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United Kingdom Supreme Court
You are here: BAILII >> Databases >> United Kingdom Supreme Court >> VTB Capital Plc v Nutritek International Corp & Ors (Rev 1)  UKSC 5 (6 February 2013)
Cite as:  1 Lloyd's Rep 466,  2 WLR 398,  UKSC 5,  BCC 514,  1 All ER 1296,  1 All ER (Comm) 1009,  1 CLC 153,  2 AC 337,  WLR(D) 41,  1 BCLC 179
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 UKSC 5
On appeal from:  EWCA Civ 808
VTB Capital plc (Appellant) v Nutritek International Corp and others (Respondents)
Lord Neuberger, President
JUDGMENT GIVEN ON
6 February 2013
Heard on 12, 13 and 14 November 2012
Mark Howard QC
Paul McGrath QC
(Instructed by Herbert Smith Freehills LLP)
(Instructed by SJ Berwin LLP (up to 1st December 2012) and Fried, Frank, Harris, Shriver & Jacobson (London) LLP (from 1st December 2012))
Mark Hapgood QC
Stephen Rubin QC
(Instructed by by SJ Berwin LLP (up to 1st December 2012) and Fried, Frank, Harris, Shriver & Jacobson (London) LLP (from 1st December 2012))
Appropriate forum - the basis of the claims
The legal principles regarding appropriate forum
"The effect is, not merely that the burden of proof rests on the plaintiff to persuade the court that England is the appropriate forum for the trial of the action, but that he has to show that this is clearly so" (p 481E).
"are of great variety, ranging from cases where, one would have thought, the discretion would normally be exercised in favour of granting leave (e.g., where the relief sought is an injunction ordering the defendant to do or refrain from doing something within the jurisdiction) to cases where the grant of leave is far more problematical. In addition, the importance to be attached to any particular ground invoked by the plaintiff may vary from case to case. For example, the fact that English law is the putative proper law of the contract may be of very great importance ….; or it may be of little importance as seen in the context of the whole case. In these circumstances, it is, in my judgment, necessary to include both the residence or place of business of the defendant and the relevant ground invoked by the plaintiff as factors to be considered by the court when deciding whether to exercise its discretion to grant leave; but, in so doing, the court should give to such factors the weight which, in all the circumstances of the case, it considers to be appropriate."
The modern rules reflect more precisely Lord Goff's statement of general principle, in providing that permission is not to be given unless the court is "satisfied that England and Wales is the proper place in which to bring the claim": CPR, rule 6.37(3).
"where it is held that a Court has jurisdiction on the basis that an alleged tort has been committed within the jurisdiction of the Court, the test which has been satisfied in order to reach that conclusion is one founded on the basis that the Court, so having jurisdiction, is the most appropriate Court to try the claim, where it is manifestly just and reasonable that the defendant should answer for his wrongdoing. This being so, it must usually be difficult in any particular case to resist the conclusion that a Court which has jurisdiction on that basis must also be the natural forum for the trial of the action. If the substance of an alleged tort is committed within a certain jurisdiction, it is not easy to imagine what other facts could displace the conclusion that the Courts of that jurisdiction are the natural forum. Certainly, in the present case, I can see no factors which could displace that conclusion."
"The express or implied supposition in all these decided cases is that the substance of the tort arose within the jurisdiction. In other words the test of substantiality as required by Kroch v Rossell  1 Al1 ER 725 was in each case satisfied. Counsel for Forbes argued that a prima facie rule that the appropriate jurisdiction is where the tort was committed is inconsistent with the Spiliada case  AC 460. He said that Spiliada admits of no presumptions. The context of the two lines of authority must be borne in mind. In Spiliada the House examined the relevant questions at a high level of generality. The leading judgment of Lord Goff of Chieveley is an essay in synthesis; he explored and explained the coherence of legal principles and provided guidance. Lord Goff of Chieveley did not attempt to examine exhaustively the classes of cases which may arise in practice, notably he did not consider the practical problems associated with libels which cross national borders. On the other hand, the line of authority of which The Albaforth is an example was concerned with practical problems at a much lower level of generality. Those decisions were concerned with the bread and butter issue of the weight of evidence. There is therefore no conflict. Counsel accepted that he could not object to a proposition that the place where in substance the tort arises is a weighty factor pointing to that jurisdiction being the appropriate one. This illustrates the weakness of the argument. The distinction between a prima facie position and treating the same factor as a weighty circumstance pointing in the same direction is a rather fine one. For my part the Albaforth line of authority is well established, tried and tested, and unobjectionable in principle."
