You’ve started – so you’ll finish
11 June 2018
Claimants commencing proceedings in the Courts of England and Wales may not be able to end those proceedings simply by serving a notice of discontinuance and can be required to take the matter to trial. In this case the claimants were not permitted to discontinue their claim for the recognition and enforcement of an arbitration award under the New York Convention.
Two individuals and two corporate entities (together known as “Statis”) commenced an international investment arbitration in Sweden against the Republic of Kazakhstan (“State”). On 19 December 2013 an Arbitration Award (“Award”) was made in favour of Statis for circa US$500m.
As part of a strategy to enforce the Award in various jurisdictions, on 24 February 2014 Statis issued an application in the High Court of England and Wales seeking permission to enforce the Award in the same manner as a judgment or order and for judgment in the terms of the Award.
As is usual, Statis made the application without notice and permission was granted by order of Burton J. That Order included the usual provision that the State may within 21 days of service of the Order apply to the court to set it aside.
The State did apply to set aside the Order on the ground that the Award had been obtained by fraud. Following a two day hearing, on 27 June 2017 the court directed that the State’s application should proceed to trial.
The court also gave directions by which the trial was fixed to commence on 31 October 2018, Statis and the State were to exchange statements of case and disclosure was to take place on 22 February 2018. Statements of case were exchanged and Statis sought an extension of time to 1 March 2018 for disclosure.
Statis did not in fact give disclosure but instead served a notice of discontinuance by which it sought to bring to an end the claim it had commenced on 24 February 2014 seeking permission to enforce the Award. The State opposed the discontinuance because it wanted the matter to proceed to trial to obtain a determination on the merits of its contention that the Award had been obtained by fraud.
Importantly, it was said by Statis the reasons they sought discontinuance was because they did not have the resources to continue to trial and as they had also secured attachment orders in other jurisdictions, there was no practical need to pursue enforcement in England.
The State opposed the discontinuance by Statis on the ground that matters had reached a stage where it had its own claim for declarations or, in the alternative, that the court’s power to set aside the notice of discontinuance should be exercised so that the question of the enforceability of the Award could be determined.
The State’s application to set aside the Order of Burton J was heard by Knowles J (Anatolie Stati and Others v The Republic of Kazakhstan  EWHC 1130 (Comm)) who rejected the State’s first argument that it had freestanding claims for declarations which fell within the jurisdiction of the Courts of England and Wales which were unaffected by any notice of discontinuance served by Statis.
As to the State’s second argument, there was no doubt that the court had the power to set aside a notice of discontinuance so as to allow a dispute to proceeding to trial. Rule 38.4(1) of the Civil Procedure Rules provides that “Where the claimant’s discontinues under Rule 38.2(1) the defendant may apply to have the notice discontinued and set aside”. The question was whether the court should exercise its power in favour of the State.
Citing Henderson J in The High Commissioner for Pakistan in the United Kingdom v The National Westminster Bank Plc  EWHC 55 (Ch) the court set aside the notice of discontinuance served by Statis stating that “the position is plainly and simply, as Henderson J made clear, that the court has a discretion which it should exercise with the aim of giving effect to the overriding objective of dealing with the case justly and at proportionate cost”.
The court confirmed that where a claimant was allowed to serve a notice of discontinuance, that did not signify a right to discontinue; it was simply a procedural first step which would allow the matter to be judicially considered in the event that another party required such judicial consideration.
In exercising its power the court had regard to the particular facts of the case and the position in four other jurisdictions where Statis had sought to enforce the Award. Guided by the overriding objective, the court did not accept that the reasons given by Statis for serving the notice of discontinuance were the actual reasons and took the view that in other jurisdictions, a determination by the English Court as to whether the Award had been obtained by fraud would not be without some use.
Accordingly, the notice of discontinuance was set aside and the matter should now proceed to trial.
The decision of Knowles J is a salutary reminder to those seeking to use the Courts of England and Wales, whether those parties are based in the jurisdiction or not, that it must not be assumed that once proceedings are commenced they can be discontinued by the claimant regardless of the views of the defendant or the court. While it is not common for a notice of discontinuance to be set aside and is to be noted that of his own decision Knowles J “if this is an exceptional conclusion, this is an exceptional case”, claimants must have in mind that bringing proceedings to an end simply by serving a notice of discontinuance cannot be guaranteed. Therefore, if claimants choose to issue proceedings before the Courts of England and Wales they must be prepared for the fact that they may be required to take those proceedings to trial.
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