Norwich Pharmacal order refused where it would expose the recipient to a risk of criminal liability under foreign law

In the context of an action alleging unlawful means conspiracy, the High Court dismissed the claimants' application for a Norwich Pharmacal order (NPO) to compel a Liechtenstein financial services company to provide information identifying the individuals behind a payment which was alleged to form part of the conspiracy. Although the court found that it was otherwise an appropriate case for an NPO, it refused to make the order on the basis that providing the information would expose the foreign company to the risk of criminal liability under Liechtenstein law, as well as the fact that the NPO would not be readily enforceable in Liechtenstein given the absence of any treaty or other mechanism for the enforcement of English court orders: Magomedov v Kuzovkov [2024] EWHC 2527 (Comm).

The court found that compliance with the proposed NPO would be likely to put the company in breach of Liechtenstein's strict laws prohibiting the disclosure of trade or business secrets for use abroad and/or its data protection legislation. In addition, the enforcement difficulty cast doubt on the usefulness of the order – and also reinforced the liability risk, as the English order would be unlikely to provide legal justification for the disclosure of otherwise protected information.

As previously reported, it is now easier to obtain permission to serve an NPO application out of the jurisdiction, since the introduction of a specific jurisdictional gateway for such applications (and similar Bankers Trust Order applications) in 2022.  However, as this case illustrates, there are still challenges to securing such orders against foreign parties where there is evidence that the required disclosure would breach a foreign law.

This can be contrasted with the position where an existing party to English litigation resists providing disclosure in the proceedings on the grounds of potential liability under a foreign law.  As discussed in this blog post, the court adopts a stricter approach in such cases, including considering whether there is a real risk of prosecution in the foreign jurisdiction.

Background

In the underlying High Court proceedings, a Russian businessman and his associated companies alleged they were victims of an unlawful means conspiracy involving the seizure of valuable assets, including interests in Russian port operators.

To support their case, they applied for an NPO against three companies operating under the "1291 Group" brand – 1291 Private Office (Liechtenstein), 1291 Dubai, and 1291 UK. The claimants sought disclosure of information to identify the individuals behind a USD 20 million illicit payment, alleged to be a bribe tied to the broader conspiracy.

NPOs are typically sought where a third party, not directly accused of wrongdoing, is "mixed up" in a legal wrong and holds information necessary to identify or pursue the wrongdoer. The claimants argued that the 1291 companies facilitated the payment and could provide key information about those involved.

On a without notice application, the claimants obtained permission to serve the NPO applications by alternative methods and, in the case of the Liechtenstein and Dubai companies, out of the jurisdiction. 

1291 Private Office challenged the court's jurisdiction, and sought to set aside the permission order on various procedural grounds (not considered in this blog post). It adopted a neutral stance as to the substantive NPO application but submitted that compliance with the NPO would expose it to criminal liability under Liechtenstein law and that the order would be unenforceable in Liechtenstein.

The Dubai and UK entities both opposed the NPO application, including on the grounds that they were not "mixed up" in the wrongdoing and thus did not meet the threshold for an NPO.
 

Decision

The High Court (Mr Justice Jacobs) dismissed the applications against all three companies.

The Application Against 1291 Private Office (Liechtenstein)

The court found that the first three conditions for granting an NPO were met in relation to 1291 Private Office:

1. A good arguable case of a legally recognised wrong: The claimants established a good arguable case of unlawful means conspiracy involving a USD20 million illicit payment.
2. Facilitation of wrongdoing: There was evidence suggesting that 1291 Private Office was "mixed up" in the alleged wrongdoing through its involvement in facilitating or processing the payment request.
3. Possession of relevant information: The court accepted that 1291 Private Office was likely to have access to the information necessary to identify the wrongdoers.

However, the court refused to grant the NPO on the basis that it did not satisfy the "overall justice" condition – which requires that disclosure be necessary and proportionate in all the circumstances. Two key issues led to this conclusion:

1. Potential contravention of Liechtenstein law: The court assessed competing expert evidence as to Liechtenstein law and concluded that compliance with the proposed order would potentially expose 1291 Private Office to criminal liability. Specifically, there was "a strong case" for saying that compliance would breach:

• Liechtenstein’s strict laws imposing criminal liability on anyone who  "discloses a business or trade secret, which they are obliged to protect, to exploitation, use or other utilisation abroad" (Article 124 of the Liechtenstein Criminal Code). There was clearly a substantial argument that the identity of the client of a financial services firm would be a business secret in this context; and
   
• data protection laws. While the claimants’ expert suggested that an English court order might potentially constitute a legally permissible reason for disclosure of personal data, the absence of any precedent or established procedure for that would leave 1291 Private Office exposed to potential criminal liability.

2. Enforceability issues: The court accepted evidence that English court orders are not directly enforceable in Liechtenstein due to the absence of a treaty or mutual enforcement framework. Any enforcement, if possible, would need to be through untested and uncertain procedures, which were neither swift nor straightforward. That gave rise to doubt as to the utility of making the order. It also reinforced the risk of criminal liability, in that an English court order would not obviously provide protection for a party disclosing confidential information. 

The court rejected an argument that the risk of criminal liability was sufficiently catered for by a paragraph in the proposed NPO which stated: “Nothing in this order authorises or requires a Respondent to do anything which is contrary to the law of the country where the Respondent is incorporated”. While that caveat would provide the recipient with a degree of protection, that did not answer the question of whether it was appropriate for the court to make the NPO in the first place. In the judge's view:

".. where there is, as here, strong evidence that compliance with the proposed order will in fact contravene the criminal law of the country where [the recipient] is incorporated and operates, the English court should be most reluctant to grant the order which is sought."

Further, the fact that the Liechtenstein company would undoubtedly seek to rely on that caveat added to the argument that the NPO would not serve any useful purpose.

The court concluded that any disclosure order in this case would need to come from a Liechtenstein court, which could directly address the interplay between local laws and the claimants’ disclosure needs. However, the court noted that, if there was no practical procedure for making such an application in Liechtenstein (at least without the benefit of an English court order), that would not be a reason for the English court to make the proposed order.
 

The Applications Against 1291 Dubai and 1291 UK

The court also dismissed the applications against the Dubai and UK entities on the basis that they did not meet the threshold conditions for an NPO:

1. Not mixed up: The court found no evidence that either entity was "mixed up" in the alleged wrongdoing. The Dubai entity was not incorporated until months after the alleged payment, and there was no evidence linking it to the transaction. Similarly, the UK entity had never conducted any business, remaining dormant since its incorporation.
2. No possession of relevant information: The court accepted evidence that neither entity had access to documents or information relating to the alleged payment or the underlying conspiracy.