Russia’s modern Klondike

Ask if anyone has heard of the city of Tyumen and a Siberian silence descends. About the size of Edinburgh – and equally historic – it is more than 1,000 miles east of Moscow, in the country’s vast hinterland beyond the Urals.

It is the capital of Russia’s richest province (or “oblast”), stretching north from Kazakhstan to the Arctic, and, despite a  province-wide population density one-fifth that of Norway, this is the Klondike of the modern age, the land of black gold, with production levels already on a par with Texas – and rising.

Russia’s own super-rich have, of course, not been slow in opening up the region, but the biggest prospector from the outside until recently has been BP, which in 2003 set up TNK-BP Holding, a joint-venture company which now ranks among the ten largest oil companies in the world. In August, BP lost out to Exxon Mobil in a mammoth bid to join forces with Russian oil giant Rosneft. Crucially, BP’s direct bid did not involve TNK-BP, and a small but powerful group of Russian shareholders in the joint venture decided to sue. They raised two actions: one against BP, claiming $13 billion in damages for failing to include TNK-BP in the Rosneft bid, and the other against BP-nominated directors on the joint-venture board, claiming $2.8bn.

The actions were brought in Tyumen’s state commercial court (somewhat confusingly referred to as the Arbitration Court). The actions share some similarities with the form of a petition for unfair prejudice allowed in Scotland under section 994 of the Companies Act 2006, and the remedies available under section 996. In terms of section 996, UK courts, including the Court of Session, have a very wide discretion, including whether to allow the petition to advance at all – see, for example, the decision in the Chancery Division case of F&C Alternative Investments (Holdings) Ltd v Barthelemy & another [2011] EWHC 1731, paragraphs 1094-1107.

The Tyumen court has its own threshold rules, and applied them to dismiss the claims due to a failure to gather a sufficient percentage of the shareholding in support. BP, which has had its fair share of litigation difficulties, hailed the judgment as “a positive contribution to the investment climate in Russia”.

On the other hand, lawyers for the minority shareholders vowed to appeal, stating they had been given less than two hours to present their billion-dollar cases. “These court proceedings showed Russia still has a long way to go to meet international standards in corporate law”, said their lawyer, Dmitriy Chepurenko.

The decision firstly appears to demonstrate a willingness on the part of the Russian court to act swiftly and robustly in dealing with a commercial claim, in an area of law well known for its potential to result in lengthy, complicated and often futile claims (F&C being a case in point). Secondly, the Tyumen court has been a successful forum over the past ten years for the minority shareholders in unrelated actions, and so the decision, quite properly, appears to be without fear or favour.

Thirdly, the case perhaps gives a glimpse into the vast and increasingly sophisticated legal system of the modern Russian Federation which includes federal and regional courts, with constitutional, civil and commercial jurisdictions within its enormous reach (for the briefest of overviews, see the independent EU-Russia Centre’s website at

If, to paraphrase Karl Marx, the legal system is simply a part of the capitalist superstructure, what if anything does that tell us about modern Russia?

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