Eddy Eccles, Covington & Burling

Eddy Eccles, who works across the commercial litigation and international arbitration spaces, had already had a hand in cases arising from the former CIS region before his standout role in Avonwick Holdings Ltd v Azitio Holdings Ltd & Ors [2020] EWHC 1844 (Comm). The Covington & Burling senior associate brought with him experience from his time at Joseph Hage Aaronson (JAH) working on behalf of the former President of Ukraine, Viktor Yanukovych, and his family, in various commercial disputes and sanctions challenges that they had to deal with in the aftermath of the Maidan revolution.

Eccles says that he is fascinated by the history of the CIS region and finds it incredible how much of it plays out in litigation before the English Courts. It all began with this first instruction and Eccles’ interest was insatiable.

Eccles was part of a Covington team led by litigation partners Craig Pollack and Greg Lascelles, acting for Mr Oleg A. Mkrtchan, the director general of the Industrial Union of Donbass (ISD), one of the largest steel companies of Ukraine in a multi-billion dollar dispute in the English Commercial Court.

British Virgin Islands-based Avonwick Holdings (controlled by Mr Vitaliy Gaiduk) commenced proceedings against the defendants in this case in the summer of 2016, following one of the largest transactions in Ukrainian history. Avonwick claimed that it sold a 33 per cent interest in ISD, equating to $1bn to fellow prominent Ukrainian businessmen Mkrtchan and Mr Sergei Taruta.

Gaiduk claimed that Mkrtchan and Taruta lied to him about the terms on which he was bought out in 2009 from ISD, which had previously been owned jointly by all three businessmen. Gaiduk sought damages of nearly $1bn, which he said had been misappropriated as a result of this fraud. Taruta alleged an entirely different billion-dollar conspiracy against Mkrtchan and Gaiduk, claiming he had been deprived of assets and funds owed to him following the breakup of the three men’s partnership.

The claim was started in 2016 and Covington was instructed at the end of 2018 to take over Mkrtchan’s defence, following a number of significant setbacks at various interlocutory stages.

“The time period to understand the dispute, formulate a strategy, and ready the client’s best position for trial, was hugely compressed,” states Eccles. “Covington was instructed only one year before trial, and not only was there a complicated history to the dispute, but also to the history of the litigation itself, which was already several years old when we came on board.

“There were times when the sky seemed to be raining interim applications, and rare was the day when we did not receive two or three or even more letters from the other parties, who were fighting the litigation in the most ‘high volume’ manner possible.

“One of the unique challenges to the case was having to carve out the space and time to think really thoughtfully about how best to fight and win the trial, even as we hurtled towards it at 100 miles an hour.”

With less than a year to go to trial, and facing off against very aggressive teams from both Quinn Emanuel and Hogan Lovells – in the first six months of Eccles’ engagement alone there were 18 interlocutory applications issued, with seven hearings – the team managed to turn the tide.

A very unusual feature of the case was that Mkrtchan had been detained in Moscow by the Russian authorities, following a secret trial in 2019 on charges that he had defrauded ISD’s new investor, the state-owned bank Vnesheconombank. Covington was unable to obtain direct access to him.

Eccles explains that it meant they were on the backfoot in terms of the factual input, and were unable to produce a witness statement from him, or have him give live evidence at trial. It also created a perception problem for his defence. Mkrtchan’s credibility was a key factor in determining the outcome of the case, and at the risk of stating the obvious, it was an unhelpful starting point to be saying to the Court that he was unable to give evidence because he was in prison.

“In recent years, the approach of the Commercial Court has been to underplay the importance of witness evidence where there are documents that can say what happened – but in high-value disputes from the former CIS region, which often hinge on what was said or done by the key individuals at the top of different corporate groups, it’s very common for there to be few if any documents about the key events,” says Eccles.

“That was certainly the case here, and so there were unique evidential challenges for us in this case.”

The main learning point for Eccles was the importance of carving out time to think strategically about how to win the case at the end of the litigation, at the same as continuing to advance his client’s position robustly in the constant, day-to-day clamour of correspondence, disclosure challenges and interim applications.

He describes it as one of the busiest and most keenly fought cases he has ever worked on, with the parties’ legal fees eventually amounting in aggregate to more than $50m.

“Although I was the senior associate on the matter, there were whole applications and strands of correspondence that I simply would not have had time to involve myself in, in any level of detail. Instead, whenever possible I and another team member were focused entirely on interrogating the underlying merits, and searching for areas where we could improve the client’s position at trial,” Eccles continues.

“I even annexed the spare office next to mine, which became the ‘War Room’ that we would go to, away from our phones and emails, to focus on those parts of the case.”

After an eight-week trial, the judge dismissed all of the claims against Mkrtchan apart from a single claim to transfer shares, which the judgment itself recognised were likely worthless.

As a result, on 14 July 2020, Covington secured a comprehensive defence win.

Eccles says that one of the lawyers who has had the greatest impacts on his career is Tom Beazley QC, who was one of the key figures involved in setting up JAH, having previously been joint head of Chambers at Blackstone for many years.

“I have never met anyone who can rival his ability to assimilate vast quantities of facts and legal submissions so quickly, and then draw from them a simple and elegant line of submissions that is perfectly judged to advance a client’s case in the best way possible. I saw this constantly in the many cases we worked on, including the Yanukovych matter mentioned earlier. Year on year, litigation is only becoming more complex and document heavy, and Tom’s ability to find order in the chaos is something that I aspire to achieve in every case I work on.”

For Eccles, the history of the dispute was nothing less than a history of Ukraine itself. The key asset in dispute, the ISD, operated an ironworks whose giant furnaces were older than the country they were located in, having been installed all the way back in Soviet times. ISD itself emerged from the chaos that followed the collapse of the Soviet Union, at a time when the economical disruptions effectively compelled the heavy industries of Donbas to revert to a barter economy. Since then, the company has grown and diversified, and brought its owners great wealth, but also great challenges.

“It is impossible to understand the history of ISD without understanding the dramatic changes that have swept through this part of the world in the last decades,” Eccles says.

“That means that it is a fascinating case for anyone to work on, but it’s also one where Covington’s long experience in the region (which has recently included wins before the ICJ and other tribunals for Ukraine itself, against Russia, relating to the annexation of Crimea) could really assist the client.”