Zaza Okuashvili & Ors v Bidzina Ivanishvili & Ors

The court considered a mixed service-in/service-out jurisdiction challenge under the Civil Procedure Rules and the private international law rules in Rome I and Rome II. Key legal principles applied included the four-part test for permission to serve out (serious issue to be tried; good arguable gateway; England the appropriate forum; overall judicial discretion), Rome I for contractual choice of law and Rome II for non-contractual obligations. The court found that most tort claims were time-barred under Georgian law (three year limitation) and that unjust enrichment claims survived (ten year limitation). The without-notice Arkush Order permitting service out in Claim 1 was set aside for failure to make full and frank disclosure; by contrast there was no material non-disclosure in the application that produced the Pester Order in Claim 2. The only claims found to raise a real issue to be tried were contractual and fiduciary claims against Mr Kipiani in Claim 1 if governed by English law and a limited unjust enrichment claim against Mr Ivanishvili (Claim 1) and restitution claims in Claim 2 (against JSC Tbilisi Tobacco and against Mr Kipiani for recovery of consultancy fees). Service on Mr Kipiani was held to have been effectively made by service on his Georgian lawyers (and by the email order in Claim 2).

Background and parties: The judgment decided a jurisdictional challenge to two related claims brought by Mr Zaza Okuashvili and associated companies (Claim 1 and Claim 2) against, principally, Mr Bidzina Ivanishvili and various Georgian persons and entities, including Mr Otar Partskhaladze, Mr Levan Kipiani, JSC Tbilisi Tobacco and TBC Bank entities. The disputes concern alleged extortion and the misappropriation in 2016 of USD 1.79m (Claim 1) and alleged misuse and infringement of an English-origin patent exploited in Georgia, alleged coercion to force a merger and related losses (Claim 2).

Nature of the applications and relief sought:

• Claim 1: damages or restitution of USD 1.79m, consequential losses (at least USD 23m), and costs, founded on breach of contract and fiduciary duty, dishonest assistance, unlawful interference and inducement, intimidation, conspiracy, unjust enrichment, breach of statutory duty and negligence.
• Claim 2: account of profits and damages arising from alleged infringement and devaluation of a patent, restitution and loss of opportunity, founded on breach of contract and fiduciary duty, dishonest assistance, intimidation, conspiracy and unjust enrichment.

Issues framed by the court: (i) whether each claim raised a serious issue to be tried; (ii) whether any such claim passed a gateway in CPR Practice Direction 6B permitting service out; (iii) whether England and Wales was the appropriate forum or whether Georgia was; (iv) whether the court should exercise its discretion not to accept jurisdiction; (v) whether the without-notice orders for service out were obtained with full and frank disclosure; and (vi) whether service was validly effected.

Court's reasoning and subsidiary findings:

• Choice of law: the governing law of the consultancy agreements was to be determined under Rome I. Clause 14 (headed "Governing Law and Jurisdiction") (which conferred exclusive jurisdiction on the courts of England and Wales) and other contractual indicators were sufficient to give rise to a serious issue that the 2015 consultancy agreement was governed by English law. If English law governed, claims for breach of contract and fiduciary duty were arguable and not obviously time-barred; if governed by Georgian law they would be time-barred.
• Tort claims: under Rome II the law of the place where the damage occurred governs non-contractual claims. The alleged primary loss (withdrawal of USD 1.79m and loss to the patent exploitation) occurred in Georgia, so Georgian law applied to the torts. Georgian limitation rules gave a three year period (Article 1008/Article 129/Article 128 as applicable) and the court concluded there was no realistic prospect that the limitation periods were suspended or that the torts were continuing so as to avoid the bar. Accordingly the non-contractual tort claims were time-barred.
• Unjust enrichment: Georgian law recognises restitution claims (Article 978) with a ten year limitation. Claims in unjust enrichment therefore remained viable: against Mr Ivanishvili in Claim 1 (as an inference of enrichment could be drawn from the pleaded facts) and against JSC Tbilisi Tobacco in Claim 2 subject to the separate question of the Patent's validity.
• Patent validity: Georgian administrative and judicial history showed that the Patent had been revoked ultimately; that limited the period during which infringement-based recovery might arise and narrowed the recoverable period for an account of profits.
• Full and frank disclosure: the court found the without-notice Arkush Order (Claim 1) had been obtained on an incomplete and misleading presentation. The original papers failed to disclose plainly fatal limitation and governing law difficulties and gave a materially misleading impression of merits. The Arkush Order was therefore set aside. By contrast, the Pester Order (Claim 2) for substituted email service was not vitiated by material non-disclosure.
• Service: service on Mr Kipiani in Claim 1 was held to have been effectively effected by delivery to two Georgian lawyers (one of whom acted on his behalf and publicly acknowledged instructions); alternatively the court would deem service effective as of 12 October 2022. In Claim 2 substituted service by email authorised by Master Pester was valid and Mr Kipiani accepted receipt.
• Forum: Mr Kipiani had expressly agreed exclusive jurisdiction to the courts of England and Wales in the consultancy agreements. The court saw no good reason, given the narrow remaining claims and the contractual bargain, to decline to hold the parties to that choice.

Outcome of the jurisdictional review: Most non-contractual claims were time-barred and dismissed on the jurisdictional challenge. The Arkush Order permitting service out in Claim 1 was set aside for failure of full and frank disclosure; the Claim 2 substituted service order remained. The only claims retained as raising serious issues were contractual/fiduciary claims against Mr Kipiani in Claim 1 (if governed by English law) and limited unjust enrichment/restitution claims against Mr Ivanishvili, TT and Mr Kipiani.

This was a first-instance jurisdiction decision. The court set aside the Deputy Master Arkush order permitting service out in Claim 1 for failure to make full and frank disclosure; it concluded that most of the non-contractual tort claims were time-barred under Georgian law and therefore did not raise a serious issue to be tried; however there was a serious issue to be tried as to whether the 2015 consultancy agreement was governed by English law, leaving contractual and fiduciary claims against Mr Kipiani (Claim 1) and unjust enrichment restitution claims (against Mr Ivanishvili in Claim 1 and JSC Tbilisi Tobacco and Mr Kipiani in Claim 2) as surviving issues. The Master Pester order for substituted service in Claim 2 was not set aside. The court upheld that service on Mr Kipiani was effective (by service on his Georgian lawyers and by email as directed). The court declined to displace the parties from their contractual choice of the courts of England and Wales in respect of the remaining contractually-governed claims.