Masri & Anor v Consolidated Contractors International Co Sal & Ors

On 1 December 2010, on the without notice application of the judgment creditor, Mr. Munib Masri (the “Judgment Creditor”), I made an order (“the Third Receivership Order”) against the second judgment debtor, Consolidated Contractors (Oil & Gas) Company SAL (“CCOG”) appointing Mr. Lee Manning, a chartered accountant and a partner in Deloitte LLP, as a receiver (“the Receiver”):

That was a reference to a previous order dated 20 December 2007 (“the First Receivership Order”), pursuant to which I had appointed Mr. Manning receiver by way of equitable execution over CCOG’s rights to income from the Masila Concession. That order was made after full argument at an inter partes hearing. I refer to certain terms of that order below.

In addition, by the Third Receivership Order, I authorised the Receiver:

Paragraphs 2 to 7 of the Third Receivership Order were in the following terms:

As described in greater detail below, the purpose of the arbitration proceedings was to seek recognition and enforcement of CCOG’s rights, acting by the Receiver, to receive oil and rights to oil from the Masila Concession.

Paragraph 12 of the Third Receivership Order gave permission to the Judgment Creditor to serve the order out of the jurisdiction “on CCOG and the individuals named on [sic] the penal notice”. That penal notice was endorsed on the front of the Third Receivership Order and was in the following terms:

I also ordered that there should be a further hearing in respect of the Third Receivership Order on 14 December 2010, and that CCOG should have the right to apply to vary or discharge that order at that hearing, in addition to the right conferred by paragraph 14 thereof on:

Paragraphs 18 and 19 of the Third Receivership Order provided as follows:

On 1 December 2010, on the without notice application of the Receiver, on behalf of CCOG, pursuant to paragraph 5 of the Third Receivership Order, I also made an asset preservation order (“the APO”) preserving the assets subject to the receivership. Such an order was intended to hold the ring pending the determination of the arbitration proceedings which I had directed the Receiver, on behalf of CCOG, to start as against Canadian Nexen Petroleum Yemen (a partnership registered in Alberta, Canada), Nexen Petroleum Operations Yemen Limited (a company incorporated in Jersey) and Nexen Inc (a company incorporated in Alberta, Canada), (together “CNPY”) as Operator under the JOA, in order to seek recognition and enforcement of the Receiver’s rights, on behalf of CCOG, to receive the oil and the rights to oil.

The APO, at paragraph 2, injuncted CNPY in the following terms:

Paragraphs 10 and 11 of the APO were in similar terms to paragraphs 18 and 19 of the Third Receivership Order:

The APO also provided for a return date on 14 December 2010.

By an order also made on 1 December 2010, I gave permission to the Judgment Debtors, acting by the Receiver, to serve the arbitration claim form out of the jurisdiction on CNPY.

At the return date hearing on 14 December 2010:

CCOG and its co-judgment debtor, Consolidated Contractors International Company SAL (“CCIC”) (together “the Judgment Debtors”), appeared by leading and junior counsel, Mr. James Lewis QC and Mr. Ben Brandon;

Mr. Edgard Elias Joujou (“Mr. Joujou”), the lead judicial administrator, and his two co-administrators (Footnote: ¹), who were appointed by an order dated 20 December 2008 of the First Instance Court of Beirut (“the Judicial Administrators”) to manage the Judgment Debtors, appeared by leading and junior counsel, Mr. Anthony Boswood QC and Mr. James Cutress;

the Judgment Creditor appeared by junior counsel, Mr. Simon Salzedo and Mr. Colin West;

the Receiver appeared by leading counsel, Mr. Michael Green QC; and

CNPY appeared by leading counsel, Mr. Timothy Howe QC.

On 14 December 2010, and subject to certain amendments to the APO as against CNPY not relevant for present purposes, I continued the APO as against CNPY on the application of CCOG, acting by the Receiver, pending a future hearing of the application for the continuation of the APO as against CNPY scheduled for January 2011. There was an adjourned hearing of that application on 31 January 2011, and on 15 February 2011, when CNPY applied to discharge the Third Receivership Order and the APO, insofar as it affected CNPY. My decision in relation to that application will be the subject of a separate judgment.

On 14 December 2010, Mr. Joujou, as the person named in the penal notice endorsed on the Third Receivership Order, applied:

As at the time of the lodging of Mr. Salzedo’s skeleton argument (1:00pm on 13 December 2010), the Judgment Creditor’s solicitors had not received any indication from CCOG, the Judicial Administrators or CNPY that any application to discharge would be made, nor any statement as to what would be their respective positions at the return date hearing on 14 December 2010. Nor had the court been informed as to the length of time that would be needed for any application by the respondent parties, or, indeed, that any application to discharge would be made. During the course of the afternoon of 13 December 2010, a skeleton argument and witness statement were served on behalf of the Judicial Administrators which made it clear that the Judicial Administrators would be applying in their personal capacities to discharge the Third Receivership Order.

At the hearing on 14 December 2010, Mr. Lewis, leading counsel for the Judgment Debtors, informed me that the Judgment Debtors were presently without instructions from the Judicial Administrators as to what action to take in respect of the Judgment Creditor’s application to continue the Third Receivership Order. In written submissions on behalf of the Judgment Debtors, it was stated:

Because of time pressure on the court, as a consequence of other cases also being listed for 14 December, and the need to deal with the interim position in relation to CNPY, the court heard further argument on the Judicial Administrators’ application to discharge for a full day on 15 December 2010. On 14 December 2010, I made certain amendments to the APO to safeguard CNPY’s position, but these did not affect the Judicial Administrators. On 15 December 2010, I formally continued the injunctions until further order, pending the announcement of my decision on the Judicial Administrators’ application to discharge.

On 21 December 2010, I announced my decision that I proposed to continue the Third Receivership Order with the inclusion of Mr. Joujou’s name in the penal notice, but that I would deliver my reasons on a later occasion. I ordered that the Third Receivership Order and the APO should continue in effect until further order of the court, subject to the following amendments.

This judgment sets out my reasons for continuing the Third Receivership Order in its revised form and for not acceding to the Judicial Administrators’ application to discharge it.

It is not necessary for present purposes to rehearse the entirety of the earlier history of this lengthy litigation which has featured so frequently in the law reports. For the purposes of this judgment, the following summary will suffice:

The Judgment Debtors are jointly and severally liable to the Judgment Creditor in an amount currently in excess of US$ 75.6 million, pursuant to my judgments on liability and quantum, and the quantum order of Tomlinson J (Footnote: ⁴) and a decision of the Court of Appeal (Footnote: ⁵). I held that the Judgment Creditor had a ten percent interest in CCOG’s ten percent interest in the valuable Masila oil concession in Yemen; and the Court of Appeal, on the Judgment Creditor’s cross-appeal, held in his favour that he had a further entitlement to a percentage of “Operating Costs” recovery. If estimates for the Judgment Creditor’s entitlement for 2008-2011 are taken into account, the total sum owed (including interest) is in the region of US$ 99.4 million.

