Taurus Petroleum Ltd v State Oil Marketing Company of the Ministry of Oil, Republic of Iraq (Defendant/Applicant)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Field,Mr Justice Field: |
| Judgment Date | 18 November 2013 |
| Neutral Citation | [2013] EWHC 3494 (Comm) |
| Docket Number | Case No: Folio 328 of 2013 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 18 November 2013 |
[2013] EWHC 3494 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Rolls Building
Fetter Lane
London EC4A 1NL
Mr Justice Field
Case No: Folio 328 of 2013
Guy Blackwood and Paul Henton (instructed by Holman Fenwick Willan LLP) for the Claimant/Respondent
Dan Sarooshi and Siddarth Dhar (instructed by Vinson & Elkins RLLP) for the Defendant/Applicant
Approved Judgment
Hearing dates: 23 rd & 24 th September 2013
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.
Introduction
By a final UNCITRAL arbitral award dated 13 February 2013 ("the award") the Claimant ("Taurus") was awarded against the Defendant ("SOMO") US$8,716,477.00 in respect of demurrage, war risk premiums, a performance bond, interest and costs. The claims that led to the award arose out of a number of contracts under which Taurus was expressed to be the purchaser and SOMO was expressed to be the seller of crude oil and LPG.
On 11 March 2013 this Court: (i) granted Taurus permission to enforce the award in the same manner as a judgement; (ii) made interim Third Party Debt Orders ("ITPDOs") against Shell Trading and Shipping Company Limited and Crédit Agricole CIB London Branch ("Crédit Agricole") in the sum of £5,808,150 plus costs in respect of purchases of crude oil from SOMO; and (iii) ordered the appointment of a receiver by way of equitable execution to receive moneys receivable in respect of SOMO's interest as beneficiary in letters of credit issued by Crédit Agricole. At this time, Taurus believed Shell Trading and Shipping Company Limited was the purchaser and SOMO the seller of a cargo of Iraqi crude oil shipped on board the mt "Princimar Strength" and that the price (around US$220 million) was to be paid under a letter of credit issued by Crédit Agricole.
On 13 March 2013 the court approved the appointment of Mr Andrew Hosking of RSM Tenon as receiver by way of equitable execution and two further ITPDOs were made (for the same sum as in the previous orders) against Shell International Trading and Shipping Company Limited and Shell Trading International Limited respectively, Taurus still not being sure which Shell entity was the purchaser of the aforesaid cargo. On 22 March 2013, Crédit Agricole was ordered to pay US$9,404,764.08 into court and the previous ITPOs made against it were varied to permit this. The payment in was made on 25 March 2013 after Crédit Agricole had deducted £6 million and US$479,265.60 from sums it paid out respectively on 13 March 2013 and on 25 March 2013 pursuant to two letters of credit (no. GBRM 300017 ("17") and GBRM 300059 ("59")) issued in respect of a contract for the sale of crude oil between SOMO as seller and Shell International Eastern Trading Company Limited ("SIETCL") as purchaser.
No ITPDO was sought against SIETCL because it is domiciled in Singapore and under the CPR Part 72 TPDO provisions such an order can only be obtained against "a third party who is within the jurisdiction".
SOMO now applies to set aside the ITPDOs and the order appointing a receiver made in March 2013. In its Application Notice the ground relied on by SOMO for the setting-aside order sought is "want of jurisdiction on grounds of State Immunity". In the light of this, the addressees of the challenged ITPDOs and Crédit Agricole opted not to participate in the application but have reserved their position on all matters other than state immunity.
The principal contentions advanced by SOMO do indeed raise issues of state immunity arising under the State Immunity Act 1978 ("the SIA"). However, SOMO has also advanced a number of arguments that do not involve issues of state immunity but go to the substantive nature of the debts sought to be attached with a view to demonstrating that the CPR Part 72 TPDO provisions are inapplicable. SOMO also submitted that the court lacked jurisdiction to make the ITPDOs on the ground that the situs of the debts sought to be attached was outside the jurisdiction.
Taurus seeks to rely only on the ITPDOs made against Crédit Agricole and on the receivership order. The question for decision is therefore whether for any of the reasons advanced by SOMO the TPDOs obtained against Crédit Agricole in respect of the two letters of credit should be set aside and/or whether execution on the sum in court can be validly and effectively achieved through the receivership order.
CPR Part 72
The following provisions within CPR Part 72 are relevant to this application
72.2
(1) Upon the application of a judgment creditor, the court may make an order (a 'final third party debt order') requiring a third party to pay to the judgment creditor —
(a) the amount of any debt due or accruing due to the judgment debtor from the third party; or
(b) so much of that debt as is sufficient to satisfy the judgment debt and the judgment creditor's costs of the application.
(2) The court will not make an order under paragraph 1 without first making an order (an 'interim third party debt order') as provided by rule 72.4(2).
72.9
(1) A final third party debt order shall be enforceable as an order to pay money.
(2) If — (a) the third party pays money to the judgment creditor in compliance with a third party debt order; or (b) the order is enforced against him, the third party shall, to the extent of the amount paid by him or realised by enforcement against him, be discharged from his debt to the judgment debtor.
