Commercial Court dismisses fraud claims in Russian / Ukrainian oil dispute after 12-week trial

PJSC Tatneft v Bogolyubov & Others [2021] EWHC 411 (Comm)

On 24 February 2021, Mrs Justice Moulder gave judgment on a long-running claim for alleged fraud brought by Tatneft, the fifth largest oil company in Russia, against four Ukrainian businessmen. Moulder J dismissed the claim on grounds it was time-barred and the pleaded “harm” would not qualify as such under Article 1064 of the Russian Civil Code (“RCC”).

The claim stemmed from Tatneft’s loss of control over a Ukrainian oil refinery in 2007 when the Fourth Defendant (Pavel Ovcharenko) was installed as chairman of the refinery following a so-called “raid”. Tatneft alleged that the other Defendants were behind the raid and that, in June 2009, they diverted to their own benefit 2.24 billion Hyrvnia owed to Tatneft for oil supplied in 2007. This was the “Oil Payment Siphoning Scheme”. Tatneft claimed as supposed assignee of a commercial agent, S-K, through which it had sold the oil to various intermediary companies and, ultimately, to the refinery. By trial, the value of the claim was put at $294.3 million.

Tatneft brought its claim in March 2016, initially obtaining worldwide freezing relief against all Defendants. In November 2016, Mr Justice Picken gave reverse summary judgment / strike out in favour of all Defendants on grounds that the pleaded claim was unsustainable in fact and under Russian law: [2017] 1 All E.R.(Comm) 833. Tatneft obtained permission to appeal and, save as against the Third Defendant (Mr Yaroslavksy) the continuation of the worldwide freezing order. The Court of Appeal overturned Picken J’s summary dismissal of the claim in October 2017, holding that it was fit for trial: [2018] 4 W.L.R. 14.

The claim was heard over a 12-week remote trial in October to December 2020. In the course of trial, the Defendants obtained disclosure of documents over which Tatneft was found to have waived legal professional privilege ([2020] EWHC 3225 (Comm)) and Tatneft failed in an application to serve late witness evidence from an in-house lawyer ([2020] EWHC 3250 (Comm)). 

Moulder J concluded that the claim was time-barred under the 3-year limitation period in Article 196 RCC. As to the operation of that limitation period:

  • Mr Yaroslavsky was right to contend that, prior to law reform in 2013, time ran on an Article 1064 claim from the date of actual or constructive knowledge of the “violation of right” under Article 200 RCC, without any separate requirement for knowledge of the identity of the wrongdoer(s);
  • for the purposes of Article 200, knowledge requires more than mere speculation but is not to be equated with evidence or the ability to plead a claim with a real prospect of success under English pleading rules.

On the facts, Moulder J concluded that Tatneft and its agent, S-K both had actual knowledge of the violation of rights by March 2010, failing that December 2011 and, in any event, S-K had knowledge of both the violation of rights and the facts allegedly implicating the Defendants more than three years before the claim was brought. Tatneft’s witness evidence on its own and S-K’s knowledge was fatally undermined by the late disclosure and through cross-examination: “…all four witnesses called for Tatneft on limitation have been found to be evasive, unreliable and in some instances likely to be not telling the truth… Unfortunately, I have to infer that to a greater or lesser extent they had decided, either individually or collectively, to give evidence which sought to advance Tatneft’s case”.

Moulder J further held that Tatneft’s pleaded case as to harm was deficient in that Russian law would not recognise a “legitimate expectation of an economic benefit” as property for the purposes of a claim under Article 1064.

Kenneth MacLean QC, Owain Draper and Tim Goldfarb acted for Mr Yaroslavsky, instructed by Annabel Thomas and Hannah Blom-Cooper of Mishcon de Reya LLP. You can view the full judgment here