After initially and unsuccessfully objecting to the jurisdiction of the English Court, the Judgment Debtors expressly submitted to the jurisdiction and participated fully in the liability and quantum proceedings before me, and in all subsequent proceedings before other courts, regularly exercising all rights of appeal open to them (except where a pre-condition of their having leave was payment into court of the judgment debt). CCOG is domiciled in Lebanon and has its “statutory seat” there, but is registered as an offshore company which, according to the Judgment Creditor’s evidence, means that its operations are not, and cannot be, based in Lebanon. The Judgment Creditor has always contended that CCOG was and is managed from London. CCOG has always denied that, but has given contradictory evidence in these proceedings about whether it is managed from Greece or Lebanon. On its appeal from the First Receivership Order, CCOG sought to contend that it was also domiciled in Greece for the purposes of Article 60 of Council Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“the Brussels I Regulation”). However, the Court of Appeal refused to allow the point about Greek domicile to be taken by CCOG and also considered that there was nothing in the point (Footnote: ⁶). Accordingly, it approached the matter on the basis that the English court had clear in personam and subject-matter jurisdiction under the normal principles of English law (Footnote: ⁷).

As other judges have previously found, there is no doubt that the Consolidated Contractors Group (the group to which CCOG and CCIC belong, and which is beneficially owned and controlled by members of the Khoury and Sabbagh families (Footnote: ⁸) (“the CCC Group”)) in general, and the Judgment Debtors in particular, have more than sufficient funds to meet the judgment debt without imperilling their ability successfully to carry on business if they wish to do so. The revenues from the Masila oil concession alone are more than sufficient to enable the Judgment Debtors to discharge the judgment debt. Thus, on the evidence before me, there is no doubt that both CCOG and CCIC are solvent.

On several occasions, judges at first instance and in the Court of Appeal have concluded that the Judgment Debtors have no intention of paying the judgment debt and are determined to do everything possible to frustrate the Judgment Creditor’s efforts to enforce the judgment in whatever jurisdiction such efforts may be made. It is also likely that Lord Bingham had such considerations in mind when, on 26 June 2008, speaking for the Appeal Committee of the House of Lords, he said that “the circumstances and history of this case call for an unusual order”.

On 25 May 2007, HHJ Mackie QC (sitting as a judge of this court) made an anti-suit injunction against CCOG and CCIC. I refer to this in greater detail below, in the context of proceedings brought by the Judgment Debtors in Yemen.

On 20 December 2007, in addition to the First Receivership Order, I also made an order requiring the Judgment Debtors to provide certain information about their assets (“the First Affidavits Order”) and a freezing order prohibiting CCOG from assigning or dealing with its rights in the Masila Concession (“Freezing Order No. 1”). The First Receivership Order contained, at paragraph 15 a provision in the following terms:

The Judgment Debtors appealed the First Receivership Order and Freezing Order No. 1. On 4 April 2008, the Court of Appeal (Lord Neuberger, Ward LJ and Lawrence Collins LJ (as he then was)) dismissed their appeal and confirmed the appointment of the Receiver by way of equitable execution over CCOG’s rights to the revenues from oil sales relating to the Masila Concession and Freezing Order No. 1 (Footnote: ⁹). The House of Lords gave the Judgment Debtors leave to appeal from the Court of Appeal’s decision, but only on condition that the Judgment Debtors paid the entire amount of the judgment debt into court. The Judgment Debtors failed to comply with that provision so their appeal was struck out.

After a three-day inter partes hearing in August 2008, on 21 October 2008, Tomlinson J (as he then was) made a second receivership order (“the Second Receivership Order”) appointing the Receiver as receiver over CCIC’s contractual receivables under 25 major international construction projects (other than the Masila Concession). The Second Receivership Order extended far wider than the First Receivership Order. Tomlinson J also made various other freezing orders on the same date restraining:

CCIC and CCOG from dealing with or diminishing the value of funds in certain bank accounts (“Freezing Order No. 2”);

CCIC from receiving or dealing with the receivables over which he had appointed a Receiver (“Freezing Order No. 3”); and

CCOG from disposing of or dealing with, or diminishing the value of, any interest in shares in other companies (“Freezing Order No. 4”).

However, unlike the First Receivership Order, paragraph 15 of the Second Receivership Order only excused the Judgment Debtors from non-compliance with the English Court order if a contradictory order was made by the courts of a jurisdiction in which the assets were located. Thus, paragraph 15 provided as follows:

Because the Judicial Administrators’ application to discharge the Third Receivership Order against them personally relied upon certain orders made by the Lebanese courts, it is appropriate that I should set out a summary of various applications that have been made to the Lebanese courts and the orders which have been made by those courts, as well as events affecting the corporate governance of the Judgment Debtors.

According to the evidence before me at the liability trial, the evidence before Tomlinson J and the evidence before me or referred to during the hearings in December 2010, the shares in the CC Group’s holding company (Consolidated Contractors Group SAL (Holding Company) (“CC Holding”)) are beneficially owned or controlled by members of the respective families of Mr. Khoury and Mr. Sabbagh. A very small number of shares in CCOG are held directly by Ms Salwa Khoury, a member of the Khoury family, and likewise a very small number of shares in CCIC are directly held by Mr. Samir Sabbagh, a member of the Sabbagh family.

On 10 July 2007, the Judgment Debtors brought pre-emptive declaratory proceedings in Lebanon seeking a declaration that the English judgments could not be recognised or enforced in Lebanon. The action appears not to have proceeded whilst the Lebanese Court considered the exequatur appeal. Further pleadings have now been exchanged, but they have not proceeded to judgment or determination.

On or around 9 January 2008, shortly after the making of the First Receivership Order and Freezing Order No. 1, the directors of CCOG were all replaced by individuals (and non-family members) based in Lebanon rather than Greece. Similarly, on or around 21 January 2008, all the directors of CCIC (members of the Sabbagh and Khoury families and the holding company), the principal operating company in the CCC group, said to be domiciled in Greece, were replaced by non-family members located in Lebanon.

Both before and during the period of the stay of the First Receivership Order (December 2007 to 4 April 2008), Mr. Samir Sabbagh and Ms Salwa Khoury as individual minority shareholders in the Judgment Debtors, instigated proceedings in Lebanon seeking “blocking” orders from the Lebanese Court prohibiting CCIC, CCOG and their officers from complying with the First Receivership Order, the affidavit and injunction orders, and the other orders of the English courts. Pursuant to these applications, on 14 April 2008, the Lebanese Court made an order prohibiting the Judgment Debtors or their directors from giving any information pursuant to the orders of the English court unless and until the Judgment Creditor was granted exequatur of the English judgment.

I refer to the summary of these proceedings to obtain blocking orders in the period prior to 21 October 2008, as contained in paragraphs 11 and 26 – 30 of Tomlinson J’s judgment of that date (“the Tomlinson J Judgment (Footnote: ¹⁰)”). His conclusion (see for example paragraph 28 and 29) was that it was plain:

Likewise at paragraph 29, he accepted as “wholly irresistible” the inferences sought to be drawn on behalf of the Judgment Creditor: that the applications made by the Khoury and Sabbagh family members to the Lebanese Court for blocking orders “should not be regarded as applications by independent third parties to protect their legitimate interests”, but rather as “applications made at the behest of, and with the co-operation of, the Judgment Debtors themselves” and that “the Judgment Debtors are the only parties who stand to gain from the applications”.

