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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Koza Ltd & Anor v Koza Altin Isletmeleri AS [2022] EWCA Civ 1284 (07 October 2022) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2022/1284.html Cite as: [2022] EWCA Civ 1284 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICEs
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
TROWER J
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE NEWEY
and
LADY JUSTICE SIMLER
____________________
(1) KOZA LTD (2) HAMDI AKIN IPEK |
Claimants/Appellants |
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- and – |
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KOZA ALTIN ISLETMELERI AS |
Defendant/Respondent |
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And between: |
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(1) KOZA LTD (2) HAMDI AKIN IPEK |
Claimants/ Appellants |
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-and- |
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(1) KOZA ALTIN ISLETMELERI AS (2) FATIN RUSTU KARAKAS (3) ISMAIL GULER (4) ENIS GUCLU SIRIN (5) ISMET DEMIR (6) PERSONS UNKNOWN |
Defendants/ Respondents |
____________________
Jonathan Crow KC and David Caplan (instructed by Mishcon de Reya LLP) for the Respondents
Hearing dates : 29 and 30 June 2022
____________________
Crown Copyright ©
Sir Julian Flaux C:
Introduction
Factual and procedural background
The judgment below
"i) The claimants have a good arguable case that the claim falls within one of the jurisdictional gateways listed in paragraph 3 of PD 6B (see CPR 6.33). This means that the claimant must have the better argument on the available material, which must supply a plausible evidential basis for the application of the gateway: Brownlie v Four Seasons Holdings Inc [2018] 1 WLR 192 at [7].
ii) There must be a serious issue to be tried on the merits of the claim, which means asking the question whether there is a real as opposed to a fanciful prospect of success: (Altimo Holdings v Kyrgyz Mobil Tel Ltd [2012] 1 WLR 1804 at [71]).
iii) England must be clearly or distinctly the appropriate forum for the resolution of the dispute."
"If the principles of English domestic law and international law are applied and if the plaintiffs succeed in establishing liability against any of the appellants in tort, misfeasance or breach of fiduciary duty then an English court will grant the appropriate relief. If the Mateos family had remained in charge of the Rumasa group perhaps no action would have been brought by any of the companies comprised in the Rumasa group against the appellants. But that consideration is irrelevant to the actions which have now been brought." (at p.430C-E)
and
"These authorities illustrate the principle that an English court will recognise the compulsory acquisition law of a foreign state and will recognise the change of title to property which has come under the control of the foreign state and will recognise the consequences of that change of title. The English court will decline to consider the merits of compulsory acquisition." (at p.431C-D)
The Grounds of Appeal and Respondents' Notice.
(1) That the judge erred in reasoning that the constitution of the board of Koza Altin is governed by Turkish law and that the Süer judgment is valid until set aside so that no question of recognition of that judgment arises. Neither the law applied by the foreign judgment nor its validity in the foreign jurisdiction has any bearing on whether the judgment should be recognised in proceedings in England. He should have found those matters were irrelevant and that the question of recognition of the Süer judgment did arise.
(2) The judge erred in reasoning that the "substantive issue" in the case was the disputed rights of Koza Altin as a shareholder of Koza and the trustees did not need to rely on the Süer judgment to exercise those right so that the judgment did not need to be recognised. He should have found that the authority issue was the only "substantive issue" in the 2021 proceedings and the strike out application, alternatively if the rights of Koza Altin are the "substantive issue" in the litigation in some more general sense, the judge was wrong to find that the principles on recognition of judgments were confined to such "substantive issue". He should have found that the trustees did need to rely upon the Süer judgment to establish their authority to bring or defend a claim in the name of Koza Altin based on its shareholder rights and accordingly they require it to be recognised by the English court.
(3) The judge erred in applying the decision in Williams & Humbert and finding that it precluded the claimants from disputing the trustees' authority to act in the name of Koza Altin. In doing so, he conflated (i) the rule against enforcing a foreign penal law with (ii) the principles on recognition of foreign judgments. He should have found that the case has no application to the authority issue because it concerns the prohibition on enforcing a foreign penal law and has nothing to do with the Court's power to decline to recognise foreign judgments on public policy or other grounds.
(4) The judge erred in applying the rule in Oppenheimer v Cattermole. He should have found (i) that the principle in that case concerns the stricter test for disregarding a foreign legislative or executive act and so says nothing about whether the Süer judgment should be recognised and (ii) the nature and degree of injustice involved in the Süer judgment and subsequent legislative and executive acts in this case could not in any event be resolved on an interlocutory basis, as the parties had accepted.
