Glenn Maud v The Libyan Investment Authority
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Rose DBE |
| Judgment Date | 08 June 2015 |
| Neutral Citation | [2015] EWHC 1625 (Ch) |
| Docket Number | Case Nos: 242/SD OF 2014 |
| Court | Chancery Division |
| Date | 08 June 2015 |
[2015] EWHC 1625 (Ch)
IN THE HIGH COURT OF JUSTICE
IN BANKRUPTCY
RE: GLENN MAUD
Royal Courts of Justice
Rolls Building, London, EN4A 1NL
Mrs Justice Rose
Case Nos: 242/SD OF 2014
Pushpinder Saini QC (instructed by Squire Patton Boggs (UK) LLP) for the Applicant
Jonathan Swift QC and Adam Al-Attar (instructed by Hogan Lovells International LLP) for the Respondent
Hearing date: 11 May 2015
The Applicant ('Mr Maud') has applied under the Insolvency Rules 1986 r 6.4 to set aside a statutory demand served on him by the Respondent ('the LIA') on 19 February 2014. By the statutory demand the LIA claims that Mr. Maud owes it the sum of £17,574,778.01 pursuant to the terms of a guarantee dated 10 April 2008 and that this sum is payable to it now. Because the application to set aside was made out of time, the LIA has already presented a bankruptcy petition. That petition stands adjourned awaiting the outcome of this application and also of another application by Mr Maud to set aside a different statutory demand for about £40 million served on him by different creditors. The hearing of Mr Maud's application to set aside the other statutory demand was heard by me the day after the hearing of this application and is determined in a judgment of even date to this: see Maud v Aabar Block SARL and Edgeworth Capital (Luxembourg) SARL [2015] EWHC 1626 (Ch).
The grounds on which the court may set aside a statutory demand are set out in the Insolvency Rules r. 6.5(4):
(a) The debtor appears to have a counterclaim, set-off or cross demand which equals or exceeds the amount of the debt or debts specified in the statutory demand; or
(b) The debt is disputed on grounds which appear to the court to be substantial; or
(c) It appears that the creditor holds some security in respect of the debt claimed by the demand, or
(d) The court is satisfied on other grounds, that the demand ought to be set aside.
Mr Maud does not dispute that he entered into the guarantee and that the principal debtor his company Propinvest Group Limited has defaulted. He accepts that the guarantee was overdue as from 2 March 2010. He also accepts that at present he does not have the money to pay the debt. He seeks to set aside the demand on the grounds that any payment of the amount due would amount to a breach of the sanctions regime currently in place prohibiting people in certain circumstances from dealing with the LIA. He therefore argues that the debt is substantially disputed or alternatively that the illegality of any payment under the sanctions regime constitutes 'other grounds' on which the court should be satisfied that the demand should be set aside.
Both parties raise threshold issues which I will need to consider. Mr Maud's application to set aside was issued only on 13 August 2014, considerably after the 18 day deadline set by IR r 6.4(1) for making such an application. The LIA argues that I should not extend time for the making of this application and so should dismiss the application on that basis. Mr Maud argues that the bankruptcy jurisdiction of the court is not a suitable forum for dealing with the complex legal argument raised by his application: there clearly is, he argues, a substantial dispute about whether the guarantee is caught by the sanctions and that should be enough to justify setting aside the demand. I shall address these preliminary issues in this judgment but, since the substantive issue of whether the guarantee is caught or not was fully argued before me I will state my conclusions on that in any event.
The Libyan sanctions regime
The provisions on which Mr Maud relies on are found in the EU regulations which implemented the sanctions regime established under resolutions of the Security Council of the United Nations, together with the domestic implementation of the EU law in the United Kingdom. I have set the full text of the relevant provisions of the UN, EU and UK legislation out in an Annex to this judgment and here describe the effect of the provisions.
The first step in establishing the sanctions regime was UNSCR Resolution 1970 (2011) adopted by the Security Council on 26 February 2011 ('UN 1970 (2011)'). In the recitals to UN 1970 (2011) the Security Council noted its concern at the violence against the civilian population at the hands of the Qadhafi regime. The UN set in place a number of measures including an arms embargo, a travel ban on particular individuals and an asset freeze. The asset freeze was set out in paragraph 17 and applied to individuals listed in an annex to the Resolution ('the targeted entities'). It required Member States to ensure two things; first that 'all funds, financial assets and economic resources' belonging to the targeted entities and located in their territory were frozen and secondly that their nationals were prevented from making available to the listed individuals 'any funds, financial assets or economic resources'. The resolution also established a Committee of the Security Council ('the UN Sanctions Committee') charged with, amongst other things, monitoring the implementation of the sanctions and designating more people to be added to the people or entities who were subject to the sanctions.
