In complex international disputes, a key consideration is where to litigate. This issue is fundamental to any litigation strategy for a well-advised claimant – one jurisdiction may carry notable advantages over another, producing a better outcome for clients.
As a litigation forum, the English courts are very well regarded. As noted in the Law Society’s International Data Insights Report of 2024[1], the English legal system is hugely appealing for its certainty of law, flexibility, the expertise and impartiality of its lawyers and judiciary, the speed of its decision-making, its position on recoverability of costs and the general enforceability of English law judgments. According to the Law Society’s International Data Insights Report, “a record 64% of litigants in cases between April 2023 and March 2024 came from jurisdictions outside the UK, representing a total of 84 nationalities”. Whilst England is clearly a desirable forum, however, whether or not the English courts have jurisdiction to hear the dispute depends on a number of factors. This article considers the approach an English court may take when faced with a jurisdiction challenge and the relevant tests to be satisfied bearing in mind guidance in recent case law.
In international disputes, frequently more than one country has potential jurisdiction to hear a case. The relative advantages and disadvantages of different legal regimes (cost, speed and enforceability being paramount) can force a race to commence proceedings in the preferred jurisdiction, so-called “forum shopping” (in the hope the court first seised will take jurisdiction where it can). Less well-prepared parties might subsequently commence parallel proceedings in another jurisdiction (albeit with a tactical disadvantage – judges may resist subsequent parallel proceedings on account of replicating costs and possible conflicting judgments). Where the English Court considers that it should have jurisdiction, it may issue an anti-suit injunction to prevent a party from continuing prior foreign proceedings. Conversely, if the English Court considers it does not have jurisdiction, it may stay English proceedings (or refuse to grant permission to serve out of the jurisdiction against foreign defendants). In some cases, for example where international conventions apply, the English courts may have to decline jurisdiction. This may be the case where the parties have agreed an exclusive jurisdiction clause in favour of a different jurisdiction.
In circumstances where no international convention applies, the English courts have a general discretion, under English common law rules, to determine whether or not they should exercise jurisdiction to hear a case. Under these rules, the English court accepts jurisdiction if a defendant is validly served with proceedings (either within or outside the jurisdiction). If the defendant is within the jurisdiction (that is, physically within England or Wales) and is validly served with process, the English court will have prima facie jurisdiction over the defendant. This is based on a territorial conception of jurisdiction. Where a defendant is registered or resident abroad (so not physically present within England or Wales), the claimant needs to make the case for the English courts having jurisdiction. In that scenario, the court’s permission is needed to serve proceedings out of the jurisdiction. To obtain permission to serve out, the following test (the “jurisdiction test”) needs to be satisfied:[2]
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- there is a good arguable case that the claim falls within one of the jurisdictional “gateways” (such gateways highlight features of the case which indicate a connection with the jurisdiction – for example, where the contract the subject of the dispute is governed by English law or tortious acts have been committed in England or the loss has been suffered in England);
- there is a serious issue to be tried on the merits of the claim;
- England is clearly and distinctly the appropriate forum for the trial of the dispute (the “forum non conveniens” test).
Once the prima facie case for jurisdiction has been made and proceedings started, a defendant may still contest the English court’s jurisdiction. The defendant need only succeed on any one ground of the above three-pronged jurisdiction test for the English court to decline jurisdiction.
In terms of understanding the English Court’s approach to the test, the recent case of Wwrt Limited v Zhevago [2024] EWHC 122 (Comm) (the “Wwrt case”) is instructive. In the context of an international fraud, it shows the attitude of the court tasked with deciding (i) relevant foreign law issues, (ii) the extent to which actions committed internationally need to have occurred within England in order to found jurisdiction and (iii) the substantive evidence needed to support a jurisdiction claim/challenge.
In this case, it was alleged that an international fraud had been perpetrated by Mr Zhevago (a Ukrainian businessman and billionaire with diverse worldwide business interests). Amongst his many interests, Mr Zhevago owned and controlled a Ukrainian bank, PJSC Finance and Credit Bank (the “Bank”). The Bank had been the tenth largest bank in Ukraine but in 2015 it failed financially and was liquidated. It was taken over by the Deposit Guarantee Fund of Ukraine (“DGF”). In 2021, following an investigation, DGF brought a claim, on behalf of the Bank, against Mr Zhevago and others before the English courts: PJSC Bank “Finance and Credit” v Zhevago [2021] EWHC 2522 (the “2021 case”). It was alleged that by a variety of fraudulent loan schemes involving English registered corporate vehicles, Mr Zhevago and others had extracted the equivalent of US$500million from the Bank between 2010 and 2015. Based largely on the same facts, the 2021 case (in which Mr Zhevago challenged the jurisdiction of the English courts to hear the Bank’s claim) proved significant in the later Wwrt case of 2024 (in which Mr Zhevago again challenged the jurisdiction of the English courts to hear Wwrt’s claim). In 2021, Mr Zhevago had successfully contested the English court’s jurisdiction on the grounds that England was not the most appropriate forum (limb 3 of the jurisdiction test above).
