Kensington International Ltd v Republic of the Congo (Formerly the People's Republic of the Congo) and Others (Defendant Third Parties)

Hearing dates: 24–27, 31 October 2005

, 2, 7, 9 November 2005

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.

THE HONOURABLE MR. JUSTICE COOKE

Introduction

The Claimant/Judgment Creditor (Kensington) obtained four judgments against the Republic of the Congo (the Congo) between 20 December 2002 and 28 January 2003 in relation to sums due under various loan and credit agreements. At the contractual rate set out in those loan agreements the effect of the judgments was that, as at 12 August 2005 the total amount of principal and interest due and owing from the Congo to Kensington (an assignee of the loan agreements) was $121,365,437.70. Interest continues to accrue at a daily rate of $22,008.23. The judgments remain unsatisfied in their entirety.

On 10 ^th April 2005 Kensington obtained interim Third Party Debt Orders in each of the four actions in which judgment had been obtained in this Court, together with supporting injunctions relating to the monies due in respect of two consignments of Congolese oil (the cargo), which were shipped on the Nordic Hawk and were bought by an English company, the first Third Party (Glencore). There followed a series of interlocutory applications pursuant to which Kensington obtained urgent injunctive relief in the form of disclosure orders directed to Glencore and various companies in both England and Bermuda and subsequently the British Virgin Islands (BVI), all relating to the sale of the cargo and payment of the proceeds and the companies concerned in it.

In consequence of the various orders made and the disclosure given, the second, third and fourth third parties (Sphynx UK, Sphynx Bermuda and AOGC), but not the fifth Third Party (Cotrade) which did not participate in these proceedings despite being joined, maintain that there is a chain of contracts relating to the sale of the cargo:

i) Cotrade, which is a wholly owned subsidiary of Société Nationale des Pétroles du Congo (SNPC), the Congo State owned Oil Company, concluded a contract with AOGC for the sale of cargo on an fob basis. The written contract produced is dated 20 March 2005 and, on its face, was signed for Cotrade in Brazzaville in the Congo by Denis Christel Sassou Nguesso (Mr Christel), the son of the Congolese President, and was signed by Mr Malonga for AOGC.

ii) AOGC in turn sold to Sphynx Bermuda under the terms of a contract in writing dated 10 March 2005. On its face this contract was signed in Brazzaville by Mr Malonga for AOGC and Dr Nwobodo for Sphynx Bermuda, both of whom said in their statements that it was actually signed sometime after 16 March 2005.

iii) There is a contract document under which Sphynx Bermuda contracted with Glencore on the general terms and conditions of SNPC which is undated. It was signed by Dr Nwobodo for Sphynx Bermuda and Mr Gibson on behalf of Glencore. It too was said to have been signed some time after 16 March 2005.

iv) Glencore in turn on-sold the cargo to BP on the terms of a contract which, it is not disputed, was a typical arm's length commercial transaction between entities involved in the conventional trading of oil.

The evidence which I heard was to the effect that the dates of the signed contracts were irrelevant and that these documents merely recorded in writing deals which had been concluded at an earlier stage. From Glencore's internal documents and an email from Glencore to Sphynx Bermuda, it appears that the agreement reached between Mr Wakefield for Glencore and Dr Nwobodo for Sphynx Bermuda and the on-sale between Glencore and BP were made on 23 February 2005. Dr Nwobodo then confirmed the sale, on Sphynx Bermuda's behalf, in an email dated 2 March 2005.

It is the purchase price payable by Glencore (approximately $39 million) which is the sum that Kensington wishes to intercept in order to enforce its judgments against the Congo. The issue which falls to be determined is whether the debt due from Glencore which Kensington is seeking to attach is in reality owed to the Congo or should be treated as owed to the Congo for the purpose of CPR 72 and enforcement of judgments by Third Party Debt Orders.

