Posts Tagged Regulation 44/2001

Spanish Supreme Court eases exequatur requirement under (2001) Brussels I.

A short post and thank you Laura Ruiz for flagging a ruling by the Spanish Supreme Court  in which it essentially seems to have pre-applied the Brussels Ia Regulation (1215/2012) to proceedings governed by its predecessor, Brussels I (44/2001). In particular, the Supreme Court would seem to have waived the requirement for exequatur in a proceeding governed by Brussels I. I have limited Spanish and no access to the ruling so I am relying on Laura’s post for reporting purposes.

Geert.

(Handbook of) EU Private international law, 2nd ed. 2016, Chapter I, Heading 2.2.16.

 

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Sabbagh v Khoury. The jurisdictional gift that keeps on giving. In today’s instalment: the possibility for qualified acknowledgment of service (prorogation) following claimant’s alleged concessions, and amended claim.

Sabbagh v Khoury [2019] EWHC 3004 (Comm) evidently builds upon the High Court and Court of Appeal previous judgments. Pro memoria: claimant established jurisdiction against all the defendants she wished to sue in relation to each element of her claim. Following judgment by the Court of Appeal and the refusal of permission to appeal further by the Supreme Court, the defendants had to decide whether to acknowledge service and accept the jurisdiction of the English Courts or to refuse to acknowledge service.

That jurisdiction should be debated at all was the result of claimant wanting to amend her claim, and having earlier been partially granted such permission. At 13: each defendant decided to acknowledge service and accept the jurisdiction of the English Courts but in each case they purported to qualify the terms on which they acknowledged service, hinging particularly on CPR Part 14: Admissions, and suggesting that a “concession” made on claimant’s behalf that certain Share Sale Agreements relied on by the defendants were “existent, valid and effective“, should have an impact on jurisdiction.

It is interesting to see the qualifications verbatim: at 13: ‘Thus in its letter of 26 March 2018, CMS Cameron McKenna Nabarro Olswang LLP on behalf of the Sabbagh defendants qualified their Acknowledgement of Service as being “… confined to the existing claims set out in the Claim Form, to the limited extent that the Court of Appeal accepted the English court’s jurisdiction over such claims, but subject to the numerous concessions your client has made including but not limited to her explicit abandonment of any claim to be presently entitled to or for delivery up of shares …”. Jones Day, the solicitors then acting for the first defendant similarly qualified his Acknowledgement of Service – see their letter of 26 March 2018. Baker McKenzie qualified the other Khoury defendants’ Acknowledgement of Service as being “… only in respect of the two claims as set out in the Claimant’s Claim Form … and is subject to the numerous concessions the Claimant has made to date …” and added that: “We understand that the Claimant intends to seek to amend her Particulars of Claim and our clients’ position as to whether any such amendment(s), if allowed, impact on the jurisdiction of the court over our clients as regards any claims other than those to which this Acknowledgement of Service is filed is fully reserved, including as to jurisdiction and/or the arbitrability of any such amended claims”. In the circumstances, it is probable that the amendment Baker McKenzie had in mind was one substantially in terms of the draft re-amended Particulars of Claim that had been placed before the Court of Appeal.’

At 21 ff Pelling J discusses the relationship between the amended claim, the earlier findings on jurisdiction, and the ‘concession’, leading at length eventually to hold that there was no impact of the concession on the extent of jurisdiction,

As Pelling J notes at 1 in fine: ‘Even allowing for the value at risk in this litigation all this is obviously disproportionate.’ One assumes the role of various counsel in the alleged concessions made earlier, must have had an impact on the energy with which the issue was advocated.

The case will now proceed to trial, lest there be any other jurisdictional challenges.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.12.1

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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 [2019] EWCA Civ 1708 has reversed [2018] 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.

Geert.

(Handbook of) European Private International Law – 2nd ed. 2016, Chapter 2, Heading 2.2.14.5

 

 

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Non multa, sed multum. Sovereign debt litigation in Kuhn leads to surprising final (?) curtain in Vienna.

In C-308/17 Leo Kuhn the CJEU held that Brussels Ia was not engaged for the matter is acta iure imperii. I suggested in my review of the judgment that in solely emphasising context, the Court casts the net too wide. I also emphasised that Greece’s sovereign immunity defense, lonely an argument as it may be, is a strong argument (I referred to the German approach to same): non multa sed multum.