(5) The judge erred in suggesting that it was necessary for the claimants to sustain challenges to certain measures subsequent to the Süer judgment. He should have found (i) on the uncontested Turkish law evidence, the subsequent measures operated only to transfer the authority of the original trustees and did not provide a fresh source of authority, such that it is sufficient for the claimants on the authority issue to impugn the Süer judgment; or (ii) that that question of Turkish law could not be resolved on an interlocutory basis.
(1) There was no serious issue to be tried in relation to either the new authority claim or the strike out application in the light of the Turkish Constitutional Court's dismissal of the appeal against the Süer judgment. The judge held at [79] that the decision of the Turkish Constitutional Court meant that the court was "most unlikely to treat the Süer judgment as corrupt for enforcement or recognition purposes". He should have gone further and held that its decision, which there was no or no sufficient reason to impeach, provided a complete answer to the new authority claim and the strike out application.
(1A) There has been a material development since the judgment in that the decision of the ECtHR of 21 October 2021 dismissed the complaint of Mr Ipek about the Süer judgment and the relief he sought against Turkey. That too provides a complete answer to the new authority claim and the strike out application.
(2) The judge should have concluded that there was no serious issue to be tried in relation to either the new authority claim or the strike out application because the authority of the existing directors of Koza Altin does not derive from the Süer judgment, but from legislatively-sanctioned administrative decision-making of the SDIF and a later confirmation of their authority by a separate court decision, the integrity of which is not subject to any specific challenge.
(3) The judge should have concluded that the service out application fell to be dismissed on the additional ground that there was no good arguable case that it fell within any jurisdictional gateway. The gateway in para 3.1(2) of PD6B on which the claimants relied is not applicable because the individual defendants are resident in Turkey and all relevant acts in procuring Koza Altin (a Turkish company) to do anything take place in Turkey. There was no evidence that they had done or would ever do anything in this jurisdiction. The judge was wrong to conclude, obiter, that the claimants had a good arguable case that this gateway was satisfied.
(4) The judge should have concluded that the service out application fell to be dismissed on the additional ground that it constituted an abuse of process. The judge's reasons for reaching the conclusion that it was not are all unsound. It was for the claimants, not the defendants, to advance the application for permission to serve out and the defendants could not force them to do so. The judge's conclusion that the court might not have dealt with the application in 2016 even if the claimants had advanced it is entirely speculative and diverts focus away from the relevant question which is whether the claimants should have advanced the application in 2016, rather than 2021. The reference to the streamlined approach under the Brussels Recast regime is wrong in principle. Questions of jurisdiction should be dealt with in one go insofar as possible, otherwise one risks the scenario here where an attempt is being made in 2021 to have a second bite of the jurisdictional cherry and set the previous battle to naught.
The parties' submissions
"It was no part of the court's function "to decide difficult questions of law which call for detailed argument and mature consideration"".
"157. Although judicial rulings of a foreign state are manifestations of state sovereignty, it is now clear that they do not themselves attract the operation of any rule of foreign act of state applicable in this jurisdiction and, as a result, are not entitled to the deference which may be shown to legislative and executive acts of a foreign state. So much was established by Lord Collins delivering the judgment of the Judicial Committee of the Privy Council in Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd [2011] UKPC 7; [2012] 1 WLR 1804, para 101:
"The true position is that there is no rule that the English court (or Manx court) will not examine the question whether the foreign court or the foreign court system is corrupt or lacking in independence. The rule is that considerations of international comity will militate against any such finding in the absence of cogent evidence. That, and not the act of state doctrine or the principle of judicial restraint in Buttes Gas & Oil Co v Hammer (No 3) …, is the basis of Lord Diplock's dictum in The Abidin Daver … and the decisions which follow it. Otherwise the paradoxical result would follow that, the worse the system of justice in the foreign country, the less it would be permissible to make adverse findings on it."
158. Rix LJ was able to build on this foundation when delivering the judgment of the Court of Appeal in Yukos Capital (No 2) [2014] QB 458, which held justiciable the issue whether judicial acts had been part of a "campaign waged by the Russian state for political reasons against the Yukos group and its former CEO" (paras 29(ii), 90). This difference of approach does not reflect any hierarchical inferiority of judicial acts but rather reflects a shared understanding of how courts should behave under the rule of law. As Lord Mance put it in Belhaj v Straw [2017] AC 964, para 73(ii):
"If one believes in justice, it is on the basis that all courts will or should subscribe to and exhibit similar standards of independence, objectivity and due process to those with which English courts identify."
