ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE HONOURABLE SIR ANTHONY COLMAN
(Sitting as a Deputy High Court Judge)
Strand, London, WC2A 2LL
B e f o r e :
THE RIGHT HONOURABLE LORD JUSTICE LONGMORE
THE RIGHT HONOURABLE LORD JUSTICE STANLEY BURNTON
| BORIS ABRAMOVICH BEREZOVSKY
|- and -
|ROMAN ARKADIEVICH ABRAMOVICH
Mr Laurence Rabinowitz QC, Mr Richard Gillis QC, Mr Simon Colton & Mr Sebastian Isaac (instructed by Addleshaw Goddard Solicitors LLP)) for the Respondent
Hearing dates : 11th, 12th, 13th, 14th, 17th & 19th & 21st January 2011
Crown Copyright ©
Lord Justice Longmore:
"there must be a threat by one person to use unlawful means (such as violence or a tort or a breach of contract) so as to compel another to obey his wishes; and the person so threatened must comply with the demand rather than risk the threat being carried into execution. In such circumstances the person damnified by the compliance can sue for intimidation."
The parties have agreed that it is implicit in this definition that the threatener must intend that his threats be acted on by the person threatened. They have also agreed, for the purpose of these interlocutory proceedings, that it is arguable that the means to be used need not necessarily be unlawful, if they can be categorised as "illegitimate" whatever that may precisely mean. (It is pointed out that, in defining the crime of blackmail, section 21 of the Theft Act requires only that there be an "unwarranted demand with menaces" and it is then said that the law of tort should not be kinder to the defendant than the criminal law). That is a debate into which this court does not need to enter. For the purposes of this case therefore the essential ingredients of the tort of intimidation are:-
1) a threat by the defendant (D) to do something unlawful or "illegitimate";
2) the threat must be intended to coerce the claimant (C) to take or refrain from taking some course of action;
3) the threat must in fact coerce C to take such action;
4) loss or damage must be incurred by C as a result.
The Alleged Facts
1) "a joint activity agreement" in accordance with the provisions of Chapter 18 of the Fundamentals of the Civil Litigation of the USSR and its Republics, alternatively
2) a binding sui generis agreement under Russian Law.
He also says that, if (as alleged by Mr Abramovich) the 1995 Agreement would not be recognized under Russian Law, Mr Berezovsky and AP were entitled under Russian Law to restitution of property (i.e. the interests in Sibneft) transferred to Mr Abramovich under the 1995 Agreement. Alternatively he claims the value of the services performed by Mr Berezovsky and AP pursuant to the 1995 Agreement as pleaded (namely, as regards Mr Berezovsky, discussing privatisation with President Yeltsin and his government and raising the finance required to enable Mr Berezovsky, AP and Mr Abramovich to acquire Sibneft). He therefore seeks a declaration that, if the attempted 1995 Agreement was invalid, he is entitled to compensation by reason of the Russian Law of vindication under Article 301 of the Russian Civil Code or by reason of the law of restitution under Article 167 of the Civil Code and/or in accordance with the law of unjust enrichment under Article 1102 of the Civil Code.
1) The trust in respect of Rusal was expressly or impliedly governed by English Law.
2) That conclusion is to be derived from the following facts:-
i) Previous purchases of aluminium assets by Mr Berezovsky, AP or Mr Abramovich had been under contracts expressly subject to English Law, it being the expressed intention of AP and Mr Abramovich to purchase through offshore structures "subject to Western law".
ii) Prior to the oral agreement between Mr Berezovsky, AP and Mr Abramovich in the course of the Dorchester Hotel meeting, a written Preliminary Agreement had been entered into by Mr Abramovich (on behalf of himself, Mr Berezovsky and AP) with Mr Deripaska, relating to the proposed merger of aluminium assets, which contained an express choice of English Law, which reflected an agreement between Mr Berezovsky, AP and Mr Abramovich before the meeting that they should make arrangements regarding the proposed merger subject to English Law or, at least, a law other than Russian law.
iii) After the conclusion of the Dorchester Hotel oral agreement, Mr Abramovich acting on behalf of himself, Mr Berezovsky and AP, entered into another agreement in writing relating to the proposed merger of assets which contained an express choice of English Law and which came after AP had agreed with Mr Deripaska and Mr Abramovich that all merger arrangements were to be governed by English Law.
