants contend that “all the indications are that the Defendants simply wish to put off the “evil day” of having the claims determined on the merits for as long as possible”, that the Defendants have had a long history of non-compliance with the directions of the Court, that they have (despite repeated warnings, including warnings from the bench) elected to focus on costly interlocutory excursions rather than concentrating on preparing for trial, and that they have in consequence been the authors of their own difficulties.

There is no substantial dispute as to the balancing exercise required to be struck in the context of an application of this kind. The balance is between the high desirability of retaining a fixed trial date and avoiding the inevitable expense and dislocation of a delay, and on the other hand, the risk of any properly demonstrated irredeemable prejudice to a party if the case goes ahead where that party has not had a proper or reasonable time to prepare its case: see Elliott Group Ltd & Ors v GEEC UK & Ors [2010] EWHC 409 (TCC).

The balancing exercise reflects the overriding objective in CPR Part 1.1 to ensure that the parties are on an equal footing, that the case is dealt with proportionately, expeditiously and fairly and that a proportionate and appropriate share of the court’s resources is allocated to the case.

In this context as set out at CPR Part 29.5.1, where a trial date has already been set, the court will make an order postponing the trial only as a last resort. The reasoning is set out by Brooke LJ in Calden v Nunn [2003] EWCA Civ 200:

“The first issue we need to consider is whether the judge was correct to place an emphasis on the sanctity of the trial window he had set. In my judgment he was. He was under a duty to ensure that the case was dealt with expeditiously and fairly (see CPR 1.2 and 1.1(2)(d)). It had already been delayed far too long by reason of the defendants’ serious breaches of their obligation to help the court to further the overriding objective (see CPR 1.3), and if the defendants complained that they were being treated to some extent unfairly, they had only themselves to blame. A central philosophy of the CPR is that case must be managed towards the trial window or the trial date. It is significant that in the rule relating to relief from sanctions, the question whether the trial date or the likely trial date can still be met if relief is granted is one of the express considerations the court is enjoined to consider (see CPR 3.9(1)(g).”

In Fitzroy Robinson v Mentmore Towers [2009] EWHC 3070 (TCC) Coulson J identified the following factors as having a bearing on the balancing exercise in circumstances such as these:

I address each in turn below.

There is no doubt, to my mind, that the Claimants’ criticisms that the Defendants have focused on interlocutory battles without properly concentrating on the ultimate trial/war are to a large extent justified.

In the various applications in the matter that have come before me I have sought both to encourage the Defendants to focus on the important matters and directions for trial and warn them of the consequences if they did not. Regrettably, neither the encouragement nor my warnings have had much effect. This may be illustrated as follows:

A particular concern is the Defendants’ notable reluctance and delay in agreeing comparators of signatures which they agree to be their own in order to facilitate expert determination of the authenticity of the signatures on the documents relied on by the Claimants but which the Defendants have always maintained are forgeries. Since this is a, possibly the, crucial issue in the case, and one which (as I have repeatedly suggested to the parties) would fundamentally affect the Court’s likely perception of the case, this is unsettling. Against that, however, I accept that it is not entirely without explanation: the Defendants say they are sinking in so many copies and possible forgeries, they cannot say for sure which are their signatures, and which are not.

Similarly, there have been long delays and misunderstandings in relation to the process of disclosure. Thus:

The Defendants submit that it is necessary for the process of disclosure and review to be completed before they can in turn complete the preparation of witness statements. They submit that further time for the completion of these tasks is essential in order to ensure a fair trial, as is further time for expert evidence on (a) Russian law (b) valuation and (c) handwriting, and that three and a half months remaining until the trial window presently fixed “would be manifestly insufficient.”

The changes to the time-table they say are necessary are very considerable. They maintain that they need some three to four months for the disclosure process and at least a further month thereafter before being in a position to exchange witness statements: some five months in all.

They accept that this is both a considerable departure from the existing time-table and also a notable increase on the estimate implicit in an application made by Mr Stroilov on 27 September 2013 (and thus after the Defendants had at last received the copy documents they had sought) for six weeks in which to consider the disclosed documents; but they say it is entirely necessary if their right to a fair trial is to be respected.

In that regard, they also inevitably stress that

The Claimants, on the other hand submit that the Defendants are greatly exaggerating the difficulties that confront them, and especially the tasks of review of disclosure and of finalising witness statements.

Mr Marshall QC pointed out that the Defendants had already served a multiplicity of affidavits and witness statements of very considerable detail, and that the First Defendant, in particular, has “already served very substantial affidavits and witness statements both in the BVI and in these proceedings in which every detail of the evidence which he is capable of giving is set out.”

As to other factual witnesses, he submitted that the Second Defendant has no relevant evidence to give which has not already been or could not now be provided in short order; and that the Defendants have previously sought to rely on the difficulty of getting any further evidence from witnesses in Russia whom they might otherwise seek to call.

As to expert evidence, the Claimants contend that (a) the Defendants have had plenty of time to obtain expert evidence on Russian law (b) any difficulties with handwriting evidence have been brought upon themselves by their obstinate refusal to agree comparators and in any event (c) there is no need for expert evidence to have reference to the witness statements in order to prepare their reports: they can proceed on the basis of the list of issues that has been prepared (though not finally agreed).

More generally, the Claimants contend that there does remain time to enable a fair trial to take place at the end of January 2014 in accordance with the existing trial window. They submit that:

“To the extent that the preparations are more compressed than they were intended to be, that is of the Defendants’ choosing. To the extent that this means that their case is not perfectly prepared this does not prevent there being a fair trial (see Fitzroy Robinson, supra). At heart this is an action about whether Mr Arkhangelsky signed certain guarantees, and the events of a short meeting in December 2008. The issues involved can and will fairly be resolved in the existing timetable.

