Russian residents could be subject to U.K. jurisdiction if family members live in England - court
MOSCOW. August 3 (Interfax) - Russian businessmen and other foreigners could be subject to U.K. jurisdiction if their families live in the United Kingdom on a permanent basis, according to a precedent set by London's Higher Court in a case between two Russian businessmen on money owed after shutting down their joint business in Russia.
According to court materials seen by Interfax, the claimant Ruslan Bestolov initiated proceedings in London's High Court, claiming that the respondent did not pay him the full sum of money owed to him for the share in a business to buy and develop mines in Russia. The respondent, Siman Povarenkin, insisted that the case did not fall under the jurisdiction of the court in England.
On July 28 the London court ruled that proceedings could take place in England even though the respondent was a Russian citizen and tax resident. In other words, despite the fact that the respondent lives in Russia for over 180 days a year and his business is also located in Russia. The businessman was in England for less than 80 days a year, exclusively for family business. The court justified its decision by arguing that the respondent had 'significant connections' with England, because his wife and children permanently live in London, at least during the school term, and that he has temporary residence in the United Kingdom and a residence visa, and the family together with the wife spent significant sums of money in order to receive an investor visa for her.
The court also concluded that it would have been 'more convenient' for the respondent to protect himself in England. In addition, according to the court decision, first and foremost, there was a supplementary agreement to the main agreement which was regulated according to U.K. law on ending relations on the main agreement. Secondly, the claimant and the respondent were preparing to create a holding company according to U.K. jurisdiction, even though they did not do so as a result. At the same time, the sides agreed to solve disputes according to Russian jurisdiction. The London court intended to review the case taking into account Russian legislation, including conflict rules. These rules would determine what kind of law needed to be applied in each specific case.
"The ruling in and of itself simply reflects the existing legal practice and that the requirements of each case will be reviewed on an individual basis. At the same time, the conception of a permanent place of residence with the aim of determining jurisdiction, as opposed to taxes, has led to a decision which will affect many people, not only Russians," a partner of the London bureau of the international law firm Withers LLP, Christopher Coffin, told Interfax in London. Withers represented the interests of the claimant in the court proceedings. "Those that consider themselves to be residents of Russia or other countries and constantly live in those countries, and not in England, could find out that their legal disputes fall under U.K. jurisdiction," he said.
According to Coffin, the court specifically said that with the aim of establishing jurisdiction an individual could be considered a permanent resident of several countries, including England, even if that country is not their main country of residence.
The same kind of reasoning could be applied toward state officials of various countries, which for instance, educate their children in England. "If state officials visit England even for official reasons, and not for family reasons, it is quite unlikely that the court would consider them to be permanent residents of England," Coffin said.
"British courts traditionally approach jurisdiction in the widest sense possible. As a rule, the presence of only one piece of property for the respondent in England is not enough under British law to recognize the jurisdiction of the court in the case against the respondent. However, if the respondent frequently visits and lives in their property in England where his family lives, all of this together could establish jurisdiction for an English court in relation to the respondent," Goltsblat BLP Chief of International Arbitrage and Transnational Disputes, Yury Babichev, told Interfax. In addition, if the respondent from Russia is presented with court documents while he is in England, the U.K. court can establish its jurisdiction regarding that individual, he added.
At the same time, ownership of British property is not enough to recognize an individual as a resident. "When determining residency, the English court took into account the overall circumstances, including the respondent's family living in Great Britain, the frequency and character of his visits and so forth. On the other hand, proof of residency in other countries does not mean that an individual cannot also simultaneously be recognized as a resident of the United Kingdom. U.K. courts allow that individuals could immediately have several home residences and one of them could be in the United Kingdom," Nektorov, Saveliev & Partners Law Bureau partner, Marat Davletbayev, said.
The court recognized that despite the fact that the respondent was a resident of Russia, the fact that his family lived in England and his children go to English schools, and the respondent himself spent a large amount of time with them, means that the respondent had a 'family home' in England and a permanent place of residence in the United Kingdom, Davlatbayev said. "Charactersitically, the court's ruling notes a case from 2007 between Mikhail Cherney against Oleg Deripaska in which the court, to the contrary, established that the presence of a house under the ownership of Deripaska in and of itself was not enough, taking into account the length and character of his visits there, in order to recognize him as a British resident," he said.
A British lifestyle, such as U.K. education for children, visits to prestigious areas of London and so forth, could prove risky for Russian businessmen and they may end up in U.K. jurisdiction for legal disputes which in and of themselves do not have any relationship with England, Babichev said.
Seeking redress for anything in Russia on the ruling of a U.K. court could be problematic. Proceedings in the U.K. could become additionally attractive for claimants, especially if the respondent has assets in the U.K. It is much easier to freeze assets via British courts and seek compensation on them in the case of winning a court case, Davletbayev said.
London is traditionally a place where Russian billionaires carry out court proceedings, since most own property in the U.K. and spend a significant amount of time there, and secondly, because the majority of shareholder agreements related to Russian assets are closed according to British jurisdiction. Court cases involving Roman Abramovich, Oleg Deripaska, Suleiman Kerimov and many other Russian businessmen have taken place in London.
The commercial court that was reviewing the given case is part of a division of the royal crown of the higher court of London and is involved in disputes that are of a trade and commercial character, including with regard to banking law and private international law.
The commercial court has in recent years more and more frequently reviewed cases from parties located outside of the United Kingdom. In the past financial year, the share of British cases has declined to 28%, according to the legal research firm Portland. Russia leads among foreign participants in court procedures, with 25 cases in 12 months that were concluded March 2017. Kazakhstan followed with 23 cases for the same period.
