BSG Resources Ltd v Vale S.A.
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Moulder |
| Judgment Date | 20 September 2019 |
| Neutral Citation | [2019] EWHC 2456 (Comm) |
| Docket Number | Case No: CL-2019-262 and 269 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 20 September 2019 |
[2019] EWHC 2456 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mrs Justice Moulder
Case No: CL-2019-262 and 269
Jeffrey Gruder QC and Iain Quirk (instructed by Mishcon de Reya LLP) for the Claimant
David Foxton QC and James Willan (instructed by Cleary Gottlieb Steen & Hamilton LLP) for Vale S.A.
Mr Hooker of for the third and fourth Defendants
Boies Schiller Flexner UK LLP
Hearing date: 4 September 2019
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.
The matters in this judgment arise out of an arbitration award dated 4 April 2019 (the “Award”) following an arbitration between Vale S.A. (“Vale”) and BSG Resources Limited (“BSGR”) which resulted in an order for BSGR to pay damages of US$1.247 billion. BSGR has challenged the Award under sections 24 and 68 of the Arbitration Act 1996 (the “Act”) and such challenge (the “Challenge Application”) is due to be heard over two days in November 2019.
This judgment deals with the following applications:
i) application by Vale under Section 70 of the Act for security for the amount payable under the Award;
ii) application by Vale for security for its costs in respect of the Challenge Application;
iii) application by BSGR to set aside the order of Bryan J dated 4 April 2019 granting permission to enforce the Award or to stay the enforcement thereof (the “Set Aside Application”);
iv) application by BSGR to amend its claim form in respect of the Challenge Application (the “Amendment Application”);
v) application by Vale to impose a condition of pursuing the Challenge Application that BSGR pay the outstanding costs order of Mr Justice Popplewell.
Hearing
The hearing of the various applications referred to above was in public for the reasons given in the ruling made at the commencement of the hearing.
The third and fourth defendants, two of the three arbitrators, were represented by Mr Hooker at the hearing. Mr Hooker largely adopted the submissions of Mr Foxton QC for Vale but did make submissions on the Amendment Application.
Background
It is not necessary for the purpose of determining the applications to consider the detailed background but in summary BSGR and Vale were parties to a joint venture in Guinea to exploit iron ore deposits. The government of Guinea changed and in April 2014 the mining rights were revoked following allegations of bribery and misconduct on the part of BSGR.
This resulted in two sets of arbitration proceedings: one brought by Vale in April 2014 against BSGR under the LCIA rules and one brought by BSGR against Guinea under ICSID. BSGR challenged the appointment of the three arbitrators and as a result of that challenge, the Chairman (but not the other arbitrators) was obliged to stand down and was replaced. This affected the timing of the hearing of the arbitration which was moved. The date of the final hearing was fixed notwithstanding the fact that BSGR said that its leading counsel was not available at such time. As a consequence, BSGR did not attend the hearing and did not cross examine witnesses. It did however participate in the ICSID proceedings and did cross examine witnesses, certain of whom were also called in the LCIA proceedings. Initially it was agreed between the parties that there would be record sharing so that the evidence in the ICSID arbitration would be available to the arbitrators in the LCIA arbitration. However after the proceedings in the LCIA arbitration had closed, BSGR applied to adduce the evidence of the transcripts of the ICSID proceedings (which included the cross examination of the witnesses) and the post hearing briefs which was refused by the arbitrators in the LCIA arbitration.
In the Award the arbitrators found that BSGR had made fraudulent misrepresentations to Vale to enter into the joint venture. It did not have to decide the bribery allegations in order to determine the arbitration claim although it did make findings on the issue.
BSGR has brought the Challenge Application on the grounds that the arbitrators displayed apparent bias. Currently BSGR relies on four matters but by its Amendment Application, it seeks to rely on the sole ground that the refusal to admit the transcripts of the ICSID proceedings demonstrates apparent bias, having regard to the context of certain other decisions made by the arbitrators in the course of the arbitration.
