Posts Tagged conspiracy
ED&F Man Capital Markets v Come Harvest Holding et al. First application of the UKSC Vedanta ruling and applicable law issues under Rome II Articles 4 and 10.
In  EWHC 1661 (Comm) ED&F Man Capital Markets v Come Harvest Holding et al claimant, MCM, entered into a Master Commodities Sale and Purchase Agreements with two Hong Kong companies, Come Harvest and Mega Wealth. The Master Agreements contained English exclusive jurisdiction agreements. Subsequent agreements were then entered into for the sale and purchase of nickel. The dispute between the parties turned on whether payments had been made by MCM to Come Harvest and Mega Wealth based on forged warehouse receipts. Those receipts had been issued by a warehouse operator, Access World, to the initial order, in most cases, of a Singaporean company, Straits.
In May 2017, MCM commenced pre-action disclosure proceedings in Singapore against Straits and in December 2017 it commenced English proceedings against Come Harvest and Mega Wealth. In September 2018 MCM sought to join Straits to the English proceedings and obtained an order granting permission to serve Straits out of the jurisdiction in Singapore. Straits challenged the jurisdiction of the English court.
There is sometimes an advantage to not immediately follow-up a Tweet with a blog post: the two preceding paras are the summary of the factual and procedural background by Herbert Smith.
Of particular note is the discussion at 43 ff on the impact of the UKSC’s Vedanta ruling: particularly, the ‘multiplicity’ issue which in my review of Vedanta, I discuss at 5. At 45:
Straits contended that MCM should not be able to rely as a “trump card” on the multiplicity point and the risk of irreconcilable judgments so as to create a single forum for all claims against all parties in England, in circumstances where that outcome was the result of choices which MCM had made along the way. Straits claims that MCM exercised a choice at the outset to commence the OS 533 action against Straits in Singapore and thereby intended that any substantive proceedings would be brought there too. Straits says that MCM should be held to this choice which it says exerted and continues to exert a “gravitational pull” towards Singapore. Straits also says that MCM could have attempted to engineer a single composite forum for all claims against all parties in Singapore by requesting that Come Harvest and Mega Wealth did not insist on their rights under the English court exclusive jurisdiction clauses in the Master Agreements or by commencing proceedings against those parties in Singapore in breach of the exclusive jurisdiction clauses and then contending that strong reasons existed as to why no anti-suit injunction should be imposed against the continuation of those proceedings.
At 46 Teledano DJ dismisses the suggestion.
In Vedanta, and leaving aside the substantial justice issue, the claimants had a straightforward choice between Zambia and England for all claims against all parties. The dispute was overwhelmingly Zambian in focus and nature. Yet the claimants chose to pursue their claims in England. In the present case, MCM has never had a straightforward choice of this kind that would have enabled it to sue all parties in Singapore (or some other jurisdiction apart from England). MCM has at all material times been bound by the exclusive jurisdiction clauses in the Master Agreements to sue Come Harvest and Mega Wealth in England. There is no evidence to suggest that, had either of these parties been approached, they would have been willing to give up their rights under those exclusive jurisdiction clauses. Nor do I accept that the concept of choice as referred to by the Supreme Court can be stretched so as to require a party to act in breach of contractual promises as to jurisdiction and then to fall on the mercy of the Court so as to avoid the grant of an anti-suit injunction. MCM is entitled to say that it had no choice but to sue Come Harvest and Mega Wealth in England. Having done so, there is real force in the submission made by MCM that England is the proper place for all claims against all parties because it is the only jurisdiction where a single composite forum can be achieved.
Turning then at 59 ff to applicable law, the issue is particularly how to define ‘direct damage’ (Article 4 Rome II) in the case of unlawful means conspiracy. Straits contends that the direct damage occurred where MCM was unable to obtain the metal it had purchased. That would be at the warehouses in Singapore, Malaysia and South Korea. By contrast, MCM contends that the direct damage occurred in England. This was the place from which MCM paid out funds to purchase the metal and it is also the place in which MCM received the Receipts that it alleges were forged. Teledano DJ at 62:
The key to ascertaining where the direct damage occurred in the present case is to keep in mind that, under the Master Agreements, MCM was only required to make payment upon receipt of the Receipts. MCM suffered direct damage when it made payment upon receipt of what are alleged to have been forged Receipts. Both the payment out, and the obtaining of the Receipts, occurred in England. If the Receipts were forged, the warehouse operators will not have been required to hand over metal from the warehouses upon presentation of the Receipts. However, it seems to me that this is a consequence of the damage that on MCM’s case it had already suffered rather than the direct damage itself.
