Ingrid Burke, RAPSI

Self-exiled Russian oligarch Boris Berezovsky left behind a tangled web of legal and financial disputes and obligations when he suddenly passed at his Surrey home last weekend. RAPSI spoke with several experts in UK estate and probate law to seek clarity on the post-mortem implications of the various facets of Berezovsky’s personal crisis under English and – surprisingly, perhaps – Russian law in the aftermath of his death.

English v. Russian law: a question of domicile

Under English law, succession procedures are primarily governed by the law of one’s domicile. Real property is the exception to the rule. Land, houses, and flats belonging to the late oligarch will pass under English law. All personal property – including liquid assets, art, cars, jewelry, etc. – will pass under the law of his domicile. A determination of Berezovsky’s domicile will thus prove crucial to the fate of his estate.

In overly simplistic terms, the English legal concept of domicile can be seen as a complex analysis of the concept of one’s home.

As explained by Pemberton Greenish partner and probate expert John Goodchild, in its most straight forward equation, domicile is determined on the basis of an individual’s physical presence in a place, paired with his intent to continue residing there indefinitely. He notes, however, that various sub-rules apply for less cut-and-dry calculations.

He explained, for instance, that if a person is born and raised in Russia, but leaves the country at a certain point in favor of residency abroad, Russian domicile would only fall away if that individual takes up foreign residency with the intention of remaining abroad indefinitely.

Solicitor Tony Millson of Royds solicitors, an expert tax and estate planner for wealthy individuals in the UK and abroad, zeroed in as well on the importance in any domicile determination of whether an individual intended to return one day, even in death.

Millson noted that one factor that could militate for or against such a determination would be that of where the fallen oligarch had hoped to be buried. If he had bought a grave plot in England, it could be concluded that he had planned to maintain his self-imposed exile, even in death. On the contrary, he added: “if he wanted to go back either when he was alive or when he was dead to be buried, that’s very good evidence that he hadn’t put all his eggs in [England’s] basket.”

Any statements or declarations made by the deceased can be used to determine his intent as well.

Goodchild noted that if a person acknowledged the fact that he lived in England, but made a point of letting it be known that he would happily return to Russia given the correct circumstances, he would tend to maintain his original domicile.

In fact, on the eve of his death Berezovsky told a Forbes journalist, “I want nothing more than to return to Russia. Even when a criminal case was launched, I wanted to return to Russia."

Dmitry Peskov, Press Secretary for Russian President Vladimir Putin, told Russian television channel Russia 24 that Berezovsky had written a personal letter to Putin shortly before his death expressing his desire to return to Russia.

Millson speculated on this point that if Berezovsky had in fact publicly proclaimed his desire to return to Russia, “I’d be quite confident saying under English law he’d be treated as being domiciled in Russia, and therefore Russian law would apply to his personal property, not English law.”

If Berezovsky is deemed to have retained his original Russian domicile, the practical outcome will hang largely on whether or not he left a will.

Under Russian law a decedent’s wishes will be respected so long as a will was left behind. A will can be contested in Russian court, but in practice wills are generally only repealed if it can be proven that the decedent was partially or fully incapacitated at the time the will was drafted. If a decedent died intestate, the law calls for the distribution of his assets between relatives and close relations based on degrees of kinship. 

Insolvency determination 

If English law is deemed to apply to succession procedings, a determination will need to be made with reference to Berezovsky’s insolvency.

Collyer Bristow partner and estate-planning expert James Badcock noted that under English law, it is not possible for an individual to be declared bankrupt post-mortem unless a bankruptcy petition had already been presented before his death. Rather, an individual’s estate may be administered as an insolvent estate if the deceased’s personal representatives or creditors petition the court for an insolvency administration order. In such cases, a trustee will be appointed to identify and realize assets, handle liabilities to the creditors of the deceased and then distribute assets to beneficiaries. If no insolvency administration order is obtained and the personal representatives make payments to the beneficiaries while leaving creditors unpaid, they leave themselves open to legal claims.

Badcock explained that if an insolvency administration order is made, the deceased’s unsecured creditors will be paid on a pro rata basis but only after payment of any funeral and testamentary expenses and the costs and expenses of the trustee. Secured creditors can continue to rely on – and enforce – their security. If unsecured creditors’ claims are very substantial, they may therefore only receive back a small part of what they are owed.

