On 14 January 2015 the General Court handed down its judgment in Abdulrahim, a sanctions case.
Abdulrahim concerned an application for annulment of Regulation 881/2002, as amended by Regulation 1330/2008, or of Regulation 1330/2008 (establishing restrictive measures against persons and entities associated with Usama bin Laden, the Al-Qaida network and the Taliban). The Commission raised an objection of inadmissibility. Subsequently, Mr Abdulrahim’s name was removed from the relevant sanctions list.
The General Court held that there was no longer any need to adjudicate on the application for annulment, and that it was consequently unnecessary to rule on its admissibility. Mr Abdulrahim appealed against the order of no need to adjudicate. The Court of Justice set aside the order of no need to adjudicate and referred the case back to the General Court for it to rule again on Mr Abdulrahim’s action for annulment.
The General Court held:
Case T‑127/09 RENV Abdulbasit Abdulrahim v Council and Commission, 14 January 2015
On 9 January 2015 the EU published a fact sheet setting out the recent developments in EU-Ukraine relations.
The European Commission has published two new taxation papers: on R&D tax incentives and on VAT compliance.
According to the Commission, the aim of the taxation papers series is:
On 18 December 2014 the Court of Justice of the European Union (“CJEU”) handed down its judgment in infringement proceedings brought by the Commission against the UK concerning the effect of section 107 Finance Act 2007 (“FA 2007”). This case concerns the limitation periods for the remedies available under English law for actions for recovery of tax unlawfully levied.
Following the High Court’s decision in Deutsche Morgan Grenfell v IRC in 2003, the UK had enacted legislation (section 320 FA 2004) which restricted the application of the 6 year limitation period in relation to claims for recovery of taxes paid under a mistake of law (Kleinwort Benson claims). The UK government later adopted section 107 FA 2007, which further amended, retrospectively and without transitional arrangements, the limitation period in relation to Kleinwort Benson claims brought against the Revenue under mistake of law.
The Commission began infringement proceedings in October 2009. By its judgment in Test Claimants in the FII GLO in May 2012, the Supreme Court unanimously ruled that section 107 FA 2007 was contrary to EU law. The UK subsequently acknowledged that section 107 breached EU law and stated that it would be disapplied each time it proved to be incompatible. However, the Commission was not satisfied with this response and proceeded with the action.
The CJEU gave judgment without an Opinion from the Advocate General. Its decision, unsurprisingly, follows that of the Supreme Court in FII and the CJEU’s own judgment in Case C-362/12 FII (3rd reference). The CJEU found that section 107 FA 2007 breached the EU law principles of effectiveness and protection of legitimate expectations. The UK had failed to uphold its obligation under Article 4(3) TEU to guarantee tax payers the right to a refund of unlawfully levied taxes. Although the UK government had argued that an amendment of section 107 FA 2007 was contemplated, the CJEU rejected this as irrelevant to the situation existing in the UK at the time.
The Administrative Court made a declaration under s 6 of the Justice and Security Act 2013 that a closed material procedure could be used in the judicial review of a decision of the Secretary of State to propose the addition of the Claimants as designated individuals under EU sanctions.
The Claimants were added to the list of designated individuals under an EU Decision and Regulation on the proposal of the Secretary of State to the EU Council on the basis that they were “senior members” of the Islamic Republic of Iran Shipping Lines. The IRISL was a designated entity under an earlier EU Decision and Regulation enacted to restrict or prevent Iranian nuclear proliferation. The IRISL and the Claimants successfully challenged their designations before the General Court of the European Union.
The Claimants issued a claim for judicial review seeking a declaration that the proposal to list them was unlawful and damages for losses suffered as a result of the listing. The Secretary of State made an interlocutory application for a declaration under s 6(2) of the Justice and Security Act 2013 that closed material procedure could be used in the case.
The judge made the declaration as the two conditions in ss 6(4) and 6(5) were met and it was an appropriate case for the court to exercise its discretion under s 6(3). There was sensitive material (being damaging to national security if disclosed) which was disclosable, subject to any PII application; the detail of the material available to the decision-maker was essential to an evaluation of the substantive case; and there was no practicable alternative to a closed material procedure if the case were to be fairly tried.
The court emphasised that the decision under review was that taken by the Secretary of State as distinct from the decisions of the EU Council and that it did not follow that because the Council’s decisions had been wrong that the Secretary of State’s decision was wrong on the basis of the different material before him. It rejected the Claimants’ submission that the Secretary of State could not seek to support his decision on the basis of material which he did not share with the Council, the Claimants or the General Court.
