United Company Rusal Plc & Ors v 1) HSBC Bank Plc & Ors

The Russian Federation is a civil law jurisdiction. The legal procedures available to litigants to obtain relevant documents from their opponents are different from the procedures available in England and other common law countries. In this application these Russian Applicants apply in London under the English Civil Procedure Rules Part 31.18 for an order of this court. The order they seek is one requiring the Respondents to give disclosure of documents and information. These Respondents are not, and are not intended to be, parties to any other proceedings, and the Applicants are not making any other claims against the Respondents. It is not suggested that the Respondents have done anything wrong. The application is made after the Applicants have commenced proceedings in other jurisdictions naming the persons against who they do make substantive claims, but there may be others so far unknown to them against whom they might wish to make claims. This form of application is commonly known as a Norwich Pharmacal application (Norwich Pharmacal v Customs and Excise Commissioners [1974] AC 133).

The principle in Norwich Pharmacal is described in the speech of Lord Reid (at page 175):

This application gives rise to five issues:

This application has many unusual features, including the following. The First and Second Applicants (together referred to as “Rusal”) are part of one of the largest corporations in Russia. The application is made in the course of a long and bitter dispute between Rusal and a very large Russian investor, Interros International Investments Ltd (“Interros”). Mr Oleg Deripaska is the Chief Executive Officer of Rusal. Mr Vladimir Potanin controls Interros. The dispute is over the control and future management of a third very large Russian corporation, Open Joint Stock Company Mining and Metallurgical Company Norilsk Nickel (“Norilsk Nickel”).

The First and Second Respondents are two banks, but they can now be ignored, since the application against them has been discontinued.

The third Respondent (“Debevoise”) is described by Mr Scoville, its managing partner, as “one of the world’s elite law firms, with over 700 lawyers based in offices spanning the Americas, Europe and Asia”, including 25 lawyers in an office in Moscow. Debevoise’s clients include both Norilsk Nickel and some of its subsidiaries, and Interros. There are few reported cases in which a Norwich Pharmacal order has been sought against a law firm. Any form of claim by one litigant against the lawyers retained by an opposing litigant is rare.

The fact that there are so many unusual features in this application does not of itself mean that the application must fail: see Ashworth Hospital Authority v MGN Ltd [2002] 1 WLR 2033. But it does mean that the application requires more scrutiny than it would if it had been indistinguishable from established authority.

There is already an arbitration in London between Rusal and Interros commenced in August 2010, and there is related litigation commenced recently by Rusal in other jurisdictions: Russia, St Kitts and Nevis (“the Nevis Injunction Proceedings”), and two of the United States of America, New York and Connecticut (“the New York Discovery Proceedings” and “the CT Discovery Proceedings”).

The first basis for this Norwich Pharmacal application is in aid of the proceedings which Rusal has commenced in Russia and the Nevis Injunction Proceedings. This application is not in aid of the London arbitration. No substantive litigation is expected to take place in England. There have been only a small number of Norwich Pharmacal orders made in the past in aid of foreign legal proceedings.

There is a second basis for the application by Rusal, which is unprecedented. It is to enable Rusal (and the other shareholders of Norilsk Nickel) who are due to consider resolutions at an Extraordinary General Meeting of Norilsk Nickel schedules for 11 March (“the EGM”) to be informed of the affairs of Norilsk Nickel, as, so Rusal submits, they are entitled to be. This basis was not referred to in the evidence relied on in support of the Application Notice, but emerged subsequently in the evidence in reply.

The application of the Third Applicant (“Mr Sokov”), is a separate application from that of Rusal, and is also unprecedented. He is a director of Norilsk Nickel, nominated by Rusal, and General Director of the Second Applicant. He makes this application with a view to enforcing the rights he claims in his capacity of a director of Norilsk Nickel.

Rusal describes itself as the world’s largest producer of aluminium and alumina. It (through the Second Applicant) is also the holder of 25% plus 1 share in Norilsk Nickel. The First Applicant is incorporated in the Russian Federation. The Second Applicant is incorporated in Jersey. Norilsk Nickel is the world’s largest producer of nickel and palladium and one of the leading producers of platinum and copper. It is a publicly quoted company with some 50,000 shareholders, said to have a market capitalisation of over $40 billion. But one of those shareholders is Interros and that company also holds 25% plus 1 share in Norilsk Nickel. By a Co-Operation Agreement (“the Co-Operation Agreement”) dated 25 November 2008 Rusal and Interros agreed to use their best endeavours to ensure the election of the maximum number of directors to the board of directors of Norilsk Nickel from each of them equally. What is at stake in this dispute is said to be worth many billions of US Dollars.

In 2008 Rusal acquired its shares in Norilsk Nickel for a consideration worth $12.7 billion. There soon arose differences between Rusal and the Board of Norilsk Nickel over a proposal approved by the Board for the buying back of 4% of Norilsk Nickel’s shares at a premium over the prevailing market price. Rusal called an EGM of Norilsk Nickel to seek the dismissal of the Board. Rusal and Interros entered into discussions with a view them co-operating. But meanwhile Rusal obtained an injunction in Krasnoyarski Territory Arbitrazh Court (“the Russian Court”) prohibiting Norilsk Nickel from proceeding with the buy back. On 25 November 2008 Rusal and Interros entered into the Co-operation Agreement. This agreement was to cover representation on the Board, and policies for Norilsk Nickel, including dividends, sources of finance, share transactions and mergers and acquisitions. Nevertheless, differences continued to occur.

In December 2009 the directors of Norilsk Nickel who had been nominated by Rusal voted against a resolution approving the budget for the coming year. The resolution was passed. In April 2010 Rusal nominated Mr Deripaska for election to the Board of Norilsk Nickel, and he became a director. He and the other directors nominated by Rusal proposed a resolution for the 2009 dividend. The resolution was not passed.

In June 2010, at the AGM of Norilsk Nickel, a total of four directors nominated by Interros were elected, but directors nominated by Rusal were reduced from four to three. Rusal responded in various ways in August and September 2010. First, it challenged the legality of the actions taken at the AGM in an application to the Federal Service for Financial Markets (“FSFM”). The FSFM rejected Rusal’s complaint. Second, Rusal submitted a request for the EGM of Norilsk Nickel. Third, it commenced the arbitration proceedings in London at the London Court of International Arbitration (“LCIA”). Fourth, it commenced proceedings in the Russian Court (Action A33-14337/2010). Rusal sought the annulment of the resolutions at the AGM, but the Russian Court stayed these proceedings on grounds of procedural defects.

In 21 October an EGM was held. But a resolution by Rusal proposing the replacement of the Board of Norilsk Nickel was not passed. The next day Interros announced a tentative proposal to buy Rusal’s shares in Norilsk Nickel. On 16 December 2010 Norilsk Nickel announced an offer to buy Rusal’s shares for $12 billion, subject to a deadline for acceptance on 28 December. Rusal did not accept the offer.

There then followed two transactions which are central to the present application, as they are to Rusal’s case in a second set of proceedings brought in the Russian court, and in the Nevis injunction proceedings. These transactions are the alleged wrongdoing which is said to give rise to the right to disclosure which this court is being asked to order.

On 20 December 2010 Norilsk Nickel announced the sale by its “wholly owned indirect subsidiaries” of about 8% of its share capital to Trafigura Beheer NV (“Trafigura”). This transaction is referred to as “the Trafigura Deal”. There is a letter from HSBC which discloses that one of the subsidiaries making the sale was Corbiere Holdings Ltd (“Corbiere”) (HSBC had been engaged to give an opinion regarding the fairness of the Buy Back Deal). Mr Sokov states that he suspects that another subsidiary that was involved in the sale was Raleigh Investment Incorporated (“Raleigh”). Both were incorporated in St Kitts and Nevis. He suspects that there may also be other subsidiaries involved.

The 20 December 2010 announcement disclosed little about the terms of the deal, and nothing about the consideration for it. It referred to “agreements” with Trafigura. The explanation offered in the announcement is that the deal “further strengthens the relationship between [Norilsk Nickel] and [Trafigura]” and that Trafigura is “the world’s largest independent oil trader and the second largest independent trader of non-ferrous metals”. It states that the sale has enabled Norilsk Nickel to “realise a substantial gain on investments in [Norilsk Nickel] securities. The proceeds from the sale will be used for general corporate purposes”. It adds that “in connection with the sale Trafigura entered into a lock up pursuant to which it undertook not to sell the [Norilsk Nickel] ADRs acquired in the transaction to a non affiliated third party until after June 30, 2011”. Mr Kitchener draws attention to plural in the word “agreements” and the phrase “indirect subsidiaries”.

The terms of the Trafigura were not disclosed to, or discussed by, the Board. This is a major complaint made on behalf of Rusal.

