Unveiling the source: Norwich Pharmacal order against Quinn Emanuel in high-stakes arbitration

When a judge begins describing the disputing parties as “not the best of friends” and the “honesty and integrity of both” sides “has from time to time been found to be wanting”, it’s fair to say the following judgment is likely to be interesting.

The judgment handed down by Mr Justice Calver earlier this month in Filatona Trading Ltd & another v Quinn Emanuel Urquhart & Sullivan UK LLP [2024] EWHC 2573 (Comm) however was interesting for a different reason. The judgment concerned the circumstances in which a Norwich Pharmaceutical order may be granted against law firm Quinn Emanuel Urquhart & Sullivan UK.

The Facts

Oleg Vladimirovich Deripaska (Mr Deripaska) and his company, Filatona Trading Limited ( Deripaska Parties), had been in arbitration proceedings with Vladimir Chernukhin (Mr Chernukhin) and his company, Navigator Equities Ltd (Chernukhin Parties), for some time.

These disputes centred around a joint venture the two sides had entered into in 2005 for a Russian based textiles manufacturing company. However, by 2010, the relationship had deteriorated, leading to Mr Deripaska taking effective control of the company. In response, Mr Chernukhin initiated an unfair prejudice claim and started arbitration, which resulted in him receiving an arbitration award of USD $95 million.

However, Mr Chernukhin was dissatisfied with the award and so brought proceedings under Section 68 of the Arbitration Act 1996, alleging a serious irregularity affecting the case and the award granted. In support of these proceedings, a report was submitted, claiming that should such a report have been provided in the tribunal, the arbitration would have resulted in an additional USD $300 million being awarded (being $395 million in total).

Quinn Emanuel, representing Mr Chernukhin, stated that the report (originally obtained as a Russian hard copy and later translated into English for the proceedings) had been obtained through an unidentified London-based business intelligence consultancy. Mr Deripaska contended that the report was a forgery and requested that Quinn Emanuel disclose the ultimate source of the report. Quinn Emanuel refused, claiming that litigation privilege had not been waived. Mr Deripaska sought a Norwich Pharmaceutical order requiring Quinn Emanuel to disclose the source of the report.

Norwich Pharmaceutical order

The court will grant a Norwich Pharmaceutical order if these conditions are met:

1. There is a good arguable case against the wrongdoer. The court found that It was “strongly arguable’” that the report was a forgery, as Mr Deripaska had asserted and further noted that it “was calculated to deceive the court and an arbitral tribunal in an attempt to impose a wrongful additional financial liability on Mr. Deripaska of some US$300 million.” Therefore, it was in the interests of Mr Deripaska to seek to vindicate himself.
2. The respondent must be involved or mixed up in the wrongdoing or have information or documents to identify the wrongdoing. The court found that Quinn Emanuel “were actively involved in the (unwitting) verification and deployment of that document in legal proceedings, which it is strongly arguable was a forgery. They were accordingly mixed up in the alleged wrongdoing and enabled the purpose of that wrongdoing to be furthered. The fact that counsel for the Chernukhin Parties also failed to spot the fact that the document was arguably a forgery does not in any way detract from this conclusion.” The court went so far as to say Quinn Emanuel had “become involved in the wrongdoing in this case and…unwittingly facilitated it”.
3. The order must be necessary in the interests of justice and proportionate. Mr Deripaska had been unable to identify the source of the report himself and so this remained the only available avenue for him to do so.

The court found that all three conditions were met and granted the order. It also found that the communications with the consultancy were not subject to litigation privilege as Quinn Emanuel had maintained. The communication was unlikely to reveal information relating to the litigation strategy of Mr Chernukhin and his legal advisers, especially since the report had been provided in the s68 proceedings.

Conclusion

This judgment provides an interesting and unique reason as to the circumstances under which the court may grant a Norwich Pharmaceutical order against a law firm. However, these circumstances are exceptional and reflect the balance of justice and proportionality when wrongdoing and forgery is alleged.

In finding that the identity of the consultancy was not confidential, the case demonstrates that law firms should be conscious of what communications can and should properly fall within legal advice and litigation privilege.

Update: When considering the costs to be awarded as a result of the Norwich Pharmaceutical Order, the Court found that Quinn Emanuel should have its costs reduced by 30%. In reaching the decision, Mr Justice Calver said “It is only fair that the claimants should not have to pay a proportion of QE’s costs which reflects the unnecessary increase in costs caused by QE’s failure to engage with the claimants’ forgery allegations as described in the judgment… In all the circumstances I consider that a fair approach to the order for costs in the present case is to apply a 30% reduction in QE’s costs of resisting the disclosure application. The remainder of QE’s costs, as the party giving disclosure, should (in accordance with the general rule) be paid by the claimants.”