CL-2020-000117 - [2025] EWHC 1620 (Comm)

As will be apparent from the summary of the Falcon Phase claim set out above, the applicable lex causae could arguably be either Swedish or Maltese law. In my judgment however, the applicable lex causae is Maltese law. My reasons for reaching that conclusion are as follows.

Determination of this issue involves applying Article 4 of Rome II. This is so because that Regulation applies to the resolution of conflicts issues concerning non-contractual obligations in civil and commercial matters – see Article 1. Article 4 is concerned with the applicable rules in relation to torts and delicts. It provides:

“1.

Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.

2.

However, where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply.

3.

Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.”

“… damage…” in Article 4(1) means “direct damage” – see Rome II, Recital (16). As Recital (17) adds, the applicable law “… should be determined on the basis of where the damage occurs, regardless of the country or countries in which the indirect consequences could occur. Accordingly, in cases of damage to … property, the country in which the damage occurs should be the country where … the property was damaged …”. In relation to the order in which sub-articles (1) to (3) of Article 4 should be applied, Recital (18) provides that:

“The general rule in this Regulation should be the lex loci damni provided for in Article 4(1). Article 4(2) should be seen as an exception to this general principle, creating a special connection where the parties have their habitual residence in the same country. Article 4(3) should be understood as an ‘escape clause’ from Article 4(1) and (2), where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with another country.”

The factors that might require the application of Article 4(2) are primarily that Mr Ökten may have lived in Sweden at the relevant time and the 12^th defendant (Gergeo Holding AB) and the 13^th defendant (Gergeo Invest AB) are or were Swedish registered companies. Article 4(3) does not arise unless it is clear that the civil wrong in issue is “… manifestly more closely connected with another country.” The most cogent argument for applying Article 4(3) arises from the Falcon Phase being in substance a continuation of the Optimus Phase and involving the use of PPM moneys.

The claimant’s primary case is that Maltese law applies to both the tortious claims and claims based upon fiduciary duty against both the individual and the corporate defendants. Its alternative case is that Swedish law applies in which case no liability can attach to the companies and only to Messrs Serwin and Ökten because the Swedish statute that is the only basis for the claimant’s claim as a matter of Swedish law requires the commission of a criminal offence with only individuals not companies being liable criminally. However, in that event the primary targets of the claim (Messrs Serwin and Ökten) would be liable whichever system of law applies.

No positive case has been advanced by any of the defendants with whom I am concerned on this issue. Foxton J was willing not to enter summary judgment in relation to the Falcon Phase in order to facilitate the resolution of this issue at a time when at least some of the individual defendants were actively participating in the litigation. Since then all the individuals other than Messrs Serwin and Ökten have settled with the claimant and none of the corporate defendants has chosen to appear or be represented at this trial. In my judgment the better view is that Maltese law is the applicable lex causae, I have reached that view for the following reasons.

The claims that are advanced in relation to Falcon are both delictual claims and claims for breach of fiduciary duty. The vehicle by which the Falcon Phase was carried into effect was Falcon, a company incorporated in Malta as I have said earlier. It was described in its initial prospectus as being “… an open-ended collective investment scheme organised as a multi-fund public limited company with variable share capital…” referred to in Maltese company law by the acronym “SICAV”. Investors acquired shares in Falcon that in turn acquired the assets which were to be invested in. Given the way in which the Swedish premium pension scheme worked, the SPA has title to any shares in investment funds that are purchased for PPM accounts so that the only investor shareholder in Falcon was the SPA.

Returning to the lex causae issue, in relation to the fiduciary claims, the relevant relationship is between the claimant (in its capacity as the SPA) as a shareholder in Falcon on the one hand and Falcon on the other. Maltese law impliedly governed that relationship by reason of that being the law of Falcon’s country of incorporation. Non-contractual obligations which are classified as equitable in English law (of which claims for breach of fiduciary are one) are not subject to specific rules in the Rome II Regulation – see Dicey, Morris & Collins, Conflicts of Law (16th ed.) at para. 36-057. Prior to the coming into effect of Rome I and Rome II, a claim for breach of fiduciary duty qua director was generally regarded by English law as governed by the law of the place of incorporation of the company concerned – see Base Metal Trading Ltd v Shamurin [2004] EWCA Civ 1316; [2005] 1 WLR 1157 and Fiona Trust & Holding Corp v Privalov [2010] EWHC 3199 (Comm.). I conclude that remains the law after the coming into effect of Rome II. I reach that conclusion because by Article 1(2)(d), “… the personal liability of officers and members as such for the obligations of the company or body…” is expressly excluded from the scope of Rome II. This language is materially similar to that used in Article 1(2)(e) of the Rome Convention considered by the Court of Appeal in Metal Trading Ltd v Shamurin (ibid) – see Tuckey LJ at [24] - and applied by the Court of Appeal in that case – see Tuckey LJ at [27] – [30] and Arden LJ at [65]-[66] (with whom Tuckey LJ agreed – see [57]) where she observed that “… the matters mentioned in the company law exclusion are aspects of company law, which, under generally accepted principles of the conflicts of laws in the member states, are considered to be governed by the law of the place of incorporation.” She concluded in relation to this point:

“69.

