Forum Non Conveniens in Ukrainian Litigations: “… and Justice for all”?
Taras Dumych, Sergii Zheka, Iryna Fedorovych
Forum non conveniens (hereinafter — “FNC”) is a common law doctrine that allows parties to dismiss a civil action in a court that is a natural venue for the dispute and choose a more appropriate alternative forum, including an alternative forum in another country.
Even though the doctrine remains alien for Ukrainian law (which is the case for most, if not all, civil law countries), the goal of this article is to answer whether in a dispute where Ukrainian courts have jurisdiction, a party may use the FNC doctrine as the justification for turning to another country’s courts, such as English courts, instead of Ukrainian courts. Even though the doctrine is not regulated by Ukrainian law, it is still relevant for disputes containing a Ukrainian element (such as a party or subject matter). This is so because the jurisdiction of Ukrainian courts is not immune from the application of conflict of law rules and foreign laws which can be applied in order to deprive, or try to deprive, Ukrainian courts of their jurisdiction, particularly as the doctrine has already been tested in Ukraine related cases.
On the whole, the FNC was first recognized in Atlantic Star1, later in MacShannon v. Rockware Glass Ltd2 cases. The final version of the doctrine was finally established in 1987 by the House of Lords in the landmark case of Spiliada Maritime Corporation v. Cansulex Ltd3 (hereinafter — “Spiliada”).
When applying the FNC, English courts use the Spiliada test. Firstly, the party shall satisfy the court and establish the existence of the alternative forum the jurisdiction of which the party is amenable to, and which is more appropriate than the natural forum. Secondly, the party shall establish that, in interests of justice, action must proceed in the UK.
In practice, the factors which the court is entitled to take into account when considering whether one forum is more appropriate are legion. Every dispute over the appropriate forum is complicated by the fact that each party is seeking an advantage and may be influenced by considerations which are not apparent or relevant to the court.
Therefore, the court shall additionally establish “cogent evidence, that the plaintiff will not obtain justice in the foreign jurisdiction…”4, as well as establish that the case may be tried “suitably for the interests of all the parties and for the ends of justice”5. The English court would assess, by taking relevant factors into account, the risk of what might happen in future by having regard to the degree of likelihood that a future event might occur.
Case law
To find out when English courts would apply FNC to accept jurisdiction in a case that has a much stronger connection with an alternative forum, we decided to turn to recent case law. Out of the large number of cases where FNC was dealt with by English courts, we picked three recent landmark cases that have either CIS or even a Ukrainian nexus: (1) Altimo Holdings and Investment Limited and Others v. Kurgyz Mobil Tel Limited and others6 (hereinafter — “Altimo Holdings”), (2) Deripaska v. Cherney7 (hereinafter —“Cherney”), and (3) Pacific International Sports Clubs Limited v. Igor Surkis & others8 (hereinafter — “Pacific”).
It is no coincidence that we chose cases where former Soviet republics (Kyrgyzstan, Russia and Ukraine) are featured. English courts would use different standards for different parts of the world when considering FNC submissions. For instance, in cases where an alternative forum takes place in a former Soviet republic, the arguments about the non-existent or underdeveloped legal system, high court fees and lack of legal aid provisions and the like are out of place, while arguments regarding unlawful political influence on judges or criminal prosecution for trumped up charges work well.
From the jurisdictional point of view, the substance of all these cases has a very insignificant connection with the UK. However, in cases (1) and (2) the court accepts the jurisdiction, while in case (3) the jurisdiction of English courts is denied and the parties are advised to turn to Ukrainian courts.
Let us now briefly analyse each of the judgments. We do not comprehensively analyze all procedural and doctrinal aspects. Our focus is rather on arguments and evidence that English judges take into account when considering whether the courts of England are indeed the proper forum for a trial.
Altimo Holdings
At the core of this complex case is a legal battle between two Russian groups over a telecommunications business in Kyrgyzstan. The part of the case that we are interested in concerns counterclaims of a number of companies incorporated in the Isle of Man. Kyrgyzstan would be a natural forum for the counterclaims, but the counterclaimants wished to have the case tried in the Isle of Man.
The first instance judiciary of the Isle of Man (Deemster Doyle) ruled that counterclaimants had failed to establish that the Isle of Man was clearly the appropriate forum for trial. The court of appeals (the Staff of Government Division) whose decision was affirmed by the Privy Council, overturned Deemster Doyle’s decision and ruled that the case should be tried in the UK.
