Solicitors debarred from acting in multi-billion dollar oligarch case

31/01/14

On 31 January 2014, Mr Justice Field handed down a judgment granting a permanent injunction to restrain the firm of solicitors, White & Case, from acting for the Ukrainian oligarch, Mr Victor Pinchuk, in a multi-billion dollar case in the Commercial Court.

In April 2011, White & Case in New York accepted instructions to act for a number of companies on a restructuring and initial public offering of their ferroalloy business (the Claimants in the application before Field J). Mr Igor Kolomoisky and Mr Gennadiy Bogolyubov, two Ukrainian oligarchs, have ownership interests in those ferroalloy companies.

White & Case acted for the Claimants until May 2013 and became privy to and obtained substantial confidential information about the Claimants’ ferroalloy businesses’ assets and the structure of various corporate vehicles.

Unknown to the Claimants, at the same time as White & Case was advising them on their restructuring, White & Case’s solicitors in London and Moscow were also advising Mr Pinchuk to prepare claims against Messrs Kolomoisky and Bogolyubov. On a number of occasions, unknown to the Claimants at the time, White & Case decided internally that there was no conflict of interest between its acting for the Claimants and also acting for Mr Pinchuk, and for two years did not establish any Chinese walls or information barriers separating the teams acting for the Claimants and for Mr Pinchuk.  Eventually, Mr Pinchuk, represented by White & Case, commenced proceedings in the Commercial Court in March 2013, and commenced related London arbitration proceedings in August 2013, in which he made a number of allegations concerning the Claimant companies and ferroalloy activities. The amounts in dispute in the Commercial Court action alone total no less than US$2 billion.

The Claimants sought an injunction to prevent White & Case acting for Mr Pinchuk in both the Commercial Court and the London arbitration.

Two days before the hearing, White & Case ceased acting for Mr Pinchuk in the London arbitration, but sought to continue to act on the Commercial Court proceedings.

The Judge applied the test set out in Bolkiah v. KPMG [1999] 2 AC 222. He found that White & Case was in possession of confidential information which was or might be relevant to the Commercial Court proceedings, and that Mr Pinchuk’s interests were or might be adverse to the interests of the Claimants. He further held that White & Case could not discharge the heavy burden on it to show that there was no real risk of the disclosure of the Claimants’ confidential information to Mr Pinchuk.

Unusually, Mr Pinchuk himself was separately represented and was permitted to make submissions as to the alleged prejudice that he would suffer if White & Case was restrained from acting for him. The Judge, having analysed the Bolkiah test and the need to protect a former client’s confidential information, considered that the impact of an injunction on the solicitors’ current client was not a relevant consideration for him to take into account as a ‘balancing factor’ when granting the injunction.

The judgment is here.