Dreymoor Fertilisers Overseas PTE LTD v (1) Eurochem Trading GMBH (2) JSC MCC Eurochem [2018] EWHC 2267 (Comm)

The Claimant (Dreymoor) was an international trading company incorporated in Singapore. The Defendants (ECTG and EuroChem) were sister companies under common ownership, incorporated in Switzerland and Russia, who sold fertiliser products worldwide. Between 2008 and 2013 ECTG and Dreymoor entered into several hundred contracts for the sale of fertiliser products, all containing UK arbitration clauses. ECTG had brought proceedings in the BVI and in two London arbitrations (each jurisdiction relating to different collections of contracts), alleging that the contracts were vitiated by very substantial bribes paid by Dreymoor to two former senior employees of ECTG.

The Defendants had also filed an application before the US District Court for the Middle District of Tennessee under section 1782 of the United States Code. Section 1782 authorises the District Court of the district in which a person resides to order that person to provide testimony and/or documents “for use in a proceeding in a foreign or international tribunal.” The application was made against a Mr Chauhan, who was formerly a director and chief trader of Dreymoor. The application was granted, which (despite the US Court declining to find whether a London arbitration was a “foreign or international tribunal” under the meaning of the section) meant that as a matter of US law the information obtained could then be used for any purpose, including the London arbitrations.

Dreymoor then brought proceedings in the English High Court, seeking an injunction to restrain enforcement of the order made by the United States Court until (effectively) after the conclusion of the arbitral proceedings. The application was put on two bases: first, that it was implied into the agreement to arbitrate that disputes should be dealt with by the agreed arbitral process and in no other way; second, that it would be unconscionable to permit reliance on section 1782. After a temporary injunction was granted, the full hearing took place before Mr Justice Males.

Discussion

Section 1782 of the United States code has been considered by the English court before, on at least three previous occasions (including in the House of Lords in South Carolina Insurance Co v Assurantie Maatschappij “De Zeven Provincien” NV [1987] 1 AC 24). It was apparent from the authorities that the use of the procedure under section 1782 is (as a matter of English law) capable of constituting unconscionable conduct interfering with the fair disposal of English court or arbitration proceedings, which the English court will restrain by injunction. Whether it will do so in any given case will depend on all the circumstances, but a driving factor (as set out by Lord Brandon in the South Carolina case) will be that “the English court would not in general seek to control the manner in which a party obtained evidence, provided that the means by which it did so were lawful in the country where they were used” (§60).  Further, it followed that “the fact that a party to English litigation is able to obtain evidence by means of a right available in a foreign country significantly different from that available in the English system does not, by itself, constitute unconscionable conduct” (§61(3)). Examples of potential unconscionable conduct include the risk that witnesses are exposed to unwarranted double cross-examination, or that witnesses will be discouraged from appearing in the English proceedings.

However, in this case the Court found that there would be no unconscionable conduct in refusing the injunction, for ten separate reasons (§§71-82), including that granting the injunction would be a serious breach of comity; the delay in making the application; and that Mr Chauhan would face double cross-examination in any event, the only question being whether the deposition would occur before or after the arbitration.

It is easy to see the interest this case holds for employment lawyers. Claimant companies may well find themselves in disputes with former employees and their new employers who are now located outside the jurisdiction (including the US). The case provides a salutary reminder to consider making applications outside the jurisdiction to gather information for use here.

It is apparent from the judgment that, on the facts, judicial sympathy lay entirely with the Defendant. It was evident that Males J was surprised by the obviously strenuous and expensive efforts expended by Dreymoor across several jurisdictions to prevent reliance on its former director’s information. As Counsel for the Defendant submitted (§15), it might be expected that if Dreymoor had innocently become the means by which a fraud had been perpetrated on its contractual counterparty then it would cooperate in bringing the fraudsters to justice, including by providing such information as necessary. Males J expressly declined to decide on the force of that submission, but it was clearly a driving factor in the decision; indeed, as Males J said, “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” (§15). Those opposing the use of information can take comfort that the decision may well go the other way on more balanced facts.

The text for the full judgment can be found here.