The history of the transaction
"G. Whilst it was entirely a matter for the Credit Committee of VTB Moscow, if VTB Moscow had known that the proposal for the sale by Nutritek was to a company under common control, it is likely VTB Moscow would have approached the proposal differently. In particular, I believe that it is likely to have viewed the proposal as one seeking asset finance rather than acquisition finance. Amongst one of the many additional matters that would have been considered (and to which I will briefly refer later in this statement) would be the provision of additional security;
H. Given that it was disclosed to VTB Moscow at the outset that Nutritek was controlled by Marcap, which I understood was a family of funds controlled by Mr Konstantin Malofeev …. then Marcap was the obvious target to provide that security. This was particularly the case, when it was known to VTB Moscow that Nutritek urgently needed to raise funds to pay certain credit linked notes ("CLN") and that some of the monies raised by the sale of the Dairy Companies were being used to pay them. It would have been noteworthy if Marcap refused to provide security for the risk that VTB and VTB Moscow were taking."
"A. Once the decision had been taken by VTB Moscow to enter into the Participation Agreement, there was no need for the matter to be decided by the Credit Committee of [VTB];
B. Instead, it was sufficient for the loan to proceed if the proposed transaction had been approved by Mr Ryzhkov, given his senior position within both [VTB] and JSC VTB, and the ACF [Advance Credit Facility] dated 13 November 2007 was signed off by the appropriate authorised signatories;
C. Mr Ryzhkov approved the transaction and indeed he signed the Facility Agreement together with Ms Bragina on behalf of [VTB];
H. Notwithstanding the position taken by Credit Risk in the ACF dated 15 November 2007 that 'Credit Risk consider this transaction as unsecured as the security package has little tangible value', in granting the loan and approving the ISA, [VTB] did rely heavily on the representations that had been made as to:
i. the past financial performance of the Dairy Companies and the forecast performance;
ii. the 2007 E&Y 2007 Valuation of the Dairy Companies based upon those figures, and
iii. The SPA representing a commercial transaction between two separate entities, namely RAP and Nutritek. It was entirely unaware that they were under the common control of Marshall Capital Group of Companies and believed them to be under separate control based on the information that had been provided by Nutritek."
"11. Having spoken to Mr Yates, Colin Magee, Julia Ferris and Martin Pasek I am informed that and believe that if [VTB] had known that RAP and Nutritek were under the common control of Marshall BVI or that the representations identified above and contained in the 2007 E&Y Valuation were false then it would not have entered into the Facility Agreement or the ISA or permitted the draw down of the Tranche A monies."
The judgments below
"186. Stage I. The factors that may be taken into account in determining which is the natural forum for the action include: (a) the personal connections which the parties have to the countries in question; (b) the factual connections which the events relevant to the claim have with those countries; (c) factors affecting convenience or expense such as the location of the witnesses or documents; and (d) the applicable law.
187. Counsel for VTB submitted that England was the natural forum because (i)VTB is English, (ii) the misrepresentations were relied upon in England, (iii) the money was lent and the loss sustained in England, (iv) the Facility Agreement, ISA, the Participation Agreement and the SPA contain English law and English jurisdiction or arbitration clauses and (v) the applicable law is English law. I do not consider that any of these factors points strongly to England being the natural forum in the present case. So far as (i) is concerned, VTB is controlled by VTB Moscow. As to (ii), as explained above, it seems to me that VTB's reliance was wholly secondary to that of VTB Moscow. In relation to factor (iii), the loss was sustained because Russian assets provided inadequate security. As to (iv) and (v), the English law clauses are immaterial once it is concluded, as I have, that the law applicable to the tort is Russian law. The English jurisdiction and arbitration clauses are a pointer to England, but not a strong one given that the claim is a tort claim not a contract claim.
