Cukurova Holding as v Imanagement Services Ltd

• Jurisdiction: British Virgin Islands
• Judge: HARIPRASHAD-CHARLES J
• Judgment Date: 17 July 2007
• Court: High Court (British Virgin Islands)
• Docket Number: Claim No. BVIHCV2006/0305
• Date: 17 July 2007

THE EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE (CIVIL)

Before: Her Ladyship Justice Indra Hariprashad—Charles

Claim No. BVIHCV2006/0305

BETWEEN

Cukurova Holding A.S.

Claimant/Applicant

and

Imanagement Services Ltd

Cukurova (BVI) Limited

Defendants/Respondents

Appearances:

Mr John Higham QC of White & Case, London and Mr Christopher Young of Harney Westwood & Riegels for the Claimant

Mr Guy Philipps QC of Fountain Court Chambers, London and Mr Michael Fay of Ogier for the First Defendant

Mrs Benedicta Samuels-Richardson of Samuels Richardson for the Second Defendant

Cases referred to and considered in the Judgment

1. Carl Zeiss Stiftung v Rayner & Keeler (No.2), [1967] 1 A.C. 853.

2. The Sennar (No. 2), [1985] 1 W.L.R. 490

3. The Abidin Daver [1984] 1 A.C. 398.

4. de Dampierre v de Dampierre, [1988] A.C. 92

5. Spiliada Maritime Corporation v Cansulex Limited [1987] 1 A.C. 460.

6. IPOC International Growth Fund Limited v LV Finance Group Limited et al, BVI Civil Appeal Nos. 20 of 2003 & 1 of 2004 [unreported] delivered on 19 September 2005.

7. Sibir Energy PLC v Gregory Trading SA and others, BVI Civil Appeal No. 26 of 2005.

8. Sim v Rainbow (1892) 19 R. 665.

9. Connelly v RTZ Corporation plc. [1998] A.C. 854.

10. Lubbe v Cape plc. [2000] 1 W.L.R. 545.

11. Banco Atlantico S.A. v The British Bank of the Middle East [1990] 2 Lloyd's Report 504.

12. Bitech Downstream Ltd v Rinex Capital Inc et al, BVIHCV2002/0233.

13. Arabian American Insurance Company (Bahrain) E.C. v Al Amana Insurance and Reinsurance Company Ltd Civil Case No. 38 of 1993 (Supreme Court of Bermuda).

14. Hagstromer et al v Sibneft Oil Trade Company Limited, BVIHCV2004/0055.

15. The Varna (No.2) [1994] 2 Lloyd's Rep. 41.

16. Berezovsky v Michaels [2000] 1 W.L.R. 1004.

17. The Eleftheria [1969] 1 Lloyd's Rep. 237.

18. The Albaforth [1984] 2 Lloyd's Rep 91.

19. Diamond v Bank of London and Montreal Ltd. (1979) 1 Lloyd's Rep. 335.

20. Sibir Energy PLC v Gregory Trading SA and others, High Court Civil case BVIHCV2005/0174 [unreported].

CATCHWORDS:

Application for a stay of proceedings on the ground of forum non conveniens — Application for a stay pursuant to Section 6 (2) of the Arbitration Ordinance and/or the inherent jurisdiction of the Court and/or which is an abuse of the process of the Court and/or on the ground of lis alibi pendens — Issue estoppel — res judicata — Onus on Defendants to demonstrate that Russia is an available and appropriate forum — Whether the action has its most real and substantial connection with Russia

HEADNOTE:

Cukurova is a company incorporated under the laws of Turkey. Imanagement is a company incorporated under the laws of the BVI. Cukurova (BVI) Limited (‘CBVI’) is also a company incorporated under the laws of the BVI with its registered office at the same address as Imanagement. On 14 December 2006, Cukurova instituted the present proceedings in the BVI seeking declarations that (a) the Defendants fraudulently represented that there was an agreement to arbitrate between Cukurova and Imanagement; (b) the Arbitral Award was procured by fraud and as such, is not binding on Cukurova; (c) the Defendants are estopped, restrained or prohibited from seeking to enforce or obtain any benefit from the Arbitral Award. In addition, Cukurova claimed that it is entitled to damages for the loss occasioned by the Defendants' conspiracy and/or abuse of civil process and/or malicious falsehood along with a percentage of the legal costs occasioned by Cukurova in defending the arbitration proceedings and appealing the Award, and in resisting Imanagement's attempts to enforce the Award.

The basis for Imanagement's claim in the arbitration proceedings was an alleged breach of a contract purportedly concluded between Cukurova and Imanagement which was governed by New York laws concerning the sale of shares in a Turkish Petroleum Refinery. CBVI was named as a respondent in the first of the arbitration proceedings on the basis that it had executed a guarantee in favour of Imanagement in respect of the contractual obligations which Cukurova had allegedly breached. Cukurova joined CBVI as a co-defendant on the basis that, by knowingly executing a guarantee of obligations which never existed, CBVI conspired with Imanagement in the perpetration of the fraud against Cukurova.