There are independent non-executives on the Board of Norilsk Nickel, Mr Gerard Holden and Mr Brad Mills. They publish a Blog to provide the investment community with detailed information on their activities. In their posting of 9 January 2011, these two directors said this about the Trafigura Deal:

“(5)

… On the sale of treasury shares to Trafigura, shareholders should be aware that the Board has never reviewed or approved this transaction and is still not aware of its terms. Under Russian corporate law, offshore subsidiaries are wholly controlled by the management of the company and management appoints directors of those companies.  While this practice is completely alien to those of us that operates with a background of English or US corporate governance, Russian corporate practice is completely different with regards to the management of assets held by subsidiaries. In fairness to the management, the board has been pushing for the disposal of non core holdings and these treasury shares are certainly one of those.  We would however, have preferred that this disposal had been discussed and the terms outlined to the board. This will be a future topic of discussion between the Norilsk Nickel Board and the management of the company.  Needless to say, Gerard and I were unhappy with the way this transaction was conducted and believe it should have been fully reviewed by the Board regardless of the legal niceties.”

On 23 December 2010 Rusal announced its intention of convening the EGM. It is scheduled to be held on 11 March 2011. Norilsk Nickel issued a Press Release in response. Norilsk Nickel accused Rusal of abusing its shareholder rights to disrupt discussion of important business with the aim of bargaining the highest possible premium for the sale of Rusal’s 25% stake in Norilsk Nickel. Norilsk Nickel’s Press Release included the following:

“ - [Rusal] is misinforming the public, saying the deal was of a non-cash character. [Norilsk Nickel] expect to receive profit from the deal, it is a cash deal and was done on market terms.

- Under the laws of Russian Federation this deal should not be put for consideration of [Norilsk Nickel]’s Board of Directors since indirect subsidiaries of the Company are involved. Moreover [Rusal] itself on numerous occasions requested to sell these shares, that is what was implemented.

- [Rusal]’s statement that the deal aims at ‘evasion’ of Federal law, which regulates foreign investment in the country’s strategic enterprises, is an absurd. Since the deal involves a share holding of less than 10% of [Norilsk Nickel]’s statutory capital, Trafigura is not required to obtain the permits under this law. Even more so, Company’s subsidiaries selling she shares never held 10% of the shares or more”.

Also on 23 December 2010 the Wall Street Journal published an account of an interview with Mr Potanin of Interros. Mr Kitchener puts this report of what Mr Potanin said at the forefront of his arguments. He submits it is the most important document in the case. The article is headed “Norilsk Nearer to Ending Feud”. It describes the feud as a battle between Mr Potanin’s and Mr Deripaska for control of Norilsk Nickel. It explains that Deripaska’s plan had been to merge Norilsk Nickel and Rusal, It suggests that Rusal would be inclined to sell its stake for $15 billion. The following are the words Mr Kitchener emphasises:

“Tuesday management seemed to strengthen its hand, announcing a deal to sell an 8% stake that the company held indirectly to Trafigura… The deal headed off Rusal’s challenge to management’s right to vote the 8% stake, and gave the company cash to help cover a bid for Rusal’s stake.
The deal opens the way for management and Mr Potanin to form a block of shareholders with enough shares to wield effective control, Mr Potanin said. That would ‘lock up’ Rusal’s stake, making it less valuable because it would have less influence, he added. Rusal rejects this argument”.

On 27 December 2010 Norilsk Nickel issued a further press release to explain its offer to buy Rusal’s 25% stake in Norilsk Nickel. It includes the following:

“… [Norilsk Nickel]’s Management is positive that in current conditions it is a logical step facilitating the resolution of the corporate conflict which hampers the growth of shareholder value and diverts the resources of the Company… The deadline for [Rusal]’s response … is … on December 28. We have to state that in case the negotiations on the proposed transaction fail, [Norilsk Nickel] will have to implement other means to neutralize negative effects of the shareholders’ conflict on current operation of [Norilsk Nickel] and its strategic development. Striving to increase shareholder value …. [Norilsk Nickel] will be intending to present a general buy back proposal for approval by the Board….
It should be noted… that if [Rusal] rejects the offer, [Norilsk Nickel] will not be able to propose to the aluminium producer such lucrative terms for exiting its investment in [Norilsk Nickel] in the short and medium term”.

On 28 December 2010, the date of the expiry of the offer by Norilsk Nickel to buy Rusal’s shares in Norilsk Nickel, the Board of Norilsk Nickel approved a Shareholder Value Enhancement Programme (“SHVEP”). This gave authority for the second of the two transactions which Rusal submits is unlawful, and which is referred to as the “Buy Back Deal”. Under this deal Corbiere made an offer to purchase shares from shareholders of Norilsk Nickel at $252. This is stated to be at a premium of $32.59 to the closing market price the night before, which is given as $219.41. The Second Respondent was the Dealer Manager for the offer. The offer expired on 21 January 2011. It was an offer open to Rusal, as to any other shareholder, to accept. But Rusal did not accept it.

Mr Kitchener draws attention to the following passages in the Summary attached to the Offer Memorandum which relate to the Buy Back Deal:

“[p15] … This Offer provides security holders who wish to sell all or a portion of their interest in [Norilsk Nickel] an opportunity to do so at a premium to market price and provides Corbiere with a block of securities that may be used for financial and business purposes. Although the Offer is open by its terms to all eligible security holders, Interros, a private investment company beneficially owned by Vladimir O. Potanin, notified us that it did not intend to tender any securities in this Offer

[p16] … Corbiere will be considered the owner of the securities, entitled to vote in its own discretion ….

[p36] … If you … tender and transfer your Common Shares … and those securities are accepted by Corbiere, you will not able to vote at the Extraordinary General Meeting of Shareholders on March 11, 2011 … Under Russian law, Corbiere will be entitled to exercise voting rights with respect to such securities at such meeting in its discretion in the procedure established by law. Corbiere has not yet determined how it will vote such securities at such meeting”.

On p36 of the Offer Memorandum there is a passage headed “Recent Developments”. It recites the offer made to Rusal on 16 December. It also recites Rusal’s request for the EGM, in relation to which it made the statement recited above. On the subject of the Trafigura Deal the Offer Memorandum stated the following:

“On December 20, 2010, Norilsk Nickel announced that its indirect subsidiaries, including Corbiere, had entered into agreements with [Trafigura] to sell the ADRs held by them and representing approximately 8% of Norilsk Nickel’s share capital (the “Sale”). The proceeds from the Sale will be used for general corporate purposes of Norilsk Nickel group. Norilsk Nickel understands that Trafigura has no current plans to increase its stake in the Company to over 10% of Norilsk Nickel’s share capital, which would require an application for approval under Russian Federal Law dated April 29, 2008 No. 57-FZ “On Foreign Investments in Commercial Entities Having Strategic Importance for the Defense of the Country and the Security of the State” (the “Russian Strategic Investment Law”). As a result of this Sale it is expected that the number of Common Shares and ADRs held by Norilsk Nickel’s direct and indirect subsidiaries will be reduced to less than 1% (without taking into account any Common Shares and ADS that may be required in this Offer). In connection with the Sale, Trafigura entered into a lock-up agreement pursuant to which it undertook not to sell the ADRs acquired in the Sale to a non-affiliated third party until after June 30, 2011. It is currently expected that Trafigura will not participate in this Offer in respect of the securities acquired by it as a result of the Sale.

On December 20, 2010, a court in Krasnoyarsk issued a ruling that it would consider a claim by one of Norilsk Nickel’s principal shareholders, UC Rusal, to require Norilsk Nickel to produce certain bookkeeping, accounting and corporate records of Norilsk Nickel. Although Corbiere believes that the Offer is being carried out in full conformity with all applicable laws, UC Rusal in October 2008 challenged in the Russian courts the validity of a prior buyback of shares, and we cannot rule out that there may be litigation challenging the Offer. Any such litigation could, in addition to seeking monetary damages, also seek to enjoin completion of the Offer, which could delay payment made in respect of any tendered securities or prohibit Corbiere from returning any securities tendered by it while such litigation is pending”.

The point made by Mr Kitchener in relation to the passages of the document at p15 and p36 (relating to Trafigura) is that Interros and Trafigura both appear to have been given advance notice of the Board’ intention to make this offer. This suggests that there is some agreement or arrangement between them. Mr Kitchener contrasts the position of Rusal, which was not given advance notice.

In a press release of the same day the Board of Norilsk Nickel explained the Buy Back as follows:

“- The Company believes that its shares are significantly undervalued compared to most of its international peers
- The Company has significant value on its balance sheet
- The Company is well placed to generate strong cash flow …
- The Program will contribute to the optimization of its capital structure”.

In their Blog of 9 January 2011, the independent directors wrote this about Buy Back:

“3)

Once it was clear that the offer to acquire the Rusal shares by the company was not likely to proceed, at least in the short term, the board discussed various alternatives for long term shareholder value creation including dividend policy, share buybacks (both on market and via tender), special dividends etc... At this time, the company is essentially debt free and through a combination of the proceeds of asset sales, operational cash flow and moderate borrowing can easily afford to return capital in some form to its shareholders. The Board has been advised by Citibank and UBS that Norilsk shares are undervalued compared to large international competitors and closing this gap is desirable. Given various sensitivities to the absolute level of cash dividends paid in any period of time, it makes sense to consider share buybacks, that all shareholders can participate in equally, as an efficient way of returning capital to shareholders. The majority of the board approved a program that will involve share buybacks at it Dec 28^th meeting. Gerard and I believed it would have been preferable to delay this decision somewhat until a complete financial review of the long term strategic production plan and full assessment of the capital requirements of this plan has been complete.”

