An extraordinary wave of Russian litigation has washed over London in the past few years, with the list of combatants reading like a Who’s Who of oligarchs and celebrities.
The influx has had a profound – and for English lawyers, profitable – effect.
It is estimated that, in London’s Commercial and Chancery courts alone, more than half of the cases involve Russian or other eastern European parties. Included have been big names such as Boris Berezovsky and Roman Abramovich – involved in last year’s battle that saw the former suing the latter for a reported £3.5 billion for his shares in Russian oil firm, Sibneft.
This month, Michael Cherney began his fight in the High Court against Oleg Deripaska for a reported £730 million over a 13 per cent stake in Rusal, the world’s biggest producer of aluminium.
And there is more to come. November will see the start of the trial in Kazakhstan’s BTA Bank’s claim against its former chairman, Mukhtar Ablyazov. He is accused of having embezzled a reported £3.2 billion of the bank’s assets.

Calling time

But now it seems the Russian authorities want to call time on the English litigation party. In an on-going dispute between Sony Ericsson Communication Rus v Russian Telephone Company, last month Russia’s Supreme Commercial Court Panel rejected the parties’ right to refer a matter to arbitration in London.
Instead, the panel gave the Moscow Commercial Court jurisdiction to try the case. The panel concluded that the optional arbitration clause in the distribution agreement was not valid since it gave Sony Ericsson – but not Russian Telephone – the right to submit the dispute either to arbitration or to a court of law. This, the panel said, was unfair and breached article 6 (the right to a fair trial) of the European Convention on Human Rights.
In previous cases, the Russian courts have not questioned the validity of optional arbitration clauses – so why the change?
The panel’s decision comes after Anton Ivanov, chairman of Russia’s Supreme Commercial Court, openly criticised foreign arbitration and litigation proceedings at the St Petersburg International Legal Forum in May.
He said: ‘Russia should guarantee its citizens and entities protection from the unfair competition of foreign judicial systems’.
Mr Ivanov’s proposals include giving local judges the right to set aside foreign judgments or arbitration awards if they feel that Russian parties are unfairly prejudiced in any way, and taking punitive measures against those who interfere with Russian interests overseas. In extreme cases, this would include denying entry into Russia and freezing assets in the country.
The senior judge also suggested that the Kremlin should provide special insurance to Russians who invest their money abroad. This would give the government, as provider of the insurance, a political platform to take on states that ‘wrongfully’ seize Russian assets.
Mr Ivanov’s view is shared by Prime Minister Dmitry Medvedev, a lawyer himself, who at the same forum also condemned the ‘prejudiced competition of foreign legal systems’. He endorsed Mr Ivanov’s plan and described it as a ‘civilised means of resolving issues’.
What has provoked this recent rhetoric? And what can be done about the Russian authorities’ apparent sudden concern over where litigation is conducted and heard?
The Ivanov response to the wave of litigation rushing up the Thames may in part be a reaction to the claims made before the English courts – such as in the Cherney v Deripaska jurisdiction hearing – that some (or many) Russian courts lack independence.
How determined the Russian authorities are to overrule foreign judgments or arbitration awards and what tactics they will use, is not yet clear, but there are steps that contracting parties can take now to reduce the risk that a foreign judgment or award will not be enforced.
Parties should ensure clarity in the drafting of dispute resolution clauses. Even where both are Russian, they can agree that their contract is governed by English law and is subject to English court jurisdiction. Russian courts will have little scope to assert that a party has been unfairly prejudiced or that Russian assets have been wrongly seized if the underlying contract expressly demonstrates the Russian party’s consent.
Parties should also consider whether arbitration – rather than litigation – is the better option to resolve disputes. Russia is a signatory to the New York Convention dealing with the recognition and enforcement of foreign arbitral awards, which requires the country to recognise and give effect to arbitration agreements and awards. There is no equivalent treaty with Russia for English court judgments.

Procedural formalities

Despite the Sony Ericsson decision, Russian courts may be more reluctant to violate the New York Convention by rejecting a compliant agreement or award. If parties choose arbitration, following Sony Ericsson, they should agree to exclusive (and not optional) arbitration clauses.
Russian courts tend to reject foreign judgments or arbitration awards for public policy reasons or procedural violations. Parties enforcing foreign judgments or awards in Russia should ensure their contracts comply with mandatory Russian laws. Parties should also pay attention to procedural formalities when entering into agreements and during proceedings to reduce the risk of a procedural annulment.
Given the ready enforceability of English court judgments and arbitration awards in other EU states and worldwide, it seems likely that for now England will continue to be one of the popular jurisdictions for parties that want to enforce their claims against Russian assets outside Russia.

David Allen and Philippa Charles are partners in the London litigation and dispute resolution group at global law firm Mayer Brown International. Senior associate Julie Bowring also contributed to this article