Limits on bringing civil fraud claims in multiple jurisdictions

Syedur Rahman of Rahman Ravelli examines Federal Republic of Nigeria v Royal Dutch Shell & Others [2020]; a case that focused on where and when civil fraud claims can be brought.

If an international fraud involves a number of jurisdictions, the individual or corporate intending to bring a civil fraud claim to recover their losses often faces the dilemma of deciding where to begin it. 

Such a course of action is far from straightforward. Civil fraud claims can be ongoing at the same time as related criminal investigations, which may also involve more than one jurisdiction. Those accused of the fraud will attempt to block the civil claim wherever it is brought. This can lead to challenges being made regarding the jurisdiction of the court where the claimant has commenced their action. Some of the issues that can arise in such situations were addressed in the High Court decision in Federal Republic of Nigeria v Royal Dutch Shell & Others [2020] EWHC 766.

In this case, the High Court refused an application to adjourn a challenge to its jurisdiction in an international fraud case. It refused because to have allowed it would have delayed the challenge for up to two years – a length of time that the court considered to be too long. 

The High Court was concerned that an adjournment would have meant that the claimant was maintaining two claims in two jurisdictions for longer than it considered to be reasonable.

Lis Pendens Rules

The court in this case was concerned that an adjournment might deny the defendants their right to challenge the court’s jurisdiction under the lis pendens rules. Lis pendens relates to a situation where different legal proceedings relating to the same object and cause of action are brought between the same parties in the courts of different forums. In order to reduce concurrent proceedings before the courts in a number of EU states – and to avoid a decision in one court that contradicts a decision made in another – provisions in Articles 29 or 30 of the Recast Brussels Regulation (and/or the equivalent provisions of the Lugano Convention) can be cited.

Article 29 provides that where proceedings involving the same cause of action and between the same parties are brought in the courts of different EU Member States, any court other than the court first seized must stay its proceedings until the jurisdiction of the court first seized is established. If such jurisdiction is established, the other court (or courts) must decline jurisdiction. Article 30 provides that where related actions are pending in the courts of different Member States, any court other than the court first seized “may” stay its proceedings.

Background to the Case

The Federal Republic of Nigeria (FRN) brought a claim in Italy against Royal Dutch Shell and the Italian oil company ENI. The FRN alleged that the oil prospecting licence it had granted to Shell and ENI in 2011 was due to one or both of the companies paying bribes to FRN officials. Criminal proceedings were commenced against Shell and ENI in Italy in December 2017. Four months later, FRN joined those proceedings as a civil claimant.

In December 2018, the FRN issued civil proceedings against various Shell entities and various ENI entities in the English court. This prompted Shell and ENI to challenge the jurisdiction of the English court on a number of grounds; including the lis pendens rules.

The jurisdiction challenge was due to be heard in April 2020. But when it found out that a decision was expected to be made in the Italian proceedings by December 2020 at the very latest, FRN immediately applied to have the challenge rescheduled for January 2021. The FRN wanted the Italian decision - and the grounds for that decision - to be available to the English court when determining the lis pendens arguments. Shell supported the FRN application but ENI objected to it.

ENI’s objection was based on the argument that there would be prejudice if its jurisdiction challenge was postponed until after the decision in the Italian court. This was because ENI and Shell were both bringing challenges under Article 29. As Shell was based in England it was the sole “anchor defendant” through which the English court’s jurisdiction could possibly be established – meaning that if the Article 29 challenge was successful, the proceedings against all parties would have to be dismissed.

The FRN said that an adjournment of the jurisdiction challenge would not prejudice ENI. It argued that if the Article 30 challenge succeeded, the result would be a stay of the English claim until after the final determination of proceedings in Italy, with the possibility of a further order being made after that to make the stay permanent.

The High Court Decision

The High Court said that while it considered the issues were “finely balanced” and that there was “a tension, if not an outright conflict” in the case law, it rejected FRN’s application. This was primarily on the basis that it was arguable that ENI would lose its right to challenge jurisdiction under Article 29 if the Italian court had already given its judgment. The court also appeared concerned that the adjournment would have left ENI’s jurisdiction challenge unresolved for up to two years.

The tension in the case law related to the High Court’s decision in Tavoulareas v Tsavliris [2005] EWHC 2643 and the High Court and Court of Appeal decisions in PJSC Commercial Bank Privatbank v Kolomoisky ([2018] EWHC 3308 and [2019] EWCA Civ 1708).

In Tavoulareas there had been parallel proceedings in Greece and England. The Greek court - which was first seized - gave judgment before the defendant’s jurisdiction challenge came to be heard in England. It was held that there were no concurrent proceedings so Article 27 of the 2001 Brussels Regulation (the predecessor to Article 29) had no application.

In Kolomoisky, there were parallel claims in courts in Ukraine - which was first seized - and England. The Ukrainian claims were dismissed for procedural impropriety shortly before the English court decided on the defendants’ jurisdiction challenge. But the defendants were pursuing a right to appeal and, if successful, the claims could have been reinstated. On that basis, the court held that the Ukrainian proceedings were “still pending’’ for the purposes of Lugano-Brussels.

The High Court felt this conflict was not an issue that could be resolved at this interlocutory hearing. But it believed it would be wrong to permit the application if that risked compromising ENI’s jurisdiction challenge in the manner alleged. That was the case despite FRN offering an undertaking – that was rejected by ENI – that it would not deny ENI the opportunity to challenge jurisdiction under Article 29 or 30. The court held that even if such an undertaking was in place the adjournment would allow FRN to maintain two sets of proceedings relating to the same essential facts in two different jurisdictions for longer than is reasonable and “for as long as it needs to decide which of the proceedings are likely to most favour its interests”. This outweighed any legitimate attraction offered by waiting for the Italian court’s verdict.

The Decision’s Implications

There is still ambiguity in English case law regarding precisely when parallel proceedings that are first brought in a non-English court can be considered ended for the purposes of the lis pendens rules. While that ambiguity remains it is likely that there will be more disputes of the sort we saw in Federal Republic of Nigeria v Royal Dutch Shell & Others [2020]; especially when the international nature of many fraud claims is taken into account.

It was very apparent in this case that the High Court would not consider allowing a defendant’s jurisdiction challenge to be unheard for as long as two years. It may have been the case that the court may have permitted the application if the adjournment had been for a shorter period of time. But the court had no enthusiasm for a claimant to have two claims ongoing without any challenge, although FRN has indicated it will appeal this decision.

What should also be noted is that the Recast Brussels Regulation will not apply in the UK after 2020 because of the UK’s departure from the EU. But in April 2020 the UK applied to accede to the 2007 Lugano Convention, which means the UK will be subject to very similar provisions to those it is no longer bound by.

This article was also featured on Lexology.com.