AK Investment CJSC v Kyrgyz Mobil Tel Ltd & Ors (Isle of Man)

Factual and Procedural Background

This appeal concerns competing claims to a Kyrgyz telecommunications company (“Company A”). In Kyrgyz proceedings, Company A obtained a 2006 monetary judgment (“the 2006 Judgment”) against three Isle of Man companies (“the Company B Group”). Company A later sued in the Isle of Man to enforce the unpaid balance of that judgment. The Company B Group responded with a Counterclaim alleging that the 2006 Judgment (and earlier Kyrgyz judgments of 2005) had been procured by fraud and that Company A’s shares and assets had been wrongfully diverted through a chain of transactions involving multiple foreign entities.

The Company B Group sought and obtained permission to join thirteen additional foreign defendants to the Counterclaim, including six present Appellants (“the Appellants”). Deemster Doyle set aside service on those Appellants, holding that Kyrgyzstan, not the Isle of Man, was the appropriate forum. The Staff of Government Division reversed that decision and restored service out of the jurisdiction. The Appellants now appeal to the Privy Council.

Legal Issues Presented

1. Whether the Appellants are “necessary or proper parties” to the Counterclaim so as to justify service out of the Isle of Man under Manx High Court Rule Ord. 6 r.1(g).
2. Whether the Isle of Man is clearly or distinctly the appropriate forum, or whether the proceedings should be pursued in Kyrgyzstan.
3. Whether the Counterclaim against Company A is “properly brought,” i.e. raises a serious issue to be tried and is not bound to fail.
4. The standard by which an Isle of Man court may refuse to defer to a foreign forum on the ground that substantial justice may not be obtainable there.
5. Whether, and to what extent, a foreign judgment alleged to have been procured by fraud may be impeached in Isle of Man proceedings (the continued vitality and scope of the Abouloff principle).

Arguments of the Parties

Appellants’ Arguments

• The Counterclaim is not “properly brought” because its real object is to anchor jurisdiction over foreign parties; claims against Company A are bound to fail.
• Kyrgyzstan is the natural and available forum; the Company B Group has not proved they will be denied justice there.
• The Abouloff rule (allowing foreign judgments to be impeached for fraud without fresh evidence) is obsolete and should not apply; moreover, the impugned Kyrgyz judgments are judgments in rem affecting title to shares and cannot be collaterally attacked.
• Even if fraudulent, earlier 2005 Kyrgyz judgments cannot taint the 2006 Judgment because Company A was not party to the earlier fraud.

Company B Group’s Arguments

• The claims against Company A and the Appellants are factually and legally intertwined; a single investigation is required in the Isle of Man.
• If confined to Kyrgyzstan the Company B Group will have no practical remedy; criminal-procedure pre-conditions and systemic irregularities make a civil action there illusory.
• The Isle of Man court may, and should, decline to recognise the 2005–2006 Kyrgyz judgments as they were procured in breach of natural justice, of English/BVI anti-suit injunctions, and by fraudulent misrepresentation.
• There is at least a serious issue to be tried on Kyrgyz-law causes of action for (i) causing harm, (ii) unjust enrichment, and (iii) abuse of right.

Table of Precedents Cited

Court's Reasoning and Analysis

The Board reaffirmed the three-stage test for service out of the jurisdiction. It held:

• Serious Issue / Bound to Fail: The Counterclaim raises substantial questions on fraud, unjust enrichment and abuse of right under Kyrgyz law. Whether Kyrgyz procedural law requiring prior criminal findings is “substantive” or “procedural” for Manx purposes is itself a triable issue. Accordingly, the claims are not bound to fail.
• Necessary or Proper Parties: The alleged fraudulent chain of share and asset transfers, the procurement of the 2005–2006 Kyrgyz judgments, and the enforcement efforts in the Isle of Man form a single, inter-woven factual matrix. A “single investigation” will be required; hence the Appellants are proper parties to the Counterclaim against Company A.
• Forum Conveniens: Kyrgyzstan is naturally connected to the dispute, but the practical likelihood of a fair trial there is remote. The Board accepted extensive evidence of past procedural irregularities, irrational judgments, and alleged external influence over Kyrgyz courts. The correct test is whether there is a real risk that justice may not be obtained abroad; that risk was present.
• Discretion: Deemster Doyle erred (a) by requiring proof that justice would not be done in Kyrgyzstan, and (b) by discounting the overlapping issues between claims against Company A and the Appellants. The Staff of Government Division was therefore entitled to re-exercise discretion and did so on proper principles.
• Abouloff Principle: The Board acknowledged criticism of the rule but considered it unnecessary (and inappropriate at interlocutory stage) to decide whether it survives in Manx law; even without Abouloff, public-policy and natural-justice grounds could justify refusing to recognise the Kyrgyz judgments.

Holding and Implications

APPEAL DISMISSED.

The order permitting service out of the jurisdiction on the six Appellants stands. The Counterclaim against Company A and all joined defendants will proceed in the Isle of Man. The decision underscores that Manx (and by extension English) courts will:

• Closely scrutinise whether a foreign forum can in practice deliver justice before declining jurisdiction.
• Apply a flexible “single investigation / closely bound up” test when assessing “necessary or proper party” gateways.
• Leave open, for a suitable later case, the question whether the century-old Abouloff rule should be re-examined.

No new precedent is set on the merits, but the judgment signals a robust willingness to retain jurisdiction where foreign judicial integrity is credibly in doubt, thus preserving practical access to justice for claimants.