Arcelormittal Usa Llc v Essar Global Fund Ltd and Essar Capital Ltd

• Jurisdiction: Cayman Islands
• Judge: (Kawaley, J.)
• Judgment Date: 29 March 2019
• Court: Grand Court (Cayman Islands)
• Date: 29 March 2019

ARCELORMITTAL USA LLC

and

ESSAR GLOBAL FUND LIMITED and ESSAR CAPITAL LIMITED

(Kawaley, J.)

Grand Court, Financial Services Division (Cayman Islands)

Civil Procedure — disclosure — Norwich Pharmacal order — order may be granted in aid of foreign proceedings where statutory regime under Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978 inapplicable, e.g. if insufficient evidence to commence substantive remedial proceedings overseas — whether Norwich Pharmacal jurisdiction displaced by statutory remedy mixed question of law and fact

Held, varying the Norwich Pharmacal order:

(1) The court accepted the plaintiff’s submission that reliance on the fact that the award had been obtained was permissible as against the defendants for the purposes of the present application. Section 5 of the Foreign Arbitral Awards Enforcement Law (1997 Revision) was designed to facilitate the enforcement of arbitral awards without the award creditor having to relitigate the underlying dispute against the award debtor. The court rejected the defendants’ submission that it had no jurisdiction to grant the Norwich Pharmacal order because s.5 of the Foreign Arbitral Awards Enforcement Law required local enforcement to enable the plaintiff to place any reliance at all on the award (para. 38).

(2) Norwich Pharmacal relief could be granted in aid of foreign proceedings where the statutory regime under the Evidence Order did not apply. Whether the Norwich Pharmacal jurisdiction had been displaced by the statutory regime was a mixed question of law and fact the answer to which was significantly shaped by the legal and factual matrix of each case. Where an applicant for Norwich Pharmacal relief could obtainadequate relief via the statutory route for obtaining evidence for use in foreign proceedings, the court’s equitable jurisdiction to grant corresponding relief fell away and was no longer available. However, determining whether the statutory regime was engaged required a careful assessment depending on the particular facts and circumstances of each case. Factors such as the following might often be relevant: (a) whether the claimant already possessed sufficient information to commence proceedings in relation to the relevant wrongdoing; (b) whether it was clear that the substantive proceedings were likely to be commenced abroad; (c) whether effective relief for the wrongdoing which formed the basis for the Norwich Pharmacal application would be rendered nugatory by exclusive recourse to the statutory regime. The mere fact that information was sought for use in aid of foreign proceedings was not an automatic ground for refusing relief. When considering the scope of the Evidence Order, it was important to remember that it was extended to the Cayman Islands to give effect to international legal obligations arising under the Hague Convention on the Taking of Evidence Abroad in Civil and Commercial Matters. The main purpose of that and similar conventions was to facilitate civil justice by creating a transnational framework for national courts to assist each other in civil proceedings. It was true that Parliament must be deemed to have intended the Evidence Order to be applied in aid of civil justice in place of any common law or equitable remedies which might previously have applied. However, Parliament might also be presumed not to have intended the Evidence Order to be used as a fixed barrier to civil justice, ousting this court’s equitable jurisdiction automatically whenever information or evidence was sought for use in foreign proceedings, without regard to whether the statutory regime was accessible in practical terms. The different function served by the competing statutory and equitable jurisdiction was not in and of itself a material consideration. The key question was whether on the facts of a particular case the need for equitable relief was displaced by the availability of the statutory remedy. In addition, whether or not foreign proceedings had been commenced in which the information sought might be deployed was not dispositive of the question whether, in a particular factual and legal matrix, the statutory regime was engaged because it was available. Whether the statutory jurisdiction displaced the equitable jurisdiction could not be properly determined in a simple formulaic fashion. There was no inflexible legal principle that debarred litigants from seeking to obtain information invoking the court’s equitable jurisdiction solely because the information would likely be deployed in foreign proceedings; nor because the wrongdoing involved a breach of foreign law (paras. 63–70).

(3) The Norwich Pharmacal jurisdiction had not been displaced by the Evidence Order in the factual and legal matrix of the present case. The most critical considerations in the present case were that although it was true that the information sought appeared likely to be deployed in proceedings abroad, the court was satisfied that (a) the plaintiff did not yethave sufficient information to commence substantive remedial proceedings abroad; and (b) having regard to the risk of information being destroyed, deploying the statutory regime for obtaining the information was not an available effective alternative remedy which the plaintiff should be left to pursue (paras. 71–73).

