Jalal Bezee Mejel Al-Gaood & Partner & Anor v Innospec Ltd & Ors

The first claimant is a Jordanian registered company which traded at all material times as “NUFT” and/or “NASS”. Its primary business was the supply of special chemicals such as lubricant additives and fuel additives to the oil refining industry. These additives were purchased during the period with which this case is concerned (2000 to 2011) from subsidiaries of Ethyl Corporation (now known as Newmarket Corporation) in the United States, including Ethyl Petroleum Additives Inc, now known as Afton Chemicals Corporation. I will refer to those companies compendiously as “Ethyl”. The second claimant is an Iraqi registered company established for the purpose of carrying on the same business as the first claimant under a 2004 distribution agreement with Ethyl. However the second claimant is dormant and for all practical purposes the business in Iraq was carried on by the first claimant. Mr Jalal Al-Gaood owns 95% of the equity in the first claimant and 100% of the equity in the second claimant and is and was at all material times a director of both. He was clearly the driving force behind these proceedings and was the claimants’ principal witness.

The first defendant (formerly known as Associated Octel Corporation Limited) is an English company which manufactured and sold speciality chemicals including a lead based fuel additive called tetraethyl lead (“TEL”). The first defendant is a 100% subsidiary of the second defendant, formerly known as Octel Corporation, incorporated in Delaware but with its headquarters at the first defendant’s plant in Ellesmere Port, Cheshire. The third defendant, Dr David Turner (with whom the claimants have settled their dispute) was employed by the first defendant as regional sales manager for TEL for Europe, Asia and Australasia from 1994 to 2006 then as business director of TEL from 2006, reporting directly to Mr Paul Jennings, the chief executive officer. Alcor Chemie Vertriebs GmbH (“Alcor”) is a Swiss company which manufactured and supplied fuel additives. It was acquired by the second defendant in 1999 and thereafter acted as a distributor for the defendants’ additives, including TEL. Save where it is necessary to distinguish between these companies, I will refer to them compendiously as “Innospec”. Innospec’s agent for sales of TEL in Iraq was Ousama Naaman acting by his companies Interact and Tawam. The principal individuals who dealt with Mr Naaman were Dr Turner at the first defendant and Mr Norbert Schack at Alcor.

TEL was widely used throughout the world between about 1925 and 1990 for the purpose of increasing the RON (Research Octane Number) of gasoline (Footnote: ¹) and increasing its antiknock quality. Its use has been phased out across the world over the last 25 years (other than in Iraq and a very small number of developing countries) following the US Environmental Protection Agency Order 1972 to eradicate leaded fuel, because of the well-known and widely reported detrimental effects of lead on people and the environment. Accordingly, during the period with which this case is concerned, it was what is described as a “sunset product” with no future once lead was phased out of gasoline in any given country.

One of the products manufactured by Ethyl was methylcyclopentadienyl manganese tricarbonyl or “MMT” developed as a manganese based octane boosting and antiknock additive which was less toxic than TEL. It has been in use worldwide since the 1950s. Ethyl sells two different variants of MMT for use in refineries, HITEC 3000 which contains 24.4% manganese by weight and HITEC 3062, which contains 15.1% manganese by weight. This case is concerned with HITEC 3062, which was the product under consideration in Iraq during the period 2003 to 2010.

It is the claimants’ case that, during the period 2003 to 2008, Innospec conspired to injure the claimants by engaging in corrupt practices, in particular the bribery of officials within the Iraqi Ministry of Oil (“the MOO”) with the intention of inducing its refineries to buy TEL rather than MMT manufactured by Ethyl and sold by the claimants. The parties to the conspiracy are said to have been not only the first and second defendants (acting by Dr Turner and Mr Jennings) but Mr Schack of Alcor and Mr Naaman. The claimants claim damages for the losses they allege they have suffered as a consequence of the conspiracy on the basis that, but for the bribery and corruption, the MOO would have started to purchase MMT for its annual additive requirements and phased out TEL use from late 2003/early 2004 onwards. The loss is quantified by the claimants’ quantum expert Adrian Howick at US$26,572,603, based on the annual production figures provided by the MOO. Alternative formulations of higher damages claims based upon different production figures produced by various international organisations are no longer pursued, as it is accepted that those alternative production figures are not reliable.