159. As a result, courts in this jurisdiction are more willing to investigate whether a foreign court is acting in a way that meets the standards expected of a court and whether there has occurred or is likely to occur a failure of substantial justice. For this reason, foreign judgments fall to be assessed under different rules from those applicable to legislative and executive acts and are simply less impervious to review. The matter is admirably expressed by Rix LJ in Yukos [2014] QB 458, para 87:
"So the position is, to put the matter broadly, that whereas in a proper case comity would seem to require (at any rate as a principle of restraint rather than abstention) that the validity or lawfulness of the legislative or executive acts of a foreign friendly state acting within its territory should not be the subject of adjudication in our courts, comity only cautions that the judicial acts of a foreign state acting within its territory should not be challenged without cogent evidence. If then the question is asked - Well, why should acts of a foreign judiciary be treated differently from other acts of state, and what is the basis of that difference? - the answer, in our judgment, is that judicial acts are not acts of state for the purposes of the act of state doctrine. The doctrine in its classic statements has never referred to judicial acts of state, it has referred to legislative or executive (or governmental or official) acts of a foreign sovereign. … It is not hard to understand why there should be a distinction. Sovereigns act on their own plane: they are responsible to their own peoples, but internationally they are responsible only in accordance with international law and internationally recognised norms. Courts, however, are always responsible for their acts, both domestically and internationally. Domestically they are responsible up to the level of their supreme court, and internationally they are responsible in the sense that their judgments are recognisable and enforceable in other nations only to the extent that they have observed what we would call substantive or natural justice, what in the United States is called due process, and what internationally is more and more being referred to as the rule of law. In other words the judicial acts of a foreign state are judged by judicial standards, including international standards regarding jurisdiction, in accordance with doctrines separate from the act of state doctrine, even if the dictates of comity still have an important role to play. As Lindley MR said in Pemberton v Hughes [1899] 1 Ch 781, 790: 'If a judgment is pronounced by a foreign court over persons within its jurisdiction and in a matter with which it is competent to deal, English courts never investigate the propriety of the proceedings in the foreign court, unless they offend against English views of substantial justice'." (Emphasis added)
In the result, the Court of Appeal therefore agreed with the holding of Hamblen J at first instance, [2011] EWHC 1461 (Comm); [2012] 1 All ER (Comm) 479, para 201, that "there is no rule against passing judgment on the judiciary of a foreign country"."
"The true position is that there is no rule that the English court (or Manx court) will not examine the question whether the foreign court or the foreign court system is corrupt or lacking in independence. The rule is that considerations of international comity will militate against any such finding in the absence of cogent evidence. That, and not the act of state doctrine or the principle of judicial restraint in Buttes Gas and Oil v Hammer (No 3) [1982] AC 888, is the basis of Lord Diplock's dictum in The Abidan Daver [1984] AC 398 and the decisions which follow it. Otherwise the paradoxical result would follow that, the worse the system of justice in the foreign country, the less it would be permissible to make adverse findings on it."
"The principle in Abouloff v Oppenheimer & Co (1882) 10 QBD 295 is that, in the context of recognition and enforcement of foreign judgments at common law, a foreign judgment may be impeached for fraud even though no newly discovered evidence is produced and even though the fraud might have been produced, or even was produced and rejected, in the foreign court."
"Our Courts, as he says, never inquire whether a competent foreign Court has exercised its jurisdiction improperly, provided that no substantial injustice according to our notions has been committed."
Viscount Dunedin, also applying Pemberton v Hughes, said at [663]:
"In order for a foreign decree to be immune from disturbance by an English Court - and in my opinion Scottish may with perfect justice be substituted for English - it must be pronounced between persons subject to the foreign jurisdiction, and deal with a matter with which the Court is competent to deal, and it must not offend against English ideas of substantial justice."
"Most of the common law authorities and commentaries to which I was referred do not deal with recognition in quite the same way as the CBIR [Cross-Border Insolvency Regulation], which focusses on recognition of the foreign representative or office-holder. Instead, they treat recognition as a question of recognition by the English court of the foreign court order commencing bankruptcy proceedings."
"(1) The first rule ("Rule 1") is that the courts of this country will recognise and will not question the effect of a foreign state's legislation or other laws in relation to any acts which take place or take effect within the territory of that state ([2017] AC 964, para 121).
