- Why do Russian oligarchs choose London to resolve their corporate disputes?
Andrey Goltsblat:“…They believe they can get more fair justice in London than in Russia, obviously. And it is not because they do not trust the Russian system; it is because the English legal system and legal justice have developed over hundreds of years, while the Russian ones are just beginning to take shape and, traditionally and historically, we are two different legal systems. While the Anglo-Saxon system of London is based on precedent, the Russian traditional court system is so different that, in Russia, law prevails, whereas in London or in the UK, whatever parties agreed is law. To cut the story short, there are parties going to London believing that, whatever they agreed would be judged in court. In Russia, meanwhile, you may be in a situation when what you agreed on is not necessarily judged fairly. So, in that respect, the Russian legal system still, unfortunately, got a long way to go to compete with the UK system.”
- A decision is made in London: how does that apply here and how can it be enforced here?
Andrey Goltsblat:“So far, it’s enforced on the basis of the Euro convention, which is an international convention to which Russia is party, too, so any decisions of the Arbitration court should be enforced in Russia on the basis of the Euro convention. But if domestically you pass a law which says that arbitration decisions cannot be enforced or that corporate disputes should only go to the Commercial Court, then questions of enforcеability might be raised.”
- So that would force these cases to come back to…
Andrey Goltsblat:“…To come back to Russia, the corporate disputes, unless the enforcement is somewhere outside Russia, which is why that kind of decision or that kind of desire or intent on the part of the Russian Supreme Arbitration Court might pull further assets out of Russia, so they do realise that, if they get an arbitration award, to enforce it in Russia is going to be complicated for corporate disputes, so we’d rather invest outside. Then it will be easy to enforce because then you may rely on the arbitration award of the UK court.”
- What is that relationship between the legal infrastructure in Russia and the desire of companies to have off-shore holdings?
Andrey Goltsblat:“If you have an off-shore holding as any business in Russia has been developed since early 90-s or 2000-s, they obviously…many of them have a lengthy strategy; many of them think about selling; many of them are thinking about IPO. In many ways, structured off-shore is much more flexible to go for an IPO outside Russia or to be sold or to set up a joint venture.”
- What is the worry?
Andrey Goltsblat:“The worry is that the potential buyer might not necessarily agree to buy a business that is located in Russia. And we have many cases when a Russian business that has been structured in Russia, has been operating in Russia and has been very good, has to acquire the corporate structure in Cyprus, in order to be an A-level, to become an attractive target for a foreign purchaser. If we’re talking about Russian businesses, or a Russian purchaser, or a Russian buyer, if you want, then this might not be the case. But Russian business is the medium-sized… We’re talking about medium-sizes business. It has been developed well, no-one prefers to be bought by a strategic foreigner. So that’s the situation, is what they prefer. Plus any further investment from offshore into Russia is more attractive because of the tax system. If they make investments and that pulls dividends back to the offshore, which is not taxed in a VBI, or Cayman or Cyprus or taxed at a lower level in Cyprus than in Russia, then why should they build a holding in Russia if it’s allowed now to have holdings overseas? And even major Russian businesses, major Russian companies, they do structure their dividends offshore, even Russian state corporations.”
- How is that changing? Do you see the law changing for the better here at the moment?
Andrey Goltsblat:“The law is changing and the desire is to build an international financial centre. If you want to build a financial centre, you obviously need to achieve the objective of attracting more investments here and keeping money here. So, to achieve that, you need obviously to create and design the law, and the law is moving in that direction, but probably more slowly than we want. The fundamental question is how to make Russia attractive for keeping money. If we can resolve that and build an environment, legal, economic and political, that would be much more attractive for keeping money here, then the law is no longer an issue.”
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