157. We should record that Advocate Robinson also referred this court to a 1995 French judicial dictionary under the name Dalloz. Given that this does not bear in any way to reflect the law of this Island, we do not consider it further.
158. In another argument which does not appear to have been made below, Advocate Robinson on behalf of GTL submitted that the court below was in error in appearing to proceed on the basis (i) that an arrêt had been effected by the simple process of a declaration and (ii) that the funds were, by that fact, trapped in GTL's account. In his submission, however, there was a substantial requirement that the arresting officer actually carried out an arrest and identified the matters subject to the process. In the present case the arrest was simply "declared" in the order.
159. The procedure of distraint was covered by Rule 11/3(1) of the Royal Court Rules which provided that the judgment was to be There was, therefore, not an automatic distraint but rather an authority to make one.
160. Advocate Lawrence pointed out that GTL could not dispute that the arrêt had been made by the Viscount personally serving the ex parte order upon GTL. That order contained all the necessary information that GTL required to show which property (that is the shares and the debts) were the subject of the arrêt entre mains.
Discussion
161. In our opinion this point is of no substance. The order is a judicial act, as is made clear by Rule 20/5(1) which provides that It seems to us, therefore, that the Order operated as an arrêt entre mains upon being signed. It authorized the distraint and, having been served on GTL there is no difficulty for the latter in being aware of the ambit of the judicial act.
No Attachment of Future Movables
162. Advocate Robinson submitted that an arrêt entre mains could not, as a matter of Jersey law, enable the judgment creditor to attach future movables and that the effect of the order was to attach only payments owing at the date of the order and not also future payments accruing. He made reference to the court's findings at paragraphs 144, 148(iv), 149 and 196.
163. He submitted that the only authoritative source in favour of this proposition was Pothier, as quoted at paragraph 147 of the decision below. The relevant passage is in the following terms:-
164. The translation used below had been put forward on behalf of Hemisphere and had not been the subject of debate. Before this Court, however, Advocate Robinson at one stage suggested that in place of the words "all that he can owe and will owe in the course of time", the proper translation should be "all that he may owe or may in the future owe".
165. It is clear, to our mind, that the words "all that he may owe" is a reasonable translation of the words . What seems less clear is whether the use of the verb "pouvoir" is intended to attach to "devra". If, instead of "devra" the infinitive had been used, it might more readily have been assumed that "peut" attached to both; but a fair translation of "devra" on its own is "will owe". We shall return to this point in discussion.
166. Advocate Robinson further submitted that, whilst English law permitted execution against future payments and income from a defined asset, it did not do so by way of third party debt / garnishee order but through the appointment of a receiver by way of equitable execution. He referred to Masri-v-Consolidated Contractors International Company SAL [2008] EWCA Civ 303 at paragraphs 136 - 172 and 184. In that decision, after a detailed analysis, Lawrence Collins LJ, with whom the other members of the Court of Appeal agreed, concluded in the following terms:-
167. In response, Advocate Lawrence contended that it was proper to have regard to Pothier. She referred also to Routier and the fact that the arrêt lasts for thirty years. In her submission, there would be no point in the imposition of such a timescale were there not the ability to attach future debts in order that the judgment creditor could continue to receive payments due in the future until such time as the debt to it from the primary debtor had been paid.
168. She also submitted that the most obvious example of an arrêt entre mains in respect of a future debt was an arrest on wages and that the judge at the ex parte hearing had been content with the concept of distraint against future payments because of the analogy of an arrest on wages. She referred this court also to Dessain & Wilkins, Jersey Insolvency and Asset Tracing (3rd edition) at page 60 where the possibility of an arrestment of wages by way of an arrêt entre mains is noted. We were informed, however, that in practice an application for such an arrestment is granted automatically only for an amount up to £80 per week. Applications seeking greater amounts required special grounds. Advocate Lawrence observed that she had also referred below to two potentially relevant cases Eloury-v-JW Huelin Limited (1935) 238 Ex 326 and Falle-v-Pocock (1949) 244 Ex 361, although these had not been relied on in the judgment below.
Discussion
169. The issue raised under this head does not appear to have been the subject of any - or at least any focused - debate in any Jersey authority. It is clear from the transcript that the judge at the ex parte hearing had been immediately content with the concept of distraint against future payments because of the analogy of an arrest on wages and did not require particular argument on the point. The passage in Dessain & Wilkins at page 60 states without qualification that wages are susceptible to arrest by arrêt entre mains. Although reflecting on possible uncertainties, the ability to attach wages is not queried by the authors. There is no definitive guidance in the two cases referred to by Advocate Lawrence and in Eloury-v-JW Huelin the arrestment was not of a future debt but of an amount already owed under a building contract, the precise amount payable, however, being yet to be determined.
170. Nor is there any detailed discussion of the issue in the judgment below. What is stated at paragraph 148(iv) is that an arrêt entre mains But, whilst Advocate Robinson suggested that the only authoritative source in favour of this proposition was the passage in Pothier quoted above at paragraph 163 above, it seems to us that the passage quoted in the court below at paragraph 148(iii) is also relevant. In the translated version it states:-
171. What is immediately obvious from that passage is that Pothier has in mind the possibility of an arrestment attaching not only to an instalment of rent under a lease, currently due and payable, but that all the instalments of rent for the years to expire would have been arrested.
172. Nor is Pothier the only pertinent source on this issue. As Advocate Lawrence pointed out, Routier, in the third paragraph of the first section quoted at paragraph 149 above, specifically records that the arrestment endures for thirty years. In addition to that provision we also note that, in the first paragraph of the second section, reference is made to the third party producing a Lease for confirmation of the amounts due. Whilst not as precisely stated as by Pothier, we take these passages as an indication that in Normandy something more than an instalment of rent under a lease, currently due and payable, was attached upon an arrestment in the hands of a tenant. If all that could be attached was the instalment currently due and payable, there would seem little need for the lease to be supplied to the court: the tenant could simply depone to the amount owing and in his hands. The requirement for the lease to be produced, on the other hand, would tend to suggest that the court, the arrestor, the arrestee and, doubtless, the judgment debtor would wish to be clear as to the amounts in the future and the exact timeframe.
173. Returning to the passage in Pothier, quoted in paragraph 163 above, it is, in our view impossible, with any reasonable degree of certainty, to determine whether the proper construction of the second part of the passage should be translated as "may in the future owe" or "will in the future owe" if regard is had merely to the words used in that sub clause. Either is possible. That said, the use of the wording "may owe" in the first part of the sub clause is rational in that at the time of notification to the third party the exact amount owed is not clear and is to be the subject of a subsequent part of the procedure.
174. There are two possibilities as regards the proper construction of the second portion. Either it is to be construed as covering anything whatsoever that may be owed by the third party to the judgment debtor at any time during the thirty year period and for whatever reason (that is, the "may" construction) or it is something certain, for example an ascertained debt for which the date of payment has not yet arrived, a debt owed but the amount payable yet to be ascertained (as in Eloury-v-JW Huelin ), or wages where, so long as the contract of employment continues, there is an obligation to pay a set or ascertainable amount each week or month (the "will" construction).
175. In our opinion, the solution to this apparent dilemma is found in the remainder of Section III of Pothier, where the subsidiary debtor is summoned to make the declaration of that which he owes and, thereafter, to make the appropriate payment. This is consistent with Terrien and Routier. In other words, that which can be arrested must be something capable of identification and solemn declaration. It is also consistent with Section 4 of Pothier where he identifies that the arrestee who, contrary to the arrest, pays his creditor is liable to sentence to deliver to the arrestor . Without a declaration or affirmation there could be no precision as to that amount (whether ascertained or to be ascertained). And without knowledge of the transaction and the debt arising, there could be no declaration.
176. This approach would be consistent with the apparent and undisputed acceptance in this Island, of the ability to attach wages. It seems to us that the underlying requirement is that the debt in question can be deponed to, with precision, by the third party debtor. Were it otherwise as regards wages or rent it would, to our mind, be a pettifogging approach to procedure to require a new arrestment each week, month or quarter; not to mention an unnecessary drain on the resources of arrestor and debtor. We would observe that, when dealing with arrestment of movables what is certain is that present movables can be identified. As regards the debt arising out of a continuing contract, why is there not certainty, for arresting creditor, arrestee and the Court in being able to identify the obligations under the contract, just as one might the rent due under a lease? With wages and a rent it is surely a reasonable premise that the contract will continue until terminated according to its provisions or by some extraneous event. So long as it does, a sum - either specified or for the identification of which a mechanism is set - is payable as the counterpart for the service or occupation. The sum payable will, almost certainly, be payable by reason of the individual contractual relationship and not by reference to a wholly unconnected event or agreement. In our opinion the test of certainty is satisfied where there is a contract, the obligations under which are continuing and under which there is a stipulated mechanism for identifying the financial obligation.