Thank you Stephan Walter for alerting us to, and analysing the final judgment in Vienna: Greece enjoys immunity; and even if it had not (this is how I understand Stephan’s analysis – I trust he will correct me should I be wrong), the court would have declined jurisdiction given that the ‘assets held in Austria’ head of jurisdiction, was not mentioned in the particulars of claim.

Stephan clearly is not happy with the judgment: the Supreme Court not only reverses its earlier stance on immunity; it also could be argued it should be estopped as it were (my words, not Stephan’s) from disciplining a claimant’s absence of reference to residual private international law rules, given that hitherto the Supreme Court had never strayed from steering the course of Brussels Ia applying.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Heading 2, Heading 2.2, Heading 2.2.9.

 

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PrivatBank v Kolomoisky and Boholiubov. The High court puts the spotlight on the abuse of the anchor mechanism, on reflexive effect of lis alibi pendens, and on Article 34’s new rule.

In [2018] EWHC 3308 (Ch) PrivatBank v Kolomoisky and Boholiubov et al the High Court has 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.

The case considers a high number of issues to which even a long blog post cannot do justice – I will consider these further in a paper in progress.

The issues to be determined, are

  • First, whether the Bank has a good arguable case (as pleaded in the particulars of claim) that loss of US$1.91 billion plus interest was caused to it by the alleged fraud of the Defendants. For the purposes of these applications, all Defendants do not dispute that there is a good arguable case that US$248 million of loss was caused to the Bank by the pleaded fraud, but they deny any good arguable case of loss in excess of that amount.
  • Second, whether the worldwide freezing orders should be set aside in whole or in part for non-disclosure or misrepresentation, or reduced to or reimposed in a lesser maximum sum than the current maximum sum of US$2.6 billion.
  • Third, whether the Court has jurisdiction over the First and Second Defendants under Article 6.1 Lugano by reason of the claim against the English Defendants as “anchor defendants”. Although the claims as pleaded against the First and Second Defendants and the English Defendants are closely connected, the particular issue is whether the claim against the English Defendants was brought with the sole object of removing the First and Second Defendants from Swiss jurisdiction and so was an abuse of Article 6
  • Fourth, if there is jurisdiction against the First and Second Defendants, whether the claims against them and the English Defendants should be stayed on grounds of lis pendens in Ukraine. This raises separate questions:
    • a) Whether the Court has power to stay proceedings against the First and Second Defendants (where jurisdiction only exists (if at all) under the Lugano Convention) in favour of proceedings in a non-Convention state, namely Ukraine. The First and Second Defendants argue that Article 28 of the Convention, which empowers a Convention State to stay proceedings on grounds of lis pendens in another Convention State, should be applied by analogy (or ‘reflexively’ in favour of proceedings in a non-Convention State.
    • b) Whether the Court should stay proceedings against the English Defendants (who are sued in accordance with Article 4 of the recast Brussels Regulation) in favour of proceedings in Ukraine. The issue here is as to the meaning, effect and application of Article 34 of the Regulation, which as from 10 January 2015 conferred a power on EU States in defined circumstances to stay proceedings in favour of proceedings in a non-Member State (“a third State”).
  • Fifth, to the extent that the Court has power to stay on grounds of lis pendens in Ukraine, whether it should exercise that power given the nature of the proceedings in Ukraine, the degree of connection between the Bank’s claim and Ukraine and the risk of irreconcilable judgments if no stay is granted.
  • Sixth, whether the Court should set aside the permission granted without notice to serve the claim form on the BVI Defendants out of the jurisdiction, or alternatively stay the proceedings against the BVI Defendants on grounds of forum non conveniens.

 

Fancourt J’s judgment implies in essence

First of all, very careful and complete consideration of the Lugano Convention’s anchor defendant mechanism.

(hence also implicating Brussels I Recast case-law, particularly Reisch Montage, Freeport and CDC), but also Sabbagh v Khoury, in which as I noted at the time the Court of Appeal struggles with the precise role for merits review in examining a potential abuse of the anchor defendant mechanism.

One assumes counsel for the defendants did an excellent job in deciphering precedent. This includes Ali Malek QC who is clearly a counsel of choice for international litigation, witness his involvement in other cases, too, this week: on which more soon on the blog.

Kolomoisky and Boholiubov may be sued in England and Wales, despite their Swiss domicile, only if the claims against them and the claims against the English Defendants are so closely connected that it is expedient to hear and determine them together, to avoid the risk of irreconcilable judgments resulting from separate proceedings: that is the wording of Article 6.1 of the Lugano Convention, as it is of (now) Article 8(1) Brussels I Recast.

