Lost At Sea No Longer – Clarification on the use of “Anchor Defendants”

18 December 2019

The Court of Appeal has allowed the appeal of Privatbank against a High Court judgment dismissing its claim against foreign domiciled defendants on the basis that the bank had inappropriately pursued claims against English domiciled defendants for the “sole purpose” of attaching English jurisdiction to the former group. The decision helpfully clarifies the position on the use of so-called “anchor defendants”.

The claimant, JSC Commercial Bank Privatbank (the “Bank”), incorporated in Ukraine, issued proceedings in England alleging that the first and second defendants, Mr Kolomoisky and Mr Bogolyubov orchestrated the fraudulent misappropriation of over US$1.9 billion from the Bank. The claim was also brought against various other defendant companies, registered in England and the BVI, and said to be controlled by Mr Kolomoisky and Mr Bogolyubov. Mr Kolomoisky and Mr Bogolyubov were both domiciled in Switzerland, and the Bank, bringing proceedings in England, asserted English jurisdiction against them under the Lugano Convention[1].

The defendants challenged the jurisdiction of the English court asserting that the use of the English domiciled defendants as “anchor defendants” was an abuse in circumstances where, it was alleged, the sole object of suing those defendants was to remove Mr Kolomoisky and Mr Bogolyubov from their ordinary jurisdiction in Switzerland and bring them into the Bank’s jurisdiction of choice. At first instance, the High Court agreed, dismissing the Bank’s claim against Mr Kolomoisky and Mr Bogolyubov, and staying the claim against the remaining defendants.

In overturning the High Court’s judgment, and allowing the appeal, the Court of Appeal made two important determinations:

  1. The majority of the Court of held that there was no “sole object” test under Article 6(1) of the Lugano Convention – a claimant with a sustainable claim against an anchor defendant, which it intends to pursue to judgment in proceedings to which a foreign defendant is joined as a co-defendant, is entitled to rely on Article 6(1) even if the claimant’s sole object in issuing the proceedings against the anchor defendant is to sue the foreign defendant in the same proceedings.
  2. If, contrary to the majority view, there was “sole object” qualification relating to the use of anchor defendants, such a qualification would be assessed objectively. In this regard the Court of Appeal felt that the pursuit of the English defendants would also enable the Bank to obtain disclosure from them which would be of assistance in the wider proceedings.

The Court’s rejection of a “sole object” test represents an important confirmation of the operation of Article 6 of the Lugano Convention. As a consequence, provided a claimant has a sustainable claim against an anchor defendant which it intends to pursue to judgment, it will be entitled to join a foreign domiciled defendant to that claim bringing them within the jurisdiction of the English Court (provided also that the claims are closely connected and it is expedient to hear them together to avoid the risk of irreconcilable judgments). The Court will not refuse jurisdiction on the basis that the sole object in issuing the proceedings against the anchor defendant was to sue the foreign defendant in the same proceedings.

[1]     Article 2 of the Lugano Convention provides that persons domiciled in a convention state shall be sued in that state. However, Article 6(1) provides that, where that person is one of a number of defendants, they may also be sued in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.

Leigh Callaway Author
Leigh Callaway
Senior Associate
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