Tajik Aluminium Plant v Ermatov & Ors

This is an appeal against an order made by David Steel J in the course of a case management conference in proceedings between the claimant, Tajik Aluminium Plant, and its former director Mr Abdukadir Ermatov, that Mr Ermatov should disclose the name of a Tajik friend whom he says lent him a sum of US$150,000 in connection with the purchase of certain property in Moscow.

In order to place the issues which arise on this appeal in context it is necessary to begin by summarising the events that have given rise to the proceedings currently pending in the Commercial Court. Until 1991, the Republic of Tajikistan was one of the Central Asian republics forming part of the USSR. It became an independent state following the dismantling of the USSR. Tajik Aluminium Plant (commonly referred to as “TadAZ”), which is situated in Tajikistan, is one of the largest aluminium smelters in the world and as such requires access to large quantities of alumina, the raw material from which aluminium is produced. Mr Ermatov became director of the plant in late 1994 or early 1995. TadAZ is a unitary state enterprise and is one of the largest, if not the largest, single economic enterprise in Tajikistan. It is an essential part of the national economy. Following the dismantling of the Soviet Union, there was a period of instability in Tajikistan, which provided difficult economic conditions in which to operate a heavy industrial plant of that kind. In particular, it became difficult to generate adequate working capital to finance the business in the usual way. As a result, it became the practice for TadAZ to enter into barter arrangements under which it supplied quantities of refined aluminium against supplies of raw materials. Much of the raw materials it received during the period of Mr Ermatov’s management were supplied through one or more companies controlled directly or indirectly by a Mr Nazarov, another national of Tajikistan, acting as intermediaries.

Following a change of government in December 2004, the suggestion was made to Mr Ermatov that he should retire from his post as director of TadAZ and go into politics. He did so. On his retirement he received commendations from the government for his work as director and for a short time he became Deputy Economics and Trade minister. He was also a member of the Senate. Shortly afterwards, however, allegations were made that he had colluded with Mr Nazarov to defraud TadAZ of very large amounts of money by causing it to supply aluminium to companies controlled by Mr Nazarov under barter arrangements valued at well below the market price. Mr Ermatov says that these are trumped-up charges and that his departure from TadAZ was engineered to enable the president to put in place new commercial arrangements for the sale of aluminium from which he and his associates could benefit personally.

In October 2005 TadAZ began proceedings in this country against a number of defendants including Mr Ermatov, Mr Nazarov and various companies said to be controlled by Mr Nazarov seeking to recover property which it says was wrongfully taken from it by the defendants and also damages for fraud.

An important part of TadAZ’s case is that Mr Ermatov received large sums of money or other valuable benefits from Mr Nazarov in return for his part in the corrupt arrangements by means of which funds were siphoned out of the company. In its pleadings TadAZ has identified various payments made to, or for the benefit of, Mr Ermatov and other members of his family, which it is said cannot be explained otherwise than as representing the benefits derived from those corrupt arrangements.

The pleadings in this case are long and complex and have given rise to substantial requests for information. In paragraph 25A of its re-re-amended points of claim, as they stood at the time of the application before the judge, TadAZ purported to identify a number of payments and other benefits made available to Mr Ermatov and other members of his family by Mr Nazarov or persons or companies associated with him. They included in paragraph 26(e) the provision of a loan to Mr Ermatov’s wife by a company called Foriteks to enable Mrs Ermatov to purchase two flats on Ostozhenka Street, Moscow. TadAZ alleges that Foriteks obtained the funds it lent to Mrs Ermatov from Mr Nazarov or companies associated with him.

