Determining Forum And Governing Law For Claims Involving Foreign Defendants

Published date11 January 2021
Subject MatterCorporate/Commercial Law, Government, Public Sector, Corporate and Company Law, Contracts and Commercial Law, Government Contracts, Procurement & PPP
Law FirmMourant
AuthorEleanor Morgan, Justine Lau, Jennifer White and Teenie Yu

Forum and governing law are typical matters of dispute when proceedings are brought in the British Virgin Islands (the BVI) against foreign defendants. Further argument may arise when a contract contains a choice of law clause other than the BVI. The factors at play in determining the appropriate forum and governing law were re-examined in the recent and long-awaited Privy Council decision of Livingston Properties Equities Inc and others (Respondents) v JSC MCC Eurochem and another (Appellants)1, which involved applications to (i) set aside leave to serve foreign defendants out of the jurisdiction and (ii) stay BVI proceedings on jurisdiction grounds arising from claims against 18 defendants for breach of duty, knowing receipt, dishonest assistance and unlawful means conspiracy.

Background

In 2015, the appellants, a Russian and Swiss company trading in mineral fertilisers (together Eurochem), commenced proceedings in the BVI to recover bribes alleged to have been paid to, or for the benefit of, the 8th and 9th defendants, Eurochem's former Russian senior executives (the Russian Defendants). Eurochem alleged that the Russian Defendants entered into contracts for sale at an undervalue with Eurochem's trading partners (the Contracts) in return for secret commission payments of over US$45 million (the Bribes). Eurochem alleged that the Bribes were channelled through other defendant companies established by the Russian Defendants in various jurisdictions around the world for the sole purpose of receiving, concealing and laundering the Bribes.

Of the 16 other defendants, nine were BVI-registered companies who were capable of being served there (the BVI Defendants), whilst the others comprised defendants in Panama, Switzerland, Singapore and Scotland (the Foreign Defendants). Although the Contracts contained Russian choice of law clauses, and the Russian Defendants were Russian nationals, Eurochem claimed that Russian law did not apply as the Russian Defendants were not in Russia at the material times and the deals were negotiated outside of Russia. By order of Farara J (Ag), permission was given to serve the Foreign Defendants out of the jurisdiction (the Service Out Order). The Russian Defendants did not enter an appearance and the 8th defendant raised a jurisdictional challenge in the BVI. Five of the Foreign Defendants applied to set aside the Service Out Order (the Set Aside Application) and six sought to stay the proceedings (the Stay Application) on the basis that Russia was the more appropriate forum.

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