Livingston Properties Equities Inc. and Others v JSC MCC Eurochem and another
| Jurisdiction | UK Non-devolved |
| Judge | Lady Arden |
| Judgment Date | 30 November 2020 |
| Neutral Citation | [2020] UKPC 31 |
| Court | Privy Council |
| Docket Number | Privy Council Appeal No 0026 of 2019 |
| Date | 30 November 2020 |
[2020] UKPC 31
Lord Reed
Lord Carnwath
Lady Black
Lady Arden
Lord Kitchin
Privy Council Appeal No 0026 of 2019
Privy Council
Michaelmas Term
From the Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands)
Appellants
Justin Fenwick QC
George Spalton
Jonathan Addo
Christopher Pease
(Instructed by Harney Westwood & Riegels LP (British Virgin Islands))
Respondents (10th–13th)
Hefin Rees QC
Scott Cruickshank
Jonathan Child
(Instructed by Alan Taylor & Co)
Respondent (16th)
Stephen Moverley Smith QC
Paul Griffiths
(Instructed by Edwin Coe LLP)
Respondents:-
(1) [Livingston Properties Equities Inc]
(2) [ Nimati International Trading Ltd]
(3) [ Nautilus Services Ltd]
(4) [ Global Med Services Inc]
(5) [ Sevan Properties Management Ltd]
(6) [ Rumbay Assets Corp]
(7) [ Banter Industries Ltd]
(8) [ Valery Rogalskiy]
(9) [ Dimitry Pomytkin]
(10) Nedjet Baysan
(11) Kopist Holding Ltd
(12) Itrade Fertilisers SA
(13) Fabio Scalambrin
(14) [ Darlow Enterprises]
(15) [ Darlow Investment LP]
(16) Dearborn Enterprises Ltd
(17) [ Gianthill Management Ltd]
(18) [ Dreymoor Fertilisers Overseas Pte Ltd]
Heard on 5 March 2020
This appeal is from the order of the Eastern Caribbean Court of Appeal (the ECCA) dated 18 September 2018, on appeal from Wallbank J sitting in the High Court of Justice (Commercial Division) of the British Virgin Islands (“the BVI”). The two appellants (collectively, “Eurochem”) commenced these proceedings in the BVI in 2015 to recover bribes alleged to have been paid to or for the benefit of the 8th and 9th defendants (“the Russian defendants”). They are Russian nationals. They were formerly senior executives of Eurochem, and had service contracts containing Russian choice of law clauses. They live in Russia but according to Eurochem at the material times they travelled abroad regularly and negotiated sales outside Russia.
There are sixteen other defendants, of whom nine (the first seven, the 11th and, by amendment of the pleadings, the 17th defendants) are companies registered, and so able to be served, in the BVI (“the BVI defendants”). By order dated 19 November 2015, Farara J (Ag) gave permission to serve the proceedings out of the jurisdiction on all the non-BVI defendants (“the foreign defendants”) in Switzerland, Singapore, Scotland and Panama. At the time of that order, the 17th defendant was understood to be a Panamanian company but Eurochem has amended its proceedings to show that the 17th defendant is a BVI company. The Russian defendants have not entered an appearance, although the 8th defendant has challenged the jurisdiction of the court, a challenge which has been stayed pending the determination of this appeal.
Eurochem comprises a Russian and a Swiss company trading in mineral fertilisers. Eurochem alleges that the Russian defendants set up and beneficially owned companies registered in the BVI, Panama, Cyprus, Singapore, Switzerland and Scotland (that is, the corporate defendants to these proceedings) for the sole purpose of receiving, concealing and laundering the proceeds of over US$45 million in secret commission payments made by Eurochem's trading partners and their associates, including the 18th defendant, Dreymoor Ltd. Eurochem alleges that the 10th and 13th defendants, who are Turkish nationals living in Turkey and Monaco respectively, were involved in the payment and receipt of the bribes.
Eurochem alleges in the proceedings that the defendants are liable for, among other matters, paying or receiving secret commissions amounting to bribes, knowing receipt, dishonest assistance and unlawful means conspiracy. It alleges that they are liable also to compensate Eurochem for the losses incurred by it and that the recipients of the bribes are liable to account for them to Eurochem as constructive trustees. Eurochem estimates that as a result of the secret commissions it also incurred losses, including loss of profits, currently estimated to be in excess of US$135m. The bribes are alleged to have been paid to bank accounts in Cyprus and Singapore.
