JSC BTA Bank & Anor v Tyrkiye Vakiflar Bankasi TAO

Permission to serve proceedings out of the jurisdiction requires a serious issue to be tried, a good arguable case that a jurisdictional gateway applies, and England to be clearly or distinctly the appropriate forum. A foreign judgment may create an issue estoppel even if the foreign court is alleged to have applied the wrong law. Participation in foreign proceedings on the merits, followed by an appeal on the merits, ordinarily amounts to submission to that court’s jurisdiction. The exception for participation solely to protect seized property does not apply where the defendant also contests the merits. A covenant not to sue is not an agreement within section 32 of the Civil Jurisdiction and Judgments Act 1982. A choice of English law may be insufficient to make England the appropriate forum where the dispute has stronger foreign connections.

The claimants, Kazakh companies, alleged that the defendant Turkish bank breached an English-law Deed of Release by bringing and pursuing Turkish proceedings under a guarantee. The Turkish court had rejected the Deed of Release as invalid and entered judgment against the claimants. The claimants commenced proceedings in England and obtained permission to serve out of the jurisdiction.

The defendant applied to set aside that permission, arguing that the Turkish judgment created an issue or cause of action estoppel, that the claimants had submitted to the Turkish court, and that England was not the appropriate forum. The central issues were whether the claimants had shown a serious issue and a good arguable case, whether the Turkish judgment was entitled to recognition, and whether England was the clearly or distinctly appropriate forum.

1. Application allowed. The requirements for service out were not met. The claimants could not show a serious issue to be tried on the merits or a good arguable case that the relevant jurisdictional gateway applied.
2. The applicable requirements were a serious issue to be tried, a good arguable case that a gateway in paragraph 3.1 of Practice Direction 6B applied, and a showing that England was clearly or distinctly the appropriate forum. The good arguable case test required more than a case capable of resisting summary judgment, but did not require proof on the balance of probabilities.
3. The Turkish judgment satisfied the requirements for an issue estoppel identified in The Sennar (No. 2) [1985] 1 WLR 490. It was final and conclusive, was given by a court with jurisdiction, concerned the same parties, and decided the same issue. A decision was on the merits even if the foreign court was alleged to have applied the wrong law. Issue estoppel operated regardless of whether an English court considered the foreign reasoning open to criticism.
4. The claimants had submitted to the Turkish jurisdiction. Their substantive defence went beyond steps taken solely to protect or release seized property. Their appeal, which sought reversal of the finding that the Deed of Release was invalid, independently constituted submission. Section 33(1)(c) of the Civil Jurisdiction and Judgments Act 1982 therefore did not assist them.
5. Section 32 of the Civil Jurisdiction and Judgments Act 1982 did not apply. A covenant not to sue was not an agreement providing for resolution of a dispute otherwise than by proceedings in the foreign court; it was an undertaking not to commence proceedings anywhere.
6. There was no separate requirement of full contestation for issue estoppel. In any event, the relevant questions concerning the authority to execute the release and whether it had been executed were contested in Turkey. The proposed injustice exception was narrow and was not established. The unsupported allegation that the Turkish court lacked independence could not be taken into account.
7. England was not clearly or distinctly the appropriate forum. The Turkish proceedings had been continuing for six years, Turkey was a natural forum, the claimants had submitted there, and the dispute had no significant English connections apart from the choice of English law. That choice was insufficient because the issues identified did not present a significant disputed question of English law.