[Note parties, Mr Bogolyubov specifically, earlier in the year in [2018] EWHC 160 (Ch) successfully had applied for a declaration that they were not domiciled in the UK; hence no Article 4 jurisdiction.

As I have pointed out on various occasions (use ‘fraud’ or ‘fraus’ as a search term in the blog’s search box), abuse is not a concept easily caught in statute and given the need for high predictability in the application of the Brussels and Lugano regimes, the CJEU is not finding it easy to provide much instruction.

Justice Fancourt excellently reviews the issues 85 ff and it is best to let those paras speak for their insightful selves. One readers have done so, they will see that at 93, his conclusion is ‘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.

Onus of proof of abuse lies on the defendant, and it was met here: the English Defendants serving as anchor, are not considered legitimate targets in their own right. Five reasons for same are listed in para 99 ff: it is clear that a single criterion will not be enough to meet the burden of proof, rather a number if indications will contribute to an overall finding of abuse.

 

Having established that the Switzerland-based defendants ought to be sued there or indeed in the Ukraine, the Court turns to the English defendants’ attempt to have it apply Brussels I Recast’s new Article 34 rule on lis alibi pendens in favour of third States. 

At 129, Justice Fancourt reviews the cases which might potentially be said to be ‘related’ to the English proceedings. At the heart of that analysis lies a defamation claim which (at 144) ‘Although the causes of action in the Ukrainian claim of the First Defendant and the claim of the Bank in the current proceedings are quite different, I am satisfied that there is considerable factual overlap between the allegations made against the Defendants in the Bank’s claim and the allegations published by the Ukrainian journal that the First Defendant seeks to challenge as unfounded and defamatory in the Ukrainian proceedings. The general subject-matter is one and the same: a fraudulent scheme to embezzle huge sums of money from the Bank, orchestrated by the First and Second Defendants and making use of a large number of shell companies, including the English and BVI Defendants, to circulate monies and conceal their whereabouts. Key issues that may have to be determined in each claim will be: whether there was a fraudulent scheme; who set it up and operated it; how did it work; what was its purpose; who benefited from the scheme, and how much money was unlawfully removed from the Bank.’

This analysis presumes, in my view correctly, that the term ‘related’ in the Article 34 rule, is to be interpreted in line with (now) Article 30 Brussels I Recast on related intra-EU actions.

At 145: ‘if the appeal in the defamation proceedings were to fail, or the claims be otherwise disposed of on a limited point of law, any stay granted under Article 34 (or by analogy with it) will be lifted.

Upon reflection, a stay of proceedings in favour of the Ukranaian case, is granted, for the reasons that

  • (the ultimate condition for applying Article 34) a potential eventual judgment in Ukraine on the defamation case is likely to be recognised and enforced in England; this is the so-called [but not so by the High Court 🙂 ] Anerkennungsprognose;
  •  the claim has a high proximity to the Ukraine: the issues raised in common by the defamation claim and the current proceedings are almost exclusively concerned with events in Ukraine; the majority of witnesses will be Ukrainian, and Ukrainian law will apply to decide both sets of proceedings. By contrast, none of the harmful acts complained of occurred in England; the matters in issue have no connection with England at all, and the existence of three English defendants is of no materiality. The proximity of the claim to Ukraine therefore points strongly in favour of a stay.
  • finally, at 158 ff: The Bank nevertheless argues that a stay would be contrary to the proper administration of justice – a core criterion to Article 34. ‘It contends that the current proceedings cry out for determination by a truly independent tribunal. But the Bank does not contend that the Ukrainian court is unable to resolve the issues or that it cannot obtain justice in Ukraine. There is no evidence on the basis of which this court can conclude that the Ukrainian courts would not provide justice to the parties. Similarly, there is no evidence before the court that would justify a conclusion that the Ukrainian judiciary is not independent. The Bank complains about how the First Defendant obtained an interim injunction against the Bank and Hogan Lovells on 15th December 2017, without proper process taking place; but this order was set aside in Ukraine on appeal, demonstrating that justice can be achieved by the Bank.’

Note that at 161 Justice Fancourt emphasises the relative character of the stay: ‘The argument against a stay would have greater weight if the stay to be granted under Article 34 (or by reference to its principles) were a once and for all decision, but it is clear that it should not be so confined. Under Article 34.2, these proceedings may be continued at any time when it is appropriate to do so, and so potential prejudice to the Bank in granting a stay is thereby limited. If the appeal in Ukraine is dismissed, or if though successful the claim is disposed of without a judgment on the merits, or if the First Defendant does not properly pursue the claim to judgment, the grounds for a continuing stay are likely to fall away’.

