Letters of Request Under the Hague Evidence Convention Obtaining Evidence in England in Aid of US Proceedings Introduction

Despite the clear message of the English Court to US litigants in the cases of State of Minnesota v. Philip Morris [1998] I.L.Pr.170 and First American Corp. v. Zayed [1999] 1 WLR 1154, that a careful distinction must be drawn between "discovery" and "evidence" when seeking to enforce US letters of request in England against third parties, another recent high profile and expensive failure to appreciate the distinction, shows that the message continues to go unheeded.

To quote the Court of Appeal in Refco & Another v. Credit Suisse First Boston and Standard Bank ("the Banks") [2001] EWCA Civ 1733, in which this firm represented the Banks:

"Once again time and money is being spent in the English Courts over Letters Rogatory... [which] would be unnecessary, if those seeking the request from the United States Court appreciated the differences between the attitude of the United States Court to the making of "discovery" orders against non-parties, and the attitude of the English Court to the making of such orders."

When the United Kingdom became a party to the Hague Evidence Convention, it entered a reservation to Article 23 which became enshrined in the Evidence (Proceedings in Other Jurisdictions) Act 1975 ("the 1975 Act"), making it clear that pre-trial discovery against non-parties was something which the English Court would not provide because there was no equivalent under English procedural law. Therefore, the English Court will not assist where a request is for the purposes of discovery, in the nature of a roving enquiry by which a party seeks to fish for material which might lead to admissible evidence at trial, rather than for evidence at trial which is admissible and relevant to issues in the foreign proceedings.

The Facts

Companies named Genira and Binzer were Plaintiffs in an action in the Supreme Court of the State of New York against two Refco companies, with which the Plaintiffs had engaged in bond and equity securities transactions over an 18 month period. The Plaintiffs had been introduced to Refco by a broker in London, who had told the Plaintiffs that his firm would be compensated "in accordance with industry custom and practice", being a small fraction of the spread between the bid and ask price for each trade. Difficult market conditions emerged and it was necessary for Refco to liquidate the Plaintiffs' trades, as a result of which the Plaintiffs sued for breach of contract. In the course of these proceedings, the Plaintiffs deposed the broker in New York, during which it became apparent that Refco appeared to have entered into certain commission or profit sharing arrangements with the broker.

As a result, the Plaintiffs abandoned their contractual claims and obtained leave to plead claims in fraud instead. In essence, they alleged that the sharing arrangements between Refco and the broker were improper and that the payments made to the broker were illegal commissions or kick backs in order to induce the broker to bring customers to Refco and to trade through Refco. In answer, Refco wished to assert that the type of fee arrangement which it had with the broker, was in accordance with industry custom and practice and suggested that evidence of the Banks, which also had trading relationships with the...