Forum conveniens – foreign disputes and the risk of inconsistent judgments
In the case of PJSC National Bank Trust and another v Mints and another  EWHC 692 (Comm), an application to set aside an order made ex parte for service on three defendants outside of the jurisdiction was refused. The court applied the same reasoning in Lungowe and others v Vedanta Resources and held that it was in the interests of justice and the interests of the parties that the order permitting service out of the jurisdiction should be upheld. There should be one forum to determine the claim to avoid the risk of inconsistent judgments.
Further, it was not an abuse of process that the claim be heard in England, notwithstanding the existence of other related (but not the same) proceedings in Russia, New York and LCIA arbitration. The order was also not set aside as a result of a failure by the claimants to give full and frank disclosure when applying ex parte. The failure to comply with the duty of full and frank disclosure was instead marked by an order for costs against the claimants.
What are the practical implications of this case?
PJSC National Bank Trust provides helpful guidance on the factors the court will take into account when considering jurisdiction issues, particularly in claims alleging conspiracy, even where other related proceedings are being pursued in different jurisdictions.
In reaching his judgment, Sir Nigel Teare did not depart from the applicable forum conveniens principles, which were not in dispute. As set out in Vedanta by Lord Briggs, a summary examination of the connecting factors between the case and the jurisdiction should be undertaken, including:
- matters of practical convenience such as accessibility to courts for parties and witnesses;
- the availability of a common language;
- the system of law which will be applied to decide the issues;
- the place where the wrongful act or omission occurred; and
- the place where the harm occurred.
The court will be concerned to avoid the risk of a multiplicity of proceedings and inconsistent judgments, which is a ‘very important factor in the evaluative task of identifying the proper place’. This is particularly so in actions where conspiracy is alleged. Evidence and submissions from all of the parties should be heard together in one single forum.
Avoiding the risk of inconsistent judgments is also a factor the court can consider when assessing whether or not the pursuit of English proceedings may be abusive. When considering forum conveniens the court is encouraged to stand back and look at the matter in the round. If determining the claim in England is in the interests of all the parties and the ends of justice, the existence of other proceedings may not render pursuit of the English claim abusive.
PJSC National Bank Trust also makes clear that an order for permission to serve out of the jurisdiction made ex parte may not necessarily be set aside where the claimant has failed to give full and frank disclosure. Sir Nigel Teare considered it would not be in the interests of justice to set aside the order as a result of the inadvertent failure by the claimants to disclose the existence of foreign proceedings (actual and intended) when applying for permission to serve out. The harm caused could, rather, be marked by an order for costs against the claimants, in order to make plain to them (and other litigants) of the importance of providing full and frank disclosure.
What was the background?
As explained at the outset of his judgment, the claim is ‘essentially a Russian dispute’.
The claim is brought by two Russian banks against seven individuals. The first four defendants, Boris Mints, Dmitry Mints, Alexander Mints and Igor Mints (the ‘Mints Defendants’) are all now resident in England and so can be sued here. The claim was initially commenced against the Mints Defendants in June 2019.
The claim seeks damages in respect of certain loans (the ‘Loans’) made by the claimant banks to companies ultimately controlled by the Mints Defendants, with a value of approximately $US 800m. It is alleged that, in 2017, shortly before the banks were taken over by the Central Bank of Russia (‘CBR’) and placed into an insolvency process (whereby the claimant banks were bailed out with loans from the CBR), the loans which were then performing, were significantly secured and were relatively short term were repaid with the banks’ own money and replaced with illiquid, unsecured, non—income producing long term bonds worth at best a small fraction of the price the banks paid for them and their value (the ‘Replacement Transactions’).
The fifth defendant, Vadim Wolfson was at the time of the replacement transactions the holder of over 28% of the shares in a company which was a major shareholder in the second claimant, Bank Otkritie. He was also the chairman and CEO of the company. The sixth defendant, Evgeny Dankevich, was at the time the Chairman of the Board of Bank Otkritie. The seventh defendant, Mikail Shishkhanov, was at the time the sole shareholder and chairman of Rost Bank.
The claim against the Mints Defendants in England alleges a conspiracy between the Mints Defendants and Messrs. Wolfson, Dankevich and Shishkhanov to bring about the replacement transactions. However, when the proceedings were commenced against the Mints Defendants in June 2019 Messrs. Wolfson, Dankevich and Shishkhanov were not made party to them. The claimant banks subsequently applied in July 2020 to join Messrs. Wolfson, Dankevich and Shishkhanov to the claim and applied ex parte for permission to serve the claim on them out of the jurisdiction. Permission was granted by HHJ Pelling QC in August 2020. Sir Nigel Teare’s judgment concerned the application at the return hearing by Messrs. Wolfson, Dankevich and Shishkhanov to set aside the order permitting service out.
Various proceedings have been pursued in respect of matters arising out of the insolvency process by which the claimant banks were bailed out by the CBR, including proceedings in Russia, Cyprus, New York and in LCIA arbitration. Some of those proceedings have already been determined and others are ongoing. Importantly for this judgment, in none of those proceedings were damages specifically sought against Messrs. Wolfson, Dankevich and Shishkhanov.
What did the court decide?
Sir Nigel Teare refused the application by Messrs. Wolfson, Dankevich and Shishkhanov to set aside the order permitting service of the claim on them outside the jurisdiction. In carrying out the summary examination of the connection of the claim to England, the Judge held that, whilst the claim was to be distinguished from Vedanta on the facts, the same principle applied, ie the importance of not increasing materially the risk of inconsistent judgments, which would be increased if the claimants had to pursue their claim against the Mints Defendants in England and against Messrs. Wolfson, Dankevich and Shishkhanov in Russia.
Sir Nigel Teare considered the argument that it was the claimants’ own decision to bring proceedings in England and that, accordingly, the risk of inconsistent judgments was caused by them. The judge rejected this argument. It was rational for the claimants to pursue their claim in England because it would be easier to enforce an English judgment against certain Cayman trust interests held by the Mints Defendants than a Russian judgment. Although evidence had not been given on the point, it was plain that the Mints Defendants would resist enforcement of any judgment against their trust interests based on the position set out in their defence. The ease with which a judgment can be enforced is recognised as a legitimate juridical advantage justifying pursuit of a claim in England (eg see International Credit and Investment Company (Overseas) Limited v Shaikh Kama Adham  I.L.Pr 302 at paragraphs 24—25).
The judge also considered that, notwithstanding that the application was based on forum conveniens arguments, he could consider the point made by Messrs. Wolfson and Dankevich that the English proceedings were an abuse of process (albeit that the point was ultimately rejected). The existence of foreign proceedings is a relevant factor when considering forum conveniens, and it was open to the judge to also consider an abuse of process point. In rejecting the abuse of process argument, the judge considered it important that it was only in the English proceedings that damages were being sought against Messrs. Wolfson, Dankevich and Shishkhanov (and so the proceedings could be distinguished). Looking at matters in the round and stepping back (per Vedanta at ), the judge considered that a single forum to hear the claim is in the interests of justice, notwithstanding that Mr Dankevich was willing to submit to the jurisdiction of the Russian court.
The judge also refused to set aside the order permitting service out as a result of the failure by the claimants to disclose the existence of the Russian proceedings and the intention to commence New York proceedings when making their ex parte application. The potential harm suffered by failing to provide full and frank disclosure is less for an order permitting service out than for a freezing order. Consequently, the harm could be addressed by an order for costs against the claimants, the order being that they could recover none of their costs of the applications and that they must pay one quarter of the costs of Messrs. Wolfson, Dankevich and Shishkhanov.
This article was first published by Lexis®PSL on 31/03/2021.