First published in New Law Journal, July 2021.
Appleby partners Anthony William and Jared Dann and Counsel Claire Corkish join partner & head of civil fraud and asset recovery at Pinsent Masons, Alan Sheeley and Emilie Jones to discuss the key role of third-party disclosure to tackle offshore fraud.
A recent decision of the Court of Appeal of the Cayman Islands (CICA), Essar Global Fund Ltd & anorv ArcelorMittal USA LLC (3 May 2021, CICA (Civil) Appeal No 15 of 2019), highlights the power of a key investigative tool for victims of fraud involving offshore jurisdictions, the Norwich Pharmacal order (NPO).
The CICA confirmed that the Cayman courts have jurisdiction to grant an NPO in support of potential proceedings in a foreign court, such as the UK courts. This is an issue which has been the subject of debate under English law. The Cayman approach is of significant assistance in the fight against fraud perpetrated using vehicles in offshore jurisdictions, helping victims to seek from trustees and corporate service providers information they need to identify wrongdoers and trace lost assets.
An NPO is a type of disclosure order which allows information to be obtained from third parties 'mixed up' in wrongdoing, helping victims pursue those ultimately responsible. NPOs can be used to identify a wrongdoer, trace assets and obtain other information needed by a victim to put together its case against the wrongdoer.
Essar v ArcelorMittal
In this case, the CICA upheld an NPO requiring two Cayman entities in corporate group Essar to disclose information and documents relating to the assets of another Essar entity, in Mauritius, which owes an entity in US group ArcelorMittal over USD$1.5bn under an arbitral award. The information was sought given concerns that assets were being stripped from the relevant Essar entity to evade enforcement.
One of Essar's arguments against the making of the NPO was that such an order cannot be made where the information is sought for the purpose of pursuing foreign proceedings. They argued that a Cayman statute, the Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978 ('the Evidence Order'), provided the exclusive means of obtaining information or documents for use in overseas litigation. They based this on an English case, Ramilos Trading Ltd v Buyanovsky  EWHC 3175 (Comm), in which the Commercial Court considered this issue in relation to UK legislation similar to the Evidence Order, the Evidence (Proceedings in Other Jurisdictions) Act 1975 (E(POJ)A 1975), and held that an NPO could not be used to obtain evidence in support of foreign proceedings.
The CICA's decision
However, the CICA found that the Evidence Order and the NPO jurisdiction covered different ground. The Evidence Order concerned the giving of evidence for the purposes of foreign proceedings, whereas NPOs involve the provision of information. There was therefore no reason to regard the NPO jurisdiction as ousted by the Evidence Order, provided care was taken to confine the NPO jurisdiction to its proper scope.
The CICA said that it was difficult to see 'why legislation dealing with the giving of evidence in foreign proceedings should be treated as impliedly excluding jurisdiction to order the provision of information necessary to enable foreign proceedings to come into existence at all - such as.. .information about the identity of the wrongdoer.' The court recognised that the Evidence Order applied where there had been a request for evidence 'for the purposes of civil proceedings which either have been instituted before the requesting court or whose institution before that court is contemplated', so that it did not only apply where there were live proceedings. However, given the need under the Evidence Order for a request from a court, it could only apply to 'contemplated' proceedings in a jurisdiction whose court procedures allowed for the taking of evidence pre-action. In addition, proceedings could not be contemplated in any given jurisdiction unless a potential claimant knew critical information, often sought by way of an NPO, such as the identity of the person to sue.
The CICA disagreed with Essar's argument based on Ramilos that unless proceedings were 'contemplated' there could not be a sufficiently good arguable case of wrongdoing to satisfy the threshold merits test for an NPO, so that in any case where that test could be satisfied there would be overlap with the legislation on evidence in support of overseas proceedings. The CICA's decision in Essar is also a departure from Ramilos in relation to the distinction Essar draws between information and evidence, which was doubted in Ramilos.
The CICA also referred to a further Cayman statute, the Grand Court Act (2015 Revision), which gave the court power to grant interim relief in relation to foreign proceedings. While the disclosure in this case had not been sought under that Act, the existence of the power it contained made it 'impossible to assert that the overall intention of the legislature is to exclude Norwich Pharmacal relief in support of foreign proceedings.'
The approach in other offshore jurisdictions
Essar provides helpful confirmation that victims of fraud can, in appropriate circumstances, use the NPO procedure to seek from trustees and corporate service providers in the Cayman Islands information, as opposed to evidence, which is necessary to pursue a wrongdoer elsewhere.
While this diverges from the more restrictive approach of the English courts, it is consistent with the position in a number of other offshore jurisdictions, demonstrating a policy not to allow such jurisdictions to become a safe haven for fraudsters.
The British Virgin Islands
The British Virgin Islands have recently enacted the Eastern Caribbean Supreme Court (Virgin Islands) (Amendment) Act 2020. This confirms that where the High Court has a common law power to make an order for the provision of documents and information, such as under the NPO jurisdiction, the court may make such an order even though proceedings will be commenced in another country or there is a parallel statutory power to make such an order.