188. Counsel for the defendants submitted that the following factors pointed to Russia being the natural forum. First, the connections of the parties to Russia. VTB is controlled by VTB Moscow, which is Russian. Furthermore, the litigation is being managed by VTBDC, which is also Russian. MarCap Moscow and Mr Malofeev are Russian. It is common ground that Nutritek was managed from Russia, and VTB's case is that Mr Malofeev controls both Nutritek and MarCap BVI. Furthermore, it is VTB's case that Mr Malofeev orchestrated the fraud, primarily through MarCap Moscow.
189. Secondly, the connections of the events constituting the torts to Russia. The transaction was introduced to VTB Moscow at meetings between Russian individuals in Russia. The negotiations mainly took place in Russia. The misrepresentations were made and mainly received in Russia. The more important misrepresentation concerned the performance of the Dairy Companies, which are Russian companies. The 2007 E&Y Valuation was a valuation by Ernst & Young's Moscow office and was based on information provided by Nutritek's Russian management. The misrepresentations were primarily relied upon by VTB Moscow acting through its Credit Committee and Management Board in Russia. It was VTB Moscow and VTBDC which primarily dealt with RAP's default and enforcing the security. The secured assets were in Russia. The discovery of the fraud took place in Russia. Although the loss was sustained by VTB in England, as discussed above the ultimate economic impact is in Russia.
190. Thirdly, most of the witnesses are Russian and many of the documents are in Russian and located in Russia. So far as the witnesses are concerned, there are a considerable number of relevant Russian witnesses from VTB Moscow, VTBDC, Ernst & Young, Nutritek (Mr Skuratov and the managers of the Dairy Companies), MarCap Moscow (Mr Leonov, Mr Provotorov, Ms Tyurina and Mr Popov as well as Mr Malofeev) and RAP (Ms Kremneva and Mr Pankov). Other potential Russian witnesses include Mr Sazhinov and Mr Alginin. By contrast, there are relatively few material witnesses from VTB. The two most important ones appear to be Ms Bragina and Mr Ryzhkov. Both have left VTB (as has Mr Thunem). It appears that Mr Ryzhkov is in Russia, while VTB's evidence is that Ms Bragina is 'believed to be' in England. Although Mr Ryzhkov has been contacted about the matter, it does not appear that Ms Bragina had been.
191. As counsel for the defendants pointed out, it is striking that all of VTB's witness statements in support of its application for permission to serve out, other than one from its solicitor, were made by Russian witnesses. In addition to the statements of Mr Tulupov and Mr Chernenko, these consisted of:
i) a statement made by Andrey Puchkov, Deputy Chairman of VTB Moscow, which among other matters dealt with VTB Moscow's reliance on the misrepresentations alleged, Mr Puchkov having been present at the Management Board meeting on 13 November 2007 at which the transaction was approved;
ii) a statement made by Vadim Muraviev, Head of the Division of Distressed Debt Settlements at VTB Moscow, who gave evidence as to VTB's reliance on the misrepresentations alleged based on interviews with four English employees of VTB including Mr Magee and Mr Pasek; and
iii) a statement made by Denis Zemlyakov, General Director of VTBDC, who gave evidence concerning RAP's default and the enforcement of the security.
192. In addition, VTB relied on two draft statements from Alexander Buryan and Irina Leonova, who were employed by RAP as Vice-President and Chief Accountant. Furthermore, since then a number of statements have been made by Arthur Klaos of VTBDC, in the most recent of which Mr Klaos relays information provided to him by (among others) Mr Ryzhkov and Alexander Yastrib (at the time Senior Vice President of VTB Moscow and now a board member of the Bank of Moscow).