On 13 January 2011 Rusal commenced fresh proceedings in the Russian court, as had been correctly anticipated in the Offer Memorandum. There are in fact two separate claims in respect of the Trafigura and the Buy Back Deals. In action A33-266/2011 against Corbiere, Raleigh, Trafigura, Bank of New York International Nominees and Bank of New York Mellon, Rusal seeks a declaration that the Trafigura Deal is invalid. In action A33-267/2011 against Corbiere and Norilsk Nickel, Rusal sought a declaration that the Buy Back Deal is invalid.

On 14 January 2011 the Russian Court rejected the two claims on procedural grounds, giving Rusal an opportunity to correct the defects. In respect of the claim against Corbiere and Norilsk Nickel, the Russian Court ruled that one of the defects was the lack of “a statement of specified claims against” Norilsk Nickel. In respect of the other claim the Russian Court ruled that two of the defects were (1) the lack of “a statement of specified claims against each of the Defendants including clarification of requirements for applying the consequences of the invalidity of the challenged transactions” and (2) “documents confirming the fact of concluding of transactions disputed” by Rusal.

It is disclosure of these documents “confirming the fact of concluding of” the Trafigura Deal which is the main object of Rusal’s application before this court in the present application.

On 1 February 2011 Rusal commenced the Nevis injunction proceedings. It made an ex parte application for an injunction against Corbiere and Raleigh. On 3 February the High Court of Justice of St Kitts and Nevis granted the injunction sought. It prohibited Corbiere and Raleigh from, amongst other things, voting shares held by them in Norilsk Nickel, and disposing of such shares. There is to be an application to discharge this on various grounds. There has been no application for a Norwich Pharmacal order in Nevis. Mr Sokov states that the purpose of the interim application in the Nevis proceedings is to enjoin Corbiere and Raleigh from voting shares held in Norilsk and from disposing of their shares in Norilsk. The wrongdoing he alleges in the Nevis proceedings is discussed in paras 79 below. The Nevis proceedings therefore raise no point requiring separate consideration from the points raised in relation to the Russian proceedings. Nothing in the present judgment should be taken as determining any issue that is to be decided in the Nevis proceedings.

On 4 February 2011 Rusal issued the Claim Form in the proceedings in this court. It had not given to the Respondents prior notice of its intention to do this, or made a request to the Respondents to provide the documents or information sought on a voluntary basis. On the same day Rusal served Debevoise with notice of the injunction granted in the Nevis proceedings. Service of the injunctions was effected on both the New York and the London offices of Debevoise.

Three letters were sent on behalf of Rusal requesting information on a voluntary basis. On 4 February 2011 Mr Sokov wrote to Corbiere and Raleigh requesting disclosure within 7 days of their agreements with Trafigura and related agreements.

On 5 February 2011 Mr Deripaska wrote to Trafigura. He stated that Norilsk Nickel had refused to provide Rusal with information about the Trafigura Deal. He said that Rusal was “concerned as to whether this transaction is a bona fide arm’s length purchase. In the event that it is not, such transaction would violate not only Russian law but also the express terms of the Co-operation Agreement”. He required that Trafigura fully disclose its agreement with Norilsk Nickel and its subsidiaries and any agreement with Interros and any of its subsidiaries, together with information as to the nature of the financing for the transaction, and any agreement concerning the voting of the shares. Trafigura declined to comply with this requirement on grounds of confidentiality.

On 7 February solicitors for Rusal wrote to Corbiere. They referred to this Norwich Pharmacal application and continued:

“Our clients have made this application against [the Respondents] since our clients believe that they will hold information and documentation in this jurisdiction that will enable our clients to properly identify, formulate and prosecute their claims in Nevis, Russia and elsewhere… [after referring to Mr Sokov’s application] … Our clients believe that Corbiere has instructed [the Respondents] to provide financial and legal services to it in the context of [the Trafigura Deal and the Buy Back Deal]. The purpose of this letter is therefore to provide Corbiere (and its directors) with an opportunity to instruct [the Respondents] to consent to the terms of our clients’ application and to provide us with the information and documentation sought by the terms of the draft order…”.

Although that letter refers to documentation in this jurisdiction, none of the draft orders put before this court contained that limitation until late on the second day of the hearing. Corbiere did not accede to the invitation to give the instructions to Debevoise to consent, and, save on one point, have given no information to Rusal.

The one point is that on the second day of the hearing Mr Dutton said that Debevoise did not negotiate or draft any document in the Trafigura Deal. This was said on instructions from Debevoise given with the consent of their clients.

On 10 February 2011 Rusal commenced the New York Discovery Proceedings. It seeks an order under 28 U.S.C § 1782 for an order compelling discovery for use in foreign proceedings. The jurisdiction corresponds in some respects to the English Norwich Pharmacal jurisdiction. The respondents in New York are two other banks. On the same day Rusal commenced the CT Discovery Proceedings under the same provision of US law. The respondent is Trafigura AG, which is the ultimate parent company of Trafigura Beheer NV.

On 14 February 2011 the Board of Norilsk Nickel issued a press release. They remarked that this was the second time in less than six months that an EGM had been initiated by Rusal for the purpose of considering the re-election of directors to the Board. To the surprise of Rusal, the Board adopted this proposal. The Press Release states that the Board

“… recommends to shareholders to vote For on the first item of the EGM and to approve the pre-termination of the powers of the Board members and re-elect the Board. This recommendation is given taking into consideration the recent changes in the Company’s share capital and appearance of a new shareholder”.

The Board approved their own list of 27 nominees. This list includes only two who hold directorships of Rusal, Mr Deripaska and Mr Sokov. But it includes four names of persons who hold directorships of Interros companies. It also includes two names of persons who hold directorships of Trafigura, apparently referred to as “the new shareholder”. Rusal draw attention to the fact that these two persons are nominated by Corbiere, as appears from a letter dated 3 February.

On 15 February CNBC published on its website under Europe News and the heading “Rusal Rejects Norilsk Offer of $12.8 Billion for Stake” the following: “Mr Deripaska told CNBC there is a price at which he would sell the stake, but he would not confirm if that price is $16.5m billion to $17 billion dollars”. I do not know where or not this report is a true or fair account of what Mr Deripaska said to the CNBC reporter.

Any English lawyer reading the above chronology of events will understand the reference by the independent directors to things being “completely alien to those of us that operate with a background of English or US corporate governance”. Russian company law is very different from English company law.

One difference is that under English company law a subsidiary company cannot own shares in its parent company. So neither the Trafigura Deal, nor the Buy Back Deal could have taken place as they did if Norilsk Nickel had been incorporated under English law (or under the law of any similar common law jurisdiction). No subsidiary of Norilsk Nickel would have held shares to sell to Trafigura, and Corbiere could not have bought shares in its parent company.

A second and notable feature of Russian company law is implicit in the reference to “the Management”. For example, the Wall Street Journal included the words: “management’s right to vote the 8% stake, … The deal opens the way for management and Mr Potanin to form a block of shareholders with enough shares to wield effective control”. Under English law “management” do not vote shares in the company by which they are employed, and they do not form blocks of shares with other shareholders. I have had no explanation given to me as the identity of the individuals referred to by the term “management”, or the nature of their rights under Russian law. It may be that the rights of management under Russian company law are different from those in England because of the different economic and political history of the Russian Federation.

A third possible difference is that, if a Buy Back Deal had been put into effect (which it could be under English law), it is unlikely that Norilsk Nickel would have claimed that the voting rights of the shares could continue to be exercised after the buy back. As noted above, it is one of Rusal’s claims in the Russian proceedings that this is unlawful under Russian law also.

There are further matters of Russian law which will be referred to below. Rusal did not adduce any expert evidence of Russian law in support of the application. Debevoise adduced evidence of Russian law from Mr Yadykin as to the liability of a director of a company, and as to rights to disclosure under Art 66 of the Arbitrazh Procedure Code and Art 67 of the Civil Code. In reply to this evidence, Rusal did adduce a witness statement dated 16 February from Mr Chernyshov, followed by a further statement dated 17 February, as described in para 85 below.

There is no dispute that the standard of proof which an applicant must attain before a Norwich Pharmacal order may be granted is that he has at least an arguable case: see R(Mohamed) v Secretary of State for Foreign and Commonwealth Affairs (No 1) [2009] 1 WLR 2579; [2008] EWHC 2048 (Admin) (“Binyan Mohammed”) para 67. In Ashworth Lord Woolf CJ said that a claimant must identify “clearly the wrongdoing on which he relies in general terms”. But there is little guidance in the cases as to whether more than that is required. One reason for this absence of authority is that in most Norwich Pharmacal applications the applicant plainly has a very strong case that it has been the victim of wrongdoing. It is commonly a breach of confidentiality or other relatively straightforward type of legal wrong.

