Mr Justice Butcher has upheld a challenge by Vakifbank, a Turkish bank, to the English Court’s jurisdiction to try a claim brought by BTA, a Kazakh bank, and its affiliate.

The background was that BTA had given Vakifbank a guarantee, governed by Turkish law, of a debt. By the time Vakifbank called on the guarantee, BTA had entered an insolvency restructuring. Vakifbank made a claim in the insolvency, as part of which it signed an authority for BTA to execute a Deed of Release, governed by English law, releasing claims against BTA and its affiliates.

Later, Vakifbank brought proceedings on the guarantee in the Turkish courts, which BTA defended on the merits, including by reference to the Deed of Release. Judgment was given in Vakifbank’s favour, holding the Deed of Release invalid. BTA appealed in Turkey, and that appeal remains pending. Subsequently, BTA brought proceedings in the Kazakh Courts challenging the institution of the Turkish claim and, when these failed, finally brought a claim in the English Court on the footing that the institution of the Turkish proceedings had breached an implied covenant not to sue in the Deed of Release.

Vakifbank challenged jurisdiction, principally on the basis that the Turkish judgment, holding the Deed of Release invalid, created a cause of action estoppel or issue estoppel which barred the claim under the Deed of Release in England.

BTA argued that there was no estoppel on the ground that the Turkish Court had applied Turkish law, rather than English law, to the question of the validity of the Deed of Release. Mr Justice Butcher described this argument as “clearly wrong”: the mere fact that a foreign judgment might be open to criticism does not prevent it giving rise to an issue estoppel.

Although BTA had conceded on its ex parte application for permission to serve out that it had submitted to the jurisdiction of the Turkish Court, Mr Justice Butcher held that this did not constitute an admission for the purposes of CPR 14.1 and so BTA was permitted to argue on the inter partes hearing that it had not submitted in Turkey. BTA’s principal argument in this respect was that it had appeared only for the purpose of protecting assets in Turkey that had been the subject of a pre-judgment attachment, and that its appearance was therefore deemed not to be a submission by virtue of s. 33(1)(c) of the Civil Jurisdiction and Judgments Act 1982 which protects an appearance in the foreign proceedings “to protect, or obtain the release of, property seized or threatened with seizure”. Mr Justice Butcher rejected this argument, holding that, in order to avail of s. 33(1)(c), the appearance must be made solely to obtain the release of the seized property, whereas BTA had fully defended the claim on the merits after its application for release of the property had failed, and had gone on to appeal the substantive judgment.

The judgment of Mr Justice Butcher can be found here.

Conall Patton (led by Mark Howard QC) appeared for Vakifbank.