Kensington International Ltd and Another v Republic of the Congo
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CRESSWELL |
| Judgment Date | 26 May 2006 |
| Neutral Citation | [2006] EWHC 1712 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2002 1357 |
| Date | 26 May 2006 |
[2006] EWHC 1712 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN's BENCH DIVISION
COMMERCIAL COURT
Mr Justice Cresswell
Case No: 2002 1357
Mr E McQuater, QC and Mr P Ratcliffe (instructed by Dechert LLP) appeared on behalf of the Claimant
Mr J Gruder, QC (instructed by Ince & Co.) appeared on behalf of the Defendant
The third parties apply for an order discharging the order of Gloster J dated 5 April (as varied by the order of 10 April) on the grounds that these orders were wrongly granted, and for an order that the claimant should pay damages pursuant to its undertaking in damages to any Vitol party which has suffered loss pursuant to the orders.
1. 2.The third parties further seek a declaration that:
�The Third Parties and any of the Vitol Parties be free to purchase oil from any Congo Party (including on a prepayment basis if required by the relevant Congo Party) so long as the transaction is not at an undervalue as defined in section 423(1) of the Insolvency Act 1986.�
The parties to this litigation
Kensington International Limited is a corporation organised and existing under the laws of the Cayman Islands. Kensington is in the business of, among other things, purchasing and selling debt and equity instruments issued by domestic US and foreign entities. Kensington is managed by Elliot International Capital Advisers Inc, a Delaware corporation with its principal place of business in New York City.
1. 4.The third parties, Vitol Services Limited and Vitol Broking Limited, are English companies which provide broking and other services to Vitol SA, a company organised under the laws of Switzerland, and to other companies in the Vitol Group of companies.
1. 5.It is necessary to refer to a number of relevant Congo entities.
1. 6.Soci�t� Nationale des P�troles du Congo (�SNPC�) is the state oil company of Congo, incorporated in 1998. Mrin the Nordic Hawk (see below) found that SNPC is part of the Congolese State, having no separate existence from the State.
1. 7. SNPC UK is an English company, a subsidiary of SNPC, established in May 998 as a commercial branch of SNPC in London. It ceased activity in November 2003. It was put into creditors' liquidation in mid-2004.
Cotrade SA and Cotrade Asia are wholly owned subsidiaries of SNPC through which the Congo sells its oil. Cotrade is a contraction of �La Congolaise de Trading�. In the Nordic Hawk, Cooke J found that Cotrade, like SNPC, is an emanation of the Congolese State with no separate existence from the State.
Sphynx Bermuda Limited is a Bermuda company incorporated in February 002. Cooke J found in the Nordic Hawk that Sphynx Bermuda Limited is a �sham� company, a �creature� of the Congo in a fa�ade used by the Congo to sell its oil. Sphynx UK is an English company incorporated in February 002. Cooke J found in the Nordic Hawk that this company is controlled by Mr(President and Director General of SNPC since January 2005) to act as contact/service company for Sphynx Bermuda.
1.
The orders of Gloster
On 5Glostergranted ex parte orders against the third parties. Disclosure orders were made as set out in paragraphs 1 to 7. An injunction was granted (paragraph 8) in the following terms:
�Until further order of the Court, the Third Parties must not (unless the Claimant's solicitors consent in advance in writing) whether by themselves, their servants or agents or otherwise howsoever:
(a) pay, or cause to be paid, or assist any other person to pay to any of the Congolese Parties (as defined in Schedule A):
(i) any sum of money due or accruing due by or from any of the Vitol Parties (as defined in Schedule A) to any of the Congolese Parties.
(ii) any sum of money in payment for or in respect of any of the Transactions identified in paragraphs to 4 of Schedule A.
(b) enter into, or participate in any agreement or arrangement or act on any instructions by which any contract in respect of or pursuant to any of the Transactions identified in paragraphs 2 to 4 of Schedule A is varied, modified or assigned or the debt due in respect of or pursuant to any such Transaction is assigned or otherwise dealt with or by which there is any alteration in the terms or process or mechanism by which payment in respect of or pursuant to any such Transaction is to be made, including for the avoidance of doubt by means of any prepayment or pre-financing arrangement.
An order was made as to the preservation of documents (paragraph 9) and the claimant was granted permission to use information obtained in these proceedings elsewhere (paragraph 12).
