Bank St Petersburg Ojsc & Anor v Arkhangelsky & Ors (Rev 1)

The court has to consider 3 interlocking interlocutory appeals arising out of (apparently so far successful) attempts by the Bank of St Petersburg (“the Bank”) and its chairman Mr Savelyev to wrest a large group of companies known as the Oslo Marine Group (“OMG”) from the control and majority ownership of Mr and Mrs Arkhangelsky. One of the many assets owned by Mr and Mrs Arkhangelsky, through their company Oslo Marine Group Ports LLC (“OMG Ports”) was part of the port of St Petersburg known as The Western Terminal. OMG had substantial debts owing to the Bank by the end of 2008; the Arkhangelskys assert that at about that time the Bank agreed to restructure the debts, not to demand repayment before the end of a six month moratorium, not to interfere in OMG’s day-to-day commercial activities, not to dispose of the Arkhangelskys’ shareholdings which were pledged in support of the loan and to return the pledged shareholdings once specified loans were repaid. They further allege that in breach of contract, the Bank demanded instant repayment, replaced the management of OMG companies and transferred the shareholdings to special purpose vehicles controlled by the Bank and/or Mr Savelyev who have obtained judgments in Russia in pursuance of these wrongful activities. They have sought to enforce those judgments in France and Bulgaria where it is believed there are assets. The Arkhangelskys by contrast brought claims against the Bank and Mr Savelyev and related parties in the British Virgin Islands and Cyprus for conspiracy, deceit and duress or intimidation pursuant to Article 1064 (the tort provision) of the Russian Civil Code. There were jurisdictional (or perhaps other) difficulties about those claims and it was agreed between the parties by an Exclusive Jurisdiction Agreement of 14^th December 2011 that the English court would have exclusive jurisdiction to determine the disputes between them.

Pursuant to this agreement the Arkhangelskys (who have now been granted a form of asylum in France) and OMG Ports began proceedings in the Commercial Court, issued by their then solicitors Bristows, on 22^nd December 2011 against the Bank, Mr Savelyev and other defendants but did not attempt to serve them until 23^rd July 2012. Meanwhile the Bank and Mr Savelyev instructed their solicitors, Baker & McKenzie, to issue proceedings against the Arkhangelskys in the Chancery Division claiming negative declaratory relief and also claiming sums allegedly due under loan agreements or guarantees which the Arkhangelskys say are forgeries. Those proceedings were issued on 20^th February 2012 and duly served. Morgan J granted a freezing order against the Arkhangelskys on 15^th March 2012. There has been an order for disclosure of assets with which the Arkhangelskys say they have substantially complied. The Bank disputes that but it is the fact that the Arkhangelskys were not represented by English solicitors and counsel in the proceedings below and it is only in this court for the first time that they have secured representation by counsel pro bono, Mr Alexander Milner. The court is most grateful to him.

The claim form issued by Bristows was marked Not For Service Outside the Jurisdiction and expired on 14^th April 2012. By this time Bristows were no longer instructed and the Arkhangelskys’ French lawyers wrote to Baker & McKenzie on 8^th May 2012 asking if they had instructions to accept service of proceedings. Baker & McKenzie replied on the same day asking for the proceedings to be identified but adding that they saw no need for further proceedings. That was, on the face of it, a reasonable observation since the Arkhangelskys were already defendants in the Chancery proceedings and could counterclaim in those proceedings. The Arkhangelskys were, however, concerned about limitation if they and OMG Ports were confined to counter-claiming in the Chancery Division and on 18^th June 2012 Mr Arkhangelsky applied in person for an extension of time to serve the Commercial Court claim form on the Bank and Mr Savelyev. On 23^rd July Christopher Clarke J gave permission to serve the claim form (within the jurisdiction) on or before 29^th July 2012. A Mr Stroilov (an associate of the Arkhangelskys with a certain knowledge of legal matters who subsequently acted as the Arkhangelskys’ McKenzie friend) then personally handed the claim form and Christopher Clarke J’s order to Mr Thomas Yates of Baker & McKenzie who returned it two days later saying that Baker & McKenzie had no instructions to accept service.