The relevant assertions and counter assertions on this appeal
Mr Berezovsky alleges that Mr Abramovich undertook a course of conduct in which he made and was a party to explicit and implicit coercive threats and intimidation, including the threats and intimidation relating to ORT. Mr Berezovsky pleads that the course of conduct and statements made by Mr Abramovich in connection with Sibneft were "unlawful" and "illegitimate" in that they
1) threatened Mr Abramovich could and would procure (or, at any rate do his best to procure) improper and unlawful conduct by the Russian state interfering in legitimate business dealings and interests and the expropriation of property for political ends;
2) used Mr Glushkov's imprisonment, physical well-being and survival as a commercial bargaining counter;
3) interfered with rights under Article 1 of Protocol No. 1 of the European Convention on Human Rights;
4) were threats to act in breach of fiduciary duty and/or in breach of the duties owed by Mr Abramovich to Mr Berezovsky and AP under the 1995 Sibneft Agreement and/or the 1996 Agreement and/or to them as common owners of Sibneft shares.
Mr Berezovsky contends that in disposing of a 25% interest in Rusal to Mr Deripaska in about September 2003 Mr Abramovich acted in breach of trust and/or his fiduciary duty because he either sold Mr Berezovsky's and AP's 25% without their consent as beneficiaries and without accounting to them or sold his own 25% thereby wrongfully favouring his own interests over those of Mr Berezovsky and AP, or, if he sold a mixture of his own and Mr Berezovsky's and AP's shares, he did so without their consent and without accounting to them and, to the extent of the disposal of part of his own 25%, by wrongfully favouring his own interests over their interests.
Issues on the appeal
1) do the proposed amendments to the Sibneft claim give rise to a new claim? (the "new claim" issue);
2) if so, does such new claim arise from the same, or substantially the same, facts as the original claim? (the "same facts" issue);
3) if the proposed amendments do amount to a new claim and do not arise out of the same or substantially the same facts as the original claim, so that permission for the amendments should be refused, is Mr Abramovich now entitled to judgment dismissing Mr Berezovsky's Sibneft claim? (the "summary judgment" issue);
4) should the claim for intimidation be struck out because it does not allege (or only insufficiently alleges) that Mr Abramovich threatened that he would do something illegitimate (as opposed to merely warning that someone else might do something)? (the "plea of threat" issue);
5) should the Sibneft claim be struck out because it calls into question or requires determination of matters which are properly to be regarded as acts of state? (the "act of state" issue);
6) should judgment now be given for Mr Abramovich on the Rusal claim on the basis that it is not even arguable that English law applies to determine that claim but it is clear that the claim must be determined by Russian law? (the "English law" issue).
7) if not, should Mr Berezovsky be permitted to amend to allege that there was an express oral agreement that English law should apply ("the oral agreement issue").
1) Proposed amendments in the Sibneft case
"(1) For the purposes of this Act, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced –
a) in the case of a new claim made in or by way of third party proceedings, on the date on which those proceedings were commenced; and
b) in the case of any other claim, on the same date as the original action.
(2) In this section a new claim means any claim by way of set-off or counterclaim, and any claim involving either –
a) the addition or substitution of a new cause of action, or
b) the addition or substitution of a new party;
(3) Except as provided by section 33 of this Act or by rules of court, neither the High Court nor any country court shall allow a new claim within subsection (1)(b) above, other than an original set-off or counterclaim, to be made in the course of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim.
(4) Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions to the rules may impose.
(5) The conditions referred to in subsection (4) above are the following –
(a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action; and
(b) in the case of a claim involving a new party, if the addition or substitution of the new party is necessary for the determination of the original action."
