LLC Eurochem North-West-2 v Société Générale S.A.
| Jurisdiction | England & Wales |
| Judge | Mr Justice Butcher |
| Judgment Date | 03 November 2023 |
| Neutral Citation | [2023] EWHC 2720 (Comm) |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2022-000456 |
and
[2023] EWHC 2720 (Comm)
THE HON Mr Justice Butcher
Case No: CL-2022-000456
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Justin Fenwick KC, George Spalton KC and George McDonald (instructed by Vinson & Elkins RLLP) for the Claimant
Richard Handyside KC and James Duffy (instructed by Herbert Smith Freehills LLP) for the First to Third Defendants
Camilla Bingham KC (instructed by Clifford Chance LLP) for the Fourth and Fifth Defendants
Tom Leary (instructed by Curtis, Mallet-Prevost, Colt & Mosle LLP) for the Third Party
Hearing date: 26 October 2023
Approved Judgment
This judgment was handed down remotely at 10am on Friday 3 November 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives
(see eg https://www.bailii.org/ew/cases/EWCA/Civ/2022/1169.html).
The Claimant seeks, in its application notice, an order for payment of the sums which it claims from the Defendants into court or into a frozen account in either the United Kingdom or the EU.
The Claimant's claim is for the payment of EUR 137,159,881.61 by the First to Third Defendants (‘SG’) and of EUR 75,285,299.85 by the Fourth and Fifth Defendants (‘ING’) pursuant to on-demand bonds (‘the Bonds’). The Bonds were procured by the Third Party and/or LLC MT Russia in support of contracts entered into between those entities and the Claimant for the design and construction of a fertiliser plant in Russia.
In August 2022 the Claimant made written demands under the Bonds.
Both SG and ING (together, ‘the Defendants’) have declined to make payment under the Bonds on the basis, in summary, that to make payment would breach international sanctions. This is said to be because the Claimant is part of the EuroChem group which is closely associated with Andrey Melnichenko, who is subject to both EU and UK sanctions.
Following a CMC heard in September 2023, the court has ordered a trial with an estimate of four weeks to be listed not before 13 January 2025.
The Defendants dispute that there is any jurisdiction in the court to make the order sought by the Claimant; alternatively, if there is, contend that the present is not an appropriate case and that the court should refuse such an order as a matter of any discretion which it may have.
The Claimant's application is said, in the witness statement of Ms Louise Woods, which supports it, to be made under CPR r. 25.1(1)(c), 25.1(1)(k) and/or 25.1(1)(l), alternatively the court's inherent jurisdiction and/or CPR r. 3.1(2)(m). In its argument at the hearing the Claimant also added CPR 25.1(1)(a) as a basis on which the order might be made.
CPR Provisions
It is convenient to set out what those and related rules provide. CPR r. 25.1 provides, in part:
‘(1) The court may grant the following remedies—
(a) an interim injunction;
…
(c) an order—
(i) for the detention, custody or preservation of the relevant property;
…
(k) an order (referred to as an order for interim payment) under rule 25.6 for payment by a defendant on account of any damages, debt or other sum (except costs) which the court may hold the defendant liable to pay;
(l) an order for a specified fund to be paid into court or otherwise secured, where there is a dispute over a party's right to the fund.’
CPR 25.1 (2) states that in paragraphs (1)(c) and (g) ‘relevant property’ means ‘property (including land) which is the subject of a claim or as to which any question may arise on a claim.’ CPR 25.1(3) provides that: ‘The fact that a particular kind of interim remedy is not listed in paragraph (1) does not affect any power that the court may have to grant that remedy.’
CPR r. 25.7 provides:
(1) ‘The court may only make an order for an interim payment where any of the following conditions are satisfied—
…
(c) it is satisfied that, if the claim went to trial, the claimant would obtain judgment for a substantial sum of money (other than costs) against the defendant from whom he is seeking an order for an interim payment whether or not that defendant is the only defendant or one of a number of defendants to the claim…’
CPR 3.1(2)(m) provides that the court may ‘take any other step or make any other order for the purpose of managing the case and furthering the overriding objective…’
I intend to consider the Claimant's application under each of the bases relied upon, in turn.
CPR r. 25.1(1)(k): interim payment
As CPR r. 25.7 expressly provides, the court may only make an order for interim payment when one of the relevant conditions is satisfied. That relied on here is (c), which depends on the court being satisfied that if the claim went to trial the claimant ‘would obtain judgment’.
The simple answer to the application for an interim payment is that I am not able, on this application, to be so satisfied. SG pleads that they have been excused from performing or making payment under the Bonds and/or are obliged or entitled to withhold performance; and/or that the Bonds have been discharged and/or terminated and/or frustrated because payment by SG to the Claimant was and is illegal under EU, French and Italian law. They rely on what they call the principle in Ralli Brothers v Compania Naviera Sota y Aznar [1920] 2 KB 287, to the effect that a contract is invalid insofar as its performance is unlawful by the law of the place in which it is to be performed, namely France and Italy. They plead also that payment under the Bonds would be contrary to English public policy; and that SG is excused from their obligation to pay under the Bonds, relying on a term which they say is to be implied into the Bonds, to the effect that they are excused from performance if to perform would cause SG to be in breach of any restrictions imposed by sanctions. ING puts forward similar defences, relying in particular on the so-called Ralli Brothers principle.
Thus, in the present case, the fact of sanctions is said to give rise to substantive defences to the claims. For this reason, the decision in PJSC National Bank v Mints [2023] EWCA Civ 1132 does not provide the support for the Claimant's position on this application which the Claimant argued it had. Mints decided that the entry of a judgment against a designated person would not be a breach of the Russia (Sanctions) (EU Exit) Regulations 2019. However, in that case, the existence of sanctions did not form part of the defendants' substantive defence: the claim there being in tort or delict for an alleged conspiracy and the hypothesis was that the claim could be made out. That is a significantly different position from that which appertains in the present case.
Insofar as Mr Fenwick KC suggested that I could decide now that the Defendants' defences, to which I have referred, were bound to fail, I considered that that was not a course which was fairly open to the court. The relevant defences are pleaded. There has been no application to strike them out; nor has there been any application for summary judgment in relation to them. The present application and hearing are not a suitable occasion for an argument to the effect that the relevant pleas are, in effect, demurrable; and I accept what the Defendants said, namely that they had reasonably not come prepared to argue against the summary dismissal of significant parts of their defences.
CPR r. 25.1(1)(c): detention, custody or preservation of relevant property
Here, the Claimant's contention is that the sums which it claims are due to it from the Defendants are ‘relevant property’ for the purposes of CPR r. 25.1(1)(c)(i). In my judgment they are not.
I was referred to two authorities in relation to this. The Defendants relied on Sports Network Ltd v Calzaghe [2008] EWHC 2566 (QB). At [50]–[51] of that case, Coulson J said the following (obiter):
‘[50] I have concluded that, in general terms, property under CPR 25.1(1)(c) does not mean any money in issue in the litigation. First, the word “property” is not the usual way in which one describes money, be it a company's investments or balance at the bank. Secondly, the word “property” on its own should be contrasted with the...
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