1. 9.A hearing followed on 7at which Mrrepresented the third parties. I will refer later to the judgment of Gloster J on that occasion. There was a further order dated 10 Paragraph 8 of the order of 10was in these terms:
�Until further order of the Court, the Third Parties must not (unless the Claimant's solicitors consent in advance in writing) whether by themselves, their servants or agents (including for the avoidance of doubt MrChautard and Mr Sam Lambroza) or otherwise howsoever:
(a) pay, or cause to be paid, or assist any other person to pay to any of the Congolese Parties (as defined in Schedule A) any sum of money in payment for or in respect of any of the Transactions identified in paragraphs 2 to 3 of Schedule A.
(b) enter into, or participate in any agreement or arrangement or act on any instructions by which any contract in respect of or pursuant to any of the Transactions identified in paragraphs 2 to 3 of Schedule A is varied, modified or assigned or the debt due in respect of or pursuant to any such Transaction is assigned or otherwise dealt with or by which there is any alteration in the terms or process or mechanism by which payment in respect of or pursuant to any such Transaction is to be made, including for the avoidance of doubt by means of any prepayment or pre-financing arrangement.�
1. 10.The evidence before the court
There is a considerable amount of evidence before the court to which I refer. On behalf of the claimant, there are witness statements from Donald(1 to 3), Catherine Thomas (1), Iqbal Rajahbalee (1), Jean-Cedric Michel (1 and 2). On behalf of third parties, there are witness statements from Mr(1 to 5) and Mr Rodolphe(1).
1. 11. Chronology of relevant proceedings and hearings
I set out below a chronology of relevant proceedings and hearings.
October 2001:
Connecticut Bank of Commerce (�CBC�) obtained attachment orders against accounts of SNPC in Paris.
002:
The first instance court in Paris refused to set aside the attachment order made in October 001 on the basis that SNPC was an emanation of Congo.
August 2002:
Walker, another creditor of Congo successfully applied to Grahamin the Grand Court of the Cayman Islands for an interim injunction against Congo attaching certain sums flowing through the Olearius Facility.
002:
Kensington obtained summary judgment (Cresswell J) against the Congo in the sum of US$56,911,991.47 plus interest (claim number Folio 2002 No 1088) relating to the breach by Congo of a Loan Agreement dated 18 984.
January 2003:
The decision of the first instance court in Paris of 23 002 was upheld on appeal.
January 003:
Kensington obtained default judgment (Cresswell J) against the Congo in the sum of US$ 22,438,606.91 plus interest (claim number Folio 002 No 281) relating to the breach by Congo of a loan agreement dated 21 983.
003:
Kensington obtained default judgment (Cresswell J) against the Congo in the sum of US$ 19,745,970.89 plus interest (claim number Folio 002 No 282) relating to the breach by Congo of a credit agreement dated 8 983.
003:
Kensington obtained default judgment ( Moore-Bick J) against the Congo in the sum of US$ 1,316,027.48 plus interest in respect of claim number Folio No 357 relating to the breach by Congo of a loan agreement dated 12 983.
003:
In proceedings before Tomlinsonin the Commercial Court, Kensington sought unsuccessfully to enforce the negative pledge and pari passu provisions of the 18 984 Loan Agreement. In his judgment, Tomlinsonsaid:
�46. Furthermore, there is evidence before the Court, apparently publicly available also on the Internet, to the effect that the legal structure of the large hedged crude oil prepayment facility, to which I have already referred, was deliberately selected by Congo and by its legal advisors in an attempt to prevent Congo's creditors from seizing oil in the hands of SNPC and to try to reduce the risk of action by Congo's creditors. This information emerges from a memorandum prepared for Congo, or for SNPC, in May of 2002 by Messrs Cleary, Gottlieb, Steen & Hamilton.
�
It remains to consider the declaratory relief. As I indicated during the hearing I am entirely satisfied on the basis of the evidence before me that the defendant has adopted in relation to its oil exports cumbersome and apparently commercially disadvantageous and inflexible pre-financing structures with the interposition of special purpose vehicles for the very purpose of preventing its creditors seizing its oil in execution of debts owed by it.�
003:
Kensington applied for a worldwide freezing order against Congo's assets. Morisondecided that he would not hear the application unless notice of it was given to Congo.
003:
The Court of Appeal upheld Morison's decision.
May 003:
Kensington issued proceedings against Congo in the United States District Court for the Southern District of New York in which it sought the following remedies: (i) recognition of the 2002 Judgment; (ii)...
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