The judge also noted that CPR r 82.23(4) could not be read literally and that it should be interpreted as meaning that “the hearing of the application shall so far as necessary take place in the absence of the claimants, their lawyers and the public” and that this was only necessary when submissions referred to closed material.
The common law jurisdiction of the English courts over foreign company derivative claims has not been revoked by the Companies Act 2006.
The Claimant owned 50% of the Third Defendant, a company incorporated in the BVI. It commenced English proceedings, both in its own right and in a derivative action on behalf of the Third Defendant. The claims were brought against the First Defendant, the owner of the other 50% of the Third Defendant, for breaches of, amongst other things, a shareholders’ agreement, and against the First Defendant’s representative director on the board of the BVI company, the Second Defendant, for breaches of fiduciary duty.
The First and Second Defendant applied to the English court for, inter alia, an order setting aside permission to serve the English proceedings out of the jurisdiction.
The High Court acceded to the application to set aside permission in respect of both the claims in the Claimant’s own name and the derivative claims, holding that:
(1) The Claimant had established a real case that the common law jurisdiction over foreign company derivative claims had not been revoked by the operation of Part 11, Chapter 1 of the Companies Act 2006. The court drew support from the decisions of Briggs J in Universal Project Management Services ([2013] EWHC 348 (Ch)) and David Richards J in Abouraya([2014] EWHC 277 (Ch)) which were consistent with the conclusion that the whole of the common law relating to derivative claims had not been abolished (Paragraphs 27-30).
(2) As a matter of English conflicts law, the law of the country of incorporation of the company governed the right of a shareholder to bring a claim in England (following Konananeni [2002] 1 WLR 1269). Section 184C of BVI Business Companies Act 2004, requiring a member of a BVI company to seek to leave in the BVI court, was a substantive condition precedent to the bringing of a derivative claim in relation to a BVI registered company and thus a requirement that must be complied with as a matter of English conflicts law before such a claim could be brought in England. The Claimant had failed to show more than a fanciful case that it had the right to commence derivative proceedings in the absence of such permission and accordingly permission to serve out in respect of the derivative claims would be set aside (Paragraphs 31-46).
(3) In respect of its personal claims, permission would also be set aside because the Claimant had failed to show that it had more than a fanciful claim for damages which were not reflective of the losses suffered by the Third Defendant (Paragraphs 54-61).
While this was held sufficient to grant the application, the judge went on to bolster his reasoning by considering that the Claimant had failed to establish an arguable case in respect of the alleged breaches of the shareholders’ agreement or a realistic case that the declarations sought would be granted.
Finally, the judge noted that he would have concluded that England was the most appropriate forum giving most weight to the exclusive jurisdiction clause in the shareholders’ agreement than to other factors such as the familiarity of the courts of the country of incorporation with the law applicable to the claims concerning breach of fiduciary duty (given the unlikelihood of material differences with English company law).
Novatrust Ltd v Kea Investments Ltd [2014] EWHC 4061 (Ch), 10 December 2014
A bank challenging financial restrictions affecting it was entitled to disclosure of sufficient information about the allegations against it to enable it to give effective instructions to special advocates in a closed hearing.
The Claimant bank applied pursuant to section 63 of the Counter-Terrorism Act 2008 to set aside financial restriction decisions affecting it in the Financial Restrictions (Iran) Orders 2011 and 2012, which restricted the access of Iranian banks to UK financial markets. The Defendant had relied on material which it was not prepared to disclose since it would breach national security to do so. The Defendant argued that the standard of disclosure required by the decision of the House of Lords in Secretary of State for the Home Department v AF (No 3) ([2010] 2 AC 269) did not apply and that there was no requirement in this case to disclose the details of allegations to the Claimant where the interests of national security required secrecy.
This approach was rejected by the judge who was persuaded that Article 6.1 of the ECHR required disclosure that met the requirements of AF (No 3). While the Claimant’s liberty was not affected in the same way as an individual, the utterly damaging effect on its ability to function was material and its exclusion from London as a major centre for financial institutions was particularly damaging.
Bank Mellat v HM Treasury [2014] EWHC 3631 (Admin), 5 November 2014
A bribe or secret commission received by an agent in breach of his fiduciary duty to his principal is held on trust for his principal. The principal has a proprietary remedy in addition to his personal claim for equitable compensation.