Sub-rules (1) and (2) of CPR 17.4 provide as follows:-
"(1) This rule applies where –
(a) a party applies to amend his statement of case in one of the ways mentioned in this rule; and
(b) a period of limitation has expired under –
i. the Limitation Act 1980; or
ii. the Foreign Limitation Periods Act 1984 or;
iii. any other enactment which allows such an amendment, or under which such an amendment is allowed.
(2) The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings."
1) there were seven important changes between the old allegations and the proposed new allegations:-
i) the alleged rights were originally trust rights; now they were said to be contractual;
ii) the rights were originally said to arise by way of an express oral declaration of trust; now no such declaration of trust was alleged;
iii) the rights were originally said to have been created by the 1996 Agreement with the 1995 Agreement being merely narrative background; now it is said that the rights were created by the 1995 Agreement and the 1996 Agreement was mere implementation of the earlier agreement;
iv) the original plea alleged that the interest disposed of was an interest in shares (held for Mr Berezovsky) transferred to Mr Abramovich; now it was said that the interest disposed of was a right in an unspecific undivided moiety of shares acquired by Mr Abramovich from others;
v) the original claim was an English law claim; now it is a Russian law claim;
vi) the mechanism of the loss was originally pleaded by reference to the Devonia agreement; now it was also pleaded by reference to an estoppel by convention;
vii) the amount of the loss was originally valued by reference to shares which Mr Berezovsky himself owned; now a new alternative was proposed in the form of the value of services allegedly provided by Mr Berezovsky in enabling Mr Abramovich himself to acquire the Sibneft shares.
All this was said to show that a new cause of action was being asserted.
2) once a general plea of loss or damage had been particularised, any substitution for such particularised loss or damage of a different head of loss or damage amounted to pleading a new cause of action. It is not, as the judge said it was, a mere re-labelling of an already pleaded loss.
3) if a cause of action was pleaded which was bound to fail any addition or substitution was, of necessity, a new cause of action and, thus, a new claim which, in the present case, would inevitably be time-barred;
4) the subject of the threat had changed from being a threat of expropriation of property to a threat to remove rights in contract which were enforceable, if at all, only in personam. That meant that a new and different threat with a new different intention had been made and that also must be a new cause of action and a new claim.
"'Cause of action' has been held from the earliest time to mean every fact which is material to be proved to entitle the plaintiff to succeed – every fact which the defendant would have a right to traverse."
In Paragon Finance Plc v Thakerar & Co  1 AER 400, 405 Millett LJ cited that definition and added:-
"… only those facts which are material to be proved are to be taken into account. The pleading of unnecessary allegations or the addition of further instances or better particulars do not amount to a distinct cause of action. The selection must be made at the highest level of abstraction."
"So in identifying a new cause of action the bare minimum of essential facts abstracted from the original pleading is to be compared with the minimum as it would be constituted under the amended pleading."
i) Mr Abramovich threatened that he would (do his best to) procure that the Russian state would expropriate Mr Berezovsky's interest in Sibneft;
ii) Mr Abramovich intended to coerce Mr Berezovsky to dispose of such interest;
iii) Mr Berezovsky was coerced into disposing of that interest;
iv) Mr Berezovsky suffered loss as a result.
Those allegations of essential fact (inter alia) appear at paras 41-44, 45-46, 51-54 and 55-56 of the original pleading. They also appear at paras C41-44, C45-46, C51-54 and C55-56 (albeit with some amendments) of the proposed amended pleading. In these circumstances no new cause of action is alleged in the proposed amended pleading unless it can be said that once a claimant has particularised his loss e.g. (to take the example used in argument) by alleging the loss or theft of his cat, he cannot thereafter allege the loss or theft of his dog. As Mr Popplewell put the argument: a pleader can particularise a general allegation but, once he has so particularised it, he cannot regeneralise the particular without alleging a new cause of action.
"There can be no claim or cause of action without an underlying system of law to prescribe the remedy and the circumstances in which it is available. In my view it is self-evident that a claim made under the law of one state is a different cause of action to a claim made under the law of a different state."