In these proceedings, Eurochem alleges that there were five secret commission schemes with different distributors. The alleged way in which the schemes worked was that the Russian defendants, in breach of their duties to Eurochem, agreed contracts of sale with Eurochem's trading partners at well below market value and in return the Russian defendants were paid substantial secret commissions through the BVI defendants, which accordingly knew of their breach of duty.
The re-amended statement of claim is almost completely silent about when, where and how the defendants made the alleged wrongful arrangements and payments. Eurochem's case is that none of the defendants was in Russia at the relevant time and that the events occurred outside Russia. Foreign law is not pleaded.
Following service, the 10th, 12th, 13th, 16th and 18th defendants applied to the court to set aside the order for service on them. The 2nd to 5th, 11th and 17th defendants applied to stay the proceedings against them on the basis that Russia was a more convenient forum. Wallbank J dismissed these applications, but the ECCA reversed his decision by the order now under appeal.
The principles which the judge had to apply are well-known and are not in dispute. They are to be found in the well-known case of Spiliada Maritime Corpn v Cansulex Ltd [1987] AC 460 (“the Spiliada”) and the cases which follow it, in particular VTB Capital plc v Nutritek International Corpn [2013] 2 AC 337 (“ VTB”) and Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd [2012] 1 WLR 1804, PC.
In seeking leave to serve out, Eurochem had firstly to show in relation to the foreign defendants that there was a serious issue to be tried on the merits, that is, a substantial question of fact or law. That is not in dispute. Secondly, Eurochem had to show that there was a good arguable case that the claim against the foreign defendants fell within the classes of case for which permission to serve out may be given and that is also not in dispute in this case. Thirdly, Eurochem had to show that the BVI was clearly or distinctly the appropriate forum for the trial of the dispute and that in all the circumstances the court ought to exercise its discretion to permit service out of the jurisdiction. This third requirement reflects the doctrine of forum non conveniens, which before the Spiliada existed in Scottish law and American law but only doubtfully in the law of England and Wales (see, for example, Dicey & Morris on The Conflict of Laws, 8th edition (1967), p 1081, n1, a passage not found in the current edition of this work cited elsewhere in this judgment). It is compliance with that third requirement that is now in issue on the applications to set aside service out of the jurisdiction.
In exercise of its discretion the court will consider whether the BVI is a more appropriate forum than any other foreign forum in the interests of all parties and the ends of justice, and, if not, whether justice nevertheless requires that the case should be tried in the BVI.
The same principles apply where the defendants seek to obtain a stay of proceedings properly served within the jurisdiction on the basis that there is a more appropriate forum. The onus, however, is on the defendants seeking a stay, and not the claimants, unless the claimants seek to show that, despite the fact that there is another available forum which is prima facie the appropriate forum, there are special circumstances why justice requires that the trial should nevertheless take place in the BVI.
When assessing whether there is another more appropriate forum, the court will consider what connecting factors exist in relation to that forum, such as the place where the alleged wrongs were committed and the governing law of the pleaded claims. The governing law is an important factor because it is generally preferable that a case should be tried in the country whose law applies ( VTB per Lord Mance at [46]). If there is no other available forum which is clearly more appropriate the court will ordinarily refuse a stay. In general, the assessment of the factors relevant to forum conveniens is a matter for the trial judge: see per Lord Templeman in the Spiliada at p 465.
With that introduction, the Board turns to the judgment of Wallbank J.
For present purposes, the two key findings of the judge, in his impressive ex tempore judgment, relate to the availability of the Russian courts as a forum for the claims made by Eurochem in these proceedings, and to the governing law of those claims. In summary on these points, the judge found that the defendants had failed to prove that the claims could be brought in Russia and that he could not make any finding as to the governing law of the claims. Having considered all the relevant issues, the judge concluded that the BVI was the most appropriate forum to determine the claims.
Taking first the availability of the Russian courts as an alternative forum, the judge noted that the expert evidence on Russian law called by the claimants on the one hand and that called by the defendants on the other was conflicting on the issue whether the Russian courts would assume jurisdiction over the claims against the non-Russian defendants. There are two courts in Russia which might have jurisdiction: the courts of general jurisdiction and the...
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