That left Mr Arkhangelsky in something of a quandary. He had explained in the statement supporting his application that he had been told by Bristows it would be a lengthy and expensive procedure to serve the proceedings out of the jurisdiction. He said he did not have the resources for that and yet the Bank and Mr Savelyev refused to instruct Baker & McKenzie to accept service. He had worries about limitation. Those stemmed from the fact that there was a three year limitation period in Russia beginning from the time when he knew or ought to have known that his rights had been violated. That is agreed to have been sometime in March 2009. The Commercial Court proceedings were therefore in time having been issued on 22^nd December 2011. He seems to have thought that any counterclaim in the Chancery proceedings might be time-barred because he had not counterclaimed in those proceedings before 1^st April 2012. He therefore seems not to have been aware that pursuant to section 35(1)(b) of the Limitation Act 1980 he and Mrs Arkhangelsky could counterclaim at any time because the proceedings against them had been issued on 20^th February 2012 and their counterclaim would be deemed to have begun on that date, a few days before March 2012. Any worry about a claim by OMG Ports who were not defendants to the Chancery proceedings would, however, have been well founded, because any counterclaim begun by them would only be regarded as having begun when that counterclaim was made.

In these circumstances, Mr Arkhangelsky on 22^nd October 2012, with the help of counsel instructed on a direct access basis, applied for an order dispensing with service of the Commercial Court claim form under CPR 6.16 on the basis that it was sensible to avoid what might be a complex dispute about limitation and no prejudice could be caused to the Bank and Mr Savelyev since the Chancery proceedings were a mirror of the Commercial Court proceedings. That application was refused first by Teare J on paper on 10^th December 2012 and than on 30^th April 2013 at an oral inter partes hearing by HHJ Mackie QC (at which Mr Stroilov represented the Arkhangelskys and helpfully referred the judge to Magna Carta) on the basis that any counterclaim could be advanced in the Chancery action and that the existence of limitation issues was not a good reason for dispensing with service. On 23^rd July Lewison LJ granted permission to appeal observing that the decision of the Supreme Court in Abela v Baadarani [2013] UKSC 44; [2013] 1 WLR 2043 handed down on 26^th June 2013, showed that the appeal had real prospects of success. That case dealt with alternative service pursuant to CPR 6.15 rather than dispensing with service pursuant to CPR 6.16 but certainly discourages any legalistic or technical approach to service of proceedings, if they have been brought to the notice of a defendant.

Meanwhile the Arkhangelskys on or about 4^th July 2013 applied (inter alia) for permission to serve a counterclaim in the Chancery proceedings and for an injunction preventing the Bank and Mr Savelyev from enforcing the Russian (and other) judgments they had obtained. Those applications were opposed and so the Arkhangelskys also applied for the Russian 3 year limitation period to be disapplied pursuant to section 2(2) (the undue hardship provision) of the Foreign Limitation Periods Act 1984.

These applications (among others) came before Hildyard J who has been case-managing the Chancery litigation. He decided to allow the counterclaim made by the Arkhangelskys because that dated back to the date of the issue of the Chancery proceedings. He decided further that the objections to OMG Ports being joined were motivated by the wish to argue that the Arkhangelskys’ claim was merely reflective of a loss suffered by OMG Ports so that, if OMG Ports were not joined, the counterclaim in the Arkhangelskys’ name would fail. For this and other reasons he held that the Arkhangelskys and OMG Ports would suffer undue hardship if the Russian limitation period applied. He would therefore disapply the limitation period. He decided further not to grant the injunction sought, thus leaving the Bank free to execute on the Russian judgments wherever assets could be found. He felt that any such injunction would appear to be an infringement of sovereignty of the states where enforcement was taking place.

Lewison LJ has given both sets of parties permission to appeal these two decisions.

There are thus three separate appeals before this court; the first appeal is by the Arkhangelskys and OMG Ports against the order of HHJ Mackie QC refusing to dispense with service of the Commercial Court proceedings; the second appeal is by the Bank and Mr Savelyev against Hildyard J’s order disapplying the 3 year Russian limitation period; the third appeal is by the Arkhangelskys and OMG Ports against Hildyard J’s refusal of an anti-enforcement injunction. The first two appeals are effective mirrors of each other and it is convenient to take the second appeal first since, whatever the decision on the first appeal may be, it is the Chancery proceedings which will be the effective proceedings. Before considering the detail of this second appeal, it is necessary to say something about the findings of the judge.

