The Libyan Investment Authority v JP Morgan Chase & Company
| Jurisdiction | England & Wales |
| Judge | Mr Justice Bryan |
| Judgment Date | 10 June 2019 |
| Neutral Citation | [2019] EWHC 1452 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Claim No CL-2018-000228 |
| Date | 10 June 2019 |
[2019] EWHC 1452 (Comm)
THE HONOURABLE Mr Justice Bryan
Claim No CL-2018-000228
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF
ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane
London, EC4A 1NL
Roger Masefield QC, Craig Morrison and Samuel Ritchie (instructed by Enyo Law LLP) for the Claimant
Alan Gourgey QC, Adam Kramer and Anna Littler (instructed by PCB Litigation LLP) for the Third Defendant
Michael Holmes (instructed by Stewarts Law LLP) for the Fourth Defendant
Hearing dates: 7, 8 and 9 May 2019
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.
A. INTRODUCTION
A.1. The parties and their applications
The applications before me relate to an order made by Teare J on 12 June 2018 in which he granted the Claimant, the Libyan Investment Authority (the “LIA”), on a without notice application, on paper, permission to serve the Third Defendant Mr Walid Mohamed Ali Al-Giahmi (“Mr Giahmi”) and the Fourth Defendant, Lands Company Limited (“Lands”) out of the jurisdiction with the Claim Form and, as sought by the LIA, also made an order for alternative service in relation to Mr Giahmi.
Mr Giahmi and Lands each challenge jurisdiction, applying to set aside service of these proceedings against them on the basis that the claims of the LIA against each of them stand no real prospect of success as they are time-barred under English law, and on the basis that service should in any event be set aside as there has been what is said to be a very serious failure on the part of the LIA to comply with its obligation of full and frank disclosure on the without notice paper application for permission to serve out before Teare J including in failing to identify, still less address, the limitation issues that arise. Mr Giahmi and Lands also apply to strike out certain of the claims against them (for money had and received and in fraud) on the basis that they disclose no reasonable cause of action being, it is said, claims that have no legal foundation as a matter of English law. They also submit that there was an associated failure to comply with the duty of full and frank disclosure in that regard.
Mr Giahmi also alleges that the claims against him are an abuse of process on the basis that such claims ought to have been brought at the same time as those in an earlier action of the LIA against him (the SocGen Proceedings as defined below) engaging the principle in Henderson v. Henderson or otherwise amounting to an abuse of process, and/or that they arise out of the same facts as the claims against him that were discontinued in the SocGen Proceedings, so as to require permission of the court under CPR 38.7 with the result that the proceedings stand no real prospect of success on the jurisdictional challenge and/or should in any event be struck out.
Finally, if the above applications are not successful, Mr Giahmi and Lands seek to stay the proceedings pending the outcome of applications by one of the alleged Chairmen of the LIA, Dr Mahmoud, to discharge the Receiverships under which these proceedings (and others) have been conducted (“the Discharge Applications”). Mr Giahmi asserts that there is a “real prospect” that Dr Mahmoud would, if successful, then discontinue the proceedings against him. In such circumstances it is said that the Court should stay these proceedings pending the outcome of the Discharge Applications in the exercise of the Court's case management powers, in furtherance of the overriding objective, and so as to save costs being incurred, and court resources utilised, in circumstances where the action may not proceed.
A.2. Overview of the LIA's claims in the Proceedings and LIA's associated knowledge
The LIA brings claims against JP Morgan Markets Limited (“JP Morgan”), Mr Giahmi and Lands in relation to a US$200 million derivative transaction concluded between the LIA and Bear Stearns International Limited (“Bear Stearns Trade”) in November 2007 (“the Bear Stearns Trade”). JP Morgan Markets Limited is the same entity as Bear Stearns, having been renamed after JP Morgan Chase & Co acquired the Bear Stearns group of companies in 2008.
The LIA contends, in summary, that the Bear Stearns Trade was procured by a fraudulent and corrupt scheme between Bear Stearns and Mr Giahmi. The alleged key elements of the scheme were that Bear Stearns would pay Mr Giahmi a commission of US$6 million, in exchange for which Mr Giahmi would exercise corrupt influence over LIA officers and employees to ensure that the LIA entered into the Bear Stearns Trade. The LIA alleges (but Mr Giahmi strongly denies) that Mr Giahmi was a close associate of the former Gaddafi family and regime and was known as the ‘right hand’ of Saif al-Islam Gaddafi, Colonel Gaddafi's son, and was therefore well placed to carry out this scheme. Mr Giahmi's fees were routed via Lands, a Cayman company which the LIA says was (and is) under his control.
