Magomedov & others -v- PJSC Transneft & others [2024] EWHC 1176 (Comm)
Court continues anti-anti-suit injunction in respect of Russian court proceedings
The English Court has once again shown its willingness to grant injunctive relief in circumstances where sanctioned Russian entities have commenced Russian Court proceedings, arguing that they cannot get access to justice in foreign courts due to sanctions.
This was not the usual case where an exclusive English jurisdiction provision or an arbitration agreement had been breached. Instead, the claimants were bringing non-contractual claims for conspiracy to injure.
Nonetheless, the Court thought it was appropriate to continue an anti-anti-suit injunction (AASI) directed at anti-suit injunctions (ASIs) granted by the Russian Courts until such time as the sanctioned Russian defendant’s jurisdictional challenge was heard by the English Court. The Court formed the view that this was a proportionate measure and justified in the circumstances of this case.
The background facts
Mr Magomedov and a number of companies associated with him (including Port Petrovsk) commenced English court proceedings against Transneft (a Russian state-owned company) and a number of other defendants. The claimants alleged conspiracy to injure them by unlawful means. The alleged conspiracy involved attempts by Transneft and others to wrest from Mr Magomedov and Port Petrovsk the ownership and control of Port Petrovsk’s interest in a Russian company operating commercial ports in Russia (NCSP).
Transneft sought to challenge the English Court’s jurisdiction. It also then commenced proceedings in the Arbitrazh Court in Moscow, seeking ASIs against both Mr Magomedov and Port Petrovsk.
Transneft’s Russian proceedings were brought under Russian legislative provisions that grant the Russian Arbitrazh Courts exclusive jurisdiction over disputes involving sanctioned parties. These provisions permit the Arbitrazh Courts to grant ASIs on the application of a sanctioned party and the Court may award a sum of money up to the quantum of the claim brought outside Russia in breach of the Russian ASI. This legislation was introduced because of the effect of Western sanctions on Russian parties; in particular, the alleged effect on such parties’ ability to access justice in Western countries as a result of sanctions.
Mr Magomedov and Port Petrovsk subsequently sought an AASI against Transneft. The English Court granted an interim AASI and ordered Transneft not to pursue the Russian ASI proceedings until the AASI return date. It also ordered Transneft to stay or adjourn the Russian ASI proceedings pending the outcome of Transneft’s jurisdictional challenge.
The Russian Court refused to adjourn the case against Mr Magomedov and granted the ASI against him with a penalty of US$ 2.5 billion in the event that he failed to comply with the ASI. However, Transneft undertook not to take any steps to enforce the ASI pending the AASI return date. The Russian Court then granted the ASI against Port Petrovsk with a penalty of US$ 5 billion for non-compliance.
Natural forum
The claimants argued that England was the natural forum for the determination of the issues between the parties. This was primarily on the basis that Port Petrovsk’s interest in NCSP was held via a Cypriot company, Omirico, and the NCSP conspiracy resulted in Port Petrovsk purportedly agreeing to sell its shares in Omirico by a sale and purchase agreement (SPA) dated 31 August 2018, which expressly provided that it and any non-contractual obligations arising out of or in connection with it were subject to English law.
The claimants also argued that there were proceedings underway in the English courts in relation to another, related, conspiracy.
Transneft contended that the natural forum was Russia, this being where most of the relevant parties and potential witnesses were situated, where all the relevant events occurred and where the harm was alleged to have been suffered.
The English Court maintained that it did not, at this stage, have sufficient evidence to decide the issue of natural forum. This issue would be decided when Transneft’s jurisdictional challenge was dealt with in due course.
Parties’ difficulties in litigating
The claimants argued that they could not get a fair trial in Russia because the conspiracies were part of a campaign against Mr Magomedov by individuals aligned with the Russian state. Among other things, Mr Magomedov had been arrested and prosecuted in Russia in 2018, and threats made against him and his assets confiscated. It was alleged that the objective was for Transneft to own and control NCSP, a strategically important company. The claimants also alleged that they were unable to get a Russian lawyer willing to act for them against Transneft.
Transneft submitted that it did not have adequate access to justice in England, primarily because it was subject to US and EU (although not UK) sanctions. It had difficulties transferring funds to the UK to pay its lawyers. In fact, the lawyers representing them at this hearing had not yet been paid.
The Commercial Court decision
The Court noted that as the Moscow Court had granted ASIs in final form, an AASI could not now serve any real purpose. However, the claimants wished to demonstrate that they were in principle entitled to an AASI in order that they could then seek an anti-enforcement injunction (AEI) or anti-reliance injunction (ARI).
The majority of English cases involving ASIs were contractual ones. This was a non-contractual case, and an ASI would only be granted where the English Court had sufficient interest. It was not sufficient merely to show that England was the natural forum. It was also necessary to show that further pursuit of the foreign proceedings was vexatious and oppressive or unconscionable. There also appeared to be no English case where an AASI had been granted in a non-contractual case where the claimant was not an English resident/domiciliary.
The Court considered that Transneft’s behaviour had been unconscionable. It had arranged matters so that the claimants had to choose between: (i) not resisting the Transneft jurisdictional challenge and so losing the chance to claim in the English Court, without any further contest; or (ii) resisting the jurisdictional challenge and facing the risk of having to pay (in total) US$7.5 billion as ordered by the Moscow Court.
Furthermore, the AASI relief sought by the claimants was calibrated so as to minimise the offence to the Moscow Court and any collateral damage to comity. They were not seeking a permanent AASI but only to have the AASI continued pending Transeft’s jurisdictional challenge. The AASI being sought was an interim order of very limited duration, intended only to ‘hold the ring’ and allow the English Court to make its own assessment of its own jurisdiction.
This was particularly important where not to do so would expose a claimant in England to an ASI granted in a foreign jurisdiction, which might have penal consequences if the claimant resisted the defendant’s challenge to English jurisdiction. While it would not be appropriate to grant an interim AASI in every case where an ASI was sought in a foreign court, where this was coupled with a challenge to the English Court’s jurisdiction, and where the foreign ASI was intended to stymie the proper determination of the jurisdictional challenge in England, that may be the appropriate course.
The Court accepted that there had been a certain failure by the claimants regarding their duty to make full and frank disclosure at the without notice application for an AASI. Primarily, they had not drawn attention to the fact that Transneft was facing significant difficulties in instructing English lawyers and that this was the cause of a delay in bringing their jurisdictional challenge and complying with a costs’ order. Nonetheless, the Court did not think that this failure was deliberate or intentional and decided that this information, had it been brought to the Court’s attention at the time, would not have resulted in the interim AASI not being granted.
Given that in the absence of an AASI or AEI, and that the claimants would face a penalty of US$7.5 billion merely for proceeding with this case, the Court declined to set aside the AASI order. That would have been disproportionate.
It decided instead that it was appropriate to continue the AASI on an interim basis until the Court decided the jurisdictional challenge.
The Court also granted an AEI on an interim basis pending the outcome of the jurisdictional challenge. The AEI prevented Transneft from seeking to enforce the penalty sums ordered by the Moscow Court for failure to comply with the ASIs. However, it did not grant an ARI, which was sought on a permanent basis.
Comment
In our view, the Court took a measured approach, balancing its acknowledgment that Transneft had experienced real difficulties in litigating in this jurisdiction, together with the fact that Transneft had also tactically sought to pressure the claimants into backing down in the English proceedings by exposing them to the risk of having to pay up to US$ 7.5 billion in penalties for breaching the Russian ASIs.
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