To date, applications made by the Judgment Creditor to discharge the blocking orders have failed. Further ex parte blocking orders were obtained in 2009 at the request of shareholders of CCOG and CCIC, respectively prohibiting the Judgment Creditor from implementing various orders of the English court, including (in relation to CCOG) the First Receivership Order (Footnote: ¹¹) and (in relation to CCIC) (Footnote: ¹²) the Second Receivership Order, unless exequatur were first obtained of such orders in the Lebanon.

On or about 5 December 2008, the three Lebanese directors of the Judgment Debtors resigned. In a letter of resignation they stated that their reasons for so doing were as follows:

On 20 December 2008, these former directors applied to the Lebanese Court (Footnote: ¹³) for the appointment of three Judicial Administrators. The application was unopposed. The order, in relation to each of CCOG and CCIC recited:

This order appears to anticipate that the Judicial Administrators’ responsibility would cease as soon as new directors were appointed, and that the purpose of the administration was to manage the business in the interim. No suggestion appears to have been made at this stage that there would be any difficulty in appointing new directors.

In paragraph 56 of the first affidavit of Georges Naffah, a Lebanese lawyer and a professor of law at the Lebanese University in Beirut, sworn on 12 November 2010 on behalf of the Judgment Debtors in contempt proceedings brought by the Judgment Creditor and currently before another judge of this court (“the Naffah Affidavit”), Professor Naffah said:

In the meantime, on 12 June 2008, the Judgment Creditor had applied, ex parte, to the Lebanese Court for exequatur in respect of the three quantum orders of this court, and three other orders of the English court. On 22 December 2008, two days after the appointment of the Judicial Administrators, the Court of Appeal of Beirut granted exequatur in favour of the Judgment Creditor in respect of the three quantum orders.

In a further order made on 14 January 2009, the Lebanese Court made further orders in respect of each Judgment Debtor:

On 23 January 2009, the Judicial Administrators filed an application on behalf of CCOG and CCIC to set aside the three exequatur orders obtained by the Judgment Creditor. According to Mr Joujou (Footnote: ¹⁴), the decision to do so was based on the advice of the Judgment Debtors’ lawyers that:

The decision taken by Mr. Joujou to apply to the Lebanese Court of Appeal to set aside the three exequatur orders does not appear to have been a decision taken pursuant to any directions of the Lebanese courts, but rather a decision taken by him on the advice of the Judgment Debtors’ lawyers. No explanation was given in the evidence before me as to why the Judicial Administrators considered it in the interests of CCOG or CCIC not to pay its judgment debts once exequatur had been granted.

On 21 February 2009, pursuant to an application made by Mr. Joujou, the Lebanese Court issued further directions to the Judicial Administrators in relation to two matters, namely the calling of the general assembly of CCIC and CCOG, and the conduct of the litigation between the Judgment Debtors and the Judgment Creditor. The orders provided:

It does not appear from the evidence before me on this application that the Lebanese court making this order was informed at this stage that Mr. Joujou had decided to appeal the order granting exequatur in favour of the Judgment Creditor, as opposed to proceeding on the basis of the exequatur orders.

General meetings of shareholders of both CCIC and CCOG were convened for 27 April 2009, but such meetings were declared inquorate because shareholders in the Judgment Debtors did not choose to attend those meetings, despite the fact that the order appointing the Judicial Administrators had specifically referred to the fact that the shareholders did not oppose “the judicial administration aiming primarily at electing a new Board of Directors.” Further meetings were called for 26 May 2009, but these were also declared inquorate for the same reason.

On 29 May 2009, Mr. Joujou made a further application to the Lebanese Court in his capacity as Judicial Administrator of the Judgment Debtors for directions as to whether:

payment of the judgment sum constituted an important matter which could only be decided upon by the Lebanese Court, pursuant to the order dated 14 January 2009;

payment could be made prior to the determination of the exequatur proceedings; and

whether the Judgment Debtors’ opposition to the exequatur orders should be continued.

On 1 June 2009, the Lebanese Court ruled in respect of the application and issued the following directions in relation to both CCOG and CCIC:

In a letter dated 5 June 2009 to Simmons & Simmons, solicitors for the Judgment Creditor, Mr. Joujou said that, in accordance with this order, he had been expressly instructed to continue the opposition to the Judgment Creditor’s application for exequatur, and not to meet the English judgments in the meantime.

On 8 April 2010, on the application of the Judgment Debtors, acting by the Judicial Administrators, the Lebanese Court set aside the previous ex parte exequatur orders granted in favour of the Judgment Creditor. This decision appears to have been based on a finding that it was not appropriate to issue orders of exequatur in relation to the quantum judgments, without considering the primary English judgments on liability on which they were based, and in respect of which no exequatur had been obtained. A number of other points were taken by the Judgment Debtors but these were rejected.

The Judgment Creditor is in the course of appealing this decision to the Lebanese Court of Cassation.

On 17 September 2010, Mr. Joujou lodged a further application to the Lebanese Court, updating the court on the committal proceedings and seeking further directions in respect of the application for contempt of court made against the Judgment Debtors.

On 4 October 2010, the Lebanese Court issued the following ruling in respect of this application.

Mr Joujou is the managing partner of KPMG, Lebanon, a member firm of KPMG International. He is a graduate of Cambridge University, has a MA from London University, and qualified as a chartered accountant with the London office of Ernst & Young. He is a Certified Public Accountant in Lebanon. He states he has extensive audit and financial advisory experience. He has dual Lebanese and UK nationality and speaks fluent English. His professional and personal commitments mean that he may need to travel to the UK on occasions. Mr. Boswood informed me that Mr. Joujou may need to do so not least in order to discharge his duty to the Beirut Court to conduct the present proceedings on behalf of the Judgment Debtors. Mr. Boswood also informed me that Mr. Joujou considers that he is unable to do so as matters stand in the light of the Third Receivership Order for fear of proceedings which might be served upon him here to hold him in contempt of court.

At a meeting held in Paris on 7 April 2009, attended by representatives from Simmons & Simmons, Mr. Joujou, Mr. Mallat (legal advisor to Mr. Joujou), Mr. Marina (a representative of CCIC), and a representative from Olswang, the Judgment Debtors’ solicitor, Mr. Joujou confirmed that he was conducting sales of oil from the Masila Concession for CCOG and that he saw his role as ensuring that he obtained the best price for the oil. In a response to a letter dated 2009 from Simmons & Simmons seeking confirmation of this statement, Mr. Joujou did not deny the position in regard to CCOG’s sales of oil from the Masila Concession, but stated that he was prohibited from confirming whether CCOG had in fact sold oil or received proceeds from the sale of oil, as any such confirmation would be providing confidential information contrary to the orders of the Beirut Court.

In his witness statement, Mr. Joujou sets out his position. I have attached a copy of that statement as Annex 1 to this judgment. It would appear from that statement that Mr. Joujou does not merely seek the deletion of his name from the penal notice endorsed on the front of the Third Receivership Order, but also the discharge of the entirety of the order, insofar as it personally affects the Judicial Administrators. Mr. Boswood’s submissions were to like effect, although the latter went further to suggest that the orders against the Judgment Debtors themselves should be discharged.

