Posts Tagged abuse
Thank you Pailler Ludovic for signalling the French Supreme Court’s judgment in 18-24.261 A and X v et al B and Y et al. The Court annulled the Court of Appeal’s (Versailles) decision which had accepted for recognition and enforcement a Cameroonian judgment in a Cameroonian-French adoption case.
Legal basis for the refusal is Article 34 of the relevant 1974 FR- Cam Treaty. Specically, the classic ordre public international hurdle to recognition and enforcement: ‘Elle ne contient rien de contraire à l’ordre public de l’Etat où elle est invoquée ou aux principes de droit public applicables dans cet Etat.’
The Supreme Court held that absence of Agrément does not infringe French ordre public international (Agrément is required by French adoption law and needs to be sought by the prospective adoptant). Yet fraus (fraude à la loi) might and needs to be properly examined, which the Court of Appeal had failed to do. Suggestion is made in the case that the adoption was engineered with the sole purpose of facilitating the French rights of residence of the adopting father’s partner, who is the mother of the children.
The case emphasises the relevance of fraus omnia corrumpit. Whether of course fraus will be proven in the new proceedings before the Paris Court of Appeal remains to be seen.
Punjab National Bank. In a complex set of claims, Owusu is never easily applied and material non-disclosure severely punished by the High Court.
In  EWHC 3495 (Ch) Punjabi National Bank v Ravi Srnivasan et al three loan transactions lie at the core of the case. They were made between 29th March 2011 and 1st December 2014, and totaled some US$45 million. They were made for the purposes of oil re-refining and wind energy generating projects in the USA. Most defendants are all allegedly guarantors domiciled either in India or the USA. The borrowers themselves, with the exception of two defendants, both ex-EU, are not party to the proceedings because they are insolvent.
Proceedings concern both the enforcement of the loans but also allegations of fraud, and have also been started in the US and in India however these were not disclosed to the court at the time the original permission was sought to serve out of jurisdiction.
At first glimpse the case might be easily held, along the lines suggested by lead counsel for claimant: at 5 (iii). ‘A combination of the exclusive jurisdiction clauses and the strongly arguable claims in fraud pointed towards the need to try the whole matter in one jurisdiction. England was the only possible jurisdiction. The omission to disclose the US proceedings and the Chennai proceedings caused the defendants no prejudice as they knew from the loan documentation that PNB was at liberty to bring parallel enforcement proceedings in different jurisdictions. The Chief Master ought to have placed strong reliance on articles 3 and 5 of the Hague Convention on Choice of Court Agreements (the “Hague Convention”), and article 25 of The Recast Brussels Regulation (“Brussels Recast”), which obliged the court to accept jurisdiction where there were such exclusive jurisdiction clauses.’
Owusu v Jackson would suggest no entertainment at all of forum non conveniens. However the fraud allegations initially opened the door to a point of entry for forum non seeing as none of the defendants are EU based. Sir Geoffrey Vos at 63 lists the relevant factors: ‘the most important being the choice of jurisdiction clauses in both loan agreements and guarantees, the effect of Brussels Recast and the Hague Convention, the fact that some parallel proceedings can be necessary where enforcement against real property is required, and the centre of gravity of the lending relationship which was indeed in London. In addition, the US and Chennai proceedings did not cover the Pesco loans at all, so that disallowing English jurisdiction for those contractual claims prevented PNB from bringing proceedings in its main chosen jurisdiction in respect of that lending and the guarantees given in respect of it.’
In the end however Vos agreed with the initial assessment of the High Court which emphasised non-disclosure (undoubtedly an example of procedural fraus): notwithstanding England being the most appropriate forum for those contractual claims without clear choice of court, and without a doubt the English jurisdiction guarantees of the other loans, but also for the fraud claims, had they been (which they were not) seriously arguable as presently pleaded, (at 72) jurisdiction must be dismissed in light of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.
That is a strict approach in light of the choice of court made and an awkward way around the forceful nature of Article 25 Brussels Ia. An outcome of my discussion with Andrew Dickinson and Alex Layton, is (per Alex’ suggestion) that the High Court seems to have applied an Elefteria approach to choice of court rather than Article 25 BIa.