The courts applied the following reasoning: (1) the correct test should not be whether the counterclaimants had shown that they would not obtain substantial justice, but whether substantial injustice “will or may not be done” in the natural forum; (2) the litigation in Kyrgyzstan, in which the counterclaimants had been engaged, exhibited irrational conclusions and decisions which seemed, prima facie, contrary to natural justice, and there was a risk that they would not obtain substantial justice in Kyrgyzstan; (3) the combination of the existence of obstacles to the counterclaimants’ mounting claims in Kyrgyzstan and the allegations of corruption was that in all probability there would be no trial on the issues raised by the counterclaimants’ claims in Kyrgyzstan and, and as a result, there was no real risk of concurrent proceedings in two jurisdictions on the same issues; (4) the fact that counterclaimants made investments in Kyrgyzstan does not automatically entail jurisdiction of Kyrgyz courts, especially when the parties had agreed to arbitration of disputes in London under English law; (5) the Privy Council referred to copious evidence of endemic corruption in Kyrgyz courts; (6) there are two prima facie unlawful court decisions in force in Kyrgyzstan that would prevent counterclaims being considered by a Kyrgyz court at all (and these two decisions are unlikely to be set aside).
The Privy Council concludes with a powerful and dramatic statement: “if there is no trial in the Isle of Man, there will be no trial anywhere”.
Cherney
The dispute was between Mr. Deripaska and Mr. Cherney regarding the ownership of shares in a Russian company. One of the focal issues considered by the court was where the trial should take place in England or Russia. Mr. Cherney insisted the trial take place in England, while Mr. Deripaska maintained that Russian courts should have jurisdiction.
Undoubtedly, Russia was a natural forum for the dispute. However, the judges stated that English courts could have jurisdiction if it were established objectively by “cogent evidence” that, inter alia, the plaintiff would not obtain justice in a foreign jurisdiction.
The court ultimately decided that if the claim “is not permitted to continue in England, it will almost certainly not be pursued in Russia or elsewhere”. Let us look at the reasoning behind this decision.
After meticulously studying the provided evidence, the court established that Mr Cherney had a well-founded fear that if he proceeds in Russia, (a) he will be at greater risk of assassination (there have been attempts with a Russian trail to assassinate him); (b) he will face criminal prosecution for what, on his evidence, and the reported remarks of Mr Deripaska’s lawyer, would be a trumped up charge (the judge analyzed the record of Mr. Cherney’s actions but found no criminality on his part); (c) there is a significant risk that Mr Cherney would not obtain a trial in Russia unaffected by improper interference by State actors and that substantial justice may not be done (taking into account Mr. Deripaska’s connections); and (d) according to experts, in certain cases, the arbitration courts of Russia cannot necessarily be expected to perform their task fairly and impartially.
Moreover, the judges also pointed out that the parties are no strangers to England and have assets there. Both parties have confidence in English law and English courts, and England can be described as neutral territory. The need to call witnesses from other jurisdictions would not be a problem.
The courts, however, emphasized on balance that any allegations that impugn the integrity of institutions of a friendly foreign state “must be distinctly alleged and supported by positive and cogent evidence”.
Pacific International
The key question considered in the judgement is whether tortious and restitutionary claims under Ukrainian law arising out of the bitter struggle for control of a stake in FC Dynamo Kyiv should be permitted to go to trial in English Courts. In this case Pacific sought to establish the jurisdiction of English courts, while Mr. Surkis tried to prove England is not a proper place for Pacific’s claims.
The courts found that the evidence presented was “not sufficiently cogent” to justify a finding that Pacific would be denied justice if it were compelled to litigate in Ukraine. The court added the following comments after making a decision to stay proceedings in the UK: (1) the dispute had absolutely no connection with the United Kingdom, except for the registration of one of Mr. Surkis’ minor companies (SMI) there (“The principal parties, their claims, their defenses and the events that have generated this litigation have no connection with England, its laws or its judicial system”); (2) Ukraine was the only appropriate jurisdiction for the trial; and (3) Pacific’s claim gives rise to acutely difficult issues of Ukrainian law on which experts hold sharply different views and which it would be inappropriate for English courts to pronounce upon.
The judge indicated that the evidence needed to establish the unavailability of the appropriate forum should demonstrate that the forum in question is, or will be, unavailable, not merely that it may be unavailable.
Defects of Ukrainian legal system
In its submission Pacific relied heavily on the argument that Ukrainian judges are subject to improper influence and therefore Pacific could not get justice in Ukrainian courts. Even though the court admitted that indeed there were problems in the Ukrainian judicial system, Pacific’s evidence was too general (“no cogent evidence”) and the court expected to see specific proof that Mr. Surkis is personally corrupt in his relations with the judiciary in Ukraine, or that he has sought to take advantage of the deficiencies of the legal system in Ukraine by engaging in attempts to put pressure or exercise improper influence over the judges in litigation involving Pacific.