It appears that on 22 April 2007, CCIC and CCOG commenced proceedings in the Republic of Yemen seeking to re-litigate the same issues in the Yemeni courts that had been determined in the final judgments of the English courts. As I have already mentioned, on 25 May 2007, on the application of the Judgment Creditor, this court (HHJ Mackie QC) granted an anti-suit injunction which prohibited CCIC and CCOG from commencing proceedings in other countries (other than EU Member States). The anti-suit injunction was appealed by the Judgment Debtors and a judgment was handed down by the Court of Appeal on 6 June 2008, dismissing the appeal. Following the grant of the injunction, and after some delay, the Yemeni proceedings were discontinued by the Judgment Debtors.

On 28 February 2010, CCOG filed further proceedings in Yemen, stating that it had not sold any oil since March 2008 as a result of the Judgment Creditor’s “… illegal actions and operations” which include, “… in exchange for a fee, to appoint a consultancy firm called Deloitte to interfere in a direct and negative way in the relationship between the plaintiff and the traditional buyers as well as potential buyers of [CCOG’s] oil from Yemen”.

It would appear that this is a reference to the Receiver’s appointment pursuant to the First Receivership Order. In the proceedings, CCOG also claims that the Judgment Creditor has conducted a widespread media campaign and that it has appointed an unnamed “British consultant” (apparently a reference to Simmons & Simmons) to threaten CCOG’s independent agent who was authorised to sell CCOG’s oil.

The evidence from the Judgment Creditor before me was that these proceedings had been dismissed by the Yemeni Court. However, the evidence of Mr. S C Andrew, a partner in S C Andrew LLP, solicitors for the Judgment Debtors, refers to there having been a further hearing in these proceedings on 27 November 2010. I was not informed of the outcome of this latter hearing.

The Judgment Creditor also sought to have the English judgments recognised in Greece, in accordance with the provisions of EC Regulation 44/2001 (“the Brussels Regulation). The judgments were recognised pursuant to a Greek judgment dated 21 October 2010, but the Judgment Debtors have lodged an appeal against recognition. There is some evidence to suggest that the Judgment Debtors have assets in Greece.

However, before the Judgment Creditor’s proceedings were issued, in September 2007 the Judgment Debtors commenced proceedings in Greece for a declaration that the English judgments should not be recognised or enforced in Greece. This application was lodged despite the provisions of the Brussels Regulation to the effect that a judgment creditor should be able to register a judgment in another Member State without any intervention by the judgment debtor: the judgment debtor only has the right to appeal the decision after it has been made.

The Judgment Debtors also began a second and third Greek claim on or around 17 April 2008. The second claim sought to re-litigate the issues that were determined in the English judgments. The third claim sought damages of some US$1 million on the alleged grounds that the Judgment Creditor attempted to serve documents on members of the Khoury family in Greece in a manner which did not comply with Greek law. It also sought an injunction prohibiting the Judgment Creditor from serving further court documents with a penal notice on the Judgment Debtors or their officers in Greece. The first and second claims of CCIC and CCOG in Greece were dismissed in a judgment dated 31 September 2010. However, I was informed that CCIC and CCOG may be appealing against those decisions.

The Judgment Creditor has also brought proceedings in other jurisdictions to seek to enforce his judgment These include the Cayman Islands, Azerbaijan, Bermuda and Qatar. To date, none of these proceedings has resulted in any significant recovery.

At the without notice hearing before the court on 1 December 2010, a number of grounds were advanced on behalf of the Judgment Creditor as to why it was necessary to extend the assets over which the Receiver should be appointed so that they included not just the proceeds from the sale of the oil, but CCOG’s share of the oil itself, including oil entitlements which will arise in future in respect of the CCOG’s contractual rights. I refer in particular to paragraphs 109-121 of Mr. Bartlett’s affidavit dated 30 November 2010.

In summary, Mr. Salzedo submitted as follows:

The First Receivership Order has not proved effective in enabling the Receiver to collect CCOG’s revenues from the sale of its oil entitlements because of CCOG’s refusal to provide information identifying purchasers and its refusal to account to the Receiver for revenues which it has received to his order. CCOG has failed to instruct the purchasers of the oil to pay the sales proceeds of oil to the Receiver. The Receiver has not to date been able to collect any oil revenues.

None of the orders granted by the English courts or those of other jurisdictions have yet resulted in the Judgment Creditor receiving any substantial sums in respect of the judgment debt. Certain amounts have been paid into court, or are subject to provisional attachments in the Cayman Islands and Switzerland, but these sums total less than US$ 1 million. The reasons for the failure of the First Receivership Order to bear fruit have been the Judgment Debtors’ determined efforts to circumvent the various orders.

Part of the Judgment Debtors’ strategy appears to involve delaying execution long enough that the Judgment Debtors will have no significant assets left. Their business affairs are being deliberately run down. The concession expires in December 2011 and certain of the Judgment Debtors’ other contracts will expire shortly thereafter. Neither CCOG nor CCIC are taking on new projects, such projects being taken on by other companies in the CCC Group. Since the vast majority of both companies’ assets consist of contractual revenue streams, this practice alone makes it inevitable that the assets of the companies are diminishing. Further, accounting information disclosed by the Judgment Debtors shows clearly very significant decreases in the value of their assets between mid-2007 and early-2008.

If the Receiver were put in a position himself to stand in CCOG’s shoes and himself to deal with CCOG’s oil entitlements (rather than merely to collect the proceeds of CCOG’s sales of CCOG’s oil entitlement), he would have actual control of sales of oil. He himself would arrange sales of CCOG’s oil and third party purchasers (potentially including other participants in the Masila Concession) and collecting the proceeds of such sales. The likelihood is that the Receiver would be able to arrange sales on FOB terms which would mean that the purchasers would be responsible for taking delivery of the oil at the export terminal.

The reason why this approach has a reasonable prospect of being effective in terms of enforcing the judgment debt (and a better chance than the existing receivership order) is that CCOG’s right to oil itself takes the form of a contractual right under a contract subject to English law (namely the JOA) and to arbitration against an independent third party (CNPY) which is itself based in jurisdictions where English judgments or arbitration awards are likely to be enforceable without difficulty. It is the JOA which provides the contractual nexus and would enable the Receiver (if the Receivership were extended) to receive, on behalf of CCOG, the oil of which CNPY has physical possession as operator of the concession.

The right of CCOG, acting by the Receiver, to lift the oil and transport it from the terminal, is a right that the Receiver (if the First Receivership Order were extended) could enforce by arbitration proceedings in England, brought on behalf of CCOG as against CNPY under the terms of the JOA. Such proceeding would effectively determine the question whether CNPY would receive a good receipt as against CCOG, if CNPY delivered the oil to the Receiver acting on its behalf.

