IN VTB Capital plc v Nutritek International Corporation [2013] UKSC 5, the Supreme Court considered two quite distinct issues: the application of forum conveniens principles to tort claims and the common law jurisdiction to “pierce” the corporate veil. VTB (an English-registered bank) advanced US$225,050,000 to RAP (a Russian-incorporated company) to purchase dairy farms from Nutritek (a BVI-registered company). As the loan agreement was induced by Nutritek's fraudulent misrepresentations concerning its links with RAP and the value of VTB's security, VTB obtained permission to serve deceit and conspiracy claims abroad on Nutritek, its parent company (Marcap) and a Russian businessman (Malofeev) who ultimately controlled RAP, Nutritek and Marcap. These defendants applied to set service aside. Although there was a serious issue to be tried on the merits of its tort claims and a good arguable case that its losses were “sustained with the jurisdiction” within CPR Part 6, VTB failed to show that England was forum conveniens and Arnold J. set service aside ([2011] EWHC 307 (Ch)), as did the Court of Appeal ([2012] EWCA Civ 808).

In the Supreme Court, their Lordships unanimously concluded that the lower courts had made several mistakes when identifying the forum conveniens, such as adding a supplementary step to the Spiliada-mandated one-step enquiry; (for Lords Clarke and Reed) downplaying the relevance of the torts having been committed in England; (for Lord Clarke alone) under-estimating the impact of the English jurisdiction and choice of law clauses in the loan agreement; and applying the wrong law to the tort claims. On this last issue, Lord Clarke applied English law to the deceit claim (and parasitically to the conspiracy claim), since, under the general rule in the Private International Law (Miscellaneous Provisions) Act 1995 (“PIL(MP)A 1995”), s. 11(1), all “the events constituting the tort” (namely the defendants' making of the misrepresentations and VTB's reliance and subsequent loss) occurred in England. Further, despite PIL(MP)A 1995, s. 12(1) enabling the court to have regard to a “potentially much wider” range of factors than under s. 11(1) (including any pre-existing relationship between the parties – a factor now explicitly recognised under the Rome II Regulation, Art. 4(3), although this obviously had no direct application in VTB as the relevant events occurred before the Regulation's commencement), his Lordship did not consider Russian law to be “substantially more appropriate” than English law, especially as the law identified by s. 11(1) “should not be easily dislodged” and only in a “very rare case” where “a clear preponderance of factors” pointed elsewhere. For the majority (Lords Neuberger, Mance and Wilson), the lower courts' errors were insufficient to take their setting aside of service “outside the ambit of permissible decisions”. Accordingly, their Lordships followed the exhortation in Spiliada that an “appellate court should be slow to interfere” with decisions below. The minority (Lords Clarke and Reed) was less reticent and considered the lower courts' errors sufficiently grave to justify giving permission to serve out. Essentially, the Supreme Court split over the significance of various connecting factors and the threshold at which appellate courts should interfere with the lower courts' forum conveniens assessment.

More significantly, their Lordships considered the validity of Goff LJ's statement in The Albaforth [1984] 2 Lloyd's Rep. 91 that “[i]f the substance of an alleged tort is committed within a certain jurisdiction, it is not easy to imagine what other facts could displace the conclusion that the Courts of that jurisdiction are the natural forum.” Whilst rejecting any formal legal presumption in that regard, Lords Mance and Clarke endorsed the relevance of the tort's place of commission (which Lord Clarke considered could include a jurisdiction where the relevant damage, but nothing else, occurred) in identifying the forum conveniens. In VTB, this was England as “the place where the representation was received and acted upon”. Their Lordships disagreed, however, as to the weight that the tort's place of commission should bear as part of the forum conveniens enquiry. Lord Mance considered the Albaforth principle “a useful rule of thumb or a prima facie starting point” that could sometimes be determinative, but stressed that in international tort cases the tort's place of commission should not generally be viewed in isolation but globally with other relevant connecting factors. Applying this watered-down version of the Albaforth principle, Lord Mance considered that countervailing factors in VTB dwarfed the significance of the tort's place of commission (similarly, Lord Wilson considered that place to be entirely fortuitous). In contrast, whilst accepting that the Albaforth principle's strength might change according to circumstance, Lords Clarke and Reed viewed the principle as “likely to be a strong or weighty factor” and (like Goff L.J. above) struggled to identifying countervailing circumstances that might indicate the forum conveniens to be elsewhere. Whilst this latter approach accords more closely with previous authority, including the majority view in Berezovsky v Michaels [2000] 1 W.L.R. 1004, Berezovsky has been criticised for encouraging claimants to forum-shop by tailoring their claims to bring themselves within the Albaforth principle. Indeed, just as international libel claims can be artificially limited to the circulation occurring in England, so too can a particular misrepresentation be re-formulated so as to “occur” there. Whilst the abuse of process doctrine might have curbed the worst examples of “libel tourism” (Dow Jones & Co. Inc. v Jameel [2005] Q.B. 946), a more comprehensive solution to the perverse incentives created by Berezovsky would be, like Lord Mance in VTB and the Berezovsky minority, to diminish the role played by the tort's place of commission in the forum conveniens enquiry. Indeed, the repeal of both the jurisdictional rules for tort in R.S.C Order 11 and the common law choice of law rule in Boys v Chaplin [1971] A.C. 356, since The Albaforth, makes the continuing fixation with the tort's place of commission appear anachronistic. Instead, a tort's applicable law might nowadays provide a more robust and reliable guide to the forum conveniens – certainly Lord Clarke considered the tort's applicable law to be “a strong pointer to the forum conveniens” (cf. Puttick v. Tenon Ltd. [2008] HCA 54).