In paragraph 27(eb) of his amended defence, served in October 2006, Mr Ermatov admitted that those two flats had been purchased by his wife for the sum of US$ 793,980 in or about 1999 with funds provided by Foriteks, to whom he had been introduced by a friend and former colleague, a Mr Gabrielyan. He stated that the loan had been repaid in full by 5 March 1999 and that the funds used to repay the loan did not come from Mr Nazarov or any of his companies. However, at that stage he declined to say where they had come from. That led to a request for further information, served on 18 October 2006, in which TadAZ asked Mr Ermatov, amongst many other things, to give full particulars of the source of the funds used to finance the repayment of the loan and the means by which they had been obtained. In his response, served on 9 January 2007, Mr Ermatov said that $650,000 had been repaid from his own and his wife’s personal funds, and that the rest had been repaid using monies lent to him by a friend whose identity he was not willing to disclose because he feared that to do so might expose him to danger from the government of Tajikistan. He stated, however, that the friend was not Mr Nazarov or anyone connected with him. Mr Ermatov said that he had repaid his friend within two years and without assistance from Mr Nazarov or any company associated with him

On 12 February 2007 the solicitors acting for TadAZ wrote to Mr Ermatov’s solicitors, combining in one letter all the outstanding requests for information with a view to having answers provided in, or at any rate at the same time as, the service of a re-amended defence which Mr Ermatov had been given permission to serve by 28 February. One of those requests was for full particulars of the friend who was said to have lent Mr Ermatov the sum of $150,000 to which he had earlier referred.

On 26 March a case management conference was held, at which David Steel J dealt with a number of outstanding matters, including the outstanding requests for further information set out in the letter of 12 February. Mr Ermatov resisted an order that he disclose the identity of his Tajik friend on the grounds that to do so would expose him to harm at the hands of the Tajik government. In support of his case he relied on a witness statement made by Mr Alastair Shaw, a solicitor in the firm acting for him in the action. Also before the judge was a witness statement from Mr Stuart Paterson, one of the solicitors acting for TadAZ. It will be necessary to refer to Mr Shaw’s statement in a little more detail at a later stage.

After hearing argument, the judge held that it was appropriate to make an order for the provision of further information. He observed that it was accepted that certain payments to Mr Ermatov’s family had been made from sources close to Mr Nazarov and that there had been a degree of shilly-shallying about the nature, timing and scope of those payments. As a result he considered that TadAZ and the court were entitled to a complete picture of the financial relationship, if any, between Mr Ermatov and Mr Nazarov. The judge also thought that there had been wholly inadequate particularisation of the source of funds to be used for the purchase of various properties, including the two flats on Ostozhenka Street and the source of the funds used to repay the loans with which they had been purchased, so he ordered Mr Ermatov to give the further information requested about those matters. When he came to the identity of the Tajik friend the judge said this:

Mr Ermatov now appeals against that part of the judge’s order which requires him to disclose the identity of his Tajik friend, and in support of his appeal he seeks to adduce evidence which was not before the judge. The first matter to consider, therefore, is whether Mr Ermatov should be given permission to adduce that fresh evidence.

As a result of the decisions of this court in Hertfordshire Investments Ltd v Bubb & Anr [2000] 1 WLR 2318 and Hamilton v Al-Fayed (No 4) [2001] EMLR 15 (CA), it is now established that the factors identified in the previous decision of this court in Ladd v Marshall [1954] 1 WLR 1489, as bearing on the question whether a party to an appeal should be permitted to adduce in support of, or in opposition to, the appeal evidence that was not adduced in the court below remain relevant. They are, in summary, three: (i) that the evidence could not with reasonable diligence have been obtained for use at the trial; (ii) that if given it would probably have had an important influence on the outcome; and (iii) that it is apparently credible.

The fresh evidence in this case is contained in Mr Ermatov’s sixth witness statement, to which is exhibited a report on Tajikistan issued by the US Department of State on 6 March 2007. In his statement Mr Ermatov elaborates a little on his grounds for thinking that identification of the individual concerned might have adverse repercussions for him. However, he now seeks to cast the net rather wider than he did before the judge, saying:

The real questions for present purposes are to what extent the information contained in Mr Ermatov’s latest statement was available to him at the time of the case management conference and so could with reasonable diligence have been placed before the judge in one form or another, and whether it would be likely to have had an important effect on the outcome of the application. Mr Rosen QC has submitted in his written skeleton argument that most of the evidence is not new at all and that which is appears to be of little significance.

