La Générale des Carrières et des Mines v F.G. Hemisphere Associates LLC

JurisdictionUK Non-devolved
CourtPrivy Council
JudgeLord Mance
Judgment Date17 July 2012
Neutral Citation[2012] UKPC 27
Date17 July 2012
Docket NumberAppeal No 0061 of 2011

[2012] UKPC 27

Privy Council

Before

Lord Hope

Lord Walker

Lord Mance

Lord Wilson

Lord Carnwath

Appeal No 0061 of 2011

La Générale des Carrières et des Mines
(Appellant)
and
F.G. Hemisphere Associates LLC
(Respondent)

Appellant

Jonathan Hirst QC

Giles Richardson

Justin Harvey-Hills

(Instructed by Clyde & Co LLP)

Respondent

Lord Pannick

Andrew Hunter

(Instructed by Ogier)

Heard on 28–29 May 2012

Lord Mance
Introduction
1

The respondent, FG Hemisphere Associates LLC ("Hemisphere"), is a Delaware corporation. It invests in "distressed" assets, and it has purchased the assignment of two very substantial International Chamber of Commerce arbitration awards against the Democratic Republic of the Congo (the "DRC"). The awards arose from supply and financing contracts entered into by the DRC during the Mobutu era with the then Yugoslavian hydroelectric company, Energoinvest DD. Hemisphere now claims to enforce those awards against assets of La Générale des Carrières et des Mines Sarl ("Gécamines"), a DRC state-owned corporation. The assets consist of, first, Gécamines' shareholding in a Jersey joint venture company called Groupement pour le traitment du Terril de Lumumbashi Ltd ("GTL") and, secondly, the income flow due from GTL to Gécamines under a Slag Sales Contract.

2

By a judgment given in the Royal Court on 27 th October 2010, the Commissioner, Howard Page QC, assisted by Jurats Tibbo and Kerley, upheld Hemisphere's claim, on the basis that Gécamines was at all material times an organ of and so to be equated with the DRC. The Royal Court reached this conclusion following an examination of (i) Gécamines' constitutional position, by reference to which it concluded that "the exceptional degree of power accorded to the state over the affairs of Gécamines, at all levels, was such that the company was no more, in truth, than an arm of the state with responsibility for operations in a sector of vital importance to the national economy" (para 69) and (ii) occasions on which the DRC had for its own use taken or used assets belonging to Gécamines without compensation. On appeal, on 14 th July 2011 the Court of Appeal, by a majority (James McNeill QC, President, and Sir Hugh Bennett; Nigel Pleming QC dissenting), affirmed this judgment. Gécamines appeals to the Board, with leave of the Court of Appeal.

3

The appeal raises important issues regarding the position of state-owned corporations and the circumstances, if any, in which they and their assets may be equated with the state and its assets. In this case, the issues arise in a claim to hold a state-owned corporation liable for the state's debts. In another case, the claim could be to hold a state liable for its state-owned corporation's debts. On the findings made and approach of the courts below, the DRC and Gécamines would appear to be equated for both such purposes. The creditors of each would have to accept that the (commercial) assets of either were liable to be taken in execution by the creditors of the other. Whether this would leave the creditors of one or the other better or worse off would depend on the nature and accessibility of each's assets. The majority in the Court of Appeal drew comfort from the thought that in many cases the creditors would have notice of the circumstances leading in law to a conclusion that the DRC and Gécamines should be equated (paras 70 and 108). However that may be, Hemisphere has here located, and obtained interim injunctive relief relating to, substantial assets of Gécamines in Jersey, in respect of a liability of the DRC which has nothing to do with Gécamines' activities.

The law
4

In the courts below, the case was argued and decided on the basis that whether Gécamines was an organ of the DRC was to be determined by a common law test derived from the English Court of Appeal's decision in Trendtex Trading Corp v Central Bank of Nigeria [1977] 1 QB 529, especially, though not exclusively, from Lord Denning MR's judgment. Addressing the matter on a hypothesis that the court was still bound by the doctrine of absolute immunity, Lord Denning said (p.559C-D and 560C-D):

"If we are still bound to apply the doctrine of absolute immunity, there is, even so, an important question arising upon it. The doctrine grants immunity to a foreign government or its department of state, or any body which can be regarded as an 'alter ego or organ' of the government. But how are we to discover whether a body is an 'alter ego or organ' of the government?