CNPY, as an entity beyond the personal jurisdiction of the court, under principles of comity, is not required to recognise the Receiver’s rights without more. However, the appropriate mechanism for the determination of that dispute is arbitration under the Arbitration Act 1996, as envisaged under the JOA. Thus, the tribunal with competent jurisdiction over CNPY for the purpose of determining the question whether CNPY should treat the Receiver (or any other person) as acting on behalf of CCOG to call for the oil under the JOA is an arbitral tribunal established in accordance with the arbitration agreement contained in the JOA. Accordingly, this court has supervisory jurisdiction over any such arbitration proceedings pursuant to the provisions of the Arbitration Act 1996.

Such a mechanism together with an asset preservation order preventing CNPY from lifting any oil to which CCOG is entitled under the terms of the JOA save with the consent of the Receiver, would be an efficient and proportionate means of enforcing the judgment.

I accepted those submissions (and other submissions made by Mr. Salzedo) at the without notice hearing, as providing justifiable grounds for extending the ambit of the First Receivership Order and granting the APO. At the hearing on 1 December 2010, I asked the question whether the decision of the House of Lords in Masri v Consolidated Contractors (No 4) (Footnote: ¹⁵) affected the question whether penal notices should be included in the orders made at that hearing, not only as against Mr. Joujou, but also as against other alleged controllers of the Judgment Debtors who are not ordinarily resident in England and Wales. Mr. Salzedo provided the court with a supplemental submission dated 2 December 2010 in relation to penal notices. Taking into account those submissions, I made the Third Receivership Order on 1 December 2010 with the penal endorsement as set out above.

I turn now to consider the arguments put forward by Mr. Boswood at the hearing on 14 and 15 December 2010, on behalf of the Judicial Administrators, as to why the Third Receivership Order should be discharged.

Mr. Boswood’s argument may be summarised as follows:

As a matter of English law the court had no jurisdiction to order the service of the order out of the jurisdiction on Mr. Joujou, or to name him in the penal notice. There were a number of reasons why the English court lacked jurisdiction:

First, the English court had no personal jurisdiction over the Judicial Administrators. So far as the proceedings were concerned, he was a third party. Professor Naffah’s evidence showed that, as a matter of Lebanese law, he was not an officer or agent of CCOG or CCIC. Rather, Mr. Joujou represented the Lebanese Court in relation to its custodianship of the Judgment Debtors’ affairs. He therefore did not fall within the standard Babanaft (Footnote: ¹⁶) proviso as set out at paragraph 18(A) of the Third Receivership Order (“the Defendant or its officer or agent appointed by power of attorney”).

Second, even if Mr. Joujou were an officer or agent of the Judgment Debtors (which, submits Mr. Boswood, he is not), since the decision of the House of Lords in Masri (No. 4) (Footnote: ¹⁷), the fact that a corporate judgment debtor is subject to the English court’s jurisdiction does not mean that its directors or officers are likewise so subject. Accordingly, the Babanaft proviso in its current form (as it appears, for example, in Appendix 5 of the Admiralty and Commercial Courts Guide) is wrong. It fails to reflect the statement of Lord Mance at paragraph 34 of his opinion in Masri (No. 4):

Third, in any event, even if (contrary to the foregoing) there were personal jurisdiction, there was no subject matter jurisdiction to justify the service of an order out of the jurisdiction or the naming of Mr. Joujou in the order. It would therefore be illegitimate for him to be served with the order within the jurisdiction because of the absence of subject matter jurisdiction. As stated by Hoffmann J in MacKinnon v Donaldson (Footnote: ¹⁸) at 493:

Fourth, accordingly, as a matter or principle, it is therefore impermissible for the English courts to attempt to compel the Judicial Administrators to act in a certain way outside the jurisdiction. Yet the order seeks to do just that. Indeed, on the basis of the authorities referred to above it is difficult to see the new, extended receivership order as other than wholly exorbitant, as it purports to be an order which interposes a receiver into a contract in relation to and as manager of assets located overseas in Yemen; and it purports to “… impose obligations on persons not before the court in respect of acts to be done by them abroad regarding property outside the jurisdiction….”, namely the Judicial Administrators, in relation to their duty to deal with a Lebanese company’s assets outside England.

Fifth, because Mr. Joujou was named in the penal notice, he was wrongly deprived of the protection of the Babanaft proviso contained in paragraph 18(C) of the Third Receivership Order. It was wrong to require Mr. Joujou, as an officer of the Lebanese Court, to assist in the enforcement of an English judgment before such time as the Judgment Creditor had obtained exequatur of the English judgment from the Lebanese Court; at present, the Judgment Creditor had lodged an appeal to the Lebanese Court of Cassation, against the discharge of the exequatur order granted in his favour. Indeed, in the absence of any order of exequatur from the Lebanese Court, it was wrong that there should be any extension of the First Receivership Order even as against the Judgment Debtors themselves.

Sixth, on any basis, as in Masri (No. 4), there was no gateway permitting service of contempt proceedings out of the jurisdiction. The English Court should not be seen to be threatening non-parties outside the jurisdiction with imprisonment unless there was proper jurisdiction over them.

Seventh, the terms of the Third Receivership Order, and in particular the provisos entitling the Receiver to exercise CCOG’s rights to the exclusion of CCOG or any agent or officer of CCOG, and restraining CCOG from receiving or selling any oil, or from taking any steps in any jurisdiction in the world the object or effect of which is to interfere with the receivership, place Mr. Joujou in impermissible double jeopardy so far as the Lebanese Courts are concerned. On the one hand, if he fails to comply with the Third Receivership Order, he is under threat from the English Court for contempt of court; on the other hand, if he takes any steps to carry out the order or to co-operate with the Receiver, he will be acting in breach of orders of the Lebanese Court, exposing him to serious professional and legal sanctions. As Lawrence Collins LJ said in Masri (No 2) (Footnote: ²¹):

Eighth, in any event, the Judicial Administrators are “an emanation of the Lebanese State. Professor Naffah states (Footnote: ²²):

Accordingly, the Third Receivership Order should be discharged in its entirety (i.e. as against the Judgment Debtors as well) or at least insofar as it affects Mr. Joujou and the other Judicial Administrators personally who, the evidence shows, are completely independent of any of the shareholders in the CCC Group.

Tenth, moreover, the order should in any event be discharged on grounds of non-disclosure, since counsel for the Judgment Creditor did not bring to the court’s attention, either sufficiently or at all, the relevant legal principles, the evidence relating to Lebanese law and double jeopardy or the status of the Judicial Administrators as emanations of the Lebanese State.

I do not separately summarise the submissions put forward by Mr. Salzedo, on behalf of the Judgment Creditor, in response to Mr. Boswood’s submissions, as my reasons for continuing the Third Receivership Order in its revised form reflect, to a considerable extent, the submissions which Mr. Salzedo made at the hearing.

I start from the proposition that:

I also bear in mind that before this court makes an order such as the receivership order sought here, which may have extra-territorial effect, it

In particular, this court is very mindful that it must not trespass on what are matters properly within the jurisdiction of the Lebanese Court, or appear in any way to be dictating to, or interfering with, the powers of the Lebanese Court in derogation from universal principles of comity.