In my view there is a good deal of force in that submission. Indeed Mr Stanley, who appeared on this appeal for Mr Ermatov and to whose argument I would like to pay tribute, accepted that Mr Ermatov’s latest statement contains only two truly new pieces of evidence: one concerning the seizure of six cars from his property, which is said to have occurred in June of this year; the other concerning information he has received about threats to his son. Although the US State Department report was issued some three weeks before the case management conference there is evidence before the court from Mr O’Sullivan, the solicitor who has day-to-day conduct of the proceedings on behalf of Mr Ermatov, though not, it should be said, from Mr Ermatov himself, that he was not aware of the report at the time of the case management conference. Nonetheless, reports have previously been issued by the US State Department containing broadly similar information and their existence was clearly known to Mr Ermatov and those acting for him because Mr Shaw refers to one of them in the statement he made in January. Indeed, Mr Stanley had available in court copies of the earlier report and was able to identify any differences between that and the more recent report. It is not clear that the later report provides any important new information so far as this appeal is concerned.

Mr Ermatov’s general description of the political situation in Tajikistan, his account of the activities and modus operandi of the current president, which provide a large part of the foundation for his assertion that his Tajik friend, his family and their associates would all be endangered if he were to be identified, could, it seems to me, all have been placed before the judge at the case management conference. Even the account he gives of events which are said to have occurred more recently are in truth little more than examples of how he says the government has been behaving for some time past. It should also be noted that although Mr Ermatov refers in a general way to the persecution of his family, friends and colleagues, the only persons he has actually identified as having received unwelcome attention from agents of the state are his son and his brother-in-law. In the case of the brother-in-law, evidence has been provided by Mr Gary Milner-Moore, the solicitor acting for TadAZ in these proceedings, which casts some doubt on the reliability of what Mr Ermatov says.

However, there is an obvious difference, on the face of it, between the position of close family members such as a son or brother-in-law and that of a friend who provided a certain amount of financial assistance to Mr. Ermatov some years ago. The description of the interrogation of Mr Ermatov’s brother-in-law provides a good example of evidence which could easily have been placed before the judge. It is said to have been going on intermittently since 2005, although it is also said to have increased in frequency since the end of May last year. Many of the allegations made by Mr Ermatov are not related to any specific date or period. The threats against his son are said to have been discussed in June last year, but they are of a relatively vague and unsubstantiated nature. That is true also of many of the other allegations he makes, which are based on second- or third-hand reports from people Mr Ermatov is unwilling to identify.

As Mr Ermatov himself accepts, many reports on the political situation in Tajikistan have been made in recent years by different organisations and could without much difficulty have been placed before the judge. The suggestion that the government of Tajikistan operates an authoritarian regime which has a poor human rights record is not new and does little to explain why a particular friend of Mr Ermatov should be at greater risk if his connection with Mr Ermatov were to become known, much less members of his family and their associates.

In my view much of the evidence which Mr Ermatov now seeks to adduce could have been put before the judge without any great difficulty and those parts that are new do little to support the contention that any person known to have been a friend of Mr Ermatov as long ago as 1999 is likely to be at significant risk now. Such of the evidence as could not with reasonable diligence have been put before the judge would not, in my view, have had an important influence on the outcome of the application. In those circumstances I do not think that this new evidence meets the full requirements laid down in Ladd v Marshall and the subsequent cases to which I have referred. However, this matter comes before the court on an appeal against an interlocutory application, in relation to which a more generous approach may sometimes be appropriate, and the court has in fact read the additional evidence together with the evidence served in response. For my own part I would prefer, in the somewhat unusual circumstances of this case, to take that evidence into account when arriving at a decision on the appeal.

