Akers & Ors v Samba Financial Group

A stay of proceedings will be granted under Spiliada Maritime Corp v Cansulex Ltd where the defendant shows that another forum is clearly or distinctly more appropriate and the claimant cannot establish that justice requires the English proceedings to continue.

In determining the appropriate forum, the governing law of the relevant transactions is generally an important factor and may be decisive. Under common law conflict rules, ownership of shares is governed by the law of the place where the shares are situated, ordinarily the place of incorporation. The same rule applies under the Hague Trusts Convention to issues concerning title. A trust’s governing law may be determined under Article 7 even where that law does not recognise the trust category relied upon.

The joint liquidators of a Cayman Islands company sought declarations under section 127 of the Insolvency Act 1986 that a transfer of shares in Saudi Arabian companies was void. They alleged that the shares were held on Cayman Islands trusts for the company and had been transferred to the defendant, a Saudi Arabian bank, after recognition of the Cayman insolvency proceedings in England.

The defendant applied under CPR Part 11 for a stay in favour of Saudi Arabia. The central issues were the law governing the alleged proprietary interests and trusts, the appropriate forum under the Spiliada principles, and whether justice required the proceedings to continue in England.

1. The application for a stay was granted. The courts of Saudi Arabia were clearly and distinctly the more appropriate forum.

2. Under common law conflict principles, ownership of shares is determined by the law of the place where the shares are situated, namely the place where the company is incorporated. The disputed shares were shares in Saudi Arabian companies and were registered in Saudi Arabia. No different common law rule was established for beneficial ownership as distinct from legal title.

3. That rule applied under the Recognition of Trusts Act 1987 and the Hague Trusts Convention. Article 15(d) permitted the application of the law designated by the forum’s conflict rules to the transfer of title to property and security interests. The creation or vesting of a beneficial interest under an express trust fell within that provision. Alternatively, if Article 15(d) did not apply, Articles 6 to 8 directed attention to the law most closely connected with the trust.

4. Under Article 7, the relevant factors overwhelmingly connected the transactions with Saudi Arabian law: the shares, companies and registration were in Saudi Arabia; the trustee was resident there; and the arrangements were connected with Saudi Arabian foreign investment restrictions. The governing law was therefore Saudi Arabian law. It was unnecessary to resolve finally whether the transactions created an amaana.

5. The governing law was decisive to the forum application. If Saudi Arabian law governed, the alleged common law trust was not recognised and the company had no proprietary interest engaging section 127. The remaining issues concerned Saudi Arabian law and events occurring in Saudi Arabia.

6. The court’s alternative conclusion was that, if Cayman Islands law were reasonably arguable as the governing law, the stay would have been refused. Saudi courts did not apply foreign law, whereas English courts could receive evidence of Saudi Arabian law and determine the relevant issues. The Spiliada conditions would not then have been satisfied.