Permanent injunction to prevent solicitors acting in a Commercial Court action

Rachel Price

In Georgian American Alloys Inc v White & Case LLP, the court granted a permanent injunction to prevent a firm of solicitors from acting for or advising Mr Victor Pinchuk in multi-billion dollar proceedings brought by Mr Pinchuk in the Commercial Court.  The judgment illustrates the high threshold required to satisfy the court that sufficient protections have been introduced to prevent disclosure of confidential information, even in circumstances where the relevant advisers may consider that there is no conflict of interest.

The applicable law – Bolkiah v KPMG

The principles to be applied when the court is asked to grant an injunction against solicitors or other professional agents to restrain them from acting in a matter on the basis of risk of unauthorised use of confidential information were set out in the case of Bolkiah v KPMG [1999] 2 AC 222.  In summary, the claimant seeking the injunction must establish:

  • That the adviser is in possession of information which is confidential to the claimant and the disclosure of which he has not contested; and
  • That the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to the claimant’s own.

The court in Bolkiah rejected the need to establish an “appreciable” risk on the basis that a strict approach is entirely justifiable, and concluded that:

  • The court should intervene unless it is satisfied that there is no risk of disclosure;
  • Once the former client has established that:
    • the defendant firm is in possession of information which was imparted in confidence; and
    • that the firm is proposing to act for another party with an interest adverse to his in a matter to which the information is or may be relevant;

the evidential burden shifts to the defendant firm to show that there is no risk that the information will come into the possession of those now acting for the other party;

  • There is no rule of law that Chinese Walls or other arrangements of a similar kind are insufficient to eliminate the risk, but the starting point must be that, unless special measures are taken, information will move within a firm; and
  • The court should restrain the firm from acting for the second client unless satisfied on the basis of clear and convincing evidence that effective measures have been taken to ensure that no disclosure will occur (an adapted formulation of the test set out in the Canadian authority MacDonald Estates v Martin 77 D.L.R. (4th) 249).


By way of background to the Georgian Alloys case:

  • The London and Moscow offices of the firm in question, White & Case, had initially advised Mr Pinchuk on a potential dispute with Messrs Kolomoisky and Bogolyubov arising out of a joint venture in September 2010;
  • The New York office of White & Case subsequently advised the claimant companies, in which Messrs Kolomoisky and Bogolyubov were majority shareholders and directors, in relation to a corporate restructuring and potential IPO;
  • Before accepting this instruction, White & Case carried out a conflict check and a potential conflict was flagged. Internal communications took place at White & Case regarding whether the instruction from Mr Pinchuk had terminated and, on the basis that the matter had settled, the firm proceeded to accept the claimant companies’ instruction;
  • During their engagement by the claimant companies, and as a result of far-reaching investigations and extensive due diligence undertaken in the context of the restructuring, White & Case gained access to information which might have been relevant to Mr Pinchuk’s claim;
  • In June 2012, further instructions were received from Mr Pinchuk and accepted by White & Case, which resulted in the prospect of a Commercial Court claim being made against Messrs Kolomoisky and Bogolyubov. At this point a potential conflict was identified, however following discussion with White & Case’s General Counsel it was decided that there was no conflict and that the instruction could proceed;
  • After a number of months had elapsed, further internal discussions took place at White & Case and it was decided that various “ethical screens” should be established between the London/Moscow Pinchuk team and the New York restructuring team;
  • Neither Mr Pinchuk nor Messrs Kolomoisky and Bogolyubov were made aware of the potential conflict of interest, nor of the ethical screens having been put in place;
  • When the claimant companies eventually learned that White & Case were also acting for Mr Pinchuk, they wrote to various partners within White & Case to outline their concerns and to request a detailed account of the information barriers erected;
  • These concerns were not satisfactorily dealt with and the claimants eventually issued proceedings seeking an injunction restraining White & Case from acting for Mr Pinchuk in the Commercial Court proceedings.

The judgment

Applying the Bolkiah principles, the court in Georgian Alloys concluded that:

  • The information imparted to White & Case was confidential information which White & Case was under a duty not to disclose and which satisfied the relevancy test;
  • The Bolkiah test was satisfied on the basis that the interests of Mr Pinchuk in the new matter might be adverse to those of the claimants seeking the injunction, whose majority shareholders would be adversely affected by the action; and
  • White & Case had failed to discharge the evidential burden of showing that there was no real risk that the information had already or would come into the possession of the Pinchuk team.

The judgment provides a useful insight into how the aspect of the Bolkiah test relating to Chinese Walls/information barriers will be applied.  On the facts, the court found that there was a real risk that confidential information had already come into the possession of Mr Pinchuk’s legal team and that it might be used (at least inadvertently) in the claim against Messrs Kolomoisky and Bogolyubov.

The relevant factors identified by the court included:

  • The period of several months which had elapsed between White & Case first receiving the confidential information and the ethical screens being established between the two legal teams;
  • The ethical screens did not prevent the possibility of oral disclosure between the teams; and
  • Members of both the London/Moscow Pinchuk team and the New York restructuring team working in the same offices at certain times.

The court was not persuaded that the impact of the injunction on Mr Pinchuk was a relevant consideration, nor any potential prejudice to him from having to instruct alternative solicitors.

Georgian American Alloys, Inc and Others v White & Case LLP and another [2014] EWHC 94 (Comm)

Olswang acted for the defendants, White & Case.

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