I confess that I can think of no satisfactory test except that of looking at the functions and control of the organisation. I do not think that it should depend on the foreign law alone. I would look to all the evidence to see whether the organisation was under government control and exercised governmental functions. That is the way in which we looked at it in Mellenger v New Brunswick Development Corp [1971] 1 WLR 604, when I said, at p.609:

'The corporation…. has never pursued any ordinary trade or commerce. All that it has done is to promote the industrial development of the province in a way that government department does.'"

Earlier in his judgment, Lord Denning had referred to the doctrine of restrictive immunity as giving "immunity to acts of a governmental nature, described in Latin as jure imperii" (p555F). Lord Denning was, presumably, using the phrase "governmental functions" at p. 560 in the same sense.

5

Shaw LJ put the matter in somewhat different terms at p.573E:

"Whether a particular organisation is to be accorded the status of a department of government or not must depend on its constitution, its powers and duties and its activities These are the basic factors to be considered. The view of the government concerned must be taken into account but is not of itself decisive….; it does not relieve a court before which the issue of sovereign immunity arises of the responsibility of examining all the relevant circumstances."

In the light of these statements, the Royal Court and Court of Appeal looked at the formal constitutional position, at the control exercised by the state in practice over Gécamines and at Gécamines' functions.

6

Trendtex was a decision on state immunity. The issue was whether the Central Bank of Nigeria, a legal entity incorporated by a Nigerian statute, was a department or organ of the State of Nigeria. After a close analysis of its powers, functions and relationship with the State, Donaldson J at first instance held that it was: [1976] 1 WLR 868, 874A-877A. The Court of Appeal found the issue difficult, but held the contrary: [1977] 1 QB 529, 560E-H per Lord Denning MR, 563D-565G per Stephenson LJ and 572H-575G per Shaw LJ. Lord Denning noted that the bank had governmental functions, in that it issued legal tender and safeguarded the international value of the currency, and that its affairs were under a great deal of governmental control in that the Federal Executive Council might overrule its board on monetary and banking as well as internal administrative policy. But it also acted as banker and adviser to the government, to federal states and some private customers. Stephenson and Shaw LJJ emphasised the need for caution against too ready a recognition of a status involving sovereign immunity, particularly in the absence of any clear expression of intent in the domestic incorporating legislation to confer such a status: pp.564F-G and 573C-D. Stephenson LJ was not satisfied that the bank was or had become a department of the State in the light of eleven amending decrees by which it was contended that the Nigerian Government "had dramatically eroded its independence", because "A hobbled horse is still a horse": p.565F. Shaw LJ said that it did not follow from the fact that the issue of legal currency and the safeguarding of its value were functions of government that the delegation of those functions under very tight governmental control to the Central Bank as the Government's agent gave the Central Bank the status of a government department: p.574C-E. Further, it was not adequate to constitute it an organ or department of government that the Central Bank "was the subserving agent of the government in a variety of activities": p.575F.

7

When Trendtex was decided in January 1977, the common law operated in two potential respects on an "all or nothing" basis. First, on a traditional view, immunity was either absolute or non-existent; and, secondly, whether a body had immunity depended upon whether or not it was regarded as part of the state. Trendtex re-affirmed the latter aspect, with Shaw LJ saying at p.573A-B that "There can be no intermediate hybrid status occupied by the bank wherein it is to be regarded as a government department for certain purposes and as an ordinary commercial or financial institution for different purposes". But Trendtex changed the former aspect. Under international law, there had already been a shift away from absolute immunity towards a more restrictive principle excluding ordinary commercial dealings from the ambit of sovereign immunity; the majority in Trendtex held that —international law being, as it exists from time to time, part of the common law —the common law should give effect to this shift by endorsing the restrictive principle, and, further, that whether an act constituted an ordinary commercial dealing depends upon its nature, rather than its purpose: per Lord Denning at pp.554C-559C and Shaw LJ at pp.575G-579H.

8

When, four years later, the cases of Playa Larga and Marble Islands v I Congreso del Partido [1983] AC 244 came to be decided, the restrictive principle of immunity at common law was accepted on both sides and by the House. Lord Wilberforce at pp.261A-262G justified it as resting on two main foundations:

"(a) It is necessary in the interest of justice to individuals having...

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