ReInsurance and Reinsurance - Weekly Update - 24 July 2012

LA GÉNÉRALE DES CARRIÈRES ET DES MINES v FG HEMISPHERE

Privy Council decision on enforcing an award against a state-owned company

http://www.bailii.org/uk/cases/UKPC/2012/27.html

Clyde & Co (Simon Kemp, Julie Tripp, Henrietta Wells, Jerome Stedman and Amy Stafford) for the appellant

The respondent was assigned an arbitration award against the Democratic Republic of the Congo. It sought to enforce that award against the assets of the appellant, a state-owned corporation (those assets being located in Jersey). The appellant appealed against a finding that its assets could be equated with the assets of the state (relying on the English Court of Appeal's decision in Trendtex Trading v Central Bank of Nigeria [1977]). The Privy Council has now allowed that appeal, holding as follows:

International law has developed since Trendtex. In particular, the United Kingdom has enacted the State Immunity Act 1978 (the provisions of which were extended to Jersey in 1985). This act gave effect to the European Convention on State Immunity which excluded from the scope of the State any distinct legal entity capable of suing or being sued. There should be full and appropriate recognition of the existence of separate juridical entities established by a state, particularly for trading purposes (and this principle applies as much to questions of liability and enforcement as it does to questions of immunity). Although an entity's constitution, control and functions remain relevant, there is a strong presumption that its separate corporate status should be respected "and that it and the State forming it should not have to bear each other's liabilities. It will in the Board's view take quite extreme circumstances to displace this presumption". The presumption will be displaced if the entity has, despite its juridical personality, "no effective separate existence". There may, for example, be circumstances in which the State has so interfered with a state-owned entity that it would be appropriate to lift the corporate veil. However, "Merely because a State's conduct makes it appropriate to lift the corporate veil to enable a third party or creditor of a state-owned corporation to look to the State does not automatically entitle a creditor of the State to look to the state-owned corporation. Lifting the veil may mean that a corporation is treated as part of the State for some purposes, but not others".

On the facts of this case, there was no justification for "deriving...