In short, Kensington maintains that Sphynx Bermuda is a mere device or façade concealing the true facts which are that:—

i) The receipt of monies by Sphynx Bermuda in respect of the cargo would in reality be receipt by the Congo, the judgment debtor and;

ii) The monies apparently due from Glencore to Sphynx Bermuda are in reality due to and (if paid) will be paid to the Congo.

In consequence it is said that the Court should "pierce the corporate veil" of Sphynx Bermuda and treat Glencore's debt to Sphynx Bermuda as a debt which is in reality due to the Congo. If and insofar as it is necessary, Kensington also says that AOGC and Cotrade were used for the purpose of hiding the fact that the debt due from Glencore was in reality a debt due to the Congo and that SNPC and Cotrade are in any event part of the Congolese State.

It is the case of the Sphynx companies and AOGC that they are private oil trading vehicles of Mr Denis Gokana (Mr Gokana), who is and was at the time of this transaction the President and Director General (DG) of SNPC and a Special Adviser to the President of the Congo, President Sassou Nguesso.

Glencore's position on the issue is neutral, being willing to pay the money as the Court directs. It is concerned to get a good discharge of its debt by making payment to the appropriate recipient. By virtue of orders made in this action, which debar the raising of such an issue, it is now clear that Glencore cannot be at risk of having to pay twice. Counsel for Glencore appeared at the beginning of the trial out of courtesy to the Court, expressing the intention to absent himself for the rest of the trial and only to make submissions in the event that I might consider making findings which might sully Glencore's reputation. In the event he did make written submissions. Until shortly before the trial, it seemed that Glencore would appear at the trial and would call its witnesses to give evidence but it decided not to do so and the other parties relied upon the statements which had been put in by those witnesses. At the outset it was made clear by Counsel for Kensington that for the purposes of this trial it was not being said that Glencore was privy to a conspiracy to defraud creditors of the Congo but it was being said that Glencore treated payments to Sphynx Bermuda as equivalent to payment to SNPC and the Congo.

In this connection it is worth pointing out that there have been prior decisions which equate SNPC with the Congo albeit that such decisions are not binding on these parties. In a judgment of the Commercial Court, Tomlinson J on 16 April 2003 found that SNPC was simply part of the Congolese State and had no existence separate from it. Kensington and the Congo were parties to those proceedings. Similarly, the Court of Appeal of Paris has twice reached the view that SNPC is an alter ego of the Congo on 23 January 2003 and 3 July 2003 in the context of enforcing judgments given against the Congo, against assets belonging to SNPC.

The Witnesses and the Documents

Kensington adduced evidence in the form of hearsay statements from Glencore personnel, an individual who had been a director of Sphynx Bermuda and from lawyers and others instructed by them who had sought to discover the identity of those who lay behind the seller of the cargo to Glencore. The evidence of those instructed establishes that the disclosure orders obtained from the courts were complied with tardily and incompletely by the Third Parties, save for Glencore. This was due, according to Mr Gokana to the differences between the practice in civil law jurisdictions and common law jurisdictions and the need for the advice of Mr Junod, the Swiss lawyer consulted by Mr Gokana. The tardiness, defaults and shortfalls in compliance with disclosure obligations are apparent from any study of the history of the matter and, throughout the course of the trial, further documents were regularly promised, but few arrived.

Orders were made by this Court on 29 April against the Sphynx companies and on 26 May against all the third parties, including AOGC, which only decided to participate in these proceedings in September, by which time it had been conceded that the contracts between it and Sphynx Bermuda were "paper transactions" only. AOGC provided a list of documents on 21 September, a few untranslated documents on the eve of the trial and a few more during the trial. A bundle of documents was said to have been dispatched by courier on the Friday before the trial, a transit which normally takes 4 days maximum. I ordered further disclosure during the trial, to be given by 1 November. The order encompassed all relevant documents, but in particular those supposedly sent by courier and those promised alternatively by fax, as well as those referred to in evidence, which Mr Gokana (on his evidence, the 90% shareholder of AOGC and the owner of the Sphynx companies) undertook to produce. These documents were...