Russian businessman living in Russia held to be subject to the jurisdiction of the English courts

23rd August 2017

At the end of July 2017 the Commercial Court in London handed down Judgment in a dispute as to whether or not it had jurisdiction to hear a dispute between two wealthy Russian businessmen.

Mr Bestolov and Mr Povarenkin are both Russian citizens and the dispute between them arises out of the “partnership” agreements they entered into in 2007 (with further agreements in 2012 and 2013) in Russia.  The agreements relate to various mining projects in Yakutia which is in the Russian Federation.

Mr Bestolov commenced the proceedings in England against Mr Povarenkin making various claims for damages and Mr Povarenkin sought to argue that the English Court did not have jurisdiction and that the proper place for these disputes to be determined was in Russia.

At this stage, the Commercial Court was not seeking to determine the merits of the claims themselves but simply to ascertain whether or not the case should continue in England or whether, as Mr Povarenkin argued, it should decline jurisdiction in favour of the Russian Courts.

Mr Povarenkin had been served with English proceedings at Heathrow Airport when he had arrived in London to celebrate the birthdays of his wife and son who live here.

It is common in international cases, for jurisdiction to be decided on the basis of “forum conveniens” (i.e. which is the most appropriate place).  However, under English law, if a Defendant is domiciled in England then the English Court may not refuse to accept jurisdiction on the basis that there may be another more appropriate forum.

The rules provide that if a Defendant is resident in England and has a substantial connection with England then he is domiciled here.  A person maybe resident and domiciled in more than one place.

The Court had to decide whether or not Mr Povarenkin is domiciled in England and, in making this decision, it referred to the House of Lords decision in Canada Trust v Stolzenberg (the leading case in this area in which Colman Coyle acted for the Defendant).

That case determined that domicile should be tested as at the date of the issue of the claim and that it is not necessary for the Claimant to prove domicile but simply to demonstrate a “good arguable case”.

The Court conducted a detailed investigation of the factual position and determined that Mr Povarenkin had lived his whole life in Russia and still resides and pays tax there.  He has a major business, GeoProMining, which is based in Moscow, with a large number of staff and, over the last 3 years has spent a minimum of 208 days a year in Russia.

However his wife, young son and daughter all live in London where the children are being educated and they spend more than half the year here.

Mr Povarenkin stated that he had no business interests in London (although his wife had a Tier 1 investors visa).  In the years 2014, 2015 and 2016 he had spent 60, 75 and 79 days respectively in England, solely to visit his family.

The Court, having taken account of various factors decided that, because of his family connections, Mr Povarenkin is resident in England.

Once the decision had been made, it was a fairly simple process to determine that he had a substantial connection with England and therefore he was “domiciled” in England so that the Court had jurisdiction and was obliged to dismiss his challenge.

This may seem a surprising result in that a dispute between two Russian businessmen regarding an agreement which was made in Russia and related to projects solely to be undertaken in Russia should fall within the jurisdiction of the English Courts.  It also remains to be seen what approach the Russian Courts may take to any attempt to enforce any Judgment of the English Courts in due course.

Nevertheless, even if there are difficulties in enforcing Judgments overseas, being able to sue Defendants in England is attractive in many cases, not least because the powers of the English Courts to freeze assets.

Whilst this case involved two Russian citizens, the principle does not only apply to Russia and could affect Defendants from many other countries.

It seems that there may be unexpected consequences for businessmen whose families come to live in England even if they remain resident in their home country for much of the year.

Howard Colman