English law, therefore, applies, as it does (at 70 ff) to the knowing receipt and equitable proprietary claims (see discussion re Article 4 cq 10 (unjust enrichment) Rome II, at 70 ff).
(Handbook of) European private international law, second ed. 2016, Chapter 8, Headings 188.8.131.52., 8.3.2; Chapter 4, Heading 4.4.
LIC Telecommunications et al v VTB Capital et al. High Court suggests autonomous EU approach to asymmetric choice of court. Also discusses contract and tort distinction, and abuse of process.
In  EWHC 1747 (Comm) LIC Telecommunications et al v VTB Capital et al Moulder J suggests an unorthodox interpretations of Article 25 of the Brussels Ia Regulation. (Note also her very critical view at 22 of one of the experts, whom she found having confused his role as expert with a role as advocate). Much of the lengthy judgment is devoted to intricate discussions of Luxembourgish corporate law (hence the need for expert evidence) and the jurisdictional issues are, somewhat illogically, discussed towards the end of the judgment, at 245 ff.
Maze, one of the defendants, acts as a manager of V2 pursuant to a directorship agreement dated 26 May 2015 (the “Directorship Agreement”). It relies on the effect of clause 19 of the Directorship Agreement and submitted that claims against it are subject to the exclusive jurisdiction of the courts of Luxembourg pursuant to Article 25 Brussels Ia. Clause 19 provides:
“for the benefit of the Manager, the Shareholder and the Company hereby irrevocably, specially and expressly agree that the courts of Luxembourg city have jurisdiction to settle any disputes in connection with this Agreement and accordingly submits to the jurisdiction of the courts of Luxembourg city. Nothing in this clause limits however the rights of the Manager to bring proceedings against the Company in connection with this Agreement in any other court of competent jurisdiction or concurrently in more than one jurisdiction.”
The clause is asymmetric aka hybrid aka unilateral. (See e.g. my discussion of Rothschild etc.). These clauses as I have noted elsewhere highlight the clear insufficiency of Brussels Ia’s new lex fori prorogati (including renvoi) rule for choice of court. Which court has been prorogated, hence also lex fori prorogati, is not clear when the clause is asymmetric.
Moulder J discusses  EWHC 161 (Comm) Commerzbank v Liquimar Tankers as precedent: I reviewed it here and signalled at the time that it would not be the last we would hear of the issue. In that case Cranston J held ‘There is nothing in Article 25 that a valid jurisdiction agreement has to exclude any courts, in particular non EU Courts. Article 17, penultimate paragraph, of the Brussels Convention recognised asymmetric jurisdiction clauses. To my mind it would need a strong indication that Brussels 1 Recast somehow renders what is a regular feature of financial documentation in the EU ineffective.‘ I was never taken by that conclusion viz the Brussels Convention: its Article 17 reference to a party having ‘benefit’ from choice of court does not relate entirely to the same discussion on asymmetric clauses (Peralla v Codere  EWHC 1182 (Comm) which I discussed here illustrates that difference).
At any rate I disagree with Moulder J’s statement at 254 that
It is now common ground that it is a question of autonomous EU law and not a question of national law. (It was I believe accepted that the proviso “unless the agreement is null and void as to its substantive validity” refers to issues such as capacity, fraud and mistake, not whether particular kinds of “choice of court” agreements are permitted under the Regulation).
Asymmetric clauses are the first example often given when highlighting the limited cover of Article 25 Brussels I a (and the need for certainty on the lex causae for choice of court). There is no autonomous interpretation there at all. I do agree however with the conclusion at 261: that Luxembourg courts, applying EU law, would not uphold such clauses was not made out on the evidence. Luxembourgish courts at least when they apply Luxembourgish law, generally uphold the validity of asymmetric choice of court.