(2) The second rule ("Rule 2") is that the courts of this country will recognise, and will not question, the effect of an act of a foreign state's executive in relation to any acts which take place or take effect within the territory of that state (at para 122)."
"The various manifestations of foreign act of state in English law are undoubtedly subject to limitations and exceptions. These were considered in detail by Rix LJ in Yukos Capital (No 2) [2014] QB 458, paras 68-115 and may be summarised as follows:
…
(2) "[T]he doctrine will not apply to foreign acts of state which are in breach of clearly established rules of international law, or are contrary to English principles of public policy, as well as where there is a grave infringement of human rights" (Oppenheimer v Cattermole [1976] AC 249, 277-278, per Lord Cross of Chelsea; Kuwait Airways (Nos 4 and 5) [2002] 2 AC 883 and Yukos Capital (No 2), paras 69–72).
(3) Judicial acts will not be regarded as acts of state for the purposes of the act of state doctrine (Altimo Holdings … and Yukos Capital (No 2), paras 73–91)."
"There is therefore no rule requiring an unquestioning acceptance by courts in the United Kingdom of the validity or legality of a foreign judgment. Rather, the status of a foreign judgment is left to be determined in accordance with domestic rules on the recognition and enforcement of foreign judgments."
"One matter, however, is clear. Courts in this jurisdiction will refuse to recognise or give effect to foreign judgments such as those of the STJ if to do so would conflict with domestic public policy. On this appeal we have not been taken to the judgments in question and the Commercial Court will have to address this issue among others when the matter is remitted to it. It is important to note at this point, however, that the public policy of the forum will necessarily include the fundamental rule of UK constitutional law that the executive and the judiciary must speak with one voice on issues relating to the recognition of foreign states, governments and heads of state. As a result, if and to the extent that the reasoning of the STJ leading to its decisions that acts of Mr Guaidó are unlawful and nullities depends on the view that he is not the President of Venezuela, those judicial decisions cannot be recognised or given effect by courts in this jurisdiction because to do so would conflict with the view of the United Kingdom executive."
"These authorities illustrate the principle that an English court will recognise the compulsory acquisition law of a foreign state and will recognise the change of title to property which has come under the control of the foreign state and will recognise the consequences of that change of title. The English court will decline to consider the merits of compulsory acquisition. In their pleadings the appellants seek to attack the motives of the Spanish legislators, to allege oppression on the part of the Spanish government and to question the good faith of the Spanish administration in connection with the enactment, terms and implementation of the law of the 29 June 1983. No English judge could properly entertain such an attack launched on a friendly state which will shortly become a fellow member of the European Economic Community."
"It appears therefore that a substantial body of authority, not all of which is obiter, lends powerful support for the existence of a rule that courts in this jurisdiction will not adjudicate or sit in judgment on the lawfulness or validity under its own law of an executive act of a foreign state, performed within the territory of that state. The rule also has a sound basis in principle. It is founded on the respect due to the sovereignty and independence of foreign states and is intended to promote comity in inter-state relations. While the same rationale underpins state immunity, the rule is distinct from state immunity and is not required by international law. It is not founded on the personal immunity of a party directly or indirectly impleaded but upon the subject matter of the proceedings. The rule does not turn on a conventional application of choice of law rules in private international law nor does it depend on the lawfulness of the conduct under the law of the state in question. On the contrary it is an exclusionary rule, limiting the power of courts to decide certain issues as to the legality or validity of the conduct of foreign states within their proper jurisdiction. It operates not by reference to law but by reference to the sovereign character of the conduct which forms the subject matter of the proceedings. In the words of Lord Cottenham, it applies "whether it be according to law or not according to law". I can, therefore, see no good reason to distinguish in this regard between legislative acts, in respect of which such a rule is clearly established (see paras 171-179 below), and executive acts. The fact that executive acts may lack any legal basis does not prevent the application of the rule. In my view, we should now acknowledge the existence of such a rule."
"The applicant initially expressed that the conditions of [article 133] relating to the appointment of a trustee had not occurred in this case. According to the applicant, in order for a trustee to be appointed to a company, there must be a crime being conducted, not a crime conducted already. Also the applicant asserted that there was no strong criminal suspicion which is needed to exist according to the law in this case. Besides the appointment of a trustee was not registered and announced. The applicant for these reasons, complained that injunction cannot be foreseen and was applied against the rule of legal clarity."
Thus contrary to Mr Scott's suggestion that the Turkish Constitutional Court did not review the justification for the appointment of trustees under article 133, that is precisely what it did.
