Eurasian Natural Resources Corporation (ENRC) is seeking more than $167 million (£124m) plus costs over the Serious Fraud Office’s now-abandoned investigation into the Kazakh mining company.
The ‘phase two’ trial, before Mr Justice Waksman, follows the 2023 High Court judgment which found that the SFO was a ‘vital participant in the overall wrongdoing’ of now retired solicitor Neil Gerrard whom it ‘actively encouraged’ in relation to an inquiry into ENRC.
This trial, which is listed for six weeks, will deal with quantum. The company claims losses in relation to legal fees and other costs incurred in defending itself and employees which it says total around $76m and around $90m over increased borrowing costs caused by the SFO’s criminal investigation.
In written submissions, ENRC said the sums it spent ‘defending the [criminal investigation] are dwarfed by the potential fines and penalties it might have faced had it been charged’.
Nathan Pillow KC told the court ENRC was seeking ‘compensation for the consequences of the criminal investigation that you decided in Phase 1 and Phase 1a would not have been started but for the misconduct of the defendants Dechert and the Serious Fraud Office’.
‘Your Lordship is assessing at this trial the loss that has flowed from the SFO’s unlawful conduct committed, as you have found, by some of its senior officials.’
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He added that when the state publicly announces it has started an investigation into ‘serious criminal offences', the identified suspect’s – here, the ENRC’s – ‘reputation will be damaged’.
‘When those allegations include allegations of financial serious fraud…third parties will either be deterred from dealing with the suspect [and] particularly deterred from being financially involved with the suspect or at the very least, those prepared to continue dealing with the suspect will factor the increased risk of doing so,’ Pillow said.
Pillow said western banks which lent to ENRC before the SFO announced its criminal investigation were ‘not willing to do so afterward’ adding: ‘The reputation risks is largely what drove western banks away.’
Pillow told the court ENRC was claiming ‘dollar for dollar or bust’ as its ‘equity value is affected dollar for dollar’. He said: ‘The parent suffers relevant loss when the subsidiary pays extra cash out of its bank account that would have been left in its bank account had it not suffered the costs and the parent suffers accordingly.'
The SFO argues that ENRC’s claim for both unnecessary costs and increased borrowing costs should be dismissed.
In written submissions, the SFO said: ‘The evidence that ENRC has adduced is insufficient to demonstrate that ENRC (as opposed to other entities) has suffered any loss, save in respect of two supplier invoices for which a total of £25,202 is claimed. That sum is dwarfed by the amount which ENRC has already recovered from its insurers, for which it must give credit.'
If damages are awarded, the SFO argues it should be entitled to the same split as decided previously. For losses incurred before March 2013, the apportionment was set at 25% to the SFO and the other defendants the remaining 75%.
Tom Richards KC, for the SFO, referring to ENRC’s ‘dollar for dollar’ claim said the evidence ‘fails to show any loss to ENRC’.
He told the court there ‘are unnecessary costs in ENRC’s schedule’ including costs ‘manifestly outside the scope of its claim against the SFO’.
Richards added: ‘There is no evidence any invoices were paid by ENRC itself. The SFO is not attempting to be unduly difficult in relation to recharges and there are instances were ENRC have produced perfectly good proof that costs were recharged to ENRC. When evidence is clear and comprehensive…the SFO accepts there has been recharge.’
International firm Dechert, in written submissions, described ENRC's case as 'both conceptually flawed and unproven, and cannot be rescued by its expert evidence. ENRC can only recover for losses it can prove that it incurred itself, as opposed to incurred by any subsidiary or remoter corporate relationship. ENRC cannot prove that it itself incurred any [increasing borrowing costs] as a result of the [criminal investigation] decision.’
The trial continues.
