Windward Prospects, formerly Arjo Wiggins Appleton, has been instructed by the High Court to either sue Sequana for €578m (£484m) of contested dividends paid in 2008 and 2009 or face receivers being appointed to take the action.

BAT Industries, a division of British American Tobacco (BAT), is attempting to force Windward Prospects to sue its former owner Sequana for the dividends it paid out to the French paper group to ensure that Windward has sufficient funds to meet its share of any obligations resulting from the $1bn clean-up operation following the pollution of two US rivers with chemicals used in paper production between the 1950s and 1970s.

According to Bloomberg, the US authorities have sued nine companies over the chemical leaks. The article stated that BAT is liable because it owned various NCR paper operations in the 1990s, which through a series of mergers and demergers ultimately resulted in the creation of Windward Prospects.

Windward denies it is liable for the clean-up operation.

Following a two-day hearing on 12 and 13 November, Mr Justice Hamblen said in a written judgement last week: “I have concluded that, absent an appropriate undertaking from Windward, receivers should be appointed in order to commence the Dividend Claims in the name of Windward and thereby protect the limitation position [of BAT Industries].”

A spokeswoman for Sequana said: “Regarding the English High Court of Justice decision in the proceedings between BAT Industries Plc and Windward Prospects Ltd, to which Sequana is not a party, Sequana sold its investment in Windward Prospects Ltd on May 18, 2009 and believes that dividends distributed by Windward Prospects Ltd to Sequana prior to the sale were paid in compliance with all relevant legal requirements."

Regarding whether Sequana would defend any potential legal action, she added: “Sequana has not received any claim at this stage and cannot therefore comment."