This dictum is wider than was necessary for the decision in that case where different duties were alleged and, necessarily therefore, different causes of action were also alleged. I doubt, with respect, whether the Vice-Chancellor's wider proposition is correct for all actions in tort, if the new claim merely pleads a different measure of loss from a loss already pleaded. If the loss stems from an already pleaded breach of duty the fact that the loss may be measured by a different law from that already pleaded does not necessarily mean that there is a new claim.
(2) Same or Similar Facts
(3) Summary Judgment in respect of Sibneft
1) November 2008 when the application to strike out the Sibneft claim was issued;
2) 13th July 2009 when the first re-amendments were proposed; or
3) 24th July 2009 at the end of the first hearing before Sir Anthony.
By 7th August 2009 of course, the pleadings took their final form for the purpose of the final stage of the argument and, subject to (4) and (5) below, the claims, as then pleaded, give rise to an arguable case.
(4) The plea of threat
"C41. From about August 2000, Mr Patarkatsishvili and Mr Abramovich met on a number of occasions. Mr Abramovich on more than one occasion informed Mr Patarkatsishvili that there was increasing pressure from the Kremlin and that Mr Berezovsky and Mr Patarkatsishvili's interests in Sibneft could be expropriated as it was known that Mr Berezovsky and Mr Patarkatsishvili had interests in Sibneft. It was clear to Mr Patarkatsishvili (as intended by Mr Abramovich) that Mr Abramovich's message to him and Mr Berezovsky was that they should sell their interests in Sibneft to him, or face the consequences.
C44. Mr Abramovich was well aware that Mr Berezovsky was vulnerable to the threats and pressure imposed in the lead up to and at the meeting at Munich Airport in early May 2001 (described below) given that;
(1) From November 2000 Mr Berezovsky was a political exile from Russia. From March 2001, Mr Patarkatsishvili also was a political exile from Russia.
(2) By contrast, Mr Abramovich was close to President Putin and part of his inner circle. …
(a). Mr Patarkatsishvili raised the issue of releasing Mr Glushkov from jail. Mr Abramovich told Mr Patarkatsishvili that although Mr Glushkov had not been released in December 2000, if Mr Berezovsky and Mr Patarkatsishvili were to sell their interest in Sibneft to him, Mr Glushkov would now be released;
C51. Mr Abramovich undertook a course of conduct in which he made and was a party to the explicit and implicit coercive threats and intimidation pleaded above, including, as inextricably intertwined with the Sibneft transaction, the threats and intimidation relating to ORT.
C52. The course of conduct and the statements made by Mr Abramovich were unlawful and/or illegitimate in that they
(1) threatened improper and unlawful state conduct interfering in legitimate business dealings and interests and expropriating property without justification for political ends;
(2) used Mr Glushkov's liberty, physical well-being and survival as a commercial bargaining chip;
(3) interfered with rights under Article 1 of protocol No. 1 of the European Convention on Human Rights; and
(4) were threats to act in breach of fiduciary duty and/or in breach of the duties owed by Mr Abramovich to Mr Berezovsky and Mr Patarkatsishvili pursuant to the 1995 and/or 1996 Agreements and/or as common owners of Sibneft shares."
Reading those paragraphs, any informed and reasonable person would understand that Mr Berezovsky was alleging that Mr Abramovich was threatening (at any rate impliedly, if not expressly) that he would do what he could to bring about the threatened expropriation of Mr Berezovsky's Sibneft interests if he was not prepared to sell at an undervalue to Mr Abramovich.
"Mr Berezovsky's case is that:
(1) The statements pleaded at paragraph C41 were implicit threats, in that Mr Abramovich intended by these statements to cause Mr Berezovsky and Mr Patarkatsishvili to fear that, unless they sold their interests in Sibneft to Mr Abramovich, Mr Abramovich would use his influence within the Putin regime to seek to cause their interests to be expropriated.