Hildyard J made a number of important findings, relevant to both the first and second appeals, in his judgment of 14^th November 2013:-

Mr Marshall QC for the Bank sought to challenge the judge’s finding of fact that the Arkhangelskys were impecunious; he submitted that they had not complied (or fully complied) with the requirements of the freezing injunctions; in particular he relied on the fact that the Bank had had to get court orders requiring the Arkhangelskys to authorise Messrs Clyde & Co to release information about Acorn Trust which was at the top of the corporate structure created by the Arkhangelskys. Clyde & Co had provided the Bank with a copy of the deed setting up Acorn Trust but the trustees had declined to provide further information. Moreover OMG Ports was owned by a BVI company called “Monaco”, which had apparently been struck off the register in BVI. It seems that the Arkhangelskys were able to correct this by paying the relevant local taxes and penalties from a Bulgarian company called Petrograd. Mr Marshall contended that the Arkhangelskys must be hiding substantial assets and that their inability to instruct lawyers the equivalent of Baker & McKenzie and leading counsel such as himself was all a charade.

I am not persuaded by this that the judge’s findings of impecuniosity and consequent lack of a level playing field should be set aside. Hildyard J knows far more about this case than does this court, having been required to hold many interlocutory hearings. It is inherently unlikely that, in litigation which is obviously of high importance to the Arkhangelskys, they would not pay for proper legal representation if they could.

Mr Marshall sought to rely on the judge’s conclusions at a yet further interlocutory hearing (given after the judgment he is appealing) when it was suggested that Mrs Arkhangelsky was in breach of the freezing order granted by Morgan J because she had surrendered a policy of life assurance but to my mind the conclusion reached by the judge at that later hearing reinforces rather than contradicts his conclusion in the judgment under appeal. At paragraph 27 of his later judgment he said:-

“It does seem from the evidence so far that the defendants have not been as co-operative as they could and (to my mind) should have been. There are signs, for example, that Mr A made progress in obtaining evidence from the trustees of the Acorn Trust when it suited him, but not when (earlier) it did not. I find it difficult to dispel the feeling that if the defendants did not feel justified by their plight in adopting a stone-wall stance more complete disclosure might have been provided. Indeed, I cannot be sure at this stage that full disclosure has been made; I cannot therefore be sure that the defendants have no other assets. But equally I cannot discard as incredible the evidence of Mr A. Indeed, I find it difficult to believe that Mrs A would have surrendered the Policy or that the defendants would have deprived themselves of legal representation if truly they had a stash of substantial, undisclosed assets. My sense is of an attitude on the part of the defendants of regrettable recalcitrance rather than of a deliberate concealment of assets of real value. I do not think the evidence presently compels the latter conclusion.”

I think therefore that we must proceed on the basis that the judge’s findings about impecuniosity are correct.

Section 1 of the Foreign Limitation Periods Act 1984 (hereafter “the 1984 Act”) provides that, if the law of a foreign country falls to be taken into account in English proceedings, that is to include the law of that foreign country relating to limitation. Since any claim of the Arkhangelskys and OMG Ports is accepted to be governed by Russian law, the Russian law of limitation will apply and, as already stated, proceedings will therefore be time-barred if begun more than three years after a potential claimant becomes aware (or ought to have become aware) that his rights have been violated. In this case that meant that proceedings would have to be begun by some date in March 2012 being three years after March 2009.

Section 2 of the Act, however, provides as follows:-

“1)

In any case in which the application of section 1 above would to any extent conflict (whether under subsection (2) below or otherwise) with public policy, that section shall not apply to the extent that its application would so conflict.

2)

The application of section 1 above to any action or proceedings shall conflict with public policy to the extent that its application would cause undue hardship to a person who is, or might be made, a party to the action or proceedings.”

Section 2(2) did not appear in the draft bill annexed to the Law Commission report (Law Com. No 114, Cmnd. 8570 (1982)) which preceded the enactment of the 1984 Act. Its origin may perhaps be discerned in paragraph 4.50 of that report which records the concern of one of the Law Commissioners, Mr Brian Davenport QC, in relation (ironically) to foreign limitation periods which were longer rather than these which were shorter than English limitation periods. Be that as it may, the question for Hildyard J was whether the application of the Russian time limit would cause undue hardship to the Arkhangelskys or OMG Ports. Strictly speaking, his decision was not a discretionary decision but a decision which required an evaluation of a somewhat complex factual background. As such it is a decision with which this court should not lightly interfere, especially since he has been case managing the Chancery proceedings since their inception.

