Orascom Telecom Holding SAE v Republic of Chad [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BURTON,Mr Justice Burton |
| Judgment Date | 28 July 2008 |
| Neutral Citation | [2008] EWHC 1841 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2007 FOLIO 1440 |
| Date | 28 July 2008 |
[2008] EWHC 1841 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Burton
Case No: 2007 FOLIO 1440
Mr Toby Landau QC (instructed by Gide Loyrette Nouel LLP) for the Claimant
Mr James Dingemans QC (instructed by Saunders LLP) for the First Defendant
Hearing date: 17 July 2008
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgmentthat copies of this version as handed down may be treated as authentic.
This has been the hearing of an application by the Claimant, Orascom Telecom Holding SAE (“Orascom”), for a final Third Party Debt Order (what used to be called a Garnishee Order) in respect of monies held by the Third Party Citibank NA (“Citibank”) for the First Defendant, the Republic of Chad (“Chad”), in order to enforce its unpaid Arbitration Award by the International Chamber of Commerce (“ICC”) against Chad made on 12 June 2007. A number of bank accounts is held by Citibank for Chad, which were in issue when these proceedings were first brought, but, by virtue of concessions made by Orascom,as a result of the intervention in the proceedings of the World Bankthe European Investment Bank in respect of some of the accounts, the application has been slimmed down so as to remain in respect of only one account, the “Borrowers' Account”.
Chad, though ably represented by solicitorsCounsel, Mr James Dingemans QC, has not played a very active role in these proceedings in the sense of giving instructions to its solicitorsCounsel or producing any substantial evidence, which has had the effect that (i) the only material evidence as to the nature of the Citibank accounts has been provided by Orascom, by reference to publicly available material published on the website of the World Bank (ii) Orascom did not, at least at the outset, know precisely what case, if any, would be put forward by Chad in opposition to the application. In this latter regard, Mr Toby Landau QC produced a very thorough skeleton argument in support of the application dealing with every issue that he considered might possibly arise: in the event there have only been two issues before me in contention between the parties (i) whether the Borrowers' Account is “property which is for the time being in use or intended to be used for commercial purposes”,thus within s13(4) of the State Immunity Act 1978 (“the 1978 Act”), which permits execution against the property of a State which is otherwise immune from the jurisdiction of the courts of the United Kingdom (ii) whether there has been waiver by Chad of immunity from execution by virtue of its submission to the ICC Rules and, in particular, Article 28(6) of those Rules.
Notwithstanding that Chad is ranked number 171 out of 177 countries in the United Nations Development Programme Human Development Index, it has numerous oil reserves which are exploited commercially by a number of multi-national oil companies. In 1998, a 1000 km pipeline was constructed across ChadCameroon to deliver oil supplies to the Atlantic Ocean for onward transport to international markets. The project involved investment of some US $4 billion, of which approximately US $300 million was loaned by the World Bank (“IBRD”): as will be seen, the arrangements with Citibank were set up in order to facilitatesecure repayment inter alia to the World Bank of such loans out of the proceeds of sale of such oil and/or in respect of the use of such pipeline.
The involvement of Orascom arose in the following way. In or about 2000, Orascom established, at Chad's request, a joint venture telecommunications company in Chad, together with the Second Defendant (“Sotel Tchad”), the Chad national telecommunications company. At a time when Orascom had made substantial investments, Chad itself intervened, so as, in effect, to force Orascom out, by such steps as freezing bank accounts, closing business premises, shutting down the networkeventually cancelling an operating licence by decree. Although Chad was not party to the Arbitration Agreement which formed part of the contractual arrangements between OrascomSotel Tchad, Orascom joined both Sotel TchadChad in an ICC Arbitration in Geneva.