193. While the four VTB employees interviewed by Mr Muraviev are evidently material witnesses to VTB's claim (although Mr Magee and Mr Yates appear to have had more involvement in the transaction than Mr Pasek or the fourth employee Julia Ferris), it is clear that they are of secondary importance compared to Ms Bragina and Mr Ryzhkov, let alone Mr Tulupov and his colleagues in Moscow. If the claim is tried in England, witnesses located in Russia will not be compellable except by means of letters rogatory. Even if they are prepared to give evidence voluntarily, they may not be prepared to come in person, necessitating evidence being given by videolink. Even if they are prepared to come in person, they are likely to require interpreters. As for the documents, many of these have required or will require translation. It is true that the agreements are mainly in English, and that these are important documents, but these and other documents in English form a relatively small proportion of the relevant documents even at this stage of the proceedings.
194. Fourthly, counsel for the defendants submitted that the applicable law was not a strong factor in favour of England even if it was English law. It is clear from the expert evidence before the court (as to which, see below) that the Russian courts can receive expert evidence as to English law. Furthermore, the key issues in the case are likely to be factual rather than legal. In the event, of course, I have concluded that the applicable law is Russian law, which supports the conclusion that Russia is the natural forum.
195. In my judgment, taking all the factors considered above into account, the natural forum is Russia."
"164. We have already commented that the judge may have erred in his interpretation of the test adumbrated in the Spiliada case. Instead of asking first whether England was the 'natural forum' and then, even if it is not, asking whether England is nevertheless the appropriate forum for other reasons, there is only one overall question to be answered: has VTB established that England is clearly or distinctly the appropriate forum?
165. In our view the judge was correct to conclude that VTB has failed to do so. The steps leading to our conclusions are as follows: first, we will assume (based on our discussion above) that the fact that VTB has sustained its loss resulting from the torts in England raises a prima facie case that England is the appropriate forum in which to try the disputes. Secondly, however, we have to take account of all the other factors identified by both sides in order to determine whether VTB has satisfied the court that England is clearly or distinctly the appropriate forum.
166. Thirdly, in that regard, we have concluded, on the basis of the material presently before us, that the applicable law of the torts is Russian law. That cannot be a concluded view. Wherever a trial takes place, it can be challenged. But that point works both ways. Even if we had concluded that the applicable law of the torts was English law, this would not have been a factor that would weigh heavily in making England the appropriate forum, precisely because if the defendants wished to allege and plead that the applicable law was Russian law, both sides would have had to prepare for a trial on that basis. If the case were to be heard in England, both sides would have to prepare expert evidence on Russian law; and, doubtless, the obverse would be so if the case were to be heard in Russia. This is not a case, such as we think Lord Goff of Chieveley contemplated in Spiliada at 481G, where the law of the contract is a known certainty. In this case the applicable law of the torts remains very much in issue. Moreover, there was no serious challenge to the judge's view (at para 194) that the key issues in the case are likely to be factual rather than legal.
167. Fourthly, we have to give due weight to all the other factors (apart from those where we have found the judge erred) which the judge took into account and which have not been challenged on appeal. These are set out at paras 188 and 189 of the judgment and, as we have indicated in relation to the applicable law point, we think that these indicate that the centre of gravity of these disputes is in Russia, not England. Fifthly, VTB has not challenged the judge's conclusion that VTB had failed to show that there was a real risk that it would not obtain substantial justice in Russia for any of the reasons it advanced before him.
168. Accordingly, the judge was correct to set aside Chief Master Winegarten's order granting VTB permission to serve the proceedings on Nutritek, Marcap BVI and Mr Malofeev out of the jurisdiction."
The factors relevant to the appropriate forum
(a) Governing law
(b) Place of commission of tort
(c) The factual focus
(e) Aim of the alleged torts
(f) Fair trial?
