POC International Growth Fund Ltd v OAO ‘CT-Mobile’ and LV Finance Group

• Jurisdiction: Bermuda
• Judgment Date: 25 March 2007
• Date: 25 March 2007
• Docket Number: Civil Appeal 2006 No. 22 & 23
• Court: Court of Appeal (Bermuda)

In The Court of Appeal for Bermuda

Sir Murray Stuart-Smith

Civil Appeal 2006 No. 22 & 23

BETWEEN:

IPOC International Growth Fund Ltd

Appellant

and

OAO ‘CT-Mobile’ LV Finance Group

Respondents

Mr Hacker, QC for the Appellant

The following cases were referred to in the judgment:

Fourie v Le RouxUNK [2007] UKHL 1

Turner v GrovitWLR [2007] 1 WLR 107

Airbus Industries GIE v PatelELR [1999] 1 AC 119

Anchem Products Inc v British Columbia Workers Compensation Board [1993] 1 SLR 897

The Angelic GraceUNK [1995] 1 Lloyds Rep 87

OT Africa Line Ltd v Magic Sportswear CorpUNK [2005] 2 Lloyds Rep 170

Donohue v ArmcoUNK [2002] 1 All ER 749

People Insurance Co v Akai PTY [1998] 1 SLR 206

Econet Wireless v Vee Networks [2006] EWHC 1568

West Tankers Inc v RAS Riunione Adriatica de Sicurta SP (‘the Front Comer’)UNK [2007] UKHL 4

Toepfer International GmbH v Societe Cargill FranceUNK [1988] 1 Lloyds Rep 379

Through Transport Mutual Assurance Association (Eurasia) Ltd v New India Assurance Co LtdUNK [2005] 1 Lloyds rep 67

Doherty v AllmanELR (1878) 3 app Cas 709

Finecroft v Lamane Trading Corporation (unreported BVI)

Coflexip SA v Stort Comex Seaway MS LtdUNK [2001] 2 All ER 952

Welex v AG v Rosa Maritime (‘The Epsilon Rosa’)UNK [2002] 2 Lloyds Rep 701

Youel v Kara Mara Shipping CoUNK [2000] 1 Lloyds Rep 102

ACE Bermuda v PetersenBDLR [2005] Bda LR 44

Appeal against anti-suit injunction requiring IPOC to discontinue proceedings in Russia in breach of agreement to arbitrate — Whether Bermudian court is entitled to issue injunction on the basis that it has in personam jurisdiction — Comity — Wide terms of injunction

JUDGMENT of Sir Murray Stuart-Smith

Introduction

1. This is an appeal by IPOC International Growth Fund Ltd (IPOC) from a judgment of Kawaley J. and an Order made on the 12 October 2006 by which he granted an anti-suit injunction against IPOC (i) requiring it to discontinue proceedings it had brought against OAO ‘CT-Mobile’ (CTM) in the courts of Russia (the Russian proceedings) in breach of agreements to arbitrate; (ii) requiring IPOC to discharge the injunctions which IPOC had obtained from the court in St. Petersburg freezing CTM's shareholdings in a company called MegaFon; (iii) prohibiting IPOC from commencing any legal proceedings against CTM relating to any claim in respect of the MegaFon Stake in breach of the agreement to arbitrate.

2. In separate but related proceedings in which LV Finance Group Limited (LVFG) had sought similar relief to that claimed by CTM, the judge made a similar Order against IPOC. IPOC now appeals that Order also.

Background

3. (‘CTM’) is a Russian company which is the registered owner of 25.1% of the shares of a Russian telecommunications company referred to in these proceedings as MegaFon. CTM and the Defendant, IPOC, a mutual trust fund Company incorporated in Bermuda, are parties to two agreements dated August 6, 2001. One agreement is a Shareholder Agreement (‘SHA’) and the other is a Business Combination Agreement (‘BCA’). Both agreements relate to the shareholding of various parties in MegaFon, and contain arbitration clauses providing for arbitration in Sweden under Swedish law.

4. LVFG is a British Virgin Islands incorporated company which entered into two Option Agreements with IPOC on April 10, 2001 and December 14, 2001 (respectively, ‘the April Option Agreement’ and ‘the December Option Agreement’). The Option Agreements purportedly gave IPOC the right to purchase from LVFG 100% (77.7% and 22.3%, respectively) of the shares of a Bahamian company, Transcontinental Mobile Investment Ltd. (‘TMI’), which, as the April Option Agreement contemplated, owned the shares of CTM. IPOC purportedly exercised both options and expected to become indirect owner of CTM's 25.1% ‘MegaFon Stake’. Instead, LVFG sold its TMI shares, which eventually were acquired by companies belonging to the Alfa Group. The April Option Agreement provided for arbitration in Zurich, and the December Option Agreement provided for an ICC administered arbitration in Geneva. Both agreements were expressed to be governed by English law.