By 2024, as different claims against Mr Zhevago were progressed, facts relevant to the jurisdiction argument of 2021 had changed. First, whereas the 2021 case was brought in the name of the Bank, the 2024 claim was commenced by Wwrt Limited (“Wwrt”) as second assignee of the Bank’s rights against Mr Zhevago. (In distressed debt scenarios it is common for a creditor to assign (i.e. transfer) its rights to a debt to a third party for a discounted sum). This fact was material because Mr Zhevago’s argument was that the Bank’s tortious rights against him were neither expressly transferred to Wwrt under the express terms of the Ukrainian law assignment nor did such rights pass automatically as a matter of Ukrainian law. In relation to limb 2 of the jurisdiction test, if Wwrt was not entitled to bring the claim against Mr Zhevago there was no serious issue which could be tried on the merits of the claim. Second, whilst the limb 3 “forum non conveniens” argument had been raised in 2021 (and on the face of it, already determined), it was argued by Wwrt that since then, based on intervening events, additional arguments could be made as to the availability and suitability of Ukraine as a competing jurisdiction. For example, war had since broken out in Ukraine (February 2022). It was alleged also that Mr Zhevago had sought to bribe the most senior judge of the Ukrainian Supreme Court so that it would be difficult to get a fair hearing there. Lastly, there was an alleged real risk that Mr Zhevago would seek to challenge enforcement of any judgment from the Ukrainian court on the basis of unfairness and bias within the Ukrainian legal system. Whilst this last argument had been raised and rejected in 2021, in 2023 Mr Zhevago had argued in French proceedings that he faced a risk of unfairness and bias before the Ukrainian courts when successfully resisting extradition from France to the Ukraine to face criminal charges. If, by Mr Zhevago’s own argument, Ukrainian courts were unsuitable in that context, Wwrt argued that the Ukrainian courts should be considered unsuitable to hear the civil case.
The Court considered each limb as follows:
Serious issue to be tried on the merits
In relation to the assignment (governed by Ukrainian law), the Court found that on the evidence and argument before it, there was no express contractual provision to transfer tortious rights. Moreover, there was no substantive Ukrainian law which allowed for the automatic transfer of such rights. As a result, there was no basis on which the claim could be brought by Wwrt and therefore no serious issue to be tried on the merits. The court noted that an “issue of Ukrainian law is viewed, in the context of English proceedings, as an issue of fact, not an issue of law.” Where such an issue arises in the context of a summary judgment or “serious issue to be tried” argument, the court can adopt the approach it normally takes to issues of fact which is to “consider whether the factual point raised carries the necessary degree of conviction to reach the threshold of having a real, as opposed to a fanciful, prospect of success….”
The jurisdictional gateway
In relation to the jurisdictional gateway, Wwrt claimed it had a good arguable case in respect of a tortious claim that damage “has been or will be sustained from an act [perpetrating the fraud] committed or likely to be committed, within the [English] jurisdiction.”
In relation to tortious acts in an international context, the court recognised that not all the tortious acts needed to have been committed within the jurisdiction but whatever acts were committed here needed to be more than relatively minor or insignificant (i.e. they needed to be substantial and efficacious) in order for the court to consider taking jurisdiction. In assessing whether acts which had taken place within the jurisdiction were minor or insignificant, the test is not relative to acts committed in other jurisdictions. As regards “good arguable case”, the court simply needed to decide who had the better of the case.
