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Michael Holmes QC and Henry Moore secure dismissal of US$300 million+ Russian conspiracy claim

2nd Jul 2021

VTB Commodities Trading DAC v JSC Antipinsky Refinery [2021] EWHC 1758 (Comm)

Michael Holmes QC and Henry Moore have won a jurisdiction challenge in a Commercial Court claim valued at over US$300 million. Michael and Henry were acting for JSC VO MachinoImport, a Russian company whose business includes the export of oil products, instructed by Stewarts Law LLP (Sean Upson and Fiona Gillett).

The proceedings in question were instituted by a subsidiary of the second largest bank in Russia, VTB Commodities Trading DAC, against MachinoImport and PJSC Sberbank, the largest bank in Russia, alleging a conspiracy under Russian law associated with the insolvency of the largest independent refinery in Russia, the Antipinsky Refinery.

VTB accused Sberbank of orchestrating, and MachinoImport of participating in and facilitating, a scheme to induce VTB to pre-pay for parcels of vacuum gasoil (“VGO”) from the Antipinsky Refinery which it then sold and delivered to other international buyers.

VTB had commenced Part 8 proceedings in the Commercial Court for injunctive relief under s. 44 of the Arbitration Act 1996 in support of London arbitrations pursued by VTB against the owners of the Antipinsky Refinery. In particular, VTB sought, and obtained, a freezing injunction over parcels of VGO aboard the floating storage vessel M/T “POLAR ROCK”.  Two of those parcels of VGO had been purchased from the Refinery by MachinoImport and on-sold to its customer, Petraco Oil Company SA. Petraco intervened in those proceedings, seeking to obtain delivery of the two parcels of VGO it had purchased, alternatively seeking an inquiry as to damages under VTB’s cross-undertakings to the Court.

Arguing that Petraco’s action had constituted it a defendant, VTB sought to join MachinoImport and Sberbank as Part 20 additional defendants to the existing Part 8 proceedings and further sought permission to serve those parties outside the jurisdiction.

Following a three-day hearing, Cockerill J held that VTB’s claims lacked any jurisdictional basis. She decided that VTB was the claimant in an arbitration claim, not a ‘defendant’ within the meaning of Part 20. VTB had not become a defendant simply because a third party had applied for enforcement of cross-undertakings in damages given by VTB in the arbitration claim (applying JSC Karat-1 v Tugushev [2021] EWHC 743 (Comm)).

Cockerill J also accepted the applicants’ further submissions that, in any event, (i) permission to bring a Part 20 claim should be refused as a matter of discretion, and (ii) the forum conveniens for VTB’s claims could only be Russia. She flagged for future determination the question of whether the Court had jurisdiction to permit the use of the Part 20 process in an arbitration claim, noting that its use in that context did not appear to have been within the experience of “the vastly experienced teams in this litigation”.

MachinoImport’s and Sberbank’s jurisdiction challenges therefore succeeded in their entirety.

The judgment contains a useful summary of principles relevant to the enforcement of cross-undertakings and directed trials of issues (at [138]-[157]). Cockerill J also considered the Supreme Court’s decision in Lungowe v Vedanta Resources plc [2020] AC 1045, holding that the decision was a reminder that multiplicity of proceedings was only one factor to be considered in the overall forum non conveniens analysis (at [224]-[228]).

This case note has been prepared by Michael Holmes QC and Henry Moore who were instructed by Stewarts Law LLP on behalf of MachinoImport.

A copy of the judgment can be found here.