John Reynolds on the Russian trend of London litigation
Quite a few cases linked in one way or another to Russia have passed through England’s courts and arbitration tribunals. As a growing number of business contracts stipulate that disputes should be governed by English law, the list continues to grow. Meanwhile, Russia has resolved to draw cases back to its own courts, aiming to tackle some of the judiciary’s more prominent issues. To learn more about this quagmire, RAPSI spoke with John Reynolds, a partner at White & Case and head of its London Litigation Department.
- When we met in London last year, the late Russian oligarch Boris Berezovsky’s case against Roman Abramovich was consuming international headlines and dominating legal discussions. Did the case end up having a lasting impact on the English legal market?
- It really was a unique case. I’m not sure we will see one like that again. And the law firms involved did a huge amount of work over a long period of time. The judgment was enormous as well. Everything about that case was a one-off. When that decision came out it had implications for other litigation cases. Witnessing a huge piece of litigation going through from start to finish and getting a judgment and realizing that there is a winner and there is a loser probably came as a bit of a shock to people. That sounds obvious, but people play the litigation game, if you like, and forget that if you see it all the way through - and sometimes you can’t stop it - someone’s going to win and someone’s going to lose. And the winner is going to win big and the loser is going to lose big, which is what happened in this case. I was not involved in this case or any of the others, so I do not know what led to the settlements of the related cases but I’m sure the sight of that result was a reality check for a lot of people.
- Did the case pose a challenge for the London court itself?
- The Commercial Court moved to the Rolls Building [ed: where the litigation took place] two years ago now, and the Berezovsky case was its first really big trial, and I think faired well. First of all, the judge probably enjoyed the challenge of organizing the case and did it very well indeed. The building came up to scratch – in other words, the technology, as far as I’m aware, seems to work. There was space for the parties and space for people to watch. I think actually it was a very good advertisement for justice in London - if you want to see litigation all the way through, I think London came out very well. Save for the fact that it is costly. You could bring a case in many other jurisdictions where the legal process is not as long, and the trial is not as long, where you don’t have as many papers, as many oral witnesses etc and it will of course be considerably cheaper. Who’s to say whether that process will come out with a different result or not. But I think the purest answer to it is that if you examine all the relevant documents, and have witnesses in front of you cross-examined, and then reach a decision – the parties ought to feel more comfortable that the decision was reached for the right reasons.
The person who loses will always be unhappy to some degree, but in a sense perhaps less unhappy than if they had gone into a much shorter summary process, or one that doesn’t involve all the examination. So this is a very extreme case in which the parties had the opportunity to call as many of the witnesses as they possibly could. Millions of documents were looked at, and after all of that a long trial and careful consideration by a judge. You can feel confident that the judge has come up with the right result. If you have the money and the time to be able to go through that process, then that’s good justice. But there are few who could afford that type of case for that length of time.
- And in your experience, the cost hasn’t served as a deterrent for Russians wishing to litigate in London?
- No. The rules of the court are now more rigid when it comes to costs. Budgets have to be provided, solicitors have to report to the court on how much it’s all costing, so that there are no horrendous surprises at the end. However, the numbers can be very big. A case was reported in the press recently where the parties have told the court that it’s going cost £42 million to take the case right the way through to the trial. That’s a huge number, but at least someone has been through the exercise of doing that - you go into this with your eyes open. If you hire lawyers and they tell you it’s going to cost you £20 million to get this case through to trial, then that’s an element you take into consideration in determining whether you want to even start litigation, and if you do, whether you want to try and settle it at some stage. But at least you have that information up front to know whether it’s worth doing.
- Do Russian clients present any unique challenges to the English solicitors and barristers that represent them?
- I think first of all they are well aware of what the process involves. It’s unfair to generalize but my experience is that litigation involving Russian parties is often aggressive – they want to fight, they’ve made the decision, and they proceed - they don’t have doubts once they have taken that decision. Yes, they can be demanding and things need to be done quickly (but so are most clients and there is nothing wrong with that); but they also know that if we as lawyers say: “Ok, if you want to do that, I need two days of your time to go through all these statements, I need these documents, etc.,” - you’ll get it. So they are good clients because they understand what’s involved and if you need access to employees or documents, or other information in order to develop your test case theory - you will get it.
- Are the other CIS countries strongly represented in the English courts?
- Probably Ukraine and Kazakhstan are next in line after Russia.
- Would you say the BTA Bank v. Mukhtar Ablyazov case is the biggest Kazakh case to reach London?
- Yes, but again I think that’s a bit of one-off. In some respects that case is similar to the Berezovsky and Abramovich case in that it involves unusual facts, and that’s not typical of the type of cases that are coming out of Kazakhstan. And it’s also unusual in that the defendant hasn’t appeared. He’s really taken no part in these proceedings.
- Well, there are not really too many options. You may either go through to the very end, give up or settle. I’ve read that about 90% of US commercial cases are settled before a verdict is reached. What are the English statistics in this arena?
- Occasionally you see numbers published that tell you how many cases are settled. I haven’t seen anyone do that kind of analysis for a long time. It really is quite difficult to do because sometimes there is a dispute that is settled before proceedings were brought. I would think 90% is probably the same in the UK.
- In general, have the English courts’ Russian caseload increased or decreased in the months following the decision in Berezovsky v. Abramovich?
- I haven’t got numbers at my fingertips. The cases may not be as large as the Berezovsky case or the Deripaska case, but there are still plenty out there. It hasn’t done anything to reduce the number of cases that are coming through the London courts with some sort of Russian connection.
- Russian Supreme Commercial Court Chairman Anton Ivanov has voiced a certain degree of concern about the London-litigation trend. What are your thoughts on the matter?
- I understand his point, but it’s not something that we in Britain or you in Russia can do anything about. The fact is that the legal system in Russia has developed in a different way and is now trying to compete for the same business as London. International parties have been accustomed to using London for decades, for hundreds of years. So, yes it’s difficult, but it’s a question of confidence and obviously that’s in part why there’s now greater transparency [ed.: in the Russian judiciary], although perhaps the sophistication of Russian corporate law needs to further develop to enable the Russian courts to better compete in the international arena. I think it is having some effect, because I have certainly spoken to clients in London who are always asking the question of how reliable the legal system is in Russia. They ask because they may be faced with the prospect of either signing up to a contract that contains Russian courts dispute clauses, or the contract doesn’t have a disputes clause at all. In other words, if you do business in Russia you’ve got to do it this way, so people are keen to understand how the system works and whether indeed all the good intentions are backed up by what actually happens.
- Setting Russia aside for a moment - from which industry sectors does most of your firm’s work originate?
- Banking, oil and gas, telecoms, construction projects and infrastructure. Those areas probably throw out more disputes than others.
- Does your firm do a lot of work with mergers and acquisitions (M&A)?
- The M&A market has been incredibly flat for five or six years now, there is much more advisory dispute work in M&A, there’s not so much real litigation coming out of it. A number of warranty claims, but really only a handful of real litigation has come out of it. Plenty of helping clients work through claims, but they have not resulted in litigation. So only a few – there will be cases where deals haven’t closed and they should have done, where people are trying to sell for a higher price to someone else, and there are quite a lot of shareholder disputes.
Interviewed by Vladimir Yaduta, RAPSI