London at the crossroads of Russian conspiracy: A question of jurisdiction in PJSC National Bank Trust v Mints

The claims in National Bank Trust are part of a series of actions relating to the near collapse and state backed bailout in 2017 of the two claimant banks, then known as Rost Bank and Bank Otkritie.^[1] For present purposes the claim can be understood as centring on allegations that the Mints Defendants took out some US$800m in loans from the claimants as part of a fraudulent scheme to strip the claimants of assets. It is claimed that the NDDs, who were executives and shareholders of the claimants, conspired with the Mints Defendants to arrange these loans on uncommercial terms in breach of their duties under Russian law to act in good faith and reasonably.

The conspiracy allegations are not the only claims brought in relation to the near collapse and subsequent bailout of Rost Bank and Bank Otkritie, which has given rise to various civil and criminal claims in Russia, Cyprus and New York, as well as an arbitration seated in London, all of which commenced before the English High Court proceedings.^[2] On 4 August 2020, in an ex parte hearing, a High Court judge granted permission for service on the NDDs out of jurisdiction. The NDDs then applied to the High Court to set aside the permission and decline jurisdiction over the claims against them.

At the ex parte hearing the claimants obtained permission to join the NDDs to proceedings on the basis that they were "necessary or proper parties" to the claims against the Mints Defendants. Although seeking permission under this gateway engages a multi-limbed test, the only ground on which the NDDs sought to set it aside was that England was not the 'forum conveniens' (the convenient forum) to hear the proceedings against them. Where it applies, this doctrine requires the English court to decline jurisdiction where it is not the forums conveniens:

Determining a jurisdiction as the forum conveniens will depend upon establishing "connecting factors" between the claim and jurisdiction.^[4] A range of factors may be relevant, typically including the location where the relevant events took place, the applicable law, the predominant language of the documentary and witness evidence, and the practical convenience for the parties and witnesses.  Two further factors were of particular importance in National Bank Trust. First, the possibility of parallel proceedings leading to duplication of cost and disruption, and potentially giving rise to inconsistent judgments, which as discussed below is a matter that the English court will weigh very heavily in the balance. Second, the Court may consider the enforceability of any judgment that the claimants might obtain.^[5]

It has long been thought that the risk of parallel proceedings was in all but name a 'trump card' in the application of the forum conveniens test. Courts have previously held it to be almost inconceivable that they would allow proceedings on the same issues to run in different jurisdictions:

However, this position was considered by the Supreme Court decision in Vedanta Resources Plc v Lungowe [2019] UKSC 20 to be an over-statement of the importance of parallel proceedings in the scales of forums conveniens. In Vedanta the claimants, villagers seeking damages for alleged environmental harm caused by a large copper mine, sought to join the Zambian subsidiary which owned the mine to claims against its English domiciled parent company in England. Although the English company could not dispute the jurisdiction of the English Court,^[7] it nonetheless declared that it was prepared to submit to the jurisdiction of the Zambian courts. This meant that the claimants had the option of suing both English and Zambian defendants in Zambia. Lord Briggs, giving the judgment of the Court, concluded "after anxious consideration"^[8]  that this meant that the risk of parallel proceedings and inconsistent judgments would arise at the claimants' election, and that as it was to their detriment, it was not right to treat that risk as a trump card when weighing the factors and determining the forum conveniens. He therefore held that, notwithstanding the English proceedings already on foot, Zambia was the forums conveniens (although the Court in fact ultimately allowed proceedings against the Zambian defendant to proceed in England on other grounds).

Save for "perhaps inevitably"^[9] a meeting in the south of France, the dispute was clearly Russian in nature. "There is no doubt, and no dispute, that this is a Russian case. The Claimants and the Defendants are Russian. The alleged wrongdoing by all Defendants occurred in Russia…"^[10] The only reason why England was the forums conveniens was that the claimants had already chosen to bring the claim against the Mints Defendants there,^[11] which gave rise to the risk of parallel proceedings if the NDDs were not joined.

