Abstract

This case concerned two materially identical Letters of Request (LORs) sent by Hon. Jesse Furman of the U.S. District Court for the Southern District of New York to London’s High Court (Queen’s Bench Division) requesting that two non-party witnesses be required to give oral evidence by deposition in London for the purposes of proceedings in New York. In giving judgment for the successful plaintiffs, who were represented by Cozen O'Connor, Justice Julian Knowles applied and clarified certain important legal issues arising under the UK’s Evidence (Proceedings in Other Jurisdictions) Act 1975 (the 1975 Act), including in respect of the court’s jurisdiction, and the substantial degree of deference to be given to the overseas court’s own determination of the relevance of the evidence sought.

The New York Proceedings

Ongoing litigation in New York concerns the purchase by the plaintiffs of securities (subordinated debt/notes) in BTA Bank, allegedly in reliance upon false statements and omissions by the defendants. This occurred, it is alleged, pursuant to a large and complex fraudulent scheme whereby the defendants diverted assets from BTA Bank over the course of two debt restructurings at the expense of its international creditors, including the plaintiffs, whose securities lost all or most of their value because of the defendants’ activities. Those allegations are denied by the defendants.

The plaintiffs allege in New York that Mr. Prosyankin was at all material times the deputy head of the Asset Recovery Sub-Committee and that he became a member of BTA Bank’s Management Board in 2012. They also allege that Mr. Howell was retained by BTA Bank to advise on the 2010 restructuring and post-restructuring operations, particularly as a coordinator of the Asset Recovery Sub-Committee. The plaintiffs contend that both Mr. Prosyankin and Mr. Howell were personally involved in all aspects of the 2010 restructuring, the 2012 restructuring, and the Asset Recovery Process knew since before the 2010 restructuring of the “Negative Carry Swap,” and knew that BTA Bank was underreporting assets recovered during the Asset Recovery Process. The Negative Carry Swap was alleged to be a series of transactions the net effect of which was that BTA Bank would be liable for, and in the event paid, hundreds of millions of dollars to SK Fund in interest from 2010 onwards. The allegations are denied by Mr. Prosyankin and Mr. Howell (the witnesses)².

The plaintiffs sought evidence from the witnesses, both of whom were located in England, because, they allege that “none of BTA Bank’s current management or employees were in senior positions or directly involved … during the relevant period” and “the [witnesses] remain the best placed available witnesses with contemporaneous knowledge of the workings and actions of the Bank and SK Fund at the material time.”

The New York LORs

The plaintiffs’ motion for the LORs was filed in New York on November 20, 2018. The defendants did not file any opposition to the motion. The motion was accompanied by a detailed memorandum of law addressing relevant U.S. and English legal principles, and explaining why, in the plaintiffs’ view, the evidence of Mr. Prosyankin and Mr. Howell was central to resolving issues in the New York proceedings.

Judge Furman granted the plaintiffs’ motion on December 6, 2018, by signing and issuing the LORs. The LORs set out the key pleadings and explained that the plaintiffs sought evidence from the witnesses “under United States Federal Rules of Civil Procedure 30 and 45 for purposes of using that testimony at trial.” Judge Furman’s LORs to the High Court said: “I find that it is necessary for purposes of justice and the due determination of the matters in dispute at trial in the aforesaid U.S. proceedings between the parties that you cause the BTA Witnesses and Howell to be examined for the purposes of using that testimony at trial.” The LORs contained a list of topics for questioning that Judge Furman said was “relevant to matters at issue in the U.S. Proceedings.” The witnesses were not required to produce any documents.

English Procedure

The LORs were transmitted to the UK under the provisions of the Hague Convention, which the UK ratified after passing the 1975 Act. The plaintiffs applied to the High Court pursuant to CPR 34.17 for an order to give effect to Judge Furman’s LORs requiring the oral examination of the witnesses under oath. Morris granted the plaintiffs’ application on December 21, 2018.

That order was made without notice to the applicants, and, as is normal, gave the witnesses the right to apply to set it aside, which they duly exercised. The hearing before Justice Julian Knowles on January 15, 2019, was the hearing of that set-aside application. Both witnesses were represented by counsel, and counsel also appeared on behalf of BTA Bank.

Legal Principles — Jurisdiction — Discretion

In a clear judgment, Knowles set out the legal principles governing the exercise of the High Court’s powers to provide mutual legal assistance to a foreign court under the 1975 Act following the receipt of a LOR. The court’s powers derive from s.1 and s. 2 of the 1975 Act. In dealing with such a request, the judge found that the English Court must: “first decide whether it has jurisdiction to make an order to give effect to the request and, secondly, if it has, whether as a matter of discretion it ought to make or refuse to make such an order.”