Norwich Pharmacal applications are one of a number of different types of applications which require the court to be satisfied as to matters which will never be the subject of a final determination at a trial before the court considering this application. In this case such questions include whether there has been wrongdoing, and if so whether the respondent has facilitated it. So an order may be made on a factual basis that will never be determined, and may therefore be mistaken. A similar risk has long been recognised as inherent in applications for permission to serve proceedings out of the jurisdiction, and it is inherent in some decisions made under the Civil Jurisdiction and Judgments Act. The standard for such cases is generally that of a good arguable case.

In that context, in the case of Bols Distilleries BV v Superior Yacht Services Ltd [2007] 1 WLR 12 the Privy Council summarised the test at para [28] as requiring the court to be as satisfied as it can be, having regard to the limitations which an interlocutory process imposes, that factors exist which allow the court to take jurisdiction, or that the applicant has a much better argument than the defendant. That test is appropriate in Norwich Pharmacal applications.

Rusal require the disclosure for use outside the jurisdiction in proceedings brought, or to be brought, in Russia and Nevis. Rusal also advanced the further ground for seeking the disclosure, namely for use at the EGM due to be held in Russia on 11 March as set out in para 10 above.

It is not in dispute that an applicant does not have to show that he requires the disclosure for the purposes of legal proceedings: BSC v Granada Television [1981] AC 1096, 1174C-D, 1200D-G, Binyan Mohamed para [96], CHC Software Care Ltd v Hopkins & Wood [1993] FSR 241. He may require it (as discussed in BSC v Granada) to seek redress for his grievance by other means (eg dismissal of an employee who has acted in breach of his duties), so long as it is not sought in aid of criminal proceedings. In CHC the plaintiff required it in order to write to recipients of defamatory communications concerning himself in order to set the records straight. It was in that sense a remedy for a tort, in that it was a step reasonably taken to protect himself against the damaging consequences of the alleged wrongdoing.

Further, it is established that where disclosure is sought in aid of proceedings, those proceedings may be outside this jurisdiction. In Smith Kline & French Laboratories Ltd v Global Pharmaceuticals [1986] RPC 394 the plaintiff manufacturer obtained evidence by test purchases in England that the defendant was marketing a drug which appeared to have been made in Spain by its Spanish patentee, where there was no permission to export to England. The Court of Appeal held there was jurisdiction to make a Norwich Pharmacal order against the defendant to enable the plaintiff to track down the wrongdoer, albeit a wrongdoer under the law of a country other than the UK, in this case Spain, so as to enable the plaintiff to sue in Spain.

In Secilpar SL v Fiduciary Trust Ltd [2003-04 Gib LR 463] the Court of Appeal of Gibraltar (Glidewell P, Stuart-Smith and Otton JJA) considered a case which is on its facts closer to the present. The applicant (and appellant) had brought proceedings in Portugal against alleged controlling shareholders of a Portuguese company of which the applicant was a minority shareholder. It claimed that the controlling shareholders controlled over 50% of the shares and were obliged under Portuguese law to make a public offer for the remainder. But it was unable to establish the beneficial owner of a British Virgin Islands company which it contended was part of the alleged group of controlling shareholders. The respondents, which were Gibraltar companies, acknowledged that they knew the identity of the beneficial owner. The Portuguese court could not have made the disclosure order the applicant sought in Gibraltar.

Glidewell P considered a judgment of Millett LJ in Crédit Suisse Fides Trust SA v Cuoghi [1998] QB 818. That case had concerned an application under the Civil Jurisdiction and Judgments Act 1982 s25(2) in aid of a freezing order. Millet LJ had said at p827:

“I recognise that an ancillary jurisdiction ought to be exercised with caution, and that care should be taken not to make orders which conflict with those of the court seised of the substantive proceedings. But I do not accept that interim relief should be limited to that which would be available in the court trying the substantive dispute; or that by going further we would be seeking to remedy defects in the laws of other countries. The principle which underlies article 24 is that each contracting state should be willing to assist the courts of another contracting state by providing such interim relief as would be available if its own courts were seised of the substantive proceedings: see Alltrans Inc. v. Interdom Holdings Ltd. [1991] 4 All E.R. 458, 468, per Leggatt L.J. By going further than the Swiss courts would be prepared to go in relation to a defendant resident outside Switzerland, we would not be seeking to remedy any perceived deficiency in Swiss law, but rather to supplement the jurisdiction of the Swiss courts in accordance with article 24 and principles which are internationally accepted.

In other areas of law, such as cross-border insolvency, commercial necessity has encouraged national courts to provide assistance to each other without waiting for such co-operation to be sanctioned by international convention. International fraud requires a similar response. It is becoming widely accepted that comity between the courts of different countries requires mutual respect for the territorial integrity of each other's jurisdiction, but that this should not inhibit a court in one jurisdiction from rendering whatever assistance it properly can to a court in another in respect of assets located or persons resident within the territory of the former.”

He concluded at para [52] that the Gibraltar Court had power to make a Norwich Pharmacal order despite the fact that the Portuguese court had no jurisdiction to do so. He also held at para [71(vii)] that the making of the disclosure order sought in Gibraltar against defendants based in Gibraltar would aid, but not interfere or intermeddle with, the Portuguese proceedings.

Mr Dutton submitted that there is a further point to be made arising out the existence of statutory procedures, including s25 of the Civil Jurisdiction and Judgments Act 1982, and the Evidence (Proceedings in Other Jurisdictions) Act 1975 as implemented in section II of Part 34 of the Civil Procedure Rules. These are the appropriate routes for an applicant to take, rather than a Norwich Pharmacal application, unless there is great urgency, or other good reason, for not following the statutory procedures. This is not a point considered in the authorities, because in those cases (unlike the present case) there were no proceedings in existence in the foreign jurisdictions at the time when the Norwich Pharmacal applications were made. I do not need to consider this point further in this judgment.

Debevoise put at the forefront of their evidence and submissions the fact they are a firm of lawyers who have been instructed by Interros in the LCIA arbitration, and have been instructed by both Interros and Corbiere in relation to the Nevis injunction proceedings (although they are not on the record in those proceedings). Debevoise state that they are also corporate counsel to Norilsk Nickel, but give no further information as to that. They refer to their position in relation to two matters. First, they do so with a view to explaining what evidence they can properly give, and what inferences may (or may not) be drawn from their omission to address some of the issues in the case. Secondly, they rely on the disruption that this application is causing, and will cause, to their relationship with their clients as a consideration going to discretion. I shall consider the latter point below.

There is, of course, no issue as to any legal privilege in this case. Rusal accepts that it cannot obtain privileged documents, and does not ask for any to be disclosed. But it submits that the documents which embody, or evidence, the agreements it does seek, in particular those relating to the Trafigura Deal, will not be privileged. Privilege belongs to the client not to the lawyers. Once an agreement has been reached it cannot be privileged, and it does not become privileged again merely by reason of the fact that a copy is sent to lawyers to be kept by them. None of this is in dispute.

But Mr Dutton submits that there is more involved than the question of privilege. He submits that the scope of the duty of a solicitor to a client includes not only a duty of confidentiality, but also a duty to act in his client’s best interests. The effect of this duty is that that a solicitor may be in breach even if he discloses about his client matters which are of public record, if such disclosure would be against the interests of his client: see Hilton v Barker Booth & Eastwood [2005] 1 WLR567; [2005] UKHL 8 paras 7 and 34. It means that Debevoise cannot in these proceedings disclose matters which it would in its own interest to disclose, if such disclosure would not be in the best interests of its clients. It is thus under a disadvantage in defending itself which other litigants (including its own clients, if sued) would not be under.

Mr Dutton submitted that no adverse inference can be drawn from the fact that Debevoise have not been authorised by their clients to disclose matters which are professional confidences. He cites Wentworth v Lloyd (1864) 10 HLC 589 at 591.

It seems likely that in Wentworth v Lloyd the information which the client prevented the solicitor from revealing was information which was privileged as well as being confidential. Not all information communicated by a client to a solicitor is necessarily both of these, and some information may be neither of these (for example that the client has a criminal conviction, or other matter of public record). But the principle that no adverse inference can be drawn from an omission to speak cannot be confined to cases where the reason for not speaking is legal privilege. The principle must apply to any case where there is an obvious explanation for that omission (compare R v IRC ex p TC Coombs and Co [1991] 2 AC 283, 302).

Mr Kitchener submits that even if in such a case no inference can be drawn against Debevoise, who are lawyers, nevertheless an inference be drawn against their clients, who has refused to authorise the lawyers to disclose information. That seems to me to be taking matters too far. The clients are not parties to this application, and are under no obligation to behave as if they were. The court cannot know what may or may not have passed between the clients and the solicitors in this case. And in this case the lawyers have identified more than one relevant client. It would not be possible to known whether any adverse inference should be drawn against all of these clients, or only some, and in that case which client.

I accept that no inference is to be drawn from the fact, where it is such, that Debevoise has not responded to allegations made by Rusal.