The judge in National Bank Trust distinguished the case from Vedanta, because although it was not challenged that the claimants could have sued the Mints Defendants in Russia, the Court considered that it was perfectly reasonable for the claimants not to have done so, a factor not present in Vedanta. Indeed, the judge accepted the proposition that the decision to sue the Mints Defendants in England was the only "rational choice".^[12]

The Court came to this conclusion because it considered that there were legitimate concerns over the enforceability of a Russian judgment.^[13] Although the Court rejected the claimants' submissions that the Mints Defendants would not appear in proceedings in Russia as not being borne out by the evidence, it appears to have given great weight to the fact that the Mints Defendants had alleged in their Defences in the English proceedings that the Russian criminal proceedings on foot against them were abusive, and, amongst other things, that actors with state connections were known to be able to influence the conduct of such prosecutions. The judge accepted that the Mints Defendants – if  faced by a judgment of a Russian court – would be very likely to attempt to resist enforcement in other jurisdictions by claiming that they faced an "unfair campaign" against them in Russia.^[14] He considered this to be a very cogent reason for the claimants electing to proceed in England, because "the ease with which a judgment can be enforced has long been recognised as a legitimate juridical advantage."

As noted in section 1 above, the claim in National Bank Trust is part of a broader tapestry of overlapping litigation and arbitration already spanning multiple jurisdictions, including Russia, Cyprus and New York. The NDDs suggested that by the English court accepting jurisdiction over the claims, inconsistencies would arise between the eventual English judgment and these other proceedings occurring abroad.^[15] The judge considered this a legitimate concern, but upon analysing the evidence as to the focus of the other proceedings, he identified that none of them (either on their own or together) covered all of the issues that would be determined in the present proceedings. Moreover, separating the claim against the NDDs from the claim against the Mints Defendants would only add to the mix of parallel proceedings already on foot in various other jurisdictions. Declining jurisdiction over the NDDs would therefore only exacerbate the risk of inconsistent judgments.^[16]

One issue which does though appear to have given the judge some pause for thought was that while the fifth and sixth defendants were domiciled in the United States and Israel respectively, the seventh was based in Russia. Not only this, but he appeared to be content to be sued in Russia, putting him in a very different position to the other NDDs.^[17] Although giving the judge cause for "anxious consideration", it was decided that the desirability of the English Court proceedings involving all the defendants together "outweighs the personal inconvenience and extra expense" that would be imposed on the seventh defendant.^[18]

Although the claimants succeeded in adjoining the NDDs to the claim in England, they were sharply criticised for failing to fulfil their obligation of providing full and frank disclosure, because when making their initial ex parte application they failed to disclose the existence of insolvency proceedings taking place in Russia, which the judge considered plainly relevant to the question of convenient forum. This criticism arose notwithstanding that the judge accepted that the failure was the product of a mistake, rather than a deliberate act.^[19]

The duty of full and frank disclosure requires a party making an application without notice to the other party (and therefore, almost certainly without the other party's presence before the Court) to:

The judge in National Bank Trust considered that even though the inclusion of the omitted evidence would probably not have changed the decision to permit service out of the jurisdiction (as he himself had concluded that such permission was appropriate), he might nonetheless set aside the permission due to the failure to provide full and frank disclosure. Whether he should do so depended on what was in the interests of justice, and, in particular, whether that required the permission to be set aside, or whether the failure could instead be recognised in costs. The judge decided that the appropriate sanction was to not award the claimants their costs, and additionally ordered them to pay one quarter of the costs of the NDDs – an unusual result for a party who has otherwise won the day, and a significant sanction for the inadvertent failure to include evidence.^[21]

Although the claimants were successful in serving notice of the claim against the NDDs out of jurisdiction, the proceedings against them have been stayed, pending an appeal of this decision. If the Court of Appeal were to consider England the forum conveniens for claims against foreign domiciled persons, and endorse the first instance judge's reasoning, then this might have significant implications, both for other 'Russian' cases in London's courts, and for multi-jurisdictional litigation more generally.