Astian Group Ltd et Al v Tnk Industrial Holding Ltd et Al
| Jurisdiction | British Virgin Islands |
| Judge | Rawlins, J. |
| Judgment Date | 17 November 2003 |
| Neutral Citation | VG 2003 HC 18 |
| Docket Number | BVIHCV 0072 of 2003 |
| Court | High Court (British Virgin Islands) |
| Date | 17 November 2003 |
High Court
Rawlins, J.
BVIHCV 0072 of 2003
Mr. Stephen Moverley-Smith, QC, for the claimants/respondents, with him Mr. Michael Fay.
Mr. Robert Hildyard, QC, for the defendants/applicants, with him Mr. Tim Clarke and Mr. Phillip Kite.
Conflict of Laws - Forum non conveniens — Forum challenge — Appeal for declaration that the Court should not exercise its jurisdiction — Stay of proceedings — Whether there is available a more competent forum in which the case may be tried more suitable for the interest of all parties and for the ends of justice — Burden of proof — Domicile or place of incorporation — Practical convenience factor — Inadequate procedures to ensure procedural justice — Connection of the case to the forum — Stay of proceedings on the ground of forum non conveniens.
The defendants, TNK, Alfa Petroleum and “OGIP” applied on 3 rd July 2003 for a declaration that the Court should not exercise its jurisdiction in these proceedings. They also applied for an order staying these proceedings or, alternatively, that the service of the claim form should be set aside and the Statement of Claim struck out. They further applied to vary or discharge two orders that were given by this Court on 26 th May 2003 and 12 th June 2003, respectively. The first order froze assets of the defendants within this Territory up to US$383, 173, 392.00. The second order, enjoined the defendants to retain, either collectively or individually, assets in the jurisdiction up to this sum. In the second order, the claimants also undertook to provide the defendants with information of their financial position within 7 days of the date of that order.
The aspect of the application for discharging the orders was not canvassed at the hearing. This Court agreed with the defendants that the forum challenge should be initially pursued. The defendants reserved their right to pursue the application to discharge the orders at a subsequent stage, or to take such action as the judgment on the forum challenge may make necessary. This judgment is given against the background of the antecedents of the parties and the claim and the applicable principles.
The first named claimant, Astian, and the 3 defendant companies are registered in this Territory. The second named claimant, “IOPS”, is a Seychelles company. TNK, the first named defendant, is a holding company within a group of companies referred to as “the TNK Group”. Alfa Petroleum and OGIP, the second and third named defendants, wholly own TNK respectively. They established TNK as a joint venture.
The substantive claim in this case was brought pursuant to Articles 6(2) and (3) of the Law on Joint Stock Companies of Russia, 1996, (“the Russian Statute”), and Articles 15(2) and 105(5) of the Russian Federation Civil Code. Astian claims damages and an account for the income that the defendants allegedly received or from which they allegedly benefited as a result of alleged guilty actions in relation to a Russian Joint Stock Company, OAO Saratovneftegaz (“SNG”). SNG is involved in the exploration and production of oil in Russia. IOPS claims the same relief on the said grounds in relation to another Russian company, OAO Saratovsky Refinery (“SR”), which is involved in the refining of oil.
OAO Sidanco (“Sidanco”), another Russian Joint Stock Company, is the parent Company of SNG, SR, and other Russian companies that are engaged in exploring, producing, refining, marketing and distributing oil. TNK is a majority shareholder in Sidanco, while the claimants, Astian and IOPS, are minority shareholders in SNG and SR, respectively. The claimants say that the defendants, either solely or in conjunction with others, had the opportunity to determine decisions that were adopted by SNG and SR, or they were able to impact those decisions, decisively.
The claimants further allege that the defendants used the opportunity of their decisions that were adopted by SNG and SR, or that impacted the decisions of these 2 companies. They claim that these decisions caused SNG and SR to undertake ‘guilty actions’ within Article 6(3) of the Russian Statute, which caused them (SNG and SR) damage.
