Fg Hemisphere Associates Llc v Democratic Republic of Congo and La Generale Des Carrieres Et Des Mines

CourtRoyal Court
JudgePage, Commr. and Jurats Tibbo and Kerley
Judgment Date27 October 2010
Date27 October 2010
Page, Commr. and Jurats Tibbo and Kerley

K.J. Lawrence for the representor;

J. Harvey-Hills for the second respondent;

A.D. Robinson for the party cited;

The first respondent did not appear and was not represented.

Cases cited:

(1) Cambridge Credit Corp. Ltd. v. Lissenden, [1987] NSWLR 411, distinguished.

(2) Deutsche Schachtbau-und Tiefbohr-Gesellschaft mbH v. Shell Intl. Trading Co., [1990] 1 A.C. 295; [1988] 3 W.L.R. 230; [1988] 2 All E.R. 833; [1988] 2 Lloyd's Rep. 293, applied.

(3) Helbert Wagg & Co.Ltd., In re, [1956] Ch. 323; [1956] 2 W.L.R. 183; [1956] 1 All E.R. 129, referred to.

(4) Kaplan, In re, 2009 JLR 88, distinguished.

(5) Kensington Intl. Ltd. v. Republic of Congo, [2005] EWHC 2684 (Comm); [2006] 2 B.C.L.C. 296, applied.

(6) King v. Serious Fraud Office, [2009] 1 W.L.R. 718; [2009] 2 All E.R. 223; [2009] 2 Cr. App. R. 2; [2009] UKHL 17, referred to.

(7) Kwok Chi Leung Karl v. Estate Duty Commr., [1988] 1 W.L.R. 1035; [1988] S.T.C. 728, applied.

(8) New York Life Ins. Co. v. Public Trustee, [1924] 2 Ch. 101, considered.

(9) Rosedale (J.W.) Invs.Ltd., In re, 1995 JLR 123, referred to.

(10) Société Eram Shipping Co. Ltd. v. Cie Intl. de Navigation, [2004] 1 A.C. 260; [2003] 3 W.L.R. 21; [2003] 3 All E.R. 465; [2003] 2 Lloyd's Rep. 405; [2003] 1 C.L.C. 1163; [2003] UKHL 30, distinguished.

(11) Trendtex Trading Corp. v. Central Bank of Nigeria, [1977] Q.B. 529; [1977] 2 W.L.R. 356; [1977] 1 All E.R. 881; [1977] 1 Lloyd's Rep. 581; [1977] 2 C.M.L.R. 465, applied.

(12) Walker Intl. Holdings Ltd. v. Republic of Congo, [2005] EWHC 2813 (Comm), applied.

Texts cited:

Dicey, Morris & Collins, The Conflict of Laws, vol. 2, 14th ed., para. 22R-023, at 116; paras. 22-026 - 22-029, at 1118-1119 (2006).

Pothier, Traité de la Procédure Civile, at 339-343 (1821 ed.).

Administrative Law—organ of state—test—company is organ of state (and liable to state's creditors) if under government control and exercises governmental functions—exercises governmental functions if constituted to assist and promote industrial development, prosperity and economic welfare, or if, despite apparent independence, in practice made instrument of state for such purposes (e.g. large mining company controlled by government and assets sometimes treated as state revenue)

Conflict of Laws—companies—debts—situs of debt owed by corporate body is place where resides, i.e. carries on business—company incorporated and with registered office in Jersey resident in Jersey, regardless of location of daily business, directors or bank accounts—body carrying on business in more than one place resides in each place—debt owed considered to be sited in each place unless one expressly or impliedly designated as place where debt recoverable

The representor sought to enforce two arbitration awards in Jersey.

The representor ("Hemisphere") was the assignee of the benefit of two very substantial arbitration awards against the first respondent ("the DRC") and a Congolese company. It sought leave to enforce the awards as judgments in Jersey and to execute them against certain assets of the second respondent ("Gécamines"), namely Gécamines's shares in the party cited ("GTL," a company incorporated in Jersey with its registered office in the Island), and certain very substantial trading debts owed by GTL to Gécamines ("the slag sales payments"). Hemisphere contended that the relationship between the respondents was such that Gécamines, a substantial mining company incorporated in the DRC, was to be regarded as an organ of state of the DRC, thus making its assets liable to execution by creditors of the DRC. Hemisphere further contended that the shares and slag sales payments were sited in Jersey and susceptible to execution in part satisfaction of the awards.

