Joint Stock Company 'Aeroflot-Russian Airlines' v Berezovsky & Ors

An exclusive jurisdiction clause falling within article 23 of the revised Lugano Convention is assessed under an autonomous European-law regime. Written consent satisfying the article’s formal requirements is not displaced merely because the substantive contract is alleged to be void under its putative applicable law.

On an application under section 9 of the Arbitration Act 1996, the applicant must establish a concluded arbitration agreement covering the dispute. Once that is shown, the resisting party must satisfy the court that the agreement is null and void or inoperative. A foreign-law doctrine which merely makes reliance on a valid agreement inequitable does not meet that statutory standard.

Article 6(1) jurisdiction depends on the risk of irreconcilable judgments, not a separate merits threshold against the foreign defendant.

Joint Stock Company 'Aeroflot-Russian Airlines' v Berezovsky & Ors concerned Aeroflot’s allegations that its former officers and companies in the Forus group had participated in a fraud involving credit agreements and the assignment of overflight-fee receivables.

The corporate defendants were domiciled in Luxembourg, Cyprus, Switzerland and the British Virgin Islands. Aeroflot sued the individual defendants in England. It sought to join the corporate defendants through the jurisdictional rules in the revised Lugano Convention and Council Regulation (EC) No 44/2001, and obtained permission to serve the BVI company out of the jurisdiction.

Floyd J held that the Lausanne jurisdiction clause bound Aeroflot and Services, but refused a stay in favour of Cyprus under section 9 of the Arbitration Act 1996. He retained jurisdiction over Holdings and Finance: [2012] EWHC 1610 (Ch). Cyprus, Holdings and Finance appealed; Aeroflot cross-appealed concerning Services.

1. The Cyprus appeal was allowed. Aeroflot’s cross-appeal concerning Services, and the appeals of Holdings and Finance, were dismissed.
2. For article 23 of the revised Lugano Convention, the existence and effect of a jurisdiction agreement are governed by autonomous European principles. The article’s formal requirements provide a full safeguard that consent to the jurisdiction clause has been clearly and precisely demonstrated. The separability principle therefore prevents a party from defeating a written jurisdiction clause merely by alleging that the substantive contract is void under Swiss law. Aeroflot’s signatures established written consent to the Lausanne clause, and there was no tenable case of bad faith concerning that clause. The English court had to decline jurisdiction over Services.
3. Cyprus established a written ICC arbitration agreement in the amended second credit agreement which covered the dispute. Under section 9 of the Arbitration Act 1996, an applicant for a stay must prove the agreement and its scope. The party resisting the stay must then prove, ordinarily on the balance of probabilities where the court can decide the issue, that the agreement is null and void, inoperative or incapable of performance.
4. Swiss law governed whether the alleged defects affected the arbitration agreement. Aeroflot had not shown double representation, a defect specifically affecting the arbitration clause, or prejudice caused by it. The Swiss doctrine of abuse of right did not make an otherwise valid agreement legally ineffective merely because arbitration would fragment related disputes. The proceedings against Cyprus were therefore stayed.
5. Article 6(1) of Council Regulation (EC) No 44/2001 required only a good arguable case of a connection creating a risk of irreconcilable judgments. It imposed no additional serious-issue or merits test against Holdings. The pleaded conspiracy created the requisite common legal and factual situation. Finance also remained a proper party because there was a serious issue to be tried and a good arguable case for its joinder.

• Court of Appeal (Civil Division): Allowed Cyprus’s appeal and stayed the proceedings against it. Dismissed Aeroflot’s cross-appeal concerning Services, and dismissed the appeals of Holdings and Finance: [2013] EWCA Civ 784 .
• High Court, Chancery Division (Floyd J): Declined jurisdiction over Services under the Lausanne jurisdiction clause; refused a stay in favour of Cyprus; and retained jurisdiction over Holdings and Finance: [2012] EWHC 1610 (Ch) .