The letters of credit
The sale contract in respect of which the two letters of credit were issued required that irrevocable letters of credit be opened by Taurus acceptable to the Central Bank of Iraq ("CBI") and that they be in the form set out in Appendix 1. The two letters of credit are in consequence in common form, save in respect of specific details such as dates of expiry. The parts of the credits relevant to this application are as follows:
Sender : CRLYGB2LXXX
CREDIT AGRICOLE CIB
LONDON GB
Receiver : CBIRIQBAXXX
CENTRAL BANK OF IRAQ
BAGHDAD IQ
MUR:KSAKD 1
Message Text
PLEASE ADVISE OUR FOLLOWING IRREVOCABLE, DOCUMENTARY CREDIT TO OIL MARKETING COMPANY (SOMO) AFTER ADDING YOUR CONFIRMATION. OUR REFERENCE: GBRM300017
WE HEREBY ESTABLISH OUR IRREVOCABLE DOCUMENTARY LETTER OF CREDIT NUMBER GBRM300017 (GRBM300059) 2
BY ORDER OF:
IN FAVOUR OF: OIL MARKETING COMPANY ('SOMO') FOR A MAXIMUM AMOUNT OF USD
(UNITED STATES DOLLARS
)
EXPIRY: 20 APRIL 2013 [28 APRIL 2013] 3 AT THE COUNTERS OF CENTRAL BANK OF IRAQ, BAGHDAD
THIS LETTER OF CREDIT IS AVAILABLE BY DEFERRED PAYMENT AT THIRTY (30) DAYS FROM BILL OF LADING DATE (B/L DATE TO COUNT AS DAY ONE) AGAINST PRESENTATION NOT LATER THAN 20 APRIL 2013 OF THE FOLLOWING DOCUMENTS AT THE COUNTERS OF THE CENTRAL BANK OF IRAQ, BAGHDAD FOR NEGOTIATION
……
THIS LETTER OF CREDIT IS NOT ASSIGNABLE AND NOT TRANSFERABLE.
PROVIDED ALL TERMS AND CONDITIONS OF THIS LETTER OF CREDIT ARE COMPLIED WITH, PROCEEDS OF THIS LETTER OF CREDIT WILL BE IRREVOCABLY
PAID IN TO YOUR ACCOUNT WITH FEDERAL RESERVE BANK NEW YORK, WITH REFERENCE TO 'IRAQ OIL PROCEEDS ACCOUNT'. THESE INSTRUCTIONS WILL BE FOLLOWED IRRESPECTIVE OF ANY CONFLICTING INSTRUCTIONS CONTAINED IN THE SELLER'S COMMERCIAL INVOICE OR ANY TRANSMITTED LETTER.
WE HEREBY ENGAGE WITH THE BENEFICIARY AND CENTRAL BANK OF IRAQ THAT DOCUMENTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS CREDIT WILL BE DULY HONORED UPON PRESENTATION AS SPECIFIED TO CREDIT C. B. I. A/C WITH FEDERAL RESERVE BANK NEW YORK.
THIS CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (2007 REVISION) INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 600.
SPECIAL INSTRUCTIONS TO CENTRAL BANK OF IRAQ:
UPON RECEIPT OF YOUR AUTHENTICATED TELEX/SWIFT CONFIRMING THAT YOU HAVE TAKEN UP DOCUMENTS IN STRICT CONFORMITY WITH CREDIT TERMS AND CONDITIONS AND COURIERED THEM TO US, WE UNDERTAKE TO EFFECT PAYMENT AT MATURITY AS PER YOUR INSTRUCTIONS, PROVIDED THAT SUCH TELEX/SWIFT IS RECEIVED AT LEAST 1 NEW YORK/LONDON BANKING DAY PRIOR TO DUE DATE. OTHERWISE, PAYMENT WILL BE MADE 1 NEW YORK/LONDON BANKING DAY LATER.
IF OUR COVER DOES NOT REACH YOU IN TIME TO REIMBURSE YOU FOR YOUR PAYMENT UNDER THE CREDIT ON DUE DATE, WE HEREBY UNDERTAKE TO COMPENSATE YOU FOR ANY LOSS OF INTEREST INCURRED BY YOU DUE TO THIS DELAY.
DOCUMENTS TO BE COURIERED TO:
CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK, DOCUMENTARY CREDIT OPERATIONS, BROADWALK HOUSE, 5 APPOLD STERET, LONDON EC2A 2DA
REGARDS, DOCUMENTARY CREDIT OPERATIONS
CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK, LONDON.
The provision that the stipulated sum would be paid into the account of the Central Bank of Iraq at the Federal Reserve Bank New York accords with the payment mechanism established by Iraq under which all proceeds of the sale of Iraqi oil must be paid into CBI's Oil Proceeds Account at FRBNY, from which 5% must be transferred to the UN Compensation Fund Account and the remaining 95% transferred to another account in part controlled by the Iraq Ministry of Finance. This mechanism replaced that set up in response to UN Security Council Resolution 1483 of 22 May 2003 which required all proceeds from the sale of Iraq oil to be deposited into the Development Fund for Iraq, from which 5% was to be transferred to the Compensation Fund established after the invasion of Kuwait by UN Security Council Resolution 687 of 1991.
Payment pursuant to the credits (less the sum paid into court) was made by Crédit Agricole sending an instruction from London to JP Morgan Chase Bank NA in New York to pay the sum due into CBI's Oil Proceeds...
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