The gravamen of the claim that was brought on behalf of SNG is that the impugned decisions of Sidanco procured SNG to sell oil to it (Sidanco) at prices that were substantially below market prices. Further, that Sidanco procured SNG to sell oil to it (Sidanco) to be refined in Russia, rather than permit or enable SNG to contract to have oil refined and to sell the resulting oil products at market prices on SNG's own behalf.
The crux of the claim on behalf of SR is that the defendants, in conjunction with others, procured SR to enter into contract's) to refine oil supplied to it by Sidanco at prices substantially below market prices. In the alternative, they complain that Sidanco sold the refined oil products for its own benefit or for the benefit of others that are further up in the TNK group structure, rather than permit or enable SR itself to purchase crude oil, refine it and sell the products on its own behalf.
The principles that are applicable on the forum challenge are fairly well settled, except for one aspect. I considered the basic principles in a judgment that was delivered in this Court on 12 th June 2003. This was in Bitech Downstream Limited v. Rinex Capital Inc. and Woodbridge Trading Limited, Claims Nos. BVIHCV 2002/0233 and BVIHCV2003/0008. The basic guiding principles were distilled from the statements of Lord Goff in the leading case Spiliada Maritime Corporation v. Consulex Ltd. [1987] A.C. 460, at pages 476–478. On those principles, the defendants will succeed on their plea of forum non conveniens if this Court is satisfied that the Russian Arbitrazh Courts provide an available and competent forum in which this case may be tried more suitably for the interest of all the parties and for the ends of justice.
In relation to the burden of proof, the defendants must persuade this Court to exercise its jurisdiction to grant a stay. They must show that this Court is not the natural or appropriate forum for the trial. They must also establish that the Russian Arbitrazh Courts provide another available forum which is prima facie the clearly or distinctly more appropriate forum for the trial of the claim, rather than this forum. This is the first limb of the Spiliada test.
The first limb of the Spiliada test requires me to consider, first, whether Russia is an available forum. I must consider, second, whether Russia is clearly the more appropriate forum. I shall canvas the factors that connect this case to this jurisdiction or to Russia, which indicate in which of these fora the trial can be done at substantially more convenience or less expense. In other words, this Court must decide which Court is the forum with which this case has its most real and substantial connections. Quite importantly, the connecting indicators include factors such as the law that governs the issues to be tried and the relevant transactions, and the place where the parties were incorporated or carry on business. They also include factors affecting convenience or expense such as the availability of witnesses.
If the defendants discharge the evidential burden on the first limb, and convince this Court that the Russian Court is available and clearly the more appropriate forum for the trial of this case, the burden of proof then shifts to the claimants. They must then prove that there are special circumstances in which justice requires that the trial should nevertheless be conducted in this Court. This is the second stage of the Spiliada test. On this further inquiry, I should consider all of the circumstances of the case. These include circumstances that revolve substantially around issues of justice. These arise for consideration in this case because the claimants insist that they would not obtain justice in the Russian Arbitrazh Courts.
Counsel for the parties asked me to visit an aspect of the Spiliada principles that is seemingly not quite settled. It is an area that I do not think is very essential for the purposes of this case. It arose, however, because learned counsel for the claimants, Mr. Moverley-Smith, QC, submitted, in essence, that issues of justice are to be considered at the first stage of the Spiliada test, and the burden is upon the defendants.
As I understand it, the focus of the submission by learned counsel for the claimants is that if this Court finds that this case is more closely connected with Russia, it has nevertheless to determine whether justice can be obtained there, prior to embarking upon an examination under the second stage of the Spiliada test. Counsel for the claimants submitted that the burden of proof on that inquiry is on the defendants because it is a first stage inquiry. He cited as authority the decision of the English Court of Appeal in Mohammed v. Bank of Kuwait and the Middle East KSC [1996] 1 W.L.R. 1483. As I understand it, the essence of the decision in this case, as it impacts our case, is that the Russian Court must also be available in that the claimants will be able to bring their claim, and generally have access to that Court.
Mohammed v. Bank of Kuwait
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