 

Fancourt J also adds 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, too, applying the lis alibi pendens rule of Lugano reflexively, despite the absence of an Article 34 mechanism in Lugano. Consideration of this issue is at 114 ff, with of course reference to Ferrexpo. (Although even there this particular point may have been made obiter, as Justice Fancourt himself points out at 123). The suggestion is made that in accepting such reflexive, ex-Lugano effect of the Lugano lis alibi pendens rule, the courts should take instruction from the Article 34 Brussels I-Recast conditions. This is not a straightforward proposition by any means and the debate is far from settled.

 

Finally, jurisdiction against the BVI defendants is dismissed at this time on the basis of forum non conveniens: at 172 and necessarily entangled with the other findings: ‘So far as forum conveniens is concerned, the claim against the First and Second Defendants will not proceed in England. The natural forum for a trial of that claim is Ukraine though, as regards Lugano Convention States, the First and Second Defendants are entitled to be sued in Switzerland. The task of the court in exercising its discretion is to identify the forum in which the case can be suitably tried in the interests of all the parties and for the ends of justice: see Altimo Holdings at [88]. The natural forum is Ukraine, in that all the parties are Ukrainian, almost all the events occurred in Ukraine and Ukrainian law is the governing law. There is no suggestion by any party that they cannot have a fair trial in Ukraine. However, the Bank may not be willing to sue the First and Second Defendants in Ukraine: if it cannot sue them in England it may sue them in Switzerland.

************

With PrivatBank v Kolomoisky and Boholiubov we now have a much more reasoned application of Article 34 than the more concise considerations in B.win v Emerald Bay and also interesting additional analysis as compared to Zavarco.

Geert.

(Handbook of) European Private International Law – 2nd ed. 2016, Chapter 2, Heading 2.2.14.5

 

 

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Griffin v Varouxakis: (obiter) rejection of jurisdiction on the basis of indirect damage, ditto discussion of Brussels I’s insurance title.

In [2018] EWHC 3259 (Comm) Griffin v Varouxakis, Males J gives an obiter masterclass in the (ir)relevance of indirect damage for the establishment of jurisdiction.

Objections to jurisdiction where formally dismissed on the basis that they were made late according to the relevant CPR rules. Yet Males J went on to discuss at length and obiter whether, if such objection had been made timely, it would have been successful. He suggest it would partially have been successful, for those parts of the claim based on indirect damage, and directed against a Greece domiciled defendant.

(Of immediate note is the contrast with Four Seasons v Brownlie: here indirect damage was not immediately dismissed as a jurisdictional trigger however in that case jurisdiction was to be assessed on the basis of residual English rules; Brussels I did not apply).

Claimant insurance company (“Griffin”) contends that as a result of the defendant’s conduct it has lost the right to claim general average contributions which were payable and would have been paid in London, so that the damage it has suffered was suffered in the London jurisdiction. The defendant disputes this analysis, contending that the damage in question was suffered either in the place where the underlying contract was broken or alternatively in Guernsey where Griffin is domiciled and where it would ultimately have received any general average payments. Alternatively he contends that Griffin’s claim is a “matter relating to insurance” within the meaning of Section 3 of Chapter II of the Regulation so that, in accordance with Article 14, he can only be sued in the courts of Greece where he is domiciled.

The Court reviews relevant case-law on Article 7(2) and applies it to two separate claims (particulars of which are in para 28 and para 29): for one of them only, direct damage would have been suffered in England; for the other, in Oman.

Finally at 92 ff and equally obiter Males J concludes that the litigation is not a “matter relating to insurance” within the meaning of Section 3 of Chapter II of the Recast Brussels Regulation. At 96: ‘Not all claims brought by a claimant who happens to be an insurer comprise matters relating to insurance.’ at 98: ‘neither of Griffin’s claims are matters relating to insurance. The fact that Griffin is an insurer forms part of the background to the claim and explains why the harm which Griffin has suffered is the loss of an ability to enforce a subrogated right (although insurers are not the only people who sometimes have the benefit of rights of subrogation), but that is all. In all other respects the nexus between the claim in tort and the policy is tenuous. Determination of the claim requires no consideration of the terms of the policy, which was scarcely looked at during the hearing.’ This latter suggestion goes along the Granarolo etc. judgments on the distinction between contract and tort.

Geert.

(Handbook of) EU Private international law, 2nd ed. 2016, Chapter 2 Heading 2.2.11.2, Chapter 4, Heading 4.4 .

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