Travis Coal Restructured Holdings Llc v Essar Global Fund Ltd (Formerly Known as Essar Global Ltd)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Blair |
| Judgment Date | 24 July 2014 |
| Neutral Citation | [2014] EWHC 2510 (Comm) |
| Docket Number | Case No: 2014 FOLIO 326 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 24 July 2014 |
[2014] EWHC 2510 (Comm)
Mr Justice Blair
Case No: 2014 FOLIO 326
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Edmund King (instructed by Latham & Watkins (London) LLP) for the Claimant
Ricky Diwan (instructed by Shearman & Sterling (London) LLP) for the Defendant
Hearing dates: 5 June & 20 June 2014
This is an application by the defendant, a Cayman company called Essar Global Fund Limited ("EGFL"), in respect of proceedings in England brought by the claimant, a Delaware company called Travis Coal Restructured Holdings LLC ("Travis"), to enforce an ICC arbitral award dated 7 March 2014 in the claimant's favour in the sum of US$148m plus pre-award interest of US$56.7m and costs. Judgment was entered by this court in terms of the award in the claimant's favour on 26 March 2014 under s. 101 Arbitration Act 1996.
On 10 April 2014, EGFL applied under s. 103 Arbitration Act 1996 (1) for an order setting aside the judgment, (2) alternatively seeking an adjournment of the decision on recognition and enforcement of the award pending the determination of proceedings filed by EGFL challenging the award. These were filed on 9 April 2014 before the United States District Court for the Southern District of New York applying to vacate the award pursuant to the provisions of s. 10 of the Federal Arbitration Act and New York law. EGFL's contention at the hearing has been that the proceedings in England should be adjourned, and this is where the argument has centred. Travis opposes its application, contending that the court should order immediate enforcement in full, but in the event that the court decides to adjourn, seeks an order for suitable security pursuant to s. 103(5) Arbitration Act 1996. EGFL denies that this is a case in which to order security.
There was a dispute between the parties as to whether the hearing should be in public or in private. Neither party had addressed the relevant provisions of CPR Part 62 in their written submissions. In short, Travis submitted that the hearing should be in public because it concerned enforcement, whilst EGFL submitted that it should be held in private because it related to its application to set aside or adjourn the decision on recognition or enforcement of the award. This raised a somewhat complex question as to the interrelationship of the various provisions of the CPR, and whilst the parties' respective positions were further explained in letters exchanged by their solicitors between hearings, the question should (I consider) be decided in a case where there has been proper argument. I add that the dispute is somewhat unreal, since the arbitration award (with some minor redactions relating to financial information) is now publicly available on the website of the New York court. The parties agree that this judgment should be in public. However, the hearing itself will be treated as in private, which is the usual position in arbitration proceedings.
The facts
The facts are complex, but for the purposes of this application can be stated relatively simply. By a Stock Purchase Agreement of 29 March 2010, a company called Essar Minerals Inc (which is a wholly owned subsidiary of EGFL) acquired from Travis the shares in a US coal mining operation called Trinity Parent Corporation. As part consideration for the purchase, on 7 April 2010 Essar Minerals Inc issued promissory notes in favour of Travis in the sum of US$203m.
Also on 7 April 2010, an Intercreditor and Subordination Agreement was entered into between Essar Minerals Inc, Travis and Crédit Agricole. Further on 7 April 2010, a Guarantee was entered into between EGFL, Travis and Crédit Agricole (the latter on behalf of the Senior Lenders). Under the Guarantee, EGFL guaranteed (1) Trinity's obligation to repay the Senior Lenders, and (2) Essar Minerals Inc's obligation to Travis to make payment under the US$203m notes issued in respect of the price.
Under the terms of the Guarantee, EGFL's guarantee to the Senior Lenders was capped at US$103m, and EGFL's total liability under the Guarantee was capped at US$203m. EGFL's case is that Travis's rights under the Guarantee were subordinated to the fulfilment of EGFL's guarantee obligations to the Senior Lenders, so that the Senior Lenders were to be paid first up to the cap amount of US$103m. Thus, payments to the Senior Lenders under the Guarantee counted against the overall US$203 million cap, thereby reducing any amount due to Travis.
