As Latvijas Krajbanka ((in Liquidation)) v Vladimir Antonov
| Jurisdiction | England & Wales |
| Judge | Mr Justice Leggatt |
| Judgment Date | 08 July 2016 |
| Neutral Citation | [2016] EWHC 1679 (Comm) |
| Docket Number | Case No: 2014 FOLIO 861 & 761 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 08 July 2016 |
[2016] EWHC 1679 (Comm)
Mr Justice Leggatt
Case No: 2014 FOLIO 861 & 761
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Paul McGrath QC & George Hayman (instructed by Stephenson Harwood LLP) for the Claimant
No attendance on behalf of the Defendant
Hearing dates: 11 and 13–14 April 2016, 27 May 2016
Introduction
In the judgment which I handed down on 27 May 2016 following the trial of this action, I concluded that, in each of the eight transactions which are the subject of the Bank's claims, the defendant, Mr Antonov, acted dishonestly and in breach of duties owed to the Bank under Latvian law. I further concluded that, as a result of Mr Antonov's wrongdoing, the Bank suffered losses of €60,499,567 and US$30,762,458 which it is entitled to recover as damages.
In its particulars of claim and submissions made at the trial, the Bank claimed interest on damages pursuant to Article 195 of the Latvian Civil Procedure Code, or alternatively under section 35A of the Senior Courts Act 1981, at the rate of 6% per annum. In the judgment given on 27 May 2016, I did not determine the amount of interest recoverable by the Bank and invited further submissions on the appropriate rate and on the law applicable to that question.
The Bank filed such submissions on 17 June 2016, along with a further expert report from a Latvian lawyer, Mr Romualds Vonsovics, concerning the Latvian law applicable to an award of interest in civil proceedings and a witness statement addressing the calculation of interest. A revised calculation of interest was provided on 5 July 2016.
In this judgment I will first address the question whether the rate of interest is governed by Latvian law or English law, and I will then specify the rates at which the Bank is entitled to interest on the sums awarded as damages.
The applicable law
English rules of private international law distinguish between questions of substance, which are governed by the law applicable to the cause of action, and questions of procedure, which are governed by the law of the forum. In dealing with interest, a preliminary question arises as to whether the award of interest is a matter of substance or procedure. In applying that distinction, the position is complicated by the fact that the transactions in this case span three different legal regimes.
The Plazmexon, Krapivny and Davitiashvili loans were made before 11 January 2009 and therefore fall outside the temporal scope of Regulation (EC) No. 864/2007 of 11 July 2007 on the law applicable to non-contractual obligations ("Rome II"). The law applicable to Mr Antonov's non-contractual liability in relation to these transactions is determined by the Private International Law (Miscellaneous Provisions) Act 1995. There is no doubt that, pursuant to section 11(1) of the 1995 Act, the applicable law is the law of Latvia, being the country in which the events constituting the torts occurred. This is subject, however, to section 14(3)(b), which provides that nothing in the relevant part of the Act "authorises questions of procedure in any proceedings to be determined otherwise than in accordance with the law of the forum."
The proper approach to applying this distinction has been considered by the House of Lords in Harding v Wealands [2007] 2 AC 1 and by the Supreme Court in Cox v Ergo Versicherung AG [2014] AC 1379. Those cases decide that the question whether a particular head of loss is recoverable is a question of substance governed by the law applicable to the obligation. On the other hand, whether there is a remedy available for any particular item of loss is a procedural question governed by English law as the law of the forum. Applying that distinction to a claim for interest, the Court of Appeal held in Maher v Groupama Grand Est [2010] 1 WLR 1564, para 40, that the existence of a right to recover interest as a head of damage is a matter of substance governed by the applicable law, but that section 35A of the 1981 Act is a procedural provision which creates a remedy exercised at the court's discretion. The Court of Appeal considered that this discretionary remedy is available whether a substantive right to recover interest exists or not, although the factors to be taken into account in exercising the court's discretion might well include any relevant provisions of the applicable foreign law relating to the recovery of interest.
The Eagle River, Multikapitals, Clarkson, VTB Bank and EWUB transactions all fall entirely within the temporal scope of Rome II. Pursuant to Article 4(2) of the regulation, for these transactions the law applicable to the claims arising out of tort/delict is again that of Latvia, as the country in which the damage occurred. Article 1(2)(d), however, excludes from the scope of Rome II non-contractual obligations arising out of the law of companies. The claims made against Mr Antonov for breach of duties owed to the Bank as a member of the Bank's Supervisory Council after 15 September 2009 fall within this exclusion. Under common law choice of law rules, these claims are governed by Latvian law as the law of the place of incorporation of the Bank: see Base Metal Trading Ltd v Shamurin [2005] 1 WLR 1157, paras 65–69. For these claims, the distinction between substance and procedure must be drawn in the same way as the claims to which the 1995 Act applies, as section 14(3)(b) of the 1995 Act (quoted above) merely preserved the common law distinction between matters of substance and procedure.
For the claims arising out of tort/delict which fall within the scope of Rome II, Article 15(c) of the regulation provides that the law applicable to the non-contractual obligation governs "the existence, the nature and the assessment of damage or the remedy claimed". Pursuant to Article 15(d), the same law...
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