Koza Ltd & Anor. v Koza Altin Işletmeleri AS

Where the status or authority of a foreign company’s directors derives from a foreign judicial decision, an English court must determine whether that decision is entitled to recognition. It cannot treat the foreign law of incorporation as conclusive where corruption or a failure of substantial justice is alleged.

Different principles apply where the authority instead derives from foreign legislative or executive acts. Those acts are protected by the foreign act of state doctrine unless an exceptionally grave public-policy, human-rights or international-law exception is arguable. A bona fide higher-court review, and Strasbourg proceedings addressing the same complaints, may also mean that no serious issue arises as to the alleged corruption of the original judgment.

Koza Ltd and its director challenged the authority of Turkish directors to cause Koza Altin, a Turkish company and shareholder in Koza, to exercise shareholder rights in England. They alleged that the directors’ authority ultimately derived from a corrupt Turkish judgment appointing trustees.

Trower J dismissed an application for permission to serve the 2021 claim out in Turkey and summarily dismissed a related application in the 2016 proceedings: [2021] EWHC 2131 (Ch). He held that there was no serious issue to be tried.

The appeals raised whether the authority issue depended on recognition of the Turkish judicial decision, whether later Turkish legislative and executive measures supplied an independent source of authority, and whether the Turkish Constitutional Court and ECtHR decisions precluded an arguable case of corruption.

1. The appeals were dismissed. Trower J was right to refuse permission to serve the 2021 proceedings out of the jurisdiction and to dismiss the related strike-out application, although part of his reasoning was incorrect.

2. The judge erred in treating the authority issue as conclusively governed by Turkish law. Where a person’s corporate status or authority derives from a foreign judgment, the English court must decide whether to recognise that judgment. A foreign judgment does not attract the foreign act of state doctrine. The correct question is whether its recognition would be prevented by corruption or a failure of substantial justice. The analogy with Williams & Humbert was inapt because that case concerned foreign legislative acts and the revenue rule, not recognition of foreign judgments.

3. That error did not assist the appellants. The current directors’ authority derived from Turkish legislative decree 674, the subsequent appointments made by the SDIF, and the continuation of the trusteeship by the Ankara High Criminal Court. It did not derive from the Süer judgment. The foreign legislative and executive acts therefore fell within the foreign act of state doctrine.

4. The public-policy exception to that doctrine is narrow. It requires an exceptionally flagrant breach of human rights or international law. The allegations concerning Turkey did not arguably approach that standard.

5. Alternatively, the Turkish Constitutional Court’s detailed review validated the Süer judgment for recognition purposes. There was no serious issue that its decision lacked good faith or integrity. The ECtHR’s final decision rejecting Mr Ipek’s complaints, including those concerning the criminal peace court, independently confirmed that no serious issue was triable.

6. Obiter, the court held that the injunction claim was arguably within paragraph 3.1(2) of PD6B if the authority issue had been triable. It also upheld the judge’s rejection of abuse of process.

• Court of Appeal (Civil Division): Dismissed the claimants’ appeals and upheld the refusal of permission to serve the 2021 claim out and the summary dismissal of the related strike-out application.
• High Court (Chancery Division): Trower J dismissed the application for permission to serve out and allowed the defendants’ summary-dismissal application: [2021] EWHC 2131 (Ch).