The LIA claims Mr Giahmi did in fact ensure that the LIA entered into the Bear Stearns Trade via the alleged bribery and/or intimidation of a Mr Hatim Gheriani (then head of the LIA's alternative investment team) and a Mr Mustafa Zarti (then the LIA's deputy executive director), such that both breached their fiduciary duties to the LIA. It is asserted that a Mr Layas, then the executive director of the LIA, may also have been suborned.
It is said by the LIA that despite these proceedings being at an early stage, with disclosure not yet given, the LIA has been able to infer the existence of Mr Giahmi's corrupt scheme with Bear Stearns from numerous pieces of evidence. These include the concealment of Mr Giahmi's involvement from the LIA (despite him purportedly acting as an “ introducer” to the LIA), the false description of Lands' role in term sheets provided to the LIA (which said that “Lands Ltd” provided “ structuring” services), the execution of sham documentation between Mr Giahmi and Bear Stearns which similarly misdescribed his role, and the size of the sums paid to Mr Giahmi (which were out of all proportion to any legitimate ‘introductory’ services he is said to have provided).
The LIA also infers Mr Giahmi's corrupt involvement in the Bear Stearns Trade from certain specific acts of bribery and intimidation, which it says the LIA became aware of during previous proceedings brought by the LIA against Société Générale SA (“SocGen”), Mr Giahmi and others (“the SocGen Proceedings”). In the SocGen Proceedings the LIA alleged fraud in relation to US$ 2.1 billion of different transactions entered into between 2007 and 2010 (“SocGen Disputed Trades”). The LIA's case was that Mr Giahmi was paid US$ 58 million in relation to these transactions, via a Panamanian company known as “Leinada”. It is said that in the course of the SocGen Proceedings it emerged (partly from Mr Giahmi's financial disclosure and partly from disclosure by the SocGen Defendants) that Mr Giahmi had engaged in numerous corrupt acts in relation to LIA officers and employees, including paying bribes in 2006 (to Mr Gheriani's father) and 2007 (to a person known as Person Z, whose identity is presently confidential). It is said he also engaged in acts of intimidation in relation to both Mr Gheriani and Mr Zarti in late 2007, which were revealed by telephone recordings of conversations with SocGen employees.
SocGen ultimately settled the SocGen Proceedings with the LIA shortly before the start of trial in 2017. Mr Giahmi did not participate in the settlement agreement. By the settlement, the SocGen Defendants did not admit liability, but – in respect of the US$ 2.1 billion transactions – agreed to (a) pay the LIA over US$ 1 billion representing the losses sustained by the LIA on the SocGen Disputed Trades; (b) allow the LIA to retain the balance of the SocGen Disputed Trades, valued at a further US$ 1 billion; and (c) issue a public apology to the LIA. As part of this settlement the LIA agreed formally to discontinue its claim against Mr Giahmi, but SocGen paid Mr Giahmi's costs (albeit there was a short-fall between such payment and the costs actually incurred by Mr Giahmi with the result that Mr Giahmi had still incurred very substantial unrecovered costs in those proceedings).
Against this background the LIA considers that the evidence that came to light in the SocGen Proceedings supports the inference that Mr Giahmi also engaged in fraud in relation to the Bear Stearns Trade. It is said that this inference was further bolstered, after the JP Morgan Proceedings were issued, when SocGen admitted in a Deferred Prosecution Agreement concluded with the US Department of Justice that it had engaged Mr Giahmi on the false basis that he would provide “ introduction” services, when SocGen in fact knew that Mr Giahmi would pay bribes to Libyan government officials (whom Mr Giahmi had caused to be hired by the LIA using threats and intimidation) to procure transactions for SocGen. I reiterate that such matters are strongly denied by Mr Giahmi.
It is said that there are clear similarities with Mr Giahmi's alleged modus operandi in relation to the Bear Stearns Trade. Indeed Mr Allen, in his first witness statement, on behalf of the LIA, in support of the application for permission to serve Mr Giahmi and Lands out of the jurisdiction that was before Teare J on the paper application, says that the LIA's claim in the JP Morgan Proceedings is based on “a similar, if not near-identical, fraudulent and corrupt scheme...
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