BSGR went into administration in March 2018 and Mr Malcolm Cohen, a partner of BDO LLP and Mr William Callewaert of BDO Ltd of Guernsey were appointed the administrators by order of the Royal Court of Guernsey.
Evidence
The evidence before the court in respect of the applications was witness statements from Mr Jonathan Kelly, a partner of Cleary Gottlieb Steen & Hamilton LLP, solicitors for Vale, and for BSGR, evidence from Mr Malcolm Cohen, one of the joint administrators of BSGR, and from Mr Libson of Mishcon de Reya LLP.
At the outset it is necessary to say something about the evidence of Mr Cohen. As stated in his witness statement Mr Cohen has been a partner for over 30 years of BDO LLP. BDO LLP is the UK member of BDO International, the world's fifth largest accounting firm. Mr Cohen is the head of BDO's contentious insolvency team. He has served as a member of R3 which collectively represents the U.K.'s insolvency, restructuring, advisory and turnaround professionals. It is against that background of an experienced insolvency practitioner at a leading accountancy firm that I approach his evidence and consider the assertions made by Vale against the joint administrators and Mr Cohen.
In written submissions counsel for Vale referred to the statement in Mr Cohen's witness statement describing Vale as a “single, unsecured creditor with an axe to grind” or having “their own agenda” (paragraph 49 and 51). It was submitted for Vale that the “dismissive language and approach” is not what would be expected from professional officeholder acting independently in the interests of creditors.
It is clear from Mr Kelly's witness statements and Mr Cohen's witness statement the nature of the exchanges that have taken place between those representing Vale and the administrators. Whilst (perhaps understandably) in oral submissions counsel for Vale chose not to repeat some of the assertions made in the witness statements of Mr Kelly against the administrators, it is in my view unsurprising that Mr Cohen (correctly in my view in the context) described Vale as having an axe to grind. What is surprising on the evidence in my view, are the assertions in the witness statements of Mr Kelly against Mr Cohen, a professional and experienced administrator, that they were guilty of a “lack of supervision and care” or that the administrators are not in a position to approach explanations and information provided to them with “scepticism and circumspection”. Mr Kelly referred at paragraph 10 of his third witness statement to “serious concerns” about the steps which have been taken by the joint administrators. These included the attempt to stay the arbitration process, the alleged hostile stance towards Vale, the manner of the challenge to the Award, the role of Nysco and the management of BSGR. All of the matters raised in this regard by Mr Kelly are dealt with by Mr Cohen in his witness statement (as more particularly discussed below) and on the evidence before me the “serious concerns” are not made out.
I Application by Vale under Section 70 of the Act for security for the amount payable under the Award
The relevant provisions of Section 70 of the Act state:
“(1) The following provisions apply to an application or appeal under section 67, 68 or 69.
…
(7) The court may order that any money payable under the award shall be brought into court or otherwise secured pending the determination of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with.”
The legal principles to be applied by the court were said in oral submissions for Vale to be common ground and although some differences were notable in the written submissions, I proceed on the basis that for present purposes the law is as stated by Picken J in Progas v Pakistan [2018] EWHC 209 (Comm) that it is necessary (in relation to a challenge under section 68 or 69) to show that the challenge in some way prejudices the ability of the defendant to enforce the award or diminishes the claimant's ability to honour the award and that, at [64]:
“… in order to show that the ability to enforce an award has been prejudiced or the ability of the applicant to honour it has been diminished, it is “effectively necessary to satisfy a similar requirement to that of a freezing injunction, namely the risk of dissipation of assets” between the time of the section 68 application and its final disposal…”
It was accepted by both parties that unlike the position in relation to a section 67 challenge (challenge to substantive jurisdiction) and as stated by Picken J in Progas, there is no threshold or additional requirement that the party seeking security should show that the challenge to the award is flimsy or otherwise lacks substance.
I bear in mind however the observations of Teare J in X v Y [2013] EWHC 1104 (Comm), cited by Picken J at [53], that:
“… the jurisdiction conferred on the court by section 70 should not be used a means of assisting a party to enforce an award which has been made in its favour.”
It was submitted for Vale that...
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