News / 07-03-2023 / London

Navigator Equities Ltd & another v. Oleg Deripaska [2023] EWHC 457 (Comm)

In the recent case of PJSC National Bank Trust v. Boris Mints, the Court confirmed that sanctioned entities have a fundamental right of access to the English courts. Where a sanctioned entity has a good arguable claim that is subject to English Court jurisdiction, defendants will not be permitted to use international sanctions as a means of escaping liability for their wrongs.

In this case, the Court has made it clear that a defendant will not be permitted to delay any legitimate proceedings against him beyond what is reasonable on the basis that his sanctioned status may prevent him getting a fair trial.

The background facts

The underlying dispute arose out of a joint venture regarding the development of land in Moscow and a related shareholders’ agreement. The claimants commenced arbitration against the defendant and, in the course of those arbitration proceedings and in subsequent court challenges relating to the arbitration, the defendant was found to have advanced a dishonest case and to have paid a significant bribe to a principal witness to advance a false case.

The Court of Appeal dismissed the defendant’s appeal from these findings and the claimants issued a committal application in November 2019, alleging that the defendant had breached certain undertakings he had given in lieu of a worldwide freezing order that was made against him in May 2018.

Although the judge at first instance dismissed the committal application as an abuse of process, the Court of Appeal subsequently found that it was at least arguable that the defendant had committed a serious contempt of court and that the contempt application was a proportionate response. The Court of Appeal indicated that the hearing of the committal application should take place without further or undue delay.

The four-day trial was re-listed to commence on 23 May 2022. On 10 March 2022, the defendant became subject to an asset freeze under the Russia (Sanctions) (EU Exit) Regulations 2019. This prevented solicitors and counsel from being paid to represent the defendant and his longstanding London solicitors terminated their retainer with him. The Court adjourned the trial three weeks before the hearing on the basis that it would not be possible for the defendant to have a fair trial. However, it was anticipated that the adjournment would be a short one and that the trial would be re-listed for October/November 2022.

In the meantime, the defendant’s new solicitors applied to the OFSI (UK Office of Financial Sanctions Implementation) for a specific licence to cover the defendant’s reasonable legal fees. The trial was re-listed for 28 November but, by 18 October, no specific licence had been granted. The solicitors, therefore, sought a further adjournment and indicated to the Court that the defendant needed a licence not just from the OFSI but also from OFAC (US Office of Foreign Assets Control) because payment would be routed through the US.

At the directions hearing on 28 November, the defendant’s solicitors did not attend, stating that they did not want to come on the record or to instruct counsel unless they could be paid. The defendant sought a further adjournment, pending the grant of a special licence by OFSI that was not subject to a £500,000 limit. There was also an indication that the defendant might seek to pay his lawyers via a route that did not involve the US, so that an OFAC licence might not be required. The trial was re-listed for three days commencing either 20 or 27 March 2023.

By 11 January 2023, the defendant had instructed replacement solicitors who sought to agree a further adjournment to July 2023. The claimants’ solicitors declined to agree. The matter, therefore, came before the Court on 3 February 2023, by which time the special licence had been granted in the amount of £1.286 million.

The Commercial Court decision

The Court stated that adjournment of the hearing was highly undesirable, given the timeline and the fact that contempt proceedings of this type should be heard with as little delay as possible. Furthermore, if the matter was adjourned, the only alternative trial dates available would be in October 2023 or February 2024.

Given that the special licence had by this time been granted, arguments for an adjournment based on lack of a licence or funds were no longer relevant. The principal remaining ground for an adjournment was that the defendant’s leading and senior junior counsel would be unavailable and this allegedly put a fair trial at risk and infringed the defendant’s rights to a fair trial under Article 6 of the ECHR.

The Court recognised that there was to some extent the right to a counsel of choice. However, there were limits. While choice of counsel was an important matter and relevant and sufficient grounds had to be given for overriding it, it fell to be considered as part of the overall right to a fair trial. The mere fact that the presence of a particular longstanding counsel was desirable was not enough to justify an adjournment, particularly where a fair trial would not otherwise be imperilled.

The broader picture in this case dictated that choice of counsel should be displaced. Firstly, while the two more senior counsel would not be available, junior counsel would be. In addition, the defendant could still get competent counsel. The special licence was granted for a significant amount and six weeks remained in which to instruct new counsel. That was more than enough time to prepare for a three-day hearing on committal. Furthermore, there had already been a number of adjournments and the defendant could have indicated the unavailability of counsel at the directions hearing and become familiar with alternative counsel earlier.

The Court added that the evidence had been completed in 2020. The committal was fully prepared by the existing team, including a full skeleton argument and preparation for the points which were advanced plus advice. There was, therefore, a huge head-start in place.

The Court concluded that, in terms of achieving a fair trial, the unavailability of preferred counsel did not make a fair trial impossible or even remotely impracticable. The Court also dismissed the contention that three days was not sufficient time to dispose of this matter. The application was, therefore, dismissed.

Comment

Notwithstanding its findings, the Court was not minded to infer that the defendant was “gaming the system” and using his Article 6 rights to a fair trial to dictate a timeline for these proceedings. Instead, it chose to highlight the prejudice which was caused to other court users by repeated adjournments, as well as the fact that there was ample time for unavailable counsel to be replaced by competent counsel given the ample budget in place.

The Court clearly gave due consideration to the financial constraints placed on the defendant as a result of becoming sanctioned, as reflected by the fact that it had granted earlier adjournments to allow for the relevant licences to be obtained and the legal team to be guaranteed payment. Once the generous special licence had been granted, however, there remained no real risk to a fair trial taking place and no obstacle to the contempt proceedings going ahead.

Given the frequency with which English Court proceedings involve sanctioned entities, whether as claimants or defendants, the increasing number of authorities on the types of issues that arise is very useful.