R v V

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMR JUSTICE DAVID STEEL,Mr Justice David Steel
Judgment Date03 July 2008
Neutral Citation[2008] EWHC 1531 (Comm)
Date03 July 2008
Docket NumberCase No: 2008 FOLIO 52, 159

[2008] EWHC 1531 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand,

London, WC2A 2LL

Before:

Mr Justice David Steel

Case No: 2008 FOLIO 52, 159

Between
R
Claimant
and
V
Defendant

And In The Matter Of An Arbitration

Between
V
Claimant
and
R
Respondents

Graham Dunning Q.C. & Sara Cockerill (instructed by Ashurst LLP) for the Claimant

Terence Mowschenson Q.C. & Jacob Grierson of Jones Day (instructed by Pitmans) for the Defendant

Hearing dates: 10 & 11 June 2008

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.

MR JUSTICE DAVID STEEL Mr Justice David Steel
1

The claimant [“R”] makes two applications:

i) a challenge to an award under section 68(2)(g) of the Arbitration Act 1996 on the grounds that the award is contrary to English public policy; and

ii) a challenge to enforcement of the same award under section 81(1) (c) of the Act on the grounds that the award is contrary to public policy at common law.

The public policy on which R relies is that against the upholding of corrupt practices including influence peddling: see Montefiore v Menday Motor Components [1918] 2 KB 241 and Lemenda Trading v African Middle East Petroleum [1988] QB 448).

2

The award was made on 12 December 2007 in London under the auspices of the ICC. The tribunal was made up of three distinguished arbitrators: Dr Laurent Levy, Arthur Marriott Q.C. and Prof. Dr. Siegfried Elsing. By the award the Tribunal upheld a claim by the Defendant [“V”] for immediate payment of $3 million and substantial further payments due on the achievement of specified oil production figures.

3

The claim was brought under the terms of a Consultant Agreement [“the Agreement”] dated 25 March 2002. V was beneficially owned by a Mr. F whose personal services as a consultant were being retained by R. The contract was no doubt entered into in the name of V, a BVI company, primarily for Mr. F's tax purposes.

4

The recitals to the agreement recorded that V had expertise in Libya concerning the oil industry. (Indeed Mr F had been retained by R and a number of other oil companies as a consultant in this field for some years.) The recitals identified the specific objects of the Agreement as follows:

“Whereas R. desires to use the Consultant to advise and assist [R's subsidiary] in its negotiations with NOC [the National Oil Company of Libya] with the purpose of obtaining for [R's subsidiary] the approval of the development plans and production quotas submitted for the discoveries in Blocks NC 186, NC 187 and M4 … in terms and conditions acceptable for [R's Subsidiary].”

5

The Agreement provided as follows:

ARTICLE 2 —OBLIGATIONS OF THE CONSULTANT

2.1 Consultant agrees that during the term of this Agreement it will, subject to the terms and conditions hereinafter expressed, and use its best efforts in connection with the following obligations and duties which Consultant undertakes to respect and carry out.

The Consultant shall assist R in connection with the promotion of its interests related to the Blocks as follows:

a) Consultant shall obtain all possible relevant formal and informal information on NOCs requirements for a successful approval of the development plans for the discoveries in the Blocks;

b) Consultant shall obtain all possible relevant formal and informal information in NOCs requirements for a successful approval of the production quotas for the discoveries in the Blocks;

c) Consultant represents that it has inside knowledge of the Libyan petroleum industry, and has long term experience in dealing with Libyan authorities;

d) During the term of this Contract Consultant shall provide consulting services related to the scope of this Contract exclusively to R. Consultant shall not engage in any other agreement to provide similar services to other persons for a period of 6 months from the termination of this Contract.

e) For the avoidance of doubt, Consultant is not appointed R's representative, and shall not commit or bind R without R's prior written approval.

f) Assist R in negotiations with Government officials, and State and private corporations in the territory, when requested by R.

g) Advise R with respect to the preparation and presentation of R's offers for the Blocks, in order to optimise the form and content of R's offers so that they are properly prepared;

h) Promote and defend the image and reputation of R, in light of the reliability of R's services and the professionalism of its staff;

i) Advise R, and assist if necessary, with respect to the negotiation strategy and the tactics to be adopted concerning the Blocks….

