Comity and ‘domestic illegality’. Colt v SGG.

International comity underlies the rule of both Ralli Brothers v Compania Naviera Sota y Aznar (‘Ralli Bros’) [1920] 2 KB 287 and Foster v Driscoll [1929] 1 KB 470, jointly known as ‘illegality under foreign law’. They both engage lois de police of the place of performance, and the English courts’ attitude towards not assisting with contractual performance that would go against such lois. Per Cockerill J in Magdeev v Tsvetkov [2020] EWHC 887 at 307:

The Foster v Driscoll and Ralli Bros principles differ in this way: the latter is concerned only with whether the contract between the parties necessarily involves performance of an act which is illegal by the law of the place of performance, irrespective of the object and intention of the parties; the former is only concerned with whether the object and intention of the parties is to perform their agreement in a manner which involves an illegal act in the place of performance, and is not concerned with whether the contract necessitates the undertaking of such an act…’

At issue in Colt Technology Services v SG Global Group SRL [2020] EWHC 1417 (Ch), is an injunction to restrain SGG (of Italy) from presenting a winding-up petition against it. SGG claims that Colt UK is indebted to it in the sum of US$4,936,619.93 plus interest. Colt UK contends that the debt is bona fide disputed on substantial grounds, such that the Companies Court is not an appropriate forum to determine the dispute and the presentation of a winding-up petition would be an abuse of process. Colt UK says that SGG was not the true supplier of the services under the relevant agreement, but was a shell company acting as a front for another supplier and was engaged in a form of VAT “missing trader” fraud with the Italian authorities as victims.

After due consideration Wicks J holds that Colt UK has a properly arguable illegality defence to the sums claimed by SGG, based on the Ralli Bros principle. Held: the presentation of a winding-up petition against Colt UK would be an abuse of process and in all the circumstances it is right to restrain SGG from taking that step.

Another interesting example of international comity in private, commercial litigation.

Geert.

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