"The applicant complained that his group was placed under the administration of a curator by decision of a [criminal peace judge]. He alleges that [criminal peace judges] do not constitute judicial authorities in accordance with the requirements of Article 6 of the Convention and that they are not independent and impartial."
"This measure was ordered by an independent judicial authority on the basis of technical reports. On this point, the Court recalls that it has already ruled on complaints similar to those of the applicant concerning the independence of [criminal peace judges] and has declared them inadmissible (see Bas cited above [269] to [281]). There is nothing in the present case to depart from that conclusion."
In other words, as Mr Crow pointed out, Mr Ipek did complain about the impartiality of Judge Süer but the ECtHR rejected that complaint because nothing he put in front of the court caused it to depart from its earlier rulings.
"Other cases which I have cited also indicate that the alignment between Convention rights at the domestic and international levels described in Ullah was not as narrow in scope as was suggested in Re G. For example, in N v Secretary of State for the Home Department, para 25, Lord Nicholls stated as a general proposition, in relation to the courts' role under theHuman Rights Act: "It is not for us to search for a solution to [the appellant's] problem which is not to be found in the Strasbourg case law". In R (Quark Fishing Ltd) v Secretary of State for Foreign and Commonwealth Affairs, para 25, Lord Bingham stated unequivocally: "A party unable to mount a successful claim in Strasbourg can never mount a successful claim under sections 6 and 7 of the 1998 Act". In the same case, Lord Nicholls stated at para 34 that "the Act was not intended to provide a domestic remedy where a remedy would not have been available in Strasbourg"."
"An appeal against a decision to strike out on the grounds of abuse, described by Lord Sumption JSC in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2014] AC 160, para 17 as the application of a procedural rule against abusive proceedings, is a challenge to the judgment of the court below and not to the exercise of a discretion. Nevertheless, in reviewing the decision the Court of Appeal will give considerable weight to the views of the judge, see Buxton LJ in the Laing v Taylor Walton case, para 13."
"an appellate court will be reluctant to interfere with the decision of the judge in the judgment he reaches on abuse of process by the balance of the factors; it will generally only interfere where the judge has taken into account immaterial factors, omitted to take account of material factors, erred in principle or come to a conclusion which was impermissible or not open to him."
Discussion
"…courts in this jurisdiction are more willing to investigate whether a foreign court is acting in a way that meets the standards expected of a court and whether there has occurred or is likely to occur a failure of substantial justice. For this reason, foreign judgments fall to be assessed under different rules from those applicable to legislative and executive acts and are simply less impervious to review."
"The fact that a foreign court decision is manifestly wrong or is perverse is not sufficient (see for example Dicey, Morris and Collins, The Conflict of Laws (15th edn) at 14-163, OJSC Bank of Moscow v Chernyakov [2016] EWHC 2583 (Comm) and Erste Group Bank AG (London) v JSC VMZ Red October [2013] EWHC 2926 (Comm)). The decision must be so wrong as to be evidence of bias, or be such that no court acting in good faith could have arrived at it."
"In my view there is real substance in the submission made by Koza Altin and the individual defendants that the decision of the Constitutional Court in the present case means that the English court is most unlikely to treat the Süer judgment as corrupt for enforcement or recognition purposes."
"82. Although Mr Jonathan Crow QC, who appeared for Koza Altin and the individual defendants, said that the allegations in relation to deficiencies in the functioning of organs of the Turkish state were hotly contested and would be difficult to establish given the large number of individuals and entities now involved, he accepted that many of them could not be resolved on an interlocutory basis. His oral submissions did not therefore concentrate on the question of whether or not there is a serious issue as to the integrity of the Süer judgment, as reviewed by the Sahinbey judgment and on appeal by the Turkish Constitutional Court.
83. That was an understandable position for him to adopt, because the core of his case is that Koza Altin and the individual defendants are not seeking to enforce the Süer judgment in England…"
"Nowhere in the claimants' (extensive) evidence is there any attack on the bona fides of the Turkish Constitutional Court. Quite the reverse-the suggestion is that one of the problems in the Turkish legal system is that the decisions of the Constitutional Court are not properly implemented when they go against the judgment:[passages from the Jowell report are then cited.] Nor is there any specific attack on the Constitutional Court's decision of 24 May 2018 dismissing Mr Ipek's appeal against the appointment of trustees. Nor are there even any pleas on these matters. In the circumstances, any "non-recognition" of judgments case could not get off the ground".
Lady Justice Simler
Lord Justice Newey