Vol 6 (2009) - Issue 1

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UK Court Considers Insolvency Jurisdiction over Russian Company: OJSC ANK Yugraneft, Re, Millhouse Capital UK Ltd and Roman Abramovich v Sibir Energy plc and others [2008] EWHC 2614 (Ch)

Introduction

In this case the High Court considered the court’s jurisdiction to wind up a Russian company, and the circumstances in which the exercise of the court’s discretion was appropriate to make a winding-up order.

The outcome of the case ultimately turned on issues of non-disclosure and the dismissal of underlying substantive proceedings. This notwithstanding, the court undertook a detailed analysis of the issues relating to whether the appointment of an English provisional liquidator was appropriate. Two key issues considered by the court were whether there was sufficient connection to England for the court to exercise jurisdiction and whether there was a reasonable possibility of benefit to the party applying for the winding-up order.

The facts

Yugraneft (or the ‘Company’) was a Russian company being wound up in Russia. In May 2007, the Company was declared insolvent and a Russian liquidator was appointed. In November 2007, Sibir (Yugraneft’s parent company), together with another subsidiary (the ‘Petitioners’), applied to the English Companies Court for an order that the Company be wound up and that a provisional liquidator be appointed. Such order was granted on 14 November 2007.

The purpose of the appointment of the provisional liquidator was to pursue substantive proceedings in the English Commercial Court on behalf of the Company against Roman Abramovich and Millhouse Capital UK Ltd (the ‘Applicants’) in relation to an alleged fraud directed by the Applicants (the ‘Fraud Claim’) against the Company. The complex and protracted dispute between the Company and the Applicants began eight years ago and has involved a series of unsuccessful attempts to bring proceedings against the Applicants in both Russia and the British Virgin Islands (the ‘BVI’).

The Applicants applied for the Fraud Claim to be dismissed on the basis that there was no realistic prospect of success and that the claims brought were an abuse of process. The Applicants also sought an order setting aside the appointment of the provisional liquidator together with a declaration that the court decline to exercise its insolvency jurisdiction over Yugraneft and an order dismissing the petition to wind up Yugraneft (the ‘Insolvency Claim’).

Both the Fraud Claim and the Insolvency Claim were heard by Mr. Justice Christopher Clarke.

Clarke J dismissed the Fraud Claim, in light of which the Petitioners accepted that the petition to wind up Yugraneft should be dismissed, at which point the appointment of the provisional liquidator would automatically terminate. Clarke J nevertheless dealt with the Insolvency Claim as a standalone application and proceeded to consider the issues as if the Fraud Claim had not been dismissed.

The issues

The issues before the court were:

1. Whether the English court had jurisdiction.

2. Whether the Petitioners were in breach of their duty of full and frank disclosure when applying for the order appointing the provisional liquidator and to wind up Yugraneft in England.