Jurisdiction

Service out of the jurisdiction - Alternative forum available - Claimant bank alleging fraud by defendants

Alliance Bank JSC v Aquanta Corporation and others: QBD (Comm) (Mr Justice Burton): 14 December 2011

The claimant bank, based in Kazakhstan, alleged that the defendants had been party to a conspiracy to deprive the claimant of $1.1bn. The sixth, seventh and eighth defendants were brothers (the brothers). The sixth defendant was, at the material time, chairman of the board of the claimant. Between November 2005 and April 2008, it was alleged that the claimant was caused by the conspirators to acquire US Treasury notes called STRIPS, in a total value over the period of $1.1bn.

The conspirators caused those STRIPS to be charged or pledged to two Cypriot banks as security for loans made by those banks to the first, second, third and fourth defendant offshore companies, who were beneficially owned by the sixth defendant. The loan funds were then paid out through circuitous routes to or via other offshore companies, owned by one or more of the brothers or a member of their family, and much of the funds ended up with the ninth defendant company, at the material time owned by the brothers. The claimant alleged that that had been a dishonest scheme.

In April 2009, the claimant instigated a criminal investigation in Kazakhstan, conducted by the Kazakh general prosecutor. In October 2009, the sixth defendant was charged in the criminal investigation. In April 2011, the claimant was granted permission to serve proceedings claiming the value of the loans by way of subrogation out of the jurisdiction and a worldwide freezing order. In July 2011, the sixth, 11th and 13th defendants were convicted in Kazakhstan. The first, second, third, fourth, sixth, seventh, eighth and ninth defendants (the active defendants) applied, inter alia, to set aside the proceedings against them and service upon them, on the basis that the matter should be heard in Kazakhstan.

The active defendants submitted, inter alia, that the UK was not the appropriate forum for the claimant’s claims because: (i) the litigation was a complex international fraud dispute; (ii) it was not the lender that sought to enforce the loan agreements but (unforeseeably) the claimant by way of subrogation; (iii) none of the defendants were based in the UK; (iv) there was a mass of documents and witnesses from the criminal proceedings in, or amenable to the jurisdiction of, Kazakhstan; and (v) the claimant itself had commenced proceedings in Kazakhstan, even though, in the event, they had, for the time being, come to an end. The claimant submitted, inter alia, that the fee of 3% of the $1.1bn claim levied by the Kazakh court was a substantial sum and would not be leviable in the UK. The application would be allowed.

On the facts, the claimant had not established that the Commercial Court in the UK was clearly and distinctly the most appropriate forum, and that there were strong reasons or exceptional circumstances why the subrogated claims under the loan agreements should not be confined to the UK jurisdiction. There was an overriding Kazakh feel to all the claims being made. Almost all of the events had taken place in Kazakhstan; Kazakh law might have an important role to play; all, or almost all, the substantial quantity of documents would be in Kazakhstan.

Above all, there had been detailed proceedings in Kazakhstan; which had resulted (subject to possible appeal) in the conviction of the sixth defendant and important findings of fact by the Kazakhstan courts. The evidence to establish certain allegations would be overwhelmingly in Kazakhstan. The 3% fee was not a sufficient juridical disadvantage to outweigh the otherwise appropriateness of the Kazakh forum (see [75] of the judgment).

The service of the proceedings against the active defendants would be set aside (see [77] of the judgment).

Kenneth MacLean QC and Nicholas Sloboda (instructed by Slaughter and May) for the claimant; Steven Thompson (instructed by Fox Williams) for the first and second defendants; Richard Slade QC (instructed by Klein Solicitors) for the third and fourth defendants; Richard Morgan QC and Thomas Munby (instructed by Dewey & LeBoeuf) for the sixth defendant; Harry Matovu QC (instructed by Memery Crystal) for the seventh and eighth defendants; Rosanna Foskett (instructed by Stevens & Bolton, Guildford) for the ninth defendant; The fifth, 10th, 11th, 12th, 13th, 14th and 15th defendants did not appear and were not represented.