Privatbank v Kolomoisky and ors

The Court of Appeal (David Richards, Flaux and Newey LJJ) has given judgment in the case of Privatbank v Kolomoisky and ors [2019] EWCA Civ 1708, unanimously allowing the appeal of the Ukrainian bank, Privatbank, against the judgment of Fancourt J dated 4 December 2018 [2018] EWHC 3308 (Ch). Lord Pannick QC and Andrew Hunter QC, instructed by Hogan Lovells, acted for Privatbank. 

The case concerns an alleged scheme perpetrated by the defendants to misappropriate c. US$2 billion from the Bank. The Bank alleged that the scheme was orchestrated by Ds 1 and 2, Ukrainian “oligarchs” domiciled in Switzerland, with the assistance of English and BVI companies through which the Bank alleged that misappropriated monies were laundered. The Bank sued Ds 1 and 2 and the BVI companies in England, using the English companies as “anchor defendants”. It sought, and was granted by Nugee J, a Worldwide Freezing Order in the amount of US$2.6 billion.

By the Judgment under appeal, Fancourt J dismissed the Bank’s claim against Ds1-2 on jurisdictional grounds, finding that the Bank had abused Article 6(1) of the Lugano Convention (the co-defendant rule) on the basis that the Bank’s “sole object” in claiming against the English domiciled defendants was to bring D1 and D2 into the English jurisdiction.  He stayed the claim against the remaining defendants in favour of Ukrainian proceedings, applying Article 28 of the Lugano Convention “reflexively”. He discharged the Worldwide Freezing Order on the ground of deliberate material non-disclosure. The Court of Appeal reversed all of these decisions.

In relation to Article 6 (the co-Defendant rule), the majority of the Court of Appeal (David Richards and Flaux LJJ) held that there was no “sole object” qualification to Article 6(1) of the Lugano Convention.  Under Article 6(1) and hence also Article 8(1) of the Recast Brussels Regulation, the fact that a Claimant’s sole object in issuing proceedings against an anchor defendant is to sue a foreign defendant is not a bar to jurisdiction.    

In any event, the Court held unanimously that, even if there were such a qualification, it would fall to be assessed objectively, and that the Judge’s assessment on the facts that this was the sole object of the Bank was wrong. In relation to the stay, the Court held that Article 28 could be applied reflexively (resolving a division in first instance authority on this point).  However, it found that the Judge had erred in the exercise of his discretion.   The Court re-exercised the discretion and refused to stay the proceedings. In relation to the Worldwide Freezing Order, the Court found that the Judge had erred in various ways in his factual assessment. It endorsed the approach of Males J in National Bank Trust v Yurov [2016] EWHC 1913 (Comm) to issues of non-disclosure.  It found that the Judge’s findings of deliberate material non-disclosure were wrong and reinstated the Worldwide Freezing Order. 

Permission to appeal to the Supreme Court was refused.

The judgment is available here.