Following the acquisition, EGFL's case is that Essar Minerals Inc discovered that the true financial position of Trinity was very different to that which had been represented by Travis in that it is claimed that Travis failed to disclose that Trinity would need a US$200m capital infusion to continue operating and had significantly understated Trinity's environmental rehabilitation obligations and significantly overstated the amount that Essar Minerals Inc would receive from a third party. These are described in the papers as EGFL's "fraud defences".
Following a non-payment by Essar Minerals Inc in April 2012, Travis accelerated the amounts due under the notes, but the notes were not paid. Travis then claimed payment from EGFL under the Guarantee, but this claim was not met either.
By clause 7.7 of the Guarantee, which is governed by New York law, the parties agreed to settle disputes by arbitration, to "…be conducted in accordance with the Rules of Arbitration of the International Chamber of Commerce (the "ICC Rules") as in effect at the time of arbitration, except as may be modified herein… The place of arbitration shall be New York, New York".
On 25 May 2012, Travis commenced arbitral proceedings under this clause. An ICC arbitral tribunal was appointed on 26 October 2012 comprising Professor William W. Park, Mr Mark Kantor and Mr Philip Lacovara. It is not in dispute that these are leading international arbitrators.
The procedural history of the arbitration is set out in the award. Of particular relevance to the present proceedings is that on 7 December 2012, Travis filed a motion for summary judgment, which was opposed by EGFL on the basis that the Tribunal had no power of summary judgment, and that this procedure would contravene its right to a fair opportunity to be heard on its fraud defences. This gives rise to one of the two complaints that EGFL makes in this case.
Meanwhile, on 11 February 2013, the Senior Lenders accelerated Trinity's debt and demanded payment from EGFL of US$166.7m comprising US$117.4m being the outstanding principal amount of Loans, and US$49.3m being the amount of outstanding Letters of Credit. On 19 February 2013, the Senior Lenders filed an involuntary bankruptcy petition against Trinity in the US Bankruptcy Court for the Eastern District of Kentucky under Chapter 11 of the Bankruptcy Code. (They also commenced their own arbitration proceedings against EGFL under the Guarantee, though these proceedings were eventually withdrawn following the payment mentioned below under the bankruptcy Reorganization Plan by EGFL.)
EGFL's case is that a complex arrangement was negotiated in the bankruptcy proceedings involving numerous parties (including the Senior Lenders, unsecured creditors and employees of the company), which culminated in Trinity and certain of its affiliates submitting a proposed Reorganization Plan for approval by the Bankruptcy Court. The Reorganization Plan provided for the payment of US$103m to the Senior Lenders under the Guarantee comprising: (1) repayment of certain Loans; and (2) satisfaction of the Senior Lenders contingent obligations under Letters of Credit issued for Trinity's benefit.
Travis submitted objections to the proposed Reorganization Plan because of concerns as to the effect of the proposals on its claims under the Guarantee. EGFL responded to the effect that it was not seeking the Bankruptcy Court to make any finding or conclusion with respect to EGFL's obligations to Travis whilst (as EGFL says in its submissions) noting that Travis's obligations might be affected as a result of the operation of the Guarantee.
A hearing took place before the Bankruptcy Court on 8 November 2013, and it is sufficient to summarise EGFL's case in this respect. Travis's counsel made oral submissions objecting to the Trinity Reorganization Plan allocating payments to the Guarantee. Counsel for EGFL took the opposing position that confirmation of the Reorganization Plan would require the Bankruptcy Court to find that the payments made to the Senior Lenders were payments under the Guarantee and thus satisfied its guarantee obligations. At the same time, Counsel for EGFL acknowledged that the Court was not being asked to determine the impact on Travis.
The Bankruptcy Court's Chapter 11 Confirmation Order In re Trinity Coal Corporation et al is dated 8 November 2013. EGFL's case is that in its Findings of Facts and Conclusions of Law, the Bankruptcy Court stated that payment of US$103m was pursuant to the terms of the Guarantee. Paragraph 7 of the Order is to the effect that upon payment of the Loan amounts and replacement of the Letters of Credit, EGFL shall have paid the amount of US$103m in respect of the guaranteed obligations. This gives rise to the second of the two complaints that EGFL makes in this case, which is that the Bankruptcy Court in effect decided that this sum went towards the US$203m cap, and that its decision was binding on the Tribunal under the doctrine of "collateral estoppel" (which is similar to the English law doctrine of issue estoppel or res judicata).
Travis contests this. It relies among...
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