On Hemisphere's ex parte application, the Royal Court (Clyde-Smith, Commr. and Jurats Le Breton and Newcombe) granted an immediate arrêt entre mains of the shares and slag sales payments held by or under the control of GTL. It also, inter alia, gave Hemisphere leave to enforce the arbitration awards as judgments against the DRC and Gécamines in Jersey, and leave to execute the awards by means of arrêt entre mains confirmée, subject to the respondents being at liberty to apply to set aside or vary those parts of the order within a stipulated period. After summonses were issued by Gécamines and GTL, the parties agreed that the issues raised in Hemisphere's representation should be determined in the present proceedings.

Hemisphere submitted that Gécamines should be regarded as an organ of state of the DRC because (a) Gécamines had historically been wholly owned by the state, which had exercised a degree of power and potential control that was incompatible with the concept of independence, e.g. Gécamines's articles had provided inter alia that the President of the DRC would determine Gécamines's board and management; Gécamines's budget had to be submitted to the Minister of Mines for approval; the company's net profits were to be used to constitute reserves and/or be remitted to the Treasury at the discretion of the Government, etc.; (b) the legislative reform of public enterprises, under which Gécamines was to be transformed into an independent company (the first major step of which began in 2008) was incomplete; Gécamines was operating under a transitional regime as at the end of the trial; and the terms of any new constitution that might eventually be conferred on it were unknown; and (c) irrespective of the constitutional position, Gécamines had in practice always been controlled by the DRC Government, e.g. (i) successive governments had used Gécamines's assets to fund wars, without any compensation; (ii) in 2007, there had been a review of mining contracts which had been dominated by the Government—the renegotiation of certain contracts between Gécamines and private companies had been largely conducted by the Government rather than Gécamines and the majority of the entry fees payable by the private companies following renegotiation had been appropriated by the Government as state revenue rather than treated as Gécamines's property; (iii) in 2008, Gécamines became a partner in a significant joint venture with two major Chinese groups ("the Sicomines project") one of the primary aims of which was to generate funding for a large-scale infrastructure development programme in the DRC, with the Government taking over 70% of the US$350m. entry fee payable by the Chinese consortium; and (iv) Gécamines's assets were immune from execution.

Gécamines submitted in reply, inter alia, that (a) as a matter of both legal formality and practice it was and always had been a duly constituted entity in its own right, wholly independent of the state, which position had been reinforced by the ongoing legislative reforms; (b) its assets were not in fact immune from execution; and (c) even if the arrêt entre mains had been properly granted, it would only be effective to attach slag sales payments that had become due at the time of the trial and not from the date of the ex parte order.

GTL submitted that, even if the court were to conclude that Hemisphere was an organ of state of the DRC, the interim arrêt entre mains should not be confirmed because (a) Jersey was not the situs of the debt represented by the slag sales payments (as GTL was resident in the DRC not Jersey) and there was therefore no jurisdiction to make the interim order (the shares were, however, clearly sited in Jersey); (b) as the debt represented by the slag sales payments was governed by foreign law and payable in a jurisdiction other than Jersey, if the arrêt entre mains were confirmed there would be a risk that GTL would be ordered to make the payment twice; and (c) the court should refuse to confirm the arrêt entre mains as a matter of discretion because there was no realistic prospect of the Viscount being able to recover the money.

Held, ruling as follows:

(1) The interim arrêt entre mains had been properly made, there was no reason as a matter of principle or discretion to decline to confirm it and it should therefore be confirmed. Gécamines was to be regarded as an organ of state of the DRC, so as to render its assets liable to execution by creditors of the DRC, because it was under the control of the DRC Government and exercised governmental functions. When determining whether an organization was under government control and exercised governmental functions, regard was to be had to all the evidence, not merely the constitutional formalities of the organization. The relevant time at which the matter had to be determined in the present case was the date when the ex parte orders had been made and served on GTL (as the effect of the arrêt entre mains was to give Hemisphere an immediate proprietary interest in the shares and the slag sales payments, subject only to a condition providing for the seizure to be discharged if it were shown to be unwarranted). The question was, therefore, whether or not those assets were, on a true analysis, the property of the DRC at that date. As regards the first limb of the test, it was clear from the evidence that Gécamines was under the control of the DRC Government. The second limb of the test, namely the performance of governmental functions, was also satisfied. An entity that was constituted in such a way that its purpose was to assist, promote and advance the industrial development, prosperity and economic welfare of the area in which it operated could be seen as effectively carrying out governmental policy and to assume the position of an organ of government. The same necessarily applied if, irrespective of its formal constitution, an entity or its property was in practice made the instrument of the state for such purposes. The evidence showed that, despite its formal constitution and apparent independence, Gécamines had at various times been...

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