177. It therefore follows, in our view, that future payments under the Slag Sales Agreement are not, when that agreement is properly characterized and construed, future payments so uncertain that they could not be the subject of a deposition. The contract covers the whole of the slag deposits at the Gecamines site. GTL will either purchase all deposits or have a right of pre-emption once a certain quantity has been reached. Whilst there are provisions allowing for termination on mutual agreement, it is provided that insolvency, receivership and winding up are not to terminate the purchaser's rights; but there are limited provisions for the purchaser to terminate and for review in the event of forms of economic hardship. Accordingly the contract puts GTL into the position, not of an entity which may or may not engage in transactions with Gecamines in the future, but rather into the position where, being under an obligation to take deliveries, and in the event of deliveries being made by Gecamines and accepted by GTL, to pay a quantifiable amount. As all these future debts can be traced to obligations under the present contract, we are of opinion that to seek to arrest 'payments which...should in the future become payable....in terms of the Slag Sales Agreement...' does not offend against what we discern as the principle of certainty which underlies the arret: a principle of importance for the arresting creditor, the arrestee and the Courts.
The proper test as to the place where the Debt is situated
178. As indicated by the court below, the focus of dispute under this head is whether the fact of GTL's having been incorporated in this jurisdiction and having its registered office here has the effect that the location of the debt can be said to be within the jurisdiction of the courts of this Island.
179. Advocate Robinson submitted that the court below fell into error in treating the decision of the Privy Council in Kwok Chi Leung Karl-v-Commissioner of Estate Duty [1988] 1 WLR 1035 as authority for a proposition that some minimal physical presence of a corporation, by reason of the country in question being the place of incorporation or location of registered office, could, without more, be a foundation for residence. The court below had misinterpreted that decision and had taken the test further than the rules laid down in New York Life Insurance Co-v-Public Trustee [1994] 2 Ch 101. In his submission, there was, ordinarily, a need to show a place of jurisdiction consistent with carrying on business in order to identify the location of the debt. He submitted that, if the task of locating a debt was to be a serious and well balanced process, the court had to strive to localise the debt insofar as possible, an example being the treatment of banks with branch offices abroad where the country of the account was found to be the location of the debt. He referred to Kuwait Oil Tanker Co SAK and Another-v-Quabazard [2004] 1 AC 300 at paragraph 13; R-v-Lovitt [1912] AC 212. He referred also to the insurance cases of F & K Jabbour-v-Custodian of Israeli Absentee Property [1954] 1 WLR 139 and Cambridge Credit Corporation-v-Lissenden (1987) NSWLR 411. GTL had far closer connection with the DRC than with Jersey.
180. For Hemisphere, Advocate Lawrence contended that nothing in the submissions on behalf of GTL undermined the soundness of the analysis set out by the Royal Court.
Discussion
181. The starting point is the decision of the Court of Appeal in New York Life Insurance Co-v-Public Trustee. In that case, the question was whether certain sums due and payable by the plaintiffs to various German nationals under policies of assurance, issued in the United Kingdom before the outbreak of war, were . The plaintiff company was incorporated in New York and had its central office and the bulk of its assets in New York. It had a branch in London and in most of the capitals of Europe, the branch in Paris being its head office for Europe. The policy monies were expressed to be payable in London, but all premiums were payable either at the central office in New York or at the office where the insurance was payable. An endorsement on the policies provided that they should be construed according to English law. The issue, therefore, was whether some form of carrying on of business in London meant that the plaintiff should be treated as resident or present in England and Wales and subject to the jurisdiction of those courts.
182. Among other matters, Pollock MR quoted the views of Lord Halsbury LC in Compagnie Générale Transatlantique-v-Thomas Law & Co [1899] AC 431, 433 where he said:-
The Master of the Rolls went on to identify that there was clear evidence that the plaintiffs were resident both in New York and in London, in both places they carried on a business and in both places they were subject to the jurisdiction of the courts. To resolve that issue his Lordship looked at the terms of the contract.
183. Warrington LJ, at 114 - 115, having indicated that there was no difficulty in applying the rule of residence in the case of a physical person because he could not be resident in more than once place at the same time, was of the view that there was serious difficulty arising in the case of a corporation which could have two residencies, each as much its residence as another for the purpose of legal jurisdiction at all events. Where there was an office in London, carrying on an English business the corporation was resident in London for the purposes of jurisdiction and could be sued
184. Atkin LJ, at 119 - 120 said:-
185. Whilst these opinions emphasise, for the purposes of that case, the importance to be attached to carrying on business in a jurisdiction, the opinions do not seem, to our minds, to indicate that carrying on business is a necessary criterion for jurisdiction. All that the court was identifying was that certain circumstances had come to pass which resulted in the courts of a particular country having jurisdiction over the corporation just as, with an individual, he might on one day be found within a particular country and could, therefore, be taken before the courts of that country.
186. In Kwok, the judgment of a very strongly constituted Privy Council was delivered by Lord Oliver of Aylmerton. The facts of the case were that, shortly before the death in Hong Kong of the testator, a Hong Kong resident, a company had been incorporated in Liberia, where a registered agent for service of process had been appointed. The only activity engaged in by the company was the acquisition of assets from the testator, and the day before his death the company entered into an agreement with him for the purchase from him of certain Hong Kong shares, as part of which agreement the company executed a promissory note payable on demand after sixty days in Monrovia. The issue was whether, at the date of death, the debt contained in the promissory note was property situated outside Hong Kong.
187. The views of the Privy Council could not be clearer. At page 1041, after quoting the passage from the judgment of Atkin LJ in New York Life Insurance Co, which we have quoted above, Lord Oliver continues:-
188. This view is clear and determinative for present purposes. The jurisdiction of the place of incorporation or of the place where the registered office is located constitutes residence for the purposes of service and, accordingly, identifies the location of the debt unless there is some competing place of residence. The Board of the Privy Council did not consider such a view to require explanation and it is only with the utmost diffidence that we proceed to do so. Under systems of corporate law such as exist in the United Kingdom and in Jersey a corporation, a non-natural person, must have a registered office, in other words, a place where it can be "found". Further, it is the law of the country of incorporation which settles how a company is to be operated, how its directors are to act and, ultimately, the bases upon which it might be wound up or otherwise taken into judicial control. The courts of that country can control it, just as they can control an individual within their territory.
189. There is a further reason for attaching this degree of importance to the country of incorporation and place of registered office: it is particularly apt in the present day and age. Little may readily be ascertainable as regards a company and its operations other than the formal details held on the register. A company may have no factories, no offices: merely employees who, with telephones or electronic means of communication provide services worldwide. Assume, for example, that a company purchases software, the company's registered office being given as the address for the invoice, but electronic delivery to be made to the electronic address of an employee. If required to sue on that contract, the supplier knows only one thing certain as to the location of the purchaser, namely, the registered office. Or take an individual to whom that company provides services and wishes to claim for defective performance. Must the claimant find the physical location of the employee who was carrying out the electronic services? Why should the company not be able to be sued for the debt in question at its formal location? It may be the case that the company in question has no assets physically located in that jurisdiction. But it will have control over those assets, wherever situated, and the courts of the place of incorporation can determine that the company should be wound up, or otherwise taken into judicial control, and the assets distributed.
190. For all these reasons we consider that the court below was correct to determine that the place of incorporation and registered office is sufficient to make a company resident irrespective of where its daily business activities are conducted or where its directors happen to live or where its bank accounts are located. We do not find any assistance in the cases dealing with banks and their branch offices or underwriting syndicates.
The Evidence as to a place of business in the DRC
191. Advocate Robinson submitted that, contrary to the Royal Court's findings at paragraphs 166 - 173, GTL did carry on business in the DRC and so was resident there for present purposes. The Royal Court was wrong to require evidence of a physical presence such as an office and wrong not to find the contractual arrangements and ownership of minerals to be sufficient.
Discussion
192. In the first place, we agree with the Royal Court that the proper test of residence for an incorporated entity is an identifiable place with a degree of permanence: see paragraph 171 of the judgment below. So much seems little more than commonsense in following views such as those of Lord Atkin set out at paragraph 184 above. The creditor must be able to bring suit against his debtor. He therefore has to find him to bring him before the court of competent jurisdiction. How is the ordinary creditor to know where the company has contracts or where it might own some asset or other? How is he to serve his summons for the courts of that jurisdiction?
193. As to the Royal Court's findings in respect of the activities of GTL, these were findings of fact with which an appellate court will be slow to interfere and, in our opinion, there is no basis for doing so here. As Atkin LJ said in New York Life Insurance Co, at page 120, the criterion of carrying on business which leads to deemed residence is constituted not just by holding assets and having contractual interests but . The evidence rehearsed by the Royal Court was manifestly of a nature and content which entitled the court below to reach the view that such a test was not met.
194. In any event, as the court below noted in paragraphs 161 and 165, and as was accepted by GTL in the proceedings before this court, there is no stipulated place of payment for the slag sales. It therefore follows that, even if there were some form of residence in the DRC, the jurisdiction of the courts in this Island would not be excluded. Advocate Robinson had attempted to draw from the decision in New York Life Insurance Co a proposition that the courts would strive to localise the debt in the event of competing jurisdictions. Not only is that contrary to the views expressed by Lord Atkin, set out at paragraph 184 above, it is clear that, on the facts of that case, it was of the utmost importance to identify a single location because of the question as to whether the policy moneys were subject to a charge by virtue of the 1919 Treaty of Peace Order.