It is a striking feature of the case and one on which the claimants place particular reliance, that the second defendant and Mr Naaman have been variously charged by the United States Department of Justice (“the DOJ”) with and have pleaded guilty to criminal offences (principally under the Foreign Corrupt Practices Act 1977) in relation to bribery and corruption in Iraq and Indonesia. The offences alleged in relation to Iraq were concerned with (i) the payment of after sales service fees (or ASSFs) to the Government of Iraq before the allied invasion in 2003, contrary to the terms of the Oil for Food Programme (“OFFP”) operated by the United Nations at a time when the Saddam Hussein regime was subject to UN sanctions and with (ii) the payment or promise of bribes to officials of the MOO and the Trade Bank of Iraq. Both the second defendant and Mr Naaman admitted the commission of offences and entered into plea agreements with the United States authorities. Civil proceedings were also brought by the Securities and Exchange Commission (“SEC”) against the second defendant, Dr Turner, Mr Jennings and Mr Naaman. Criminal proceedings were also brought in England by the Serious Fraud Office (“SFO”) against the first defendant and against Mr Jennings, Dr Turner and another director Mr Kerrison. The first defendant, Dr Turner and Mr Jennings all pleaded guilty and Mr Kerrison was recently convicted after a jury trial. The criminal proceedings and the admissions made are of importance in the case and I therefore propose to summarise the position in the criminal proceedings early in this judgment.

In addition, Ethyl commenced civil proceedings against Innospec in the District Court of the Eastern District of Virginia (“the Newmarket proceedings”) claiming damages for loss suffered as a consequence of corrupt practices by Innospec in Iraq and Indonesia. The claim was for some U.S. $123 million, of which U.S. $102 million related to Iraq and the balance to Indonesia. The allegations in relation to Iraq were broadly similar to the allegations made by the claimants in the present proceedings. Those proceedings were settled in September 2011 by Innospec agreeing to pay Ethyl U.S. $45 million. The settlement was described by Mr Williams, the current General Counsel of Innospec, who gave evidence, as a “black box” settlement, where that sum was not apportioned between the Iraq claims and the Indonesia claims, so that it was impossible to say what proportion of the settlement sum related to Iraq. A large number of the documents disclosed by Ethyl in the Newmarket proceedings have been made available in the present proceedings, but on terms designed to preserve the confidentiality of sensitive commercial and confidential information.

In summary, in the present proceedings the claimants allege that Innospec is liable to them for the tort of unlawful means conspiracy. Although there was originally an issue as to whether any tort was governed by Iraqi or English law, by the time of the trial it was common ground that the question of whether a tort was committed was governed by English law.

The claimants’ case is that, by October 2003, a decision had been made by the MOO to switch from TEL to MMT and to place an order for 1,000 metric tons of MMT. Notwithstanding that decision, no order was placed and it was not until late in 2004 that the MOO indicated that it wished to purchase a small quantity of 50 metric tons of MMT for trial purposes. In the event, an order was placed for 120 metric tons in May 2005. In the meantime, during the course of 2004, the MOO negotiated with Innospec for the supply of TEL pursuant to a three year “take or pay” agreement and a long term purchase agreement was entered between Alcor and the MOO on 15 October 2004 (“the 2004 LTPA”). It is the claimants’ case that the decision to continue using TEL rather than switching to MMT and the entry of the 2004 LTPA were induced by bribes or the promise of bribes to MOO officials in late 2003 and that Innospec is liable in tort for unlawful means conspiracy. The court is invited to infer this from a number of matters, including that Innospec and Mr Naaman admitted in the DOJ proceedings that a bribe was paid to procure two shipments under the LTPA, although there was no specific allegation or admission in those criminal proceedings that the 2004 LTPA had been procured by bribes or the promise of bribes.

