Arcelormittal USA LLC v Mr Ravi Ruia
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henshaw |
| Judgment Date | 30 March 2020 |
| Neutral Citation | [2020] EWHC 740 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2019-000674 |
| Date | 30 March 2020 |
[2020] EWHC 740 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
THE HONOURABLE Mr Justice Henshaw
Case No: CL-2019-000674
and
Anthony Peto QC, Peter Head, Andrew Scott, Isabel Buchanan and Timothy Lau (instructed by Mischon de Reya LLP) for the Claimant
Paul McGrath QC and Ruth Den Besten (instructed by Stephenson Harwood) for the First and Second Defendants
Paul Stanley QC and David Peters (instructed by Quinn Emmanuel Urquhart & Sullivan UK LLP) for the Eighth Defendant
Adrian Beltrami QC and Ian Higgins (instructed by Dechert LLP) for the Interested Party
Hearing dates: 3 and 4 March 2020
Draft Judgment circulated on 19 March 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
| (A) INTRODUCTION | 4 |
| (B) THE RELEVANT PARTIES | 5 |
| (C) AMUSA'S CONSPIRACY CASE | 6 |
| (D) THE PELLET SALE AGREEMENT AND THE ARBITRATION | 8 |
| (E) SUBSEQUENT PROCEDURAL HISTORY | 9 |
| (1) Minnesota | 9 |
| (2) Mauritius | 9 |
| (3) Cayman Islands | 10 |
| (4) Delaware | 10 |
| (5) England and Wales | 11 |
| (F) TRANSACTIONS RELATING TO ESSAR STEEL INDIA | 11 |
| (1) AMUSA's case | 11 |
| (2) Origins of and Essar Steel's decision to enter into the Restructuring | 13 |
| (3) Stage 1: June 2012 sale of Essar Steel shares in Essar Steel India | 17 |
| (4) Stage 2: March 2013 assignments of US$1.38 billion promissory note | 18 |
| (5) Stages 3 and 4: August and November 2013 sale and assignment | 22 |
| (6) Stage 5: 2016 change in accounting treatment | 22 |
| (7) Stage 6: VTB subordination deed | 31 |
| (8) Essar Steel's failure to seek to recover the ‘debt’ from EGFL | 35 |
| (9) Marex | 36 |
| (G) ESSAR STEEL UAE | 36 |
| (H) ALGOMA | 38 |
| (I) ENTRY INTO AMENDED PSA | 46 |
| (J) RELEVANT EVENTS IN RELATED PROCEEDINGS | 47 |
| (1) The ICC Arbitration | 47 |
| (2) Cayman proceedings | 51 |
| (3) Mauritius proceedings | 52 |
| (4) Proceedings in India | 53 |
| (5) Proceedings in England and Wales | 57 |
| (K) GOOD ARGUABLE CASE | 60 |
| (L) RISK OF DISSIPATION | 62 |
| (M) JUST AND CONVENIENT TEST | 68 |
| (1) Likely impact of a worldwide freezing order on the respondents | 69 |
| (a) Impact on the Essar group | 69 |
| (b) Impact on the Ruias | 71 |
| (2) Likely impact of a worldwide freezing order on VTB | 71 |
| (3) Delay | 78 |
| (4) The overall balance | 80 |
| (N) CONCLUSION | 81 |
(A) INTRODUCTION
The Claimant (“ AMUSA”) applies on notice for a worldwide freezing injunction and ancillary disclosure orders against the First Defendant (“ Ravi Ruia”), the Second Defendant (“ Prashant Ruia”), and the Eighth Defendant (“ EGFL”).
The freezing order is sought in support of AMUSA's claim for damages in excess of US$1.5 billion in respect of loss alleged to have been caused by an unlawful means conspiracy between the Defendants to frustrate enforcement of liabilities under a 10-year iron ore supply contract (the “ PSA”) entered into between AMUSA and three companies in the Essar group, which AMUSA terminated in May 2016, and an ICC arbitral award (“ the ICC Award”) in AMUSA's favour against Essar Steel Limited (“ Essar Steel”) in respect of those liabilities.
Essar Steel went into administration in March 2019, and an application to wind it up was filed in December 2019, without it having made any payment pursuant to the Award. AMUSA says Essar Steel's inability to pay resulted from the alleged unlawful means conspiracy. In addition to EGFL, which is Essar Steel's parent company and the group's main holding company, AMUSA alleges that Ravi Ruia and Prashant Ruia are key individuals at the Essar group who were at the heart of the alleged wrongdoing.