195. In submissions which formed a significant part of his oral presentation, Advocate Robinson took issue with the views of the Royal Court as set out in paragraphs 189 to 192 of the judgment below. He put forward numerous lines of argument. In written submission he had contended that there was no authority as a matter of Jersey Law that non-compliance with an arrêt entre mains would render the arrestee potentially subject to an order to pay money to the arresting party. We disagree. The passages from Terrien, Routier and Pothier quoted above at paragraphs 144, 149 and 163 respectively are ample support for the proposition and show that the order is not merely conservatory. It therefore follows that Hemisphere, with such an order, would indeed be in a position to proceed to obtain judgment against GTL, and, in the event of non-compliance, proceed to seek GTL declared en desastre, with the effect that GTL's assets would be vested in the Viscount.
196. Further, the court should not make an order that could not be enforced and Advocate Robinson submitted that the court had no power make an order such as the order for payment in Jersey set out in paragraph 8(a) of the Act of 15 November 2010. Upon the assumption that GTL had no assets in Jersey, this was to order a resident to bring in assets from abroad; and the court had no power to do so. The importance of this line of argument may be elided by our response to the argument set out in the preceding paragraph. In any event, we do not agree with the submission. A court, in general, has power over those within its jurisdiction. Often that will be exercised to ordain an individual to carry out an act, where the act is, for example, a contractual stipulation. So, if a contract stipulated for delivery of movables to another, the court would in general, order delivery at such place, if any, as was specified. If none were specified we see no reason why the person making the claim should not ask the court to make the order for delivery at a place within its jurisdiction, even if the assets were currently situated outside the jurisdiction. Undoubtedly a court might not make such an order if, to do so, would place the defender in breach of the laws of a friendly state. There is no indication that GTL would be in breach of such laws in respect of the moneys currently trapped by the interim arrêt entre mains, wherever they happen to be situated; as to which, as the Royal Court recorded at paragraph 168 of its judgment, GTL was not prepared to inform anyone.
197. In our view, the Royal Court, having available to it the remedy of arrêt entre mains, was perfectly entitled to exercise its discretion to grant such an order to an appropriate Representor in appropriate circumstances, leaving it up to the Viscount (doubtless in association with the Representor) to attempt to obtain satisfaction of the order. It seems to us a moot point as to whether the order separately set out in paragraph 8(a) of the Act of 15 November was adding anything to the order arrêt entre mains set out in paragraph 7 of that Act. On one view of the older authorities an order arrêt entre mains would bring with it the obligation to pay. In any event, an order to pay being a potential part of an order arrêt entre mains we see no reason why it could not be made in this separate way. In addition, paragraph 8(a) gave further specification in indicating the time within which payment was to be made and the identity of the payee.
198. Advocate Robinson submitted that the Royal Court should not have exercised its discretion to grant the orders made below as (a) to do so was to exercise an exorbitant jurisdiction by interfering with foreign assets and regulating foreign conduct, (b) the orders were likely adversely to affect the rights of GTL, its shareholders and connected parties, (c) the orders were inequitable as Hemisphere was acting improperly in seeking enforcement of its awards against the assets of an insolvent country and (d) the orders were oppressive and unfair and an unwarranted interference in the business and affairs of GTL.
Discussion
199. It is well known that this Court will consider a review of the exercise of discretion by the Royal Court only in limited circumstances, namely:-
200. Despite copious written submissions, GTL's contentions do not meet any of these requirements. The suggestion that there is an exorbitant jurisdiction being exercised fails to appreciate that the orders being made are not being made over a foreigner or foreign entity: they are being made over a Jersey company: compare Mackinnon-v-Donaldson, Lufkin & Jenrette Securities Corporation [1986] Ch 482, 493 (Hoffmann J). Nor, for the reasons given above, is this an application in relation to a foreign debt.
201. Turning to adverse effects, GTL has submitted that the orders would place it in breach of contract. However, court orders do regularly innovate on parties' rights. Here, there was no evidence to support the assertion that there would be culpable breaches, GTL is not a foreigner as far as these courts are concerned and the other party to the Slag Sales Agreement is Gécamines, which is a party to these proceedings and is therefore aware that the orders are being made in accordance with the rule of law.
202. GTL also submitted that the joint venture could not operate were Gécamines not to be a shareholder in GTL and, further, that the shares were valueless because they could not be transferred without the consent of all of the members of GTL. These points were not raised below and, accordingly, cannot form the basis of an interference by this Court in the discretionary decision below.
203. Further submissions by Advocate Robinson under this head were to the effect that there was a substantial risk, for a variety of reasons, that GTL and other parties would, sooner or later be likely commercially to be adversely affected by the court's final order. Again, these points were not raised below and, in our view, this Court cannot proceed upon them.
204. Advocate Robinson made two final points under this head, namely that the court should not have assumed that GTL would in fact comply with a court order and, secondly, that there was no authority for the court's conclusion that as a matter of Jersey law non-compliance with the arrêt would render the arrestee liable to make payment to the arresting party.
205. As regards the first point, Advocate Lawrence pointed out that, in his opening statement at the June 2010 hearing, GTL's counsel had made it clear that GTL, by its conduct to date, had showed that it had been entirely compliant with orders made by the Royal Court so far. As regards the second, the proposition is adequately vouched by Routier and Pothier, as cited above.
206. As for the line of argument based on impropriety of Hemisphere's actions, again it was not an argument raised below and cannot form the basis of an interference by this Court in the discretionary decision below.
207. The final argument under this head was that the orders were in principle oppressive and unfair, in particular preclusion of the right to move the registered office. Again, there is no basis upon which it can be said that the decision below falls into the criteria set out in UCC-v-Bender. The issue of disclosure was addressed in submissions by all parties at a hearing on 30 September, 2010. GTL made particular contentions in relation to individual orders, making no objection to what became (a) (e) or (f). It appears that where it expressed concerns, those concerns were reflected in the terms of the final order.
208. As regards alteration of the location of the registered office, the reason for making such an order is, in the whole circumstances manifest. GTL does not suggest that, at present it wishes to change its registered office. Were those circumstances to change, GTL could make an application to the Royal Court for variation and the Royal Court could then, after full consideration of matters, decide how best to proceed and what protective mechanisms to attempt to adopt.
209. In the whole circumstances, therefore, this ground of appeal, in our opinion, is not made out.
Leave to Adduce Fresh Evidence
210. GTL had sought leave to adduce fresh evidence pursuant to Rule 12(1) of the Court of Appeal (Civil) Rules 1964. These were third and fourth affidavits of Mr. Kallioinen, Group Controller of OM Group, Inc, and one of OMG's representatives on GTL's board.
211. The proposed evidence related, in essence, to two matters. The first was the collateral damage which might be caused to OMG because of dependence on GTL's supplies and the prospect that Gécamines might cease supplying cobalt. The second issue was the problem which could be caused to the joint venture if the shares in GTL were transferred to a third party. All of this information could have been presented at the hearing below and, accordingly, it is not open to this court to accede to the request.
212. The application to be allowed to adduce fresh evidence should therefore, in our opinion, be refused.
Conclusion in respect of the GTL Appeal
213. In our opinion the appeal should be refused.
pleming ja:
Introduction
214. In this judgment I will refer to the Representor/Respondent to the appeal as "Hemisphere", the First Respondent as "the DRC", the Appellant as "Gécamines", and the Party Cited as "GTL".
215. I have had the opportunity of reading in draft the judgment of McNeill and Bennett JJA, and I am in complete agreement with their analysis and rejection of the appeal by GTL. I have nothing to add on that appeal, and agree that it should be dismissed for the reasons they give. However, save for the agreed disposal of Ground 6 (see paragraph 213 above), I am unable to agree with the analysis and dismissal of the appeal by Gécamines. I would allow that appeal on Grounds 1-4 taken compendiously (but not on Ground 5) for the reasons developed in this judgment, which would also mean that the claim against GTL falls away. In my view, the appeal should be allowed without any need to refer to new evidence, and I would also dismiss the application by Gécamines to rely on the three additional affidavits identified in the judgment of McNeill and Bennett JJA at paragraph 126 (and the application by GLT to rely on the two additional affidavits referred to at paragraph 210).
216. I am grateful to McNeill and Bennett JJA for setting out of the background in paragraphs 1 -33 of their judgment, which I gratefully adopt.
217. The principal issue on the Gécamines appeal is whether or not the Royal Court erred in concluding that the relationship between Gécamines and the DRC was such that Gécamines was and remains an organ of state. The essence of the appeal on this topic, as set out in Gécamines' Notice of Appeal is that the Royal Court failed to apply, or make findings on, the "governmental functions" requirement of the appropriate test (Grounds 1-4), and in relation to the "control" requirement of the test, reached a determination that was wrong (Ground 5).
218. In order to reach a conclusion on these Grounds (particularly Grounds 1-4) it is necessary to consider the test to be applied; and the Royal Court's decision in light of the evidence in relation to the constitution of Gécamines, its powers, duties and activities. That will involve further consideration of the degree of control by the DRC and whether or not, on the facts presented to the Royal Court, there was sufficient evidence to support a conclusion that Gécamines discharged governmental functions such that it can be categorised as an organ or alter ego of the State.