The proposed contractual claim based on piercing the corporate veil
The Freezing Order
The first question: the appropriate forum: three general points
(i) VTB's substantive case is that it was induced by deceitful misrepresentations, for which the defendants were responsible, to enter into certain agreements ("the agreements") with various parties, in particular Russagropom LLC ("RAP"), under which VTB agreed to lend, and thereafter did lend, money to RAP;
(ii) VTB obtained permission ex parte to effect service of proceedings, claiming damages for deceit and conspiracy, on the defendants out of the jurisdiction, and the defendants then applied to set aside service on the ground that Russia, rather than England, was the appropriate forum for the issues to be determined.
"[t]his is a field in which differing conclusions can be reached by different tribunals without either being susceptible to legal challenge. The jurisdiction to stay is liable to be perverted if parties litigate the issue at different levels of the judicial hierarchy in the hope of persuading a higher court to strike a different balance in the factors pointing for and against a foreign forum."
Precisely the same applies in many cases involving permission to serve out.
The first question: the appropriate forum: the instant appeal
The second issue: piercing the corporate veil: VTB's case
(i) Mr Malofeev controlled RAP and Nutritek;
(ii) RAP was specifically formed for the purpose of entering into the two agreements, which it duly did and thereby obtained the benefit of the loans of over US$225,050,000 made available to RAP by VTB thereunder;
(iii) The two agreements appeared to involve, and were misrepresented to VTB to involve, a loan to RAP to enable it to purchase the shares in certain Dairy Companies owned by Nutritek, whereas their true purpose, as Mr Malofeev knew, was to transfer those shares between the two companies at an inflated price;
(iv) In particular, Mr Malofeev was responsible for inducing VTB to enter into the two agreements by virtue of Nutritek's misrepresentations as to the control, trading performance, and value of the Dairy Companies, and, in particular, representing that they were not controlled by Mr Malofeev or Marcap;
(v) Mr Malofeev accordingly improperly used RAP "as the corporate vehicle to enter into" the two agreements, "and obtain[ed] thereby" the loans, which "involved the fraudulent misuse of the company structure";
(vi) In particular, Mr Malofeev used RAP's "separate legal status to disguise the ownership and control ultimately exercised over RAP by [Mr Malofeev and Marcap]", which disguise duly misled VTB into believing that there was a genuine arm's length transaction at a genuinely negotiated price;
(vii) In these circumstances, "the corporate veil of RAP should be lifted, exposing … Mr Malofeev … as the puppeteer … behind it to remedies to enforce the terms of the [two agreements]", so that Mr Malofeev is "jointly and severally liable with RAP" under the two agreements "in respect of VTB's losses".
The second issue: piercing the corporate veil: the principle of piercing the veil
"[T]he International Court of Justice referred (para 56) to municipal law practice to lift the corporate veil … 'for instance, to prevent the misuse of the privileges of legal personality, as in certain cases of fraud or malfeasance, to protect third persons such as a creditor or purchaser, or to prevent the evasion of legal requirements or of obligations'".
However, at para 27, Lord Mance pointed out that Barcelona Traction concerned "international legal considerations, indicating that there may not always be a precise equation between factors relevant to the lifting of the corporate veil under domestic and international law."
The second issue: piercing the corporate veil: why it cannot succeed in this case
(a) The location of the alleged torts in England. It is worthwhile to remember, however, that, in one sense, the bringing of the transactions into England was pure chance. In July 2007 VTB Moscow informed Mr Malofeev and MarCap that the proposed lender would be either itself or VTB; and in October 2007 it informed them that it would be VTB. They had no objection; but the placement of the lending into the hands of its English subsidiary was effected entirely at the election of, and for the convenience of, VTB Moscow.
