TEKRON RESOURCES Ltd v GUINEA INVESTMENT Company Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jack: |
| Judgment Date | 24 November 2003 |
| Neutral Citation | [2003] EWHC 2577 (QB) |
| Docket Number | Case No: HQ03X00547 |
| Court | Queen's Bench Division |
| Date | 24 November 2003 |
[2003] EWHC 2577 (QB)
The Honourable Mr Justice Jack
Case No: HQ03X00547
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Jeffrey Gruder QC and Salim Moollan (instructed by Lawrence Graham) for the Claimant
Joe Smouha QC (instructed by Clifford Chance Limited Liability Partnership) for the Defendant
Hearing dates : 7 —16 October 2003
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 Hon. Mr. Justice Jack
Introduction
This is a claim for sums totalling US$3,473,337.00, which are alleged to be due to the claimant from the defendant under an agreement dated 30 November 1999, referred to as 'the representation agreement'. The defendant denies that the agreement is an enforceable agreement and counterclaims for $9,424,836 being the total of sums previously paid by it under the agreement. There are further claims to which I will come in due course.
The claim relates to an industrial complex at Fria in Guinea, West Africa. The complex comprises a bauxite mine and a refinery which processes the bauxite into alumina, and ancillary facilities. I will refer to it simply as 'the refinery'. Alumina from the refinery is exported from Guinea for conversion to aluminium in smelters elsewhere. This export provides a major contribution to the economy of Guinea and the refinery is an important employer. In 1958 a long term concession agreement was entered into between a company named Friguia, whereby for present purposes it is enough to say that Friguia became the long-term leaseholder and effectively the owner of the refinery. In 1997 Friguia was owned as to 49% by the Government of Guinea and as to 51% by Frialco, a joint venture made up of a number of substantial international companies involved in aluminium. There was a dispute between Frialco and the Government. The refinery was in poor condition and Frialco were unwilling to provide further investment. The consequence was that in about June 1998 Frialco gave up its interest to the Government for US$1. It was intended that Frialco cease to have any involvement in January 1999. The Government assumed the totality of Friguia's debts. A new entity was needed with the ability to manage the refinery and to invest in it. There was some urgency in the situation.
In 1998 the Government instructed Warburg Dillon Reed ('Warburgs') to conduct a process leading to the privatisation of the refinery. By early 1999, if not earlier, it was clear the privatisation scheme was not going to succeed.
Meanwhile an alternative scheme was under consideration. The originators of this scheme were three men, Mr Karim Karjian, Mr Safwat Safwat and Mr Jack Nounou. The claimant company, Tekron Resources was incorporated on 29 October 1998 in the British Virgin Islands as their vehicle in relation to this scheme. They had succeeded in interesting the American company, Reynolds Metal Company, in the refinery. Reynolds was then the third largest aluminium producer in the world. It has since been taken over. They developed the concept of a lease and management arrangement for a period of years, later agreed as 25. They acted as intermediaries between Reynolds and the Government of Guinea, representing Reynolds.
The outcome was that on 30 November 1999 an agreement was entered into in New York between Friguia, Alumina Company of Guinea Limited, ('ACG'), the Republic of Guinea and Reynolds Metals Company. It was titled 'Lease-Management and Concession Agreement'. I will refer to it as 'the lease-management agreement'. Under it ACG took over the refinery for 25 years. The shareholders in ACG were as to 75%, the defendants, Guinea Investment Company, ('GIC'), as to 15% the Republic of Guinea, and as to 10%, Reynolds Metal Company. ACG was a company incorporated in the Marshall Islands for the purpose of the lease-management agreement. GIC was incorporated in the Cayman Islands. Its shareholders were individuals and companies. They included Mr Randolph Reynolds and Mr Charles Hardy, who were executives of Reynolds Metals, and also Greek shipping interests. The lease-management agreement is governed by French law and contains a provision for arbitration in Geneva.
There was also a management agreement between ACG and GIC entered into on 1 March 2000 whereby GIC undertook defined off-shore management services for ACG in relation to the refinery. As consideration GIC were to receive 8% of the annual net sales of ACG.
