Dreymoor Fertilisers Overseas Pte Ltd v Eurochem Trading GmbH
| Jurisdiction | England & Wales |
| Judge | Mr Justice Males |
| Judgment Date | 24 August 2018 |
| Neutral Citation | [2018] EWHC 2267 (Comm) |
| Date | 24 August 2018 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2018-000504 |
[2018] EWHC 2267 (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
Mr Justice Males
Case No: CL-2018-000504
Catherine Newman QC (instructed by Kermans LLP) for the Claimant
Justin Fenwick QC and George Spalton (instructed by Sherrards Solicitors LLP) for the Defendants
Hearing date: 21.8.18
Approved Judgment
The application
This is an application by the claimant, Dreymoor Fertilisers Overseas Pte Ltd (“Dreymoor”), to continue an injunction to restrain the defendants from enforcing an order made by a court in the United States requiring Mr Sandeep Chauhan to disclose documents in his possession and to provide evidence by way of deposition. The order was made pursuant to section 1782 of the United States Code and was stated to be made for the purpose of providing evidence in proceedings taking place in the British Virgin Islands and Cyprus. However, the defendants make no secret of the fact that they intend also to use whatever information is obtained pursuant to the order in arbitrations between the parties in London. Dreymoor submits that this would constitute an unconscionable interference with the arbitral process which should be restrained by an injunction. I shall refer to the order of the United States court as “the 1782 Order”.
An interim injunction was granted by Bryan J at a without notice hearing on 27 July 2018. Dreymoor seeks now to continue that injunction until after the completion of disclosure in the arbitrations so far as production of documents is concerned and until after the conclusion of the evidentiary hearing in the arbitrations so far as the deposition is concerned. Its position is that it will produce as part of its disclosure in the arbitrations any material documents in Mr Chauhan's possession, thereby rendering the order for disclosure by Mr Chauhan unnecessary, and that it intends and expects to be able to produce a witness statement from Mr Chauhan and to make him available for cross-examination at the hearing, thereby rendering his deposition unnecessary.
Thus Dreymoor does not seek to prevent enforcement of the 1782 Order for all time. It accepts that the defendants may seek disclosure of documents from Mr Chauhan and may depose him in the future – but only at a time when this will not affect its preparation in the arbitrations and when it will be too late for the defendants to use the fruits of the 1782 Order in the arbitrations.
The parties
The first defendant, Eurochem Trading GmbH (“ECTG”) is a Swiss company. It was a wholly owned subsidiary of the second defendant, JSC MCC EuroChem (“EuroChem”), a Russian company, but as a result of a corporate reorganisation the two companies have become sister companies under common ownership. ECTG and EuroChem sell fertiliser products in a range of countries worldwide.
Dreymoor is an international trading company incorporated in Singapore. Its sole shareholder and beneficial owner is Mr Aleksandr Shishkin.
The parties' contracts
Between 2008 and 2013 ECTG and Dreymoor entered into several hundred contracts for the sale of fertiliser products. For present purposes those contracts fall into two categories.
Some were for the supply of fertiliser products to India. It is ECTG's position that, in the case of these contracts, Dreymoor was acting as an agent for ECTG in reselling the goods, and therefore owed it fiduciary obligations. Dreymoor disputes that, saying that it contracted to buy and resell the goods as a principal.
Other contracts between the parties were for supply to destinations other than India. These have been referred to as the “rest of the world” or “RoW” contracts. It is common ground that in the case of these contracts the parties were acting as principals.
All of the parties' contracts contained arbitration clauses providing for arbitration in London. Most provided for arbitration in accordance with the LCIA Rules although some provided for the ICC Rules.
ECTG's claims
ECTG's case is that the contracts between the parties were vitiated by very substantial bribes paid by Dreymoor to two former senior employees of ECTG, Mr Valery Rogalskiy and Mr Dimitry Pomytkin. It appears that another counterparty of ECTG, a company called Yara which is independent of Dreymoor, has admitted that it paid such bribes, but Dreymoor disputes this. As a result ECTG has brought proceedings in the British Virgin Islands (where EuroChem is also a claimant) which are concerned with the RoW contracts and in two London arbitrations which are concerned with the Indian contracts. While it asserts a variety of causes of action, they all appear to depend on the allegation of bribery. As explained below, Dreymoor has challenged the jurisdiction of the BVI court but has not (or at any rate has not yet) sought a stay of those proceedings in favour of arbitration.