ARTICLE 4 —COMPENSATION

4.2 R shall pay Consultant, as the sole and exclusive compensation for Consultant's services hereunder, the following:

a) in respect of the successful approval of the first development plan with a plateau production level of 40,000 BOPD by the management committee under the EPSA relating to any discovery in the Blocks, a success fee of four million five hundred thousand US dollars (US $ 4,500,000) to be paid within thirty days after the date of approval of the first development plan under the EPSA 97.

b) in respect of the successful approval of the second development plan with a plateau production level of 25,000 BOPD by the management committee under the EPSA relating to any discovery in the Blocks, a success fee of three million US dollars (USS 3,000,000) to be paid within thirty days after the date of approval of the first development plan by the Management Committee under the EPSA 97.

c) in respect of the successful approval of the third development plan with a plateau production level of 20,000 BOPD by the management committee under the EPSA relating to any discovery in the Blocks, a success fee of three million US dollars (USS 3,000,000) to be paid within thirty days after the date of approval of the first development plan under the EPSA 97.

Notwithstanding the foregoing, when the total production reaches 85,000 BOPD, even in the case that the above referred development plans have not been reached, the Consultant shall be entitled to receive ten million five hundred thousand US dollars (USS 10,500,000).

d) Furthermore in respect of total daily production from all the fields in production in the Blocks, a success fee dependent of production level reached as per the table below provided such level of production is maintained during a period of thirty (30) consecutive days:

Daily Production, BOPD Success Fee, Million USS

Above 100,000 2,5

Above 150,000 2,5

Above 200,000 2,5

For the avoidance of doubt, the success fee in respect of any of the production levels reached will be calculated on the basis of the combined production from the Blocks and will be due and payable only once, i.e. when the relevant production level is reached for the first time. The payment shall be made in United States dollars to the bank account duly notified in writing by Consultant to R.

ARTICLE 12 —APPLICABLE LAW AND ARBITRATION

12.1 The laws applicable to any dispute arising in connection with this Agreement shall be the laws of England.

12.2 Any of these disputes which cannot be settled amicably by the Parties shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce (“ICC”) by three arbitrators appointed in accordance with the aforesaid rules.

12.3 The arbitration shall take place in London, England, and shall be conducted in English.”

6

Following approval by the National Oil Corporation of Libya (“NOC”) of the relevant development plans, the payments specified in Article 4.2(a) and (b) were duly made. The arbitration claim was concerned with the issue of liability for the payments under Article 4.2(c) and (d). These were said by V to have been earned by way of “strategic assistance” under the terms of the agreement in like manner to the earlier payments.

7

It appears from the award that at the arbitration R had contended that the Agreement was unenforceable on three grounds:

i) that it was not supported by consideration;

ii) that Mr. F was in breach of his fiduciary duty and was precluded from obtaining any personal benefit from the Agreement;

iii) that the Agreement was illegal under Libyan law and contrary to English public policy in regard to influence peddling.

8

R lost on all three grounds. For present purposes it is only necessary to have regard to the Tribunal's conclusions on illegality and public policy. The tribunal held that R had failed to establish that the Agreement (or V's performance of it) were illegal under Libyan law. The Tribunal also held that the Agreement and V's performance under it did not violate English public policy.

9

The question therefore arises whether it is open to the court to look behind the findings of the Tribunal in the context of an application under section 68 or 81 of the 1996 Act. In this connection it must be borne in mind that there is no basis for any challenge under Section 67 to the Tribunal's jurisdiction to determine the matter and furthermore no basis, given Article 28(6) of the rules of ICC arbitration, for any appeal under section 69 of the Act.

10

At first blush it may be somewhat surprising that, with the initial payments having been made to V without complaint, there should nonetheless be an objection on the grounds of illegality to the later payments. However it is clear that a new management broom came into R in the meantime and given the sums involved it is perhaps not entirely surprising that some doubts were expressed as to the appropriateness of the payments. In the circumstances, it is also clear that the arbitrators had well in mind the need to be vigilant given the nature and terms of the Agreement to ensure...

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1 firm's commentaries
  • Case Law Review - Construction, Property & Real Estate (February 2009)
    • United Kingdom
    • Mondaq United Kingdom
    • 23 February 2009
    ...this was held only to apply to parties each appointing an arbitrator and not to a sole arbitrator. Public Policy Challenge Fails R v V [2008] 119 Con LR 73 In an arbitration arising from an agreement for the provision of consultancy services in the Libyan oil industry, the arbitrators gave ......

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