Welcome to the latest edition of our Asset Tracing and Enforcement Update.
In this edition, we discuss recent developments in relation to anchor defendants, jurisdiction issues relating to letters of credit, and the tricky question of domicile involving individuals with links to a number of jurisdictions. In addition, we mention a recent Osborne Clarke case for Dell, where we successfully obtained anti-suit relief for an associated entity which was not party to the contract (nor, therefore, the exclusive jurisdiction clause).
We are also pleased to announce the addition of Artem Doudko to our Russia/CIS disputes practice. Artem, who has dual British and Russian nationality, is an English qualified solicitor who has a strong reputation and profile in his field. Artem has extensive experience of cases under all the major arbitral rules of LCIA, ICC, SCC, UNCITRAL and ICSID. He regularly advises on arbitration cases in England, Russia and Sweden and on a wide range of jurisdictional and conflict of law issues.
Please do get in touch if you would like to discuss any of the issues covered in this Update.
Two recent cases give guidance on the application of the “domicile” test for wealthy individuals with an international presence
The cases (Bestolov v Povarenkin and Eng King v Petrillo) provide a useful reminder to international elites that their family and personal ties in the UK may provide a basis for the English court to assert jurisdiction over them, regardless of whether they have a more substantial connection elsewhere and even where the dispute has limited or no link to England.
Jurisdiction is generally based on the principle that a defendant should be sued in the place of their domicile unless other specified factors apply. Domicile is a question of fact and degree and a defendant may have multiple domiciles. In both cases, the defendants were wealthy Russian residents who also had links to the UK. In both instances, the court found that the individual was also domiciled in England.
These cases also highlight that where the European regime applies, the English courts do not have the discretion to decline jurisdiction in favour of a more appropriate forum.
Osborne Clarke obtains anti-suit relief for Dell EMC to restrain Moroccan proceedings
This case demonstrates that the court will grant anti-suit injunctions prohibiting proceedings against non-contracting parties in appropriate situations based on the interpretation of an exclusive law and jurisdiction clause, or where there is a “quasi-contract”.
Dell UK argued that the wording of the exclusive law and jurisdiction clause with a Moroccan supplier was sufficiently wide to capture a claim by the supplier against another Dell entity. The court agreed, holding that the expression in the exclusion jurisdiction clause “any dispute arising out of or in connection with this contract”, was wide enough to cover the claim against the affiliated Dell entity.
The “quasi-contractual” argument holds that where a party is facing a claim under a contract, the existence of which it denies, the claimant must respect the exclusive jurisdiction clause in that contract. The claimant cannot ‘have its cake and eat it’ by bringing a contractual claim but ignoring the jurisdiction clause in the contract in question.
Brussels Regulation | Merits test applies to claim against an anchor defendant
Under the European regime, so-called ‘anchor defendants’ domiciled in England are often used as a justification for bringing related claims against foreign defendants under the jurisdiction of the English Court. A recent Court of Appeal case (Sabbagh v Khoury) has confirmed that claims against the foreign defendants will only be allowed where the claim against the anchor defendant has sufficient merit.
The decision confirms the established practice of the English Courts but arguably departs from European authority which suggests that the law should be interpreted strictly and that no merits test applies.
The decision will continue to help prevent the forum shopping tactic of claimants bringing proceedings in England against foreign parties, where the matter and the defendants have little or no connection to England, based solely on a spurious claim against an anchor defendant.
A new way to combat online crime | Landmark freezing order granted in internet fraud against ‘ghost’ perpetrators
A worldwide freezing order was granted against ‘Person(s) Unknown’ who, in what appears to have been a cyber-attack, caused several million dollars of the Claimant’s funds to be transferred from the Claimant company’s bank accounts in London to a number of banks across different jurisdictions.
The innovative freezing order will allow the Claimant company to trace and secure the money that had been stolen from its accounts by the yet unidentified individuals. This could prove a potentially powerful tool to fight online fraud at an international level when the perpetrators are hiding behind cyber cloaks of anonymity. The decision was welcomed as an innovative response from the Commercial Court to modern threats brought about by online banking and e-commerce.
Supreme Court changes the law on jurisdiction over debt under letters of credit
This decision has the effect of bringing assets into the jurisdiction for enforcement purposes based on the location of the banks financing international trade, even though the assets being traded and contracting parties are located out of the jurisdiction.
Letters of credit have widespread application in the proper functioning of international trade. In the case (Taurus Petroleum v State Oil Marketing Company of the Ministry of Oil, Republic of Iraq) it was held that the debt under a letter of credit is located at the place where the debtor (i.e. the bank) is resident. The court therefore had jurisdiction to award the third party debt order sought.