The duties discussed in para 61 above are duties under English law owed by lawyers whose relationship with a client is governed by English law. In the case of a firm or corporation with offices in different jurisdictions the lawyers may be subject to regulation, and the duties owed to clients may be governed, by the law of that jurisdiction. This has consequences which were explained. in R v Grossman 73 Cr App R 302 by Lord Denning MR at p 307-308:

“I think that the branch of Barclays Bank in Douglas, Isle of Man, should be considered in the same way as a branch of the Bank of Ireland or an American bank, or any other bank in the Isle of Man which is not subject to our jurisdiction. The branch of Barclays Bank in Douglas, Isle of Man, should be considered as a different entity separate from the head office in London. It is subject to the laws and regulations of the Isle of Man. It is licensed by the Isle of Man government. It has its customers there who are subject to the Manx laws. It seems to me that the court here ought not in its discretion to make an order against the head office here in respect of the books of the branch in the Isle of Man in regard to the customers of that branch. It would not be right to compel the branch - or its customers - to open their books or to reveal their confidences in support of legal proceedings in Wales. Any order in respect of the production of the books ought to be made by the courts of the Isle of Man - if they will make such an order. It ought not to be made by these courts. Otherwise there would be danger of a conflict of jurisdictions between the High Court here and the courts of the Isle of Man. That is a conflict which we must always avoid. … It seems to me that, although this court has jurisdiction to order the head office here to produce the books, in our discretion it should not be done.”

Hoffman J considered the effect of this in relation to Norwich Pharmacal applications in Mackinnon v Donaldson Lufkin and Jenrette Corpn [1986] 1 Ch 482. Hoffmann J set out the facts of that case at pt 490B-C:

“A plaintiff in an action before this court has served a subpoena and an order obtained ex parte under the Bankers' Books Evidence Act 1879 upon Citibank at its branch office in London. Citibank is a New York bank with its head office in Manhattan and with branches all over the world. It is not a party to the proceedings. The subpoena and the order require Citibank to produce books and other papers held at its head office in New York, relating to transactions which took place in New York on an account maintained there by a Bahamian company. Citibank has moved to set aside the subpoena and to discharge the ex parte order on the grounds that in principle it exceeds the international jurisdiction of this court and infringes the sovereignty of the United States.”

In that case the claim was based on fraud. At p497F-G Hoffmann J turned to consider the application on the footing that there was before the court a motion to join Citibank as defendant to a Norwich Pharmacal application. Just before that, at p496D-E he had said:

“…in two respects this is an a fortiori case. Barclays was at least an English bank whereas Citibank is foreign. International law generally recognises the right of a state to regulate the conduct of its own nationals even outside its jurisdiction, provided that this does not involve disobedience to the local law. But banks, as I have already said, are in a special position. The nature of banking business is such that if an English court invokes its jurisdiction even over an English bank in respect of an account at a branch abroad, there is a strong likelihood of conflict with the bank's duties to its customer under the local law. It is therefore not surprising that any bank, whether English or foreign, should as a general rule be entitled to the protection of an order of the foreign court before it is required to disclose documents kept at a branch or head office abroad.”

At p498 D-E he said of the Norwich Pharamacal jurisdiction that it:

“… is, therefore, also an exercise of sovereign authority and not merely a condition of being allowed to take part as plaintiff or defendant in an English trial. In the United States there is a general right to discovery from third parties but the fact that this process is characterised as discovery does not alter its nature for the purposes of international jurisdiction. In addition, the policy grounds for the restraint enjoined in Reg. v. Grossman, 73 Cr.App.R. 302 apply with equal force to discovery under Bankers Trust Co. v. Shapira [1980] 1 W.L.R. 1274.”

At p499F he said it:

“seems to me that in a case like this, where alternative legitimate procedures are available, an infringement of sovereignty can seldom be justified except perhaps on the grounds of urgent necessity relied upon by Templeman J. in the  London and County Securities Ltd. v. Caplan  (unreported)”

He decided to exercise his discretion by applying the principle stated in R g Grossman and discharged the order against Citibank.

In my judgment, what applies to banks with offices in more than one jurisdiction must apply to law firms with offices in more than one jurisdiction. So in considering whether a respondent law firm has become involved in wrongdoing, it is necessary to consider whether the lawyers in the office in England and Wales have become involved. It will not be enough that the lawyers in some other office have become involved.

Representatives of Rusal have made a number of criticisms of the actions of Norilsk Nickel, both in the form of public statements, and in the statements of case filed in the various proceedings in other jurisdictions. Mr Dutton notes that in none of these is there any suggestion that Rusal are alleging fraud. It was therefore surprising that Mr Kitchener both opened and closed his submissions on the basis that the allegations of deliberate wrongdoing in this case do amount to fraud. It is well known that allegations of fraud must be made clearly and specifically, and upon the basis of evidence, if they are to be made at all, and that proper supporting particulars must be given. In the absence of any such allegations on the papers, I do not treat this case as one in which either Rusal or Mr Sokov is alleging fraud.

I shall consider first the case of Rusal, and separately the case of Mr Sokov.

Mr Sokov and the other directors nominated by Rusal each issued a statement (in similar terms) headed “Special Opinion” on the discussion of the Buy Back Deal at the Board Meeting of 28 December. They said:

“This decision raises serious concerns in the light of [Norilsk Nickel]’s statement of December 20, 2010 (ie 8 days before the current Board of Directors meeting date) regarding the sale of approximately 8% of Company’s shares held by its subsidiaries to [Trafigura].

The performance of the agreement to sell ADRs to Trafigura on one hand, and the announcement of the buyback of the Company’s shares and/or ADRs in a comparable volume on the other hand, all happening in 8 day period, raise serious concerns due to the lack of rational economic basis for the Company to enter into such transactions.

Moreover, in the absence of clear information on terms of the agreement to dispose ADRs and on Trafigura’s financial capabilities there are reasons to believe that: (1) the transactions might be completed with a significant discount in ADRs prices as compared with their market value; or (2) Trafigura might not be the ultimate purchaser of the ADRs and the financing of the transaction is provided by an organization ‘friendly’ to the Company or one of its shareholders; or (3) the said transaction is not monetary, does not provide for any subsequent income to the Company, but rather it is directed at securing the ability of the Company’s management to vote with these shares”.

Mr Sokov and his fellow directors went on to refer to the Press Release of 23 December in which Norilsk Nickel had referred to the Trafigura Deal being “on market terms”. They argued that that would mean that the Buy Back at a $35 premium to the market price of the shares would result in a loss of 20 billion rubles for the buy back of 10% of the shares. In his affidavit in the Nevis injunction proceedings Mr Sokov puts this loss at up to $700m. Thus they concluded that the implementation of the Buy Back Deal in the context of the Trafigura Deal “would inevitably result in losses to the Company”, and that the Buy Back Deal was extremely disadvantageous for Norilsk Nickel and could in no way be justified by the need to increase Norilsk Nickel’s value.

The argument that there was wrongdoing builds on these points, which are also points made in the Russian proceedings issue in January 2011. The first argument goes as follows. Corbiere is itself a foreign company. If it owned more than 10% of the shares of Norilsk Nickel it would be subject to the requirement to obtain permission referred to in Norilsk Nickel’s Press Release of 23 December (para 22 above). So if it was to receive 8% of Norilsk Nickel’s shares in the Buy Back it needed first to sell shares it already owned.

The second argument is that the effect of the two deals together is that these two blocks of shares represent 15% of the share capital of Norilsk Nickel. Rusal invites the court to infer that Trafigura, Corbiere, Raleigh (with their 15%) and Interros (with its 25%) are a single group of persons in accordance with clause 14, part 1, article 9 of the Federal Law No 135-FZ dated 26 July 2006 “On Protection of Competition”, together controlling 40% of the shares. If this is right, and Interros and its group acquired more than 30% of the shares of Norilsk Nickel, then they became under an obligation to make an offer to acquire the shares of the other shareholders under article 84.2 of Federal Law No 208-FZ dated 26 December 1995 “On Joint Stock Companies”. It is argued that the Corbiere, Raleigh, Interros and others have carried out the impugned transactions in order to avoid having to make the mandatory offer to buy the shares of the other shareholders.

In the Nevis injunction proceedings it is not as clear as it might be what the cause of action relied upon is. In his affidavit Mr Sokov states that impugned transactions “have been designed to damage Rusal’s interests” in Norilsk Nickel, and to do so by the unlawful means of circumventing the safeguards provided by Russian law to other shareholders referred to in the preceding paragraphs. As to the latter, he refers to the claims made in January in Russia, and sets out the provisions of Russian law relied on. As I understood it, the case is one of unlawful means conspiracy, assuming that Nevis law is the same as English law as to this tort.

In response to this case on wrongdoing, Debevoise expressly declined to set out positive factual evidence to meet the allegations made against its clients. It adopted this stance on the basis that to do so would infringe upon the confidentiality and privilege of those clients, and perhaps also defeat the purpose of its opposition to this application by giving Rusal the information that it wants.

Mr Dutton submits that this court has been provided with no Russian law evidence to demonstrate that there has been any wrongdoing known to Russian law.

It appears to me that, for the purposes of the application before me, the law applicable to the relationship between the parties must be Russian law, save that the law of Nevis may apply to some acts or omissions of Corbiere.

