Quillon Law successfully represents FESCO in jurisdiction challenge as $13.8bn Magomedov claim fails

The High Court today handed down judgment in respect of applications by all of the active Defendants to challenge the jurisdiction of the English courts and/or to strike out the claim in the case of Ziyavudin Magomedov & Ors v TPG Group Holdings (SBS) LP & Ors.  The applications were heard over a 3-week period in September and November 2024.

Quillon Law represented FESCO – the largest transportation company in Russia – with a team including Partners Mark Hastings and Abigail Healey, Of Counsel Alina Neal and Associate Genevieve Douglas, instructing David Mumford KC, Watson Pringle and James Mitchell of Maitland Chambers.

Today’s judgment is significant in that, bar the Claimants obtaining permission to appeal and succeeding on any subsequent appeal, it brings to an end Mr Magomedov’s latest attempt to seek to recover substantial amounts in damages from these Defendants.  The Claimants did not seek the Judge’s permission to appeal against FESCO and he refused the Claimants permission to appeal against the other Defendants.

Background

By their claim, the Claimants sought USD 13.8 billion (c. GBP 11.3 billion) in damages against 22 Defendants, who are all said to have conspired with each other and with others, with the object of wresting assets from Mr Magomedov (and companies associated with him). Mr Magomedov is a Russian businessman who is currently serving 19 years in prison.

The claim relates to two alleged conspiracies, which the Claimants say are separate but related. One – the NCSP Conspiracy – relates to an interest Mr Magomedov had in PJSC Novorossiyk Commercial Sea Port (NCSP). The other – the FESCO Conspiracy – relates to Mr Magomedov’s stake in PJSC Far-Eastern Shipping Company (FESCO).

FESCO challenged jurisdiction on the basis that: (i) the Claimants’ claims (in respect of which the Claimants obtained ex parte permission to serve out) raised no serious issue to be tried; (ii) there was no available jurisdictional gateway for service out; and (iii) England was not the most appropriate forum, with a number of places more appropriate (including Russia, the BVI and Cyprus) and FESCO was prepared to submit to the jurisdiction of the Cypriot courts.

FESCO’s application was successful on all grounds.

The court found no serious issue to be tried as against FESCO with the Claimants’ two core allegations forcibly dismissed on the below grounds:

1. The Judge found that there is “nothing intrinsically striking or suspicious” about the FESCO board’s decision to pursue two of the Claimants (Maple Ridge and Sian) to repay their debts rather than proceeding with Project Moonlight (which related to the tax efficiency of the FESCO group structure). In doing so, it followed that this limb of the FESCO Conspiracy could raise no serious issued as against FESCO;
2. The Claimants’ case that, in commencing civil proceedings in Russia against Mr Magomedov and other of the Claimants, FESCO’s purpose was “to target [C1] as part of the conspiracy rather than it being a genuine attempt to recover losses” was dismissed, with the Judge stating “I do not see how the pursuit of these proceedings – which succeeded – was a breach of the directors’ duties”. The Judge also noted the failure by the Claimants even to allege that the directors of FESCO lacked a bona fide belief in the merits of the proceedings. Given the claims in Russia succeeded, the Judge found it “highly likely” that the directors did have such a belief.

In terms of jurisdictional gateways, the TPG parties and Mark Garber could be and were served within the jurisdiction.  The Judge observed “I have no doubt that one of the reasons for including them as Defendants was to enable to the Claimants to rely on the “necessary and proper party” gateway”.  Given the claims against these Defendants were struck out or summarily dismissed, the Claimants could not rely on this gateway.  The Claimants had also sought to rely on the contract, tort and Norwich Pharmacal gateways, with the Judge finding that none of the gateways relied on by the Claimants was available to them.

As for forum, the court found that the natural forum “is unquestionably Russia”, but there was a dispute as to the appropriate forum. FESCO – and several other Defendants – had undertook to submit to Cypriot jurisdiction. In relation to the alleged FESCO Conspiracy, the Judge commented that he would have concluded that the court should decline jurisdiction in favour of Cyprus, had the Claimants succeeded on serious issue to be tried and jurisdictional gateways.

The case is of Ziyavudin Magomedov & Ors v TPG Group Holdings (SBS) LP & Ors.

A link to the High Court’s judgment can be found here.