Winning a claim in court is one matter; actually obtaining the value of your claim can be quite another.
This judgment, handed down in July, concerned a challenge to an “order for questioning”, the order having been applied for by Vale S.A. and granted by the High Court earlier this year. This order was intended to assist Vale in gaining information regarding the ability of BSG Resources Ltd to pay a judgment debt of $2 billion awarded in 2019.
The director of BSGR who had been summoned for questioning by the order, Mr Dag Lars Cramer, applied for the order to be set aside. Following a hearing convened to determine the validity of this “set aside application”, Master Davison dismissed the application and upheld the order.
Relations between the two mining companies Vale and BSGR, the former based in Brazil and the latter in Guernsey, began in 2010 when they entered a joint venture agreement to mine iron ore deposits in Guinea. BSGR had previously acquired the rights to mine the vast unexploited deposits of the Simandou region. Vale paid $500 million for a 51% stake in the venture and subsequently invested $750 million.
In 2014, however, BSGR had its mining rights revoked by the Guinean government upon findings that the rights had been obtained from the previous administration by means of bribery and corruption, one party to which was allegedly the wife of a former President.
If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has.”
John Maynard Keynes
Vale soon began proceedings to recover the amount of its investment, claiming that when enticing Vale into the agreement BSGR had concealed information as to how the mining rights had been obtained. In April 2019 the London Court of International Arbitration ruled that BSGR had made fraudulent misrepresentations to Vale and awarded $2 billion to cover damages, interest and costs.
On the same day that the LCIA gave its ruling, Mr Justice Bryan of the High Court granted Vale permission to enforce the arbitral award in the same manner as a judgment of the High Court in accordance with section 66 of the Arbitration Act 1996. For potential litigants considering the option of arbitration, this example demonstrates the importance of the 1996 Act in bestowing legitimacy on arbitral courts, as well as the recognition shown towards these bodies by the official UK courts.
With no payment forthcoming from BSGR, which had already entered administration in 2018, Vale made continued efforts to enforce the award including an application for an “order for questioning”, as permitted by Part 71 of the Civil Procedure Rules. This order would require Mr Cramer to attend court in his capacity as a director of BSGR and answer questions regarding the ability of the company to pay its debt to Vale, as well as to produce relevant documents in his possession. Mr Cramer applied for the order to be set aside on a variety of grounds, leading to the case heard in July 2020.
One of the points submitted by Mr Cramer’s counsel was that it was unfair for Mr Cramer to be subjected to questioning on the matter of BSGR’s financial position when he was a defendant in other proceedings brought by Vale which are still due to be heard by the High Court. The substance of these proceedings is that Mr Cramer and seven other defendants are liable to Vale for making fraudulent misrepresentations around the time of the joint venture agreement in 2010.
The counsel argued that there was a risk of the cross-examination trespassing into the topic of these proceedings, and hence that the “order for questioning” was oppressive. Master Davison dismissed this point, ruling that it would be for the court to keep the cross-examination within appropriate boundaries and that these concerns were no reason for the order to be set aside.
Another of the counsel’s submissions was that the order should be set aside because Mr Cramer had already made reasonable proposals to aid the enforcement proceedings; the court was shown correspondence in which Mr Cramer had offered to liaise with the joint administrators of BSGR in helping to supply relevant documents to Vale. Master Davison noted caveats in this submission, for example that it was not within Mr Cramer’s power to force the joint administrators to disclose confidential documents, and ruled regardless that such proposals of assistance had no effect on Vale’s right to apply for the order.
This case demonstrates the substantial level of support which the courts are able and willing to provide to judgment creditors. An “order for questioning” is a straightforward procedure which is automatically granted upon correct submission of the application notice and does not require the other party to be present at the hearing. As seen in this case, such an order is very difficult if not impossible to set aside. Creditors must nevertheless beware of the possibility that the funds required to pay their award do not exist.
Link: Vale SA v BSG Resources Ltd & Anor [2020] EWHC 2021 (Comm) (30 July 2020)
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