Ashot Egiazaryan and Another v OJSC OEK Finance and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Burton,Burton J. |
| Judgment Date | 04 December 2015 |
| Neutral Citation | [2015] EWHC 3532 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2014813 |
| Date | 04 December 2015 |
[2015] EWHC 3532 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Burton
Case No: 2014813
Mr Joe Smouha QC and Mr Jeremy Brier (instructed by Gibson, Dunn & Crutcher LLP) for the Claimants
Mr Richard Millett QC and Ms Jessica Wells (instructed by Jones Day) for the Respondents
Hearing dates: 18, 19 and 20 November 2015
Mr Justice Burton :
This hearing arises out of an Arbitration Award by Mr Andrew Foyle, Mr Dominic Kendrick QC and, as Chairman, Dr Georg von Segessor, dated 5 June 2014, by which the Arbitrators concluded that they had no jurisdiction over the claims brought by the First Claimant, Mr Ashot Egiazaryan ("C1"), and the Second Claimant, Mr Vitaly Gogokhiya ("C2"), against the First Respondent, OJSC OEK Finance, a Russian company based in Moscow ("R1"), and the Second Respondent, the City of Moscow ("R2"). The application before me under s.67 of the Arbitration Act 1996 ("the Act") is brought by C2; C1, who was originally a party to the application, no longer challenges the findings of no jurisdiction over his claims. C2 has been represented by Joe Smouha QC and Jeremy Brier, and both the Respondents, as they were before the Arbitrators, by Richard Millett QC, and now also by Jessica Wells. The claims by C1 and C2 are in tort, by reference to Russian law, namely Article 1064 of the Russian Civil Court, which provides that " harm caused to the personality or property of [a citizen or legal entity] shall be subject to compensation in full by the person who has caused the harm". The tortious claims were made by reference to what Mr Smouha described as " a corporate raid" (being " the redistribution of a company's ownership through a combination of legal, illegal and illegitimate means"), allegedly devised and orchestrated by R1 and R2 to oust the Claimants from a prestigious and lucrative project to redevelop the Moskva Hotel adjacent to Red Square in Moscow ("the Project").
The two Agreements containing the relevant arbitration clauses, which related to the control and management of a BVI company initially owned by C2, Konk Select Partners Inc ("Konk"), were the Konk Shareholders' Agreement the ("Konk SHA") and the Konk Share Purchase Agreement the ("Konk SPA", or "the First Konk SPA" to differentiate it from that in June 2009). C2, R1 and Konk were the parties to the Konk SHA, and they were also parties to the Konk SPA, in addition to a Cyprus company, Falmiro Trading Ltd ("Falmiro"), beneficially owned by C1 and others, being the borrower under a loan from Deutsche Bank AG, which was being acquired by Konk. Recital J of the Konk SHA recorded that the shareholders (C2 and R1) were entering into that agreement to set out the terms governing both their relationship as shareholders of Konk and the management and operations of Konk and of Tribalin Trading Ltd ("Tribalin"), CJSC Decorum ("Decorum"), OJSC DecMos ("DecMos") and what was defined as the " complex", of which DecMos was the lessee, being the plot on which the Project was being constructed. The governing law of both Agreements was English law.
Section 10.13 of the Konk SHA reads as follows:
" 10.13 Arbitration of Disputes
(a) Any dispute, controversy or claim arising out of, relating to or in connection with this Agreement, including any question regarding its existence, validity or termination, or regarding a breach of this Agreement (a " Dispute"), shall be referred to, and finally settled by arbitration under and in accordance with the Rules of the LCIA then in effect (the " Rules"), which Rules are deemed to be incorporated by reference into this Section 10.13.
(b) The place of arbitration shall be London, England, and the award shall be deemed to have been made there…
…
(e) The parties agree, that all arbitration proceedings initiated under this Agreement and other Transaction Documents [defined so as to include, inter alia, the SPA] (subject to changes and amendments made from time to time thereto) may be considered simultaneously by one and the same arbitration tribunal provided that such proceedings are interdependent or proceed from the same or interdependent facts, causes or circumstances, and provided always that the tribunal considers the full or partial consolidation of such arbitration proceedings possible."
The Konk SPA contained mutatis mutandis materially the same provisions in its clause 8.
