Constantin Medien AG v Ecclestone & Ors

In civil proceedings alleging bribery and economic loss, the claimant must prove both the unlawful conduct and loss caused by it. Where the alleged loss depends on what a third party would have done absent the wrongdoing, the court must determine that counterfactual on the balance of probabilities.

For choice of law under the Private International Law (Miscellaneous Provisions) Act 1995, the court identifies the significant elements of the tort under section 11 and displaces the general rule under section 12 only where another law is substantially more appropriate. Under German law, reflective loss cannot be recovered independently, and liability under §826 requires the requisite intention and conduct contrary to good morals towards the claimant.

Constantin Medien AG, the successor to EM.TV, claimed damages from Bernard Ecclestone, Stephen Mullens and Bambino Holdings Limited. It alleged that payments totalling $44 million to Gerhard Gribkowsky, a member of the management board of Bayerische Landesbank, were bribes intended to procure the sale of the bank’s Formula One shares to CVC Capital Partners.

Constantin relied on overage rights arising from the 2003 compromise of earlier Jersey litigation. It alleged that the shares were sold below value and that this deprived it of an overage payment. The claims were advanced principally under §826 of the German Civil Code, alternatively in English tort. The central issues were the reason for the payments, causation and loss, the defendants’ knowledge of the overage rights, and the applicable law.

1. Findings of fact. On the balance of probabilities, the payments represented a bribe. Mr Ecclestone had entered into a corrupt agreement with Dr Gribkowsky in May 2005 under which Dr Gribkowsky would be rewarded for facilitating the sale of BLB’s shares to a purchaser acceptable to Mr Ecclestone. Mr Mullens was complicit. Bambino was not shown to have been complicit and acted on the basis of supposed intimations concerning HMRC.
2. The purpose of the arrangement was to remove the Banks from the Formula One group and secure a more congenial owner. It was not proved that Mr Ecclestone or Mr Mullens intended the shares to be sold at an undervalue. Nor was it proved that BLB would have obtained more by delaying the sale, seeking another purchaser or obtaining further valuation advice. BLB would probably have accepted CVC’s offer in any event.
3. Applicable law. Applying the approach in VTB Capital plc v Nutritek International Corp [2012] EWCA Civ 808 and VTB Capital plc v Nutritek International Corpn [2013] UKSC 5, the most significant elements of the alleged torts occurred in Germany. The corrupt agreement was made in London, but it concerned the conduct of an employee and board member of a German bank; most of the relevant conduct occurred in Germany; and the alleged loss was suffered by German companies. Section 12 of the Private International Law (Miscellaneous Provisions) Act 1995 did not displace German law.
4. Under §826 of the German Civil Code, Constantin’s alleged loss was reflective of loss suffered by BLB. The overage rights did not transfer the loss from BLB to Constantin. A claim by Constantin would overlap with any claim by BLB, and German law would not permit recovery in that form. Further, the defendants lacked knowledge of the overage rights, and causation of loss was not established. Mr Mullens was not shown to have had conditional intent as regards BLB or Constantin.
5. Had English law applied, the claims would also have failed. The defendants lacked the necessary intention to injure Constantin, and no loss caused by the corrupt arrangement was proved. The claim was dismissed.