Cruz City 1 Mauritius Holdings v Unitech Ltd & Ors

Service out of the jurisdiction to obtain Chabra relief against a foreign non-party to an arbitration is not permitted under CPR 62.5(1)(c). The gateway is confined to claims against a party to the arbitration or arbitration agreement. A post-award freezing application against the award debtor may nevertheless fall within the arbitration-claim provisions of CPR 62. A jurisdictional gateway must be construed in favour of the foreign defendant where doubt exists. The necessary or proper party gateway requires a substantive claim and a real issue to be tried against the anchor defendant. For interim measures against assets in a Brussels Regulation state, there must also be a real connecting link between the assets and the territorial jurisdiction of the court.

The claimant obtained a London arbitration award against Unitech Ltd exceeding US$350 million and sought to enforce it. It had already obtained freezing, disclosure and receivership orders against Unitech. It then joined five overseas subsidiaries as Chabra defendants and obtained permission to serve them out of the jurisdiction, seeking worldwide freezing orders and disclosure relief.

The subsidiaries had no assets, presence or business in England. They challenged jurisdiction under CPR 62.5(1)(c) and CPR PD 6B, para 3.1(3). Three defendants were incorporated in Cyprus, so the court also considered the European requirement for a real connecting link between the subject matter of the measures and the territorial jurisdiction.

1. Application allowed. The order permitting service out of the jurisdiction was set aside. The court had no jurisdiction over the Chabra defendants.
2. Questions of law going to the existence of jurisdiction had to be finally decided, rather than assessed by the good arguable case standard: Altimo Holdings & Investment Ltd v Kyrgyz Mobil Tel Ltd [2011] UKPC 7. Any doubt in construing a jurisdictional gateway was to be resolved in favour of the foreign defendant: The Hagen [1908] P 189.
3. CPR 62.5(1)(c) did not permit service out against a person who was not a party to the arbitration or arbitration agreement. The reasoning in The Cienvik [1996] CLC 434, Vale do Rio Doce Navegacao SA v Shanghai Bao Steel Ocean Shipping Co Ltd [2000] 2 Lloyd’s Rep 1 and Starlight Shipping Co v Tai Ping Insurance Co Ltd [2008] 1 Lloyd’s Rep 230 formed a clear and consistent line of authority. The policy of supporting enforcement of arbitration awards could not enlarge the proper construction of the gateway.
4. Had it been necessary to decide the alternative issue, a post-award freezing order against an award debtor would be an arbitration claim affecting arbitration proceedings and an award. The expression “affecting” therefore had a sufficiently broad meaning, consistent with AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] UKSC 35.
5. The necessary or proper party gateway was unavailable. The substantive dispute with Unitech had been determined by arbitration. Ancillary enforcement applications did not constitute the required substantive claim or real issue to be tried. The reasoning in Belletti v Morici [2009] EWHC 2316 and Linsen International Ltd v Humpuss Sea Transport Pte Ltd [2011] EWHC 2339 was followed; C Plc v L [2001] 2 Lloyd’s Rep 459 was difficult to reconcile with those decisions and was not followed.
6. In relation to the Cypriot defendants, the subject matter of the freezing measures was the assets to be frozen, or possibly the defendants controlling them. There was no real connecting link with England because the defendants had no English assets or presence. Jurisdiction was therefore declined under the additional European-law requirement derived from Van Uden Maritime BV v KG in Firma Deco-Line [1999] QB 1225.
7. Even if jurisdiction existed over the Indian and Isle of Man defendants, the discretion would have been exercised against service out because the Cypriot defendants could not be dealt with in the same English proceeding. The complaint of non-disclosure was rejected as an independent ground for setting aside service.

First-instance decision. The judgment records earlier orders in the same proceedings but no appeal from a lower court decision.