The Claimants asserted before the Arbitrators that C2 entered into the Konk SHA and Konk SPA as nominee or agent of C1, so that C1 was entitled to participate in the arbitration even though not a signatory to the Agreements. The Arbitrators concluded, after considering the evidence before them, that C2 was not C1's agent but held the Konk shares in his own right. Hence C1 was not entitled to participate in the arbitration. As set out above, C1 does not now challenge that decision.
The Claimants alleged before the Arbitrators that R2, albeit not a signatory to the Konk SHA or SPA could be joined in the arbitration by virtue of the provisions of Article 105 of the Russian Civil Code, by virtue of R2's liability in respect of the contractual obligations of its dependent company R1. Jurisdiction over the claim against R2 was rejected by the Arbitrators, but is renewed before me.
The issues before me were as follows:
i) Whether the Tort Claim, now sought to be made only by C2, falls within the arbitration clauses. The Arbitrators found that neither the claims made by C1 nor C2 fell within those clauses ("Issue 1").
ii) Whether the Tort Claim can be pursued by C2 against R2, by virtue of Article 105. The Arbitrators concluded, having heard evidence from Russian law experts, in paragraph 468 of the Award that:
" The provision makes a parent jointly and severally liable on the relevant contract as a whole. To the Arbitral Tribunal's mind, this includes liability to perform the Arbitration Agreement. The parent is as liable to arbitrate disputes as it is to perform the primary obligations under the relevant contract".
However the Arbitrators concluded that, since English law was the proper law of the Agreements, Article 105 had no effect ("Issue 2").
iii) If Issues 1 and/or 2 are resolved in favour of C2, whether the Tort Claim by C2 should be remitted to the Arbitrators in the exercise of my discretion pursuant to s.67(3) of the Act, or whether for him to pursue such a claim would be an abuse of process pursuant, or analogous, to the principles of Henderson v Henderson (1843) 3 Hare 100, or an abuse of s.1(a) of the Act. The main question is whether C2 is held to have made the Tort Claim before the Arbitrators or whether the claim now made by reference to his own beneficial entitlement to the Konk shares (as found by the Arbitrators), as compared with the case rejected by the Arbitrators that he held the shares as nominee for C1, is a new claim ("Issue 3").
The Arbitrators held an Evidentiary Hearing over a number of days in February 2013, hearing live evidence from factual and expert witnesses. There was also a large number of written statements, submissions and memorials, and the Award consisted of 629 paragraphs. They decided, after opposition by the Claimants, by a Procedural Order No. 11 of 31 August 2012, not to have a separate hearing on jurisdiction, recording that they were not convinced that any of the jurisdictional issues could be effectively isolated from questions of fact which were related to the merits. In the event they reached conclusions of fact by reference to the jurisdictional arguments, but recorded, in paragraph 566 of the Award, that, in the light of their rejection of jurisdiction over the Tort Claim, they had concluded that " there is no need for the Arbitral Tribunal to consider the arguments on the merits of the Tort Claim that were presented by the Parties".
The Claimants' Tort Claim brought in the arbitration, which C1 and C2 contended, and R1 and R2 denied, fell within the terms of the arbitration clauses, was described by the Arbitrators in paragraph 533 of the Award by reference to 21 " alleged unlawful acts", referred to by the Arbitrators as numbered bullet points. Mr Smouha before me has reconstituted the claims sought to be pursued by C2 alone in a remitted arbitration by reference to those 21 bullet points, although five of them (bullet points 1, 2, 3, 18 and 19) have been omitted, as C2 makes no claim relating to the period prior to the Konk Agreements. Mr Smouha has described the claim by reference to three main allegations, subsuming the surviving seventeen bullet points beneath them, as follows. He explains that since there is no concept of conspiracy in Russian tort law, there is simply one claim of unlawful conduct and harm contrary to Article 1064, albeit exemplified by the acts complained of:
" 1. The Konk Agreements were entered into by C2 with R1 as the gateway by which the entire "corporate raid" was made possible, including whereby an employee of Mr Kerimov became installed as a director of DecMos with the ability to control the project directly.
* Bullet Point 4 from Paragraph 533 of the Award: Respondents arranged the subsequent transfer of the interests in the Project leveraged by R2 through the Konk Agreements to Mr Kerimov.
2. The Corporate Raid involved C2 in numerous respects; critically one aspect of the corporate raid was the instituting of spurious criminal proceedings against [C2] when he sought to commence legal proceedings in...
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