The appropriate test
219. As noted by the Royal Court, there was substantial agreement between the advocates for Hemisphere and Gécamines as to the test to be applied in determining whether or not Gécamines was under the control of the DRC and exercised governmental functions - see paragraph 12 of the judgment. But notwithstanding that degree of agreement, in light of the submissions made to this court, it is necessary to consider the case-law with some care, prefaced with the following, which seems to me to apply equally to lawyers over the last 50 years or so:-
220. It was and is common ground that in the absence of Jersey case-law directly on point, it is appropriate to turn to decisions of the Courts of England and Wales for assistance. The focus before the Royal Court, and before us, was on three English authorities - the Court of Appeal's decision in Trendtex Trading Corp v Central Bank of Nigeria [1977] 1 QB 529 ("Trendtex"); Kensington International Limited v Republic of Congo [2005] EWHC 2684 (Comm) ("Kensington"); and Walker International Holdings v Republic of Congo [2005] EWHC 2813 (Comm) ("Walker").
Trendtex
221. In Trendtex, the Court of Appeal considered a claim to immunity from suit by the Central Bank of Nigeria, an entity incorporated by statute as a central bank modelled on the Bank of England. It issued legal tender and acted as banker and financial adviser to the Government of Nigeria. It also acted as banker for other banks and its affairs were under considerable governmental control. The Central Bank issued an irrevocable letter of credit in favour of the plaintiff company, but failed to make payments claimed to be due for the price of a shipment of cement and for demurrage. (This brief summary is taken from the headnote). The Court of Appeal concluded that the Central Bank was not an emanation, arm, alter ego, or department of the State of Nigeria, and, therefore, was not entitled to immunity from suit. Lord Denning M.R. at page 558D-F concluded that the transaction - the letter of credit - was and At page 559, he then turned to the question His first response was to explain that there were difficulties:-
222. Lord Denning's reasoning on absolute immunity is set out at page 560A-G (with emphasis added):-
With these considerations in mind, I turn to our problem.
Central Bank of Nigeria
At the hearing we were taken through the Act of 1958 under which the Central Bank of Nigeria was established, and of the amendments to it by later decrees. All the relevant provisions were closely examined: and we had the benefit of expert evidence on affidavit which was most helpful. The upshot of it all may be summarised as follows. (i) The Central Bank of Nigeria is a central bank modelled on the Bank of England. (ii) It has governmental functions in that it issues legal tender; it safeguards the international value of the currency; and it acts as banker and financial adviser to the government. (iii) Its affairs are under a great deal of government control in that the Federal Executive Council may overrule the board on monetary and banking policy and on internal administrative policy. (iv) It acts as banker for other banks in Nigeria and abroad, and maintains accounts with other banks. It acts as banker for the states within the federation: but has few, if any, private customers.
In these circumstances I have found it difficult to decide whether or no the Central Bank of Nigeria should be considered in international law a department of the Federation of Nigeria, even though it is a separate legal entity. But, on the whole, I do not think it should be."
223. The key sentence, underlined in the extract from the judgment, is: . These are plainly intended to be cumulative requirements: both are necessary and neither is sufficient by itself. This is clear from the analysis of the position of the Central Bank of Nigeria where there is reference to control and specific government functions such as the issuing of legal tender. Although Lord Denning emphasised that the answer to the question depended on the evidence, he appears to have reached his conclusion on the basis that the existence of some governmental functions was not determinative of the question The approach appears to have involved looking at the preponderant functions of the Central Bank, perhaps reflecting submissions made to the Court by counsel appearing for the Bank (see page 540C and 540G-H).
224. Lord Denning expressed some doubt about his conclusion, ending this part of the judgment as follows:-
225. Lord Justice Stephenson also found this a difficult question (at page 564G-H), but allowed the appeal on the following basis:-
226. Lord Justice Shaw's conclusions on the are of equal importance, and they may serve to cast some further light on the correct approach for the fact-finding court when considering control by government but also discharge of governmental functions. I draw attention, in particular, to the following extracts:-
227. The two sentences I have emphasised in the first extract above are important, and in my respectful view correct. Applying this approach to Gécamines: "There can be no intermediate hybrid status occupied by Gécamines wherein it is to be regarded as a government department for certain purposes and as an ordinary commercial or financial institution for different purposes. It must be one or the other...". Although, for whatever reason, Gécamines did not persist in its application for sovereign immunity in these proceedings (and the DRC took no part) the correct question remains - is this company "a government department for all purposes"?
228. This narrow test for sovereign immunity (control and functions) is not to be confused with the far broader test to identify a public body for the purposes of public law, or to identify for the purposes of European law, where again a broad view has been adopted: (Foster v British Gas [1991] ICR 84, ECJ at paragraph 18, and [1991] 2 AC 306, House of Lords at page 312, and see also R v British Coal Corporation, ex parte Vardy [993] IRLR 104, and Griffin v South West Water Services Limited (1995) IRLR 5). In my view the Trendtex test was intended to be, and should be treated as, tightly drawn and therefore not readily satisfied. This appears to have been accepted in Walker, at paragraphs 91 to 94 (see below), but noting there the limiting words . The need for control and discharge of governmental or sovereign functions also appears to be a stricter requirement than in some other countries, as summarised in Brownlie Principles of Public International Law (7th ed) at p.341:-
229. The Trendtex formulation as to what is and what is not an organ of the state (based on the theory of absolute immunity) has not been widely applied in subsequent cases, no doubt because of the subsequent enactment of the 1978 Act. The importance of the distinction between state-controlled enterprises (with legal personality) and their governing state was, however, emphasised by Lord Wilberforce in Playa Larga (Owners of Cargo Lately Laden on Board) v I Congreso del Partido (Owners) [1983] 1 AC 244 at page 258E-G (emphasis added):-
230. It is the second, alternative, basis for the decision in Trendtex - the recognition of the theory of restrictive immunity - that has attracted more discussion and debate. For a recent summary of the history of the shift from absolute to restrictive immunity, see NML Capital Ltd v Republic of Argentina [2011] UKSC 31, Lord Phillips at [8] to [12].
231. Gécamines did not raise before the Royal Court the difficult question of the difference referred to and discussed in Trendtex between types or classes of State actions or activity - between acta iure imperii (sovereign or public acts), and acta jure gestionis (private or commercial acts) - and the distinction between the absolute and restrictive theories of sovereign immunity. It is now raised as a new argument, but as it is an argument of law, and there was no sustained objection by Hemisphere - see paragraphs 3.15 - 3.17 of Advocate Lawrence's contentions, and the reference there to Pittalis and another v Grant and another [1989] 3 WLR 139, and Yates v. Reg's Skips Limited [2008] JCA077B. In exercise of the Court's discretion I would allow the argument to be presented.
232. The distinction is summarised in I Congreso del Partido at page 267B-C (Lord Wilberforce):-
And by Lord Bridge at page 278D-E, and 278F-279B:-
See also Kuwait Airways Corporation v Iraq Airways Co [1995] 1 WLR 1147, at 1156E-1160F, particularly at 1160A-F (Lord Goff):-
233. The distinction between acts iure imperii and acts iure gestionis only arises where it is either accepted that the actor is a State, or it has been agreed or determined that the identified entity is an organ of (and therefore part and parcel of) the State. The distinction therefore may not need to be considered in this case, as there is no specific act of either the DFC or of Gécamines that requires identification and categorisation. The entire focus here is on whether Gécamines, as an entity, is or is not an organ of government. In deciding that question it is necessary to look at what it does, and at least some of its acts/actions, but perhaps it is a circular exercise to categorise those acts/actions as sovereign or private (or commercial), when determining whether Gécamines is a part of the State.
234. I say "perhaps" in the previous paragraph because the distinction could be relevant had it been necessary here to consider the distinction between "sovereign" and "separate entity" in section 14 of the State Immunity Act 1978, and whether or not immunity can successfully be claimed - see Lord Justice Leggatt in Propend Finance Property Limited v Sing and another (1997) 111 ILR 611, at 669 (1997) The Times 2nd May:-
235. But this is not a case to be determined under the SIA 1978 (as extended to Jersey under the Schedule to the State Immunity Order 1985). It is also to be borne in mind when looking at Kuwait Airways not only that it was accepted that Iraqi Airways was part of the State of Iraq, but that the definition in section 14(2) is not the same as the test for in Trendtex.
236. It is more relevant to the determination of the central question in this appeal, to understand the reasoning and the decision in Trendtex. The references to (Lord Denning) or (Shaw LJ), were likely to be references to functions or activities properly described as iure imperii and not iure gestionis. In other words, even though governments could carry out commercial activities (as could private citizens), the activities were only to be categorised as "governmental" if they fell within the term iure imperii. Lord Wilberforce, in I Congreso del Partido, when discussing the distinction between an act iure imperii and an act iure gestionis stressed that the ultimate test, as set out by Robert Goff J at first instance:-
237. See also Svenska Petroleum Exploration AB v. Government of the Republic of Lithuania [2007] QB 886, at 929E-F. This is not to conclude that acta iure imperii is a particularly narrow category - see the extracts, above, from Kuwait Airways and Propend Finance Property - but it remains , and is to be distinguished from private activities.