The judge had to ask himself three questions in the course of deciding the applications: (i) would it be appropriate in accordance with established principles to require Mr Ermatov to give the further information sought by TadAZ? (ii) if so, would identification of his Tajik friend be likely to expose him to a significant risk of persecution at the hands of the government or those acting on its behalf? (iii) if so, would the risk to the friend outweigh the importance of giving the information?

Whether it is appropriate to require a party to provide further information of any particular allegation made in a statement of case is very much a matter to be decided by reference to the particular nature of the case and the allegation involved. It is quintessentially a matter which calls for the exercise of judgment in case management and is one on which this court ought generally to respect the judge’s decision. David Steel J was clearly of the view that the identity of the person who was alleged to have lent Mr Ermatov $150,000 was one in respect of which, in the context of this case, further information ought to be given. That was a decision which in my view could not be challenged were it not for the suggestion that compliance with his order would expose the individual concerned or those associated with him to ill-treatment of some kind. The question then arises whether, on the evidence before him, the judge was right to find that there was no such risk. It is right, first, to make the point, as Mr Stanley very fairly did, there is formally no evidence before the court that the Tajik friend is resident in Tajikistan at the moment, though Mr Stanley and, no doubt, others have inferred from the tenor of Mr Ermatov’s evidence that that is the case. It is also right to say, as again Mr Stanley very fairly accepted, that in the absence of any evidence to suggest that the Tajik friend is within the jurisdiction no question arises of any interference with his rights under the European Convention on Human Rights.

Before the judge and in the statements and skeleton arguments provided for the appeal the case has been put, implicitly if not explicitly, on the basis that, if the identity of the Tajik friend were disclosed, he or she would be at risk of physical or economic persecution by agents of the government of Tajikistan by reason of the fact that he or she was once an associate of Mr Ermatov. In other words, the case has been that the government would use the friend as a means of damaging Mr Ermatov himself.

It is necessary to bear in mind the context in which this case has been put forward. Mr Ermatov’s case is that he is regarded as a political opponent of the current president of Tajikistan and that it is for that reason that he, his immediate family and perhaps some of his friends as well, are being, or are liable to be, persecuted by the agents of the government. He does not say that the persecution is directly related to what he did in his time as director of TadAZ; rather he says that trumped-up charges have been brought against him, based on his conduct as director, for political reasons.

The loan made by the Tajik friend is said to have been advanced in the early part of 1999 – that is, nearly eight years ago – and to have been repaid within two years i.e. by 2001. In the context of the amounts with which this case is concerned, it did not involve a large sum of money. It is necessary to ask oneself, therefore, whether the evidence supports the conclusion that a person who provided modest financial assistance to Mr Ermatov eight years ago and is last known to have been directly associated with him six years ago is likely, for that reason alone, to be persecuted by the authorities now. Before reaching the conclusion that he is, one would surely wish to have some evidence of the friend’s position, such as his general circumstances (including his financial circumstances), his occupation, his political activities or affiliations, if any, and an explanation of the reasons why, eight years later, the authorities should regard him as a person through whom they could influence or harm Mr Ermatov. No evidence of that kind has been offered, nor has any attempt been made to explain why it cannot be given without compromising the friend’s position.

Before the judge the only evidence on which Mr Ermatov relied in support of his argument was a witness statement from Mr Shaw, which referred to an earlier report on Tajikistan issued by the United States Department of State providing a general description of the political situation in that country. That report was treated as the basis for a general criticism of the steps which the president was said to have been taking to consolidate political and economic power in his own hands. Mr Shaw refers to previous evidence from Mr Ermatov that he was not prepared to name sources of information at TadAZ “for their own safety” because if he did they might be sent to prison. Otherwise his evidence was directed to the political situation in Tajikistan in general and to the steps the president was said to be taking to consolidate power in his own hands. Nothing was said to indicate why the particular friend might be at risk, the implication simply being that anyone connected in any way with Mr Ermatov, however long ago, and whether active in political life or not, would be treated as a person through whom the government could strike at him.

