EUPillar Erste Group Bank A.G. London Branch v JSC “VMZ Red October” & others [2013] EWHC 2926 (Comm)

Summary

The claimant, Erste, was the English branch of an Austrian bank. The bank entered into a loan agreement with the defendant, D1. The agreement contained an English law and jurisdiction clause. The claimants inter alia sought damages for the tort of “unlawful means” conspiracy. It should be noted that “The Second Defendant (referred to hereafter as “the guarantor”) is the immediate parent of the borrower and itself a wholly owned subsidiary of the Fourth Defendant and […] an indirect subsidiary of the Third Defendant.” [3] On 23rd August 2012, the claim form was issued. The claimant was suing in contract against D1 and D2, and in tort against D1, D2 and the remaining defendants. On 24th October 2012, an order for service the out of jurisdiction was made by Mr Justice Cooke. On 31 January 2013, the defendants, D3 and D5, challenged the jurisdiction, making an application for the order of Cooke J to be set aside. The High Court dismissed the defendants’ challenge, holding that it was appropriate to served out the claim form for the tort of “unlawful means” conspiracy to the defendant in Russia. It was inter alia held by Mr Justice Flaux that the English law was applicable. On 17th April 2015, an appeal was allowed by the Court of Appeal which held: “98 In our view, it is clear that all the participants in the alleged conspiracy were based in Russia, that the alleged conspiracy itself would have been hatched in Russia, and that all the acts done pursuant to it would have occurred in Russia. It was a conspiracy allegedly designed to take improper advantage of Russian insolvency procedures, by bringing about the insolvent liquidation of D1 and D2, and the benefit to the conspirators consisted of the extraction of supposedly valuable assets (consisting of, or connected with, the Red October steel works) from D1 and D2, and their being vested in persons in Russia owing no obligations to the lending syndicate of which the Bank formed part. Any impartial observer of the alleged facts, posed with the question: ‘by reference to which system of law should it be adjudged whether the conduct complained of was unlawful?’ would answer “Russian law of course”. No aspect of the question whether that conduct was or was not unlawful could possibly turn upon any issue of interpretation of the Loan Agreement or Guarantee, to which the main perpetrators of the conspiracy (i.e. the puppet masters rather than the puppets) were not parties in any event. 99 Finally, although (as the judge said) in many cases it may be premature to reach a final decision on applicable law at the very early stage of an application for permission to serve proceedings out of the jurisdiction, we find it difficult to envisage what further developments during the litigation of a case based upon the existing Particulars of Claim could significantly detract from its manifestly close connection with Russia. It is, in short, as Russian a conspiracy as it is possible to imagine. 100 The result of this analysis is that, in our view, the judge was wrong to treat the Bank's case that the applicable law was English law as strongly arguable, or indeed better than fanciful. […] 150 Further, in the exercise of his general discretion the judge did not give any consideration to the fact that in reality the only commercial driver behind the Bank's issue of proceedings in England against D1 and D2 was to enable a claim to be brought against D3 and D5 and to attempt to execute against their assets, whether in Russia or elsewhere. Whilst taken on its own this particular factor did not predicate that permission to serve out should be refused, it was, in the circumstances of this case, clearly an important factor that should have been taken into account. 151 For all the above reasons, the exercise of the judge's discretion in granting permission to serve out cannot be upheld. […]” [2015] EWCA Civ 379 [98-100, 150 and 151]