AMUSA applied without notice on 4 November 2019 for permission to serve these proceedings out of the jurisdiction, which was granted by Jacobs J on 8 November 2019. On 21 November 2019 AMUSA applied without notice for directions for alternative service of their present application, which Jacobs J gave on 3 December 2019. AMUSA did not serve the application until 30 December 2019, apparently for reasons connected with difficulties in obtaining a date for the hearing of the application. Thereafter, a hearing listed for 16 January 2020 was adjourned by consent, against certain undertakings given by the respondents, to the hearing before me on 3 and 4 March 2020. At that hearing AMUSA, EGFL, Ravi Ruia and Prashant Ruia (jointly) were represented by leading and junior counsel, as was the Interested Party VTB Bank PJSC (“ VTB”) which is the Essar group's main lender.
The hearing before me lasted for two days and included detailed submissions on the underlying transactions which are the subject of AMUSA's claims, as well as other matters said to evidence risk of dissipation. This was unsurprising in light of the size of the claim, the nature and amount of the worldwide freezing order sought, the complexity of the matter, and the fact that the freezing order is sought in respect of an actively trading group with very large numbers of operating businesses and employees. Moreover, the alleged dissipations which are the subject of AMUSA's substantive claim were also prominent among the factors on which AMUSA relied to establish a risk of dissipation, with the result that it was and is necessary to consider those alleged dissipations when considering whether both a good arguable case and risk of dissipation have been shown. These factors have in turn contributed to the length of this judgment.
(B) THE RELEVANT PARTIES
AMUSA is part of the ArcelorMittal Group, one of the world's leading steel and mining businesses. It was organised under the laws of Delaware in 2002 to provide steel manufacturing and mining services in the USA.
The Essar group is a conglomerate, comprising companies incorporated in various jurisdictions, including the Cayman Islands, where EGFL is incorporated, and Mauritius, where Essar Steel is incorporated. Members of the Ruia family are the group's founders, and are interested in it via companies and discretionary trusts.
EGFL is the Essar group's principal holding company. According to its website, “ EGFL is a global investor, controlling a number of world-class assets diversified across the core sectors of Energy, Infrastructure (comprising Ports and EPC businesses), Metals & Mining, and Services (Shipping, IT and Retail businesses)”.
EGFL's wholly-owned subsidiaries include Essar Steel, which acted at material times as an intermediate holding company for the Essar Group's steel business. Essar Steel is the award debtor under the ICC Award and the judgment debtor under orders made in Minnesota, England & Wales, and the Cayman Islands enforcing the Award. AMUSA says EGFL exercised de facto control over Essar Steel at all material times.
Ravi Ruia along with his brother Shashi Ruia, is a co-founder of the Essar group and interested in it in the manner indicated above. EGFL's accounts for the year ended 31 March 2017 state that EGFL's initial investors (i.e. Ravi and Shashi Ruia, or trusts they have settled) “ exercise significant influence over” EGFL. Ravi was a director of EGFL from 5 April 2010 to 26 March 2012. AMUSA says that he exercised de facto control at all material times, up to and including 2016.
Prashant Ruia is Shashi's son and Ravi's nephew. He is a key individual in the Essar group and interested in it in the manner indicated above. He is described on EGFL's website as “ an integral part of EGFL's operations and management since 1985 and a key driver of the Fund's growth, diversification and value creation both within India and internationally”. He is, or was, at material times a director or equivalent officer at various Essar group companies, including Essar Steel, EGFL and Essar Capital. He was a director of Essar Steel up to 29 July 2016, but AMUSA alleges that he continued to maintain de facto control thereafter.
AMUSA and the Essar group are major commercial competitors of each other, and have for some time been embroiled not only in the present controversy but a series of other legal and commercial disputes. The second witness statement of Susan Prevezer QC, a partner in EGFL's solicitors Quinn Emanuel, sets out details of these, including a dispute over access to Hazira Port in Gujarat, India, which has assumed great significance following AMUSA's acquisition of Essar Steel India Limited (and thus its steel works at Hazira) pursuant to bankruptcy proceedings in India. Issues between the ArcelorMittal and Essar groups in connection with Essar Steel India have resulted in proceedings in the courts of India culminating in a Supreme Court decision on 15 November 2019 which I consider later in this judgment.
(C) AMUSA'S CONSPIRACY CASE
The core of AMUSA's conspiracy allegations is set out in §§ 33–36 of its Particulars of Claim as follows:
“33. The Defendants (and each of them) have conspired to injure AMUSA by unlawful means. On various dates unknown in the period from January 2012 to date, the Defendants and/or any two or more of them agreed, or combined...
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