The claimant bank, incorporated in Ukraine, alleged that the first and second defendants, the former majority shareholders of the bank and currently domiciled in Switzerland, arranged the fraudulent misappropriation of over US$1.9bn from the bank. The funds were ultimately transferred to the third to fifth defendants and sixth to eighth defendants, which were companies incorporated in England and the British Virgin Islands respectively and said to be controlled at all material times by the first and second defendants. The bank obtained a worldwide freezing order against the defendants for up to US$2.6bn on a without notice application. The bank then issued its claim against the defendants and served it on the English and BVI companies. On the defendants’ application challenging the court’s jurisdiction and to vary or discharge the freezing order, the judge held that (i) article 6(1) of the Lugano Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (2007) was subject to a requirement that a claim brought against a defendant in the court’s of his domicile could not be brought for the sole purpose of joining another defendant domiciled in another Convention state (“an anchor defendant”), that the claim against the English companies with the sole object of joining the first and second defendants, which was an abuse of article 6(1) with the consequence that the English court lacked jurisdiction to try the claim against them, (ii) if that issue had been determined differently, lis alibi pendens applied to defamation proceedings brought by the first defendant in Ukraine would have led him to stay the English proceedings against the first two defendants, under article 28 of the Lugano Convention in relation to pending proceedings in another Convention state, which although it did not apply directly because Ukraine was not an EU or Lugano Convention state, could be applied “reflexively” or by analogy. The judge also stayed the proceedings against the English companies under article 34(1) of Parliament and Council Regulation (EU) No 1215/2012 on the basis that there were “related proceedings” in Ukraine, and (iii) declined jurisdiction against the BVI companies on grounds of forum non conveniens and set aside service of the proceedings on them. The judge went on to discharge the freezing order against the defendants.
On the bank’s appeal—
Held, appeal allowed. (1) (Newey LJ dissenting). A claimant with a sustainable claim against an anchor defendant, which it intends to pursue to judgment in proceedings to which a foreign defendant is joined as a co-defendant, was entitled to rely on article 6(1) of the Lugano Convention even where the claimant’s sole object in issuing the proceedings against the anchor defendant was to sue the foreign defendant in the same proceedings. Article 6(2) contains a sole object condition unlike article 6(1), whereby the close connection condition contained therein concerning the vice of removing a foreign anchor defendant from the courts of the state of his domicile was considered by member states to be more objective. Therefore, there is a clear contrast between those provisions. An additional requirement based on a claimant’s intention would hinder the certainty and predictability required in the allocation of justice among member states. While reliance on article 6(1) must be subjected to the principle of abuse of law in cases of artificial fulfilment of the close connection condition, all rights under EU law were subject to that principle and there was no reason to exclude article 6(1). Accordingly, the bank in the present case had a sustainable claim against the English companies together with its claims against the first and second defendants and was entitled to rely on article 6(1) even if the sole object in issuing the proceedings against the English companies was to include those two defendants in the same proceedings. If contrary to that view, article 6(1) was subject to a sole object test, the judge’s assessment of the bank’s reasons for bringing the proceedings could not stand because it was based on too many false grounds. On assessment, the bank’s suing of the first and second defendants in England was not its sole object in commencing the proceedings (paras 6, 102–111, 134, 148, 269).
(2) There was no doubt that various conventions, including the Lugano Convention, concerning jurisdiction over nationals and proceedings before member and convention states provided an exclusive code regarding jurisdiction for the matters they covered. However, those conventions did not purport to cover proceedings in third states and nothing in their language precluded the applications of their provisions by analogy. Nor would the application of the Lugano Convention by analogy to cases involving potential or actual proceedings in third states be an impermissible extension of its scope but a recognition that the same principles underlying the convention should be applicable to the proceedings in the third state. Therefore, giving reflexive effect to article 28 of the Lugano Convention to pending proceedings in a third state would create legal certainty and avoid the risk of inconsistent judgments. Accordingly, the judge correctly concluded that article 28 should be given reflexive effect (paras 177, 178, 181).
(3) Proceedings were “related” for the purposes of article 28 of the Lugano Convention and article 34 of Regulation 1215/2012 if it was “expedient to hear and determine” them together. Any requirement for actions to only be “related” if they could be consolidated in one jurisdiction would have been expressly provided for if intended but there was no such requirement. Therefore, the judge correctly concluded that the actions were related, even if not capable of consolidation, and he had jurisdiction to grant a stay. However, the judge exercised his discretion erroneously because the court in Ukraine considered the first defendant’s claim there to be unmeritorious with the consequence that he should have refused to grant a stay in favour of the first and second defendants. It would be entirely inappropriate to stay an English fraud claim in favour of Ukrainian defamation claims, in circumstances where the bank had a good arguable case to recover the pleaded sum of US$1.9bn. In exercising the discretion afresh, a stay should not be granted. Accordingly, the decisions that a stay would have been granted in favour of the first and second defendants by analogy with article 28 of the Lugano Convention and to grant a stay in favour of the English companies under article 34 of Regulation 1215/2012 fell to be set aside to enable the claim in England to proceed against the first to fifth defendants. It inevitably followed that the BVI companies were necessary or proper parties to that claim and that the judge wrongly concluded that service of the proceedings against them should be set aside and that order was also set aside (paras 191, 192, 208, 211, 212, 213).
Lord Pannick QC, Andrew Hunter QC, Tim Akkouh, Christopher Lloyd and Adam Al-Attar (instructed by Hogan Lovells International llp) for the claimants.
Mark Howard QC, Michael Bools QC, Alec Haydon QC and Ben Woolgar (instructed by Fieldfisher llp) for the first defendant.
Daniel Jowell QC, Matthew Parker and Richard Eschwege (instructed by Enyo Law llp) for the second defendant.
Sonia Tolaney QC, Thomas Plewman QC and Marc Delehanty (instructed by Pinsent Masons llp) for the third to eighth defendants.