The court further pointed out that Pacific had successfully invoked the jurisdiction of the courts of Ukraine in many other cases, and that the particular claims in the present action are not the same claims as had been brought in the past in courts of Ukraine by Pacific.
Conclusion
It is sometimes a challenge to grasp the hair-breadth difference between the reasoning in each of the above cases. However, closer scrutiny reveals certain similarities between the cases where the jurisdiction was granted.
In both Altimo Holdings and Cherney the courts found that the relevant parties, for various substantial reasons (threat to health/life, imminent use of state influence on courts, existence of judgments precluding filing of claims, etc.), would be unable to seek justice in a court of any other jurisdiction of the world. In other words, there was concrete evidence that the parties would simply not be able to get their claims off the ground in the natural forum.
On the other hand, in Pacific the situation with Ukrainian courts was not that clear and no imminent threat of outright denial of justice was demonstrated. Pacific had not turned to a Ukrainian court with its claim, even though it had been successful with numerous other claims in Ukrainian courts. Additionally, no concrete facts of unlawful influence on courts were presented, while general statements about deficiencies in the Ukrainian legal system are insufficient to “impugn the integrity of institutions of a friendly foreign state”.
The party wishing to have a trial in England will have to prove that it will suffer substantial injustice in the natural forum. All submission should be as concrete and clear as possible, proper evidence should be presented.
The above features should be considered carefully by a party thinking about turning to an English court instead of, say, a Ukrainian court, particularly as it is not unusual even for high-ranking Ukrainian public officials to openly admit glaring deficiencies in the Ukrainian judicial system. For example, Valeria Hontareva, the Former Governor of the National Bank of Ukraine, recently openly criticized Ukrainian courts over the Privatbank ruling, stating: “It is impossible to do anything when justice and the rule of law are absent in the system.” Ukrainian Prime Minister Mr. Volodymyr Groysman also raised concerns about the success of the Ukrainian judicial reform of 2017: “The Ukrainian system is not reformed. There has never been any judicial reform at all.” Furthermore, in June 2019 the Judicial Council of Ukraine informed Ukrainian mass media outlets about the ongoing pressure on judges coming from the President’s Office.
Unless the situation with justice in Ukraine improves, which is an aim declared by all branches of power, including the politicians who have won the recent presidential and parliamentary elections, both foreign and Ukrainian parties may increase their efforts in bringing up the FNC plea behind the justification of court actions in English or other countries’ courts where the FNC plea would be recognized.
While the successful acceptance of the FNC plea would not only mean the parties receiving the fair trial that they look for, but it would also mean the Ukrainian justice system exposing itself to the risk of losing its privilege of being the exclusive justice provider, and receiving a message from a non-Ukrainian judiciary that the “… hammer of justice crushes you”9.
One could argue that a court decision of a foreign court which assumed its jurisdiction as a result of the application of the FNC doctrine would be unenforceable through the Ukrainian judiciary system due to being contrary to public policy of Ukraine. However, the internationalization of business transactions, investments, corporate and asset holdings by Ukrainian individuals and businesses, as well as by the state, have reached the level that enforcement actions could be initiated in a country where such a court decision would not raise the public policy concerns.
The global world has become very competitive, and court justice is no exception. English courts do tend to favor themselves, not without a good ground for this, as a viable mean for resolution of disputes, even in cases when the parties originally did not agree to their jurisdiction. The following, though controversial but still smart, dictum of Lord Denning in the Atlantic Star: “You may call this [i.e. FNC] “forum shopping” if you please, but if the forum is England, it is a good place to shop”, fairly summarizes the starting position of English courts in those cases where a party pleas for an English court’s jurisdiction.
Taras Dumych is a partner at Wolf Theiss
Sergii Zheka is a senior associate at Wolf Theiss
Iryna Fedorovych is an associate at Wolf Theiss
1 The Atlantic Star Owners of the Motor Vessel "Atlantic Star" v Owner of the Motor Vessel "Bona Spes". Judgment of the House of Lords of 10 April 1973.
2 Judgment of the House of Lords of 26 January 1978.
3 Judgment of the House of Lords of 26 January 1978.
4 Ibid.
5 Ibid.
6 Judgement of the Privy Council delivered on 10 March 2011.
7 Judgement of the Supreme Court of Judicature Court of Appeal (Civil Division) of 31 July 2009.
8 Judgment of the High Court of Justice Court of Appeal (Civil Division) of 2 July 2010.
9 Part of the article’s title and the citation are from the original song "… And Justice for All" by Metallica.
