A Russian businessman, Mr. P, who made a multi-million investment in shares in a Russian Bank through Cypriot companies and trusts. Mr. P had instructed one of his partners to set up the shareholding structure and the relevant trusts for him to hold the Russian Bank’s shares, and he transferred the necessary capital to him.
When Mr. P contacted us, the Russian Bank was facing financial difficulties and was at risk of soon closing down. Mr. P’s former partner was now disappeared, and Mr. P wanted to take control of the shares immediately or recover his money paid to his former partner. However, Mr. P did not have any original documents or information showing he was the ultimate beneficial owner of the bank shares.
Before appointing us, Mr. P had tried to take control of the Cypriot companies that owned the Russian Bank’s shares, in which he believed he was the beneficiary. However, the local service provider company which set up the structure under his former partner’s instruction denied giving him any information or their control, suggesting that he was not their beneficiary.
We discussed with Mr. P and recognized that our first problem was information. Mr. P did not know exactly what happened, whether he was still or whether he was ever the beneficiary of the bank’s shares, if a transfer had happened and how and what kind and size of assets his former partner had in Cyprus or abroad and who else was involved. As a result, it was unclear what was the appropriate legal cause of action and where we should focus on recovery.
The second issue we faced was jurisdiction. While the main defendant was Russian, Mr. P suspected that he was hiding in Cyprus as his wife had recently purchased a house in the country. Accordingly, we examined and confirmed that the Cypriot Court could take jurisdiction in Cyprus under the traditional common law jurisdiction rules, applicable in the case (the so-called “forum conveniens” test, which is largely the same as under English law.)
The third, and perhaps the biggest challenge we had to deal with was Mr. P’s former partner transferring his money out of Cyprus to one or more offshore jurisdictions, turning them into cash and disappearing.
Due to the risk of Mr. P’s former partner dissipating his assets, we had to take urgent action. Taking into account the basic information we collected, we advised Mr. P that the best solution would be to file a claim in Cyprus for breach of trust or misrepresentation (fraud), together with a without-notice (ex-parte) application for a freezing injunction (often called Mareva Injunction). Together with the freezing injunction, we would seek a disclosure order against Mr. P’s former partner about his assets.
To solve the lack of information problem however we also had to file a claim and application against the service provider company to disclose the necessary information and evidence for the case to proceed while not disclosing this Mr. P’s former partner (a Norwich Pharmacal Order together with a non-disclosure or “gagging” order.) After receiving the information, we could clarify our legal cause of action while the freezing injunction would be in place, adding pressure to Mr. P’s former partner and securing the reimbursement of Mr. P.
We proceeded as planned, filing for a without-notice, world-wide freezing injunction for up to €30.000.000 against Mr. P’s former partner together with a disclosure order against him against Mr. P’s bank accounts (directly or of other entities in which he was a shareholder or a beneficiary) giving the court evidence of bank accounts and some entities that we knew he, Mr. P’s former partner, owned in Cyprus, Latvia, England, and other countries. We filed as evidence extensive documentation of former dealings as well as media coverage and other information showing the risk of Mr. P dissipating his money in the bank and other assets.
We also filed a claim against the service provider as a conspirator coupled with a claim for a Norwich Pharmacal order, to disclose the evidence necessary to us to proceed against Mr. P’s former partner. That led to the service provider compromising by giving us the necessary information in confidence and maintaining their non-disclosure obligations.
The injunction was issued by the President of the District Court of Limassol, the day after it was filed after a 2-hour hearing. We then served it to all banks in Cyprus as a first stage. In fact, as we had found out from our investigations and the disclosure made by the service provider Mr. P’s former partner had used in Cyprus, he was the beneficiary of several companies in Cyprus, some of which held significant amounts in bank accounts in the country.
Once we served the freezing injunction to the banks in Cyprus, they froze the accounts of all the companies of Mr. P’s former partner. That led to Mr. P’s former partner reaching out to negotiate a settlement and soon a compromise agreement was signed in London where Mr. P’s former partner was now situated.
The successful conclusion made our client one of the very few people (if not the only one) that have recovered the money from Mr. P’s former partner solving his dispute in, probably, the fastest way possible and without being exposed to further delays that could risk or compromise the money recovery.