5. On or about August 15, 2003, IPOC commenced an ICC arbitration proceeding in Geneva, Switzerland, against LVFG, and on or about September 22, 2003, IPOC commenced an arbitration proceeding against LVFG in Zurich, Switzerland, under the December and April Option Agreements, respectively. On or about October 14, 2003, IPOC commenced an arbitration proceeding against, inter alios, CTM in Stockholm, Sweden, under the SHA. The broad purpose of the Swiss and Swedish arbitrations was to (a) enforce the Options Agreements, so that IPOC would become indirect owner of CTM's 25.1% MegaFon Stake and (b) have CTM's MegaFon Stake transferred to IPOC because of alleged breaches of the SHA, so that it would become the direct owner of the MegaFon Stake.

6. In the ICC arbitration proceeding, a final award was made in IPOC's favour under the December Option Agreement affecting 22.3% of the disputed stake on August 15, 2004 (‘the ICC award’). On October 19, 2004, the Zurich arbitral tribunal gave a First Partial Award (‘FPA’), and on May 22, 2006 the Zurich tribunal declared that the April Option Agreement was unenforceable on grounds of illegality in the Second Partial Award (‘SPA’). LVFG appealed the ICC Award, and it was set aside on August 30, 2006. The FPA and the SPA have been appealed by IPOC, but they were recognized by Supreme Court in granting leave to enter judgment in their terms under section 40(1) of the Bermuda International Conciliation and Arbitration Act 1993 on August 31, 2006. Judgment was entered in terms of these awards on September 1, 2006.

7. On March 30, 2006 in Case No. A56–15164/2006, IPOC commenced proceedings in St. Petersburg and Leningrad Oblast Arbitration Court against, principally, LVFG, CTM and the four other respondents to the Stockholm arbitration proceedings, (‘the St. Petersburg Proceedings’). The main relief sought was (a) direct ownership of the MegaFon Stake, and (b) consequential rectification of the SHA and the BCA. On April 4, 2006 in the St. Petersburg proceedings, IPOC obtained an injunction effectively placing CTM's shares in MegaFon under the control of a court bailiff. On April 26, 2006, IPOC obtained a second injunction restraining CTM from liquidating or reorganizing in any way.

8. On June 6 and 7, 2006, respectively, CTM and LVFG issued a Generally Indorsed Writ of Summons in the Supreme Court of Bermuda against IPOC seeking, inter alios, permanent injunctions restraining IPOC from pursuing the St. Petersburg Proceedings or similar proceedings elsewhere in breach of the relevant arbitration agreements. An interim injunction in broadly similar terms was granted by that Court on June 8, 2006, the applications (like the expedited trials) being heard together.

9. When the litigation relating to the present commercial dispute began in about the summer of 2003 the MegaFon Stake was believed to be worth just over USD 320 million. It is now estimated by CTM to be worth some USD 1.5 billion. The Bermuda proceedings follow not just the three arbitration proceedings (in Switzerland and Sweden) which were still pending at the time of the trial before the judge, but various previous litigation skirmishes in the Bahamas and BVI, including an application for leave to appeal to the Privy Council and in Russia.

10. With a view to saving costs the judge ordered an expedited trial of the Plaintiff's application for permanent injunctive relief. He also ordered the trial of a preliminary issue. In the case of CTM, so far as it is still relevant, it was in these terms: [Whether the Russian proceedings] is in breach of the dispute resolution provision in the SHA and the BCM dated the 6 August 2001 made between, inter alios, [CTM and IPOC] (the breach of the agreement to arbitrate issue) and ought, on this ground alone, to be enjoined.

11. A similar preliminary issue was ordered in the LVFG case mutatis mutandis.

12. There were other preliminary issues relating to IPOC's contentions that in the exercise of the judge's discretion no injunction should be granted, for example, that the Plaintiffs' did not come to the Court with clean hands. But those are no longer in issue, IPOC's appeal on those matters having been recently withdrawn.

13. The hearing took place between the 5–8 September 2006. The judge heard a considerable amount of expert evidence on both Swedish and Russian law. He held that the Russian proceedings had been issued in breach of the respective arbitration agreements. He said that IPOC's contention to the contrary was ‘nonsense on stilts’. He held that the Bermuda court had a sufficient interest to grant the injunction and he rejected IPOC's arguments that in the exercise of his discretion the relief should not be granted.

14. Since the judge's judgment there have been various further developments. First, IPOC's appeal to the Swiss court against the award in the Zurich arbitration has been dismissed. Secondly, in a hearing in the Khanty-Manisk region of Russia (the Russian proceedings having been transferred from St. Petersburg on the 12 July 2006) IPOC withdrew the Russian proceedings with prejudice. This was not opposed and accordingly the Khanty-Manisk court made an Order dismissing IPOC's claims and lifting the Russian injunctions. This application was made by IPOC of its own accord and not as a result of the judge's Order, which had been stayed pending the determination of the appeal in this court.

The Order under Appeal

15. The Order on the 12 October 2006 was backed with a penal notice. IPOC was ordered to discontinue or otherwise bring to an end the Russian proceedings and the Order continued as follows:-

‘It is hereby ordered that [IPOC] its servants or agents shall NOT:

5. Take any further steps in the Russian proceedings, whether by itself, its servants, agents...