Tajik Aluminium Plant v Ermatov & Ors

At an inter partes hearing for freezing or search relief, the claimant must establish a good arguable case. That does not require showing a better than 50 per cent prospect of success. The court must consider the defendant’s evidence and retain a discretion whether relief is appropriate.

Freezing relief also requires a real risk of asset dissipation. The risk must be assessed separately for each defendant. Exceptional pre-trial relief may properly be discharged where the applicant’s litigation is substantially directed or funded by a commercial rival whose interests create a serious risk of unfair access to disclosed material. The court should avoid appearing to assist a wider commercial contest.

The claimant, a state-owned aluminium smelting enterprise, alleged that its former director and associated companies had engaged in a corrupt scheme involving the supply of alumina and the receipt of finished aluminium. On a without-notice application, Etherton J granted worldwide freezing orders, asset-disclosure orders, a proprietary injunction, and search and seize orders.

The defendants applied to set those orders aside. They denied fraud and brought a Part 20 counterclaim alleging that the claimant, its new management and a major commercial participant had themselves acted unlawfully to replace the existing trading arrangements. The central issues were whether the claimant had a good arguable case, whether there was a real risk of dissipation or document suppression, and whether relief remained appropriate in light of the competing claim and the commercial involvement of the claimant’s funder and litigation adviser.

1. The court held that the inter partes test was not whether the claimant had a better than 50 per cent chance of success. The claimant had to show a good arguable case. The court was entitled to consider the defendants’ evidence and retained a discretion whether to grant or continue relief even if the threshold was met ([2005] EWHC 2241 (Ch), paras 157–160).

2. On the evidence, Tadaz had a good arguable case against Mr Ermatov, Ansol and Mr Nazarov. The case against Ashton and Mr Shushko was weaker but not unsustainable. No sufficient case was established against Ms Osadchaya or the eighth and ninth defendants. The court also found a seriously arguable case in Ansol’s Part 20 claim concerning the replacement of the Hamer arrangements by the CDH tolling agreement (paras 165–180).

3. The court found a sufficient basis to infer a risk of asset dissipation and document suppression in the case of Mr Ermatov, Ansol and Mr Nazarov, but not in the case of the other defendants. The assessment was fact-sensitive and defendant-specific (paras 169–172).

4. The relative strengths of the competing claims were broadly balanced. Rusal had been involved in the earlier joint venture, was funding some or all of Tadaz’s litigation costs, and was providing day-to-day instructions to Tadaz’s solicitors while pursuing its own commercial interests. Disclosure under the search and freezing orders was therefore likely to reach Rusal despite safeguards, creating a serious risk of unfairness to Ansol. In those circumstances, continuing exceptional pre-trial relief would improperly assist a wider commercial contest (paras 185–193).

5. The freezing orders and search and seize orders were discharged. The judge was minded to retain the proprietary injunction against Mr Ermatov, Ansol and Mr Nazarov, but not against Ashton, Mr Shushko, Ms Osadchaya or the eighth and ninth defendants, subject to further argument. The seized files were to be returned to the defendants’ solicitors, subject to identifying documents requiring disclosure (paras 194–196).

First-instance decision. The judgment does not state any prior appellate decision.