Oleg Deripaska wins disclosure from Quinn Emanuel over alleged arbitration fraud

The High Court has mandated a prominent City litigation firm to disclose the origin of a potentially fabricated report that was part of an arbitration conflict involving Russian oligarchs.

Mr. Justice Calver took the unusual step of issuing a Norwich Pharmacal order against the law firm, specifically Quinn Emanuel (QE), to reveal the business intelligence consultancy responsible for the so-called Glavstroy report. It was acknowledged that QE was unaware of the report's ultimate source, which had been utilized to support a claim under section 68 of the Arbitration Act 1996, ultimately abandoned, asserting that an arbitration award in favor of its clients should have been increased by $300 million.

Justice Calver indicated that the evidence suggested the report was indeed a forgery; however, he was “not willing to make the serious finding that QE ought to have known that they were facilitating arguable wrongdoing at the time when the section 68 proceedings were issued.” Nevertheless, after the opposing party raised concerns regarding the report, QE did not conduct the “urgent enquiries which they ought to have made at that stage to satisfy themselves as to the authenticity of the report.” This oversight was a consideration, “but no more than that,” in the decision to issue the order.

QE was representing Vladimir Chernukhin and his firm Navigator Equities—despite Clifford Chance being the solicitors on record—in a dispute with Oleg Deripaska and his company, Filatona Trading. The judge remarked that “it is fair to say [the two sides] are not the best of friends.” He further noted: “It is also fair to say that the honesty and integrity of both Mr. Deripaska and Mr. Chernukhin has from time to time been found to be wanting in cases before the English courts.”

QE engaged the consultancy that procured the Glavstroy report. The claimants argued that knowing the name of the consultancy and those who commissioned the report would enable them to seek an order compelling the identification of the ultimate source.

The core issue revolved around the dissolution of a joint venture, which resulted in an arbitration decision mandating the Deripaska parties to acquire the Chernukhin parties for $95 million. Subsequent civil actions ensued, including a section 68 motion aimed at annulling the buy-out award and referring the matter of quantum back to the tribunal. The Chernukhin parties contended that the award was compromised due to the Deripaska parties' intentional concealment of the Glavstroy report, which could have resulted in an award of $395 million.

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The solicitors representing the Deripaska parties, the City firm RPC, raised doubts regarding the report's authenticity and posed specific inquiries about it. Notably, the report was claimed to have been authored in 2016 but cited a document from 2018, a discrepancy that neither Clifford Chance nor QE addressed, other than to assert they had no reason to question its authenticity. QE informed RPC that the consultancy was "routinely engaged by city law firms in the context of legal disputes." While QE indicated it would typically have no objection to disclosing the name, it declined in this instance, citing "serious concerns about the safety of the ultimate source(s) of the Glavstroy report given the identity of your client.

" However, three months after initiating the proceedings, Clifford Chance chose to withdraw them. Although no admissions were made, Clifford Chance consented to an order for indemnity costs against its clients. Calver J determined that the criteria for Norwich Pharmacal relief were satisfied, stating it was "strongly arguable that the Glavstroy report is a forgery."

While counsel attempted to argue that only certain sections of the report were inaccurate and that the valuations might be valid, the judge noted it was "significant" that neither QE nor Clifford Chance "have ever taken issue with the indicia of fraud/forgery put forward" and "have never suggested that the report is genuine." It also appeared "very unlikely" that the Chernukhin parties would have retracted their claim and consented to pay indemnity costs if they believed the report to be authentic.

“All of the evidence before me points to this document being a forgery designed to cause very considerable loss to the Deripaska parties, by deceiving this court into granting section 68 relief and subsequently an arbitral tribunal into making an order requiring the Deripaska parties to pay up to an additional US$300m to the Chernukhin parties.”

QE was implicated in the misconduct and has, in fact, inadvertently facilitated it. In their correspondence, QE acknowledged that both it and Clifford Chance undertook a comprehensive analysis of the report prior to the initiation of the proceedings.

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The judge dismissed the claim that the names were protected by privilege, asserting that the information would not disclose any details regarding privileged communications or litigation strategies, nor would it hinder open discussions between Mr. Chernukhin and QE. Instead, there exists a significant public interest in permitting the Deripaska parties to assert their legal rights, and an order would likely serve as a deterrent against similar misconduct in the future, particularly by the alleged wrongdoers if, as the Deripaska parties reasonably suspect, the information in the Glavstroy report originates from an insider within their organization.

Calver J determined that granting the request for Norwich Pharmacal relief was a necessary and proportionate measure in light of the serious misconduct involved. He remarked, “I believe that the Deripaska parties are sincerely pursuing lawful redress for a serious wrong from which they cannot otherwise seek remedy. As counsel succinctly noted, if Mr. Chernukhin was involved in the wrongdoing, it is appropriate for his participation to be revealed. Conversely, if he is innocent, he has no reason to fear disclosure.”