(b) The English jurisdiction clause in the facility agreement and indeed also in the interest rate swap agreement. If Mr Malofeev controlled the borrowing party to the agreements, namely RAP, and so can be considered responsible for its contractual concession that VTB should have the right to demand that disputes arising out of them be resolved in the courts of England, he can hardly complain if allegations of his and his companies' fraudulent inducement of VTB to enter into them are also resolved here. But two riders fall to be attached. The first is whether the court can at this stage proceed on the basis that Mr Malofeev controlled RAP. The court must not for this purpose assume what VTB needs to prove; yet the fact is that, while not admitting control of RAP, Mr Malofeev has, to date, not actively challenged it. The second is that the test to be applied pursuant to the decision in the Spiliada case,  AC 460, mandates a much wider inquiry than into whether Mr Malofeev would have no ground for complaint about the continuation of the proceedings in England.
(c) The government by English law of VTB's claims in tort, as held unanimously by this court and as explained in judgments above with which I agree. A spectre of considerable practical inconvenience is raised around the receipt by a Russian judge of evidence of English law and around his application of it to such facts as he were to find. On the other hand the legal framework of VTB's case does not appear to be complex or controversial and Arnold J was entitled to conclude that the key issues in the case were likely to be factual rather than legal.
LORD CLARKE (dissenting)
Service out of the jurisdiction - the principles
"99. … The three basic principles were recently restated by Lord Collins of Mapesbury in giving the advice of the Privy Council in AK Investment CJSC v Kyrgyz Mobile Tel Ltd  UKPC 7, 1 CLC 205 at paragraphs 71, 81 and 88. They can be summarised as follows: first, the claimant must satisfy the court that, in relation to the foreign defendant to be served with the proceedings, there is a serious issue to be tried on the merits of the claim, i.e. a substantial question of fact or law or both. This means that there has to be a real, as opposed to a fanciful, prospect of success on the claim. Secondly, the claimant must satisfy the court that there is a good arguable case that the claim against the foreign defendant falls within one or more of the classes of case for which leave to serve out of the jurisdiction may be given. These are now set out in paragraph 3.1 of Practice Direction 6B. 'Good arguable case' in this context means that the claimant has a much better argument than the foreign defendant. Further, where a question of law arises in connection with a dispute about service out of the jurisdiction and that question of law goes to the existence of the jurisdiction (eg whether a claim falls within one of the classes set out in paragraph 3.1 of Practice Direction 6B), then the court will normally decide the question of law, as opposed to seeing whether there is a good arguable case on that issue of law.
100. Thirdly, the claimant must satisfy the court that in all the circumstances England is clearly or distinctly the appropriate forum for the trial of the dispute and that in all the circumstances the court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction. This requirement is reflected in rule 6.37(3) of the CPR, which provides that 'The court will not give permission [to serve a claim form out of the jurisdiction on any of the grounds set out in paragraph 3.1 of Practice Direction 6B] unless satisfied that England and Wales is the proper place in which to bring the claim'".
"Confirm that [RAP] is 100% owned by Alginin. As per the info just received from Nutritek management, Mr Alginin has a 90% share [RAP], the remaining 10% share belongs to the management team."
"… , in considering whether or not England is the most appropriate forum, it is necessary to have in mind the overall shape of any trial and, in particular what are, or what are at least likely to be, the issues between the parties and which will ultimately be required to be determined at any trial. These were originally set out in two letters …"
I stress that I do not mean that a defendant must set out his evidence in great detail, whether of foreign law or of fact. The purpose of the exercise is simply to state what the issues of fact are likely to be, so that the court can gauge whether England is clearly or distinctly the appropriate forum for the trial of the issues. This is of some importance in this case because no evidence was put before the court on the merits of the claims by or on behalf of Mr Malofeev. Moreover, Mr Hapgood QC submitted to the court in the course of the argument that Mr Malofeev was perfectly entitled to say and he does say to VTB, "You are accusing me of being a swindler, you get on and prove it." Mr Hapgood added that the matter proceeded in both courts below on the clear understanding that VTB will have to prove its case. As he put it, they will have to prove all five ingredients of a claim for fraudulent misrepresentation and a sixth ingredient in the case of conspiracy. It appears from what Mr Hapgood said that, at any rate at present, he has no positive case. It is of course true that a defendant in the position of Mr Malofeev is not bound to advance a positive case but, in the absence of a positive case, the focus of the court can only be on the ingredients of the claim. It should not speculate about the nature of any positive case that might be advanced in the future.
