Bnp Paribas S.A. v (1) Open Joint Stock Company Russian MacHines (2) Joint Stock Asset Management Company Ingosstrakh-investments
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BLAIR,Mr Justice Blair |
| Judgment Date | 24 November 2011 |
| Neutral Citation | [2011] EWHC 308 (Comm) |
| Docket Number | Case No: 2011 FOLIO 721 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 24 November 2011 |
[2011] EWHC 308 (Comm)
Mr Justice Blair
Case No: 2011 FOLIO 721
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Graham Dunning QC and Mr Stephen Houseman (instructed by Clifford Chance LLP) for the Claimant
Mr James Ramsden (instructed by Steptoe & Johnson) for the First Defendant
Ms Vasanti Selvaratnam QC and Mr Henry Ellis (instructed by Bryan Cave LLP) for the Second Defendant
Hearing dates: 7 and 8 November 2011
The claimant, BNP Paribas S.A., is a French bank. The first defendant, Open Joint Stock Company Russian Machines, and the second defendant, Joint Stock Asset Management Company Ingosstrakh-Investments, are both Russian companies. These proceedings in the English Court comprise a claim for anti-suit relief in connection with an arbitration agreement between the claimant and the first defendant.
Three applications are before the court for decision.
(1) The first defendant's application dated 25 July 2011 challenging the court's jurisdiction and service of proceedings upon it within the jurisdiction;
(2) The second defendant's application, also dated 25 July 2011, challenging the court's jurisdiction and service of proceedings upon it within or outside the jurisdiction, and seeking to set aside the Order of 8 June 2011 giving permission to serve out of the jurisdiction;
(3) The claimant's cross-application dated 22 August 2011, seeking various aspects of service-related relief as against the first defendant and (to a lesser extent) second defendant, depending on the outcome of (1) & (2) above.
If these issues are decided in the claimant's favour, there is a further related application dated 28 October 2011 by the claimant seeking interim anti-suit injunctive relief as against the first and second defendants.
The issues in essence are whether the court has jurisdiction in respect of the substantive anti-suit claims as against the defendants, and as to whether the defendants were properly served with the proceedings, and if not, what consequences flow from that.
For the purposes of these applications, the facts can be stated as follows. By a guarantee dated 1 October 2008, the first defendant guaranteed certain liabilities of one of its subsidiaries. The liabilities arose under a collateralised margin loan made by the claimant bank to the subsidiary. The guarantee is governed by English law, and provided for disputes to be referred to arbitration under the LCIA rules, with the claimant having the option to bring proceedings in this court instead. The relevant provisions are as follows:
" 16. ARBITRATION
16.1 Subject to Clause 16.4, any dispute (a "Dispute") arising out of or in connection with this Guarantee (including any question regarding the existence, validity or termination of this Guarantee or the consequences of its nullity) shall be referred to and finally resolved by arbitration under the Arbitration Rules of the London Court of International Arbitration.
16.2 Procedure for arbitration
16.2.1 The arbitral tribunal shall consist of one arbitrator who shall be a Queen's Counsel of at least five years' standing
16.2.2 The seat of arbitration shall be London, England and the language of the arbitration shall be English.
16.3 Save as provided in Clause 16.4, the parties to this Guarantee exclude the jurisdiction of the courts under Sections 45 and 69 of the Arbitration Act 1996
16.4 Before an arbitrator has been appointed to determine a Dispute, the Beneficiary may by notice in writing to the Guarantor require that all Disputes or a specific Dispute be heard by a court of law. If the Beneficiary gives such notice, the Dispute to which that notice refers shall be determined in accordance with Clause 17.1
ENFORCEMENT
17.1 In the event the Beneficiary issues a notice pursuant to Clause 16.4, the following provisions shall apply:
17.1.1 Subject to Clause 16.1 the courts of England have exclusive jurisdiction to settle any Dispute
17.1.2 The Beneficiary and the Guarantor agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly neither the Guarantor nor the Beneficiary will argue to the contrary
17.1.3 This Clause is for the benefit of the Beneficiary only. As a result, the Beneficiary shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Beneficiary may take concurrent proceedings in any number of jurisdictions
17.2 Without prejudice to any other mode of service allowed under any relevant law, the Guarantor:
17.2.1 irrevocably appoints Bryan Cave of 88 Wood Street, London EC2V 7 AJ England (or, if different, its registered office) as its agent for service of process in relation to any proceedings before the English Courts in connection with this Guarantee; and
17.2.2 agrees that failure by a process agent to notify the Guarantor of the process will not invalidate the proceedings concerned."