Although the two sets of proceedings are concerned with distinct contracts, and in the London arbitrations there is an issue as to the capacity in which Dreymoor was acting, it appears that the issue of substance in both of them is the same, namely whether Dreymoor paid bribes to Mr Rogalskiy and Mr Pomytkin.
Dreymoor accepts that it made payments to Mr Rogalskiy and Mr Pomytkin or at their direction, but denies that these were bribes. The witness statement of its solicitor, Mr Jonathan Evans of Kerman & Co LLP, referring to Dreymoor's Statement of Defence in the arbitrations, described these payments as follows:
“11.2 Dreymoor denies that it paid ‘bribes’ to companies controlled by Mr Rogalskiy and Mr Pomytkin. Dreymoor is quite open it made payments under an ad hoc and flexible arrangement to companies nominated by Mr Rogalskiy, which were a part of the profit that Dreymoor made on its worldwide onward sales (and not simply those into the Indian market).
11.3 Dreymoor alleges that it honestly and reasonably believed that Mr Rogalskiy was acting with the knowledge of and at the direction of the ultimate beneficial owners of EuroChem; that the companies nominated by Mr Rogalskiy were under the control of EuroChem or its ultimate beneficial owners; that it assumed (but did not know) that the purpose of the payments to nominated companies was to reward those ultimate beneficial owners in a way that would reduce the amount of tax that would otherwise be due to the relevant authorities in Russia or Switzerland; and that this was consistent with the manner in which EuroChem had structured its business historically; and that other international traders conducting business with ECTG [and EuroChem] had arrangements.”
Mr Evans does not identify the individuals who is (or are) said to have had this honest and reasonable belief, but it appears that he is referring to Mr Shishkin.
There is no reason to suppose that the nature of the payments differed as between the Indian and the RoW contracts. The passage from Mr Evans' statement set out above appears to confirm that it did not. The position, therefore, is that either these payments are properly to be characterised as bribes in both cases or in neither.
Mr Justin Fenwick QC for ECTG and EuroChem submitted that a company which, acting innocently, had become the means by which a fraud had been perpetrated on its counterparty, might be expected to cooperate in bringing the fraudsters to justice. Whether there is force in that submission is not for me to decide, but at all events that is not the position which Dreymoor has adopted. In these circumstances it does not require much imagination to predict some of the questions which ECTG's lawyers would wish to ask those who were responsible for Dreymoor's trading with ECTG. These include Mr Chauhan, who was until recently a director of ECTG and who was described by Miss Catherine Newman QC for Dreymoor as having been its chief trader at the time of the matters in dispute.
The BVI proceedings
ECTG and EuroChem brought proceedings in the BVI against 18 defendants including Dreymoor (in fact the 18 th defendant) in August 2015. The claim against Dreymoor relates only to the RoW Contracts. Other defendants included Mr Rogalskiy and Mr Pomytkin as well as various offshore companies to which illicit payments are alleged to have been made.
Dreymoor and some of the other defendants challenged the jurisdiction of the BVI court, but their challenge was unsuccessful before Wallbank J. Dreymoor and others then appealed to the Eastern Caribbean Court of Appeal. Judgment on those appeals is currently reserved but (according to ECTG) it is hoped that this will be given at the next sitting of the court in October 2018 or, if not, in January 2019. Meanwhile, the proceedings are stayed so far as they concern the defendants whose challenge to the jurisdiction on appeal is outstanding. Some of the other defendants in the BVI proceedings are in liquidation and, in some cases, ETCG and EuroChem have obtained default judgments against them.
Dreymoor has admitted that it is funding the defence of the BVI action, including the jurisdictional challenge, by at least some of the other defendants, and that the defendants so funded include Mr Rogalskiy and Mr Pomytkin.
In 2018 ECTG and EuroChem brought further proceedings in the BVI against five defendants, including Mr Shishkin, although this second action is at a very early stage and Mr Shishkin has not yet been served. This claim also relates only to the RoW contracts.
The Cyprus proceedings
EuroChem and ECTG brought proceedings in Cyprus in 2014 relating to what were alleged to have been bribes paid to a company owned by Mr Rogalskiy. The claim was for Norwich...
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