The general merits of the case which informed the exercise of my discretion to grant and continue the Third Receivership Order as against CCOG after the on notice hearing are largely those set out in paragraph 61 above. Unless such an order were made, it would, as the history of the Receiver’s unsuccessful attempts to implement the First and Second Receivership Orders have shown, be impossible for the Receiver to take effective steps to attach CCOG’s oil and entitlement to oil in the Masila Concession to enforce the judgment. There was a sufficient connection with England and Wales to found subject matter jurisdiction against CCOG for the purposes of the Third Receivership Order, given the submission of the Judgment Debtors to the jurisdiction, the various judgments, and in particular, the ability to enforce CCOG’s rights, acting by the Receiver, to its oil entitlement as against CNPY through the mechanism of English arbitration proceedings. The granting of the extended receivership order as against CCOG provided at least a prospect of assisting in the process of the ultimate collection of the judgment debt. That was a legitimate purpose.

Moreover, in my judgment there is a real, substantial and increased risk of dissipation, since the date of the First and Second Receivership Orders.

The recent history of the Judgment Debtors’ and their shareholders’ deliberate attempts to obtain orders of the Lebanese Court blocking the Judgment Debtors from paying the judgment debts to the Judgment Creditor, the subsequent wholesale resignations of CCOG’s and CCIC’s directors and those directors’ application (not opposed by the shareholders) for the appointment by the Lebanese Court of Judicial Administrators, and the refusal of any shareholders to constitute quorate shareholders’ meetings of CCOG and CCIC, leads to the drawing of only one inference. That inference is that the application to the Lebanese Court for the appointment of the Judicial Administrators, so that the management of the Judgment Debtors could be carried out by the Judicial Administrators, and the refusal of the shareholders to participate in shareholders’ meetings so as to re-elect directors, is the implementation of a deliberate strategy on the part of the Judgment Debtors and their shareholders, designed to frustrate any attempt by the Judgment Creditor to enforce the judgment debt and to render the Judgment Debtors effectively judgment-proof in any jurisdiction.

It is clear from the Lebanese Court’s order of 20 December 2008 that the grounds which were said to justify the appointment of the Judicial Administrators was the “vacancy in the management of the company exposing its interests to harm”. That vacancy and the continuing refusal of the Judgment Debtors’ shareholders to participate in meetings called by Mr. Joujou was entirely self-induced by the Judgment Debtors and their controlling shareholders, who, by refusing to attend the shareholders’ meetings have clearly expressed their determination to keep the Judgment Debtors without a legally appointed board (Footnote: ²⁵). I have little doubt that they regard the purpose of the administration as indeed being that described by Professor Naffah which I have referred to above, namely to insulate or immunise the Judgment Debtors from the pressure that would otherwise be put on them by the risk of being in contempt of this court. The so-called “corporate crisis” and double jeopardy which the Judgment Debtors – and the Judicial Administrators – potentially face, is one that has been deliberately engineered and maintained by the Judgment Debtors and their shareholders.

Despite the fact that, once a judicial administrator is appointed, the powers of the directors are transferred to the judicial administrator, the judicial administrator does not have to report to the shareholders, and it is for the court to decide how long the judicial administration should last, I, like Tomlinson J (Footnote: ²⁶), have no doubt that if they perceived it as being in their interests to do so, CCOG and CCIC and their controlling shareholders could effectively refer or apply to the Lebanese Court to take back control of the Judgment Debtors or to request the Lebanese Court to direct the Judicial Administrators to honour the Judgment Debtors’ judgment debt to the Judgment Creditor (Footnote: ²⁷). For the purposes of this application, I also accept Professor Slim’s evidence (Footnote: ²⁸) that “the purpose of the appointment of a judicial administrator is not to ‘insulate’ and ‘immunise’ a company against foreign proceedings, including contempt proceedings for breaches of court orders”.

In making these comments, I am not suggesting either that the order appointing the Judicial Administrators by the Lebanese Court was a sham, or that the order was one which the Lebanese Court was not entitled to make, or should not have made. These are matters for the Lebanese Court, with whose jurisdiction in relation to such matters I would not presume to interfere. The fact that such orders have been made are necessarily matters which I must (and do) take into account in deciding whether, given that they have been made, I must discharge the Third Receivership Order as against the Judicial Administrators or whether, in the exercise of my discretion, I should do so.

But the starting point is that the constraints to which CCOG and CCIC and the Judicial Administrators are currently subject, as a result of the orders of the Lebanese Court and the appointment of the Judicial Administrators, have been brought about entirely as a result of actions deliberately taken on behalf of the Judgment Debtors and their controlling shareholders, as part of a sophisticated strategy to render the Judgment Debtors judgment-proof. This is not a case where judicial administrators have been appointed over the affairs of an insolvent, or borderline insolvent, company, in order to protect the assets of the company in the interests of creditors, or one where the court’s intervention has been rendered necessary in order to preserve the business of the company as a result of dissension between majority and minority shareholders. There is here no genuine dysfunction of the managing organs of the companies.

It is against the above background that I approach the Judicial Administrators’ application to discharge the Third Receivership Order insofar as it affects them personally.

As Mr. Salzedo submitted, the function of the penal notice which is required to be “prominently displayed” on the front of any copy of an order requiring a body corporate to do or abstain from doing an act, is to warn the particular officer of the body corporate that disobedience to the order would be a contempt of court which may be punishable by the imprisonment of any individual responsible: see RSC Order 45 rules 5 and 7(2), (4), (6) and (7). Subject to the court’s power to dispense with service of a copy of the order endorsed with the notice, in appropriate circumstances (under RSC Order 45 rule 7(6) or (7)), an order for committal will not be made against an officer unless such a notice has been served.

Thus, the inclusion of Mr. Joujou’s name in the penal notice per se does not affect the question whether he is, or is not, bound by the terms of the actual order. It only strictly affects the question whether or not an order can be enforced against such a person by committal, although Mr. Salzedo accepted that it would not be proper to include a person’s name in such a notice if there was no justification for including him as an officer or a person responsible for the body corporate’s acts or omissions, because he was genuinely a third party. I accept Mr. Salzedo’s submission that the critical issue is whether Mr. Joujou (and, indeed, the other Judicial Administrators) should be included in the wording of paragraph 18(A) of the revised Third Receivership Order as an:

I also accept Mr. Salzedo’s submission that, if I take the view, despite Mr. Boswood’s submissions, that Mr. Joujou should be included, then questions as to whether an application for committal for contempt could or should be served out of the jurisdiction or within the jurisdiction, as against Mr. Joujou in relation, for example, to acts committed outside the jurisdiction (whether in Lebanon or elsewhere) is a jurisdictional issue for determination at a further date. As, of course, is any factual question as to whether he is in contempt.

However, the fact is that the issue whether Mr. Joujou should be bound by paragraph 18(A) of the Third Receivership Order arises not only in the context of acts or omissions of CCOG out of the jurisdiction, but also in the context of CCOG’s acts or omissions (acting through Mr. Joujou) within the jurisdiction. I mention, by way of example, the possibility of interference by CCOG, acting (or purporting to act) by the Judicial Administrators, with CCOG’s conduct of the English arbitration proceedings against CNPY which I have directed the Receiver to bring acting on CCOG’s behalf.