238. Hemisphere argued "Clearly both the traditional jure imperii, such as defence of the realm and the maintenance of law and order and the commercial activities in which modern States engage, the jure gestionis, are in day to day reality, functions of a government" - see Advocate Lawrence's contentions at paragraph 3.20, relying on the following passage from the judgment of Lord Denning in Trendtex at page 119A-119E:-
239. Although Lord Denning here refers to and , he then refers to and . It appears to me that he was there intending to confine immunity to entities that were controlled by the State and discharging (or ), and not merely engaged in , even if on behalf of, or for the benefit of, the State. (This is also consistent with Lord Wilberforce's description of in I Congreso del Partido, at pages 262 to 267.) A degree of confusion in relation to the importance of the component of the test may therefore arise from the fact (heavily relied on by Hemisphere as mentioned above) that a State can be involved in activities which fall within iure imperii and iure gestionis - an important distinction when considering the restrictive theory of sovereign immunity. However, to say that a State can be involved in both (or either) activity is of no assistance when answering the prior question in this case - whether or not the entity under consideration is itself to be categorised as the State, or an alter ego or department of the State. A high level of State control together with activities which fall within iure gestionis is not enough. The alter ego test is a means of determining whether or not an entity is to be treated as if it is the State. Or, in this case, and to adopt and adapt the words of Shaw LJ in Trendtex at 572H: There is some force therefore, in the submission made by Advocate Harvey Hills that the functions, or activities, of the entity must at least include acts which would fall within the category of iure imperii.
240. Bearing in mind Lord Justice Shaw's reference to equality of treatment, the iure imperii/iure gestionis distinction would tend to support the conclusion that Gécamines is not entitled to sovereign immunity, and is not therefore an organ of the State - it is a separate entity, essentially engaging in commercial activities (iure gestionis rather than iure imperii), even if for the benefit of, and heavily controlled and influenced by, the DRC, and at least occasionally as agent of the DRC.
241. We were referred to the facts and decision in C. Czarnikow Ltd v. Central Handlu Zagranicznego Rolimpex [1979] A.C. 351. In that case, Rolimpex was a state trading organisation of the Polish state, but the finding by the Court of Appeal (in turn based on findings by the arbitrators) was that it was not an organ of the state even although subject to the directions of the appropriate minister who could tell it - see Lord Wilberforce at 364D-F, Viscount Dilhorne at 367C-F, and Lord Salmon at 369G-H. The findings reflect the facts in that case, and to that extent are of limited assistance, but the reference by Viscount Dilhorne at page 367 may be a useful pointer when looking at the facts (and the correct approach) in this case.
Recent case law
242. I turn now to the more recent case-law. The decisions where the Trendtex formulation of the organ of state test has been accepted appear to be cases not dissimilar to the instant case - where a person (here Hemisphere) seeks to enforce an award or judgment against a State by identifying the assets of an entity outside the State. As noted above, we were taken to two such cases decided in 2005.
243. First, Kensington International Limited v. Republic of the Congo [2005] EWHC 2684 (Comm), [2006] 2 BCLC 296, Cooke J. The background to this case is that, between 20th December 2002 and 23rd January 2003, Kensington obtained four judgments in the Commercial Court for over US$110m which the Congo had ignored and which Kensington then attempted to enforce. In various proceedings, judges of the Commercial Court found that the Congo had been taking elaborate steps to conceal its oil trading activities in order to prevent Kensington from identifying any resulting assets that might be seized in execution. The key paragraphs addressing the test to be applied are 52 to 54:-
There had been prior decisions, in London and in Paris, equating SNPC with Congo. Cooke J agreed with those decisions, and at paragraph 55, held:
(The judge reached a similar conclusion in relation to SNPC's subsidiary La Congolaise de Trading [Cotrade] - see paragraph 63.)
244. In reaching his conclusion, Cooke J was clearly heavily influenced by SNPC's expressed purposes - these are referred to in paragraph 45 of the judgment, with emphasis added:-
245. This appears to be the main basis for the conclusion, together with the analysis in paragraph 53 of the judgment (set out above, but here repeated):-
If Cooke J is here saying that any commercial body, with separate corporate identity, assumes the position of an organ of government, I respectfully disagree. This is not what is said at page 609 of Mellenger, and is inconsistent with the decision in Trendtex. It would also mean that countries in which there is strong State control of the economy, whether or not operating communist systems of government, would find it difficult if not impossible to create independent commercial companies. There would be other problems, for example in relation to nationalised industries in democratic countries where the very reason for that nationalisation may well be to promote and advance the industrial or commercial development, prosperity and economic welfare of the country (or an area of it). Therefore, Cooke J must have been intending to refer to or some other more certain indicator, to establish that the entity being considered - at least standing in the shoes of a body such as the Board of Trade referred to in Mellenger.
246. Second, Walker International Holdings Limited v Republique Populaire du Congo, and others [2005] EWHC 2813 (Comm), Morison J. The judge sets out the test he proposed to apply to SNPC at paragraph 94:-
247. The judgment is of interest because it also sets out the decisions of the Paris Court of Appeal, at paragraph 10, ending:-
And, at paragraph 15, the judgment of Tomlinson J referred to earlier, which includes the following:-
248. Morison J's conclusions on this issue are at paragraphs 97 to 100:-
249. The analysis in Kensington and Walker has not been free from criticism - see Continental Transfert Technique Ltd v Federal Government of Nigeria and others [2009] EWHC 2898 (Comm), Jonathan Hirst QC (sitting as a deputy judge of the High Court) at paragraphs 36 to 43, particularly at paragraph 42 where he treated counsel's reliance on these two decisions (and decisions in the Paris Court of Appeal) with some scepticism:-
250. We were also referred to Wilhelm Finance v. Ente Administrador Del Astillero Rio Santiago [2009] EWHC 1074 (Comm), Teare J. The decision concerned a state operation (the Defendant) formed in 1993 to manage and administer a shipyard until it was privatised. The judge held (at paragraph 20) that whilst the Defendant was owned and to a significant extent controlled and financed by the state, This focus on function was by reference to the case-law which has considered the meaning of and in section 14 of the 1978 Act - Kuwait Airways Corporation, and other cases, referred to below. At paragraph 9 there is a reference to Trendtex, and at paragraph 10 the following reference to and extract from the decision of Gross J in Tsavliris Salvage (International) Limited v. The Grain Board of Iraq (The Altair) [2008] 2 Lloyd's Rep 90:-
[11] Gross J added:
251. Teare J's conclusions in Wilhelm Finance are brought together in paragraphs 49 to 51:-
252. I have also considered the recent decisions of the Court of Appeal and the Court of Final Appeal in Hong Kong in Democratic Republic of Congo, and others v FG Hemisphere Associates LLC [2010] 2HKLRD 66, and (FACV No 5/ 2010), but have concluded that they do not assist in determining the issues that arise in this appeal.
253. If the test to be applied is based on Trendtex, it is important to keep in mind (as noted earlier) that that decision pre-dated (and, at least in part, contributed to) the enactment of the Sovereign Immunity Act 1978. Care must therefore be taken when looking at subsequent cases which are likely to focus on the domestic statutory meaning of and in section 14 of that Act: .
254. The Trendtex test also pre-dates the UN Convention on Jurisdictional Immunities of States and Their Property (2004), and the definitions of there set out - in Article 2.1(b) - dealing with By this time, the adoption of the restrictive doctrine of State immunity based more on the nature of the activity complained of (immunity ratione materiae) rather than based on status (immunity ratione personae), made it less important, at least in international law, to determine whether or not the entity under consideration was an organ of the State - see Part III, particularly Article 10.
Discussion
255. In summary, therefore, although each case will depend on its own facts (but taking care to apply the Trendtex test), an entity will only be held by the courts in Jersey to be an organ, or alter ego, of the State if it is under government control and it discharges governmental functions. The test, and the answer to the question, should not change depending on whether the entity is claiming State immunity or whether (as here) it is being held responsible for the debts of the State. On this final point the Royal Court said as follows (paragraph 16):-
256. Notwithstanding the reference by the Royal Court to (control and governmental functions) in the last sentence of this paragraph, the earlier obiter remarks downplaying the need for may have lead the Court to concentrate too heavily on control by the DRC.
257. Drawing the case-law together - and proceeding on the basis that the Court of Appeal in Jersey should follow the reasoning of all the members of the Court of Appeal in Trendtex - I conclude that it was necessary for Hemisphere to have established the following on the evidence, before the Royal Court could have held that Gécamines was an organ, alter ego, emanation or arm, of the DRC: (1) That it was under the control of the DRC; and (2) That it exercised governmental functions.
258. In relation to the first of these criteria, control must mean more than a mere majority, or even 100%, share-holding in the entity (if, as here, it is a company). It is, in my view, necessary to show more (perhaps far more) than the level of control required to identify within cases such as Foster v British Gas (see above). But it is not possible to be more precise, and what is the necessary level of control will be a matter of fact and degree.
