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How English courts can force you to reveal information

Thursday, May 21, 2020

English courts are routinely ruling that information about oil and gas transactions must be made public, even in cases with no connection to England, so long as they have chosen that contracts are governed by English law, writes Simon Bushell, partner with Signature Litigation.

In an era where capital is mobile, and billions can be transferred electronically, access to information to enable complex transactions to be reconstructed can be of enormous benefit to the victims of suspected corruption.

Major players in the energy sector continue to choose English law to govern their contracts and those with their intermediaries.

As a result, the English courts routinely hear energy sector disputes which have little or no connection with England.

Even before a dispute is crystallised, the English courts may order a party to reveal information exposing dubious activities in faraway places.

The English civil courts have remarkable powers to compel third parties to reveal vital information relating to secret commissions or other payments which might give rise to claims.

Disclosure orders, technically known as Norwich Pharmacal orders, can require an innocent third party such as a bank or advisor to reveal who is behind an offshore vehicle or trust, or to release information detailing bank transfers.

Countless frauds have been uncovered using such orders. These include bribery and corruption schemes, over-invoicing, or straightforward theft.

The oil and gas industry operates globally, often in countries where corruption is unfortunately all too common. In such places, it has become apparent that tender and procurement processes can be distorted by bribery, to the detriment of businesses that wish to participate legitimately.

The difficulty which honest parties face in obtaining redress is that it can be very difficult to obtain clear evidence of corruption.

In some such cases, disclosure orders may provide a powerful tool to obtain incontrovertible evidence of a corrupt payment from a rival bidder (or someone on their behalf).

Norwich Pharmacal disclosure orders emerged from a landmark 1974 decision of the UK's highest court, the House of Lords.

These disclosure orders enable the English courts to require an innocent third party to hand over information relating to unlawful conduct, in certain circumstances.

The English courts have proven most willing to use such orders to get to the bottom of fraud and wrongdoing.

Such orders can also be sought from the courts in Cyprus, the British Virgin Islands, Cayman, the Bahamas and a host of other offshore jurisdictions where English legal principles apply extensively.

Where international companies are conducting business in jurisdictions where they do not have full confidence in the local justice system, many elect for arbitration clauses in their commercial agreements as the primary means of dispute resolution.

Norwich Pharmacal disclosure orders are not only available where the applicant intends to bring court proceedings, but also for a range of other legitimate objectives.

Therefore, there appears to be no obstacle in principle to a disclosure order being granted in support of an arbitration claim.

The fact that the eventual proceedings would be conducted via an arbitral process might be relevant as regards the court's decision as to whether to grant an order.

However, where a disclosure order would provide the best or only available means to identify wrongdoing, the court's discretion is likely to be exercised in favour of granting relief.

While the courts may be hesitant to trespass into areas that could overlap with a prospective arbitration, such arguments will carry less weight where there could be no arbitration without the relief first being granted.

Disclosure orders have been made to reveal the identity of overseas bank accounts, trustees, settlors, and trust beneficiaries, as well as details of the trust's assets and even of the relevant deeds.

The cold light of day can thus be shone on the hard detail of the legal mechanisms which are often used to disguise ownership, or to evade scrutiny and detection.

Norwich Pharmacal disclosure orders have for decades proven highly effective in revealing vital information about wrongdoing. They have been used to reveal both the identities of wrongdoers, and vital evidence, to assist in advancing remedies to a wide variety civil and criminal wrongs.

They have proven highly adaptable, and the courts continue to demonstrate a strong willingness to use them where the interests of justice require it. The remedy is both flexible, and continually developing.

Thanks to the existence of Norwich Pharmacal disclosure orders, the English courts are equipped to dispense powerful remedies.

For this reason, businesses operating internationally who have unsuccessfully participated in procurement or tender process, would be well advised to pause and consider their legal options where corruption is suspected.

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