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Jurisdiction of English court upheld on basis of English domicile and unlawful means conspiracy claim

 

25 June 2019

The jurisdiction of the English court over a foreign national (in the context of a claim of unlawful means conspiracy) has been upheld by the High Court, on the basis of the individual’s English domicile and, applying the Supreme Court’s decision in JSC BTA Bank v Khrapunov1, on the basis that the acts establishing the unlawful means conspiracy claimed were committed within the jurisdiction. The ruling provides helpful and detailed guidance on what constitutes domicile for the purposes of jurisdiction: Alexander Tugushev v Vitaly Orlov & ors [2019] EWHC 645 (Comm) (only recently reported).

The claimant, Mr Tugushev, is a Russian businessman who claims he co-founded a successful corporate group, which operates an international fishing business largely in Russian waters (the Norebo Group), with the first defendant, Mr Orlov, alongside two of his associates. The claimant brought proceedings before the English court, alleging that the three defendants conspired to misappropriate and/or deny the existence of his one-third interest in the Norebo Group and his one-third interest in a company within that group, CJSC Almor Atlantika (AA). The claim is valued at in excess of USD350m. 

Mr Orlov challenged the English court’s order granting permission to serve proceedings on him outside of the jurisdiction, on the basis that it was “an almost entirely Russian dispute, between Russians, relating to the ownership and operation of Russian companies in Russia, governed by Russian law”. Mr Tugushev maintained that the English court had jurisdiction to hear the proceedings, since Mr Orlov was domiciled in England (and therefore had a “substantial connection” with the jurisdiction). Alternatively, if Mr Orlov was not domiciled in England, Mr Tugushev sought permission to serve out of the jurisdiction, relying on, inter alia, the “tort gateway” in Practice Direction 6B 3.1(9) of the Civil Procedure Rules (the tort gateway), on the grounds that the defendants’ alleged conspiracy was hatched within the jurisdiction and amounted to an act resulting in damage within the jurisdiction for the purposes of the tort gateway.

Factors proving domicile in England

The claimant’s primary case was that Mr Orlov was domiciled in England, since if he could prove a good arguable case on this ground, the English court would have jurisdiction as of right to hear the proceedings under Article 4 of the Brussels Recast Regulation2 (the Recast), and the question of forum conveniens would be irrelevant. Under the Recast, domicile is determined by local law. Under English law, an individual is domiciled in England if he is “resident” there and the nature and circumstances of his residence indicate a substantial connection with England.3 Mr Orlov accepted that, on the facts, if it were established that he was resident in England, this would satisfy the substantial connection test. 

Carr J was satisfied that England was the settled and usual place of residence for Mr Orlov, and therefore the claimant had a good arguable case that the defendant was domiciled in England. She relied on the following factors in reaching her decision:

Time spent in England, considered alongside quality and nature of the visits

The defendant spent the majority of his time in a year in Russia; however, the number of days is not determinative on its own, and instead the purpose, nature and quality of the visits must be considered. Carr J considered that Mr Orlov spent substantial periods in England for a settled purpose in a settled pattern – visiting almost every month, along with his partner, to see his four sons and for business. 

Property held in England

Mr Orlov owns two very valuable flats in London, including a flat in Vauxhall purchased for GBP13m held in his name. The judge held that Mr Orlov’s use of the flat suggested it was more than a “private hotel” (as he had alleged) and maintenance of the flat was viewed by him as an “ordinary living expense”. The court also attached weight to the fact that utility bills were in Mr Orlov’s and/or his partner’s name (as opposed to council tax bills which simply reflect who is the owner of a property). 

Visas, tax and residence 

Mr Orlov’s partner had indefinite leave to remain in the UK, and represented each time she visited the country that she was seeking admission “for the purposes of settlement” (meaning ordinary residence in the UK). Carr J found that the fact Mr Orlov’s partner had indefinite leave to remain indicated a clear intention on her part (and by implication Mr Orlov) to maintain strong and permanent residential ties with England. 

Jurisdiction based on unlawful means conspiracy

Although the finding that the defendant was domiciled in England was a complete answer to his jurisdiction challenge, Carr J also considered the alternative jurisdictional bases, including the tort gateway. This gateway applies to claims made in tort where: 

“(a) damage was sustained, or will be sustained, within the jurisdiction; or
 (b) damage which has been or will be sustained results from an act committed, or likely to be committed, within the jurisdiction”.4 

To engage the tort gateway, the claimant relied on the fact that the alleged conspiratorial agreements were made in England. He had to establish that there was a serious issue to be tried on the merits of his claim, there was a good arguable case on the application of the tort gateway and that England was the proper place to bring the claim, clearly being the most appropriate forum to hear the claim. The judge was satisfied that the claimant had met all these conditions.

In relation to whether he had a good arguable case, the claimant asserted that the conspiracies were “hatched” in England and that they were therefore acts committed within the jurisdiction from which the relevant damage arose. Relying on Khrapunov, Carr J held that the claimant had a good arguable case that the making of a conspiratorial agreement within the jurisdiction was sufficient to amount to a “substantial and efficacious act” justifying the defendant being brought in front of the English court to answer the claim, and might constitute an act committed within the jurisdiction from which damage had been or would be sustained for the purpose of the tort gateway. This was so even though Mr Orlov alleged that other acts relevant to the alleged conspiracies (eg, the stripping of the claimant’s shares in AA and the refusal to recognise his rights in the Norebo Group) had not taken place in England. 

COMMENT

This case provides an interesting application of the Supreme Court decision in Khrapunov, establishing that a conspiratorial agreement setting up a tort of unlawful means conspiracy can be seen as the act from which damage results. 

The court also noted with severe disapproval that the applications had “generated a depressingly vast amount of material” (for instance, Mr Orlov filed 19 witness statements and five expert reports) and that the costs of the applications were estimated to be around a staggering GBP1m and GBP4m for Mr Tugushev and Mr Orlov respectively. Referring to judicial warnings on the disproportionality of lengthy submissions and hearings in applications as to appropriate forum5, the court concluded rather ironically that “this is not a case where the parties can be said to have been guilty of adopting the art of understatement”.

Footnotes:

1 [2018] UKSC 19.
2 Regulation (EU) 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.
3 Paragraph 9, Schedule 1 of the Civil Jurisdiction and Judgments Order 2001.
4  Practice Direction 6B 3.1(9).
5 Spiliada Maritime Corporation v Cansulex [1987] AC 460; VTB Capital v Nutriek International Corpn [UKSC] 5.

Further information

This case summary is part of the Allen & Overy Litigation and Dispute Resolution Review, a monthly publication.  If you wish to receive this publication, please contact Amy Edwards, amy.edwards@allenovery.com​.

 

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