Factual and Procedural Background
The Appellant, Company A, incorporated under the laws of Ukraine and nationalised in 2016, brought claims against multiple defendants including individuals domiciled in Switzerland (the first and second defendants), companies incorporated in England (the third to fifth defendants), and companies incorporated in the British Virgin Islands (the sixth to eighth defendants). The claims concern allegations of fraudulent misappropriation of approximately US$1.9 billion through a complex scheme involving loans to Ukrainian companies (the Borrowers) and sham supply agreements with companies controlled by the first and second defendants.
On 19 December 2017, a worldwide freezing order (WFO) was granted against all defendants for up to US$2.6 billion. The claim form was issued shortly thereafter and served on the English and BVI defendants. The defendants challenged jurisdiction and the WFO, leading to a hearing before a judge who declared that the court had no jurisdiction over the first and second defendants, stayed proceedings against the English defendants, and set aside service on the BVI defendants, also discharging the WFO. Company A appealed these decisions.
Legal Issues Presented
- Whether article 6(1) of the Lugano Convention is subject to a "sole object" test, i.e., whether a claim against a defendant domiciled in one Convention state may be barred if instituted solely to join a defendant domiciled in another state.
- Whether the court may stay proceedings against defendants under the Lugano Convention and the Recast Brussels Regulation on grounds of lis alibi pendens in favor of proceedings in a non-Convention (third) state, and if so, whether the judge erred in exercising discretion to stay the proceedings.
- Whether the judge erred in staying proceedings against the sixth to eighth defendants on forum non conveniens grounds and setting aside service on them.
- Issues concerning the quantum of the worldwide freezing order.
- Whether there was material non-disclosure in the initial without notice application for the worldwide freezing order and the judge’s decision on that basis.
- Whether the judge failed to give sufficient reasons on certain points (not separately pursued).
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Kalfelis v Bankhaus Schröder (Case 189/87) [1988] ECR 5565 |
Requirement of a connection between claims against multiple defendants to avoid jurisdictional abuse under article 6(1) Brussels Convention. |
Confirmed that claims must be so connected as to make it expedient to hear them together; sole object test is not expressly required but connection prevents misuse. |
| Runion Européenne SA v Spliethoff's Bevrachtingskantoor BV (Case C-51/97) [2000] QB 690 |
Clarification that article 6(1) exceptions are exhaustive and must be strictly construed to preserve domicile jurisdiction. |
Reaffirmed the connection requirement to avoid irreconcilable judgments and prevent sole purpose joinder to oust jurisdiction. |
| Freeport plc v Arnoldsson (Case C-98/06) [2008] QB 634 |
Article 6(1) applies where claims are connected; no separate need to prove claims were not brought solely to oust jurisdiction. |
Held that the close connection test alone suffices; the court need not investigate claimant’s motives absent firm evidence. |
| Reisch Montage AG v Kiesel Baumaschinen Handels GmbH (Case C-103/05) [2007] ILPr 10 |
Article 6(1) may be relied on even if claim against anchor defendant is inadmissible under national law; abuse of jurisdiction only if bad faith established. |
Emphasized that sole object misuse is prohibited but must be established on facts; absence of claimant’s bad faith meant article 6(1) applied. |
| Cartel Damage Claims (CDC) Hydrogen Peroxide SA v Akzo Nobel NV (Case C-352/13) [2015] QB 906 |
Abuse of article 6(1) jurisdiction limited to collusive or artificial fulfilment of conditions; firm evidence required to rebut application. |
Confirmed limited abuse doctrine; collusion to secure jurisdiction may negate application of article 6(1); otherwise, close connection suffices. |
| Painer v Standard Verlags GmbH (Case C-145/10) [2012] ECDR 6 |
Reiteration of the connection requirement under article 6(1). |
Restated principles consistent with prior cases; no material impact on present appeal. |
| Solvay SA v Honeywell Fluorine Products Europe BV (Case C-616/10) EU:C:2012:44 |
Similar reiteration of article 6(1) connection test. |
Confirmed connection principle; no direct bearing on outcome. |
| JSC Aeroflot v Berezovsky [2013] EWCA Civ 784 |
National court should not consider claimant’s motives under article 6(1) absent clear evidence. |
Held that courts focus on connection, not on claimant’s subjective intent. |
| Sabbagh v Khoury [2017] EWCA Civ 1120 |
Consideration of merits relevant to article 6(1) application; sole object test assumed but obiter. |
Did not resolve sole object test; accepted claim against anchor defendant was sustainable. |
| Lungowe v Vedanta Resources plc [2019] UKSC 20 |
Abuse of law principle applicable but narrowly construed; collusion required to engage abuse of jurisdiction. |
Held abuse of law limited to collusive invocation; no broad sole object test applied. |
| Owusu v Jackson (Case C-281/02) [2005] QB 801 |
National court with jurisdiction under article 2 cannot decline jurisdiction on forum non conveniens grounds. |
Prohibited introduction of discretionary forum non conveniens in EU jurisdiction rules; relevant to reflexive effect debate. |
| Ferrexpo AG v Gilson Investments Ltd [2012] EWHC 721 (Comm) |
Articles 27 and 28 of Brussels I Regulation may have reflexive effect in relation to third state proceedings. |
Applied reflexive effect to stay proceedings in favor of third state litigation; relevant to lis pendens issue. |
| Nomura International Plc v Banca Monte Dei Paschi Di Siena SpA [2013] EWHC 3187 (Comm) |
“Expedient” in article 28 means desirable, not merely possible; actions need not be practically consolidated to be related. |
Rejected argument that actions must be capable of consolidation to be related; supported stay. |
| Cardosa de Pina v MS "Birka" Beutler Schiffahrts KG [1994] I.L.Pr. 694 |
