Seise the day—jurisdictional challenges (Erste Group Bank v JSC 'VMZ Red October')

Seise the day—jurisdictional challenges (Erste Group Bank v JSC 'VMZ Red October')

What effect will the recent Court of Appeal decision of Erste Group Bank AG v JSC 'VMZ Red October' have on jurisdictional issues in English law? Richard Morgan QC, one of the barristers who argued the case, says that although these types of issues may be litigated more frequently, the English courts are doing a good job acting as a gatekeeper in relation to the extent of their jurisdiction.

Original news

Erste Group Bank AG v JSC ‘VMZ Red October’ and others [2015] EWCA Civ 379, [2015] All ER (D) 135 (Apr)

The judgment in Erste Group Bank AG v JSC ‘VMZ Red October’ and others dealt with a challenge to the English Court’s jurisdiction and, in particular, whether the judge erred in finding the gateway requirements for service of the jurisdiction were met and in concluding that England was the most appropriate forum for resolution of the issues.

What were the jurisdictional factors in this case and how did the issue arise?

The case concerned a loan to a steel factory in Volgograd called Red October. Erste Bank was one of a syndicate of lenders. The loan was governed by English law and allowed for the bank to serve on the borrower and the guarantor, its parent, as of right in England and elect to litigate in England. Erste, an Austrian bank, had participated by making the loan through the books of its English branch.

The third defendant, 'RT', for whom I acted, is a Russian entity holding state assets, one of which is an indirect minority interest in Red October.

Erste alleged that RT had conspired to cause Red October to go into insolvent liquidation by having it and its parent alienate their assets and then keep those assets from being realised in the insolvency process so that they could not be used to pay creditors. RT denied all the allegations.

Erste obtained

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.