Gazprom Export LLC v DDI Holdings Ltd
| Jurisdiction | England & Wales |
| Judge | Peter MacDonald Eggers |
| Judgment Date | 14 February 2020 |
| Neutral Citation | [2020] EWHC 303 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2018-000161 |
| Date | 14 February 2020 |
[2020] EWHC 303 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Peter MacDonald Eggers QC
(Sitting as a Deputy Judge of the High Court)
Case No: CL-2018-000161
Mr Alain Choo-Choy QC (instructed by Baker & McKenzie LLP) for the Claimant
Mr Neil Calver QC and Mr Richard Howell (instructed by Squire Patton Boggs (UK) LLP) for the Defendants
Hearing dates: 3 and 4 December 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Peter MacDonald Eggers QC:
Introduction
The Claimant (“GPE”) is owned by Gazprom PJSC (which in turn is more than 50% directly or indirectly owned by the Russian Federation) and supplies natural gas to Bulgaria. GPE and Gazprom PJSC on the one hand and companies controlled by the Second Defendant (“Mr Dontchev”) on the other hand entered into a joint venture. Pursuant to the joint venture, GPE/Gazprom PJSC and the Fifth Defendant (“Overgas Holding”) each hold a 50% shareholding in the Fourth Defendant (“Overgas Inc”). Mr Dontchev controlled Overgas Holding through the First Defendant (“DDI Holdings”) and the Sixth Defendant.
GPE and Overgas Inc had entered into a gas supply contract (“the Supply Contract”) whereby GPE agreed to supply Overgas Inc with natural gas from 1st January 1997. GPE ceased to supply gas under the Supply Contract on 31st December 2015. GPE claims that approximately US$105 million was owing by Overgas Inc to GPE under the Supply Contract.
In February 2016, Overgas Inc commenced ICC arbitration proceedings against GPE in Switzerland. In those ICC arbitration proceedings, Overgas Inc claimed damages against GPE on the ground that GPE allegedly had acted in breach of EU and Bulgarian competition law and in breach of the Supply Contract and claimed a right to set-off those damages against the US$105 million owed to GPE. In the same ICC arbitration proceedings, GPE counterclaimed for US$105 million.
On 12th December 2018, the ICC Arbitral Tribunal — constituted by Mr Christer Söderlund, Professor Kaj Hobér and Professor Vladimir Yarkov — by its Award (“the ICC Award”) dismissed Overgas Inc's claims for breach of competition law and for breach of the Supply Contract and allowed GPE's counterclaim. Overgas Inc applied to challenge the ICC Award before the Swiss Federal Tribunal, but the application was dismissed in June 2019.
Until April 2016, Overgas Inc owned a 99.628% shareholding in the Third Defendant (“Overgas Mrezhi”), a gas distribution company involved in the design, construction, operation and maintenance of gas distribution networks, facilities and equipment relating to the use and sale of natural gas in Bulgaria. Overgas Mrezhi sells natural gas to consumers in Bulgaria.
In the current proceedings before this Court (“the English proceedings”), GPE claims damages from the Defendants on the ground that there was a scheme on the part of the Defendants to dilute the shareholding of Overgas Inc (the joint venture company) in Overgas Mrezhi from approximately 99.628% to 38.471%, by issuing shares to DDI Holdings amounting to a 61.385% majority shareholding in Overgas Mrezhi at an under-value to the detriment of GPE and Gazprom PJSC. GPE alleges that the purpose of this scheme was to frustrate the recovery of sums owed to GPE by Overgas Inc and to transfer value from Overgas Inc to DDI Holdings. GPE also claims a declaration that the issue of shares to DDI Holdings is void if and to the extent that GPE does not receive adequate compensation directly for its own loss or for the benefit of Overgas Inc.
The Defendants deny GPE's claim, alleging that the share issue was lawful and part of a legitimate emergency rescue package made necessary after the cessation of supply of natural gas to Overgas Inc from 1st January 2016, because, it is said, Overgas Inc could no longer fund Overgas Mrezhi. Further, the Defendants deny any wrongdoing on their part and allege that, in any event, any alleged loss sustained by GPE was caused by GPE's own unlawful conduct, namely its own failure to supply gas to Overgas Inc in breach of competition law.
