February 6, 2013 8:00 pm

Supreme Court refuses to hear Russia case

The UK’s highest court has ruled that a Russian case over a multimillion-dollar loan should be heard in Russia rather than London, in a move that lawyers say could deter more overseas litigants from using English courts as a place to fight their legal battles.

The Supreme Court ruled on the case of VTB, a state-owned Russian bank, which attempted to pursue fraud and conspiracy claims in London’s High Court against two defendants connected to a $225m loan agreement.

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The two defendants denied the claims.

However, on Wednesday the Supreme Court said the civil case should be heard in Russia rather than London, with Lord Mance, one of the justices, ruling that the “major part of the factual subject matter involves Russia” and adding that “the Russian connection is of such strength and importance in this case”.

The case is the first time the Supreme Court has rejected jurisdiction over a Russian commercial dispute and comes after several big money disputes have been brought in London by the super-rich from Russia and other former Soviet republics.

Last year Boris Berezovsky lost a $6.5bn lawsuit against fellow oligarch Roman Abramovich, the billionaire owner of Chelsea football club, after one of the most expensive court battles heard in Britain, which racked up an estimated £100m in legal fees.

Lawyers say the latest ruling is likely to make some litigants think twice about bringing cases in London that only have a tenuous link to England – a practice dubbed “forum shopping”.

Tim Taylor QC, partner at SJ Berwin, said: “Forum shopping by a Russian bank, which preferred to litigate in England rather than in Russia, has been an expensive exercise for VTB. Hopefully this definitive ruling by the Supreme Court will deter others from making any similar attempts.”

Justin Michaelson, partner at Fried Frank Harris Shriver & Jacobson (London), who acted for two defendants in the VTB case, Marshall Capital Holdings and Russian businessman Konstantin Malofeev, said: “The ruling will make claimants more wary about bringing claims and make judges more confident about throwing out some of these claims in the light of what the Supreme Court has said.”

He added that a worldwide freezing injunction had also been discharged against Mr Malofeev as a result.

Other lawyers said it was a timely reminder that London courts could still decide the cases should be heard elsewhere.

Stephen Ross, head of the civil fraud group at law firm Withers, said: “England is still a favoured jurisdiction and so I don’t think it will put off Russian individuals from bringing claims here.

“However, the ruling does underline that there has to be a sufficient connection with England and so it might make those litigants with few links to London think again about bringing such claims.”

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