He was unfortunately required to give two decisions because, after he had given his first judgment on 14^th November 2013, counsel for the Bank, in formulating his application for permission to appeal, sought to rely on two previously uncited authorities which he submitted showed that, although the judge had formulated the correct test for “undue hardship”, he had not properly applied it. In those circumstances, apologising for his (to my mind, entirely understandable) tetchiness, the judge delivered a second judgment confirming his earlier judgment that the application of the Russian limitation period would cause undue hardship. The essential factors which led to this conclusion were:-

Mr Marshall’s main submission was that the judge had not appreciated that, for the purposes of section 2(1) of the 1984 Act, it had to be the application of the Russian limitation provision that had given rise to the undue hardship. He submitted that the real cause of any hardship in this case was that it had taken two years for the Arkhangelskys to begin any proceedings and that the proceedings in the BVI were misconceived; the short time between the agreement for English jurisdiction and the expiry of the Russian time limit only occurred because of the Arkhangelskys’ delays at a time when they did have sufficient money to institute and pursue proceedings as they had in Cyprus; in any event they did institute English proceedings within time so the application of the Russian time limit could not be said to have caused any hardship at all.

For this purpose he cited the two authorities which had not been cited to the judge before his first judgment, Harley v Smith [2010] EWCA Civ 78 reported at [2009] 1 Lloyd’s Rep 359 at first instance but curiously not reported in those reports in the Court of Appeal and Naraji v Shelbourne [2010] EWHC 3298 (Comm) in which Popplewell J at paragraph 176 considered the question to be whether the time period prescribed by the limitation provision is such that its application would deprive the claimant of his claim in circumstances where he did not have a reasonable opportunity to pursue it if acting with reasonable diligence and with knowledge of its potential application. I agree with this description of the question.

The only other authority which needs citation is the decision of this court in Jones v Trollope Colls Cementation Overseas Ltd The Times 26^th January 1990, [1990] WL 754869 which applied the well-known (at least to those with arbitration practices) decision of Liberian Shipping Corporation v A. King and Sons Ltd [1967] 2 QB 86 in which Lord Denning MR addressed the question of undue hardship (at page 98G):-

““undue” … simply means excessive. It means greater hardship than the circumstances warrant. Even though a claimant has been at fault himself, it is an undue hardship on him if the consequences are out of proportion to his fault.”

Guided by these authorities, I find I am in agreement with the judge. Applying the Russian time limit in this case to prevent any counterclaim by OMG Ports causes both the Arkhangelskys and OMG Ports undue hardship because, even though they may have been to some extent at fault e.g. in not applying sooner than they did for an order dispensing with the service of their Commercial Court claim or in not finding enough money to translate the proceedings into Russian and serving them pursuant to the Hague Convention on Service of Proceedings on the Bank in Russia, the consequences of being unable to pursue their counterclaim (which the Bank and Mr Savelyev had already agreed could be pursued in England) are out of proportion to that fault.

I agree with Mr Marshall that one must look to the whole period allowed by the foreign limitation provision but I do not agree that there can be no reliance on the undue hardship provision if it so happens that proceedings are instituted in time. Where (as here) a judge is satisfied that relevant impecuniosity has hindered or prevented due service and the limitation period expires during the period allowed for service, the application of the limitation provision still has causative effect.

The institution of the BVI and the Cyprus proceedings was something the judge had well in mind. But it has to be remembered that in a case in which the Bank and Mr Savelyev had (as it is alleged) monopolised the natural jurisdiction (Russia) and obtained judgments which would not be recognised in other jurisdictions as having been obtained by fraud, intimidation or wrongful pressure on the judicial system, the Arkhangelskys had to find somewhere else to sue. England was not an available forum until the exclusive jurisdiction agreement had been reached and it was likely that the Bank would contest jurisdiction elsewhere as they successfully did in BVI. It is true that the Cyprus proceedings (as well as the BVI proceedings) had been begun while the V Bank was supporting the Arkhangelskys’ claim but the judge pointed out (para 20(a) of his second judgment) that the proceedings in Cyprus were against parties other than the Bank and Mr Savelyev and were withdrawn before jurisdiction was determined so those proceedings were of doubtful utility. After the circulation of this judgment in draft, Mr Marshall has said that the judge was wrong to say that the Cyprus proceedings had been withdrawn and he also said that the Bank and Mr Savelyev had stated they were willing to be joined to those proceedings. But that point does not appear to have been made to the judge and, in any event, the parties did eventually (and no doubt sensibly) agree English jurisdiction. It can also be said that the Arkhangelskys should have begun proceedings before 2011, granted that they knew their rights had been violated in March 2009 but that is something of a counsel of perfection if one’s business world is disintegrating and it is necessary to emigrate and find a roof over one’s head. To begin proceedings towards the end of the limitation period may be risky and to that extent blameworthy but the judge was entitled to think that the consequence of losing one’s claim was out of proportion to that fault.

