Stephen Gentle and Richard Foss
This latest round in Madoff-related litigation comprised three interloc-utory applications before Mr Justice Flaux in the Commercial Court.
Of particular interest was the application by defendant Sonya Kohn and one of her defendant corporate vehicles (the Kohn defendants) to set aside proceedings issued against them by the second claimant and trustee in liquidation of Madoff’s US company on the grounds that the requirements of Article 6(1) of Council Regulation (EC) 44/2001 (Article 6(1)) were not met.
Article 6(1) allows claims against a non-domiciled defendant in the same jurisdiction as an ’anchor’ defendant where claims are ’closely connected’ and separate proceedings may result in ’irreconcilable judgments’.
Flaux J endorsed emphatically a restrictive interpretation of Article 6(1) when considering derogation from the basic principle that defendants should normally be sued in the contracting state where they are domiciled (Article 2).
Although the court accepted jurisdiction over the claims by Madoff Securities International (MSIL) against the Kohn defendants because it is also suing the English-domiciled ’anchor’ defendants, there was no jurisdiction over the claims by the trustee. Also, the court did not accept that irreconcilable judgments could result in circumstances where the claims were governed by two different systems of law.
The judgment is unwelcome for the Madoff trustee chasing the $19bn (£12.18bn) lost to Madoff’s fraud. As a substantive judgment on Article 6(1) it will have wider currency both here and in Europe.
Stephen Gentle and Richard Foss, partners, Kingsley Napley