The recent High Court decision in Kireeva v Zolotova ([2024] EWHC 2705 (Ch)) sheds light on the complex challenges that can arise in cross-border litigation involving Russian parties, since the widespread imposition of sanctions since 2022. The claim was brought by Ms Kireeva, a Russian bankruptcy trustee, asserting beneficial ownership of a sole share in a UK company, which in turn owns an Italian villa. The proceedings were marred by funding issues and procedural failures, culminating in the claim being struck out.
Neither party was designated pursuant to the UK sanctions regime, but the claim’s funding arrangements drew particular scrutiny due to issues arising because of the prior involvement of a litigation funder with ties to Russia (potentially impacted by US sanctions), leading to its withdrawal and other funding arrangements being put in place. Given the international sanctions environment and the challenges of transferring funds out of Russia, the claimant’s ability to secure a reliable funding route became critical to the court’s assessment of the case’s viability, in the context of an application by the claimant to adjourn the trial on the basis that her funder was having difficulty getting funds out of Russia in order to fund the litigation.
To address this, when making its order granting the adjournment, the court ordered, by way of an “unless” order, the claimant to provide a certificate in advance of the new trial date confirming that (i) funding arrangements are in place to allow the adjourned trial to take place and (ii) providing details of the banking route by which such funding will be provided. The court acknowledged that this was an unusual order, but considered that the circumstances of the case justified it. It was made clear that it was the banking route that had to be provided, and a general certificate to the effect that funds are available, not full details of the source of the funding.
In response, the claimant submitted a certificate purporting to show compliance with the order. However, the court found the certificate to be false and inaccurate, in that the remitting bank named in the certificate had announced (two weeks prior to the date of the certificate) that it was discontinuing foreign transfers of the type in question with effect from the date of the certificate. As a result, the court struck out the claim on the basis that there had been non-compliance with the “unless” order and, on the alternative basis, that the claimant’s conduct in continuing to prosecute her claim in reliance on the false certificate was an abuse of the court’s process.
This judgment highlights the challenges facing Russian parties involved in litigation in the UK. Many Russian parties struggle to obtain legal representation. However, even when solicitors and barristers are willing and able to act, practical difficulties may arise when remitting funds to the UK. The judgment discussed the now “standard” use of intermediary payment agents as a means of getting money out of Russia. The striking out of a claim in these circumstances seems severe, given that issues relating to payment are often outside the control of the party in question. However, in this case the judge referred to facts leading up to the imposition of the unless order and he found that the certificate was knowingly false (in that the trustee must have known the route was not viable when the certificate was served).
To discuss any of the issues raised in this article, please contact Joseph McCormick, Tatyana Talyanskaya or Serena Tam.
