PJSC Tatneft v Bogolyubov & Ors

Where a claimant resides outside the jurisdiction in a non-Convention state, the court may order security for costs if there is a real risk of substantial obstacles to enforcing a costs order, or of a substantial additional burden of enforcement.

The risk need not be more likely than not, but mere possibility is ordinarily insufficient. The court must consider all the circumstances and tailor the security to the relevant risk. Assets in Convention states do not necessarily defeat the application if there is a real risk that they will be unavailable or insufficient when enforcement is required. Proposed undertakings must clearly and satisfactorily eliminate that risk. Where the risk is established, and the claimant can provide security without stifling the proceedings, ordering security will generally be just.

The defendants applied for security for costs in proceedings brought by an oil company incorporated in Tatarstan. The claimant alleged that the defendants had participated in an oil-payment siphoning scheme and claimed substantial damages under Russian law.

The jurisdictional condition in CPR 25.13(2)(a) was satisfied because the claimant was resident outside the jurisdiction and in a non-Convention state. The principal issues were whether there was a real risk of substantial obstacles to enforcing a costs order in Russia, despite assets said to be held in Switzerland and Cyprus, and whether it was just to order security.

1. Outcome. The application for security for costs was granted in principle. The claimant was required to provide security. The precise amount was left for agreement or, failing agreement, a further hearing.
2. Applicable test. Under CPR 25.13, satisfaction of the jurisdictional condition gives the court discretion, but an order must be just in all the circumstances and the discretion must be exercised consistently with Articles 6 and 14 of the Convention. The relevant threshold is a real, meaning more than fanciful, risk of substantial obstacles to enforcement or a substantial additional burden. It is not necessary to establish that non-enforcement is more likely than not.
3. The court should adopt a simple and clear approach at this interlocutory stage. Where experts give conflicting evidence on foreign law and practice and neither view can safely be preferred, that unresolved evidential position may itself support a finding of real risk.
4. The court found a real risk of substantial obstacles to enforcement in Russia. Relevant matters included the absence of an enforcement treaty, uncertainty about reciprocity, uncertainty about enforcement of costs-only orders, the possible application of public policy, sanctions affecting some defendants, and evidence of recent enforcement difficulties. The political context and the possibility that sanctions might extend to other defendants reinforced the risk.
5. Assets in Switzerland and Cyprus did not remove the risk. The shareholding structures were insufficiently transparent, the assets could cease to be available or sufficient, and enforcement might ultimately have to occur in Russia. Leyvand v Barasch and Naghshineh v Chaffe did not establish any rule that security could not be ordered merely because assets existed within the Convention zone. The approach in Texuna International Ltd v Cairn Energy plc was preferred.
6. Undertakings would avoid security only if they clearly and satisfactorily eliminated the enforcement risk. The proposed undertakings did not do so. Since the proceedings would not be stifled, and the defendants might otherwise suffer prejudice, it was just to order security. The starting point was security for the entirety of the defendants’ costs, subject to determination of the appropriate amount.