Arcelormittal USA LLC v Essar Steel

The court refused the applications to discharge the worldwide freezing order, search order and Norwich Pharmacal relief granted to ArcelorMittal USA LLC in aid of enforcement of an ICC arbitral award now recognised as a judgment of the High Court. The judge held that the English court had jurisdiction to grant ancillary relief in aid of enforcement of a foreign award and that the case presented exceptional circumstances (analogous to international fraud) warranting extraterritorial protective measures.

Key legal principles applied included the requirements for a freezing order (a real risk of dissipation supported by solid evidence), the test for orders ancillary to enforcement of a foreign arbitral award (including Eastern European Engineering v Vijay), and the narrow Norwich Pharmacal jurisdiction (a good arguable wrongdoing, necessity and that the third party is "mixed up" in the wrongdoing). The court found solid evidence of a real risk of dissipation from: the Ontario judgment concerning the Algoma/Port transaction and findings of bad faith, the restatement of Essar Steel’s 2015 accounts removing a US$1.5 billion receivable, the Indian Supreme Court findings regarding control structures, the DRI report suggesting fraudulent invoicing, and contemporaneous concealment and destruction risks (including emails instructing concealment during the executed search).

The judge rejected allegations of material non-disclosure at the without-notice hearing as either immaterial or insufficient to require discharge, and concluded the freezing, search and Norwich Pharmacal orders should remain in place while their precise terms may be adjusted on further application.

Background and parties. ArcelorMittal USA LLC (AMUSA) sought urgent protective relief in England in aid of enforcement of an ICC arbitral award (Minnesota seat) against Essar Steel Limited (Mauritius). Butcher J had granted permission to enforce the award as a High Court judgment and made a worldwide freezing order (WFO), search orders and Norwich Pharmacal orders at a without-notice hearing. Essar Steel and other group individuals and companies applied to discharge those orders; Jacobs J heard the return/adjourned hearing.

Nature of the applications. AMUSA sought continuation of (i) a worldwide freezing injunction against Essar Steel, (ii) a search order at Lansdowne House and associated imaging/disclosure of electronic devices, and (iii) Norwich Pharmacal relief requiring group companies and former/current officers to identify and produce documents showing disposals or current location/value of Essar Steel’s assets since 1 January 2012.

Issues framed by the court. (i) Whether the English court had jurisdiction and whether it was just and convenient to grant or maintain a WFO in aid of enforcement of a foreign arbitration award; (ii) whether AMUSA had shown a real risk of dissipation (solid evidence standard); (iii) whether material non-disclosure at the ex parte hearing required discharge; (iv) whether the search order satisfied the exceptional stringent requirements (strong prima facie case, evidence that relevant evidence existed on the premises, real risk of destruction, proportionality); (v) whether Norwich Pharmacal relief was available and necessary; and (vi) costs consequences.

Court’s reasoning and conclusions. The court held (a) jurisdiction existed to grant WFOs ancillary to enforcement of a foreign arbitral award and that Eastern European Engineering v Vijay supported exercising discretion to do so; (b) AMUSA had established solid evidence of a real and current risk of dissipation in view of ({i}) the Ontario decision finding bad faith in related-party transactions concerning Algoma and the Port Transaction, ({ii}) the restatement of Essar Steel’s 2015/2016 accounts removing a US$1.5 billion receivable (treated as an advance against a future buy-back) in suspicious temporal proximity to the arbitration, ({iii}) the Indian Supreme Court’s findings regarding smokescreen control structures, and ({iv}) the DRI report and contemporaneous conduct (including emails instructing concealment during the search and evidence about withholding of ESML-related documents and continuing access by a key Essar employee); (c) those matters justified treating the case as analogous to international fraud and therefore as an exceptional case warranting extraterritorial relief; (d) allegations of material non-disclosure at the without-notice hearing were considered and rejected as not sufficient to require discharge; (e) the search order met the stringent test because of the risk of document destruction and the likelihood that Lansdowne House and associated servers contained documents of major importance to policing the WFO; (f) Norwich Pharmacal relief was available and, as a matter of principle, necessary to make the WFO effective because third parties were arguably mixed up in past disposals and could provide necessary information; (g) some respondents (Mr Seifert and Mr Harrold) were entitled to recover their reasonable costs of compliance under an express undertaking; other occupants of Lansdowne House were not awarded costs against AMUSA.

Practical note. The court maintained the orders in principle but left detailed scope, limitation and timing issues (including narrowing of paragraph 9 of the WFO and temporal scope of Norwich relief) for further application; committal proceedings for alleged contempts arising from the search were directed to proceed.

This was a first-instance disposition. The court refused to discharge the worldwide freezing order, the search order and the Norwich Pharmacal orders. Jacobs J held that the English court had jurisdiction to grant ancillary relief in aid of enforcement of the foreign arbitral award, that AMUSA had established a real risk of dissipation supported by solid evidence (including the Ontario judgment, the restatement of Essar Steel’s accounts removing a US$1.5 billion receivable, evidence of concealment and documents suggesting bad faith), and that the stringent tests for search and Norwich Pharmacal relief were satisfied in principle. The orders were therefore continued, with leave to seek refinement of their terms and timing, and certain costs directions were given (notably costs for Mr Seifert and Mr Harrold to be paid by AMUSA).