In any event, as Lord Justice Brooke stated in Calden (above), the Defendants only have themselves to blame, and cannot rely upon their own failure to assist the Court to achieve the overriding objective as a basis for the present application.”

Mr Marshall dismisses any special plea in light of their position as litigants in person: the same rules, he maintains, must in fairness be applied to all.

Once again, these are familiar arguments and counter-arguments; but I do consider that there are special circumstances in the present case which make it unlikely that the delays thus far, however regrettable, can be overcome sufficiently before trial to enable an efficient, properly confined, and fair process of adjudication.

To the list of their difficulties it seems to me necessary to add the basic fact that although the central issue of alleged forgery is of prime, possibly determinative importance, there are other issues of considerable complexity, including issues of Russian law (especially since the counterclaim is to proceed) which need considerable care and thought.

For example, the Defendants have not said how much further time is required for expert evidence; but I would accept (and it may be apparent from earlier parts of this judgment) that there is much work to be done.

I accept, of course, that the rules apply to litigants in person as they apply to represented parties; but the manner and rigour of their application must ultimately take into account the special circumstances of individual litigants and the paramount importance of ensuring a fair trial.

In light of my conclusions, I can be relatively brief in addressing this point: I have concluded that a fair trial would not be possible if the matter proceeds as presently time-tabled.

The issues are sufficiently disparate and complex that the risk of diffusion will remain even if further time is permitted; but on the present time-table, I consider that there is a real risk of chaos, as well as the certainty that the Defendants would perceive the process to be unfair.

I accept of course, that (as Counsel for the Claimants emphasised) the fact that their case could not be perfectly prepared does not prevent there being a fair trial. I take into account also that many litigants in person tend to feel that any confinement of the time they need is, in light of their position, unfair. I have taken careful account also that the Defendants in this case have courted difficulty by allowing themselves to be diverted from trial preparation by often misplaced interlocutory applications, and have persisted in that course despite clear warnings to them. Moreover, it has been a source of real concern to me that the Defendants have so long prevaricated on matters like agreeing comparable signatures, which has given weight to the Claimants’ contentions that the Defendants are seeking delay for the sake of it.

But all that said, I have reached the conclusion that a deferment in the trial date is necessary in order to secure a fair trial, though not so long a deferment as is sought by the Defendants: they seek a revised trial date not before October 2014; that is too long in my view, and would not strike a proper balance between the proper interests of the Defendants and the legitimate concern of the Claimants that the trial process should not be unnecessarily be delayed.

In that latter context, the Claimants make the point that the trial date has been fixed for a year; the First Claimant wishes to recover monies form the Defendants which on its case are long outstanding; and the Second Claimant has been (to quote the Claimants’ submissions without thereby adopting them) “the subject of wild allegations about his personal and professional conduct which he is entitled to have resolved in the time frame set by the Court.”

I confirm that I have taken these factors into account also in determining that the trial date must nevertheless be vacated. They have some force, though I do consider that the force is diluted by the fact that the Claimants already have judgments in their favour which they are seeking to enforce, and the claims against the Defendants have had very damaging and serious consequences for them also.

In my judgment, a fair balance requires a time-table calibrated to a trial window opening as soon as possible after 1 May 2014.

I shall hear the parties as to what directions should now be given to give effect to this.

The parties should be in no doubt that the Court will now rigorously enforce these time-tables. The trial must not slip again.

As to the appropriate trial estimate, Mr Stroilov, with diffidence in light of light of his inexperience and lack of formal advocacy training (though his own description of himself as a “complete amateur” does not reflect his conduct of the case over nearly a year), has suggested that a six-week slot should be reserved, instead of the present four-week slot. He has latterly indicated that the Defendants would hope to call 15 witnesses of fact, most of whom are likely to need an interpreter, and four experts.

Mr Marshall QC still considers four weeks enough.

I am in little doubt, from previous experience of the matter, that (especially if there really are to be numerous witnesses who require interpreters) six weeks is a more realistic time estimate: but the matter should be kept under review when the number and identity of the witnesses is clearer.

Finally, I turn to the dispute between the parties as to whether a life assurance policy for the Second Defendant falls within the scope of the freezing orders made in these proceedings, and, if it does, whether nevertheless the Defendants should be permitted to cash in the policy in order to fund legal costs.

I have not heard full argument on the issue; and I do not know for example, what the surrender value would be, or whether there are any other factors that would suggest its surrender now would amount to dissipation of a valuable asset. Nor have I a complete understanding as to what the Defendants would propose to do with the value realised.

However, there do appear to me to be signs that the effect of the freezing order is becoming increasingly oppressive: and worse, that it is further impeding the Defendants in raising money for the legitimate purpose of funding legal representation in this jurisdiction.

This is an extremely difficult case to fight without professional legal representation. I intend no discourtesy to Mr Stroilov in saying that: he has discharged his functions well; but (as he is the first to say) he is not a professional, and he is alone. If there are material assets available to the Defendants which are sufficiently liquid and of a sufficient amount that they could be realised and applied usefully to obtain legal advice and representation for the Defendants, I would be strongly inclined to consider that (subject to appropriate and monitored undertakings as to their application) the Claimants should not stand in the way.

I leave it to the Defendants whether they wish to pursue this: a convenient time might well be at the hearing after formal delivery of this judgment.