Case Update: High Court refuses to stay civil proceedings pending extradition proceedings

18 February 2013

In the case of Akciné Bendrové Bankas Snoras v Antonov and another [2013] EWHC 131 (Comm), the Commercial Court declined an application to vary a worldwide freezing injunction and stay civil proceedings generally, pending the outcome of connected extradition proceedings. 

The facts

The applicant, Mr Antonov, was a Russian banker living in the UK and former majority shareholder in a Lithuanian bank. The bank became insolvent and was placed into administration in 2011. The bank brought proceedings against Mr Antonov in the UK for breach of duty, as it claimed that the principle cause of its insolvency was the misuse and misappropriation of its assets by Mr Antonov. In conjunction with these proceedings, the bank obtained a worldwide freezing order (WFO) in relation to Mr Antonov’s assets. 

In addition to the UK proceedings, the Lithuanian authorities were conducting their own criminal investigation into the conduct of Mr Antonov in relation to the bank. The Lithuanian authorities sought the extradition of Mr Antonov to Lithuania, and a European arrest warrant was subsequently issued.

Mr Antonov made three applications:

  1. A stay in all UK proceedings pending the outcome of any criminal proceedings in Lithuania,
  2. The discharge of the WFO on the grounds of the bank’s material non-disclosure and delay in making the application, along with the absence of any risk of dissipation, and
  3. A variation in the WFO to relieve him of the obligation to disclose assets acquired since 2003.

The law

Under the principles established in R v Panel on Takeovers and Mergers, ex p Fayed [1992] BCC 524, the court has discretion to stay civil proceedings until related criminal proceedings have been determined where there is a real risk of serious prejudice which may lead to injustice. However, it was emphasised in that case that this is a power which has to be exercised with great care.

In the case of Attorney General for Zambia v Meer Care & Desai and others [2006] EWCA Civ 390, it was held that proceedings should nevertheless not be stayed if safeguards can be imposed in respect of the civil proceedings which provide sufficient protection against the risk of injustice.

The decision

The High Court refused all three applications.

The first application was refused on the grounds that the prejudice that would be suffered by the bank and its creditors by delaying the opportunity to pursue an action to recover funds, outweighed any inconvenience or prejudice to the applicant from the continuation of the civil proceedings.

Gloster J did, however, impose certain safeguards to protect the applicant from the risks of self-incrimination or other prejudice in any criminal proceedings against Mr Antonov. These safeguards included the provision that no statements of case be used by the Lithuanian authorities in any subsequent criminal proceedings.

Gloster J refused both other applications regarding the discharge and variation of the WFO after carrying out a similar balancing exercise in respect of the parties’ competing interests.  

Comment

This case serves as useful guidance as to how the courts will apply the principles established in Attorney General for Zambia v Meer Care & Desai and others [2006] EWCA Civ 39. It is a reminder that the courts will place particular focus on both parties’ competing interests when considering whether there is a real risk of serious prejudice which may lead to injustice, and not just on the interests of the party involved in overlapping criminal proceedings.

Katie Allard

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