Restructurings Frustrating Creditors And The Enforcement Of Arbitral Awards: The English Court's Decision In State Oil Company Of Azerbaijan v Mansimov Abstract

BACKGROUND

The dispute arose from two English-seated arbitration awards concerning disputes between the SOCAR group and the Palmali group.[4] The awards ordered payment of around US$240 million plus interest and costs to the SOCAR claimants, but only £107,000 had been paid by the defendants.[5]

The claimants alleged that the defendants had implemented restructurings in 2018 and 2020 by which assets were transferred away from the award debtors for no or nominal consideration.  The claims were brought under section 423 of the 1986 Act, the Marex tort, and unlawful means conspiracy.  Conversely, the defendants argued that the restructurings were legitimate measures driven by creditor and banking pressure, and the precarious financial position of the Palmali group.[6]

Against that background, the defendants applied to set aside the order granting permission for service of the claim form out of the jurisdiction.[7]

THE COURT’S DECISION

Birt J dismissed the set aside application, save in relation to the Marex claim.  The section 423 claim, and the conspiracy claim insofar as it depended on section 423, were allowed to proceed.[8]

CROSS-BORDER REACH OF SECTION 423

In reaching his decision, Birt J considered that the section 423 claim disclosed a serious issue to be tried on each of its essential elements.  In particular, he was satisfied that there was an arguable case that the impugned transactions were at an undervalue, that they were entered into for a prohibited purpose, and that the claim had a sufficiently close connection with England and Wales.

Taking these issues in turn:

• As to undervalue, notwithstanding the defendants’ contention that the relevant assets had little or no value, the claimants had adduced evidence sufficient to show that the transactions may have been entered into for insufficient consideration.[9]
• As to purpose, the claimants had advanced credible allegations that the restructurings were undertaken to place assets beyond the reach of creditors.[10] A key factor in that respect was the absence of contemporaneous documentary evidence supporting the defendants’ position that the restructurings had been driven by banking requirements.[11]
• As to jurisdiction, although the alleged transfers took place outside England, the underlying contracts were governed by English law, provided for London arbitration and had resulted in English arbitral awards.  If the restructurings were carried out for the purpose alleged, they were therefore carried out to frustrate awards likely to be made in English arbitrations and ultimately reflected in English judgments.[12]

THE MAREX TORT

Perhaps the most significant aspect of the judgment is Birt J’s discussion of the Marex tort, which imposes liability for intentionally and knowingly inducing a breach of a party’s rights arising under a judgment.

Birt J recorded the parties’ agreement that the Marex tort “applies equally to arbitration awards as to judgments” and appeared to tacitly accept that proposition.[13]

However, for the tort to apply, Birt J held that there must have been an award or judgment in place (or at least imminent in terms the Defendant was aware of) at the time of the relevant conduct.[14] This follows from the elements of the tort.  As identified in Lakatamia, the cause of action requires a judgment in the claimant’s favour, a breach of the rights existing under that judgment, and an intentional procurement or inducement of that breach.[15] The knowledge element of the cause of action presupposes that there is already a judgment or award in existence, at the time of the relevant conduct.

That was not the case here, where the restructurings took place “months or years” before the arbitral awards were issued.[16] Accordingly, Birt J held that the pleaded facts could not support a claim based on the Marex tort.

JURISDICTION AND FORUM

Finally, Birt J considered whether the claim was sufficiently connected to England and Wales.  He found that the section 423 claim passed through the relevant gateway for service out of the jurisdiction, and that the conspiracy claim passed through the gateway for closely connected claims.  Birt J further held that England was clearly the appropriate forum, given the dispute’s strong connection with the jurisdiction.  The claims concerned alleged attempts to evade English arbitration awards arising from English law contracts, and the section 423 claim was itself a claim under an English statute.[17]

IMPLICATIONS FOR PRACTITIONERS

The judgment has three important implications for practitioners working in arbitration, asset-recovery and cross-border disputes.

First, it confirms that section 423 of the 1986 Act constitutes a powerful tool where assets have allegedly been moved through offshore structures to frustrate the enforcement of English arbitral awards.  The choice of a London arbitral seat will not, of itself, place subsequent restructuring activity beyond the scrutiny of the English courts.  The decision will also be of interest in offshore jurisdictions, where judgment or award creditors may seek comparable relief under legislation such as the Cayman Islands’ Fraudulent Dispositions Act.

Second, it illustrates that justifications for restructurings will be closely scrutinised where allegations are made that assets have thereby been placed beyond the reach of creditors, particularly where the explanation is said to rest on creditor or banking pressure that is unsupported by contemporaneous records.[18]

Third, the judgment marks a principled limit on the Marex tort.  Whilst creditors may have recourse to statutory remedies or claims in conspiracy where assets have been moved before an arbitral award is made, the High Court has made clear that the Marex tort will not readily be extended to future or anticipated awards.[19] In doing so, the decision provides welcome clarity in a developing area of law.

FOOTNOTES

[1] The State Oil Company of the Republic of Azerbaijan & Ors v Mansimov & Ors [2026] EWHC 2102 (Comm) (Judgment).

[2] Named after the decision of Robin Knowles J in Marex Financial Ltd v Sevilleja [2017] EWHC 918 (Comm).

[3] Fraudulent Dispositions Act (As Revised), section 4(1). Our previous article published on 14 May 2025 discussed this provision in the context of asset tracing in the Cayman Islands.

[4] The first defendant, Mr Mansimov, was the founder of the Palmali group of companies. The fifth defendant was Mr Palmali’s life partner and the mother of their son. The second, third, fourth and sixth defendants were companies associated with Mr Mansimov and the Palmali group.

[5] At [13].

[6] At [7]-[12] and [26].

[7] At [18], the order granting permission for service out was made by Jacobs J on 6 June 2025.

[8] At [55], [68]-[69] and [83].

[9] At [27]-[28].

[10] At [34]. The judgment sits alongside recent authorities emphasizing that a transaction may fall within section 423 of the 1986 Act even where prejudicing creditors is not the debtor’s sole or dominant objective. See the judgment of Lord Justice Miles in Credit Suisse Virtuoso SICAV-SIF v SoftBank Group Corp [2025] EWHC 2631 (Ch), at paragraph 612.

[11] At [30].

[12] At [49], citing the judgment of David Edwards KC (sitting as a deputy High Court Judge) in the case of Integral Petroleum SA v Petrogat FZE [2023] EWHC 44 (Comm).

[13] At [60]. It should be noted, however, that Birt J did not make any definitive finding to the effect that the Marex tort applies to arbitration awards as much as it applies to judgments. In the absence of appellate authority on the issue, this appears to be an area where there is scope for challenge.

[14] At [62].

[15] See the judgment of Bryan J in Lakatamia Shipping Co Ltd v Su [2021] EWHC 1907 (Comm), at paragraph 126.

[16] At [65].

[17] At [79]-[80].

[18] At [30]-[34].

[19] At [62]-[65].