A dispute arose under the loan agreement, and the claimant sought to enforce the guarantee. On 6 August 2010, it commenced arbitral proceedings against the first defendant claiming about US$80 million. The first defendant is represented by Steptoe & Johnson. On 6 September 2010, it served its response on the basis that the guarantee was never valid because it did not recieve the fundamental approvals required to be effective.
Shortly afterwards the parties agreed to amend the arbitration agreement by substituting for arbitration by a Queen's Counsel, the appointment as arbitrator of Professor Albert van den Berg. It is useful to set out the relevant terms in that respect.
"1. AGREEMENT TO ARBITRATE THE DISPUTES BEFORE PROFESSOR VAN DEN BERG
In consideration of the mutual promises as set forth below, the Parties agree that any disputes arising out of or in connection with the Guarantee (including any question regarding the existence, validity, enforceability or termination of the guarantee or the consequences of its nullity) shall be referred to and finally resolved by arbitration under the Arbitration Rules of the LCIA in LCIA Arbitration No. 101665.
The arbitral tribunal shall consist of one arbitrator who shall be Professor van den Berg. If, for any reason, Professor van den Berg cannot act as arbitrator in LCIA Arbitration No. 101665, the arbitrator shall be a Queens Counsel of at least five years standing.
The seat of the arbitration shall be London, England and the language of the arbitration shall be English.
…
Clause 16 of the Guarantee shall be amended accordingly.
1.6 Clauses 17.1 and 17.2 of the Guarantee are repealed.
"2 GOVERNING LAW
2.1 This Agreement shall be governed by and construed in accordance with English Law."
As well as appointing Professor van den Berg as arbitrator therefore, the parties "repealed" the provision in the arbitration agreement as contained in the guarantee by which the London office of Bryan Cave LLP was appointed by the first defendant as agent for service of process in relation to any proceedings before the English Courts in connection with the guarantee. As I shall explain, it was this change that led in part to the problems as regards service which subsequently emerged. As is common in contracts of this kind, the guarantee gave the bank the option to bring proceedings in the English Court, but that option had not been pursued. The evidence is to the effect that the person dealing with the matter in the claimant's solicitors felt that the clause was no longer necessary, since the parties had agreed to arbitrate. On 1 December 2010, the LCIA Court confirmed the appointment of Professor van den Berg as sole arbitrator, and the arbitration got underway.
The second defendant is the trust manager of a small holding of shares in the first defendant (the evidence suggests 0.14%) that belongs to the Socium Non-Governmental Pension Fund. It is common ground that the defendants are related companies. On 27 December 2010, the second defendant commenced proceedings before the Moscow Arbitrazh Court seeking invalidation of the guarantee on the basis that it was an "interested party transaction", and a "major transaction" under the Russian Joint Stock Company Law, which should have been approved at a general meeting of the shareholders. Both the claimant and the first defendant are defendants to those proceedings. The proceedings were served on the claimant on 13 January 2011, and the evidence is that this was the first time that the claimant became aware of them.
The relationship between them is in dispute, but as a matter of fact there were now two sets of proceedings on foot as regards the guarantee. Various procedural hearings took place in the arbitration and in the Moscow Arbitrazh Court in February. The claimant's evidence is that it took some time to investigate the ownership structure of the defendants. On 8 April 2011, it issued a motion in the Arbitrazh Court to dismiss the Russian proceedings on the basis of lack of jurisdiction by reference to the arbitration.
On 11 April 2011, it requested the arbitrator's permission for the purposes of s. 44(4) Arbitration Act 1996 to commence an anti-suit action against both defendants. The matter was disputed by the defendants in correspondence, but by Order No.3 in the arbitration dated 4 May 2011, the claimant's request was...
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