Mr Marshall also launched an attack on the idea that impecuniosity had any relevance to the question of undue hardship, unless the lack of funds was actually caused by the Bank. That cannot be right; the court has to look at all the circumstances in order to decide whether the application of the foreign limitation period will cause undue hardship and impecuniosity must be highly relevant to that question. In any event the judge held (para 19(b) of his second judgment) that the Arkhangelskys’ impecuniosity did indeed arise from the bringing of the Russian proceedings and their exile from Russian. I have already dealt with the question whether the judge was entitled to find impecuniosity at all.

I conclude therefore that the judge directed himself properly as to the law on the question of undue hardship under section 2(2) of the 1984 Act and applied the law correctly to the facts. He had to adopt a multi-factorial approach with which this court should not interfere unless satisfied that he was wrong. I am not so satisfied and would dismiss the second appeal.

In these circumstances the first appeal does not need to be decided. I will confine myself to saying that while it may be difficult to say that this case is sufficiently exceptional to justify dispensing with service pursuant to CPR 6.16, the case for alternative service on Baker & McKenzie being retrospectively validated pursuant to CPR 6.15 is, as Lewison LJ perceived, highly arguable in the light of Abela v Baadarani. Although the Supreme Court pointed out that nothing they said would necessarily apply to Hague Convention cases, it would be surprising if there could never be good reason for alternative service in such cases. I do not read the decision of Cooke J in Deutsche Bank AG v Sebastian Holdings [2014] EWHC 112 (Comm) as so deciding. It would be surprising if a judge, who was prepared to hold that the application of a foreign limitation period had caused undue hardship to a claimant, were to hold that there was not good reason retrospectively to validate alternative service in England on a firm of solicitors which was already conducting the mirror image of the proceedings in England, at least if an application for alternative service were brought at the appropriate time.

That leaves for resolution the question whether the judge was wrong to refuse an injunction preventing the enforcement of the Russian judgments in Bulgaria, France or elsewhere. The draft order submitted by the Arkhangelskys had also asked for an injunction to restrain the enforcement of the costs orders made against them in the BVI. But on any view the judge was right to refuse an injunction in respect of enforcement of those orders. They brought the proceedings to an end and are orders which English courts will recognise as final judgments and which can only be stayed on application to the BVI court. The position about the enforcement of the Russian judgments is more difficult.

The starting point of any analysis must be the agreement made between the parties for English jurisdiction. It is contained in the exchange of letters between the Bank’s BVI lawyers, Messrs Maples, and the Arkhangelskys’ BVI lawyers; Conyers, Dill & Pearman on 12^th and 14^th December 2011 in the following terms:-

“Our clients consider that England would be a more convenient and inexpensive forum to resolve the substantive dispute than either the BVI or Cyprus. If all of the disputes between the parties were to be resolved in England, this would prevent a multiplicity of proceedings and would involve a substantial saving in expense, specifically additional and potentially irrecoverable legal fees, further translations in Cyprus and travel costs (a particular problem in the BVI). Please confirm that your clients are prepared to agree that the English court should have jurisdiction and that they would agree to discontinue or stay their proceedings in the BVI and Cyprus to ensure the agreement was implemented.”

and

“Having taken our clients’ instructions on your proposal our clients agree that the English court shall have exclusive jurisdiction to hear the substantive dispute and agree to stay the proceedings in the BVI and Cyprus in order, as you say, to ensure the agreement is implemented.

We shall forthwith prepare a formal consent order staying the proceedings in the BVI and the claimants will in turn instruct the correspondent lawyers in Cyprus to do likewise.”

