No ‘get out of jurisdiction free’ card available to sanctioned entity


Author: Frances Jenkins


Frances Jenkins, Associate, Fladgate LLP (fjenkins@fladgate.com)

Co-authored by Alex Sandwell, Paralegal at Fladgate LLP


 

The recent decision in the Kamoto Copper Company SA v (1) Africa Horizons Investments Ltd and (2) Ventora Development SASU case highlights the challenges that a party subjected to US sanctions may face attempting to circumvent an exclusive jurisdiction clause in favour of the English courts.

The Claimant, a subsidiary of the mining giant Glencore, applied for an anti-suit injunction prohibiting (1) Africa Horizons Investments Ltd and (2) Ventora Development SASU (First Defendant and Second Defendant respectively) from pursuing proceedings against it in the Democratic Republic of Congo (DRC) in breach of an exclusive jurisdiction clause which conferred jurisdiction on the English court.

The Claimant and the First Defendant were parties to an agreement under which the Claimant agreed to pay royalties (in US dollars) relating to the mining of copper and cobalt deposits in the DRC. The agreement provided for English law and contained an exclusive jurisdiction clause. The First Defendant purported to assign its benefit in the agreement to the Second Defendant which was one of its subsidiaries. The principal behind both entities was Mr Dan Gertler, the Israeli billionaire.

Pursuant to an executive order issued by President Trump (Order 13818: Blocking the property of persons involved in serious human rights abuses or corruption), the First Defendant and Mr Gertler were identified as “specially designated nationals” to whom sanctions applied. This meant that no US person could provide any funds or services to, or for the benefit of, such a designated person, or companies under their majority ownership or control.

As such, the Claimant argued that, although not yet due, it could not make any royalty payments to the First Defendant due to the required involvement of a US federal reserve bank to process these payments. The Claimant also asserted that the agreement had not been validly assigned to the Second Defendant but even if it had been validly assigned, the Claimant was unable to make royalty payments to the Second Defendant as it was controlled by Mr Gertler who was a “specially designated national”.

The Second Defendant commenced two sets of proceedings in the DRC and obtained a precautionary attachment of the Claimant’s property in the DRC (to a value of over $2 billion). These proceedings were made on the basis that the Second Defendant succeeded to the First Defendant’s rights under the agreement.

In defending the application for an anti-suit injunction, the Second Defendant argued that there was a distinction between proceedings in the DRC for precautionary measures (which it asserted would not constitute a breach of the exclusive jurisdiction clause) and proceedings to deal with the substantive claim for failure to pay royalties. Mr Justice Males accepted this proposition but considered that the DRC proceedings were actually part and parcel of an attempt to litigate the merits of the claim in the DRC and therefore granted the anti-suit injunction. Moreover, if the Second Defendant was correct that the rights under the agreement had been assigned to it, the jurisdiction clause would be binding. The Second Defendant had no ‘get out of jurisdiction free’ card to play it could not take the benefit of the agreement (i.e. the right to claim royalties) without taking the disadvantage of the agreement (in this case the obligation to litigate claims subject to the exclusive jurisdiction of the courts of England and Wales).

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