Two companies in the Louis Dreyfus Commodities group have, over the last 12 months, obtained a succession of protective orders from the London Commercial Court, judgment in full (with indemnity costs) against Mr. Naim Khanafer (a Lebanese businessman active in the metals industry) and three companies associated with him, and most recently a conviction for contempt of court against all Defendants, a 12 month prison sentence for Mr. Khanafer, an order for sequestration of assets and indemnity costs.
The case of Louis Dreyfus Commodities MEA Trading DMCC & Anor. vs. Concorde Pour L’Industrie et l’Exploitation SPRL & Ors. is interesting for several reasons: in late 2015, Mr. Justice Teare issued a worldwide anti-enforcement injunction (rarely seen in the English courts) and judgment in full (for USD 14,500,000) in favour of Louis Dreyfus Commodities, on the basis of an unpaid Unless Order in respects of costs. This follows a succession of judges (Mr. Justice Teare, Mr. Justice Phillips and Mr. Justice Andrew Smith) issuing anti-suit injunctions (mandatory and prohibitive) over the last 12 months, in relation to multiple sets of proceedings commenced by the Defendants in the Democratic Republic of Congo (DRC) and Dubai, worldwide freezing relief and an order for cross examination of Mr. Khanafer on the basis of incomplete disclosure in relation to the freezing injunction. Most recently, on 2 February 2016, Mr. Justice Teare issued the contempt conviction, asset sequestration and prison sentence on the basis of the Defendants’ on-going failure and refusal to comply with the English Court’s orders, criticising strongly their egregious actions in the DRC and Dubai, in “flagrant” breach of the jurisdiction of the English Courts and/or arbitration in London.
The case is one of a series brought over the last 12 months before the English Courts by commodities merchandizers seeking to protect their rights against defaulting counterparties, often seeking to derail English Court proceedings via vexatious foreign litigation, and the court using the full array of orders in its armoury, culminating in the criminal sanctions of contempt and imprisonment.
Facts Louis Dreyfus Commodities (the Claimant) provided a loan of USD 10 million to the corporate Defendants, represented by Mr. Khanafer, in order to develop a mining project in the DRC. The loan agreement contained an English jurisdiction clause. A related Memorandum of Understanding contained an ICC arbitration agreement stipulating a London seat. The Defendant companies provided security over properties in the DRC and Dubai. The Defendants failed to repay the loan. During commercial discussions, one of the Defendants secretly commenced proceedings in the DRC seeking to invalidate the security agreement and claiming USD 50 million from the Claimant. Thereafter, the Defendants started no less than 7 further sets of proceedings in the DRC and Dubai, all aimed at dismantling the security and obtaining judgments against the Claimant and including criminal proceedings in the DRC against two of the Claimant’s officers.
Louis Dreyfus Commodities applied for and obtained a series of mandatory and prohibitory anti-suit injunctions, ordering all of the Defendants to cease pursuing the existing and new proceedings in the DRC and Dubai, all of which were in breach of the exclusive jurisdiction agreement or arbitration agreement.
Despite this, and the subsequent registration of the anti-suit injunctions in the DRC by the Claimant, the proceedings continued and the DRC courts issued a judgment against Louis Dreyfus Commodities. The Claimant therefore applied for further protective relief, in the form of an anti-enforcement injunction, which was granted by Mr. Justice Teare, recognising the need for a further level of protection against the enforcement of the illegitimate judgment, over and above the existing anti-suit injunctions. This decision is topical, in light of the recent decisions concerning anti-enforcement injunctions at first instance and in the Court of Appeal in Ecobank Transnational Inc v Tanoh.
Louis Dreyfus Commodities also obtained a worldwide freezing injunction, for the full amount of the debt, and an order for the cross examination of Mr. Khanafer on his and the other Defendants’ assets. In making the cross-examination order, Mr. Justice Phillips followed the approach inJenington International Inc v Assaubayev and Otkritie International Investment Management Ltd v Urumov. Louis Dreyfus Commodities’ success is significant because it confirms that cross-examination on asset disclosure may be ordered even where the value of the assets disclosed exceeds the sum frozen and even where, on the face of it, the claimant may have security.
Louis Dreyfus Commodities also obtained judgment in full on all claims, as well as damages to be assessed, on the basis that a costs order in the amount of GBP 40,000 (that had been made subject of an Unless Order) was not paid. The court ordered judgement to be entered, the defence to be struck out and the Defendants to be debarred from entering a further defence. Notably, Louis Dreyfus Commodities also succeeded in obtaining a judgment against Mr. Khanafer personally (although he was not a party to the loan agreement) on the basis that he procured its breach and entered into an unlawful means conspiracy with the other Defendants.
As explained above, Louis Dreyfus Commodities has obtained a contempt conviction against all four Defendants, a 12 month prison sentence for Mr. Khanafer, sequestration of assets and payment of indemnity costs, as a result of the Defendants’ multiple breaches of the English Court’s various orders. The decision is particularly important because the conviction was obtained despite the Defendants not appearing in court, and all documents being served on the Defendants by email. This can be seen as part of a trend in commodities and other major commercial companies seeking the maximum assistance of the English Courts to protect their rights, including criminal sanctions, and the Courts supporting this robust approach.
The case underlines the English Court’s welcome willingness to use various judicial tools to protect against serial offenders seeking to use guerrilla tactics in foreign jurisdictions to derail the proper resolution of disputes in accordance with English jurisdiction clauses and arbitration agreements.