I should mention that an agreement had previously been entered into between Reynolds Metals Company and GIC on 16 July 1999, whereby Reynolds agreed to provide technical services at the refinery for 10 years. This agreement was required by the Government of Guinea because it wished to be assured that the expertise of Reynolds would be available.
Lastly there was the representation agreement which is now sued on, made between Tekron and GIC on 30 November 1999, where GIC became obliged to pay substantial sums to Tekron for its services as I will set out in more detail subsequently.
On the basis of the evidence that I have heard, the operation of the refinery under these various agreements was successful. Capital has been provided, the facilities have been improved, and the production has increased. In broad terms it has been good for the investors and for Guinea. GIC made the payments to Tekron, for which the representation agreement provided, and which are now counterclaimed.
On 22 December 2002 the substantial Russian aluminium company, RusAl, purchased the shareholding in GIC and the shares were vested in a holding company for RusAl. At the same time the 10% held by Reynolds Metal Company in ACG was also transferred to GIC. This left RusAl in control of ACG subject to the Government's 15%. Following its purchase RusAl determined that it was not going to honour the representation agreement made between GIC and Tekron. The result was the commencement of this action by Tekron on 18 February 2003.
The terms of the representation agreement
The preamble of the representation agreement refers to an earlier memorandum dated 17 September 1999 setting out terms agreed between GIC and Tekron, which is attached to the Agreement as schedule 2. Clause 1.1 defines 'services' as 'Those services provided by Tekron in return for consideration, more particularly detailed in Clauses 2 and 3'.
Clause 2.1 provides:
2.1 In consideration of Tekron developing and procuring the execution and performance of the Lease-Management Agreement GIC shall pay to Tekron:-
2.1.1 upon signature of the Lease-Management Agreement, the Deposit [US$400,000];
2.1.2 within 30 days of the Closing of the Lease-Management Agreement…a sum equal to the Initial Fee [$4,000,000] less the Deposit;
2.1.3 the Carrying Fee in respect of each tonne of alumina produced by ACG …
The Initial Fee is defined by clause 1.1 as 'a brokerage, financial facilitator and finders fee of US$4,000,000'. The Carrying Fee is to be calculated as set out in Schedule 2. It varies between 0% and 3% of 12% of an average London Metal Exchange price, depending on the level of the price.
Clause 3 provides for Tekron to be paid a fee of 3 per cent of the total project budget contingent upon Tekron procuring all necessary approvals and arranging acceptable non-recourse financing to ACG in connection with the expansion of the capacity of Friguia foreseen by clause 6.11 of the lease-management agreement. This financing for expansion has not come about.
Clause 4 is headed 'Duties of Tekron' and provides:
4.1 Tekron shall at all times during the term of this Agreement at its own expense:
4.1.1 assist GIC in maintaining good commercial and political relations with the government of Guinea and all regulatory authorities in Guinea;
4.1.2 generally promote the interests of GIC in Guinea;
4.1.3 in all matters act loyally and faithfully towards GIC;
4.1.4 not without the prior written consent of GIC
(a) bind GIC and/or ACG to any contract……
(b) ……….
(c) ………..
4.1.5 not act in any way which may bring GIC and/or ACG into disrepute
Clause 5.1 provides that the agreement shall be deemed to have been executed on the Effective Date —17 September 1999 and shall be effective from that date. Clause 5.2 provides that its duration shall be that of the lease-management agreement —25 years together with any extension. Clause 5.3 provides that, if the lease-management agreement is validly determined earlier, the representation agreement shall also be determined. Clause 5 provides inter alia that the provisions and subject matter of the agreement shall be kept secret. Clause 13.1 provides that the agreement shall be governed by, and construed in accordance with, English law. Clause 13.2 gives exclusive jurisdiction to the courts of England.
By an addendum to the representation agreement dated 27 January 2000 it was agreed:
During the term of the Representation Agreement, neither GIC nor Tekron nor any person acting for or on their behalf will offer, pay or agree to pay, directly or indirectly, any consideration of any nature whatsoever to any official, agent, or employee of any government or any department, agency or instrumentality of any government to influence the act, decision or omission of any such official, agent, employee, political party official or candidate in his or its official capacity in connection with the performance of the services or the directing of business to any person.
This was required by the American lawyers of Reynolds.
The representation agreement itself was drawn up between two...
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