At 263 ff then follows discussion of Article 7(1) and 7(2). Much of the authority discussed has been reviewed on this blog. (Including Bosworth (Arcadia) which in the meantime has been held by the CJEU but without the contract /tort element – the CJEU found against a contract of employment). Moulder J holds that Article 7(2) is engaged, not 7(1), and on the former discusses locus delicti commissi with reference to JSC BTA Bank v Khrapunov. At 295: it is not sufficient that there are meetings in England to implement the conspiracy, it is the making of the agreement in England which is to be regarded as the harmful event. Claimants have not supplied a plausible evidential basis that the agreement was made in England. Their evidence is consistent with a case that the conspiracy was implemented in England but that is not sufficient.
As for locus damni, at 298: Even though the share purchase agreement was under English law, it is the loss of the shares in the Luxembourg company which is the pleaded damage not the agreement to sell or the auction. The Vivacom group consists of Bulgarian telecommunications companies which were held by InterV through Viva Luxembourg Bulgaria EOOD (paragraph 3 of the Agreed List of Agreed Issues). Locus damni is Bulgaria, perhaps Luxembourg. But not England.
Finally, abuse of process considerations are linked to English procedural law (whether claims should have been brought sooner).
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.9, Heading 184.108.40.206, Heading 220.127.116.11 .
JSC BTA Bank v Khrapunov. UK Supreme Court confirms the conspiracy itself, not its implementation, as locus delicti commissi under Lugano. Does not entertain locus damni.
The UK Supreme Court held in  UKSC 19 JSC BTA Bank v Khrapunov late March. Defendant is based in Switzerland, hence triggering the Lugano Convention. Addleshaw Goddard have the history of the case and I am happy to refer for those facts. Suffice to say that at the core is a claim in tort of conspiracy, alleging that Mr Khrapunov and his father in-law Mr Ablyazov conspired to injure the Bank by preventing it from enforcing its judgments against Mr Ablyazov’s assets.
First let’s have a look at was not discussed at the SC: domicile and locus damni. As for the former, domicile once held but now fleed from was correctly rejected by Teare J as establishing domicile under Lugano (or indeed Brussels). The argument that jurisdiction should, nevertheless, be taken still to be domiciled in England because defendant was in breach of an obligation under the worldwide freezing order prohibiting him from leaving the jurisdiction, was likewise rejected. An interesting proposition though.
Now, for the location of the locus damni. At 29 the SC refers to the Bank’s argument at the High Court and Court of Appeal stage. The Bank’s argument was that the damage occurred in England. This was based on the contention that its worldwide freezing order and its judgments against Mr Ablyazov were located here and had been reduced in value by the alleged conduct in relation to assets in other jurisdictions. The High Court and Court of Appeal considered that the element of damage proximate to the harmful event was the Bank’s inability or reduced ability to execute against those assets in the places where they were located. Another fine example of the difficult implications of Bier and not one which the CJEU has hitherto had the occasion to review. (But current case will not reach it).
As for locus delicti commissi, the Bank submit that the event giving rise to the damage was the conspiracy itself, which was hatched in England. At the High Court Teare J rejected this submission, because he considered that the cause of the damage was not the conspiracy but its implementation: a suggestion I like in the context of competition law, as readers of the blog will be aware. Teare J was not followed by the Court of Appeal though, which identified the place where the conspiratorial agreement was made as the place of the event which gives rise to and is at the origin of the damage.
The SC refers to CJEU authority to conclude with CDC and at 41 it reiterates the CA’s core reasoning: ‘As Sales LJ explained (at para 76), in entering into the agreement Mr Khrapunov would have encouraged and procured the commission of unlawful acts by agreeing to help Mr Ablyazov to carry the scheme into effect. Thereafter, Mr Khrapunov’s alleged dealing with assets the subject of the freezing and receivership orders would have been undertaken pursuant to and in implementation of that agreement, whether or not he was acting on instructions from Mr Ablyazov.’
The Supreme Court concludes that the making of the agreement in England should be regarded as the harmful event which set the tort in motion.
The judgment keeps open many issues, however. For starters, to have a sole birthplace of conspiratorial agreement is handy in the case at issue however it is likely not often to be so clearly the case (as Dan and Tom point out, particularly not in a digital context). Moreover, for those instances where Mr Khrapunov were not to be acting on instructions from Mr Ablyazov, questions of ultra vires so to speak and hence of a separate tort would arise.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 18.104.22.168