It is true that there was no evidence before me in support of the application on Russian law. But Mr Sokov is in fact a lawyer with a Master’s degree in law from New York University School of Law and he is qualified to practice in both New York and Russian law. His evidence is factual, and not that of an expert. However, he does refer in his affidavit in the Nevis injunction proceedings to the provisions of Russian company law which are the basis of the claims made by Rusal in the Russian proceedings commenced in January 2011.

On 16 and 17 February Mr Chernyshov made two statements that were placed before me. He is a Russian lawyer, and his statements are his expert opinion. In his first statement he confirmed the accuracy of the statements made by Mr Sokov on the subject of Russian law. The main focus of Mr Chernyshov’s statements is the difficulty of obtaining disclosure of documents through the procedures available under Russian law, and the grounds for the application by Mr Sokov personally. He also states that the Trafigura Deal should have been approved by the Board of Norilsk Nickel, although that is not a point which has so far been raised in the Russian proceedings. Finally he mentions other possible causes of action which have not previously been mentioned in any court. He does not specifically mention the 30% or Federal Law No 208-FZ dated 26 December 1995 “On Joint Stock Companies”.

I note, too, that there is apparently no dispute that a 10% shareholding by a foreign company in a Russian company gives rise to a requirement for permission. See Norilsk Nickel’s Press Release cited in para 22 above, and the Offer Memorandum cited in para 27 above.

I conclude that Rusal has not shown that there is an arguable case that the Trafigura Deal is a breach of Russian law in this respect, that is on the basis that the 10% threshold is passed so as to require permission. There is no good arguable case on the material before me upon that it could properly be inferred that title to the shares which Norilsk Nickel have announced were sold to Trafigura remains vested in Corbiere or Raleigh. There is no good arguable case that any of these companies owns more than 10% of the shares in Norilsk Nickel.

It is also submitted for Rusal that the sale to Trafigura can have no legitimate commercial purpose, because the sale price was on “market terms”, which must mean at a lower price than the premium price offered to shareholders in the Buy Back a few days later. I heard evidence and submissions from both sides on Rusal’s submission that Trafigura’s published financial statements give grounds for doubt as to whether Trafigura could pay for the shares. The case was even advanced on the basis of the comments in the Wall Street Journal on 21 December 2010 under the title “Trafigura May Struggle to Fund Norilsk Stake Purchase”. But comments by newspapers are not a substitute for evidence. It is for an applicant to show a good arguable case that there has been wrongdoing. I assume that under Russian law, as under English law, it is wrong for the directors of a company intentionally to dispose of a company’s assets at an undervalue or for no adequate consideration. I reject this submission of Rusal’s on the ground that its case is speculative, and no more than suspicion. I do not accept that Rusal has a good arguable case that the difference between the “market terms” under which the Trafigura Deal is said to have been done, and the premium paid to shareholders under the Buy Back Deal, represents damage to Norilsk Nickel or Rusal.

The alternative wrong alleged under Russian law is in relation to the 30% which, if held by a group of shareholders, is said to give rise to an obligation to make an offer to acquire the shares of the other shareholders under article 84.2 of Federal Law No 208-FZ dated 26 December 1995 “On Joint Stock Companies”. While much of that Law has been included in the papers before me, article 84.2 is not included.

I draw no inferences from any omission to give evidence by Debevoise. But on a point of law the position is this. A point of Russian law has been made by Mr Sokov, with the support of Mr Chernyshov. There is no material before me to contradict what they say, and I have no reason to doubt it. However, the fact that I have heard no argument on the point means that the findings I make in the following paragraphs 91 to 94 are made solely for the purposes of these proceedings against Debevoise, and are entirely without prejudice to the positions of Norilsk, Trafigura, Interros or any other party. None of these been represented before me, and they cannot be affected by anything that I decide in these proceedings.

Here I find that Rusal is on stronger ground. Whatever may have been the reason for the sale of shares to Trafigura is a subsidiary point. What matters is whether Trafigura and Interros are a group for the purposes of this law. I must decide the issues in this application on the material before me in so far as it concerns this application against Debevoise.

Given the history of this matter, and the explanations (or lack of them) that have been offered publicly, I consider that (on the basis of the limited material put before me) a court could well infer that there is an agreement or arrangement between Trafigura and Interros, so as that they form a group for the purposes of passing the 30% threshold. In the Press Release of 27 December (para 24 above) the Board of Norilsk Nickel spoke of their intention “to neutralize negative effects of the shareholders’ conflict on current operation of [Norilsk Nickel] and its strategic development”.

It may well be a legitimate aim of the Board to neutralize the negative effects of shareholders’ conflicts on the company. But if the Buy Back is to achieve that aim, then it may be inferred that the means by which it was to achieve it was by enabling the Board to assemble a block of shareholders who would act together as a group. I do not accept Mr Kitchener’s submission that the aim of countering Rusal’s activities is unlawful merely because it is intentional, and might harm Rusal. But I do accept that (on the limited information put before me) it is arguable that the means are unlawful.

Accordingly I find that, for the purposes of this application before me, Rusal has shown a good arguable case on one ground. I do not need to consider any breach there may have been of the Co-operation Agreement. That is not relied upon to support this application.

The case of Mr Sokov is different. He does not rely upon the wrongdoing alleged by Rusal. He relies on what Mr Sokov and Mr Chernyshov state to be the law in respect of his rights and duties as a director, and of the liabilities which he might incur under Russian law. The wrongdoing relied on in his case, as I understand it, is the wrongdoing of Norilsk Nickel in failing to provide him with the information which he requires to carry out his duties as a director.

However, wrongdoing is essential to the Norwich Pharmacal jurisdiction. I can see no wrongdoing arising out of the impugned deals which forms any basis on which Mr Sokov can rely. His complaint is that he has not been given information which he claims to be entitled to receive is something separate from the two impugned deals.

Even if I were wrong about that, I do not see how it could be said that whatever wrongdoing is involved in not disclosing information to Mr Sokov is wrongdoing in which Debevoise can be said to have got mixed up.

It follows that Mr Sokov’s application fails at the first question.

It is established that the involvement of a respondent to an Norwich Pharmacal application does not have to be shown to have caused the wrongdoing, even innocently: Shaker Aamer v Secretary of State for Foreign and Commonwealth Affairs [2009] EWHC 3316, para 43. In Ashworth Lord Woolf CJ explained it as follows at para [35]-[36]:

“35.

Although this requirement of involvement or participation on the part of the party from whom discovery is sought is not a stringent requirement, it is still a significant requirement. It distinguishes that party from a mere onlooker or witness. The need for involvement (the reference to participation can be dispensed with because it adds nothing to the requirement of involvement) is a significant requirement because it ensures that the mere onlooker cannot be subjected to the requirement to give disclosure. Such a requirement is an intrusion upon a third party to the wrongdoing and the need for involvement provides justification for this intrusion.

36.

It is not the only protection available to the third party. There is the more general protection which derives from the fact that this is a discretionary jurisdiction which enables the court to be astute to avoid a third party who has become involved innocently in wrongdoing by another from being subjected to a requirement to give disclosure unless this is established to be a necessary and proportionate response in all the circumstances: see John v ExpressNewspapers [2000] 1 WLR 1931. The need for involvement can therefore be described as a threshold requirement. The fact that there is involvement enables a court to consider whether it is appropriate to make the order which is sought. In exercising its discretion the court will take into account the fact that innocent third parties can be indemnified for their costs while at the same time recognising that this does not mean there is no inconvenience to third parties as a result of becoming embroiled in proceedings through no fault on their part.”

The evidence of involvement or participation by Debevoise is limited. There is a series of forms of contract which were sent to shareholders in Norilsk Nickel as part of the Offer Memorandum. On them the address of Debevoise in London, and the name of Mr Scoville are given as an “addresses for correspondence”. That shows some involvement in the Buy Back Deal. It also raises the point discussed, namely which office of Debevoise was involved? The forms of contract sent to shareholders are all stated to be governed by Russian law.

For the rest, Rusal rely on inference. However, the case on wrongdoing that I have found to be arguable for the purposes of the present proceedings is based solely on the agreement or arrangement alleged to have been made between Trafigura, Corbiere, Raleigh and Interros. The Buy Back gives shares and (subject to the disputed issue of law) voting rights to the management of Norilsk Nickel through Corbiere and Raleigh. So, it is argued, if Debevoise were involved in the preparation of the Buy Back then they were also involved in the agreement or arrangement that gave rise to the obligation which the group ought to have, but has not fulfilled in making an offer to the other shareholders.

The facts relied on to give rise to the inference are that Debevoise accept that they had the relationships described in para 60 above.

The evidence in this case has been prepared in some haste, and at the time it was prepared the extra-territorial nature of the application was not at the forefront of anyone’s mind as a point of principle. It was not overlooked. Mr Scoville deals with it as a practical consideration at some length. He explains that the firm’s e-mail servers do not segregate information by client, and do not have search functionality suited to responding to the kind of demands made in the application. Mr Dutton confirmed the impression given by this evidence, namely that the firm operates one database system for all its offices.

