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Jurisdiction challenges rejected in $3 billion fraud claim

On 26 May 2022, Trower J handed down judgment on Bourlakova v Bourlakov & others [2022] EWHC 1269 (Ch) rejecting jurisdiction challenges brought by six of the Defendants. The case is notable for, among other things, its clarification of the scope of article 34 of the Brussels Regulation (Recast) (“the BRR”) and of the decision of the Supreme Court in Lungowe v Vedanta Resources plc [2020] AC 1045.

In the Claim, the Claimants allege that, following a breakdown in marital relations between Mr Bourlakov and Mrs Bourlakova, Mr Bourlakov and certain of his relatives and associates entered into a fraudulent conspiracy to defraud Mrs Bourlakova and her daughters of their rightful share of the family’s assets. Among other things, the Claimants allege that Mr Bourlakov procured the forgery of documents purporting to create fictitious liabilities and to devalue the family’s assets and that he falsely asserted a longstanding business partnership with his brother-in-law, Mr Kazakov, giving Mr Kazakov an interest in the Bourlakov family assets, thereby purportedly reducing the amount available for division between Mr Bourlakov and Mrs Bourlakova. The value of the claims is over $3 billion.

Trower J considered a range of jurisdiction challenges brought by Mr Kazakov and his wife, Vera Kazakova (the late Mr Bourlakov’s sister; together with Mr Kazakov: “the Kazakovs”), three Panamanian companies under their control (“the Panamanian Companies”) and another of Mr Bourlakov’s relatives, Semen Anufriev, who had played a central role in managing Mr Bourlakov’s business interests and personal wealth and, on the Claimants’ case, been a party to the conspiracy. The Judge also considered an application by Mr Anufriev for a stay in favour of arbitration under s. 9 Arbitration Act 1996 and applications to set aside extensions of the validity of the Claim Form. Trower J dismissed all the applications.

As to the jurisdiction challenges, while Mr Kazakov had initially asserted that he had been domiciled in Monaco at the time the Claim Form was issued, he subsequently withdrew that evidence and accepted that he had been domiciled in Estonia. The Judge did not accept Mrs Kazakova’s evidence that she had been domiciled outside the European Union and held that there was a good arguable case that she, like her husband, had been domiciled in Estonia. For his part, Mr Anufriev accepted that he had been domiciled in Latvia at the time the Claim Form was issued.

Accordingly, jurisdiction against the Kazakovs and Mr Anufriev fell to be determined under the BRR and, on that basis, they accepted that the Court had jurisdiction. They nonetheless sought stays under article 34 BRR in favour of proceedings in Monaco.

Trower J rejected that application, holding that article 34 could only apply where the relevant foreign proceedings fall within the material scope of the BRR. In this respect, the Judge followed the approach of the Court of Appeal in Moore v Moore [2007] EWCA Civ 361. It was common ground that the Monegasque proceedings relied on by the defendants were outside the scope of the BRR as they were within the matrimonial property exception. Accordingly, no stay under article 34 was available. The Judge further held that he would not have granted a stay in any event, taking into account, among other things, the limited overlap between the proceedings, the lack of evidence to indicate that consolidation was likely in Monaco and the fact that the proceedings in Monaco were suspended.

As to the position of the Panamanian Companies, it was common ground that they were domiciled outside the EU, that jurisdiction as against them fell to be determined under the common law and that under the common law the necessary and proper party gateway in PD 6B para 3.1(3) was available. The Panamanian Companies argued that permission to serve out should not have been given or, alternatively, that the proceedings against them should be stayed on the basis that Monaco, not England, was the forum conveniens. The Judge held that there were factors in favour of both Monaco and England but that considerations of multiplicity of proceedings and avoiding conflicting judgments were firmly in favour of England. That was because, among other things, many of the defendants had not offered to submit to the jurisdiction of the Monegasque courts which distinguished the case from Vedanta, where the offer by the anchor defendant to submit had been key. Accordingly, England was the appropriate forum.

The Judge rejected Mr Anufriev’s article 9 stay application on the basis that the claims against him fell outside the scope of the arbitration clause. The Judge also rejected the application to set aside extensions of time granted to the Claimants, taking into account the volume of work involved, the need to seek permission to serve out and the need to obtain expert evidence from lawyers in a number of jurisdictions.

The judgment is available here.

Matthew Cook QC, Patrick Harty and Daniel Fletcher (among others) act for the Claimants, instructed by Mishcon de Reya LLP.