"Choice of applicable law: the general rule.
11(1) The general rule is that the applicable law is the law of the country in which the events constituting the tort or delict in question occur.
(2) Where elements of those events occur in different countries, the applicable law under the general rule is to be taken as being -
(c) … , the law of the country in which the most significant element or elements of those events occurred.
Choice of applicable law: displacement of general rule.
12(1) If it appears, in all the circumstances, from a comparison of -
(a) the significance of the factors which connect a tort or delict with the country whose law would be the applicable law under the general rule; and
(b) the significance of any factors connecting the tort or delict with another country,
that it is substantially more appropriate for the applicable law for determining the issues arising in the case, or any of those issues, to be the law of the other country, the general rule is displaced and the applicable law for determining those issues or that issue (as the case may be) is the law of that other country.
(2) The factors that may be taken into account as connecting a tort or delict with a country for the purposes of this section include, in particular, factors relating to the parties, to any of the events which constitute the tort or delict in question or to any of the circumstances or consequences of those events."
"(l) Section 11 of the I995 Act sets out the general rule for ascertaining the applicable law of a tort. It adopts a geographical approach to that question. (2) Where the elements of the events constituting the tort or delict occur in different countries and the cause of action relates to something other than personal injury or damage to property, then section 11(2)(c) requires an analysis of all the elements of the events constituting the tort in question. (3) In carrying out that exercise, it is the English law constituents of the tort that matter. (4) The analysis requires examination of the 'intrinsic nature' of the elements of the events constituting the tort. It does not, at this stage, involve an examination of the nature or closeness of any tie between the element and the country where that element was involved or took place. This latter exercise is only relevant if section 12 is invoked. (5) Once the different elements of the events and the country in which they occurred have been identified, the court has to make a 'value judgment' regarding the 'significance' of each of those 'elements'. 'Significance' means the significance of the element in relation to the tort in question, rather than trying to judge which involves the most elaborate factual investigation. (6) Under section 11(2)(c), (ie in relation to causes of action other than in respect of personal injury or damage to property where the elements of the events constituting the tort occur in different countries) the applicable law of the tort in question will be that of the country where the significance of one element or several elements of events outweighs or outweigh the significance of any element or elements found in any other country."
"The antecedent facts concerning the true situation in MCB are important, but it is what is done with those facts that really matters so far as the tort of fraudulent misrepresentation or deceit is concerned. In short, it is (on the assumptions I have made) MCB's decision not to tell the facts as they are and to continue to mislead that matters most, not the true facts themselves."
In these circumstances there was in my opinion no room for a tentative conclusion that English law is the applicable law under the general rule set out in section 11. It is plainly the applicable law under the general rule.
"(7) The exercise to be conducted under section 12 is carried out after the court has determined the significance of the factors which connect a tort or delict to the country whose law would therefore be the applicable law under the general rule. (8) At this stage there has to be a comparison between the significance of those factors with the significance of any factors connecting the tort or delict with any other country. The question is whether, on that comparison, it is 'substantially more appropriate' for the applicable law to be the law of the other country so as to displace the applicable law as determined under the 'general rule'. (9) The factors which may be taken into account as connecting a tort or delict with a country other than that determined as being the country of the applicable law under the general rule are potentially much wider than the 'elements of the events constituting the tort' in section 11. They can include factors relating to the parties' connections with another country, the connections with another country of any of the events which constitute the tort or delict in question or the connection with another country of any of the circumstances or consequences of those events which constitute the tort or delict. (10) In particular the factors can include (a) a pre-existing relationship of the parties, whether contractual or otherwise; (b) any applicable law expressly or impliedly chosen by the parties to apply to that relationship, and (c) whether the pre-existing relationship is connected with the events which constitute the relevant tort or delict."
