High Court finds companies’ assets not subject to freezing order against shareholder

The High Court has varied a worldwide freezing order by removing language in the order which would have frozen the assets of companies owned by the respondent (directly or indirectly). The variation was granted on the grounds that the relevant assets belonged to, and were in the control of, those companies rather than the respondent: FM Capital Partners Ltd v Frederic Marino & Others [2018] EWHC 2889.

In doing so, the court clarified the extent to which the Supreme Court’s decision in JSC BTA Bank v Ablyazov [2015] UKSC 64 (considered here) impliedly overturned the decision of the Court of Appeal in Lakatamia Shipping Co Ltd v Nobu Su [2014] EWCA Civ 636 (considered here) in relation to the interpretation of the extended definition of assets in the standard form of freezing order – that is, to cover any asset which the respondent “has the power, directly or indirectly, to dispose of or deal with as if it were his own”, including where “a third party holds or controls the asset in accordance with his direct or indirect instructions”.

The court has sought to resolve the tension between Ablyazov and Lakatamia by holding that, if a respondent is the sole shareholder or director of a company, it does not automatically mean that the company’s assets are also subject to the freezing order. However, if the respondent also has such a degree of control over the company’s assets that the company is in truth the “wallet” of the respondent then, in an order which contains the extended definition, those assets will be subject to the order. In light of this decision, it seems likely that there will be an increased focus on what level of control a respondent does, in practice, have over the companies he owns and their assets.

Gareth Keillor and Kevin Kilgour, an Of Counsel and Senior Associate in our disputes team, consider the decision further below. Continue reading

Leave a Comment

Filed under Injunctions

CJEU finds abuse of dominance claims may come within jurisdiction clause

The European Court of Justice (CJEU) has ruled that a jurisdiction clause could apply to claims alleging abuse of a dominant position, contrary to article 102 TFEU, even if the clause did not expressly refer to claims based on competition law: Apple Sales International and others v MJA acting as liquidator of eBizcuss.com, Case C-595/17.

This decision contrasts with the decision in CDC Hydrogen Peroxide SA (Case C-352/13), a follow-on damages claim relating to a cartel. The CJEU in that case held that a jurisdiction clause would only apply to competition law claims arising out of a cartel if the clause made express reference to such claims.

According to the CJEU, the key in deciding whether competition claims are within a jurisdiction clause (absent express reference) is to consider whether the anticompetitive conduct has a connection with the contractual relationship. While an unlawful cartel is in principle not directly linked to the contractual relationship between a cartel member and a third party affected by it, the abuse of a dominant position may be connected to a contractual relationship, in which case the clause may cover the claim regardless of whether there is an express reference.

Amel Fenghour, an associate in our disputes team, considers the decision further below. Continue reading

Leave a Comment

Filed under Contract, Jurisdiction

Court of Appeal confirms appropriate means for challenging judgment allegedly obtained by fraud

The Court of Appeal has dismissed an application made after final judgment to strike out a claim for abuse of process under CPR 3.4 or to set aside the judgment under the court’s general power at CPR 3.1(7) to vary or revoke court orders: Daniel Terry v BC Corporate Acceptances Ltd [2018] EWCA Civ 2422.

The court confirmed that where a party wishes to challenge a final judgment allegedly obtained by fraud, any such challenge should be made by one of the established methods, being: (i) appealing the decision and seeking to rely on fresh evidence and obtain a retrial, or (ii) bringing a fresh action to set aside the judgment.

The decision highlights the court’s reluctance to interfere with a final judgment which, in the interests of finality, should remain in place unless there are proper grounds for appeal. It also reinforces the high threshold to be met when seeking to challenge a judgment on the basis that it was obtained by fraud. As the decision shows, the courts are not willing to allow litigants to avoid that burden by seeking to obtain relief by the back door in reliance on the court’s general powers under the CPR.

Rosanna Pinker, an associate in our disputes team, considers the decision further below. Continue reading

Leave a Comment

Filed under Appeals, Fraud, Judgments/Orders

Witness evidence working group: survey on current rules and some radical alternatives

A working group was set up earlier this year, led by Mr Justice Popplewell, to review the current rules and practice and make recommendations for potential reform of the procedures for factual witness evidence in the Business and Property Courts (the Chancery Division, Commercial Court and Technology and Construction Court). It has launched an online survey seeking views from court users on whether the current rules on witness statements ought to remain in their present form and be enforced more rigorously or whether the rules themselves need to be changed and, if so, how.

The alternatives set out in the survey include some radical alternatives such as: doing away with witness statements and returning to oral examination-in-chief; moving to pre-trial depositions; and (perhaps most controversially) lifting privilege in the production of witness statements so as to require a note be taken of oral communications with the witness, with all communications and drafts to be disclosed to the other side, or permitting the opposing party to conduct or be present at the interviewing of witnesses.

The closing date for responses is Friday 23rd November.

Leave a Comment

Filed under Announcements, Evidence

Court will ordinarily apply English law in absence of evidence of relevant foreign law, unless defendant shows it would be inappropriate to do so

The High Court has held that where a claim was, in principle, governed by foreign law, but the claimant had not pleaded or proved the content of that law, the court would apply English law to the claim. The claimant had pleaded a viable cause of action which could be determined under English law, and the defendant had not raised any basis for a contention that it would be inappropriate to do so: Iranian Offshore Engineering and Construction Company v Dean Investment Holdings SA [2018] EWHC 2759 (Comm).

This decision confirms that, in most cases, the court will apply English law to a claim unless the claimant pleads and proves the content of a relevant foreign law or the defendant shows that it would be inappropriate to apply English law eg because that would be too strained or artificial in the particular circumstances.

A defendant cannot therefore merely assert that a foreign law applies and thereby put the burden on the claimant to plead and prove the content of that law.

Maryam Oghanna, an associate in our disputes team, considers the decision further below. Continue reading

Leave a Comment

Filed under Choice of law

High Court finds SFO can compel production of documents held by foreign company outside the jurisdiction

In a recent decision in the context of a judicial review, the High Court held that the SFO was able to compel a foreign company to produce documents located outside the jurisdiction, pursuant to s.2(3) of the Criminal Justice Act 1987 (CJA), where there was “a sufficient connection between the company and the jurisdiction”: R (On The Application Of KBR Inc) v The Director of the Serious Fraud Office [2018] EWHC 2368 (Admin).

This is the first time that an English court has reasoned that compulsory disclosure powers exercisable by a UK criminal enforcement agency have extraterritorial application. The judgment is notable for its finding of the extraterritorial operation of a statute where no explicit wording in favour of extraterritoriality applied. In the civil context, the courts have also seemed increasingly willing, in recent years, to find that provisions enabling the enforcement of judgments and orders have extraterritorial effect, such as the court’s powers of committal (see here).

From a civil litigation perspective, the increased reach of the SFO to obtain documents outside of this jurisdiction, in light of the KBR decision, may increase the scope of documents that are ultimately disclosable in civil proceedings. This may be because the SFO is itself a party to the proceedings – the CJA does not act as a bar against the SFO giving disclosure of documents obtained under its compulsory powers (see Tchenguiz v Rawlinson and Hunter Trustees SA [2013] EWHC 2128 (QB), considered here) – although the circumstances in which this is likely to be the case will be rare. Or, if it was known that the SFO had obtained the documents, a litigant could make an application against the SFO for third party disclosure under CPR 31.17 – such an application was granted against the police in Frankson v Home Office [2003] EWCA Civ 655, for example, the court having balanced the competing public interests. It is relevant to note that, where there is an ongoing criminal investigation or prosecution, those public interest factors would include not only the general public interest considerations pertaining to the investigation of crime but also considerations pertaining to possible prejudice to that investigation, and, if ordered, disclosure might be made subject to strict conditions, as it was in Frankson. Further, unless the material became public via a trial process in due course, or a party confirmed that they had disclosed documents to the SFO, a litigant would not be expected to have visibility of this fact.

Nonetheless, those who provide documents to the SFO in response to s.2 notices should be aware that such documents may be disclosable by the SFO in civil proceedings, if the SFO becomes a party or is required to provide third party disclosure.

For more information on the KBR decision, see our Global Corporate Crime and Investigations e-bulletin here.

Leave a Comment

Filed under Disclosure, Jurisdiction

Handy client guide to class actions in England and Wales

Herbert Smith Freehills has launched a series of short guides to class actions in England and Wales. The first two editions, (i) Overview of class actions in the English courts and (ii) Group Litigation Orders (GLOs), have been published here. Future editions in the series will also be posted on that page.

These topics have also been discussed in a webinar presented today by Damien Byrne Hill, Gregg Rowan, Donny Surtani and Maura McIntosh, looking at how class actions are brought in the English courts, the types of claim that tend to be brought, and the outlook for the future, as well as issues relating to costs and funding.

Clients and contacts of the firm can register to access the archived version by contacting Jane Webber.

Leave a Comment

Filed under Announcements, Class actions

Applying the Hague Choice of Court Convention post-Brexit

The government has set out how it plans, in the event of a “no deal” Brexit, to ensure that the UK will continue to apply the Hague Choice of Court Convention, which currently applies to the UK by virtue of its EU membership.

As explained previously, the government has made it clear that, in the event of a no deal, the UK would re-join the Convention in its own right, and that it anticipates the Convention would come into force by 1 April 2019. That would mean that the Convention would govern jurisdiction and enforcement of judgments as between the UK and the EU (as well as the other contracting states of Mexico, Singapore and Montenegro) where there was an exclusive jurisdiction clause in favour of one of those states – unless and until some other arrangement is put in place, such as an agreement for the UK to join the Lugano Convention (which applies more broadly than Hague, including because it is not limited to exclusive jurisdiction agreements) or a bespoke agreement between the UK and the EU on jurisdiction and enforcement of judgments.

The Foreign and Commonwealth Office has now published a command paper and explanatory memorandum in relation to the Hague Convention. This explains that “if still appropriate as part of ‘No Deal’ planning”, the UK intends to deposit the relevant instrument of accession so that, assuming that is done before the end of December, the re-entry date of 1 April 2019 will be achieved (since under the terms of the Convention it enters into force on the first day of the month following three months after deposit of the relevant instrument).

There is however some uncertainty as to the Convention’s continuity of application, given that the UK will cease to be a contracting state when it leaves the EU three days earlier, on 29 March. This is because the Convention applies only where an exclusive jurisdiction clause was agreed after the Convention came into force for the chosen state and proceedings were instituted after the Convention came into force for the state of the proceedings.

In an effort to plug this gap, so far as it can do so unilaterally, the UK government has made a statutory instrument, the Civil Jurisdiction and Judgments (Hague Convention on Choice of Court Agreements 2005) (EU Exit) Regulations 2018. The Regulations aim to ensure that, so far as the UK is concerned, its membership of the Convention will be treated as seamless from when it took effect for EU member states on 1 October 2015. In brief, the intention is that:

  • Where an exclusive jurisdiction clause in favour of a (non-EU) Hague contracting state (ie Mexico, Singapore or Montenegro) was agreed pre-Brexit, the UK courts will continue to respect that jurisdiction clause, and continue to enforce judgments where the relevant court took jurisdiction based on it, in circumstances where the UK courts would do so currently under Hague.
  • Where an exclusive jurisdiction clause in favour of a Hague contracting state (including EU member states) was agreed post-Brexit but before the Convention re-enters into force for the UK (that is, assuming all goes to plan, in the narrow window between 29 March and 1 April), the UK courts will respect that jurisdiction clause, and enforce judgments where the relevant court took jurisdiction based on it – whether the UK courts would do so currently under Hague or under the recast Brussels Regulation.

The government has said that it will publish another statutory instrument dealing with transitional provisions relating to the recast Brussels Regulation. We will have to wait for that before we have a complete picture, in particular as to how the UK courts will, post-Brexit, treat jurisdiction clauses in favour of EU member states which were agreed pre-Brexit.

As the government recognises, the UK cannot legislate for how other Hague contracting states (including EU member states) will treat exclusive jurisdiction clauses in favour of the UK which were agreed before the Hague Convention re-enters into force. Unfortunately, that piece of the puzzle is likely to remain unclear for some time.

Leave a Comment

Filed under Enforcement, Jurisdiction

Information gathering by in-house lawyer in order to obtain external advice may not be protected by legal advice privilege

In a recent decision, the High Court has held that an in-house lawyer’s communications with an employee of the business, who was accepted to be her in-house “client” for some purposes, were not protected by legal advice privilege where those communications were to seek and obtain information to provide to external solicitors in order to obtain their legal advice: Glaxo Wellcome UK Ltd v Sandoz Ltd [2018] EWHC 2747 (Ch). In doing so, Chief Master Marsh applied the narrow interpretation of “client” established by the notorious Three Rivers No 5 decision as recently confirmed by the Court of Appeal (albeit with reluctance) in the ENRC case (considered here).

Significantly, the decision illustrates that an individual can be a lawyer’s “client”, and therefore entitled to communicate information to the lawyer under protection of privilege, for one purpose but not others.

The decision underlines the importance of considering, in any given context, who is likely to be considered the lawyer’s “client” for that particular purpose. Where an external lawyer is advising, and the in-house lawyer is the relevant “client” for that purpose, the in-house lawyer’s internal information gathering exercise may not be privileged (unless litigation privilege applies, as in that context a lawyer/client communication is not essential). The position may be different where the in-house lawyer’s advice is sought in addition to that of the external lawyer.

The decision also contains important messages as to how evidence should be presented in supporting a claim to privilege. Continue reading

Leave a Comment

Filed under Privilege

Service Regulation and Taking of Evidence Regulation will cease to apply post-Brexit

The government has published a draft statutory instrument, the Service of Documents and Taking of Evidence in Civil and Commercial Matters (Revocation and Saving Provisions) (EU Exit) Regulations 2018, which will mean that the EU Service Regulation (1393/2007) and Taking of Evidence Regulation (1206/2001) no longer apply to the UK when it leaves the EU.

The measure is needed to prevent these regulations, which cannot operate effectively without reciprocity between the UK and the EU27, becoming part of UK law under the European Union (Withdrawal) Act 2018. That Act provides that direct EU legislation (including EU Regulations) which is operative immediately before exit day forms part of domestic law on and after exit day. Without this statutory instrument, therefore, the Service Regulation and Taking of Evidence Regulation would be incorporated into UK law from that point.

The statutory instrument contains transitional provisions which mean that the two Regulations will continue to apply to outstanding requests for documents to be served or evidence to be taken in the UK, where those requests were received in the UK before exit day.

After Brexit, the procedures for service of documents and taking of evidence between the UK and the remaining EU Member States will mainly depend on whether those Member States are, like the UK, contracting states to:

  • the Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the Hague Service Convention); and/or
  • the Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters (the Hague Evidence Convention).

All remaining EU Member States other than Austria are contracting states to the Hague Service Convention and all but Austria, Belgium and Ireland are contracting states to the Hague Evidence Convention. Where those conventions apply they will give alternative routes for service and/or the taking of evidence across borders.

In relation to service, and depending on the country in question, there may be other methods available either in addition or as an alternative to the Hague Service Convention route. These may include service through consular authorities, or by post, or by any method permitted by the law of the country in which service is to be effected.

In relation to the taking of evidence, where the Hague Evidence Convention does not apply, it may still be possible to proceed via a letter of request even where there is no treaty relationship dealing with the taking of evidence.

Overall, the procedures may be somewhat more cumbersome than at present, but it should remain possible to serve documents and take evidence in EU member states for the purposes of English proceedings even after Brexit.

Leave a Comment

Filed under Evidence, Service