Fundo Soberano De Angola v José Filomeno Dos Santos
| Jurisdiction | England & Wales |
| Judge | Mr Justice Popplewell |
| Judgment Date | 16 August 2018 |
| Neutral Citation | [2018] EWHC 2199 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2018-000269 |
| Date | 16 August 2018 |
[2018] EWHC 2199 (Comm)
THE HON. Mr Justice Popplewell
Case No: CL-2018-000269
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Paul McGrath QC, Nik Yeo, Alexander Milner, Samuel Ritchie and Joseph Farmer (instructed by Norton Rose Fulbright LLP) for the Claimants
Mark Anderson QC and Steven Reed (instructed by Joseph Sutton Solicitors) for the First Defendant
Stephen Auld QC and Alexander Brown (instructed by Grosvenor Law LLP) for the Second Defendant
Philip Edey QC, Andrew Fulton and Sam Goodman (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Third to Twentieth Defendants
Hearing dates: 24–27 and 30 July 2018
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
The Claimants in this action are the sovereign wealth fund of the Republic of Angola (“FSDEA”) and seven of its subsidiaries. On 27 April 2018 Phillips J granted a worldwide freezing order and proprietary injunction (“the WFO”) against the First to Twentieth Defendants restraining them from disposing of or dealing with assets up to the value of US$3 billion.
At the adjourned return date hearing before me, the Claimants sought an order that the WFO, as amended, be continued until trial or further order. The Defendants sought to set aside the WFO on a number of grounds, including material non-disclosure, and raised various jurisdiction challenges. At the conclusion of the hearing I announced my decision that the WFO should be discharged for non-disclosure, and no fresh order granted, and gave reasons. I reserved judgment in relation to all the issues which I did not address. This is my full judgment, including amplified reasons in relation to nondisclosure.
The claims in support of which the WFO was granted arise out of what the Claimants contend was a dishonest conspiracy between the First Defendant, Mr dos Santos, the former Chairman of FSDEA, and his friend and business partner, the Second Defendant, Mr Bastos, who is the 95% beneficial owner of the Quantum group of companies which include the Third to Twentieth Defendants. It is the Claimants' case that, pursuant to this conspiracy, Mr dos Santos placed some US$5 billion at the disposal of the Quantum group to manage and invest on FSDEA's behalf, when the Quantum group manifestly lacked the appropriate or any qualifications and experience for such a mandate; that in the event, most of the US$5 billion has not been invested at all and has simply been used by the Quantum group to extract what were described as an extraordinary levels of fees (amounting to some US$406 million); that of the limited proportion which has been invested, the investments have not been made in the interests of the Claimants but have mostly been channelled into other projects belonging to Mr Bastos; and that in addition, as part of the same conspiracy, Mr dos Santos committed FSDEA to pay around US$153 million to the Quantum and other companies controlled by Mr Bastos, under contracts for various purported services, which contracts, if genuine at all, were manifestly uncommercial and were intended mainly to divert money from FSDEA into the pockets of Mr Bastos without FSDEA receiving anything of remotely commensurate value in return. The Defendants' case is that they are the victims of political change in Angola and a desire on the part of those now in power to get their hands on money which the previous regime sensibly and appropriately invested on a long-term basis for the people of Angola; and that the allegations are a spurious and flawed attempt to achieve this political objective.
Narrative
Mr dos Santos' father was the President of Angola from 1979 until 26 September 2017, when he was replaced by President Lourenço, who was elected on 23 August 2017 following President dos Santos' decision to step down.