PrivatBank v Kolomoisky and Boholiubov. The Court of Appeal reverses the High Court ia on abuse of the anchor mechanism. Further consideration, too, of the reflexive effect of Article 28’s lis alibi pendens, and of Article 34.
The Court of Appeal in  EWCA Civ 1708 has reversed  EWHC 3308 (Ch) PrivatBank v Kolomoisky and Boholiubov et al which I reviewed here. When I tweeted the outcome on the day of release I said it would take a little while for a post to appear, which indeed it has. Do please refer to my earlier post for otherwise the comments below will be gobbledegook.
As a reminder: the High Court had set aside a worldwide freezing order (‘WFO’) granted earlier at the request of Ukraine’s PrivatBank, against Ihor Kolomoisky and Hennadiy Boholiubov – its two former main shareholders.
Fancourt J’s judgment implied in essence first of all, the Lugano Convention’s anchor defendant mechanism, concluding that ‘any artificial fulfilment (or apparent fulfilment) of the express requirements of Article 6.1 is impermissible, and this includes a case where the sole object of the claim against the anchor defendant is to remove the foreign defendant from the jurisdiction of domicile. Bringing a hopeless claim is one example of such abuse, but the abuse may be otherwise established by clear evidence. In principle, the fact that there is a good arguable case against the anchor defendant should not prevent a co-defendant from establishing abuse on some other ground, including that the “sole object” of the claim is to provide jurisdiction against a foreign domiciled co-defendant.‘
The English Defendants serving as anchor, were not considered legitimate targets in their own right and hence the ‘sole object’ objection was met.
The Court of Appeal in majority (Lord Newey at 270 ff dissenting) disagreed and puts particular emphasis on the non-acceptance by Parliament and Council at the time of adoption of Brussels I, of an EC proposal verbatim to include a sole object test like was done in Article (then) 6(2) (it also refers to drafters and rapporteur Jenard making a bit of a muddle of the stand-alone nature, or not, of the sole object test). Following extensive consideration of authority it decides there is no stand-alone sole object test in (now) Article 8(1) Brussels I (or rather, its Lugano equivalent) but rather that this test is implied in the Article’s condition of connectivity: at 110: ‘we accept Lord Pannick’s analysis that, as shown by the references to Kalfelis and Réunion,..that the vice in using article 6(1) to remove a foreign defendant from the courts of the state of his domicile was met by a close connection condition.’
Obiter it held at 112 ff that even if the sole object test does exist, it was not met in casu, holding at 147 that the ability to obtain disclosure from the English Defendants provided a real reason for bringing these proceedings against them.
Fancourt J had also added obiter that had he accepted jurisdiction against the Switzerland-based defendants on the basis of the anchor mechanism, he would have granted a stay in those proceedings, applying the lis alibi pendens rule of Lugano reflexively, despite the absence of an Article 34 mechanism in Lugano. The Court of Appeal clearly had to discuss this given that it did accept jurisdiction against the Switserland-based defendants, and held that the High Court was right in deciding in principle for reflexive application, at 178: ‘This approach does not subvert the Convention but, on the contrary, is in line with its purposes, to achieve certainty in relation to jurisdiction and to avoid the risk of inconsistent judgments.’
That is a finding which stretches the mutual trust principle far beyond Brussels /Lugano parties and in my view is far from clear.
However, having accepted lis alibi pendens reflexively in principle, the Court of Appeal nevertheless held it should not do so in casu, at 200 as I also discuss below: ‘the fact that consolidation was not possible was an important factor militating against the grant of a stay, when it came to the exercise of discretion as to whether to do so’.
Finally, stay against the English defendants was granted by the High Court on the basis of A34 BIa, for reasons discussed in my earlier post. On this too, the Court of Appeal disagreed.
Firstly, on the issue of ‘related’ actions: At 183: ‘The Bank argues that the actions are not “related” in the sense that it is expedient to hear and determine them together, because consolidation of the Bank’s claim with Mr Kolomoisky’s claim in the defamation proceedings would not be possible. It is submitted that unless the two actions can be consolidated and actually heard together, it is not “expedient” to hear and determine them together. In other words, the Bank submits that expediency in this context means practicability.’ The Court of Appeal disagreed: At 191: ‘The word “expedient” is more akin to “desirable”, as Rix J put it, that the actions “should” be heard together, than to “practicable” or “possible”, that the actions “can” be heard together. We also consider that there is force in Ms Tolaney’s point that, if what had been intended was that actions would only be “related” if they could be consolidated in one jurisdiction, then the Convention would have made express reference to the requirement of consolidation, as was the case in article 30(2) of the Recast Brussels Regulation.’