Millson illustrated this point with the following example: “If there are still creditors after [the funeral and testamentary expenses, taxes, and secured creditors have been taken care of], they will share a dividend depending upon how the assets compare with the liabilities. So if the liabilities are ten times the assets, than each ordinary creditor will get 10 p on the pound.”

In other words, if what’s left of the estate is inadequate to cover the totality of liabilities, the remaining sum will be treated as if 100% of the money owed were there, and then divided up proportionately between creditors.

Final judgments

Berezovsky’s international notoriety exploded last summer when his civil suit against Russian businessman Roman Abramovich over a series of decade-old business deals floundered.

He had claimed approximately upwards of $5 billion in damages, but was left with nothing but the obligation to pay Abramovich’s legal fees, amounting to approximately £35 million.

If Abramovich has not yet collected these fees, he will have to line up alongside the other creditors. Badcock explained: “His liability for the costs of the Abramovich proceedings would now become a liability of his estate, to be dealt with in the same way as other liabilities. If there is a dispute over what costs are due, that will be a dispute to be taken up by those administering his estate, but they are going to be mindful of incurring additional costs. “

After this profound defeat, Berezovsky quickly settled several other suits that he had launched.

Ongoing court cases

Berezovsky was no stranger to the courts, and at the time of his death he was on the receiving end of at least three large-scale court cases in London’s High Court of Justice.

Russian national airline Aeroflot told RAPSI two days prior to the discovery of Berezovsky’s body that it had appealed a recent judgment by the High Court refusing to enforce a Russian court’s fraud conviction against the oligarch.

A dispute with his former partner Yelena Gorbunova had recently resulted in a massive freeze order, extending to: up to £200 million worth of his assets; a restraint on Berezovsky’s further dealings with the properties at issue in the case; and a restraint on further dealings with the proceeds of a recent legal settlement between Berezovsky and the estate of his late business partner Badri Patarkatsishvili settlement by Berezovsky.

Russia’s Samara Region filed a claim in September to recover 989 million rubles ($31.7 million) that the fallen oligarch had failed to pay up after a Russian court ordered him to do so.

As Goodchild explained, someone will have to step in and deal with the ongoing disputes in Berezovsky’s place. If he left a will, the appointed executors would likely be responsible for handling any outstanding claims. If Berezovsky died intestate, his beneficiaries would most likely step in on his behalf. Either way, under English law, proceedings are not buried with the deceased.

Russian prosecutors as creditors under English law

Although Berezovsky fled the country in 2000, he has been convicted of fraud, theft, and money laundering in absentia. Russian federal prosecutors announced this week their intent to seek the return of assets deemed to have been acquired illegally by Berezovsky.

Deputy Prosecutor General Alexander Zvyagintsev issued a statement Monday demanding, "Berezovsky was accused of grave economic crimes as part of a transnational criminal group. The Russian Criminal Code allows the authorities to confiscate the property of criminal group members.

Therefore, the Prosecutor General's Office will continue to insist on returning to Russia the assets illegally acquired by Berezovsky and his accomplices and laundered abroad."

Badcock explained that if the estate is administered under English law, the Russian prosecutors will have to file a claim just like any other creditor: “If his estate is being dealt with under an insolvency administration order in England, than any Russian creditor will need to contact the English trustee of the estate in the UK and put forward their claim alongside any other creditors. Where there are assets in Russia then it may be that a court there would enforce judgments against those assets directly, but this is a matter of Russian law. Under English law the deceased’s assets worldwide are deemed to vest in his trustee”

Likewise, Millson noted that going after any assets remaining in Russia might be the prosecutors’ best bet, adding that an attempt to secure assets under English insolvency law would likely lead to complicated conflict of law issues.

No matter what, chaos will ensue

Our experts were consistent on one point: this is an enormously complicated case.

Badcock explained that Berezovsky’s estate will likely give rise to a series of complex fact-finding efforts on behalf of creditors and beneficiaries alike. This process will be made even more complex by the fact that he may have had properties and other assets located in a variety of jurisdictions, and that some of these might be held by third parties. Under English insolvency law, the trustee may be able to challenge and set aside some of the transactions which the deceased entered into before his death, for example if the purpose of those transactions was to put assets beyond the reach of his creditors.

Addressing the intent of Russian federal prosecutors to recoup Russia’s losses from Berezovsky’s estate, Millson noted after suggesting the pursuit any remaining Russian assets: “All I would say is it’s going to be hard work for them.”

Goodchild concluded with the sentiment that whoever is left responsible for the administration of the estate would be well advised to seek guidance from the court, noting: “they need to tread very carefully.”