Paragraph 19 of UN 1970 (2011) set out some exceptions to the freeze imposed by paragraph 17. It provided that the freeze did not apply to funds that the Member State had determined were:
i) required for basic living expenses, medical expenses, legal services etc provided that such a determination was notified to the UN Sanctions Committee and that the Committee did not object;
ii) required for 'extraordinary expenses' provided that the UN Sanctions Committee approved;
iii) needed to satisfy a lien or judgment or arbitral lien entered against the targeted entity before the date the sanctions came into force, provided the judgment or award was not for the benefit of a targeted entity and that the UN Sanctions Committee had been notified.
Paragraph 20 of UN 1970 (2011) provided that Member States can permit the addition to frozen accounts of (i) interest or other earnings due on those accounts or (ii) payments due under contracts, agreements or obligations that arose prior to the date the freeze came into operation provided that those monies are then frozen in the accounts. Paragraph 21 which is not relevant to the current dispute allowed a further exception for targeted entities to be able to honour their own contractual obligations entered into with third parties prior to the freeze being imposed.
The targeted entities subject to the freeze in UN 1970 (2011) were Colonel Qadhafi and six members of his immediate family. However the number of targeted entities was expanded shortly afterwards by the adoption of UNSCR 1973 (2011) on 17 March 2011 ('UN 1973 (2011)'). That resolution stepped up the measures taken against Libya by establishing a no fly zone in Libyan airspace and tightening the arms embargo. Paragraph 19 of UN 1973 (2011) reaffirmed both aspects of the asset freeze in respect of targeted entities. Paragraph 22 provided that the asset freeze and the exceptions to that freeze set out in UN 1970 (2011) applied to additional individuals listed in the annex to the resolution. The annex listed some more members of the Qadhafi family plus five entities: the Central Bank of Libya, the Libyan Africa Investment Portfolio, the LIA, the Libyan Foreign Bank and the Libyan National Oil Corporation. The LIA was described in the annex as under the control of Colonel Qadhafi and his family and a potential source of funding for his regime.
The European Union brought in measures to impose sanctions on Libya by adopting Council Regulation (EU) No 204/2011 concerning restrictive measures in view of the situation in Libya. It was adopted on 2 March 2011 and came into force on the day it was published in the Official Journal which was 3 March 2011 (OJ 2011 L 58 p. 1) (' Regulation 204/2011'). The recitals to Regulation 204/2011 referred to UN 1970 (2011) and noted that since some of the measures fell within the scope of the Union, it was necessary to adopt EU wide measures to ensure consistency across the EU Member States. Recital (4) stated that Regulation 204/2011 'fully respected' the EU Member States' obligations under the UN Charter and the legally binding nature of UNSC Resolutions.
Article 1 of Regulation 204/2011 defined the terms relevant to the sanctions. 'Funds' were defined as 'financial assets and benefits of every kind' including but not limited to a list of things including at sub-paragraph (v) 'credit, right of set-off, guarantees, performance bonds or other financial commitments'. 'Freezing of assets' was defined as preventing any move, transfer, alteration, use of, access to, or dealing with funds in any way that would result in any change in their volume, amount, location, ownership, possession, character, destination or other change that would enable the funds to be used.
Articles 2, 3 and 4 prohibited the supply of arms and other equipment used in internal repression and the provision of technical assistance in relation to such goods and equipment. Article 5 provided for the asset freeze. In its original form this article provided by article 5(1) that all funds and economic resources of the targeted entities listed in Annexes II and III to the Regulation were frozen; by article 5(2) that no funds or economic resources shall be made available directly or indirectly to or for the benefit of the targeted entities in Annexes II and III; and by article 5(3) that participation, knowingly and intentionally, in activities the object or effect of which is, directly or indirectly, to circumvent the measures referred to in paragraphs 1 and 2 shall be prohibited.
...To continue reading
Request your trial
-
Aabar Block S.A.R.L. v Glenn Maud
...the two statutory demands served by the LIA and by the Petitioning Creditors. 29 Rose J set aside the LIA's statutory demand: see [2015] EWHC 1625 (Ch). The LIA then played no role in the proceedings until that decision was reversed by the Court of Appeal: see [2016] EWCA Civ 788. This le......
-
Re Maud; Maud v Aabar Block S.a.r.l and another
...demands served upon him by the LIA and by Aabar and Edgeworth. 33 Mrs. Justice Rose set aside the LIA's statutory demand: see [2015] EWHC 1625 (Ch). Apart from unsuccessfully seeking to appear at the first hearing of Aabar and Edgeworth's petition, the LIA has played no subsequent part in ......
-
Edgeworth Capital (Luxembourg) S.A.R.L. v Glenn Maud
...aside the statutory demand against him at the outset on the basis of abuse of process, Rose J rejected that challenge, observing, at [2015] EWHC 1625 (Ch) at [30], “…it has not been suggested that the bankruptcy would damage the prospects of Mr Maud's other creditors. There is no reason to......
-
Edgeworth Capital (Luxembourg) S.A.R.L. v Glenn Maud
...demand against him on the basis that it would be unlawful for him to pay the debt due to the LIA by reason of EU sanctions: see [2015] EWHC 1625 (Ch). 39 Although the LIA also gave notice to support Edgeworth's Petition, it then played no effective role in those proceedings until Rose J's ......