UK Appeals Court Says No Contempt for Sanctioned Russian in Moving Company From Jersey to Russia
The U.K. Court of Appeal last week ruled that sanctioned Russian oligarch Oleg Deripaska wasn't in contempt of court for allegedly breaching a commitment to the court that he wouldn't move to procure British Virgin Island-based B-Finance to dispose of his shares of Jersey company EN+ in an arbitration suit.
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The appeal is the "latest round in a bitter war between two adversaries who were once business partners" with "seemingly unlimited funds with which to pursue the other," the court said. This feud centers on a 2005 joint venue between Vladimir Chernukhin and Deripaska, which was used to develop a "valuable site" in Moscow. By 2010, the parties fell out and Deripaska took over the joint venture. Chernukhin took to the London Court of International Arbitration, where a tribunal found for him in 2017 in the amount of around $95 million.
As Chernukhin was awaiting the arbitral award, Deripaska was sanctioned, leading Chernukhin to express concerns that the effect of the sanctions would lead Deripaska to "dissipate his assets" or "repatriate them to Russia, where they will effectively be immune from enforcement." As a result, Chernukhin was granted a freezing order against Deripaska's assets.
Following the order, Deripaska issued an "undertaking," or a guarantee, to the court that he wouldn't move to procure B-Finance to dispose of his shares in EN+. However, a plan was developed in 2018 to remove sanctions on EN+, part of which included diluting Deripaska's shares of EN+, which was to be accomplished by Russian bank VTB Bank taking the shares. The bank only agreed to this if the "domicile" of EN+ was changed from Jersey to Russia.
In December 2018, EN+'s shareholders approved the move to Russia. At this time, B-Finance held over 53% of EN+'s shares and voted for the move, though there's a dispute on whether B-Finance voted for the move at the behest of Deripaska or not. The final move of EN+ to Russia was completed in 2019, and, as part of the move, 45.5 million shares would be "automatically canceled" and replaced with new shares in the Russia-domiciled company.
After the move, Deripaska paid the full arbitral award to Chernukhin, who nevertheless then claimed Deripaska was in contempt of the court for breaching his guarantee to the court when EN+ was moved from Jersey to Russia. The court noted that the central question was whether the EN+ shares were "automatically canceled" as part of the domicile change, ultimately finding that Chernukhin "failed to prove to the criminal standard that the shares were automatically canceled."