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English High Court refuses to block enforcement of U.S. discovery order

Robin Henry and Jonny Mitchell examine the High Court’s decision.

3 minute read

Published 7 November 2018

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In the recent decision of Dreymoor v Eurochem [2018] EWHC 2267, the English High Court refused to grant an injunction to restrain the enforcement of a U.S. discovery order under Section 1782 of the United States Code against a former director of Dreymoor.
The English court has the power to block the enforcement of Section 1782 orders if their enforcement would be “unconscionable”. On the specific facts of this case, however, the High Court concluded that it would not be unconscionable for Eurochem to enforce the order, in particular because the order principally related to non-English proceedings, and the High Court had no “legitimate interest” in policing evidence-gathering in foreign proceedings.

Background
In the underlying financial dispute, Eurochem (a fertiliser seller) alleges that Dreymoor (a fertiliser trader) knowingly paid substantial bribes to two senior employees of Eurochem. Dreymoor denies that the payments were in the nature of bribes. The ongoing dispute is taking place across a number of different jurisdictions and forums, including court proceedings in the BVI and Cyprus, and arbitration proceedings in London.
As part of the dispute, Eurochem obtained a discovery order from the District Court of the Middle District of Tennessee under Section 1782 of the United States Code, a provision which authorises U.S. District Courts to order residents to provide testimony and/or documents “for use in a proceeding in a foreign or international tribunal”. In this case, the District Court order required the Tennessee resident Mr Sandeep Chauhan (a former Dreymoor director) to provide relevant documents and to attend a deposition to provide oral testimony. Eurochem obtained the District Court order in relation to the BVI and Cyprus proceedings only, having dropped the part of its application that explicitly sought the evidence for use in the London arbitration proceedings as well, owing to uncertainty over whether London arbitration proceedings would count as “a proceeding in a foreign or international tribunal” for the purposes of Section 1782. However, there is nothing in U.S. law to prevent Eurochem from using the evidence for the London arbitration proceedings as well, and Eurochem made no secret of its intention to do so.
Dreymoor then applied to the English High Court for an injunction to restrain Eurochem from enforcing the Section 1782 order against Mr Chauhan essentially until after the London arbitration proceedings had taken place.

Previous English cases on Section 1782
In considering Dreymoor’s application, the High Court considered previous English case law on Section 1782. In South Carolina Insurance v Assurantie Maatschappij [1987] 1 AC 24, the House of Lords, in refusing to grant an injunction to restrain the enforcement of a Section 1782 order to provide documents, set out the general principle that the English courts would not seek to control the manner in which a party obtained evidence, provided that the means by which it did so were lawful in the country where they were used. Injunctive relief may however still be available to applicants if they can show that it would be “unconscionable” for the Section 1782 order to be enforced.
This threshold test of unconscionability was applied in the subsequent case of Omega Group Holdings Ltd v Kozeny [2002] CLC 132, in which the High Court granted an injunction to restrain the enforcement of a Section 1782 order. At issue in this case was a deposition, rather than simply the production of documents. Depositions do not form part of the usual evidentiary process in English civil proceedings, and English judges may therefore be wary of them. The High Court judge in Omega v Kozeny concluded that it would be “oppressive, vexatious and constitute an interference with the due process of this court” for a witness to be compelled to attend a deposition before later giving oral evidence at trial, because (i) this would amount to double cross-examination; (ii) there would be no reciprocity (i.e. Omega would not also be able to depose Kozeny’s witnesses, as they were not U.S. residents); and (iii) there would be a “real if unquantifiable risk” that the witness, having already undergone a deposition, would refuse to attend the actual trial to give evidence. Summing up, the judge commented that “the use of s. 1782 to depose the selfsame witnesses who will give witness statements and attend to give oral evidence here, has, in general, little to commend it.”

The High Court decision
Dreymoor sought to rely on the same factors that were present in Omega v Kozeny in order to justify their argument that it would be unconscionable for the District Court order to be enforced until after the London arbitration proceedings had taken place. In addition, Dreymoor said that compliance with the District Court order would distract from their preparation for the London arbitration proceedings.
In refusing to grant the injunction, the High Court emphasised that, in a crucial point of distinction to Omega v Kozeny, the evidence here was principally required not for English proceedings, but for BVI and Cyprus proceedings. The High Court concluded that it had no “legitimate interest” in policing a party’s attempts to obtain evidence for use in foreign proceedings.

Implications
Section 1782 remains a potential weapon in a party’s evidence-gathering arsenal where relevant individuals are U.S residents. This case reaffirms however that the English court has the power to block the enforcement of Section 1782 orders, even though the High Court chose not to exercise this power in the present case. It is likely that the English court will continue to be wary of the use of U.S. depositions in English proceedings and may find their use to be “unconscionable”. On the other hand, this case shows that there are limits to the English court’s willingness to use its injunctive power in this regard, and that it may be reluctant to do so in particular where foreign proceedings are likely to be impacted.

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Longer Reads

English High Court refuses to block enforcement of U.S. discovery order

Robin Henry and Jonny Mitchell examine the High Court’s decision.