In Grossman and Mackinnon the court appears to have proceeded on the assumption that the records being sought were physically located in one office or another. With physical records it would be possible to say whether an order had extra-territorial effect or not, and to distinguish records by their location. On the basis of the evidence in the present case that is not so.

The Offer Memorandum is a complicated document which, it seems to me, is unlikely to have been prepared without the benefit of legal advice of a kind which relatively few law firms are competent to give. If another law firm had been involved, I think it unlikely that Debevoise’s name would appear in the documentation, even as a correspondence address. I conclude that there is a good arguable case that at least one office of Debevoise was involved in the preparation of the Offer Memorandum. The only evidence that this was the London office is the fact that address of that office appears on the forms of contract. On that basis I find that there is a good arguable case that the London office had some involvement, the extent of which it is impossible to say.

There is no arguable case that, taken on its own, there is anything unlawful in the Offer Memorandum or the Buy Back Deal. Any unlawfulness of the kind referred to in para 93 above arises from any agreements or arrangements there may have been between Corbiere, as the holder of the shares bought pursuant to the Offer Memorandum, and other shareholders, as to how their shares were to be voted.

Mr Dutton submits that lawyers must always be regarded as mere witnesses, and not as being involved in a wrongdoing there may be. He submits that this is so on grounds of policy. It is essential that lawyers can be freely instructed by their clients. A person can be subject to a Norwich Pharmacal order only be reason of what he does, not by reason of what he knows.

I accept Mr Dutton’s submissions only up to a point. If a lawyer is provided by a client with a copy of a document upon which the lawyer is asked to advise, then it seems to me that he may be no more than a witness. But if the lawyer drafts the documents, then I do not see why he should be regarded as a mere witness, and not involved in any wrongdoing of which (unknown to the lawyer) the document forms a part. As to the reasons of policy, it seems to me that they are best addressed at the stage of discretion. As Lord Woolf CJ said in Ashworth at para 36, the requirement of involvement in wrongdoing is not the only protection for third parties.

In my judgment there is a good arguable case (for the purposes of the present proceedings) that the London office of Debevoise was (innocently) involved in the wrongdoing for which I have found there to be an arguable case.

Necessity in this context is necessity in the interests of justice.

Mr Dutton referred to the passage in Binyan Mohammed in which the Divisional court reviewed most of the authorities on the test that must be applied at this stage of the court’s enquiry. At paras 93-94 the Court said:

“93 … The requirement of necessity was also considered by King J in Campaign Against Arms Trade v BAE paragraphs 15-20; it was argued on behalf of the defendant in that case that this test was not met where the claimant had failed to exhaust other available avenues through which the information might be obtained. King J observed that that was to put the matter "too high" and to put the discretion of the court into too much of a straitjacket. He considered that the court was entitled to have regard to all the circumstances prevailing in the particular case including the size and resources of the applicant, the urgency of its need and to obtain the information it requires and any public interest in its having its needs satisfied.

94 … The intrusion into the business of others which the exercise of the Norwich Pharmacal jurisdiction obviously entails means that a court should not, as Lord Woolf in Ashworth made clear, require such information to be provided unless it is necessary. But in our view, there is nothing in any authority which justifies a more stringent requirement than necessity by elevating the test to the information being a missing piece of the jigsaw or to it being a remedy of last resort. We agree in this respect with the views expressed in Hollander Documentary Evidence, 9^th edition at paragraph 5-26. Moreover it would be inconsistent with the flexible nature of this remedy to erect artificial barriers of this kind. In our view the approach of King J in Campaign Against the Arms Trade is to be preferred”

Mr Kitchener relied on a statement by the Privy Council, not before the court in Binyan Mohamed (although it seems to me that the two cases are consistent). In The President of the State ofEquatorial Guinea v Royal Bank of Scotland International [2006] UKPC 7 the Privy Council advised:

“It is true that in some of the cases the word "necessary" has been used, echoing or employing the language of Order 24, rule 13 of the Rules of the Supreme Court. But, as Templeman LJ observed in British Steel Corporation v Granada Television Limited [1981] AC 1096, 1132, "The remedy of discovery is intended in the final analysis to enable justice to be done". Norwich Pharmacal relief exists to assist those who have been wronged but do not know by whom. If they have straightforward and available means of finding out, it will not be reasonable to achieve that end by overriding a duty of confidentiality such as that owed by banker to customer. If, on the other hand, they have no straightforward or available, or any, means of finding out, Norwich Pharmacal relief is in principle available if the other conditions of obtaining relief are met. Whether it is said that it must be just and convenient in the interests of justice to grant relief, or that relief should only be granted if it is necessary in the interests of justice to grant it, makes little or no difference of substance.”

In considering whether disclosure is necessary, regard must be had to the nature and scope of the disclosure sought. In many Norwich Pharmacal applications the disclosure sought is very limited and precise in scope, such as a name. In other cases the application is wider.

The application in the present case had been narrowed between the issue of the application notice and the start of the hearing. The form in which it was at the start of the hearing is very wide, and it remains very wide.

The substantive disclosure of document sought, by reference to Schedule B, is that Debevoise disclose:

“1.

All documents (whether in paper form or electronic format) evidencing the existence or the terms of any Agreement entered into by any of the Companies relating to the Trafigura Deal or the Instruments which were the subject matter of the Trafigura Deal or any Voting Rights attached to those Instruments.

2.

All documents obtained by the Respondent in accordance with its customer due diligence and ongoing monitoring obligations arising from The Money Laundering Regulation 2007 SI 2007/2157 in connection with the provision of its services to the Companies in any matter concerning the Transactions”.

Schedule A contains definitions in five paragraphs. Paragraph 4 identifies the Transactions as the Trafigura Deal and the Buy Back Deal.

Paragraph 1 defines the Companies. It identifies the companies already named in this judgment (Norilsk Nickel, Interros, Corbiere, Raleigh and Trafigura). But it goes on to include “any of the direct or indirect parent companies or subsidiaries or affiliates” of these named companies. It is not clear why Debevoise should be put to the trouble of identifying these, or how it is said that they should so.

Para 2 defines Instruments. It identifies shares in Norilsk Nickel and ADRS. But it also includes “any option warrant conditional or derivative or similar rights” in shares or ADRs.

Para 5 defines “Agreement”. It includes an agreement, an option, a side-agreement, memorandum of understanding or heads of agreement, plan or scheme, understanding or informal agreement or any other agreement conferring rights and trusts.

There is also sought disclosure of information by witness statement, by reference to Schedule C. The information sought is that known to “Mr James Scoville and any other partner in [Debevoise] who provided services in connection with the Transactions or either of them”. The Information is defined as the identity of individuals and information about the Agreement (in so far as not contained in any documents disclosed). The identities sought are of those persons on whose behalf Debevoise acted, those natural persons who gave Debevoise day to day instructions, any persons who provided or agreed to provide funding in respect of the Transactions and any other law firm which acted for any of the Companies in relation to any Agreement relating to the Transactions.

Near the end of the hearing, after consideration of Mackinnon, Mr Kitchener submitted a proviso to the draft order. The effect was that nothing in the order should require the disclosure of documents that are not within the jurisdiction and or information that is only within the knowledge of persons who are not ordinarily resident in the jurisdiction.

Mr Dutton submitted that this is a request for wide ranging discovery which is not what can be considered necessary for the purposes of a Norwich Pharmacal application. The position is summarised in Binyan Mohamed at paras 131-133:

“…Norwich Pharmacal does not provide a general right of discovery … the action cannot be one used for wide-ranging discovery or the gathering of evidence and is strictly confined to necessary information … ”

Mr Dutton further submitted that there are available to Rusal other means of finding out, so that it is not reasonable to achieve that end by overriding a duty of confidentiality such as that owed by lawyers to their clients.

In the course of the hearing Mr Kitchener focussed his submissions on what he called the “transactional documents” for the Trafigura Deal which Mr Chernyshov said in his first witness statement are required if the proceedings commenced in January in Russia are to be permitted to proceed. The alternative case made in respect of these documents is that even if they are in principle obtainable under the Russian procedural rules, in particular Art 66 of the Arbitrazh Procedure Code, this process is too long to afford effective relief in the present case. Mr Kitchener also relied on these documents as necessary for the EGM on 11 March 2011.

I shall consider first this narrow request.

Mr Dutton has been critical of Rusal for making requests for voluntary disclosure late, or not at all in respect of some of the companies concerned, and has pointed to procedures in principle available in Russian and in Nevis, which is a common law country.

Mr Kitchener submits that the companies concerned are determined to resist disclosure. Were it otherwise, they could have given disclosure, or indicated a willingness to do so. As to Nevis, Mr Kitchener submits that the defendants in those proceedings are defending the proceedings with vigour. The position of the defendants in Nevis is not that Rusal could have disclosure if they asked for it, so Debevoise are taking a position inconsistent with that of those defendants.

I have little doubt that Rusal are right on the availability of voluntary disclosure. This is a hard fought dispute, and I think it very unlikely that Rusal would have obtained, or could now obtain, voluntary disclosure by any means.