There was thus an agreement that the “substantive dispute” between the parties was to be resolved exclusively in England. Consistently with this agreement the Chancery proceedings brought by the Bank and Mr Savelyev in England do not rely on the judgments obtained by them in Russia. Mr Marshall brushed that somewhat important point aside by saying that it would have been futile for the Bank and Mr Savelyev to have tried to rely on those judgments because they would have been met by a defence that they had been obtained by fraud, duress or improper pressure being brought to bear upon the Russian courts; so it was considered appropriate to start afresh. But starting afresh was what the Bank and Mr Savelyev had agreed to do. When Mr Marshall was pressed as to his clients’ intentions, if they lost the proceedings in England, he asserted that they would regard themselves as still entitled to enforce the Russian judgments in Bulgaria or France or wherever they could find assets. To my mind any such behaviour would be inconsistent with the agreement contained in the exchange of correspondence I have cited above and, on the face of it, ought to be restrained by interim injunction, pending resolution of the dispute in England, see AES Ust-Kamenogorsk Hydropower Plant LLP v UST-Kamenogorsk Hydropower Plant JSC [2013] 1 WLR 1889, paras 25-27 per Lord Mance and the cases there cited.

Most of the judgment of Hildyard J on this aspect of the matter is taken up with discussion of the extent to which the exclusive jurisdiction agreement could be construed by reference to later correspondence (including discussions of a draft Tomlin order never in fact agreed). The judge rightly concluded that it could not (para 64). He then appears to have decided that the agreement was not intended to apply to or to affect enforcement proceedings then pending since the exchange of correspondence containing the agreement only mentioned staying proceedings commenced in the BVI and Cyprus and did not refer to any pending enforcement proceeding elsewhere. I say “appears to” because he does not say this in terms in this part of the judgment. He recited a number of background facts (including the fact that the exchange of correspondence mentioned only the BVI and Cyprus proceedings) as militating against the construction of the agreement proposed by the Arkhangelskys (para 69) and then a number of factors relied on by them and then merely says (para 73):-

“I have concluded that it is the words actually used, set against the admissible background facts which must control construction, even though the result is to undermine the utility of the agreement, measured against what in the event has transpired.”

I infer from this that the judge has concluded that the agreement that the English court is to have exclusive jurisdiction to resolve the substance of the dispute constitutes an agreement that existing enforcement measures can continue or, at the very least, by not referring to the then current enforcement procedures, provide a substantial objection to granting injunctive relief. If he has so decided, I fear that I cannot agree with him. I cannot read the exclusive jurisdiction agreement as countenancing the continuation of proceedings attempting to enforce the Russian judgments since, as I have said, it would be contrary to both the terms and the spirit of the agreement for enforcement of the Russian judgments to continue even after the English court has pronounced judgment (if that is what happens) in favour of the Arkhangelskys. If that cannot happen after judgment, it is only right that meanwhile such attempts should be restrained.

This is to a large extent recognised by the judge because in the next part of the judgment he accepts that he has jurisdiction to grant an injunction and accepts further that on the face of it there may be grounds for granting it in the present case. He says at paras 77-78:-

“… all parties specifically agreed that the issues should be determined on the merits and determined exclusively, by the English court. It seems to me inherently oppressive for a claimant to invoke the substantive jurisdiction of the English court to determine a dispute, agree with the other side that its exercise of jurisdiction should be exclusive, and yet at the same time and in a different country rely on some other court’s prior adjudication in his favour of the very same dispute or issues which may be decided against him on the merits in the forum which he has agreed should be exclusive forum for a determination of that dispute.

78.

I agree with the submission on behalf of the defendants to the effect that that is especially so where the premise on which the English Court is invited to exercise its jurisdiction (and which is a necessary precondition of its doing so) is that the judgments obtained elsewhere are unenforceable, or not sought to be given recognition, here.”

In spite of this, however, he says that granting an injunction involves an interference in the process of a foreign court and the jurisdiction (which he accepts he has) must be carefully and sparingly exercised; any such exercise in this case would be an unwarranted interference when the proceedings sought to be restrained existed before the jurisdiction of the English court was invoked. He has regard to four particular factors:-

I have already said that I cannot agree with the first of these factors. The second factor is not, in my view, relevant since at the time when the freezing injunctions were granted, there was no application for an anti-enforcement injunction. If there had been, it would by no means follow that any different order would have been made. Similarly the fact that assets have been frozen in Bulgaria cannot affect the position. The Arkhangelskys are not seeking to undo any such order which will, unless the Bulgarian courts otherwise order, remain until the English proceedings have concluded. They are merely asking that no further proceedings are taken in Bulgaria by way of enforcement. Once one has concluded that it is strongly arguable that if the proceedings are ultimately successful, a permanent injunction would be granted, fairness must justify the grant of an interim injunction even if the cross-undertaking is frail, as the judge himself recognised. The Bank’s security is in the freezing injunctions it has obtained. The judge’s fourth factor does not therefore come into the equation.