In my view the judge was right, on the evidence then before him, to hold that Mr Ermatov had not provided sufficient material to justify a finding of fact that the friend would be at significant risk of ill-treatment if his identity were to be disclosed. Moreover, even taking into account Mr Ermatov’s latest statement, evidence of the kind which I have described still has not been put before the court. As a result, the court has no solid basis from which to judge whether there are reasonable grounds for his professed belief that compliance with the judge’s order would place his friend in jeopardy. In effect the court is being asked not merely to take Mr Ermatov’s word at face value, but to do so without being provided with any evidence of a concrete nature tending to show that his concern is well founded.

At an early point in his argument Mr Stanley very fairly accepted that the identities of Mr Ermatov’s friends and associates are probably already well known to the government of Tajikistan and that he was not in a position to contend that the Tajik friend would be at risk merely because he was known to be one such person. He submitted, however, that once the government became aware that he was someone who might have information that could assist Mr Ermatov in the conduct of the proceedings he would be at risk of arbitrary detention, or worse, in order to cause him to change his story or not to provide assistance at all.

An argument of this kind seems to me to raise quite different considerations. In effect what is being said is that Mr Ermatov should not be required to identify a potential witness at this stage in the proceedings, or perhaps at all, because there is a real risk that TadAZ, or the government on its behalf, is likely to bring improper pressure to bear on him. In my view there are two difficulties in the way of this argument. The first is that it is supported by nothing other than general evidence of the authoritarian nature of the government combined with some rather ill-defined allegations, largely unsupported by independent evidence, that it is willing to act outside the law in order to deal with political opponents. The second is that the court should not, in my view, bow to pressure of that kind by one party to proceedings or a body associated with it and has considerable powers to prevent abuse of that kind including, where appropriate, striking out a statement of case and giving judgment accordingly. In the present case, however, there is little to support the argument that there is a real risk of interference with a potential witness, other than the inference that is said should be drawn from the general nature of the government in Tajikistan. This argument was not advanced before the judge and strikes me as something of an afterthought.

For the reasons he gave the judge thought that in the context of this case it was important for Mr Ermatov to identify the friend in question at this stage of the proceedings in order to enable TadAZ to investigate the case being put forward by him prior to the hearing. The alternative was to leave it to TadAZ to pursue the matter in cross-examination at trial in the expectation that, if Mr Ermatov were ordered to answer the question and refused to disclose his identity, the judge might not require him to answer but would probably draw adverse conclusions from his failure to do so.

Such a course, however, has some obvious disadvantages. Cross-examination is likely to be less focused if the issues have not been properly investigated in advance of the trial, at least as far as is possible, and evidence that might otherwise have come to light may not do so. There is also the risk that the emergence of evidence of such a kind at a relatively late stage might necessitate an adjournment of the trial while further enquiries are made. Moreover, in principle a party to proceedings is entitled to be provided with such particulars of his opponent’s case as are reasonably necessary to enable him to prepare properly for trial. The opponent is not entitled to withhold that information and hope to evade the issue by engaging the sympathy of the judge when it later arises in the course of the trial.

These are all factors which the judge managing the proceedings is entitled to take into consideration when he exercises his discretion whether to order a party to provide further information of this kind. He would also inevitably take into account the implications one way or the other on the likely costs of the proceedings. In the present case I do not think that there are any grounds for criticising the judge’s assessment of the importance of providing the information in question. The only grounds on which his decision could possibly be criticised is that the risk that the third party would suffer ill-treatment of some kind as a result was so great that it outweighs those considerations, with the result that his decision cannot be supported.

For the reasons I have given I do not think that the evidence is sufficient to support that conclusion or that this is a case in which we should interfere with the judge’s exercise of his discretion. For those reasons I would dismiss this appeal.

So would I, and for the reasons given by my Lord.

I agree that this appeal should be dismissed for the reasons which Moore-Bick LJ has given.