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The High Court declines to continue an injunction restraining enforcement of an order for the production of documents and deposition of a witness under section 1782 of the United States Code

  • United Kingdom
  • Financial services disputes and investigations
  • Litigation and dispute management - Disclosure – Other

21-11-2018

Dreymoor Fertilisers Overseas Pte Limited v Eurochem Trading GmbH, JSC MCC Eurochem [2018] EWHC 2267 (Comm)  

Facts of the case

– Dreymoor Fertilisers Overseas Pte Limited (“Dreymoor”) entered into numerous contracts with Eurochem Trading GmbH (“ECTG”) for the supply of fertilisers. All of these contracts contained arbitration clauses providing for arbitration in London. 

– ECTG subsequently alleged that Dreymoor had paid bribes to two of ECTG’s former senior employees.

– ECTG and another group company (together, the “Defendants”) brought civil proceedings in the British Virgin Islands (“BVI”) against Dreymoor and others, and ECTG also commenced two sets of arbitration proceedings in London against Dreymoor. 

– The Defendants obtained an order in the United States that the chief trader of Dreymoor, Mr Chauhan, produce documents and deposition evidence for the purposes of inter alia the BVI proceedings (the “1782 Order”). The Defendants made no secret of the fact that they also intended to use whatever information they obtained pursuant to the 1782 Order in the arbitration proceedings.

– Dreymoor applied for an injunction in England to stay enforcement of the 1782 Order until disclosure and witness evidence had been provided in the London arbitrations. This was on the basis that it would interfere with the effective preparation and presentation of Dreymoor’s case, in particular that (i) it would mean Mr Chauhan would be unable to assist to the same extent and (ii) if Mr Chauhan were required to submit to a deposition, he might then be unwilling to attend as a witness in the arbitrations.

– An interim injunction was ordered, and Dreymoor sought its continuation at the return hearing.

The decision 

– At the return hearing, Males J found that: 

– the English court has a legitimate interest in granting an injunction to protect the fairness and integrity of its own proceedings, and of arbitration proceedings over which it has supervisory jurisdiction; and 

– a 1782 Order is capable of constituting (as a matter of English law) unconscionable conduct interfering with the fair disposal of English court or arbitration proceedings.

– However, Males J declined to continue the injunction on the basis that enforcement of the 1782 Order was neither:

– an “unconscionable” interference in the English proceedings; or

– a breach of the contractual right of Dreymoor to have its dispute with ECTG dealt with by the agreed arbitral process, not least because the dispute would be dealt with by arbitration whether or not the 1782 Order was enforced.

Analysis and practical advice

– In reaching his decision, Males J had regard to the following factors which are of wider application:

– the English court has no legitimate interest in policing a party’s attempt to obtain documents and evidence for use in foreign proceedings, let alone reviewing the decision of a foreign court as to whether its procedures should be utilised for that purpose;

– the US court had reached a fully reasoned decision that the documents and evidence were needed for use in foreign proceedings. Further, such decision had been revisited on appeal after  extensive argument in which Dreymoor (through Mr Chauhan) had participated fully. It would therefore be a serious breach of comity for the English court to rule that the US court was wrong and, in any case, Males J was not persuaded it was;

– the impact which the 1782 Order would have on Dreymoor’s preparation for the London arbitrations was of its own making, since it was as a result of Dreymoor having successfully delayed the determination of the 1782 Order for over a year;

– in view of the BVI proceedings, it could not be said that the London arbitrations were the “lead jurisdiction” in which liability disputes between the parties would be resolved; 

– the documents to be provided under the 1782 Order were potentially wider than those which Dreymoor was prepared to provide in the arbitrations. Also, the Defendants would not be entitled as of right to use documents provided in the arbitrations or any witness statement by Mr Chauhan for the purposes of inter alia the BVI proceedings because arbitration proceedings are confidential; 

– Mr Chauhan’s evidence was that, notwithstanding the 1782 Order, his current intention was to make a witness statement in the arbitrations and attend the hearing for cross examination; and

– although there was an element of potential unfairness insofar as Mr Chauhan would be available for cross examination twice, (i) Dreymoor accepted that he would eventually have to be deposed pursuant to the 1782 Order and therefore the only question was whether that should happen in advance of the arbitrations and (ii) the fact that there were proceedings on the merits in both London and the BVI was likely to mean that witnesses on both sides would face cross examination twice.