Published 7 November 2018

Associated sectors / services

  • Banking & financial disputes
  • Financial services

Authors

In the recent decision of Dreymoor v Eurochem [2018] EWHC 2267, the English High Court refused to grant an injunction to restrain the enforcement of a U.S. discovery order under Section 1782 of the United States Code against a former director of Dreymoor.
The English court has the power to block the enforcement of Section 1782 orders if their enforcement would be “unconscionable”. On the specific facts of this case, however, the High Court concluded that it would not be unconscionable for Eurochem to enforce the order, in particular because the order principally related to non-English proceedings, and the High Court had no “legitimate interest” in policing evidence-gathering in foreign proceedings.

Background
In the underlying financial dispute, Eurochem (a fertiliser seller) alleges that Dreymoor (a fertiliser trader) knowingly paid substantial bribes to two senior employees of Eurochem. Dreymoor denies that the payments were in the nature of bribes. The ongoing dispute is taking place across a number of different jurisdictions and forums, including court proceedings in the BVI and Cyprus, and arbitration proceedings in London.
As part of the dispute, Eurochem obtained a discovery order from the District Court of the Middle District of Tennessee under Section 1782 of the United States Code, a provision which authorises U.S. District Courts to order residents to provide testimony and/or documents “for use in a proceeding in a foreign or international tribunal”. In this case, the District Court order required the Tennessee resident Mr Sandeep Chauhan (a former Dreymoor director) to provide relevant documents and to attend a deposition to provide oral testimony. Eurochem obtained the District Court order in relation to the BVI and Cyprus proceedings only, having dropped the part of its application that explicitly sought the evidence for use in the London arbitration proceedings as well, owing to uncertainty over whether London arbitration proceedings would count as “a proceeding in a foreign or international tribunal” for the purposes of Section 1782. However, there is nothing in U.S. law to prevent Eurochem from using the evidence for the London arbitration proceedings as well, and Eurochem made no secret of its intention to do so.
Dreymoor then applied to the English High Court for an injunction to restrain Eurochem from enforcing the Section 1782 order against Mr Chauhan essentially until after the London arbitration proceedings had taken place.

Previous English cases on Section 1782
In considering Dreymoor’s application, the High Court considered previous English case law on Section 1782. In South Carolina Insurance v Assurantie Maatschappij [1987] 1 AC 24, the House of Lords, in refusing to grant an injunction to restrain the enforcement of a Section 1782 order to provide documents, set out the general principle that the English courts would not seek to control the manner in which a party obtained evidence, provided that the means by which it did so were lawful in the country where they were used. Injunctive relief may however still be available to applicants if they can show that it would be “unconscionable” for the Section 1782 order to be enforced.
This threshold test of unconscionability was applied in the subsequent case of Omega Group Holdings Ltd v Kozeny [2002] CLC 132, in which the High Court granted an injunction to restrain the enforcement of a Section 1782 order. At issue in this case was a deposition, rather than simply the production of documents. Depositions do not form part of the usual evidentiary process in English civil proceedings, and English judges may therefore be wary of them. The High Court judge in Omega v Kozeny concluded that it would be “oppressive, vexatious and constitute an interference with the due process of this court” for a witness to be compelled to attend a deposition before later giving oral evidence at trial, because (i) this would amount to double cross-examination; (ii) there would be no reciprocity (i.e. Omega would not also be able to depose Kozeny’s witnesses, as they were not U.S. residents); and (iii) there would be a “real if unquantifiable risk” that the witness, having already undergone a deposition, would refuse to attend the actual trial to give evidence. Summing up, the judge commented that “the use of s. 1782 to depose the selfsame witnesses who will give witness statements and attend to give oral evidence here, has, in general, little to commend it.”

The High Court decision
Dreymoor sought to rely on the same factors that were present in Omega v Kozeny in order to justify their argument that it would be unconscionable for the District Court order to be enforced until after the London arbitration proceedings had taken place. In addition, Dreymoor said that compliance with the District Court order would distract from their preparation for the London arbitration proceedings.
In refusing to grant the injunction, the High Court emphasised that, in a crucial point of distinction to Omega v Kozeny, the evidence here was principally required not for English proceedings, but for BVI and Cyprus proceedings. The High Court concluded that it had no “legitimate interest” in policing a party’s attempts to obtain evidence for use in foreign proceedings.

Implications
Section 1782 remains a potential weapon in a party’s evidence-gathering arsenal where relevant individuals are U.S residents. This case reaffirms however that the English court has the power to block the enforcement of Section 1782 orders, even though the High Court chose not to exercise this power in the present case. It is likely that the English court will continue to be wary of the use of U.S. depositions in English proceedings and may find their use to be “unconscionable”. On the other hand, this case shows that there are limits to the English court’s willingness to use its injunctive power in this regard, and that it may be reluctant to do so in particular where foreign proceedings are likely to be impacted.

Associated sectors / services

  • Banking & financial disputes
  • Financial services

Authors

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