It does not seem to me that to grant an interim injunction in support of the English proceedings is, in reality, as unwarranted interference in the process of either the French or Bulgarian court. It is the Bank and Mr Savelyev who will be required (temporarily) to cease continuation of enforcement proceedings and not to initiate new ones. That is an order that affects them, not the foreign courts.

Mr Marshall emphasised the exceptional nature of an anti-enforcement injunction as opposed to an anti-suit injunction. He said that the only example in the decided cases was the much stronger case of Ellerman Lines v Read [1928] 2 KB 144. In that case the defendants had signed a Lloyds Form of Salvage Agreement as contractors to salve the claimants’ ship. That form provided for London arbitration and by clause 5 the salvage contractor agreed not to arrest the property salved unless there was an attempt to remove it before security for the salvor’s claim had been provided. Security was provided and a payment of £4,000 had been made on account but the salvor nevertheless arrested the vessel at Constantinople claiming that he had never authorised his solicitors to agree the amount of security offered. The owners claimed damages in England for breach of contract and an injunction to restrain the defendants from seeking to enforce a Turkish judgment for the equivalent of £23,290 for the salvage services. Mackinnon J held that the salvor had committed a “deliberate and shameless” breach of contract in arresting the vessel and lied when he said he had not authorised his solicitors to agree the amount of the security. He held, however, that he had no power to grant an injunction restraining the salvor from enforcing the Turkish judgment in Turkey or elsewhere out of England. The shipowner successfully appealed against the refusal of the injunction. Scrutton LJ said pages 152-3:-

“Mr Wilfred Lewis took the point that while an injunction can be granted to restrain the institution or continuation of proceedings in a foreign court there is no power, after the foreign court has given judgment, to grant an injunction restraining the person who has obtained it from reaping its fruits. If there is no authority for this it is time that we made one, for I cannot conceive that if an English Court finds a British subject taking proceedings in breach of his contract in a foreign Court, supporting those proceedings, and obtaining a judgment, by fraudulent lies, it is powerless to interfere to restrain him from seeking to enforce that judgment. I am quite clear that such an injunction can be and in this case ought to be granted in the terms asked for in the statement of claim.”

Atkin LJ agreed saying (page 158):-

“The principle upon which an English Court acts in granting injunctions is not that it seeks to assume jurisdiction over the foreign court, or that it arrogates to itself some superiority which entitles it to dictate to the foreign court, or that it seeks to criticize the foreign court or its procedure; the English Court has regard to the personal attitude of the person who has obtained the foreign judgment. If the English Court finds that a person subject to its jurisdiction has committed a breach of covenant, or has acted in breach of some fiduciary duty or has in any way violated the principles of equity and conscience, and that it would be inequitable on his part to seek to enforce a judgment obtained in breach of such obligations, it will restrain him, not by issuing an edict to the foreign Court, but by saying that he is in conscience bound not to enforce that judgment.”

Eve J also agreed saying (page 158):-

“The foreign proceedings here were instituted and prosecuted in clear breach of the contract, and the judgment was ultimately obtained by a deliberate and flagrant misrepresentation. The appellants in those circumstances are entitled to all protection which this Court can extend to them.”

The principle so laid down was re-stated in Masri v Consolidated Constructors International (UK) Ltd (No. 3) [2009] QB 503 para 94 per Lawrence Collins LJ albeit in the context of enjoining Yemeni proceedings inconsistent with an English judgment in proceedings in which the defendant had submitted to the jurisdiction.

Mr Marshall was correct to say that Ellerman Lines v Read was a stronger case but only to the extent there that the English trial had already taken place so that there was a finding that the Turkish judgment had been procured by fraud. Here the trial has not yet taken place and the allegations of fraud are only allegations. But an interim injunction had been granted in Ellerman’s case to protect the position pending trial (see pages 146-7). So here it seems to me that an injunction against continuing existing enforcement proceedings or initiating new enforcement proceedings should be granted.

I would therefore allow this appeal from Hildyard J. Even though the grant or refusal of an injunction is a matter of discretion, I respectfully consider the judge erred in principle in misconstruing the exclusive jurisdiction agreement and in fearing that the grant of an injunction would be an unwarranted interference with the proceedings of foreign courts.

I would therefore make no order on the first appeal, dismiss the second appeal and allow the third appeal.

I agree.

I also agree.