After the 120 metric tons of MMT was supplied, the MOO carried out a field test on about three metric tons of MMT at their Daura refinery over a period of some six months from June to December 2006. The claimants’ case is that the test was unnecessary and in effect a charade and that corrupt officials ensured that the test took a long time and that MMT failed the test. This is said to be in fulfilment of a promise at a meeting in Dubai between Dr Turner, Mr Naaman and Mr Luaibi and Mr Ghassab of the MOO in March 2006 at which, according to Mr Naaman: “our people [evidently a reference to Mr Luaibi and Mr Ghassab] promised that they will work to delay the consumption of this quantity to at least 14 months and to fail the field test of MMT”. The claimants also rely upon the fact that Innospec and Dr Turner admitted in the criminal proceedings that U.S. $155,000 had been paid to Mr Naaman to pay bribes to officials to fail the field test. However, in his plea agreement Mr Naaman admitted that, whilst he had taken that money from Innospec for that ostensible purpose, he had kept the money himself and not paid it over. He also provided Innospec with a false translation of the conclusions of the field test to make it appear that it had been failed when it had not.

In fact the remaining 117 metric tons was used as an additive in gasoline produced at the Daura refinery in the period from about August 2007 to June 2008, sometimes on its own and sometimes in mixture with TEL. However, the claimants’ case is that there was an anti-MMT faction of officials within the MOO who were being bribed or promised bribes to keep ordering TEL and to ensure that there was no switch to MMT. In late 2007, at a time when the 2004 LTPA was coming to an end, the claimants say there was another move to switch from TEL to MMT which was scotched by this corrupt group and that instead, in January 2008, a new LTPA (“the 2008 LTPA”) was agreed at a meeting in Beirut between Dr Turner, Mr Naaman and MOO officials.

The claimants’ case is that the 2008 LTPA was also procured by bribes or promises of bribes. Reliance is placed on the fact that Innospec pleaded guilty to a count in the DOJ proceedings that they had agreed to pay Mr Naaman increased commission on orders placed under the 2008 LTPA in an amount of U.S. $850,000 which he would have used to pay bribes. In the event, that money was not paid over because the 2008 LTPA was not performed, since investigations by the US authorities into allegations of bribery by Innospec in Indonesia and Iraq commenced at around that time.

The claimants also allege that between 2002 and 2008 payments were authorised by Innospec for travel and other expenses, including pocket money for Iraqi officials to incur goodwill and ensure continued orders of TEL.

It can thus be seen that the claimants allege that bribes were paid or promised throughout the period during which the conspiracy was said to operate. However, by the end of the trial, it was common ground that, for the claim as put forward to succeed, the claimants had to establish three matters on a balance of probabilities: (i) that there had been a decision by the MOO in October or November 2003 to replace TEL with MMT and to continue using TEL only until stocks were exhausted; (ii) that that decision was not implemented because the promise of bribes by Mr Naaman procured the MOO to enter into the 2004 LTPA and that prevented sales of MMT and (iii) that, but for the promise of bribes, the decision would have been implemented and the MOO would have replaced TEL with MMT from early 2004 onwards, so that the counterfactual scenario on which the claim is based would have occurred.

It is important to emphasise that common ground at the outset of the judgment. It follows that, even if the claimants could establish that bribes were promised to procure that MMT failed the field test or that the 2008 LTPA was induced by the promise of bribes, their claim cannot succeed unless they can demonstrate on a balance of probabilities the three matters set out above concerning a decision to switch to MMT in October or November 2003, which was thwarted by the promise of bribes which procured the 2004 LTPA. The claimants have to accept that this is the position, because they have advanced no alternative counterfactual case as to what the position would have been if the MOO had switched from TEL to MMT at some later date in 2005 or 2006 or 2007.