To bolster its jurisdictional claims, VTB had applied to include in its pleadings a claim against the defendants for breach of the loan agreement, despite them not being privy to that agreement. VTB argued, however, that RAP's corporate veil should be “pierced” to make the defendants co-contracting parties. The lower courts and a unanimous Supreme Court disagreed. Lord Neuberger considered that accepting VTB's claim would amount to an “unjustified extension” of the “piercing” jurisdiction as traditionally conceived, since neither the defendants' control of RAP nor their participation in Nutritek's fraudulent misrepresentations amounted to them using RAP as a “façade to conceal the true facts”. Otherwise every corporate fraud might trigger the “piercing” jurisdiction. Furthermore, his Lordship could find no authority (except Antonio Gramsci Shipping Corporation v Stepanovs [2011] EWHC 333 (Comm), which Lord Neuberger then overruled) supporting the imposition of contractual liability upon non-contracting parties as an available legal mechanism for giving effect to a decision that the corporate veil be “pierced”. Indeed, such relief was considered contrary to principle since it could potentially distort agency principles, would conflict with principles of contractual formation (since there was no objective intention that RAP's controllers be privy to the loan agreement), might amount to the surreptitious introduction of an abuse of rights doctrine and would unnecessarily overlap with VTB's existing tort claims against the defendants.

Whilst Lord Neuberger's refusal to “pierce” the corporate veil on the facts of VTB is unobjectionable, on a more general level, his judgment creates an undesirable level of uncertainty as to when the corporate veil can be “pierced” at common law. First, on a purely semantic level, he adopted the language of “piercing” the corporate veil to describe when the courts will impose the company's liabilities on those behind the corporate persona, but left unanswered whether “piercing”, “lifting” or “ignoring” the corporate veil refer to substantively different processes. This is disappointing given attempts (Ottolenghi, (1990) 53 M.L.R. 338) to distinguish these terms. Indeed, Lord Wilson's use of “lifting” terminology in VTB suggests that linguistic confusion will likely persist. Secondly, Lord Neuberger questioned whether the courts have any general power at common law (beyond specific statutory or contractual examples) to “pierce” the corporate veil. His Lordship's doubts were reinforced by the fact that the House of Lords had never positively accepted the existence of such a power (casting doubt on Woolfson v Strathclyde Regional Council 1978 S.L.T. 159), by the “confusion and uncertainty” over when such a power might actually be exercised and by the possibility of explaining many so-called “piercing” cases on “less controversial” grounds. That said, Lord Neuberger did note the recognition of a common law “piercing” jurisdiction in textbooks, Adams v Cape Industries plc [1990] Ch. 433 and La Générale des Carrières et des Mines v FG Hemisphere Associates LLC [2012] UKPC 27. This will do little, however, to resolve the confusion that lower courts will no doubt experience when next asked to exercise that jurisdiction. Thirdly, even assuming that a common law “piercing” jurisdiction exists, Lord Neuberger has cast considerable doubt over the one situation in which it was tolerably clear that the courts could “pierce” the corporate veil—the so-called “fraud exception”, where the corporate form has been used to evade legal limitations on a person's conduct or pre-existing obligations owed to third parties. The classic examples of the fraud exception have long been Gilford Motor Company Ltd. v Horne [1933] Ch 935 and Jones v Lipman [1962] 1 W.L.R. 832, but Lord Neuberger has now explained these decisions (and potentially undermined others, including Adams) as not involving “piercing” the corporate veil at all: in Horne, the injunction could be justified as necessary to prevent the company from committing the tort of inducing breach of contract; and, in Jones, the order for specific performance could be justified as necessary to protect and enforce the purchaser's equitable interest in the land wrongfully transferred to the company. Fourthly, beyond rejecting the imposition of contractual liability on non-contracting parties as a possible legal response to “piercing” the corporate veil, Lord Neuberger gave no guidance as to what legal responses are possible, whether other limitations exist or what choice of law rule might govern such issues. Petrodel Resources Ltd v Prest (UKSC 2013/0004) may yet clarify these issues.