Jurisdiction

As to jurisdiction, Knowles summarized that:

Firstly, there must be an application for an order for evidence to be obtained in England and Wales. Second, the application must be made pursuant to the request of a court exercising jurisdiction outside England and Wales. Third, the evidence to which the application relates is to be obtained for the purposes of civil proceedings which either have been instituted before the requesting court or whose institution before that court is contemplated.

Discretion arises under s. 2:

once the Court decides that the three jurisdictional conditions precedent in s 1 are satisfied. Section 2(1) confers the power on the High Court (in England and Wales) to make an order for obtaining evidence to give effect to the request. Section 2(2) specifies the forms of order which may be made, subject to the limitations in the section, including the examination of witnesses (s 2(2)(a)). As to this, in particular, s 2(3) prevents the court from making an order requiring any particular steps to be taken unless they are steps which can be required to be taken by way of obtaining evidence for the purposes of civil proceedings in the court making the order. Section 2(4) contains restrictions in relation to documents which are not relevant to the matter before me.

Discretion

The court rejected counsel for Mr. Prosyankin’s submission that the issue of relevance under s. 2(2) and s. 2(3) was a matter of “jurisdiction” notwithstanding some support for that proposition in Gubarev v Buzzfeed Inc.³ where the Senior Master dealt with the question of relevance under the heading Jurisdiction. In a useful clarification, Knowles preferred Morris’s approach in Galas v Alere Inc.⁴ that s. 2 confers a discretion on the High Court to make an order to give effect to an LOR, with restrictions on how that discretion may be exercised. It does not concern the conferral of jurisdiction to make an order.

As to how that discretion should be exercised, Knowles adopted Senior Master Fontaine’s distillation of relevant principles in the recent case of Aureus Currency Fund LP v Credit Suisse Group.⁵ First, the court must consider the width of the request. If the request is too wide, or uncertain or vague, it may be refused on the grounds that it is oppressive to the witness. Second, if the request is considered to be too wide, the court can edit (blue pencil) the request, but cannot redraft it. Third, and fundamentally, there is the question of relevance, which is the “fundamental building block”⁶ on which the correct approach to an application to s 2 should be based.

In determining the question of relevance, there are 2 principal questions.⁷ First, whether the intended witnesses can reasonably be expected to have relevant evidence to give on the topics stated in the LOR, and second whether the intention underlying the formulation of the topics is an intention to obtain evidence for use at trial or is for some other investigatory, and therefore impermissible, intention.

Relevance — Deference to a Foreign Court

As to the first question: “If the letter of request states that a particular person is a necessary witness then the English court should not itself embark upon an investigation as to whether the requesting court is correct for the purpose of determining in advance whether the evidence is relevant and admissible.”⁸

But, the court asked itself, by what process should the English court determine the question of relevance? Should it determine the question for itself, independently of the views of the foreign court, or should it defer to the view of the foreign court, and if so, to what degree?

The starting point is that the English court should rely on the requesting court’s determination of the issue of relevance of the evidence sought to the issues for trial, although the English court can, in certain circumstances, consider for itself the relevance of the evidence sought, including for example “where the relevance of the topics for examination in the request has obviously not been considered by the requesting court.”

In this context, the judge believed that the comment in Gredd v Busson⁹ that “orders for letters of request are normally made by the U.S. judge without any real scrutiny” should be approached with caution. The court also rejected the judge’s comment in Aureus that it was only in an “exceptional case”  that the English court should consider the question of relevance for itself. Rather, in Knowles’s view:

The question whether the relevance of the topics for examination in the LOR has been properly considered on the merits by the requesting court is fact specific and should be determined by reference to the specific wording of the LOR in question, without any presumption one way or the other whether it will or will not show that the question of relevance is for determination by the English Court …

If an examination of the terms of the LOR and any other relevant material shows that the matter has been considered on the merits by the requesting court, and the topics found by it to be relevant, then the English Court should respect that determination because the requesting court is in the best position to judge relevance …

However, if the opposite is the case and it is plain (and, I emphasise, plain) that the requesting court has not considered the question of relevance where it is clear, even on a broad examination, that the evidence is not relevant, then the English Court should consider the question of relevance for itself.¹⁰

Argument and Decision

Oppression — Short Notice of the Application/Insufficient Time to Prepare for the Examination

The witnesses/BTA Bank argued that the witnesses had not had sufficient time to prepare for depositions, particularly as the issues were complex and raised questions of wrongdoing. The judge rejected those submissions, holding that:

… none of the matters relied upon by [counsel for Mr. Proyankin] either collectively or individually come close to meeting the test of oppression such that I should, in the exercise of my discretion, and contrary to the important trans-national interests served by LORs, refuse to give effect to Judge Furman’s requests to this Court for assistance.¹¹

Although the timetables were short, the English Court did not find them so short as to deprive the witnesses of a proper opportunity to prepare. They had known of the topics since at least December 18, 2018, and the volume of documents to consider had been reduced to less than 200 pages, although initially 1,800 pages had been served on January 2, 2019. As to allegations of wrongdoing by the witnesses, they would be protected by a variety of safeguards, under the terms of a protective order of the U.S. Court, and the U.S. and English law of privilege.