Chad was joined into the arbitration on 4 March 2005, and, on 4 April 2005, Chad lodged with the ICC a responsecounterclaim which contained an objection to the jurisdiction of the ICC arbitrators. In the event however, it is entirely clear,was no longer in issue by the time of the hearings before me, that Chad withdrew such objectionaccepted the jurisdiction of the ICC. On 26 October 2005 Chad signed the Terms of Reference for the arbitration, by Clause 11 of which the seat of arbitration was provided to be Geneva, Switzerland, and, by Clause 13, the applicable rules were to be the ICC Rules. On 28 February 2006, a further Response was lodged with the ICC in Paris by Chad, which, by Title IV, at point 4, stated (in a passage translated by Orascom's solicitors):
“In this case, the serious allegations made by the Applicants extend beyond the limits of the agreementare levelled directly at the Republic of Chad, which must meet any such liabilities by taking part in this claim. In so doing, the Respondents have simplified any arguments there may have been about the matter.”
The Final Award rejected Chad's defences,certain other technical pleas,ordered Chad to pay substantial sums constituting in excess of £3.7m. So far as the original jurisdiction objection referred to above is concerned, paragraph 14 of the Award read as follows:
“In its Response to the Request for Arbitration of 25 March 2005, the Respondents raised objections regarding the Arbitral Tribunal's jurisdiction over the Republic of Chad.
The Respondents are hereby advised that the Terms of Reference did not contain these objections since the Chadian State is a direct party to the arbitrationsince the objections were withdrawn from their response to the Claimant's Statement of Claim of 28 February 2006. The Arbitral Tribunal thus did not have to rule on this point.”
The evidence put in by Orascom, which has not been in dispute, was that the requirement of the World Bank for the channelling of the oiloil pipeline proceeds through Citibank in London, was described as the Revenue Management Program (“RMP”), which is fully explained on the World Bank's website. The RMP requires that all of Chad's oil revenue be paid directly into what is described as an escrow account established at Citibank in London,the first account, into which the monies due by way of gross revenue to Chad in respect of royalties, taxes or dividends is required to be paid, is called the “Transit Account”. The evidence describes how:
“All directindirect revenues from oil extractiontransportation flow first into the Transit Account. In this account, amounts are set aside on the 15th of every month to cover debts owed to [the World Bank][the European Investment Bank]. Remaining funds are then transferred to Chad's Borrower's Account, which is part of the escrow agreement.”
The amounts which are thus “set aside” are to provide for Chad's debt service payments to the World Bankthe European Investment Bank. There are, it seems, three such accounts with Citibank: the IBRD Debt Service Account, the EIB Debt Service Accountthe IBRD Debt Service Reserve Account. The Claimant originally sought a final order in respect of those accounts also,included them in the interim freezing order which I granted at the first hearing of this application, but, in the light of the intervention to which I referred in paragraph 1 above, by which the World Bankthe European Investment Bank asserted a proprietary interest in those accounts, such case has no longer been pursued. So far as the direct revenues are concerned, the evidence is as follows:
“Of the direct revenues, which are royaltiesdividends, 10 per cent is put aside in a future generations fund, also housed at Citibank. The remaining 90 per cent move to a special oil revenue account in Chad.”
On the evidence supplied by Citibank pursuant to an order for information that I made at the first hearing, Citibank gave the following information:
i) As at 29 April 2008 there was a nil balance in the Transit Account.
ii) All the sums in the three Debt Service Accounts had been transferred to a money market fund at the Citibank London branch (“Citi”), the Citi Institutional Liquidity Fund (“CILF”), where three accounts, CILF 154724, 42254726 were, as at 29 April 2008, held with substantial balances on behalf of Chad (though, as set out above, now conceded by Orascom to be subject to a proprietary interest of the Intervenors).
iii) As provided in the RMP, as set out in paragraph 8 above, 10% of the direct revenues was put aside in a Fund for Future Generations, which account has remained with Citibank, not in a Citi CILF account, with a balance as at 29 April 2008 of US$114,945.68: Orascom has not made any claim in respect of such account.
iv) The content of the Borrower's Account was also transferred to a money market account, CILF Account No 4723, and, as at 29 April 2008, there is a balance of US$43,830,642.73.
A freezing order was made by me on 12 May 2008 in respect of the five accounts referred to in (i), (ii)(iv) above,there is no reason to believe that the position has materially changed since 29 April 2008.
The First Issue: The Borrowers' Account
The 1978 Act “represented a marked relaxation of the...
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