(4) Norwich Pharmacal relief could be sought in respect of foreign wrongdoing including evading foreign enforcement procedures in circumstances where no local enforcement proceedings had been commenced. The plaintiff in the present case could therefore seek and obtain relief in respect of anticipated wilful steps to avoid the award which was being enforced in the English and Mauritian proceedings. The jurisdictional anchor which provided the gateway for the plaintiff to seek equitable relief under local law was the fact that the defendants were domiciled in the Cayman Islands and subject to the court’s territorial jurisdiction. An application seeking equitable discovery in relation to wrongdoing which took the form of evading enforcement of arbitral awards or judgments would invariably have greater resonance when sought in aid of a domesticated foreign award or judgment. There was a strong legal policy imperative for the court to uphold the integrity of its own orders and/or processes. This imperative was clearer and easier to define than the comparatively ethereal common law duty to assist foreign courts in the cross-border civil litigation field. Accordingly, seeking Norwich Pharmacal relief grounded upon a complaint of wrongdoing in the form of wilfully evading debts would usually be clearer and stronger where the foreign award and/or judgment in question had been (or was proposed to be) converted into a local judgment. (If there were a requirement of wrongdoing within the jurisdiction, the court would have afforded the plaintiff an opportunity to seek leave to enforce the award in the Cayman Islands and to apply for a domestic freezing order.) The deliberate steps to avoid enforcement of the award which the plaintiff believed the defendants had facilitated constituted an arguable case of wrongdoing for the purposes of satisfying that requirement for obtaining Norwich Pharmacal relief. It mattered not that no domestic enforcement proceedings had been instituted against Essar Steel (which was not resident in the Cayman Islands); no local freezing order had been sought; and the Norwich Pharmacal order was in substance sought in aid of the execution processes of foreign courts (paras. 99–106).

(5) Justice required the temporal scope of the Norwich Pharmacal order to be narrowed so as to commence on March 1st, 2015, approximately six months before the most significant suspect transfer made at a time when the defendants must very arguably have been aware that Essar Steel had substantial liabilities under the agreement. Requiring the defendants to produce information over a period of just under three years preceding the date when the ICC award was made in favour of the plaintiff was sufficiently proportionate to meet the needs of necessity in the NorwichPharmacal context. The longer period initially ordered might have rationally supported an information preservation order in aid of a substantive avoidance claim, assuming it was legally possible to grant such relief. But where the plaintiff was seeking information to enable it to decide whether or not to bring a claim, there must be a fundamental distinction between information which was necessary to achieve that limited purpose and information which would more broadly be relevant and discoverable in the context of future substantive asset recovery proceedings (paras. 125–126).

(6) Subject to the plaintiff having liberty to apply to seek extended discovery in aid of the worldwide freezing order, if so advised, the court accepted that discovery should at this stage be limited to assets transfers to related parties which had resulted in or contributed to a net reduction in Essar Steel’s assets over the period (as modified by this ruling) covered by the Norwich Pharmacal order. Schedule B, para. 4(a) should accordingly be amended by adding the following words (or language to like effect) at the end of the sub-paragraph: “which has resulted in or contributed to a net reduction in Essar Steel’s assets” (para. 134).

Cases cited:

(1)Ashworth Hospital Auth. v. MGN Ltd., [2002] UKHL 29; [2002] 1 W.L.R. 2033; [2002] 4 All E.R. 193; [2002] H.R.L.R. 41; [2002] U.K.H.R.R. 1263, referred to.

(2)Berkeley Administration Inc. v. McClelland, [1990] F.S.R. 381, referred to.

(3)Black Swan Inv. I.S.A. v. Harvest View Ltd., Eastern Caribbean Supreme Ct. (BVI High Ct.), Case No. BVI HCOM 2009/399, March 23rd, 2010, unreported, referred to.

(4)Braga v. Equity Trust Co. (Cayman) Ltd., 2011 (1) CILR 402, followed.

(5)Dallah Real Estate & Tourism Holding Co. v. Religious Affairs Min. (Pakistan), [2010] UKSC 46; [2011] 1 A.C. 763; [2010] 3...