Further, on the finding of ‘sound administration of justice’: at 211: ‘the unavailability in the Ukrainian court of consolidation of the Bank’s current claim with Mr Kolomoisky’s defamation claim remains a compelling reason for refusing to grant a stay. In particular, the fact that the Bank’s claim would have to be brought before the Ukrainian commercial court rather than before the Pechersky District Court in which the defamation proceedings are being heard means that if a stay were granted, the risk of inconsistent findings in these different courts would remain. Furthermore, we accept Lord Pannick’s overall submission that, standing back in this case, it would be entirely inappropriate to stay an English fraud claim in favour of Ukrainian defamation claims, in circumstances where the fraud claim involves what the judge found was fraud and money laundering on an “epic scale” ‘
Finally, at 213, ‘that the English claim against Mr Kolomoisky and Mr Bogolyubov and the English Defendants should be allowed to proceed, it inevitably follows that the BVI Defendants are necessary or proper parties to that claim and that the judge was wrong to conclude that the proceedings against the BVI Defendants should be set aside or stayed.’
One or two issues in this appeal deserve to go up to the CJEU. I have further analysis in a forthcoming paper on A34.
(Handbook of) European Private International Law – 2nd ed. 2016, Chapter 2, Heading 220.127.116.11
 NSWCA 243 Wigmans v AMP concerns the challenging application of fraus /abuse / vexatious and oppressive proceedings principles to multiplicity of proceedings. Fraus or abuse is not easily applied in civil procedure let alone conflict of laws context. See e.g. my critique of Pablo Star but equally other postings; search tag ‘abuse’ or ‘fraus’ should help locate them. Neither is the common law Aldi rule requiring claimants to bring grouped cases together easy to consider.
Following testimony given by executives of AMP in the (Australian) Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, five class actions were commenced within a short time of each other on behalf of shareholders in AMP who had made investments during periods of time in which it was said that AMP ought to have disclosed certain information to the market. Four of the five class actions were commenced in the Federal Court but were transferred to the Supreme Court. Two of the sets of proceedings then consolidated so that five became four. Each of the respective plaintiffs of the remaining four pending proceedings brought applications to stay each of the other sets of proceedings. AMP, whilst not filing a stay application, supported an outcome in which it would face only one set of proceedings.
Unclear principles on the issue have led to considerations of ‘beauty parades’ (which legal team might best lead the class action) as well as third party funding implications.
The primary judge ordered, pursuant to ss 67 and 183 of the Civil Procedure Act 2005 (NSW) and the inherent power of the Court, that the representative proceedings commenced by 3 of the 4 be permanently stayed. Each of these 3 fell within the definition of group member in the 4th, the ‘Komlotex’ proceedings. Ms Wigmans, one of the 3, made an application for leave to appeal that decision.
The issue in respect of which leave to appeal was granted (but appeal eventually refused) related to the principles applicable to applications to stay and counter-stay multiple open representative action proceedings.
The case therefore does not strictly relate to conflict of laws, rather to civil procedure and case management. However multiplicity of proceedings is clearly an issue viz conflicts, too (think lis alibi pendens; forum non etc.) hence I thought it worthwhile to flag the case; in which Bell P quotes conflicts handbooks; and in which 85 he expressly considers forum non and Cape v Lubbe. The House of Lords in that case had refused to stay proceedings which had been commenced in England where it was said that South Africa was the natural or more appropriate forum, in circumstances where it was held that the proceedings could only be handled efficiently and expeditiously on a group basis in England where appropriate funding was available. The lack of means available in South Africa to prosecute the claims required the application for a stay of proceedings to be refused.
An interesting case in which conflict of laws principles inspired domestic civil procedure rules, and where relevant considerations have an impact on e.g. the Article 33-34 Brussels Ia discussions.
Elena Tsareva et al v Dimitri Ananyev et al. Cypriot passports, forum shopping and anchor defendants in England.
