Orascom Telecom Holding SAE v Republic of Chad & Ors

Factual and Procedural Background

The Claimant, Company A, sought a final Third Party Debt Order against a third party bank, Company B, holding funds on behalf of the First Defendant, State A, to enforce an unpaid arbitration award made by the International Chamber of Commerce ("ICC") against State A dated 12 June 2007. Initially, multiple bank accounts held by Company B for State A were involved, but due to concessions by Company A and interventions by the World Bank and the European Investment Bank regarding some accounts, the application was narrowed to only one account, known as the "Borrowers' Account".

State A was represented by solicitors and counsel but was not actively engaged in the proceedings, providing limited instructions or evidence. Consequently, the only significant evidence regarding the nature of the accounts was provided by Company A, referencing publicly available material from the World Bank. The court identified two main contested issues: (i) whether the Borrowers' Account was "property which is for the time being in use or intended to be used for commercial purposes" under the State Immunity Act 1978, and (ii) whether State A waived immunity from execution by submitting to ICC arbitration and specifically under Article 28(6) of the ICC Rules.

State A, despite low human development rankings, possesses commercially exploited oil reserves and is linked to a major pipeline project involving multi-billion dollar investments, including loans from the World Bank and the European Investment Bank. The banking arrangements with Company B were established to facilitate and secure repayment of such loans from oil proceeds.

Company A's involvement arose from a joint venture telecommunications company in State A established around 2000 with the Second Defendant, a national telecommunications company. After substantial investments by Company A, State A took actions that effectively forced Company A out, including freezing accounts and cancelling licenses. Although State A was not party to the arbitration agreement between Company A and the Second Defendant, it was joined in ICC arbitration proceedings in Geneva.

State A initially objected to the ICC arbitrators' jurisdiction but later withdrew this objection and accepted jurisdiction. The arbitration terms designated Geneva as the seat and ICC Rules as applicable. The arbitration award rejected State A's defenses and ordered payment exceeding 3.7 million. The award noted State A's withdrawal of jurisdictional objections.

Company A provided evidence explaining the World Bank's Revenue Management Program ("RMP"), which channels State A's oil revenues through escrow accounts at Company B in London. Oil revenues first flow into a "Transit Account," from which amounts are set aside to cover debts owed to the World Bank and European Investment Bank. Remaining funds transfer to the Borrowers' Account, which is part of the escrow agreement. Other accounts include Debt Service Accounts and a Future Generations Fund.

Company B's evidence as of 29 April 2008 showed a nil balance in the Transit Account, substantial balances in money market funds for the Debt Service Accounts (now conceded as subject to proprietary claims by the intervenors), a Future Generations Fund account with a balance of approximately US$115,000 (not claimed by Company A), and a Borrowers' Account holding approximately US$43.8 million. A freezing order had been made in respect of these accounts.

Legal Issues Presented

1. Whether the Borrowers' Account constitutes "property which is for the time being in use or intended to be used for commercial purposes" under section 13(4) of the State Immunity Act 1978, thereby permitting execution against it despite State immunity.
2. Whether State A waived its immunity from execution by submitting to ICC arbitration and specifically by agreeing to Article 28(6) of the ICC Rules, which provides for waiver of recourse against an award.

Arguments of the Parties

Appellant's Arguments (Company A)

• The Borrowers' Account is established and operated specifically for commercial purposes, namely to receive proceeds from contracts for the supply of goods or services and to facilitate repayment of loans from the World Bank and European Investment Bank.
• The account is not dormant nor mixed with non-commercial funds; the Future Generations Fund is separate and not claimed.
• The statutory definition of "commercial purposes" in the 1978 Act is broad and includes the transactions for which the Borrowers' Account is used.
• The certificate provided by State A's ambassador asserting non-commercial use is insufficient to rebut the evidence that the account is commercial in nature.
• Even if the waiver issue arose, the ICC Rules' Article 28(6) supports waiver of immunity, as recognized in foreign jurisdictions such as France and the United States.

Respondent's Arguments (State A)

• The Borrowers' Account is not used or intended for commercial purposes but is effectively a transit account for sovereign revenues, ultimately destined for sovereign use.
• Reliance on the State Immunity Act 1978 and case law (including Alcom Ltd v Republic of Colombia, AIG Capital Partners Inc v Republic of Kazakhstan, and AIC Ltd v The Federal Government of Nigeria) supports immunity from execution for such accounts.
• The certificate of the State A ambassador attests that the account is not used for commercial purposes and should be accepted unless proven otherwise.
• Article 28(6) of the ICC Rules does not constitute a waiver of immunity from execution under English law, and foreign law evidence, including French and Swiss law, is inconclusive or absent.
• Precedents from other jurisdictions, such as the United States and France, do not bind the English court to expand waiver beyond the statutory commercial purposes exception.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by examining the statutory framework under the State Immunity Act 1978, particularly sections 3 and 13, which set out exceptions to sovereign immunity for commercial transactions and immunity from execution. The key legal question was whether the Borrowers' Account was property "in use or intended for use for commercial purposes" within the meaning of the Act.

Drawing on authoritative case law, including Alcom Ltd and others, the court recognized that for an account to be subject to execution, it must be shown that the account is earmarked primarily for commercial transactions. The court rejected arguments based solely on the indivisibility of accounts if there was clear evidence that the funds were held for commercial purposes.

The evidence showed that the Borrowers' Account was established and operated as part of the World Bank's Revenue Management Program to receive proceeds from commercial oil contracts and to service loans, both commercial transactions under the Act. The court found that the account's use and intended use fell squarely within the statutory exceptions permitting execution.

The certificate from State A's ambassador asserting non-commercial use was given little weight due to its generality, lack of explanation, and the fact that it covered multiple accounts, some clearly commercial. The court held that Company A had discharged the burden of proving that the account was for commercial purposes.

On the issue of waiver, the court noted the absence of statutory provisions in England explicitly equating submission to ICC arbitration with waiver of immunity from execution. While foreign decisions, particularly French jurisprudence and the US Fifth Circuit, suggested that ICC Rules' Article 28(6) might imply waiver, the court was reluctant to import such interpretations without clear statutory or evidential basis.

Due to the court's finding in favour of Company A on the commercial use issue, it did not definitively resolve the waiver question but expressed skepticism about extending waiver beyond the statutory commercial purposes exception without fuller foreign law evidence.

Holding and Implications

The court GRANTED the final Third Party Debt Order against Company B in respect of the Borrowers' Account, permitting execution of the unpaid arbitration award against the funds held therein.

The decision establishes that funds held in an account established and operated as part of a commercial transaction, specifically the World Bank's Revenue Management Program related to oil revenues and loan repayments, fall within the commercial purposes exception to sovereign immunity under the State Immunity Act 1978. The court rejected the ambassador's certificate as insufficient to rebut this finding.

The court did not resolve the question of waiver by submission to ICC arbitration under Article 28(6) of the ICC Rules, noting the lack of conclusive evidence or statutory framework in England for such waiver. The ruling does not set new precedent on waiver but confirms the strict application of the statutory commercial purposes exception for execution against State property.

State A was ordered to pay Company A's costs, except for the costs relating to expert reports on French law, for which no order was made. The court refused permission to appeal, finding no reasonable prospect of success for State A.