Imanagement brought an arbitration claim against Cukurova and CBVI before the Arbitral Court in Russia (not a court but an entity that supervises arbitrations) claiming damages for breach of the alleged contract. The Tribunal dismissed Imanagement's claim against CBVI and held that Cukurova shall pay US$81 million to Imanagement as damages (‘the First Award’). The Tribunal rejected Cukurova's contention that the agreement to arbitrate was forged. Imanagement sought to enforce the First Award in jurisdictions where Cukurova has assets (Switzerland and the Dutch Antilles). So far, Cukurova has successfully resisted these enforcement proceedings but has incurred substantial expense in doing so. Cukurova filed an annulment proceeding with the Moscow Commercial Court for an order setting aside the First Award. Cukurova relied on the alleged forgery of the Lyustiger-Karamehmet Exchange and the numerous gross violations of due process in the First Arbitration.

On 22 March 2007, the Moscow Commercial Court decreed that the First Award would be set aside. On 27 March 2007, the Court delivered the reasons for its decision stating that it had annulled the First Award on the basis that Imanagement had failed to prove the existence of a binding agreement to arbitrate between the parties. It appears that the above judgment of the Moscow Commercial Court did not resolve the issue of whether the arbitration agreement was a forgery.

On 24 January 2007, Imanagement filed this application seeking:(a) a declaration that the Court should not exercise any jurisdiction it may have to try Cukurova's claim against Imanagement; and (b) a stay of the proceedings against Imanagement pursuant to section 6 (2) of the Arbitration Ordinance of the British Virgin Islands and/or the inherent jurisdiction of the Court to stay proceedings brought in breach of an agreement to arbitrate and/or pursuant to the inherent jurisdiction of the Court to stay a claim which is an abuse of the process of the Court and/or on the ground of lis alibi pendens and/or forum non conveniens. CBVI also filed an application seeking a stay of the proceedings on the grounds of forum non conveniens.

HELD

• 1. The claims filed by Cukurova are claims in tort against Imanagement and CBVI for conspiracy to defraud, abuse of civil process and malicious falsehood that are not claims which arise out of the alleged arbitration agreement between Cukurova and Imanagement and do not fall within the ambit of the alleged agreement to arbitrate, which, on Imanagement's own case, referred only to contractual claims and, even then, did not apply to claims against CBVI.

• 2. Section 6 (2) of the Arbitration Ordinance does not apply because Cukurova's tortious claims are not a ‘matter agreed to be referred’ to the Arbitral Tribunal.

• 3. The ruling of the Moscow Commercial Court is final and conclusive in the required sense that it cannot be varied, re-opened or set aside by the court that delivered it or any court of co-ordinate jurisdiction although it may be subject to appeal to a court of higher jurisdiction.

• 4. The Defendants have not contested that the Moscow Commercial Court is a court of competent jurisdiction and, given the identity of the parties, it follows that the fact that no binding agreement to arbitrate exists between Imanagement and Cukurova is now res judicata before this Court and Imanagement is now estopped from asserting in this Court or elsewhere that there is or was such an agreement.

• 5. There is no jurisdiction to grant a stay under section 6 of the Arbitration Ordinance nor is there any basis to do so under the inherent jurisdiction of the Court which, in any event, would require exceptional circumstances.

• 6. Neither under BVI law nor the New York Convention is there any basis for contending that the Courts of the country where the award was made have exclusive jurisdiction to determine matters going to the arbitral tribunal's jurisdiction.

• 7. The Moscow Commercial Court has ruled that no agreement to arbitrate exists but left undecided the question of fraud and as such, it dismisses any doubt that Cukurova is in some way precluded from pursuing its claim before the Defendants' home courts. It does not follow from the fact that Cukurova was effectively compelled to seek annulment of the fraudulently obtained Award from the Moscow Commercial Court that it is now barred from bringing claims for damages in tort against the Defendants in this jurisdiction.

• 8. The existence of concurrent foreign proceedings is just one of the factors that the court may take into consideration in the exercise of its discretion to grant a stay of proceedings on the principle of forum non conveniens.

• 9. The onus is on the Defendants to demonstrate that Russia is both an available alternative forum and the clearly more appropriate one.

• 10. On the uncontroverted evidence before the Court, Russia would not be an available forum for Cukurova's tortious claims against Imanagement and CBVI because as stated by the expert witness, there appears to be no ‘property’ in Russia that could suffer ‘injury’ within their law and there is no agreement in writing between the parties to refer Cukurova's claims for damages in tort against these two BVI Companies to the jurisdiction of the Russian Court as undertakings would be insufficient to confer jurisdiction on the Russian Court.

• 11. The fact that a defendant is incorporated in a jurisdiction is a factor that clearly militates against...