Parties’ names alone in Elena Tsareva et al v Dimitri Ananyev et al  EWHC 2414 (Comm) clearly indicate the attraction of England in international forum shopping. As Baker J notes at 5:
‘I infer that the choice of this jurisdiction as a venue for the claimants’ claims has been led by the lawyers (Russian and English) who have engaged themselves in assisting the claimants as disappointed investors. Indeed, I think it unlikely it would have occurred to the claimants, unless so led, to try to sue here. The most natural targets for any claim are PSB and (possibly) the first defendant, so the most natural venues for any litigation (all things being equal) are Russia and (perhaps) Cyprus. But none of that means that this court does not have jurisdiction.’
One, as always, wonders where these cases might go should following Brexit (if any) the English courts will regain full authority to apply forum non conveniens.
The Ananyevs are Russian nationals who were domiciled and resident in Russia in 2017. One of them, when the Claims were commenced in 2018, was domiciled and resident in Cyprus, where he has had a dual citizenship since June 2017. They are, or at all events they were in 2017, well-known in Russia as successful and very wealthy businessmen. They were the ultimate beneficial owners together of a number of businesses and assets, including Promsvyaz Bank – PSB, of whom claimants were clients. The core allegation underlying the claimants’ claims is that they were induced to invest in Notes by mis-selling on the part of PSB employees to the effect that the Notes were personally guaranteed by the Ananyevs and/or that they were safe investments. It is alleged that PSB was in a parlous financial condition rendering it highly likely the Notes would default, as in due course they did; and that the misselling was directed by the Ananyevs in a conspiracy to enrich themselves and/or their businesses at the expense of the claimants.
Some of the corporate defendants are English companies, although ‘tax-resident’ in Ireland in 2017, in Cyprus from some time later (and still now). The English companies cannot and do not challenge jurisdiction (but the claims against them are struck out nevertheless given the absence of foundation to the claims). Promsvyaz is a Dutch company, the Issuer is a Cayman Islands company, and Peters International is a Dutch Antilles company. Other defendants are Cypriot companies.
There are a great many claimants with varying suggested gateways for jurisdiction, and one best read the judgment to get the full picture. In short, however, the gateways relevant to the Brussels regime (this blogpost does not focus on the English rules) are Article 4, 7(2), and 8(1). At 29, Baker J emphasises that for the anchor claim under Article 8(1), unlike in the English CPR rules, there cannot be a merits claim. But there can be abuse, per CJEU Reisch Montage, and CDC, as recently also applied in Privatbank v Kolomoisky. Unlike in the latter case, Article 34 is not engaged here. Baker J concludes after considerate yet concise analysis that there is no good arguable case against the English defendants, the claim against them is hopeless, and therefore the anchor mechanism is abused. As always in these cases, walking the rope between merits analysis and ‘good arguable case’ is not straightforward yet the judgment shows again how the English courts deploy creativity to ensure the anchor mechanism of Article 8(1) is not abused.
At 51, the tort gateway of Article 7(2) against the non-English EU defendants is dismissed with reference to Lober. Claimants suffered loss by parting with their funds deposited with PSB in Russia (or, perhaps, by contracting with PSB in Russia to do so); there is no indication of links to England, as required by Lober (applying Universal Music).
The above only narrates the essence of the Brussels Ia analysis. There is quite a bit more in the judgment of relevance to the CPR rules.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2.
Stand alone cartel damages suits: The High Court in Media Saturn Holding v Toshiba on anchoring jurisdiction.
In  EWHC 1095 (Ch) Media Saturn Holding v Toshiba et al, Barling J is concerned with stand-alone damages suits following the European Commission decision in COMP/39437 – TV and Monitor Tubes. None of the Defendants was an addressee of the Decision (some of their parent companies were). The claims are, therefore, “standalone” rather than “follow-on” actions, and the Decision is not binding on the court so far as the claims against the Defendants are concerned, as it would have been had the Defendants been addressees. Nevertheless, Claimants place considerable reliance upon the evidential effect of the Decision.
Claims are strike out and summary judgment application, intertwined with challenges to jurisdiction. These essentially relate to there being no arguable claim against the “anchor” defendants, particularly Toshiba Information Systems UK ltd – TIS.
