VTB Capital, the UK subsidiary of a Russian bank, alleged that it had been the victim of a conspiracy by two British Virgin Islands companies, a Russian company and a Russian individual in connection with the financing of a corporate take-over by one of the BVI companies. VTB claimed that two of the entities involved were under common control but had been represented as operating at arm’s length, and that the assets of the target company had been overstated. VTB argued that an exercise in piercing the corporate veil should have the effect of making the person who controls the company liable as if he or she had been a party to the company’s contract.

The UK Supreme Court agreed with the Court of Appeal that this was not a case for veil-piercing, and not a case to extend the reach of the exercise: VTB Capital plc v Nutritek International Corp, [2013] UKSC 5. As the Court of Appeal said, veil-piercing will permit the identification of the puppeteer behind the puppet, and permit an equitable remedy against the puppeteer where the puppet’s corporate status has been used for fraudulent purposes. Veil-piercing does not, however, make the puppeteer a party to the puppet’s contracts.

[Link available here].