259. In relation to the second criterion, it is not sufficient to show that there is some discharge of governmental functions - if that were the test, the Central Bank of Nigeria was bound to satisfy the requirement (but did not) as not only was it under but it also discharged (on a permanent basis), at least according to Lord Denning, the important governmental functions of issuing legal tender, safeguarding the international value of the currency, and acting as banker and adviser to the government. The discharge of must be predominant, or (perhaps) the essence of what the entity does so that it has no other existence. Nor can it be sufficient, as suggested by Cooke J in Kensington and Morison J in Walker (and as noted by the Royal Court at paragraph 16), for the entity to be involved in and therefore discharging a governmental function - if that were the correct analysis, it is difficult to see how a State owned oil or mining company could fail to be held to be discharging a government function and (thereby) entitled at common law to sovereign immunity. It was common ground in this appeal that because an industry (or sector) has been nationalised this did not mean that the wholly owned entities became organs of the State - this is consistent with case-law pre-dating Trendtex, such as Tamlin v Hannaford [1950] 1 KB 18, Denning LJ at page 24 (and referred to in Trendtex at page 559G). A modern democratic State may choose (and is likely only to choose) for nationalisation areas of activity which are important, probably vital, to the economic and social well-being of the nation - energy, food production or transport for goods and people (or any other similar area). But, in my view, allowing a State owned company (or companies) to exploit reserves of coal, oil or minerals, does not convert that company into an organ of the State. In contrast, assigning the ownership of all State owned oil (or similar) reserves to a company so that the company acts on behalf of the State in, for example, granting licences to exploit, may be and probably is different.
260. Although there may be some overlap between control by government and exercise of a governmental function, as already noted they are different and cumulative requirements. It follows that what was described in submissions as a finding by the Royal Court of control of Gécamines by the DRC is not probative of . There may be very good reasons why a State would want to exercise a very considerable degree of control over, for example, a nationalised industry, without the entity becoming an organ of the State, or (Stephenson LJ in Trendtex) or a , or (Shaw LJ).
261. Finally, on both the control and functions tests, it is dangerous to take too holistic a view so that the Court looks merely at without clearly identifying not only the elements of control relied on, but also what it is about or the that entitles it to be treated as an organ of the State (carrying both benefits and detriments).
262. Hemisphere invited the Court to approach the test to be applied as follows, taken from Advocate Lawrence's contentions at paragraphs 2.4 - 2.6, and 2.10:-
263. As noted above, I accept that there may be some degree of overlap between the and requirements, but there is a danger in the last sentence in paragraph 2.6: The contrast between and can be misleading in that an entity which is controlled, wholly controlled, by the State may well be required to perform its commercial/industrial functions without independence, certainly without "true" independence. But, it does not follow, in my view, that a high degree of control such that leads to the conclusion that it is performing as that term was being used in Trendtex. A body, even if a separate legal entity, which is heavily controlled by the State may not be viewed, objectively, as (from paragraph 2.10 of Hemisphere's contentions set out above).
264. There can be no doubt on the evidence that Gécamines is a substantial mining company, and (judgment of the Royal Court - see paragraphs 3 and 44), and that it engages in commercial operations. Although some doubt was cast on the affidavit evidence of Mr Calixte Mukasa Kalembwe ("Mr Mukasa"), Interim General Manager for Gécamines in relation to recent events and reforms, his account of the history of the Belgian Congo, the DRC, and the company does not appear to be open to serious question. In paragraphs 14 to 46 of his first Affidavit Mr Mukasa sets out the "factual history". These paragraphs attract little of the criticism reserved for more recent events by Mr Grossman (for Hemisphere) in his evidence in rebuttal. It is clear from Mr Mukasa's evidence, and accepted by Hemisphere (see, for example, Mr Grossman's first affidavit at paragraph 41), that Gécamines has a separate legal personality and that, according to its Articles of Association, it has been constituted to carry out industrial and commercial purposes.
265. There can be no doubt, therefore, that on its own until the early 1990s, and thereafter through joint ventures, Gécamines indeed carried out industrial/mining and commercial operations - see, for example, the Profit and Loss Accounts for the years 2007 and 2008, and the independent auditors' report by PricewaterhouseCoopers, produced to the Royal Court. This immediately marks it out as fundamentally different from the non-trading companies being considered at or about the time of the Trendtex decision. It will be recalled that Lord Denning referred to his judgment in Mellenger v New Brunswick Development Corporation [1971] 1 WLR 604, at 609D: "The corporation ... has never pursued any ordinary trade or commerce. All that it has done is to promote the industrial development of the province in a way that a government department does." This distinction is also emphasised by Lord Denning in Mellenger itself at page 610B:-
Gécamines is a very different animal - it did and does carry on commercial transactions. It is a separate legal person. It makes contracts with others. I accept that the fact that Gécamines trades cannot be determinative in its favour - after all, SNPC (referred to in Kensington) was described as "an industrial and commercial public cooperation". But it is to be recalled that Cooke J (and Tomlinson J before him) held that (emphasis added). This seems to me to be a strong conclusion - not a matter of control by the State, or the absence of genuine independence from the State, but . This conclusion effectively enables the Court to "pierce the corporate veil" so as to allow the liability of the State (under its own contractual, arbitral, liabilities) to be attributed to SNPC (although a separate legal entity).
266. I do not consider that there is a need for some bright line between the "control" and "function" parts of the Trendtex test. But, in my view, there is a need for some greater degree of certainty, some greater degree of clarity when identifying what responsibilities, what powers or duties, are or are not to fall within . Without that certainty and clarity, there is a danger that the requirement will extend to include all activities of the State, or all important or significant activities, even if essentially commercial, and the requirement will become meaningless. In this case, the activity is mining for a mineral centrally important to the economy of the DRC: in Kensington and Walker, oil. But it could be any economic activity where a State may want to become involved commercially, even dominant in that particular area. It does not seem to me that the subject matter of the activity (if it is exploitation and marketing of a national asset) can be determinative. If the Trendtex test is to continue to be applied, the differentiation must be between activities in such areas that are broadly regulatory (public acts) rather than broadly commercial (essentially private acts) - perhaps reflecting the subsequent reference to in section 14(1) of the SIA 1978. It may be that this leads back to acta iure imperii and acta iure gestionis, or that a new common law (international law) test needs to be devised, more suitable to the modern world - or at least more suitable to the international debt-chasing we are here considering, where there is no claim at all for sovereign immunity.
267. In their judgment, McNeill and Bennett JJA propose that the Trendtex requirement as to functions - see paragraph 71 [check] of their judgment. I can see some attraction in that approach, although it does not chime precisely with what I see as the Trendtex requirement, but it does serve to expose the difficulties in this case when an entity (here Gécamines) has a real commercial existence, trading and making contracts in his own name, sued and being sued. Even if it could be said to be performing some governmental functions (for which see below) its non-governmental activities are far more that merely "ancillary" - and there is no submission here (unlike in Kensington and Walker), that it is in any way a sham operation, or a mere facade for the DRC.
The Royal Court's decision
268. An appellate court should be extremely reluctant to reverse the lower court's evaluation of the facts, or to interfere in matters involving the exercise of a discretion (see Abdel Rahman v Chase Bank (C.I.) Trust Co Ltd [1984] JJ 127, at page 134 and United Capital Corporation Limited v. Bender and others [2006] JLR 269, Beloff JA at [23] to [27]). But, we have been provided with all the documentation (and submissions) relied on below, and there was no oral evidence. In those circumstances, notwithstanding the reluctance referred to above, it will be appropriate to reach a different conclusion if (1) the wrong test has been applied, or (2) the inference drawn from the factual material is not sustainable.
269. Hemisphere's arguments as to why Gécamines was an organ of the state were broken down by the Royal Court, correctly in my view, into two main submissions (see paragraphs 60 to 89, and 90 to 137):-
270. The Royal Court's overall conclusions are set out in paragraphs 138 to 142.
Gécamines' Constitution
271. I will not here attempt to reproduce the careful summary of the evidence by Commissioner Page in this section of the judgment of the Royal Court. I have read the affidavit evidence and relevant exhibits supporting the analysis. The key paragraphs are 63 and 66, here reproduced in full:-
272. What the supervisory regime and the 1995 Articles clearly show is that there was a great deal of control by the DRC, indeed a (paragraph 67 of the judgment). But, it does not seem to me that because of the degree of control, and because Gécamines operated in an important economic area in the DRC (mining), that discharge of governmental function was also established, but this appears to be the conclusion of the Royal Court in paragraph 69:-
273. At this point the case is essentially decided against Gécamines without any specific reference to governmental functions. Its nature or status (its personality) had been determined as , and this may explain why the intended discussed in paragraphs 71 to 84 of the judgment were dismissed as not creating a .
274. is discussed in paragraphs 85 to 89 of the judgment, but discounted entirely (see paragraph 89), and I do not address this topic further.
Relations between Gécamines and the State
275. This section of the judgment is perhaps at the heart of the reasoning, and again, I will not here attempt to reproduce the extremely careful and detailed exposition of the facts and analysis provided by Commissioner Page. Hemisphere's case is summarised in paragraph 90, and four particular areas are identified to illustrate the contention that "
276. Some of the points here made by Hemisphere to the Royal Court (and repeated in submissions to this Court) go further to demonstrate control of Gécamines by the DRC, but again it is necessary to seek out and identify where the analysis takes the reader when attempting to identify the discharge of governmental functions. I will take the points referred to in the second summarised submission set out in paragraph 269 above in order: -
277. (A) In time of war - it appears to be common ground that the State did take at least a third of the profits of Gécamines to finance the war effort, and otherwise made use of Gécamines' assets to fund military operations, without compensation. The Royal Court concluded I am reluctant to disagree with the Royal Court on its assessment of the evidence, but this is a finding or conclusion I find very difficult to accept. Seizure of profits and assets, with or without compensation, during a time of war seems to me to be a poor indicator of discharge of governmental functions (however identified), or perhaps even of governmental control.
