Brick Court heavyweights face off as Russian dispute reaches Supreme Court

Brick Court Chambers heavyweights Mark Hapgood QC and Mark Howard QC are set to go into battle in the Supreme Court next month as a dispute involving Russian investment business VTB Capital reaches its final stages.

Mark Howard QC
Mark Howard QC

The entry of two such heavyweights into the fight at the top court reflects its importance.

Herbert Smith has replaced PCB Litigation for appellants VTB, with partner Philip Carrington, who was instructed for Qatari Diar Real Estate Investment Company in its dispute with CPC Group over the Chelsea Barracks (6 December 2010), instructing Howard.

Hapgood, meanwhile, has been instructed for respondents Marshall Capital Holdings alongside 3 Verulam Buildings’ Michael Lazarus and Christopher Burdin by SJ Berwin partner Justin Michaelson.

Michaelson, who is leaving SJ Berwin for Fried Frank Harris Shriver & Jacobson in the coming months (20 September 2012), is also instructed for defendant Konstantin Malofeev, with Fountain Court’s Stephen Rubin QC continuing as lead counsel at the Supreme Court.

At the Court of Appeal (CoA) and High Court VTB had been represented by Anthony Reim of litigation boutique PCB Litigation. Reim had instructed four silks to lead the case for the bank – Littleton Chambers’ Clive Freedman QC, Erskine Chambers’ Richard Snowden QC, Essex Court Chambers’ Paul McGrath QC and Fountain Court’s Andrew Burrows QC. It is not yet clear whether they will be instructed at the Supreme Court hearing.

In a statement, PCB said it continued to work for VTB on “several other matters”.

Another defendant, Nutritek, which had sold Russian dairy companies to a business that borrowed money from VTB to fund the acquisition, had originally instructed Hardwicke’s Nigel Jones QC to lead its defence. It is understood that Jones is no longer involved with the dispute while Nutritek’s position as a defendant at the Supreme Court is in doubt.

Both Hapgood and Howard have been involved in other headline-grabbing Russian litigation in London this year. Hapgood’s diary was left clear after Russian oligarch Boris Berezovsky withdrew a raft of chancery claims that were set to be heard in the Rolls Building this term (13 September 2012).

His set mate and regular opponent Howard was instructed by Dechert for Michael Cherney in his multi-billion dollar dispute with oligarch Oleg Deripaska. That case was also set to return to the Rolls Building this month, but a last minute settlement meant the case was closed (27 September 2012).

Sources said the litigants in the VTB case had wanted to strengthen their legal teams by bringing in ferocious silks to lead the case, which will be heard by the Supreme Court over two days next month. One source said: “It’s not uncommon for the Russian clients just to switch legal teams, especially when there is so much at stake.”

The dispute centres on allegations of fraud and conspiracy against four defendants who were involved in the acquisition by Russagroprom (RAP) of six Russian dairy plants and associated companies from Nutritek. VTB had loaned RAP $225m to fund the acquisition, but RAP later defaulted, leaving the bank able to recover just $40m of the loan.

It was alleged that VTB made the loan following false inducements made by Nutritek. The three respondents were alleged to have participated in the supposed fraudulent conspiracy.

At the CoA the respondents argued that there was no jurisdiction upon which the claim could be heard in London. However, VTB – relying on Antonio Gramsci Shipping Corp v Stepanovs – contended that the court had the power to pierce the corporate veil of the parties to the loan and hold the defendants, as the alleged controllers, liable.  This would allow reliance to be placed on the English law jurisdiction clause in the loan.

The appeal court rejected VTB’s case (20 June 2012).