Penal notices after the award of an anti-suit injunction: who should be named?
(Renaissance Securities (Cyprus) Ltd v Chlodwig Enterprises Ltd and other companies  EWHC 3160 (Comm))
The claimant applied for an anti-suit and anti-anti-suit injunction (ASI and AASI) against sanctioned entities (and related entities) on an urgent basis without notice. Both applications were granted, and the attached penal notice expressly named ultimate beneficial owners (UBOs). At the return date, the Judge: (i) ruled that only individuals and classes of individuals against whom civil contempt proceedings may be brought for a corporate defendant's breach should be named in the penal notice i.e., directors (including de jure or de-facto directors) and other officers of the defendants but not the UBOs; but (ii) declined to include a Babanaft proviso on the basis that it would render the order less useful to the applicant. In doing so, the Judge left open as to whether a non-party abroad can be in contempt of court, or be held to be in contempt of court, by doing acts abroad which have the effect of aiding and abetting a party in breaching an anti-suit injunction.
What does this mean in practice?
The decision confirms that only those individuals or classes of individuals against whom contempt proceedings could be brought following a corporate defendant’s breach of an order should be named in a penal notice, namely, officers and directors of the corporate defendant but not shadow directors nor UBOs. However, non-parties to an action who have notice of an order can be in contempt of court if they knowingly assist a party who is restrained by an injunction in doing acts in breach of that injunction (the ‘Seaward jurisdiction’).
The particular point of interest in the case, however, was the question of whether there can be committal proceedings against third parties outside of the court’s jurisdiction who aid and abet the breach of an anti-suit injunction by a corporate defendant. While the Judge did not consider the present application the appropriate opportunity for deciding this point, he considered it to be at “at least arguable” that committal proceedings could be brought in such circumstances.
This was the return date following a hearing at which the claimant was granted both an ASI and AASI to counter proceedings commenced in Russia by the defendants. The dispute arose when the claimant was unable to pay certain monies after relevant individuals and a number of the defendants were sanctioned. The defendants commenced proceedings in Russia in contravention of arbitration clauses mandating London arbitration in the Investment Services Agreements between the parties.
The penal notice, issued after the initial hearing, named all the defendants together with their UBOs, Andrey Guryev, his wife and daughter, none of whom were directors of the defendants.
On the two salient issues the court decided:
Butcher J decided that the penal notice should only include the names of parties who could be held in contempt for the corporate defendants’ breach of the order. The reasoning hinged on the form of the penal notice to the effect that: (i) if a corporate defendant disobeys the order, (ii) certain individuals may be held in contempt. The individuals in question are those who fall within the ambit of the Body Corporate Provision established by Foxton J in Olympic Council of Asia v Novans Jets  EWHC 276 (Comm) which confirmed that civil contempt proceedings may be brought for a corporate defendant's breach against directors and officers of a company. This was extended in Integral Petroleum v Petrograt  EWHC 2686 (Comm) to include de facto directors but not shadow directors. Butcher J followed the existing position and chose not to extend it to include UBOs. He held that it was inappropriate to name Mr and Mrs Guryev in the penal notice, given that there was no evidence that they were de jure or de facto directors of the defendants.
The Guryevs asked the Court to include a Babanaft proviso in the penal order. The Babanaft proviso was developed in the context of worldwide freezing orders and is an express statement that the order will not affect third parties outside the jurisdiction until it has been recognized or enforced by a foreign court. Butcher J refused to include the proviso on the grounds that it would reduce the order’s effectiveness as a deterrent and would, in effect, reduce the utility of the order for the claimant. In support of this position, Butcher J added that it is “at least arguable that there can be committal proceedings in respect of third parties who aid or abet, abroad, the breach of an anti-suit injunction by a corporate defendant”. He noted that the constraint in this regard was one of comity, a constraint which, under the Body Corporate Provision, was overcome in relation to directors or officers of a defendant. Butcher J posited that it was arguable that the same rule “should apply to third parties abroad who have the power to cause a body corporate to breach an anti-suit injunction”. Ultimately, however, Butcher J considered that the correct juncture to test the application of the order to third parties abroad would be if and when an application was made to serve a contempt application out of the jurisdiction.
- Court: King's Bench Division (Commercial Court)
- Judge: The Hon Mr Justice Butcher
- Date of judgment: 08/12/2023