In my judgment, the law of the place of incorporation applies to the duties inherent in the office of director and it is irrelevant that the alleged breach of duty was committed, or the loss incurred, in some other jurisdiction. Accordingly, these duties can only be modified by contract to the extent that the law of the place of incorporation allows. It is not open to the company and the director to contend that they have contractually varied the liabilities imposed by the law of the place of incorporation by the terms of a contract for the appointment of the director governed by some other law, unless it is also shown that the law of the place of incorporation would allow this. In the matter of directors duties - which are essential to good corporate governance and to any effective system of law regulating companies - party autonomy is the exception not the rule, and its scope is always a matter for the law of the place of incorporation.”

Given the similarity of the language used and the context in which it is used, there is no merit in any other interpretation being adopted in relation to Rome II.

In relation to the tortious claims, I accept the claimant’s submission that for the purposes of Art. 4(1) of Rome II, where the loss is financial, where and when direct loss occurs is to be determined by asking where money has been paid away irreversibly by the victim – see Dicey, Morris & Collins, Conflicts of Law (ibid) at 35-025 and MX1 Ltd and another v Farahzad [2018] EWHC 1041 (Ch); [2018] 1 WLR 5553 per Marcus Smith J at [39(8)-(10)]. In this case the loss in this sense occurred in Malta when money paid to Falcon by the claimant was then paid out of Falcon’s accounts in execution of what the claimant alleges to be a fraudulent scheme.

The residency issue does not impact materially on these conclusions. Art. 4(2) should be seen as an exception to the general principle established by Art. 4(1). It does not provide a clear alternative answer to that which follows from applying Art. 4(1) in the circumstances of this case. Mr Serwin was resident at all material times in Malta. This is the evidence given by Mr Serwin himself to the Stockholm District Court – see the judgment of that court reciting the investigations undertaken and the evidence received by that court. Whilst findings of fact made by the Swedish court are not admissible – see Hollington v Hewthorn [1943] KB 587 – that does not prevent this Court from relying upon the substance of the evidence referred to in the judgment of the Swedish court, including the contents of documents or evidence given by a witness – see Rogers v Hoyle [2014] EWCA Civ 257; [2015] QB 265 per Christopher Clarke LJ at [49] where he held that “…statements of fact contained in the report, … are evidence which the trial judge can take into account in like manner as he would any other factual evidence, giving to it such weight as he thinks fit…” and JSC BTA Bank v Ablyazov [2016] EWHC 3071 (Comm) at [24] per Laurence Rabinowitz QC where the deputy judge summarised the position as being that “… whilst the bare finding of a prior court is opinion evidence which a subsequent court cannot rely upon because the later court must make findings of fact, a reference in a judgment to the substance of evidence is evidence which the judge in a later case can take into account “in a like manner as he would any other factual evidence giving to it such weight as he thinks fit” …”, a summary approved by Henshaw J in Kazakhstan Kagazy Plc v Zhunus [2021] EWHC 3462 (Comm) at [115] and Foxton J in Lakatamia Shipping Company Ltd v Tseng Yu Hsia & anor [2023] EWHC 3023 (Comm) at [14]. I set out these principles at this stage because they are important not merely to the issue being considered here but to the more general liability issues that I consider below. There is no clear evidence as to where Mr Ökten resided. There is some documentation that suggests he had an address in Turkey or worked from an office in Malta and/or in Sweden. In my judgment that is not sufficient to oust the general rule in Article 4(1) given the residence of Mr Serwin and the location of Falcon.

It is true that the 12^th and 13^th defendants were or are registered Swedish companies. However I do not accept that should lead me to conclude that the lex causae is Swedish rather than Maltese law given all the other factors to which I have referred – that is that Mr Serwin, who is characterised by the claimant as the principal architect of the Falcon (as well as the Optimus) Phase was resident in Malta, the loss was suffered in Malta and the vehicle that was used to carry the scheme into effect was a Maltese registered entity. In addition, the purpose of relocating to Malta was to avoid adverse attention in Sweden and the mechanism of the Falcon Phase was materially different to that of the Optimus Phase as I have explained.