At 114: Claimants refute the suggestion that the claim has been brought against TIS on a speculative basis in the hope that something may turn up on disclosure and/or simply to provide an anchor defendant for jurisdictional purposes. They point to the Commission’s finding, at Recital 595, that the cartel was implemented in the EEA through sales of cartelised CPTs that had been integrated into the finished products.
The substantive law issue of implementation of the cartel therefore is brought in not just to argue (or refute) summary dismissal, but also to shore (or reject) the jurisdictional claim under Article 8(1) Brussels 1a.
Barling J establishes as common ground (at 90) that ‘as a matter of law an entity can infringe Article 101(1) TFEU and Article 53 EEA if it participates in relevant cartel activity, in the sense of being a party to an agreement or concerted practice which falls within that Article, or if it knowingly implements a cartel to which it may not have been a party in that sense. [counsel for defendants] submitted that there is no arguable case that TIS had the requisite knowledge. However, what is sufficient knowledge for this purpose is not common ground’.
At 300 ff the most recent CJEU authority is discussed: C-724/17 Vantaan kaupunki v Skanska of March 2019.
This leads to a relevant discussion on ‘implementation’ of the cartel, which mutatis mutandis is also relevant to Article 7(2) (locus delicti commissi). At 117-118:
‘TIS [similar arguments are discussed viz other defendants, GAVC] was involved in activities which were important to the operation of the cartel from the Toshiba perspective. These included the manufacture of CTVs using the cartelised product acquired from an associated company which itself was one of the established cartelists, and the onward sale of the transformed product. TIS also had direct commercial dealings with the Claimants relating to bonuses on sales of, inter alia, the transformed products. In my judgment there is an arguable case that those activities amounted to the actus reus of participation in and/or implementation of the cartel. The available material is sufficient to preclude the summary disposal of that issue.’
At 139 ff much CJEU and national authority is discussed, viz a variety of the defendants, on the issue of ‘implementation’ for summary dismissal on substantive grounds, a discussion which then at 259 ff is applied to the jurisdiction issue. Reference is made to Brownlie v Four Seasons, to C-103/05 Reisch Montage and of course to C-352/13 CDC. At 273 Barling J distinguishes excellently in my view between predictability as part of the DNA of CJEU Brussels Ia case-law on the one hand, and its treatment (and rejection) as a stand-alone criterion on the other hand:
‘[argument of counsel] is in danger of treating the statement of the CJEU in Reisch Montage as adding a free-standing and distinct criterion of foreseeability to the preconditions of application expressly set out in Article 8(1). If that criterion were to be applied generally, and without reference to those express pre-conditions, there would be a risk of the EU law principle of legal certainty being compromised, instead of respected as Reisch Montage expressly requires. That case states that the special rule in Article 8(1) must be interpreted so as to ensure legal certainty. The special rule’s express precondition is that “the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments…” Therefore, by virtue of Reisch Montage, it is those words that must be interpreted strictly so as to respect legal certainty and thereby ensure foreseeability. In other words, foreseeability is inextricably linked to the closeness of the connection between the two sets of claims, and the criterion will be satisfied if a sufficiently close connection of the kind described in Article 8(1) exists.’
And at 276
‘It is correct that the anchor defendants were not addressees of the Decision and that there were no UK addressees. However, there is no reason why this should be significant. Article 8(1) is capable of applying in a competition claim regardless of whether a Commission infringement decision exists. What matters is that there is a claim that the anchor defendant is guilty of an infringement, and that the case against the non-anchor defendant is sufficiently “closely connected” to that claim within the meaning and for the purposes of Article 8(1). The fact that neither entity is an addressee of a Commission decision (if there is one) and that neither is the subject of any other regulatory process or civil claim relating to the cartel, is, if not immaterial, then of marginal relevance.’
For all anchor defendants the conclusion is that there is an arguable claim that they participated in and/or knowingly implemented the cartel. That strongly militates against the sole purpose of the (two sets of) proceedings being to oust the jurisdiction of the other EU courts. No abuse has occurred.
At 316 a final postscript is added suggesting summarily that the Supreme Court’s Vedanta might have an impact on the ‘abuse’ issue. The judgment concerned inter alia an alleged abuse of EU law in the context of the predecessor provision to Article 8(1). The Court gave consideration to the test for the “sole purpose” issue. At 317: Barling J: ‘I can see no basis on which my conclusions in that regard are affected by this decision.’
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 18.104.22.168.