Wwrt claimed that during the relevant period when the conduct took place, whilst not resident in the jurisdiction, Mr Zhevago came to England for specific business and family visits. When Mr Zhevago was in the jurisdiction he was working and the inference could be drawn (which met the good arguable standard) that substantial and efficacious steps in furtherance of the fraud were taken here. In response, Mr Zhevago’s counsel produced flight itineraries to evidence the time spent by Mr Zhevago in England and argued that time spent in England was either connected with Mr Zhevago’s work for Ferrexpo plc (which was not connected with the alleged fraud) or to visit his family. On the available evidence, the Court found that there were “no strong or good reasons to doubt” Mr Zhevago’s evidence. Accordingly, Wwrt did not have a sufficient case to meet the good arguable case standard that there were substantial and efficacious acts committed within the jurisdiction. The Court did go on to consider whether there could be a good arguable case if it looked at the tort alleged “in a commonsense way”. Taking into account the fact that Mr Zhevago visited England and worked “on the go”, might it be inferred that substantial and efficacious acts were carried out in the jurisdiction? As to that, the Court considered that there was nothing to suggest it was necessary for Mr Zhevago to do anything in England to accomplish any aspect of the fraud. On the contrary the centre of gravity of the fraud was Ukraine. This was the obvious place where steps would have been required in order to put in place the fraud and to accomplish it. Moreover, fatally, not only were there no acts which could be described as substantial and efficacious, there was no evidence of any acts being carried out in England in furtherance of the fraud at all. The Court was, therefore, unable to make any such inference.
In deciding the issue, the Court acknowledged that, at the pre-disclosure interlocutory stage, it may be difficult for a claimant asserting fraud to evidence what acts have been carried out within the jurisdiction. The Court recognised that inadequate disclosure by the party resisting jurisdiction or an inability to test their evidence by cross-examination without a full hearing might make it difficult to form a provisional view; it also acknowledged that on the limited evidence available to it at the interlocutory stage, a view reached by the Court on such evidence could, with the benefit of later, full disclosure, prove to be wrong. However, the Court concluded that it is sufficient to found jurisdiction if the claimant can show a “plausible evidential basis” for the claim. For that, the claimant needs to put before the court sufficient material to persuade the court that it has the better of the case that substantial and efficacious acts have been committed within the jurisdiction. The claimant had not been able to do that. This was also not a case where inadequate disclosure meant the Court was unable to form a provisional view as to which party had the better of the case. The Court was able to form a provisional view based on Mr Zhevago’s evidence and concluded that he had the better of the case.
Forum non conveniens
Based on the principles set out in Spiliada Maritime Crpn v Cansulex Ltd [1987] 1 AC 60, as considered by subsequent authorities, the Court reiterated the well-established principles in relation to forum non conveniens (limb 3 of the jurisdiction test). Briefly:
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- In a permission to serve out case, the burden is on the claimant to establish that this jurisdiction is clearly and distinctly the appropriate forum.
- The first limb of Spiliada is concerned with identifying the ‘natural forum’.
- The second limb of Spiliada is concerned with substantial justice, such that even if England is not the natural forum for the claim, if it is established objectively, by cogent evidence, that there is a real risk that justice will not be obtained in the foreign jurisdiction, then the English courts will exercise jurisdiction.[3]
In relation to Spiliada limb 1, the Court found that the relevant connecting factors to Ukraine were powerful and overwhelming and the connections that existed with England were of no weight. The case reflected a domestic fraud carried out in Ukraine by Ukrainians on a Ukrainian bank. The claims were all governed by Ukrainian law, which could be best applied by the Ukrainian courts without needing expert evidence in the manner that would be required in England to deal with foreign law issues. Nearly all the witnesses were in Ukraine and spoke Ukrainian and the documents were in Ukrainian. Trial in England would be more costly than in the Ukraine. Moreover, there were also related proceedings against Mr Zhevago which were taking place in the Ukraine. The Court held that “any other conclusion would be bizarre in the light of the decision” in relation to the 2021 case which had held, based on substantially the same facts, that Ukraine was the natural forum of the claim.
Wwrt’s case therefore rested mainly on Spiliada limb 2 arguments and the need to establish objectively, by cogent evidence, that there is a real risk that justice would not be obtained in the Ukraine. Wwrt raised three arguments relying on the changed circumstances/new evidence since 2021. First, the war in Ukraine meant the Courts were not functioning properly. Counsel could not travel to Ukraine for safety reasons and there were continued air raids and power outages. Second, the Ukrainian court system lacked independence or was corrupt. There was evidence that Mr Zhevago had sought to bribe the head of Ukraine’s Supreme Court for favourable decisions. Third, Wwrt alleged a real risk that Mr Zhevago might deliberately challenge enforceability of a Ukrainian judgment once obtained on the basis (i) he could not properly participate in Ukrainian proceedings or (ii) the procedure was unfair or otherwise politically or improperly motivated. Wwrt failed on all three counts.