In Equatorial Guinea (President) v Royal Bank of Scotland International GLR 2005-06 GLR 65, the Guernsey Court of Appeal held that the court had the power to grant NPOs in aid of proceedings in other countries where 'necessary and appropriate to assist in achieving justice'. This conclusion was due at least in part to the importance of financial services to Guernsey and concern that it should not become 'a safe haven for those wishing to evade their financial liabilities'.
The court did not consider the interplay with E(POJ)A 1975, which has been extended to the Bailiwick of Guernsey, and the decision pre-dates Ramilos. However, the CICA decision in Essar will be relevant guidance should the point arise in future, particularly given the desire to protect the reputation of the Bailiwick.
In New Media Holding Co v Capita Fiduciary Group Limited  JLR 272, the Royal Court of Jersey gave a clear steer that in appropriate circumstances, where 'convenient in the interests of justice', an NPO could be granted in support of proceedings elsewhere. The court approved dicta from another case, Durant International Corpn v Attorney General  JLR 112, that 'it has for some time been the policy of the legislature and of the executive agencies exercising statutory powers that the commercial facilities available in Jersey should not be used to launder money or mask criminal activities here or anywhere else.'
E(POJ)A 1975 only extends to Jersey in relation to criminal proceedings. Jersey has its own legislation on the taking of evidence in foreign proceedings, the Service of Process and Taking of Evidence (Jersey) Law 1960, but there has never been any suggestion that this curtails the Jersey courts' ability to grant Norwich Pharmacal relief.
As a result, the Jersey courts will likely be willing to grant NPOs in support of foreign proceedings in appropriate circumstances, and to feel unconstrained by the more restrictive English approach. In Macdoel Investments Limited v Federal Republic of Brazil  JLR 2001, the Jersey Court of Appeal noted that English NPO cases provided useful guidance but 'the courts of Jersey are in no sense bound by the scope of the jurisdiction that may have been delineated de facto by the circumstances of these cases.They will have regard to, amongst other things, the policy considerations which shape the law of Jersey and the social and economic context in which it operates.' The CICA decision in Essar provides further support for this approach.
The Isle of Man
The Isle of Man courts have consistently demonstrated their willingness to assist foreign courts in appropriate circumstances. In Templeton v Bradford & Bingley (ORD 2010/93 Judgment of Deemster Corlett, 21 January 2011), the court confirmed that granting NPO relief involving the provision of information in support of foreign proceedings was not inconsistent with the statutory regime, under which the court's powers in relation to the provision of evidence are limited to E(POJ)A 1975 (as it applies to the Isle of Man).
English judgments are of persuasive authority, so Ramilos may cause Isle of Man courts to apply greater scrutiny to applications for NPOs in support of foreign proceedings. However, the Isle of Man courts will also look to other common law jurisdictions for guidance, so the Essar judgment is likely to be significant, should this issue arise for further consideration.
Will the English courts follow suit?
In light of Ramilos, victims currently face difficult arguments if they wish to obtain an NPO from the English courts in support of proceedings elsewhere. However, it has long been emphasised in English case law that NPOs are a flexible remedy which should adapt to help the courts deliver justice. Given the importance of the UK playing its part in the fight against global corruption, it is hoped that the English courts, as they continue to develop the
Norwich Pharmacal jurisdiction, may be encouraged by Essar to revisit the availability of NPOs in support of foreign proceedings. An applicant's ability to persuade an English court to make such an order is, however, likely to turn on the specific facts, and may well involve a trip to the appellate courts.
Subject to any appeal by the respondent to the Privy Council, Essar is a welcome development in the fight against international fraud. However, there remain important considerations for victims looking to use an NPO to seek information from third parties in offshore jurisdictions, as indeed in England:
- It is necessary to understand the detail of the law in the particular jurisdiction involved as to whether, and in what circumstances, an NPO is available in support of proceedings in another jurisdiction.
- It is important for practitioners not to overstep the boundaries of the NPO jurisdiction by seeking wide-ranging material amounting to evidence rather than information. There are other important limits to the NPO jurisdiction to observe too: for example, generally an NPO should not be sought against someone who was themselves a wrongdoer, and should be limited to those simply 'mixed up' in wrongdoing.
- It is important to consider whether there is some viable alternative means of obtaining the information, such as under relevant legislation for the provision of evidence in support of overseas proceedings. Courts will be less likely to grant an NPO where such an alternative course is reasonably available.
- Where there is doubt about the availability of an NPO in support of foreign proceedings, strategy is key. Consideration should be given to whether there are proceedings which might be issued in the same jurisdiction. An English court may also be willing to grant an NPO in support of a worldwide freezing order made by it (see the English branch of xheArcelorMittal v Essar litigation,  EWHC 724 (Comm),  All ER (D) 142 (Mar)). Specialist advice is needed on potential routes to the information.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.