The Respondents purchased the issued share capital of a Monegasque company which owned a leasehold interest in a Monte Carlo hotel. The Appellant acted as the Respondents’ agent in negotiating the purchase. The Appellant had also entered into an agreement with the vendor which provided for the payment to the Appellant of a €10 million fee following successful conclusion of the sale. The Respondents issued proceedings seeking recovery of the sum of €10 million.
At first instance the judge found that the Appellant had acted in breach of fiduciary duty and ordered it to pay the sum to the Respondents, but he refused to grant the Respondents a proprietary remedy in respect of the monies. The Court of Appeal allowed the Respondents’ appeal and made an order which included a declaration that the Appellant had received the fee on constructive trust for the Respondents absolutely. The Appellant appealed to the Supreme Court.
The Supreme Court dismissed the appeal, accepting the Respondents’ submission that a bribe or secret commission received by an agent is held on trust for his principal. The previous authorities taken as a whole and the practical and policy considerations supported this conclusion. The law had taken a wrong turn in Heiron ((1880) 5 Ex D 319) and Lister((1890) 45 Ch D 1), and those decisions and any subsequent decisions (such as Sinclair([2012] Ch 453) in so far as they relied on or followed Heiron and Lister, should be treated as overruled.
The supporting arguments based on principle and practicality included its consistency with the fundamental principles of agency, the merits of simplicity and intolerance of bribery and corruption, which outweighed concerns over potential prejudice to an agent’s unsecured creditors. This also aligned the English courts with the position taken in other common law jurisdictions, including Australia, where the Federal Court had previously declined to follow Sinclair (see Grimaldi (2012) 287 ALR 22).
FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45, 16 July 2014
The Court of Appeal confirmed that the principles to be derived from the decisions in Mitchell([2013] EWCA Civ 1537) and Denton ([2014] EWCA Civ 906) applied to applications for extensions of time for filing a notice of appeal.
The Applicants had each failed to file a notice of appeal within the time prescribed by CPR r 52.4(2) and sought extensions of time. The Applicants argued that since applications for extensions of time were neither applications for relief from sanctions under CPR r 3.9 nor sufficiently analogous, the court’s jurisdiction was untrammelled by the Mitchell/Dentonprinciples and the court should make whatever order it considered just.
Whilst the Court of Appeal accepted that the applications were not formally applications for relief from sanctions under r 3.9, it held that applications for extensions of time for filing a notice of appeal should be approached in the same manner because the implied sanction of the loss of the right to pursue the appeal meant they were analogous. Therefore the Mitchell/Denton principles apply to such applications (paragraph 36).
The Court of Appeal confirmed the implied sanction basis upon which the courts had proceeded since Sayers v Clarke Walker ([2002] EWCA Civ 645) and had continued following the Mitchell decision. Moore-Bick LJ reaffirmed certain established rules and made some general observations on the Mitchell/Denton approach, which included:
(i) For the purposes of r 52.4(2), time runs from the date on which the court pronounces its decision. Where determination of application for permission to appeal is adjourned, the judge could be asked to extend time.
(ii) In most cases the merits of the parties’ respective cases will have little to do with whether it is appropriate to grant an extension of time. Only in cases where the court can assess without much investigation that the merits are very strong or very weak will they have a significant part.
(iii) The litigant’s shortage of funds or a lack of representation does not provide a good reason for non-compliance.
(iv) There are no special rules for appeals from the Administrative Court or for public authorities. The nature of proceedings (including issues which are in the public interest) may, however, be a relevant factor.
Regina (Hysaj) v Secretary of State for the Home Department [2014] EWCA Civ 1633, 16 December 2014
France and Germany have taken a cautious approach to EU sanctions against Russia.
The French president, François Hollande, has suggested lifting the EU sanctions on Russia ahead of a multinational summit on the situation in Ukraine, which is due to take place on 15 January. The current sanctions regime is due to expire in March and requires renewal. France is particularly concerned about the adverse effects of continued sanctions on EU-Russian relations, in the light of issues such as energy security.
The German Vice-Chancellor, Sigmar Gabriel has also spoken against imposing further sanctions against Russia. Gabriel has opined that renewed restrictive measures would bring with them the risk of Russia’s political and economic destabilisation, which would be counterproductive to the country’s willingness to engage in international cooperation and potentially very dangerous for Europe.
France seeks end to Russia sanctions over Ukraine
