Arcelormittal USA LLC v Essar Steel Ltd

A worldwide freezing order may support enforcement of a foreign arbitral award where the award has been recognised as an English judgment. The court’s discretion is governed by whether relief is just and convenient. In exceptional circumstances, including serious wrongdoing prejudicial to creditors and analogous to international fraud, the absence of substantial English assets or a foreign seat does not prevent intervention. In assessing risk of dissipation, the court may consider conduct by beneficial owners and related companies within the same group. A search order must satisfy the requirements of a strong prima facie case, evidence of major importance, a real possibility of destruction and proportionality. Norwich Pharmacal relief may support an English freezing order where necessary to identify assets and prevent further dissipation, but it cannot become wide-ranging discovery.

ArcelorMittal USA LLC obtained an arbitral award against Essar Steel Ltd and permission to enforce it as an English judgment. Butcher J subsequently granted a worldwide freezing order, search orders and Norwich Pharmacal orders without notice. The respondents and defendants applied to discharge those orders, alleging lack of jurisdictional connection, material non-disclosure, disproportionality and defects in service. The central issues were whether the freezing order should remain in place, whether the search and information orders were available in support of it, and whether the evidence established a real risk of dissipation and a need for exceptional relief.

1. Worldwide freezing order. The court had jurisdiction to grant a worldwide freezing order ancillary to enforcement of a foreign arbitral award recognised as an English judgment. The manner in which the application had been served was immaterial. The relevant discretion was whether relief was just and convenient under section 37(1) of the Senior Courts Act 1981 (paras [12]–[16]).
2. There was solid evidence of a very serious current risk of dissipation. The court could consider related-party transactions, the disappearance or attempted removal of a substantial asset, concealment of accounts, conduct prejudicial to creditors and evidence of bad faith. In that context, the separate legal personality of companies within the group did not prevent consideration of the conduct of ultimate owners or controllers (paras [17]–[18], [33], [42], [48]–[59], [67]–[68]).
3. The circumstances were analogous to international fraud and exceptional enough to justify intervention despite limited English assets and the foreign seat of the arbitration. There was no need for a precise definition of international fraud. Serious wrongdoing on a large or repeated scale, involving conduct prejudicial to creditors and in bad faith, could suffice. The English connections, the practical enforceability of the orders and the absence of conflicting foreign relief made intervention just and convenient (paras [69]–[83]).
4. The allegations of material non-disclosure did not justify discharge. The admitted reliance on the wrong jurisdictional gateway was immaterial because no separate gateway was required. The orders therefore remained in place (paras [84]–[94]).
5. Search order. Section 7 of the Civil Procedure Act 1997 permitted a search order ancillary to existing English proceedings in which the freezing order remained in force. The requirements were a strong prima facie case, evidence of major or critical importance, a real possibility of destruction and proportionality. Those requirements were satisfied in principle, although the precise width of the order could be reconsidered (paras [96]–[106], [124]–[128]).
6. Norwich Pharmacal relief. The court had jurisdiction under section 37(1) of the Senior Courts Act 1981 to order information from persons mixed up in wrongdoing where the order was ancillary to an English freezing injunction. Relief was necessary to identify assets and prevent further dissipation, not merely to facilitate foreign proceedings. It remained exceptional and confined to necessary information, rather than wide-ranging discovery. The orders were justified in principle, subject to later consideration of their scope (paras [152]–[172]).
7. Information about transactions and assets was not privileged merely because it came to a solicitor in the course of professional employment. Privilege depended on the circumstances in which the information was communicated, and did not extend automatically to all otherwise non-privileged facts (paras [177]–[180]).
8. The applications to discharge the orders were refused in principle. Mr Harrold and Mr Seifert were entitled to their reasonable compliance costs. No order was made for the costs of Essar Oil or Essar Capital Services (paras [181]–[182]).

The judgment concerns applications to discharge orders granted without notice by Butcher J. on 14 January 2019. It is a first-instance decision and is not described as an appeal.