Mr. Boswood also complained about the inclusion of the “without prejudice” wording in the penal notice, but, in my judgment, this criticism was unfounded. I ordered that this wording should continue to be used, as it makes clear that this court is not, on this application, determining Mr. Joujou’s capacity or status under Lebanese law. It would not be appropriate to do so in the absence of full argument and cross-examination of the Lebanese law experts.

In the light of Mr. Boswood’s submissions, this question raises the following issues:

As a matter of jurisdiction and in the light of the decision in Masri (No. 4) (supra) is it ever appropriate to include foreign officers or persons “… acting in the capacity of, or in place of, a decision-making organ of the defendant” or “directing minds” (Footnote: ³⁰) of a defendant company subject to the jurisdiction of the English court, in a standard paragraph such as paragraph 18(A) as being directly affected by an injunction granted by the English court in respect of property outside the jurisdiction, notwithstanding that the order has not been recognised in the state were the foreign officer resides?

Even if there is personal jurisdiction over Mr. Joujou or the other Judicial Administrators is there subject-matter jurisdiction?

Are the Judicial Administrators “emanations” of the Lebanese State and consequently not to be included in any order?

Are the Judicial Administrators persons “… acting in the capacity of, or in place of, a decision-making organ of” CCOG?

As a matter of discretion, should the English court make an order which might put the Judicial Administrators in conflict with the orders of the Lebanese courts and/or expose them to double jeopardy because of those court orders, in circumstances where the Judgment Creditor has not yet obtained exequatur of the liability judgments in Lebanon?

The standard wording which appears in paragraph 18(A) of the Third Receivership Order including: “officers or agents appointed by power of attorney” (“the standard officers’ wording”) is the same as, or similar to, that which appears, or has appeared, in the standard forms of world-wide freezing order for many years (Footnote: ³¹). According to Mr. Salzedo’s research, the first use of the standard officers’ wording appeared in Derby & Co Ltd v Weldon (Nos. 3 and 4) (Footnote: ³²); see, in particular, the discussion in the judgment of Lord Donaldson MR at pages 84D – E and 86G – 87C, and per Neill LJ at 84C – E. Interestingly, a proviso in those terms was included in the context of a receivership order over the assets of a foreign company, not merely that of a freezing order.

This was a decision after Babanaft (to which the Court of Appeal referred in Derby v Weldon). The statement of Nicholls LJ in Babanaft at page 45 (quoted at paragraph i)b) above) upon which Mr. Boswood relied, must have been considered in Derby v Weldon by the Court of Appeal who nonetheless made the order in the terms which they did, including a reference to “… officers or agents appointed by power of attorney” being affected by the terms of the order outside the jurisdiction, notwithstanding that such order had not been declared enforceable by a foreign court. The Court of Appeal therefore cannot have thought that Nicholls LJ’s dictum required them to exclude officers or “directing minds”.

Apart from the fact that countless orders have been made including the standard officers’ wording since the decision in Babanaft, the Court of Appeal in this case has confirmed both the First Receivership Order and the Second Receivership Order with the inclusion of such wording. The practice is well-established.

Moreover, the editors of the Fifth Edition of Briggs on Civil Jurisdiction (which was published in 2009, after the House of Lords’ decision in Masri (No. 4), and contains references to it) refers to the Babanaft proviso (including the standard officers’ wording) as “… the present exemplary version of the notice in respect of third parties outside the jurisdiction.” (Footnote: ³³)

The decision of the House of Lords in Masri (No. 4) was a decision on the construction of CPR Part 71.1. Their Lordships concluded that given (inter alia) its historical context, CPR Part 71.2 could not be construed as applying extra-territorially to directors or officers of a corporate judgment debtor who were third parties for this purpose and whose position was to be regarded “as closer to that of ordinary witnesses” (Footnote: ³⁴). The House of Lords held that their conclusion was reinforced by a consideration of the position in relation to service. They held that neither CPR Rules 6.20(9) nor 6.30(2) (as then in force), properly construed, permitted service of such a summons outside the jurisdiction.

However, the House of Lords in Masri (No. 4) did not consider the position whether a director or officer out of the jurisdiction could be liable for contempt of court or whether contempt proceedings could be served on such a person outside the jurisdiction, or served within the jurisdiction in relation to acts outside the jurisdiction. That would have required the House to consider, inter alia: the construction and legislative intendment of RSC Order 45, Rule 5 (with its express references to officers of bodies corporate); the decision of the Court of Appeal in Mansour v Mansour (Footnote: ³⁵); the terms of the Babanaft proviso, including the standard officers’ wording; and whether service is permitted under the enforcement gateway in Practice Direction 6B, paragraph 3.1(10), not least because RSC Order 45 Rule 5(1) expressly provides that a judgment or order may be enforced by committal proceedings against a director or other officer of the defendant.

Accordingly, I consider that neither the decision nor the reasoning in Masri (No. 4) requires me, without more, to exclude any references to the Judicial Administrators or Mr. Joujou in paragraph 18(A) of the revised Third Receivership Order. On the contrary, I consider that the Judgment Creditor has a good arguable case for such inclusion. First of all, as Mr. Salzedo submitted, the issue whether the Judicial Administrators are subject to such orders, or can be served with them, falls to be determined if and when contempt proceedings are served outside the jurisdiction on any of the Judicial Administrators. Second, there is a real possibility that Mr. Joujou could be served within the jurisdiction (Footnote: ³⁶). Third, as I have mentioned, there is a real possibility that CCOG, acting by Mr. Joujou, might seek to act in breach of the Third Receivership Order within the jurisdiction, if no such order is made. Fourth, in my view, there are good arguments for saying that the reasoning in Masri (No. 4) does not apply to receivership orders or injunctions of this kind, where the director or officer is named in the order, not in any third-party capacity, but because he is the directing mind or controlling organ of the corporate defendant or judgment debtor, and the person through whom any breach of the order will be committed by the corporate defendant/judgment debtor. It is not that such a person is the alter ego of the defendant. Rather, he is the person who, under the rule of attribution applicable to the injunction and any contempt proceedings under RSC Order 45, rule 5, for breach of the order, is the person whose acts or omissions are, for this purpose, to count as the acts or omissions of the company (Footnote: ³⁷). As Mr. Salzedo submitted, the order is not one that is made as against Mr. Joujou or his co-Judicial Administrators. The order is against CCOG. Mr. Joujou is merely being warned that he may be held liable to contempt proceedings if he procures the Judgment Debtors to act in contravention of its terms. It is in that capacity, and not in any third-party capacity, that the English court has personal jurisdiction over the foreign director or officer.

In my judgment, if the requirement for personal jurisdiction is satisfied, then the Third Receivership Order, including the reference to the Judicial Administrators in paragraph 18(A) of the revised order, is within the subject matter jurisdiction of the English court. That is because there is a sufficient connection here with the English jurisdiction to justify this court seeking to regulate the conduct of CCOG, acting by the Judicial Administrators outside the jurisdiction, as part of an enforcement measure ancillary to the liability and quantum judgments of the English court. Indeed, the same point was decided in the Judgment Creditor’s favour (in relation to CCOG “or its officer or agent appointed by power of attorney”) in Masri (No. 2) (Footnote: ³⁸).