The defence based on GPE's alleged breaches of competition law, set out in paragraphs 61(a) and 80(a)(i) of the Amended Consolidated Defence and Counterclaim (“the Amended Defence”), is advanced by all of the Defendants other than Overgas Inc (the joint venture company and the Fourth Defendant). The counterclaim based on GPE's alleged breaches of competition law is advanced by Overgas Mrezhi in paragraphs 96–126 of the Amended Defence. I shall refer to the Defendants other than Overgas Inc (that is, the First, Second, Third, Fifth and Sixth Defendants) as “the Principal Defendants”. Overgas Inc had advanced a similar counterclaim in paragraphs 127–132 of the Amended Defence, but has since discontinued that counterclaim. Overgas Inc's counterclaim was made pending the ICC Arbitral Tribunal's determination of whether it had jurisdiction to deal with this allegation of breaches of competition law. Once the Arbitral Tribunal determined it had jurisdiction, the discontinuance of Overgas Inc's counterclaim was inevitable given that the same issue between GPE and Overgas Inc raised in the said counterclaim was disputed and eventually determined in the ICC arbitration proceedings. During the hearing of GPE's application, Mr Neil Calver QC, who appeared with Mr Richard Howell, on behalf of the Defendants confirmed that the defence based on breaches of competition law set out in paragraphs 61(a) and 80(a)(i) of the Amended Defence was not being advanced by Overgas Inc, even though those paragraphs had been formally pleaded by all of the Defendants.
GPE applies for an order, pursuant to CPR rule 3.4(2)(b), striking out the Principal Defendants' defence and counterclaim based on the allegation of GPE's breaches of competition law, set out in paragraphs 61(a) and 80(a)(i) of the Amended Defence of the Principal Defendants, and the entirety of Overgas Mrezhi's counterclaim at paragraphs 96–126 of the Amended Defence. The application is made on the ground that the allegation of breaches of competition law which the Principal Defendants ( i.e. the Defendants other than Overgas Inc) advance in the proceedings before the English Court formed the basis of Overgas Inc's claim against GPE in tort for breaches of EU and Bulgarian competition law and in contract for breach of the Supply Contract in the ICC arbitration proceedings, which allegation was rejected by the ICC Arbitral Tribunal, after full pleading, argument and evidence which was considered and analysed in the ICC Award.
GPE argues that it is an abuse of the process of the Court for the identical allegations of breaches of competition law which had been determined by the ICC Arbitral Tribunal in the ICC arbitration proceedings between GPE and Overgas Inc to be advanced in the English proceedings by the Principal Defendants (that is the Defendants other than Overgas Inc). There is no suggestion made by GPE in this application that any of the Principal Defendants were privy to Overgas Inc's claim in the ICC arbitration proceedings, although GPE maintains that some assistance and possibly funding were provided by some of the Principal Defendants to Overgas Inc in the ICC arbitration proceedings. Accordingly, there is no suggestion in this application that the Principal Defendants are bound by the findings in the ICC Award by reason of estoppel per rem judicatam ( res judicata) or issue estoppel, as Overgas Inc is so bound. However, the point made against the Principal Defendants is that GPE's alleged anti-competitive conduct in respect of the Supply Contract has been finally determined in proceedings between the parties to that Supply Contract, namely GPE and Overgas Inc; and yet the Principal Defendants, who were not parties to the Supply Contract, wish to advance the very same allegations in the English proceedings. GPE contends that such a collateral attack by the Principal Defendants on the Arbitral Tribunal's findings in the ICC Award, if permitted to be continued, would be deeply unfair and unjust to GPE by permitting GPE to be vexed twice by allegations that have already been considered and determined on the merits after argument and on consideration of the evidence by a legitimate tribunal and would have the effect of bringing the administration of justice into disrepute by creating a real risk of alternative and conflicting decisions as to the relationship between GPE and Overgas Inc and a risk of challenge to the enforcement of the ICC Award.
The Principal Defendants respond to GPE's application to strike out the breaches of competition law allegations by observing that there is no suggestion that the allegations are otherwise irrelevant to the issues in these proceedings and that there is no application for summary judgment made by GPE. In particular, the Principal Defendants contend that the application for a strike out must be dismissed because it would not be manifestly unfair to GPE to allow the allegation of breaches of competition law to be tried. There can be no abuse of process where the ICC arbitration proceedings took place between GPE and Overgas Inc and concerned issues of competition on the gas wholesale and trading market in which Overgas Inc operated, whereas the English proceedings concern the gas retail and distribution market, where the “ principal focus...
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