278. As submitted by Advocate Harvey-Hills for Gécamines, the war here being referred to was a particularly terrible and long-running conflict. He refers to World Bank reports put before the Royal Court which record that "3.3 million (out of a total population of 58 million) died during the last round of the war"; and from the same report "On the social side, the crisis remains acute, with widespread hunger throughout the country, a collapse of social service delivery, an erosion of social capital, and the accelerating spread of the HIV/AIDS epidemic. The chances for the DRC to achieve the Millennium Development Goals (MDG5) by 2015 are seriously compromised".
279. In my view, Advocate Harvey-Hills' submission that what happened during the war "cannot properly be regarded as illuminating the wholly different peace time issues now before the courts of Jersey" is well made. The Royal Court, in my view, should have disregarded Hemisphere's contention to the contrary.
280. Hemisphere strongly relied on the use of Gécamines' assets by the DRC - in times of war, and to support social projects (see (C) below) - to demonstrate that not only did the DRC control Gécamines, but also Gécamines itself performed or discharged governmental functions. In her June 2010 Contentions (at paragraph 2.24), Advocate Lawrence introduced the argument as follows:-
"Historically, some of Gecamines' assets have been used by the DRC for governmental functions which do not form part of Gecamines' objects, such as the provision of public services and to fund the military operations of the DRC and its allies. This evidence goes to the 'governmental function' aspect of the test to determine whether an entity is an organ of the state."
I find it difficult to see the basis upon which the use of Gécamines' assets by the DRC leads logically to the conclusion that Gécamines itself was engaged in performing governmental functions, and was to be categorised as an organ of the State.
281. (B) The 2007 Mining Commission - The Commission was appointed in 2007 followed earlier attempts to revisit and review mining contracts, particularly those made during the war years. The members of the Commission were all Government officials, and the process of re-visitation of Gécamines' contracts was held by the Royal Court to be Although all the paragraphs (93 to 108) are relevant, paragraphs 101 to 103 appear to be at the heart of the analysis:-
282. The Royal Court also relied, at paragraph 105, on a "somewhat telling passage" from a letter written by the then managing director of Gécamines to the Minister of Mines:-
"In the circumstances, it would appear that the payment of Gécamines key money and key money supplements into DGRAD [Treasury] accounts arises from a government measure which is no doubt motivated by the superior interests of the State, and Gécamines has no option but to be happy to contribute, once again, to the solution of national problems. Nevertheless, in proper consideration of the logistics of managing a commercial company, and in our capacity as agents of the state in relation to a public enterprise which is prey to difficulties which threaten its survival, we should on the one hand, ensure that the most pressing operational needs of Gécamines are met and, on the other hand guarantee that the transfer of its key monies, which constitute part of its assets, to the State are balanced, "compensated", if not by means of an income, then at the very least by the extinguishment of our company's debts to the transferor." (Emphasis added.)
There is likely to be an element of sycophancy in such a letter to the Minister, but even if it is to be read without such a filter, it seems to me that it reveals a degree of independence, not to the contrary - there is reference to the difficulties of managing a commercial company, to "agents of the state", the "most pressing operational needs of Gécamines", the requirement for the transfer of its assets to be compensated. But, if and in so far as it adds further evidence of control by the DRC, in my view it says nothing in support of the submission that Gécamines is (or was then) discharging governmental functions.
283. Hemisphere contends that it does reveal the discharge by Gécamines of governmental functions (see paragraph 4.7 of Advocate Lawrence's contentions), largely on the basis (paragraph 4.7(e)) that in relation to the entry fees:-
"This is therefore another straightforward example of an entity/its property in practice being made the instrument of the State, for State purposes. There is no practical difference between the State using the entity itself to fund State activities, or perform or fulfil governmental functions, or first commandeering the funds to the public treasury and then using them in the same manner. In that regard it is to be noted that it was not dividends or profits of Gecamines that were taken, but rather assets and revenues to which others besides the shareholder (eg. Gecamines' creditors) would, in any ordinary context, have some rights and entitlements."
284. Clearly, if what was being referred to was "dividends or profits" the point would be a bad one - it is very likely that the profits of an entity wholly owned by the government would be used for the Government's purposes. One can ask, rhetorically, if they are paid over to government, whose purposes should they be used for? Advocate Lawrence identifies the funds as "assets and revenue", but I do not consider the fact that the State diverted some of the incoming payments (here the key money, or pas de porte) into its own Treasury discloses that Gécamines is itself discharging governmental functions. I agree with the submission made by Advocate Harvey-Hills for Gécamines (see paragraph 77 and 78 of his contentions): "whether the government wrongfully took pas de porte payments that should have come to Gécamines is and can be of no assistance whatsoever to FGH in trying to show Gécamines performs governmental functions." If they were rightly taken, then the argument against Gécamines falls away.
285. In summary, I do not accept that the 2007 Mining Commission material advances Hemisphere's case on the discharge of governmental functions by Gécamines. If and in so far as the Royal Court relied on this material in relation to this topic (rather than in relation to control), in my respectful opinion it fell into error.
286. (C) Sicomines - this topic is discussed in detail by the Royal Court in paragraphs 109 to 132 of the judgment, and again I pay tribute to the careful and detailed summary there set out, which I do not attempt to repeat. This seems to me to be the high point of Hemisphere's case on discharge of functions. The Royal Court held that , concluding at paragraph 189 that .
287. The Sicomines project has caused me the most concern, when examining the detailed evidence and submissions, particularly in light of the statement by the Minister of Infrastructure, Public Works and Reconstruction when addressing the National Assembly on 9th May 2008 - see paragraph 118 of the judgment:-
288. I do not see how this passage can be disregarded, as submitted to the Royal Court (but not submitted to the Court of Appeal) and it clearly reveals a degree of control by the DRC over and above the control normally attributed to a government 100% shareholder. But, as we are reminded by Lord Denning in Trendtex (at page 560A-B) the views of a representative of the state have to be treated with some care.
289. Sicomines (La Sino-Congolaise Des Mines SARL - see paragraph 110 of the judgment) is a Congolese company formed in 2008 as a joint venture between, on the one hand, two major Chinese groups, China Railway Group Limited and Sinohydro Corporation ("the Chinese Enterprise Group") and, on the other, Gécamines. It was formed pursuant to two major agreements signed on 22nd April, 2008: a "Cooperation Agreement" between the DRC and the Chinese Enterprise Group "For the Development of a Mining Project and Infrastructure Project in the Democratic Republic of Congo"; and a "Joint Venture Agreement" between Gécamines and the two Chinese groups together with certain designated affiliates of those groups". As so described there is nothing particularly noteworthy, in Trendtex terms. Clearly, the DRC can be expected to negotiate such agreements at a State level, particularly when they are on such a monumental scale. If there had been an agreement, at State level, between the DRC and the PRC it again would not have been surprising if monies (whether termed entry fees, or given some other label) were paid direct to the Treasury for subsequent expenditure on infrastructure projects. Does the fact that a joint venture was created (68% owned by the Chinese consortium and 32% by Gécamines), and the entry fees divided between the Treasury and Gécamines (with the majority going to the DRC direct) lead to the conclusion that Gécamines is now, or thereby, to be treated as an organ of the State? I say "now" or "thereby" because, at paragraph 128, the Royal Court held "there is no reason to doubt" the evidence presented for Gécamines "that there had been previous contacts and joint venture agreements between Gécamines and Chinese companies; or that, when it came to the combined mining/infrastructure venture, representatives of Gécamines' management were substantially involved in much of the detailed negotiations with their prospective counter-parties; or that the management and board of Gécamines took note of the respects in which the project was likely to be of benefit to Gécamines." It seems to me that this is unsurprising evidence, and entirely consistent with Gécamines discharging its own commercial functions acting as a mining company, even if wholly owned by the government, and entering into agreements. Paragraph 128, and the linked paragraphs 129-131, continue as follows:-
290. In my view this analysis, which I have no reason to question, can be read in two ways - to show that Gécamines (and the mining rights it owned) was being used by the DRC as a vehicle to ensure that the inter-state agreement could go ahead, or to show that Gécamines did in fact have its own particular interests to protect and promote but they were subordinated by its 100% owner to the greater interests of the State.
291. What I do not accept (notwithstanding the Minister's statements referred to above) is the conclusion by the Royal Court that this particular use by the DRC of "Gécamines as an instrument of state economic and social policy" converts Gécamines into an organ, or arm of the State within the terms of the requirements/principles set out in Trendtex. What the evidence summarised in these paragraphs clearly does show is that Gécamines fulfils different roles - it does have its own identity, and makes decisions, enters into contracts with third parties etc, but it is also subservient (when required) to the requests and demands of the State, even if it receives substantial benefits from this joint venture.
292. If my summary is correct so far (and the Royal Court was wrong), in relation to Gécamines' constitution, and the evidence and conclusions in relation to "in time of war", and "the 2007 Mining Commission", I am not convinced that the Sicomines evidence is such as to drive me to the conclusion that Gécamines is not only heavily controlled by the DRC but also, overall, discharges governmental functions.
