ENGLISH COURTS CLARIFY THE SCOPE OF THEIR JURISDICTION TO COMMIT FOREIGN DIRECTORS TO PRISON FOR THEIR COMPANIES’ BREACHES OF INTERIM INJUNCTIONS
On 17 October 2018, Mrs Justice Moulder rendered judgment in Integral Petroleum S.A. v Petrogat FZE and others. In September 2017, Integral contracted with Petrogat for the purchase of fuel oil cargoes produced by Seydi refinery in Turkmenistan, to be delivered on FOB Turkmenbashi ferry terms with subsequent shipment to Kulevi, Georgia. San Trade guaranteed Petrogat’s obligations under the contract. Between November and December 2017, the cargo was prepaid for by Integral and loaded from the Seydi refinery onto railway tank cars, with railway bills of lading naming Integral as the sole consignee and the destination as Kulevi, Georgia. A dispute arose at the beginning of January 2018 when Petrogat and San Trade, secretly from Integral, sought to amend original railway bills of lading for part of Integral’s cargo to name San Trade as the sole consignee instead of Integral, and sought to misappropriate part of the cargo and divert it to San Trade in Iran. Accidentally, Integral learned about San Trade’s and Petrogat’s actions from its local sources in Turkmenistan. It then immediately sought an urgent interim injunction to restrain Petrogat and San Trade from taking any steps to deliver the cargo to Iran. Morgan J issued the injunction on 14 January 2018. Despite Integral’s attempts to prevent this and the order of Morgan J, Petrogat and San Trade shipped part of the cargo to San Trade in Iran under the amended railway bills of lading now naming San Trade as the sole consignee. Integral therefore applied for an order that Petrogat’s and San Trade’s directors and officers be committed to prison for contempt of Court. The directors/officers argued that the Court had no jurisdiction over them mainly because the Brussels Recast Regulation (No. 1215/2012) did not apply to committal proceedings. They also said that there was no available gateway under the Civil Procedure Rules to permit service of proceedings outside of the jurisdiction. In her 17 October 2018 judgment, Mrs Justice Moulder clarified the English Court’s jurisdiction to commit foreign directors to prison for their company’s breaches of English Court injunctions. Her Ladyship’s principal conclusions were as follows:
- The Brussels Regulation applies to English committal proceedings. Hence the Court’s permission is not required to serve committal proceedings on an EU-domiciled defendant, including EU domiciled directors of defendant companies.
- For non-EU domiciled defendants, the claimant has to seek permission to serve proceedings out of the jurisdiction under CPR Practice Direction 6(b) paragraph 3.1(3). Prior to this judgment, it was not entirely clear on what basis permission could be sought if at all.
- Proceedings may be served on, and the Court has jurisdiction over, not only actual but also de-facto foreign directors.
- Whether a person is a de-facto director is a question of fact and English law, and not the law of the country where the director’s company is incorporated.
A full copy of the judgment can be found here: http://www.bailii.org/ew/cases/EWHC/Comm/2018/2686.html. Fortior’s Vitaliy Kozachenko acted for the Claimant and winning party, Integral Petroleum S.A. The foreign directors/officers were represented by Stephenson Harwood. For more information please contact us at [email protected] or reach out to your usual contact at Fortior.***Fortior Law (www.fortiorlaw.com) is a boutique practice in Geneva, Switzerland, specialising in international dispute resolution in the fields of international trade, shipping and finance.