"188. Counsel for the defendants submitted that the following factors pointed to Russia being the natural forum. First, the connections of the parties to Russia. VTB is controlled by VTB Moscow, which is Russian. Furthermore, the litigation is being managed by VTBDC, which is also Russian. MarCap Moscow and Mr Malofeev are Russian. It is common ground that Nutritek was managed from Russia, and VTB's case is that Mr Malofeev controls both Nutritek and MarCap BVI. Furthermore, it is VTB's case that Mr Malofeev orchestrated the fraud, primarily through MarCap Moscow.
189. Secondly, the connections of the events constituting the torts to Russia. The transaction was introduced to VTB Moscow at meetings between Russian individuals in Russia. The negotiations mainly took place in Russia. The misrepresentations were made and mainly received in Russia. The more important misrepresentation concerned the performance of the Dairy Companies, which are Russian companies. The 2007 E&Y Valuation was a valuation by Ernst & Young's Moscow office and was based on information provided by Nutritek's Russian management. The misrepresentations were primarily relied upon by VTB Moscow acting through its Credit Committee and Management Board in Russia. It was VTB Moscow and VTBDC which primarily dealt with RAP's default and enforcing the security. The secured assets were in Russia. The discovery of the fraud took place in Russia. Although the loss was sustained by VTB in England, as discussed above the ultimate economic impact is in Russia."
"… in our view the factors identified in the judgment at paras 188 and 189, even after discounting the point about primary reliance on the representations in Russia and the securities being in Russia, are of considerable significance. On the material that is before us, taking all those factors into account we have concluded that the centre of gravity of these torts lies in Russia. Therefore, for present purposes, we have decided that a comparison of the significance of the section 11(2)(c) factors, assuming that they would lead to the applicable law being English, with the significance of the other factors connecting the torts with Russia, leads to the conclusion that it is substantially more appropriate for the applicable law for determining the issues concerning the torts to be that of Russia."
"Counsel accepted that he could not object to a proposition that the place where in substance the tort arises is a weighty factor pointing to that jurisdiction being the appropriate one. This illustrates the weakness of the argument. The distinction between a prima facie position and treating the same factor as a weighty circumstance pointing in the same direction is a rather fine one. For my part the Albaforth line of authority is well established, tried and tested, and unobjectionable in principle. I would hold that Hirst LJ correctly relied on these decisions."
"… the importance to be attached to any particular ground [of RSC Ord 11, r 1(1)] invoked by the plaintiff may vary from case to case. For example, the fact that English law is the putative proper law of the contract may be of very great importance (as in BP Exploration Co (Libya) Ltd v Hunt  1 WLR 788, where, in my opinion, Kerr J rightly granted leave to serve proceedings on the defendant out of the jurisdiction); or it may be of little importance as seen in the context of the whole case."
See also Dicey, 15th ed, para 12-034.
"In VTB Capital plc v Nutritek International Corpn … it appears to have been accepted without substantial argument that if the hidden person were not a party to the substantive contract containing the jurisdiction clause he could not be affected by a jurisdiction agreement contained in that contract. This conclusion, with respect, should not be accepted without further reflection. For even if the lifting of the veil does not allow a contractual claim, otherwise lying against the company, to be made against the veiled person, there may be other bases for seeking to establish his personal liability. Fraud will be the most likely one … That being so, the question becomes whether the jurisdiction clause in the company's contract may be utilised to establish or sustain jurisdiction against the alleged fraudster. This is a question which requires more of an answer than a simple assertion that a jurisdiction agreement is only ever effective in relation to a contracting party. For one thing, the jurisdiction clause is separable from the substantive contract, and the absence of a contractual claim against the fraudulent defendant need not entail the irrelevance of a jurisdiction agreement which he engineered. For another … even if he is not contractually bound to the jurisdiction, it should not be challenging to contend that the court which he signed his company up to, in circumstances of fraud, is also the proper place in which to assert any available claim of substantive liability against him."
Piercing the corporate veil
LORD REED (dissenting)