Regarding the war, the Court found, on the evidence, that the Ukrainian court system was still functioning (based on court statistics). Any backlog had a negligible impact in terms of obtaining a decision (a delay of one year was estimated). There was no real risk that justice would not be obtained. Law firms were also still functioning. Although the Court order permitting service out of the jurisdiction was made in May 2022, it was relevant to look at the military position after this date (when the Russian army retreated). Later events shed light upon considerations which were relevant in May 2022 as they indicated that the impact of war on the Ukrainian court system was only temporary.
In relation to the Ukrainian Court’s lack of independence or corruption, it was made clear that this was not an endemic position; the case for corruption was specific and confined to Mr Zhevago. In the event, the Court refused Wwrt permission to raise the lack of independence/corruption argument (the bribery allegations were formally raised very late in the proceedings and Mr Zhevago had not had time to respond). However, the Court decided that such evidence as had been provided was based, in any event, on insubstantial evidence, being nothing more than a press report with no underlying materials. Accordingly, there was no cogent evidence that Mr Zhevago was able to interfere with the Ukrainian court process in terms of selecting a judge.
As regards the enforceability of a Ukrainian judgment, the Court held that they could not predict whether Mr Zhevago would dispute enforceability if unsuccessful before the Ukrainian courts. There may be a legitimate concern. However, points on enforceability could not generally be a reason for the English court to take jurisdiction. This line of argument invites the English court to decide its processes are superior to those of the foreign court. In any event, for Wwrt to succeed on jurisdiction there needed to be a real risk that a Ukrainian judgment would be unenforceable. An argument that a defendant could not be trusted not to take a point on enforceability was a long way from what the claimant needed to show. The Court also considered that even if Mr Zhevago did raise an issue on enforceability, any court would give short shrift to any inappropriate or fanciful argument that he had not had a fair trial in circumstances where he had actively sought trial in the Ukraine. As regards the criminal and extradition proceedings of 2023 providing an indication of Mr Zhevago’s future conduct in challenging enforceability of a civil judgment, the court did not think this argument relevant given the very different context for the proceedings. Moreover, Mr Zhevago had not criticised the system of civil justice in Ukraine. Even if he had, this would not have established a real risk that substantial justice would not be done in Ukraine.
In light of the Wwrt case, we think there are three key points of interest.
First, the case clearly demonstrates that English courts are willing to decide questions as to the scope of an assignment of a foreign law cause of action at the interlocutory stage in the context of a jurisdiction challenge. On the facts, the Commercial Court decided that there was no serious issue to be tried as to whether the assignment of the Bank’s rights against Mr Zhevago extended to a tortious claim under the Ukrainian Civil Code. Issues as to the validity and scope of an assignment (which is common in distressed debt scenarios) must, therefore, be considered at the outset of this type of litigation.
Second, as regards the tort gateway, specifically the issue of whether the defendant had committed relevant acts within the jurisdiction (i.e. England and Wales), the case reiterates the highly fact-sensitive nature of the gateway analysis. It will not be sufficient to point to a defendant having a residence in, or frequently visiting, England, in order to build an inferential case that relevant tortious acts were committed in this jurisdiction, rather than their more natural home jurisdiction. As with the 2021 case, the Commercial Court engaged in a careful factual analysis at the jurisdiction stage and did not consider that there was a good arguable case that the relevant tortious acts were committed in England – based on Mr Zhevago’s travel records and other evidence. Cases in which one can identify specific meetings in England at which it is believed a conspiracy was hatched are likely to be in a different category, though such evidence is generally not available, at least prior to disclosure.
Third, the fact that the Commercial Court would have upheld the jurisdiction challenge on forum conveniens grounds in any event is also notable. This is the area in which both this judgment and the judgment from the 2021 case may be more controversial. The English courts have accepted jurisdiction in many cases with a similar or even lesser degree of connection to England in the past. The forum conveniens test is a flexible one and it appears to have weighed heavily with the Commercial Court that a similar claim was dismissed on jurisdiction grounds against the same defendant relatively recently. The Zhevago cases are less likely to be persuasive authority on this issue and we think it likely they will be confined to their own facts on this point.
Authors: Astraea Group Limited and Philippe Kuhn, barrister at 39 Essex Chambers
Footnotes
[1] England and Wales hailed as legal centre of the world | The Law Society
[2] Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd [2011] UKPC 7; [2012] 1 WLR 1804
[3] See, for example, Lungowe v Vedanta Resources plc [2019] UKSC 20.