JSC Commercial Bank Privatbank v Kolomoisky & Ors

Article 6(1) of the Lugano Convention permits a sustainable claim against an anchor defendant to found jurisdiction over a closely connected claim against a foreign co-defendant. The majority held that no additional “sole object” condition applies. Jurisdiction is defeated where the close-connection requirement has been artificially fulfilled or prolonged.

Article 28 may apply reflexively to related proceedings in a non-Convention state. “Expedient to hear and determine them together” means desirable, not necessarily practicable. At the discretionary stage, however, inability to consolidate will usually be a compelling reason to refuse a stay.

Interlocutory applications must not become mini-trials of disputed facts. A freezing order should not be discharged for an innocent omission that could not have affected the original decision.

A Ukrainian bank alleged that two individuals domiciled in Switzerland had orchestrated the fraudulent misappropriation of US$1.9 billion through English and British Virgin Islands companies which they controlled. A worldwide freezing order was granted for up to US$2.6 billion.

Fancourt J, in [2018] EWHC 3308 (Ch), held that the English court lacked jurisdiction over the individuals, stayed the claims against the English companies, set aside service on the BVI companies and discharged the freezing order. He considered that the English companies had been sued solely to establish jurisdiction over the individuals. He would also have stayed the proceedings in favour of related Ukrainian defamation proceedings and discharged the order for non-disclosure.

The appeal concerned jurisdiction under article 6(1) of the Lugano Convention, reflexive application of article 28, the meaning of related proceedings, forum non conveniens, the arguable quantum of the claim and disclosure on the without-notice application.

1. Appeal allowed. The court unanimously held that jurisdiction existed and that the English proceedings should continue against all defendants. The worldwide freezing order remained in force.

2. By a majority, David Richards and Flaux LJJ held that article 6(1) of the Lugano Convention contains no general “sole object” condition. A claimant with a sustainable claim against an anchor defendant, intended to be pursued to judgment, may rely on article 6(1) even if its sole object in commencing that claim is to sue a foreign co-defendant in the same proceedings. The close-connection condition may not, however, be artificially fulfilled or prolonged. Newey LJ dissented on this point and considered that firm evidence of a sole object would make article 6(1) unavailable. [2019] EWCA Civ 1708, paras [102]–[111], [270]–[278].

3. Even if a sole-object test applied, it would be assessed objectively and would operate only if joining the foreign defendants were the claimant’s exclusive object. The prospect of obtaining relevant disclosure from the English companies supplied a real additional reason for suing them. The judge’s contrary assessment rested on several erroneous premises. Paras [119]–[148].

4. Article 28 of the Lugano Convention may be applied reflexively to proceedings pending in a non-Convention state. That approach advances certainty and avoids inconsistent judgments without extending the Convention’s territorial scope. Paras [177]–[181].

5. Proceedings are capable of being related where it is genuinely desirable that they be heard together to avoid irreconcilable judgments. Actual consolidation need not be possible. Its impossibility is nevertheless usually a compelling discretionary reason to refuse a stay. The judge had also misunderstood the Ukrainian court’s treatment of the defamation claim. A stay of a substantial English fraud claim in favour of non-consolidable Ukrainian defamation proceedings was inappropriate. Paras [191]–[212].

6. The BVI companies were necessary or proper parties once the claims against the individuals and English companies were permitted to proceed. Service should not have been set aside and no forum non conveniens stay was justified. Para [213].

7. The pleaded tort claim depended on participation with unity of intent, not on proprietary tracing of the precise loan monies. Disputed repayment, causation and transactional-linking questions could not properly be resolved through an interlocutory mini-trial. The Bank had a good arguable case for US$1.9 billion, including an arguable unjust-enrichment claim. Paras [223]–[247].

8. The Bank should have explained more clearly that the pre-payments passed only fleetingly through the corporate defendants. The omission was not deliberate and could not have affected the original order. It did not justify discharging the freezing order. Paras [266]–[268].

1. Court of Appeal (Civil Division): In [2019] EWCA Civ 1708, allowed the appeal, set aside the jurisdictional and stay decisions, and preserved the worldwide freezing order.
2. High Court of Justice, Business and Property Courts: Fancourt J in [2018] EWHC 3308 (Ch) declared that the court lacked jurisdiction over the first, second and sixth to eighth defendants; stayed the claims against the third to fifth defendants; set aside service on the sixth to eighth defendants; and discharged the worldwide freezing order, subject to appeal.