The Eastern Caribbean Court of Appeal has upheld the discharge of three freezing orders relating to assets with a gross value of over US$3 billion in the long-running Emmerson—Renova litigation. In dismissing three related appeals brought by Emmerson International Corporation (“Emmerson”), the Court of Appeal gave important guidance on several common issues that arise in obtaining and discharging freezing orders. Its decision also represents the first detailed appellate consideration of the use of confidentiality clubs in offshore commercial litigation.
The case arises from a joint venture in Russian electricity generation and distribution assets and concerns various claims and counter-claims between former Russian government minister Mikhail Abyzov and companies associated with him (the “Abyzov Parties”) and businessman Viktor Vekselberg and a number of companies in the Renova Group (the “Renova Parties”).
In 2013, the Renova Parties commenced proceedings in the British Virgin Islands seeking declaratory relief in relation to the terms of the joint venture. The Abyzov Parties subsequently brought claims against the Renova Parties within the same proceedings seeking to recover contributions made to the joint venture.
In October 2018, Emmerson (one of the Abyzov Parties) obtained an asset disclosure order on an inter partes basis against Mr Vekselberg and other Renova Parties in support the Abyzov Parties’ claims. In November and December 2018, relying in part on alleged failures to comply with the asset disclosure order, Emmerson applied ex parte and obtained freezing orders from Wallbank J that froze shares in three companies listed on the SIX Swiss Exchange, Switzerland’s main stock exchange.
In June 2019, Jack J discharged the freezing orders on several bases including that there was no evidence of a real risk of unjustifiable asset dissipation; that Emmerson was guilty of culpable delay in seeking freezing relief; and that Emmerson had committed a number of serious non-disclosures at the ex parte hearings in November and December 2018.
Emmerson appealed Jack J’s decision to the Court of Appeal. It also appealed Jack J’s earlier refusal to grant Emmerson a last-minute adjournment of the discharge hearing and a prior order by Wallbank J, which imposed a confidentiality club on documents disclosed under the asset disclosure provisions of the freezing orders pending determination of the Renova Parties’ discharge application. The Court of Appeal heard the three appeals together on an expedited basis at a three-day hearing in July 2019.
In two unanimous judgments, the Court of Appeal (Baptiste, Blenman and Thom JJA) dismissed all three appeals.
The Court upheld Jack J’s ruling that the freezing orders should be discharged, agreeing that there were multiple independent reasons to justify that outcome including the absence of any evidence of a real risk of dissipation and serious breaches of Emmerson’s duty of full and frank disclosure. In doing so, its judgment provided important guidance on the limits of relying on allegations of dishonesty and the existence of offshore asset-holding structures in support of freezing order applications.
The Court delivered a separate judgment in relation to the appeal against the confidentiality club order. The appeal had been remitted to the Court of Appeal for further consideration by the Privy Council in May 2019, following its reversal of an earlier decision by the Court of Appeal striking out the appeal.
The Court of Appeal upheld the confidentiality club order, endorsing English authority that the decision whether to impose a confidentiality club is a discretionary balancing exercise taking into account all of the circumstances of the case. The Court rejected the submission that the right of a freezing order applicant to police the order overrode the prejudice a respondent might suffer if its confidential documents were disclosed. This is the first time that the Court of Appeal has been required to consider the basis for imposing confidentiality clubs and, in particular, their use in connection with ancillary disclosure under a freezing order.
The judgments are available here and here.
Andrew McLeod acted for the Renova Parties (led by Paul McGrath KC of Essex Court Chambers), instructed by Agon Litigation and DLA Piper. He appeared unled for the Renova Parties at first instance at the hearing of Emmerson’s adjournment application (against Philip Marshall KC), the dismissal of which was upheld by the Court of Appeal.