As I have set out in paragraph 20 above, the revised paragraph 18(A) wording which Mr. Salzedo sought to substitute for the original wording in the Third Receivership Order refers to:

Mr. Salzedo submitted that this wording correctly described Mr. Joujou’s role because “… he stands in the shoes of the directors for taking decisions about what [CCOG] is going to do”.

In paragraphs 33 – 36 of the Naffah Affidavit, Professor Naffah states the following about the role and powers of a judicial administrator appointed under Lebanese law to manage the affairs of a company:

However, Professor Naffah goes on to express the view that a judicial administrator is “an officer of the Lebanese Courts”, and that this means that he “is to be considered as an organ of the Lebanese judiciary and consequently the Lebanese state itself”.

At paragraph 48, he states:

Professor Slim does not agree with this analysis that a judicial administrator is an emanation of the state, nor that his acts are “sovereign acts of the Lebanese Court”. At paragraph 4.27 of his expert report, he expresses the following views:

For the purposes of this application (and without finally determining the matter), I consider the analysis of Professor Slim to be preferred. In the context of section 14(2) of the State Immunity Act 1978, I do not characterise the Judicial Administrators, when discharging their functions as such, as doing so in the “exercise of sovereign authority”. Even if their status could be so characterised, immunity would not in any event be attracted under the Act since the acts of the Judicial Administrators relate to commercial activities, rather than the exercise of any sovereign authority on behalf of the Lebanese State: see Kuwait Airways Corporation v Iraqi Airways Co (Footnote: ³⁹) and Kuwait Airways Corporation v Iraq Airways Co (Footnote: ⁴⁰).

Accordingly, I see no reason at this stage, on the grounds of alleged state sovereign immunity, not to make an order referring to the Judicial Administrators. In my judgment, the Judgment Creditor has strong grounds for arguing that the principle is not applicable.

Irrespective of whether the Judicial Administrators are actually agents of the Judgment Debtors, it is clear from the evidence of both Professor Naffah and Professor Slim that they, and, in particular, Mr. Joujou (who has been entrusted with the management of the Judgment Debtors) are the persons who have power, according to Lebanese law, to carry out any legal act on behalf of the Judgment Debtors, and who, in place of the directors, exercise all the decision-making and management powers and functions of the directors (Footnote: ⁴¹). Accordingly, they are the persons whose acts and omissions, for the purpose of the First, Second and Third Receivership Orders (and the other orders of the English court), are to be counted as the acts and omissions of the Judgment Debtors in accordance with the attribution rules referred to in Meridian (supra).

The approach to the exercise of the court’s powers to make an injunction where there is a suggestion that compliance with its requirements will involve incrimination under another system law is a “flexible discretionary one”; see per Tomlinson J (Footnote: ⁴²), citing Brannigan v Davison (Footnote: ⁴³) and Morris v Banque Arabe et Internationale d’Investissement (Footnote: ⁴⁴).

Tomlinson J’s approach to the orders of the Lebanese Court was directly approved by the Court of Appeal on CCIC’s (unsuccessful) application for leave to appeal against his judgment (Footnote: ⁴⁵).

On the basis of the evidence before me, (including the Lebanese expert law evidence), I assess the real risk of any criminal, civil or professional sanctions being imposed on Mr. Joujou (or his co-Judicial Administrators) as a result of the orders of the Lebanese Court as being very small indeed.

In coming to this conclusion, I take into account the order of the Lebanese Court made on 7 January 2011, following the application of Mr. Joujou dated 17 December 2010 (and post-dating the hearing before me). This provided:

My reasons for assessing the risk as very small may be summarised as follows:

According to the evidence, there are no assets of the Judgment Debtors within the Lebanese jurisdiction. That being so, there are no steps, on the evidence before me, that Mr. Joujou is required to take within the jurisdiction of the Lebanese Court pursuant to the Third Receivership Order that would create any conflict with any of the orders of the Lebanese Court.

Insofar as the directions of the Lebanese Court require Mr. Joujou to take steps, or to refrain from taking steps, outside the jurisdiction of the Lebanese Court which may be in conflict with the Third Receivership Order, or other orders of this court (for example, the order of 7 January 2011 requiring Mr. Joujou to take steps “to preserve” CCOG’s rights and interests including those relating to the lifting and sale etc of CCOG’s oil from the Masila concession), or to make representations in relation to the arbitration proceedings, I consider there would be very little realistic likelihood of Mr. Joujou being subject to any sanctions from the Lebanese Court, or to professional sanctions, if he failed to comply with such directions because of his concerns about his potential liability under orders of this court.

Given my findings (as set out at paragraph 71-75 above) that the constraints of the Lebanese Court orders to which CCOG and the Judicial Administrators are purportedly subject, are the result of the adoption of a deliberate anti-enforcement strategy on the part of the Judgment Debtors, I have little doubt that, if Mr. Joujou requested the Judgment Debtors to do so, and if they chose to do so, the Judgment Debtors (and their controlling shareholders) could ensure either that the directions of the Lebanese Court were varied, or that Mr. Joujou were relieved of the obligation (if any) on his part to act in contravention of the order of the English court in Yemen or elsewhere.

The orders of the Lebanese Court do no more than direct Mr. Joujou to act in a certain way, or give liberty to him to act in certain ways. They do not impose any obligation upon him to act in a particular way in relation to the take up of oil. Indeed, the evidence shows that he has left CCOG’s employees to deal with these matters.

It is clearly open to Mr. Joujou (and his co-Judicial Administrators), whose fees are being paid voluntarily by the Judgment Debtors, to resign or stand down at any time from their office as Judicial Administrators, if he or they consider that they are being put in a difficult or impossible position because of the orders of the English court and their alleged conflict with the orders of the Lebanese Court. This is not a case where the appointment of the Judicial Administrators by the Lebanese Court can be said to be justified on the basis of any wider public interest (such as, for example the court appointment of administrators in the case of the insolvency of the subject company, in the interests of creditors). The appointment here was merely to serve the private interests of the Judgment Debtors, to render themselves judgment-proof.

The evidence of Professor Slim (which I prefer to that of Professor Naffah in this respect) concludes that Mr. Joujou is not likely to be the subject of criminal sanctions for failing to follow the directions of the Lebanese Court, or for breach of his judicial oath.

I have taken into account the fact that Mr. Joujou has professional duties and obligations to the Lebanese Court, and also, no doubt, to those who sought his appointment. However, one cannot disregard the reality that there is no obligation (professional or otherwise) upon an independent professional to continue to act as an instrument in the implementation of a deliberate anti-enforcement policy, in the interests of a judgment debtor and its shareholders, when there is no reason (other than concerns about personal exposure of directors to liability for breach of the orders of the English court) which prevents the Judgment Debtors’ shareholders themselves from appointing directors to manage the companies’ affairs, and thereby bringing the judicial administration to an end.

For the above reasons, I refused the application by Mr. Joujou and the Judicial Administrators to discharge the Third Receivership Order insofar as it affected them, and continued the Third Receivership Order in its revised form, including a penal notice which expressly referred to Mr. Joujou.