Home Information Cases (1) JSC BTA Bank (2) BTA Securities JSC v Turkiye Vakiflar Bankasi Tao (2018)

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(1) JSC BTA Bank (2) BTA Securities JSC v Turkiye Vakiflar Bankasi Tao (2018)

Summary

In proceedings between a Turkish bank and a Kazakhstan bank relating to the enforcement of a guarantee governed by Turkish law, an order granting permission to serve outside the jurisdiction was set aside on the basis that the claimant had submitted to the jurisdiction of the Turkish courts by continuing to defend the substantive proceedings and inviting the Turkish court to rule in its favour on the merits.

Facts

The defendant applied for orders setting aside permission to serve a claim outside the jurisdiction and declaring that the English courts lacked jurisdiction.

The defendant, a Turkish bank, advanced a loan to a third party which was guaranteed by the claimant, a Kazakhstan bank, under terms governed by Turkish law. Ankara was specified as the place of jurisdiction. The third party defaulted on the loan and the defendant called upon the guarantee. The claimant, which was undergoing restructuring, entered into a deed of release governed by English law in relation to the guarantee. The defendant disputed the validity of the deed and obtained an injunction preventing disposals of the claimant's assets in Turkey. The claimant unsuccessfully challenged that injunction. The defendant commenced proceedings in Istanbul under the guarantee and the claimant raised a jurisdictional challenge. The Turkish court held the deed of release invalid and found the claimant liable under the guarantee. The claimant appealed the Turkish judgment and commenced proceedings in England based on the defendant's alleged breach of the deed of release. Permission was granted to serve the claim outside the jurisdiction. The claimants relied on the jurisdictional gateway in CPR PD 6B para.3.1(6)(c) on the basis that the claim was in respect of a document governed by English law.

The claimant submitted that the case fell within the Civil Jurisdiction and Judgments Act 1982 s.33(1)(c) because it was engaging in the proceedings only to protect property, and that s.32 applied to prevent recognition of the Turkish judgment in the UK. It also denied that the Turkish judgment created an issue estoppel because the Turkish court had not considered the application of English law to the deed of release.

Held

Had the claimant submitted to the jurisdiction of the Turkish courts? Yes. Whether there was a submission to the courts of the country or to a particular court depended on the proper construction of the contract and the relevant clause within it. That would depend on such matters as the extent to which the courts of that country operated independently of each other and whether it was plausible that the parties had chosen only the courts of a particular city or place. That was an issue on which the claimant had shown a serious issue to be tried and a good arguable case (see para.71 of judgment).

Section 33(1)(c) - Section 33(1)(c) should not produce absurd results or extend to cases in which a party had actively defended the case on the merits, notwithstanding that it had done so in order to avoid the seizure of property. By defending the substantive proceedings after the failure of its jurisdictional challenge, the claimant had taken steps in the Turkish proceedings which constituted an engagement on the merits outside the ambit of a jurisdictional challenge or a challenge relating to the threatened seizure of assets, Motorola Credit Corp v Uzan [2004] EWHC 3169 (Comm) applied. The claimant had invited the Turkish court to rule in its favour on the merits, which was outside the scope of s.33(1)(c). Moreover, its filing of an appeal against the Turkish judgment constituted a submission to the jurisdiction of the Turkish courts (paras 77, 80).

Section 32 - Even if the case had fallen within s.33(1)(c), s.32 would not have applied because the deed of release did not constitute "an agreement under which the dispute in question was to be settled otherwise than by proceedings in the courts of that country". Section 32 related to settlement by a dispute resolution procedure other than proceedings in the court of the country where judgment had been given, namely arbitration and jurisdiction agreements, AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2011] EWCA Civ 647 followed (para.83).

Issue estoppel - The Turkish judgment had been issued by a court of competent jurisdiction, was final and conclusive and had been issued "on the merits". It was therefore capable of giving rise to an issue estoppel, DSV Silo und Verwaltungsgesellschaft mbH v Owners of the Sennar (The Sennar) (No.2) [1985] 1 W.L.R. 490 followed. In any event, the Turkish court had dealt with the anterior issue of whether the deed of release had been validly executed and had not refused to apply English law to its construction. Since the deed was invalid, the question of breach did not arise. There was therefore no arguable case of injustice such as to prevent the recognition of an issue estoppel (paras 58, 61, 88-89, 91-92, 94).

Appropriate forum - England was not the most appropriate forum for trial of the claim, given that (a) there were pending proceedings in Turkey in which extensive evidence and submissions had been served; (b) Turkey was the defendant's domicile and a natural forum for the resolution of the dispute, the guarantee being expressly subject to Turkish law and the jurisdiction of the Ankara courts; (c) the claimant had submitted to the jurisdiction of the Turkish courts; and (d) there were no connections with England other than the choice of English law to govern the deed of release. Nor were there any disputed issues of English law or of fact which would be more advantageously tried in England (paras 97-101).

Service out of jurisdiction - The requirements to support service out of the jurisdiction were not met (para.102).

Application granted

Queen's Bench Division (Commercial)
Butcher J
Judgment date
17 April 2018
References