Actions must be capable of being tried together to be related under article 28. |
Disagreed with by later authorities; represents conflicting case law on expediency. |
| Centro Internationale Handelsbank AG v Morgan Grenfell Trade Finance Limited [1997] CLC 870 |
“Expedient” means actions should be heard together, not merely can be heard together. |
Preferred by court over Cardosa de Pina; supports broader interpretation of relatedness. |
| Brink's Mat Ltd v Elcombe [1988] 1 WLR 1350 |
Principles on duty of full and frank disclosure in ex parte applications. |
Applied to assess alleged non-disclosure by claimant in freezing order application. |
| National Bank Trust v Yurov [2016] EWHC 1913 (Comm) |
Materiality and discretion in non-disclosure cases for freezing orders. |
Guided court’s assessment of non-disclosure culpability and relief continuation. |
| Lucasfilm v Ainsworth [2009] EWCA Civ 1328 |
Discussion on jurisdiction and lis pendens in EU and third state contexts. |
Considered but did not resolve reflexive effect issue; noted lacuna for third states. |
| Masri v Consolidated Contractors International [2008] EWCA Civ 303 |
Recognition of reflexive effect of exclusive jurisdiction provisions. |
Supported application of EU jurisdiction rules by analogy to third state proceedings. |
Court's Reasoning and Analysis
The court undertook a detailed analysis of article 6(1) of the Lugano Convention and its interpretation in EU case law. It concluded that article 6(1) is not subject to an unexpressed "sole object" test. Instead, the requirement of a close connection between claims is the key safeguard against abuse, as established in Kalfelis, Runion, and Freeport. The court emphasized that the sole object test appears only in article 6(2), and its omission from article 6(1) was deliberate and significant.
The court considered the Advocate General’s opinions and CJEU case law, including Cartel Damage, which introduced a limited abuse of law principle applicable only in cases of artificial fulfilment or collusion to secure jurisdiction. The court held that this principle does not amount to a general sole object test.
Applying these principles to the facts, the court rejected the judge’s finding that the claim against the English defendants was brought solely to establish jurisdiction over the first and second defendants. The court found that the Bank had a sustainable claim against the English defendants and that the Bank’s pursuit of the first and second defendants in England was not the sole object but one of multiple legitimate objectives, including obtaining disclosure.
Regarding lis alibi pendens, the court upheld the reflexive application of article 28 of the Lugano Convention to proceedings pending in a non-Convention state (Ukraine), following the reasoning in Ferrexpo and related cases. The court rejected the submission that the Convention’s exclusive jurisdiction regime precluded such reflexive application, finding that it promotes legal certainty and avoids irreconcilable judgments.
On the threshold for staying proceedings under article 28 and article 34 of the Recast Brussels Regulation, the court adopted the view that “expedient” means “desirable” rather than “practicable,” thus permitting a stay even where consolidation of proceedings is not possible.
However, the court found that the judge erred in exercising his discretion to grant a stay in favour of the Ukrainian defamation proceedings. The judge had proceeded on the mistaken basis that the Ukrainian court dismissed the defamation claims purely on procedural grounds without considering merits, whereas in fact the Ukrainian court had found the claims frivolous and fabricated. The court held that, given the serious nature of the Bank’s fraud claim and the unavailability of consolidation in Ukraine, a stay was inappropriate.
On the quantum of the claim, the court disagreed with the judge’s reduction of the Bank’s claim from US$1.9 billion to approximately US$515 million. The court accepted that the Bank’s pleaded case includes a claim based on assistance (conspiracy) as well as receipt of funds, and that under Ukrainian law the Bank need not trace the exact funds to the English and BVI defendants. The court held that the judge had erred in discounting the claim based on the repayment of loans and the tracing exercise, emphasizing that these factual disputes are for trial.
Regarding non-disclosure in the initial freezing order application, the court found that although the Bank should have disclosed more clearly that the English and BVI defendants were conduits through which funds passed fleetingly, the failure was not deliberate and did not affect the judge’s decision to grant the freezing order. The court declined to discharge the freezing order.
Holding and Implications
The appeal is allowed.
The court held that:
- Article 6(1) of the Lugano Convention is not subject to a general sole object test; a claimant with a sustainable claim against an anchor defendant may join foreign defendants even if the sole object is to bring them within the jurisdiction, provided the claims are closely connected.
- The judge’s finding that the Bank’s claim was brought solely to establish jurisdiction was incorrect.
- The court has jurisdiction to try the claims against the first, second, and English defendants and the stay of proceedings was wrongly granted; the stay and setting aside of service on the BVI defendants was also incorrect.
- Article 28 of the Lugano Convention may be applied reflexively to proceedings pending in non-Convention states to avoid irreconcilable judgments.
- The judge’s exercise of discretion to stay proceedings in favour of Ukrainian defamation claims was erroneous and is set aside.
- The reduction of the claim quantum by the judge was premature and incorrect; the Bank’s claim as pleaded is sustainable and requires full trial.
- The judge’s decision to discharge the worldwide freezing order for non-disclosure was not justified; the freezing order stands.
No new precedent is established beyond clarifying the interpretation of article 6(1) and the limited scope of the sole object test, as well as endorsing the reflexive application of lis alibi pendens provisions to third state proceedings.