293. (D) Public/Social services - this topic is addressed in paragraphs 133 to 137 of the judgment. It can be disposed of quite shortly as the Royal Court concludes at paragraph 137 , then referring back to the Sicomines project. This was an inevitable conclusion, and there was no basis upon which the Royal Court could have rejected the evidence/submission made on behalf of Gécamines and set out at paragraph 134 of the decision:-
Decision
294. It is now appropriate to consider the conclusions of the Royal Court on the personality issue, and the final sentence in paragraph 142:-
In my opinion, this goes too far, and blurs and confuses the dual requirements of control and discharge of governmental functions. It is perhaps clear and obvious that if and when Gécamines is so as to be it cannot then be treated as . But this is surely to set the bar/test too high. Control by government (with or without interference) is not enough for an entity to claim to be an organ of the state (to its benefit), or to be held to be an organ of the state (to its detriment). I do not accept that Gécamines, even if controlled by the state, can properly be treated as, or held to be, an organ of the state unless it discharges governmental functions, and those governmental functions are predominant.
295. As noted above, I am concerned that the test for in paragraph 53 of Kensington is too broad, and would catch too many wholly owned (perhaps nationalised) entities with the avowed purpose of . But even if that test is correctly formulated, Gécamines seems to me to be materially different from SNPC considered in both Kensington and Walker. Advocate Lawrence, for Hemisphere, set out in her contentions (at paragraph 3.11)
"(a) Features in the statute creating SNPC stating it was to perform a public function.
(b) Similar provisions in the bye-laws.
(c) Assets deriving from the State.
(d) Bye-laws confirming the company was subject to the control of the State.
(e) Bye-laws confirming the company was subject to the control of a government appointed supervisory authority.
(f) Ultimate control was by the Minister of Oil, supervised by the Minister of Petroleum (that was the supervisory authority).
(g) Government approval was necessary for financing transactions.
(h) Resolutions approving financial statements, budgets, economic policy, oil exploitation, all required approval of the Council of Ministers.
(i) The board's directors were, by majority, representatives of government ministries.
(j) The Board members were government officials appointed by a Council of Ministers.
(k) Chairman of the Board was the representative of the President, and was in effect in ultimate control.
(1) SNPC did not declare dividends, which normal commercial companies do.
(m) SNPC did not decide what monies to plough back into the company and so what dividends to declare.
(n) SNPC was used by the State as a vehicle for doing government business.
(o) SNPC undertook activities for the government which were outside the scope of its articles.
(p) The government required and demanded that SNPC's assets be used to pay for government expenditures.
(q) SNPC was 'an arm of the Treasury in financing Government projects'."
296. Save for (a) and (q) it is difficult to separate out which points in this list are said to go to control, and which to discharge of governmental functions. When considering "control", Advocate Harvey-Hills for Gécamines points to various important differences between SNPC and Gécamines - as set out in paragraph 88 of his contentions. But, in my view he makes more headway when considering and contrasting the position in relation to "governmental functions". He says this in paragraph 84(3) to (8):-
"(3) ..... But it is also the case that, unlike Gécamines, its [SNPC's] functions were close to, if not quite the same as, those of a 'Board of Trade' familiar to English courts (citing Mellenger v New Brunswick Development Corporation [1971] 1 W.L.R. 604): see Kensington at [53] and then at [55], where the Court found that "The Congolese legislation and SNPCs byelaws do demonstrate "that its purposes are to undertake the exploitation of Congo's oil reserve on behalf of Congo, to hold the State's oil related assets on its behalf and to represent the State on oil related matters - its function is to act on behalf of the State - it acts as the trading arm of the State and is controlled by it, whilst putting into effect Government policy in relation to oil and oil products..."
(4) These conclusions followed the Court's analysis of its constitution at [45] to [47], where the Court notes that its constitution provided that it was to act "on behalf of the Congo [i.e. the state of Congo-Brazzaville]" in all matters relating to Congo-Brazzaville's oil and petroleum resources, and was to "hold and manage, on behalf of the Congo, all the assets, rights, direct and indirect, whatever their nature, held originally by Congo ... in all activities related to research, exploitation, treatment and transformation of oil and secondary or connected products...".
(5) Equivalent consideration of SNPC's constitution appears in the Walker judgment at, e.g., [73] to [75].
(6) The Court in Kensington expressly adopted the functions and control tests as articulated in Trendtex (at [53]) and, given its findings as to SNPC's role in developing and putting into effect government policy in relation to the oil resources of the country, it is submitted that its conclusions are likely to have been correct: that SNPC was given, in effect, all the state's rights in the oil within its territory and charged with the implementation of government policy in relation to those oil resources made it legitimate to find as the Court did that it performed relevant governmental functions. It was an adjunct to that extent of the Oil Ministry of the country and hence an executive organ of the state.
(7) As set out under Ground 5 below, Gécamines' position is, and was at 19 March 2008, very different. It had no policy remit from the government; it did not own the state's interests in the minerals within its territories; it held no national monopoly on their exploitation. It was simply a state owned, nationalised industry. As Denning MR pointed out in Trendtex at 559G the ambit of the "Crown" traditionally entitled under domestic English law to immunity from suit does not extend to "nationalised commercial undertakings". They, like Gécamines, are not executive organs of the state.
(8) The Royal Court's analysis of the differences and similarities between SNPC and Gécamines and its conclusions in relation to the functions test at [138] to [140] of the Judgment simply failed, it is respectfully submitted, both to appreciate the essence of the functions test or to apply it properly. It quoted at [140] from Cooke J in Kensington at [53] as set out above, but did not continue that quotation to include the reference to Mellenger v New Brunswick Development Corporation and did not pick up on the essential findings in Kensington that SNPC was charged with the implementation of governmental policy in relation to the entire oil resources of the country. It was that which permitted Cooke J to draw a parallel between SNPC and a regional development agency / a Board of Trade. And it was that parallel which justified his finding that the governmental functions test had been met. Its absence in relation to Gécamines renders the Royal Court's finding, it is respectfully submitted, illegitimate and wrong."
297. When considering the final paragraphs of the Royal Court's judgment on the personality issue, it seems to me that at least some of Gécamines' criticisms are made out, even if (which must be the case) the answer to the question will inevitably be a matter of fact and degree. The key paragraphs are 140 and 141:-
298. I am satisfied that the evidence before the Royal Court does show the necessary degree of control, and therefore Ground 5 of Gécamines' Grounds of Appeal is not made out. The evidence shows that Gécamines was subject to a considerable degree of control in relation not only to its ownership, but also in relation to its management and decision-making - the tutelle regime, exercised by the Ministry of Mines over Gécamines in the period up to April 2009, is illustrative of the high level of control (see paragraphs 64, 74, 76 and 142 of the judgment below). But control is not enough - to borrow the words of Stephenson LJ in Trendtex Notwithstanding a considerable degree of control, Gécamines is still, in my opinion, a separate entity from the DRC - it is a commercial mining company, and in the DRC occupies a significantly different position from SNPC in the Congo. I do not accept that Hemisphere has established that Gécamines' activities/functions can be correctly categorised as governmental, such as to convert it from a commercial mining company under governmental control into an alter ego of the State.
299. In relation to Grounds 1 to 4, although finding this an extremely difficult decision, I am satisfied therefore that Gécamines is broadly correct. Although there is reference in the judgment to governmental functions the reasoning throughout the decision (based on the case as presented by Hemisphere) focuses almost exclusively on "control". In particular, in my view the complaint by Gécamines is made out that "the Court failed to appreciate the essential character of the 'governmental functions' requirement which is both different to and just as significant as the 'governmental control' limb of the test" (Ground 1(a)), that "It failed to appreciate, alternatively, to give proper weight to, the further significance of this principle, that the fact an entity exhibits some features consistent with it being an organ of a State is insufficient to found a declaration that it is such an organ and the entity must be considered in the light of all relevant factors." (Ground 1(b)), and "Insofar as the Royal Court did seek to apply the requirement that [Hemisphere] prove Gécamines performs governmental functions, it misdirected itself as to what the limb of the test requires and its conclusion in consequence that [Hemisphere] had met the governmental functions element of the test was flawed and cannot stand. On the Royal Court's analysis it was sufficient that the DRC used Gécamines' assets or resources to assist it in objectives of its own. Such determinations are relevant to the limb of governmental control over Gécamines. They do not enable [Hemisphere] to prove that Gécamines performs governmental functions." (Ground 3)
300. I am satisfied that Hemisphere has established that Gécamines is a (I Congreso del Partido, at page 258F-G), but I conclude it has failed to establish that it is indistinguishable from and a part, or alter ego, or mere department of that state. For all the reasons set out above, I would allow Gécamines' appeal.
301. It follows that the various orders made by the Royal Court in the Order of Court dated 15th November 2010 against Gécamines and against GTL should be set aside. However, as set out at the beginning of this judgment if and in so far as the appeal by Gécamines falls to be dismissed by the majority membership of this Court, I agree with the judgment of McNeill and Bennett JJA that the appeal of GTL should be dismissed for the reasons they give.