The EGM: So far as the EGM is concerned, Mr Dutton submits that this point makes a false comparison between the EGM and the dismissal of an employee (or other means of seeking redress for a wrong). And in so far as what Rusal is seeking is confidential information, the purpose for which it is proposed to use the information involves putting it in the public domain.

Russian law gives shareholders rights to information, as explained by Mr Chernyshov at para 17(d) of his statement. Mr Kitchener relies on this and on the evidence of Mr Chernyshov that that right was confined to documents held by Norilsk Nickel and that it might take months to enforce. As to confidentiality, Mr Kitchener submits that that can be protected, if need be, by appropriate measures.

In my judgment the rights of Russian shareholders to information stand in the same position for the purposes of this application as the rights of Mr Sokov as a director. If there has been wrongdoing on the part of a company in failing to give information to its shareholders, it is impossible to see how Debevoise can be said to have been involved in it. I accept Mr Dutton’s submission that the EGM is not an occasion where it can be said that Rusal would be seeking redress of a grievance, or vindication, comparable to the dismissal of a disloyal employee envisaged in BSC v Granada, or the attempt to reduce the damage caused by an allegedly defamatory statement considered in CHC. So this is not a purpose for which the test of necessity is satisfied.

The Russian and Nevis proceedings The other applications for disclosure that are being made are all against respondents who are not lawyers but (as the CT Discovery proceedings) are principals engaged in the impugned transactions. Because of the position of Debevoise as lawyers, as explained above, in my judgment it cannot be said to be necessary to make the order sought against Debevoise before the outcome of the applications in New York and Connecticut have been determined. So the application fails on the issue of necessity on this ground.

There is a further ground on which it fails on this issue. Following the hearing, on 22 February, the parties provided further documents to me. One was a second witness statement by Mr Yadykin, the expert in Russian law retained by Debevoise. He exhibited the Order of the Russian Court in Case No A33-266/2011 dated 14 February 2011. The effect of this Order is that the stay of proceedings has been extended until 11 March 2011 for Rusal to provide outstanding documents, including documents confirming the completion of the transaction disputed by Rusal.

As to Art 66 of the Arbitrazh Procedure Code, in his second witness statement Mr Yadykin observes that the time required depends on the circumstances of the particular dispute, but that the route is open to Rusal. He does not suggest that it would enable Rusal to receive disclosure in the near future.

The procedural remedies which the Russian Federation makes available in its courts to shareholders in Russian companies are a matter for the Russian Federation. There is nothing in the expert evidence to suggest that if this court were to make the order sought it would conflict with the orders or procedures of the Russian court seised of the substantive proceedings. It is not argued that this court has no jurisdiction to grant disclosure orders in aid of proceedings in Russia, but this is a factor which goes to discretion.

Since the Russian proceedings have been commenced, and since the ruling of 14 February 2011 does not require the disclosure of the transaction documents at present, I do not think that it can now be said that an order for disclosure by this court is now necessary, before Rusal has pursued procedures in Russia. The present case lacks the urgency arising from the need to go in hot pursuit of the proceeds of fraud, which is referred to in the Bankers Trust cases. Although Mr Kitchener submitted that the present cases was, or was akin to, a proprietary claim, I do not accept that.

In the light of my finding on necessity, the remaining questions do not arise. But I shall express my views in case the conclusion I have reached is mistaken.

The scope of the material sought is set out above. Mr Dutton also draws attention to the fact that the form of order contains, in the usual way, a Penal Notice. The order sought is an injunction, the breach of which has the most serious consequences. For this reason he submits that any injunction should be to clear and precise so that no respondent would be in any doubt whether he was disobeying the order or not. Mr Dutton did not cite authority, but there are a number which support the proposition he advanced, including, for example Times Newspapers Ltd v MGN Ltd [1993] EMLR 443 at page 447.

Mr Dutton submits that the scope of the material sought is so wide as to be an abuse of the process of the court in the light of the limits on the permissible scope Norwich Pharmacal relief set out in para 122 above.

In my judgment that submission is well founded. Mr Kitchener was right to focus his arguments on the transactional documents.

Mr Dutton also submitted that the order was lacking the specificity required, citing Arab Monetary Fund v Hashim (No 5) [1992] 2 All ER 911 at 914, where Hoffmann J repeated what he had said in Mackinnon, comparing a Norwich Pharmacal order to a subpoena.

Mr Kitchener referred me to the decision of the Court of Appeal in Marc Rich & Co Holding GmbH v Krasner unreported, 15 January 1999. The court was constituted by Morritt LJ, Clarke LJ and Sir Christopher Staughton. Morritt LJ gave the leading judgment with the agreement of the other members.

That case concerned a world wide freezing order, and the appeal was mainly on a point of non-disclosure on the ex parte application. The claim was based on allegations of widespread conspiracy between the defendants. Morritt LJ remarked that it was noticeable that it was Mr Krasner who objected to the width of the order, not the solicitors, Messrs Rakisons to whom it was directed. In that context, when he considered the width of the order he said this:

“I do not understand Hoffmann J to be stating that a Bankers Trust order must be as specific as a subpoena in all cases, and would respectfully disagree with him if he had. No doubt the degree of specificity required will differ according to the facts of each case and those facts will include the relationship between the person against whom the order is sought and the other persons against whom the claims are made. The court must in this, as in all other exercises of its discretionary powers, seek to achieve a just balance between those who seek such orders and those against whom they are sought. In striking such balance it is necessary to consider the onerousness of compliance with the order sought without being tied down by rules relating to subpoenas.”

The Court of Appeal in that case upheld an order that the respondent solicitors disclose “all documents evidencing the ownership or control of” five named companies. The court also upheld orders requiring them to produce “each and every document evidencing, relating to or connected with any relevant transaction” where transaction was defined as “any transaction relating in any way to the Marc Rich Group involving any of the Defendants or companies with which they are connected”.

However, in the present case the claim I have held to be arguable for the purposes of the present proceedings is not in conspiracy or fraud, and the lawyers do object to the lack of specificity in the order. There are also considerations relating to the worldwide character of Debevoise’s partnership. For these reasons it is necessary to look at what Hoffmann J said in Mackinnon, as set out above.

If I had been minded to make the order sought, I would have had to consider whether it could be made consistently with the principle established in Grossman and Mackinnon. As it is, I do not have to do that, and think it best to leave that question to a case where it does arise, and where the evidence is fully directed to the point. But the need to avoid infringement of these principles is a reason why in Mackinnon Hoffmann J drew the analogy with a subpoena. If the principles are to be respected, it seems to me that a higher degree of specificity may be required where the respondent is a firm with offices in more than one jurisdiction, than where the firm is confined to England, as was the case in Marc Rich. And if I had been minded to make the order, I would have included a provision to make clear that it did not have an unjustifiable extra-territorial effect, or put any lawyer at risk of being in breach of his professional obligations in another jurisdiction.

For this reason I would accept Mr Dutton’s submission that in the present case the degree of specificity in the draft order is insufficient.

In the light of the findings I have made, this question does not arise. And it is difficult to make assumptions as to where I might have been mistaken in my findings so far, with a view to considering how I would have exercised my discretion if I had made different findings.

However, there are considerations which would have weighed heavily with me. I note that in cases of fraud where the court has made orders, the court has attached importance to the fact that the claim is in fraud. While lawyers are not immune from being compelled to give evidence or produce documents (where privilege does not apply), nevertheless, an order that a lawyer do that is one that the court will scrutinise closely, since (by reason of the duties owed by lawyers to clients referred to in para 62 above) it can cause injustice to the client and to the lawyer which orders against other third parties cannot cause. This is the more so where the relationship between the lawyers and the client is not merely in relation to transactions, but is also in relation to litigation (as is the case here with Corbiere in Nevis and Interros in the LCIA arbitration).

Norwich Pharmacal orders are always exceptional, because they interfere with the rights of third parties who are not said to have done anything wrong. Where the third parties are lawyers in a professional relationship with the alleged wrongdoer, then the case must be all the more exceptional. The facts of reported cases appear to suggest that an appropriate case for an order against an innocent lawyer will be likely to be a case where fraud is alleged against the client.

Following the circulation of this judgment in draft, there were submitted to the court a note from the Applicants’ counsel dated 25 February 2011, a note from Debevoise dated 25 February, and a note from Debevoise’s counsel dated 28 February. In addition to editorial corrections, these notes addressed some matters which I do not need to consider at this stage. The parties also informed me of events that had occurred since the end of the oral hearing.

The CT Discovery Proceedings were heard on 24 February and resulted in an order in favour of Rusal and against Trafigura AG. Counsel for Rusal stated that it is by no means clear that Trafigura AG has access to “all the relevant documentation”, and that in those proceedings Trafigura AG had adopted the position that it did not have the relevant documents, and was not involved in the Trafigura Deal. Until Trafigura AG have complied with that order, it seems to me that outcome of the CT Discovery Proceedings provides a further ground for the conclusion that an order against Debevoise is not necessary at the present time.

Debevoise provided me with a copy of an order dated 27 February and made in the Nevis court on the application of Corbiere and Raleigh referred to in para 34 above. The interim injunction was set aside.

For the reasons set out above, this application is refused.