National Bank of Kazakhstan and the Republic of Kazakhstan (Claimants) v the Bank Of New York Mellon SA/NV, London Branch (Defendant)

[2017] EWHC 3512 (Comm)

Christopher Butcher QC appeared on behalf of the Defendant in these Part 8 proceedings. This is the latest development in England of a dispute spanning several jurisdictions and which has its origins in a Swedish arbitration award, in favour of a Mr Stati and others (“the Stati Parties”), for over half a billion US dollars against the Second Claimant.

These proceedings arose in the wake of attachment orders in Belgium and the Netherlands, designed to enforce that award, which were served on the Defendant, a bank incorporated in Belgium. Subsequently, the Defendant froze assets which it held on behalf of the First Claimant under a Global Custody Agreement. It relied on a clause in that agreement which excused non-performance of its banking obligations in circumstances beyond its control, “including… any order… imposed by any… judicial… authority”.

The Claimants sought declarations broadly to the effect that, in doing so, the Defendant was in breach. It was submitted that this clause, if taken at face value, was such a departure from the ordinary position at common law that its literal meaning cannot have been meant. This alleged ordinary position was, in short, that in an arrangement like the present, the situs of the Claimants’ cash and securities would be the London branch, so that the Claimants could expect their assets to be protected under English state immunity laws. Popplewell J rejected the Claimants’ construction and more generally the approach taken (at [71]-[95]), while noting in any event that he had not heard detailed argument on aspects of the alleged ordinary common law position.

Nine reasons were given: (i) in light of surrounding clauses, it was wrong to assert that the First Claimant had intended to contract only with the Defendant’s London branch; (ii) the departure from the common law position was in the interests of the Defendant and so explicable; (iii) similarly, the Claimants’ submissions impermissibly posited a one-sided view of commercial common sense without due attention to the choice of language; (iv) the relevant disputed wording was very clear; (v) a wide reading was supported by the width of the clause generally; (vi) a wide reading made sense in the context of other exculpatory clauses in the contract, which themselves “seriously and significantly altered” the common law position; (vii) the Claimants’ construction was otiose; (viii) it was also uncertain as it required the parties to ascertain its effect by reference to English private international law; and (ix) there was “much force in Mr. Butcher’s argument” that even if “any order… imposed by any… judicial… authority”  were to be qualified, it ought still to include orders of the courts of the country where the bank is domiciled.

Popplewell J further noted that Christopher Butcher QC had “made a number of justified criticisms of the width of the drafting” of the declarations and – having discussed a number of other objections to the various declarations raised by Counsel, for example the inappropriateness of granting declarations which might be deployed by the Claimants in foreign proceedings against the Stati Parties, in circumstances where they were not party to proceedings –  accepted those as further grounds for refusing to grant the declarations sought (see [96] to [118]).

Separately, the Respondent’s three objections to jurisdiction under the Brussels Recast Regulation did not succeed (see [46] to [65]):

First, for the purposes of Article 7(5) and 25 of the Regulation, a “dispute” covers circumstances where one side adopts a neutral stance, i.e. does not accept the other’s case, and also where one side disputes a declaration purely in terms which address the Court’s exercise of its discretion.

Second, under Article 7(5), there was a “sufficient nexus” between the dispute, as between the Second Claimant and the Defendant, and the Defendant’s London branch, since ROK was claiming a beneficial interest in the relevant property, which was managed at that branch.

Third, Article 30 was not engaged in respect of concurrent Belgian proceedings, either because there were “no significant overlapping issues” – principally because the Court was addressing matters arising under English law – or because the Belgian (and Dutch) proceedings were not governed by the Regulation, being proceedings to enforce an arbitration award. (It was added, obiter, that such proceedings might become Regulation proceedings where the criteria in Article 34 were met.)

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