Safe haven? Russian assets and the English courts
05 Apr 2018

March proved a dangerous month for Russian emigrés in the UK.

The poisoning of Sergei and Yulia Skripal on 4 March was followed, just over a week later, by the death of Nikolai Glushkov in his home in London, into which the Metropolitan Police has launched a murder investigation.

They are not by any means the first Russians to come to mysterious harm in Britain: the assassination of Alexander Litvinenko is well-known, but Boris Berezovsky’s death in 2013 was recorded as an open verdict by the coroner.

Buzzfeed’s lengthy investigation in 2017 uncovered 14 suspected assassinations on British soil which were not adequately investigated by the UK police.

This time the finger has been pointed firmly at the Russian President, Vladimir Putin.

The UK blames the Kremlin for the Skripal poisoning, allegations Moscow has denied and which have lead to tensions between the two states.

After the incident, the UK took a number of measures, including expelling 21 Russians officials from England.

A number of other states have taken similar action, and Russia has responded in like, expelling their diplomats too.

English courts

Equally striking to the poisoning incidents, is the prominence of the English courts in the background of these dark, peculiar stories.

For example, Berezovsky, a friend of Glushkov, had a long-running fight with fellow Russian oligarch Roman Abramovich, who this month won a victory in his lengthy fight to sell a small stake in Russia’s largest mining company.

Meanwhile, Glushkov himself was facing fraud allegations from the Russian airline Aeroflot at the Commercial Court in London just before his death.

Russian involvement in the London economy is well-known; sightseeing through the heavily Russian residential areas has been embraced by the capital’s enterprising tour guides.

The importance of Russian parties to the capital’s legal market, however, is less notorious.

This is in spite of the fact that, according to the Law Gazette, as much as 60% of the Commercial Court’s caseload in 2012 involved parties from Russia or another former Soviet republic.

Claimants with names like Deripaska or Cherney file in the English commercial courts alongside major companies and international banks, often tussling over billions of dollars at a time.

Prestigious law firms routinely advertise their multilingual services to these ultra-high-value clients, to protect their luxury goods and questionable histories.

Criminal cash

Yet Russians are not just parties to actions; they are often, perhaps increasingly, the subject of criminal investigation.

The UK became more dangerous for Russian emigrés after the assassination of Alexander Litvinenko, which was regarded as a new and vengeful approach to enemies of President Putin.

At the same time, the UK gradually ramped up its sanctions through the EU and UN in response to Russian foreign policy, from Georgia to Ukraine to Syria. The latest, fairly mild round of sanctions in response to the Skripal poisoning comes alongside the expansion of investigatory powers in the Criminal Finances Act 2017.

Russian money of dubious provenance now looks less secure in the UK than it once did – much like prominent Russians themselves.

Sanctions

Meanwhile, at home in Russia, the legal firms operating in Moscow and St Petersburg under the domestic legal system have faced blunt financial pressures as a result of the sanctions.

International firms have gradually reduced their presence as sanctions reduce the ability of potential parties and investors to raise the eye-watering sums of money needed to conduct this sort of litigation.

After some consternation, arbitration rules passed by the Duma in 2016 confirmed the justiciability of Russian corporate disputes in foreign – in practice, English – courts, reinforcing London’s appeal to litigators just as the Russian market became more challenging.

The complex economic and indeed political picture facing the English courts can be understood with a case study.

Sergei Pugachev, once known as ‘the Kremlin’s banker’, left Russia for London after his relationship with Vladimir Putin soured in 2011, whereupon he was accused of embezzlement.

Far from safety, though, several attempts on his life were made (including suspicious devices under his car, which were suspected to be either tracking devices or a bomb) while a series of adverse judgments were rendered against him by the English courts.

He now lives in France, hiding from both the men he believes are out to kill him like Litvinenko and (perhaps) others and an outstanding two-year prison sentence in Britain.

He can no longer afford to hire lawyers of his own.

‘Loss of glamour’

Pugachev’s case mirrors the general loss of glamour in Russian disputes. “Gone are the blockbuster litigation that we have seen in the late 2000s [and] early 2010s,” said Tetyana Nesterchuk, the Russian- and Ukrainian-speaking barrister at Fountain Court Chambers who represented Mr Pugachev in his 2014 appeal against a freezing order.

Speaking to KYC360, she cited the Abramovich v Berezovsky case as an example of the titanic court battles which are fading into history.

“What I see now are more low-profile disputes that tend to be fought by means of confidential arbitral proceedings here in London (in the London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC) or through ad hoc arbitration).

“The clients tend to insist on maintaining confidentiality throughout so these cases are no longer ‘visible’ (unlike the cases that fought in the English courts where all disputes are public).”

Sanctions, she added, had not led to an appreciable loss of work, as smaller clients were unaffected by the regime. Ironically, but unsurprisingly, “there is certainly now more work in dealing with the sanctions regime, in advising both the UK government and the individuals who may potentially be subject to sanctions.”

Russians may value the rule of law, but as the eye of the state turns to their wealth and history, they could come to value secrecy over public justice. The Commercial Court’s rolls may be somewhat less Russian than before, but their disputes go on – quietly.

It simply remains to be seen whether the thick armour of the rule of law prized by those Russians begins to asphyxiate them. August von Raxthausen, on the eve of the 1848 revolutions in Europe, quoted an old Russian proverb: “I sit on the shore and wait for the wind.”

Russians, flanked by their English lawyers, are doing the same. They must hope the wind is not an ill one.

Wealthy Russians London criminal assets sanctions

Richard Nicholl (@rtrnicholl) is a Master’s student at the University of St Andrews, specialising in legal history. He also works as a freelance journalist and legal researcher.

 

 

 

Read more:

Accessories for the super rich: The price of a passport

Oligarchs, owners of English football clubs on US ‘Putin’ list

Confessions of a compliance officer: How I handled dodgy demands

Quick take: Understanding the EU’s sanctions against Russia

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