(2) The statement pleaded at paragraph C46(1)(a) was an implicit threat, in that Mr Abramovich intended by this statement to cause Mr Berezovsky and Mr Patarkatsishvili to fear that, unless they sold their interests in Sibneft to Mr Abramovich, Mr Abramovich would use his influence within the Putin regime to seek to ensure that Mr Glushkov would not be released from prison.
(3) No conduct of others is relied upon as constituting threatening conduct."
We were informed that Mr Berezovsky had agreed the truth of such facts as are contained in this further information and would sign the necessary declaration to that effect.
(5) Act of State
i) on what conduct of the Russian state (in the sense of already committed acts) does Mr Berezovsky rely?
ii) does he assert that any of those acts are invalid?
iii) if not, does an inquiry into whether the acts relied on occurred constitute an adjudication upon such acts or call such acts into question in such a way as to fall foul of the act of state doctrine?
iv) if Mr Berezovsky asserts invalidity or if the doctrine of act of state applies to allegations which go wider than invalidity, are the acts relied on sufficiently collateral to the main issues in the action so as to permit him to ventilate the alleged conduct in the present proceedings?
v) if they are not collateral but sufficiently central to his case to qualify for the prohibition on calling acts of state into question, can they nevertheless be relied on as a matter of public policy if Mr Berezovsky asserts that they are a breach of either international law or his or someone else's human rights?
vi) Does the doctrine of non-justiciability have any bearing on the matter?
(i) Conduct of the Russian state relied on
1) the threats made by the Chief of the Presidential Administration, Mr Voloshin in August 2000;
2) the personal repetition of those threats by President Putin who is also said to have threatened to imprison Mr Berezovsky;
3) the repetition of these threats by President Putin to AP;
4) the arrest of Mr Glushkov, his imprisonment at Lefortovo and his apparent use as a bargaining counter in the negotiations.
The alleged result of this was the sale of the interests of both Mr Berezovsky and AP in ORT to Mr Abramovich for $175 million.
(ii) Assertion of invalidity
(iii) Ambit of the act of state principle
"… it is contrary to international law for one state to adjudicate upon the internal affairs of another state. Where a state or a state official is impleaded, this principle applies as part of the explanation for immunity. Where a state is not directly or indirectly impleaded in the litigation, so that no issue of state immunity as such arises, the English and American courts have none the less, as a matter of judicial restraint, held themselves not competent to entertain litigation that turns on the validity of the public acts of a foreign state, applying what has become known as the act of state doctrine."
In Kuwait Airways Corporation v Iraqi Airways Co (Nos. 4 and 5)  2 AC 883, 1108 para 135 Lord Hope of Craighead said:-
"There is no doubt as to the general effect of the rule which is known as the act of state rule. It applies to the legislation or other governmental acts of a recognised foreign state or government within its own territory. The English courts will not adjudicate upon, or call into question, any such acts."
"Act of state issues only arise when a court must decide – that is, when the outcome of the case turns upon – the effect of official action by a foreign sovereign. When that question is not in the case, neither is the act of state doctrine. That is the situation here. Regardless of what the court's factual findings may suggest as to the legality of the Nigerian contract, its legality is simply not a question to be decided in the present suit, and there is thus no occasion to apply the rule of decision that the act of state doctrine requires. Cf. Sharon v Time, In., 599 F.Supp. 538, 546 (SDNY 1984) ("The issue in this litigation is not whether [the alleged] acts are valid, but whether they occurred")."
1) the relevant state bought the relevant paper as a mere commercial transaction, prior to the printing and issue of the notes as currency;
2) the complaint did not relate to the issue or circulation of foreign currency or any other activity of the state within its own territory;
3) on the authority of Kirkpatrick, there was no challenge to the validity of any act of the foreign state.
All three reasons were treated as having equal weight and Mr Rabinowitz correctly submitted that we are, therefore, now bound by authority to say that the act of state doctrine only applies to challenges to the validity of the act of state relied upon, unless there is subsequent higher authority to a different effect.
(v) Public Policy
(7) & (8) Rusal: English or Russian law/Express agreement for English law
Lord Justice Stanley Burnton:
Lord Justice Laws: