The English High Court has declined jurisdiction and discharged a freezing order for up to US$2.6 billion in respect of a claim brought PJSC Commercial Bank PrivatBank (“PrivatBank”), a Ukrainian bank, against Igor Kolomoisky and Gennadiy Bogolyubov, its two former owners. PrivatBank alleged that Kolomoisky and Bogolyubov perpetrated an extensive fraud. As PrivatBank’s claim was governed by Ukrainian tort, company and banking law, and a claim for unjust enrichment under the Ukrainian Civil Code its jurisdiction claim was based on English and BVI companies playing a central role in the alleged fraud.
Article 6.1 of the Lugano Convention provides that where there are multiple defendants, a defendant can be sued in any member state where any one of the other defendants is domiciled. Kolomoisky and Bogolyubov argued that including the English companies as defendants represented an abuse of Article 6.1. The natural place for them to be sued for a fraud carried out in Ukraine was either Ukraine, or Switzerland, where they were both domiciled.
Factual analysis of the movement of funds in the alleged fraud found the English and BVI companies were no more than conduits for funds to pass through en route for immediate return to PrivatBank, or transfer to other offshore corporate entities. PrivatBank’s case relied heavily on unjustified assumptions about the movement of funds involved in the alleged fraud. In contrast, the evidence of Kolomoisky’s solicitor was precise about the amounts of money advanced, and PrivatBank had not followed the money in the same compelling way that Kolomoisky had. The judge also held that PrivatBank knew more about the full picture of the fraudulent scheme than it had disclosed at the without notice hearing to obtain the freezing order. PrivatBank deliberately presented its case in a way that did not draw attention to material that would cast real doubt on the validity of its claim.
An assessment by the judge of PrivatBank’s motivation in bringing a claim against the English companies referred to the substantial procedural advantages of bringing proceedings in England and Wales as opposed to Ukraine or Switzerland. These included the ability to obtain worldwide freezing orders that extended to assets only indirectly controlled by defendants, an extensive disclosure regime and cross-examination of witnesses at trial. Potential claimants wanting to sue in England should ensure that all the available evidence supports their claim for jurisdiction.
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