Relevance — Whether the U.S. Court Had Considered Relevance or Not

The witnesses/BTA Bank submitted that there was no evidence that Judge Furman had properly or at all considered the question of relevance, and that the English Court should, therefore, make its own determination. In that regard, counsel for Mr. Prosyankin submitted that Mr. Prosyankin had no relevant evidence to give. Knowles rejected that submission.

Knowles noted that the New York proceedings had commenced in December 2012 and that:

They have been managed from a very early stage by Judge Furman. The Court’s dockets for the two cases demonstrate that Judge Furman has given hundreds of decisions and rulings on the two cases. If I may respectfully say so, he can be taken to be very familiar indeed with the subject matter of the litigation.

Referring to the text of Judge Furman’s LORs, he held that:

In my judgment it is apparent from the LORs that Judge Furman considered the question of relevance for himself and was satisfied that the topics on which the Applicants are to be examined are relevant to the issues arising in the U.S. Proceedings. He did not merely rubber stamp the Plaintiffs’ assertion that the topics were relevant. In those circumstances, it would be contrary to comity, and to the proper approach indicated by the cases that I discussed earlier in this judgment, for me to embark upon a process of trying to second guess whether he was right or wrong in his determinations.

Rather, the text of the LORs contained:

… an explicit statement that Judge Furman considered the topics and found them to be relevant. I completely reject the suggestion that I should infer he merely rubber-stamped the Plaintiffs’ application without applying his mind to the merits. Ms. Fatima at one point in her submissions said that there was “no evidence” that the judge had considered relevance. The short answer is that there did not need to be. The LORs are, as I have said, written by the judge in the first person and they contain his reasoning and conclusions that the topics are relevant. Nothing more is required, any more than it would be if this Court were to issue an LOR to Judge Furman setting out a list of topics said to be relevant to litigation here.

In conclusion, I am entirely satisfied that the issue of relevance was considered on the merits by Judge Furman and the topics found by [him] to be relevant, and thus that as a matter of comity I must respect that determination because he was in the best position to judge relevance.

Fishing/Impermissible Motive

Thirdly, the witnesses/BTA Bank argued that the order should be set aside because it is designed to fish, i.e. investigate issues for the ulterior purpose of assisting the previous management of BTA Bank (Mr. Ablyazov and others) rather than for the purpose of seeking to prove/disprove allegations of fact in issue in the U.S. proceedings.

The judge entirely rejected that submission, as follows:

The fact that the topics for questioning are all relevant to the issues in the U.S. Proceedings, and have found to be so by the judge in charge of those proceedings, effectively disposes of the suggestion that the true motivation behind the LORs is somehow connected to Mr. Ablyazov and showing that his prosecution is politically motivated. Judge Furman stated in [20] of the LOR (set out above) the reason why the Applicants’ examination was necessary, and the suggestion that the applications for the LORs had an improper ulterior motive is effectively a suggestion that he was deceived into signing and sending them. I reject as far-fetched any such suggestion. It is unnecessary to say more.

Comment

Knowles’s clear judgment is of interest for a number of reasons:

1. It clarifies that the question of relevance of issues in a LOR is pertinent to the exercise of the English Court’s discretion, and not a matter of jurisdiction.
2. It endorses the helpful distillation of case law on the exercise of discretion set out by the Senior Master in Aureus.
3. It highlights the importance that the English Court places upon comity and its great reluctance to go behind the text of the foreign court’s LOR to consider for itself the question of relevance and motivation in seeking the LOR.

The LORs are, as I have said, written by the judge in the first person and they contain his reasoning and conclusions that the topics are relevant. Nothing more is required, any more than it would be if this Court were to issue an LOR to Judge Furman setting out a list of topics said to be relevant to litigation here.

Against that backdrop, the court was not sympathetic to arguments that complying with the order would be inconvenient for the witnesses, in the circumstances of this case.

Practical Points

Inwards LORs to English courts seeking oral and/or documentary evidence are very frequently rejected because the text of the LOR has not been drafted to meet the requirements of the UK’s Evidence (Proceedings in Other Jurisdictions Act) 1975 which has given rise to extensive case law.

This is a complex area of law. It is vital that anyone seeking evidence in England for use in overseas proceedings seeks advice from specialist English lawyers well before applying for a LOR in that overseas jurisdiction. Conversely, anyone receiving a LOR should also take legal advice because they are often open to challenge.