Erste Group Bank AG (London) v JSC (VMZ Red October) [2015]


Two Russian defendants to proceedings alleging unlawful means conspiracy established that a judge had been wrong to find that England was the appropriate forum for resolving the dispute. Although the proceedings concerned a loan governed by English law, the starting point for deciding forum was the place of commission of the tort. That was Russia. The judge had been wrong to determine the issue by examining technical factors urged on him by the claimant instead of standing back and identifying where the fundamental focus of the litigation was.


The appellant Russian companies (R and L) appealed against a decision ([2013] EWHC 2926 (Comm)) that England was the appropriate forum for proceedings alleging unlawful means conspiracy, issued against them by the claimant bank.

The bank had loaned money to the first defendant borrower and the second defendant guarantor, both based in Russia. The agreement was subject to the exclusive jurisdiction of the English courts. The borrowers defaulted. The bank's case was that R, L and the other defendants had operated an unlawful means conspiracy to make the first two defendants insolvent. It claimed damages for breach of contract against the first two defendants, and damages in tort against R and L. It also claimed relief under the Insolvency Act 1986 s.423. The court gave permission for service outside the jurisdiction. R and L disputed its jurisdiction and applied to set aside service. The judge below found that there was a serious issue to be tried and that (i) for the purposes of CPR PD 6B para.3.1(3), the bank had not submitted to the jurisdiction of the Russian courts by participating in the Russian insolvency proceedings; (ii) for the purposes of para.3.1(9) of PD 6B, the non-payment of the loan, resulting as it did from the alleged conspiracy, was "damage sustained within the jurisdiction"; (iii) for the purposes of para.3.1(20) of PD 6B, s.423 was an "enactment" and the defendants' attempt to show that there was an insufficient connection with England was misconceived, as that question depended on a careful analysis of the facts at trial. He held that England was clearly the appropriate forum. R and L challenged those findings.


HELD: (1) Under para.3.1(3)(a), a claimant had to demonstrate not only that there was "a real issue", but that it was an issue which "is reasonable for the court to try". On the evidence, the only reason the bank issued proceedings in England against the first and second defendants was to enable a claim to be brought against R and L. However, motive was not relevant to deciding whether the threshold criteria under para.3.1(3) had been satisfied, Multinational Gas & Petrochemical Co v Multinational Gas & Petrochemical Services Ltd [1983] Ch. 258 and AK Investment CJSC v Kyrgyz Mobil Tel Ltd [2011] UKPC 7, [2012] 1 W.L.R. 1804 considered (see paras 38,42-43, 46 of judgment). The judge below had not considered the two distinct questions in para.3.1(3)(a) separately from the para.3.1(3)(b) elements. He had, therefore, adopted the wrong approach when considering the consequences of the bank's participation in the Russian insolvency process, and had reached the wrong answer (paras 47-50). The bank's arguments that non-receipt of a dividend in the Russian liquidation, and its removal from the creditors' list, had prevented submission to the Russian jurisdiction were misplaced. The judge's conclusion that the tort claim was not subject to the Russian jurisdiction even if the contractual claim was, was erroneous. The judge had also been wrong to distinguish Rubin v Eurofinance SA [2012] UKSC 46, [2013] 1 A.C. 236, Rubin applied and Stichting Shell Pensioenfonds v Krys [2014] UKPC 41, [2015] 2 W.L.R. 289 considered. He should have concluded that the bank's participation in the Russian insolvencies was acceptance of the Russian jurisdiction in relation to all issues arising in the insolvencies. Even if he had been correct to find that the bank had not technically submitted to the Russian jurisdiction, the question was not whether it was "entitled" to bring its claims in England, but whether it could satisfy both requirements of para.3.1(3)(a), neither of which the judge had addressed. Permission to serve out of the jurisdiction should not have been granted (paras 51-60, 64-65, 69, 73, 77-82). (2) The para.3.1(9) gateway was extraordinarily wide, Booth v Phillips [2004] EWHC 1437 (Comm), [2004] 1 W.L.R. 3292 and Cooley v Ramsey [2008] EWHC 129 (QB), [2008] I.L.Pr. 27 considered. Whether the damage had been sustained "within the jurisdiction" depended on the interpretation of Regulation 864/2007 art.4. It was not necessary to determine the jurisprudence applicable to the Regulation because there was a much simpler reason why the judge had been wrong to find that art.4.1 pointed to England: the loan agreement nominated New York as the place of repayment of the loan instalments. The loss had been suffered there, not in England. In any event, the alleged conspiracy was more closely connected with Russia than with any other place (paras 88-90, 94-100, 104-106, 108). (3) Courts had a discretion to permit service out of the jurisdiction if a sufficient connection with the jurisdiction was demonstrated. That decision did not have to wait until trial, Banca Carige SpA Cassa di Risparmio di Genova e Imperia v Banco Nacional de Cuba [2001] 1 W.L.R. 2039 applied, Fortress Value Recovery Fund I LLC v Blue Skye Special Opportunities Fund LP [2013] EWHC 14 (Comm), [2013] 1 All E.R. (Comm) 973 not applied. The bank had failed to establish that there was a sufficient connection with England or that, on the question whether any practicable relief could be obtained under s.423 at trial, there was a serious issue to be tried (paras 116-119, 126). (4) The judge had been wrong to conclude that England was the appropriate forum for the conspiracy claims. It was overwhelmingly a Russian conspiracy. He had not given due weight to the guidance in AK Investment. He had approached the issue of forum by examining technical factors urged upon him by the bank instead of standing back and identifying where the fundamental focus of the litigation was (paras 130-131, 136, 139, 149-151).

Appeal allowed