FSDEA was established by a Decree of President dos Santos of 9 March 2011. It was then called the Petroleum Fund. It was renamed FSDEA by a Decree of 19 June 2013. By a further Presidential Decree of 28 June 2013 FSDEA was allocated a capital endowment of US$5 billion for investment. Its Chairman from 2012 to May 2013 was Dr Armando Manuel, who had been the Economic Adviser to President dos Santos. In 2012 its other directors were Mr dos Santos and Mr Gonçalves. In May 2013 Dr Manuel became the Minister of Finance of Angola, and shortly after FSDEA was renamed in June 2013, Mr dos Santos was appointed Chairman. Mr Fortunato was at that time appointed a director. Mr dos Santos remained Chairman until his removal in January 2018. His fellow directors were Mr Gonçalves and Mr Fortunato until the autumn of 2016, when Mr Gago replaced Mr Fortunato. Mr Gago had before that acted as Director of the Office of the Chairman of the Board of Directors from 2013 until 2015. He remains a director of FSDEA. Mr Gonçalves remained a director of FSDEA until January 2018, since when he has acted as a consultant to it. There is a dispute as to the degree of involvement that the other directors had in the running of the fund.
On 29 November 2013, Mr dos Santos on behalf of the FSDEA signed an Investment Management Agreement (“the IMA”) with the Third Defendant (“QGIM”), acting by Mr Bastos, whereby QGIM was appointed to act as investment manager for FSDEA “with respect to such monies and properties as are designated to it from time to time”. QGIM is part of the Quantum group of companies which are 95% owned and controlled by Mr Bastos. Mr Bastos, who has dual Swiss and Angolan citizenship, is a longstanding business associate of Mr dos Santos. They were jointly involved in the founding and management of an Angolan Bank, Banco Kwanza Invest, which was launched in 2008, and they jointly owned several other companies in Angola. Mr Bastos' evidence is that Mr dos Santos relinquished his shareholdings in these companies prior to the IMA but that is not accepted by FSDEA.
The IMA is governed by English law and contains an arbitration clause providing for disputes to be resolved by arbitration in accordance with UNCITRAL Rules in Lisbon and in the Portuguese language. There is a dispute as to whether the seat of the arbitration is England (as FSDEA contends) or Portugal (as QGIM contends). The fee payable under the IMA was a base fee of 1% of the average value of the fund plus a performance fee of 20% above a hurdle rate equivalent to the Benchmark Bank of America/Merrill Lynch 3-month Treasury Bill Index.
The IMA provided for there to be a custodian of the assets other than QGIM. On the same day as the IMA, 29 November 2013, FSDEA entered into a Master Custody Agreement with the Twenty First Defendant (“Northern Trust”), a US bank established under the laws of Illinois with a London branch in Canary Wharf. It provided for cash and security accounts to be held in FSDEA's name. It did not in terms require the accounts to be at the London branch, although references to the London branch address and UK regulatory standards suggests that that was what was envisaged, and the accounts were in fact established at the London branch.
The US$5 billion was to be invested in two conceptually different portfolios. US$2 billion was invested in a portfolio of assets (fixed income, bonds, equities etc) which were to be sufficiently liquid to be realisable within no more than 3 months (“the Liquid Portfolio”). The balance of US$3 billion was to be invested as private equity capital in longer term projects in sectors such as infrastructure, hotels, timber, agriculture, mining and healthcare, especially in Angola and elsewhere in Africa (“the Illiquid Portfolio”). It is FSDEA's case that the IMA appointed QGIM as investment manager in respect of the entire $5 billion, both the Liquid and Illiquid Portfolios. It is Mr Bastos' and the Quantum group's case that the IMA was confined to the Liquid Portfolio, and that the Illiquid Portfolio was governed by separate contractual arrangements. These involved the establishment of seven limited partnerships governed by Mauritian law (“the Limited Partnership Agreements”), who are the Fourteenth to Twentieth Defendants (“the Limited Partnerships”). Each had a Mauritian limited partner, a subsidiary of FSDEA, who are the Second to Eighth Claimants, (“the Limited Partners”) and a Mauritian General Partner owned and controlled by the Quantum group who are the Seventh to Thirteenth Defendants (“the General Partners”).
The Limited Partnerships were established pursuant to seven agreements signed on FSDEA's side by Mr dos Santos in April 2014. Five Incorporation Service Agreements (“the ISAs”) were made with the Fifth...
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