Innospec deny that bribes or the promise of bribes induced the 2004 LTPA or led to the requirement of the field test or its result or induced the 2008 LTPA. They submit that, despite the admissions in the criminal proceedings, the court must look carefully and analytically at the evidence there is as to what bribes were paid and promised and when and whether any bribes paid or promised actually led to a decision different from that which would have been made anyway. Mr Onions QC for Innospec submits that when such rigorous analysis is applied, no part of the claimants’ case is made out. However, the defendants particularly focus on the 2003/2004 period and submit that not only is there no evidence (even from the admissions in the criminal proceedings) that the 2004 LTPA was procured by bribes or the promises of bribes, but that the claimants cannot make out either of the other essential elements of their case, that there was a decision to switch from TEL to MMT and that, but for the promise of bribes, the decision would have been implemented.

Before considering in more detail the criminal proceedings and the allegations which have been admitted, I propose to make findings about various background matters which have a bearing upon the credibility and recoverability of the claim, specifically (i) the state of the refineries in Iraq in the relevant period and the octane number of base gasoline produced at each refinery; (ii) the relative boosting abilities and cost of TEL and MMT and the extent to which they might be used in a mixture and (iii) the political and economic situation in Iraq during the relevant period.

There are three main refineries in Iraq: at Daura (also known as the Midland Refining Company or MRC), Basra (also known as the Southern Refining Company or SRC) and Baiji (also known as the Northern Refining Company or NRC). Daura refinery, which is southwest of Baghdad, was built in 1955. Basra refinery, built in 1972 and upgraded in 1979, is located in the south of Iraq. Baiji refinery, built in 1982, is located in the north of the country. There are several other small refineries that specialize in crude distillation only. All three refineries are owned by the Iraqi government. Throughout the judgment I will refer to the refineries and the companies that ran them (which were all emanations of the MOO) by the name of the refineries. In the period 2002 to 2005 the total Iraqi refining capacity was about 600,000 barrels (bbls) per day, growing to about 800,000 bbls per day by 2009 due to modest expansions at existing refineries and the addition of some small new refineries.

The refineries produced base gasoline (before the application of any additives such as TEL or MMT) principally from the combination of light naphtha and reformate, the latter being produced by reformer units at the refineries. One of the issues in the case is the extent to which lack of maintenance, renewal and repair both in the period of sanctions prior to the invasion of Iraq in April 2003 and in the period thereafter, led to reformer units at the refineries not proving capable of producing reformate with a sufficiently high RON number which, when mixed with straight run naphtha, would produce consistently a base gasoline of 75 RON, the base figure required if the RON boost of 6 RON which a dose of 54mg/l of manganese could apparently produce was to be capable, on its own, without the addition of TEL, of achieving the requisite RON level of finished gasoline of 80-82 RON.

The defendants’ technical expert, Mr Neil Earnest, set out in his report his conclusions as to the capability of the reformer units derived from contemporaneous documents. Those conclusions were not challenged in cross-examination. Those documents indicated that the catalytic reforming unit at the Daura refinery was capable of producing reformate with no more than about 90 RON and that the catalytic reforming units at the Baiji and Basra refineries were producing reformate at lower octanes (as low as 73 RON) or, at times, were not operating at all.

The precise figures for the RON of base gasoline produced at each refinery are difficult to discern, since conflicting information emerges from the contemporaneous documentation, often reporting figures given by the MOO, second hand. For the present, it is only necessary to note that, based on data as to individual refinery production and TEL usage provided by Mr Sadallah Al-Fathi to Innospec, Mr Earnest was able to draw the following conclusions as to the base gasoline at each refinery in the period January 2003 to November 2005.

The Basra refinery base gasoline averaged 70.8 RON, with minimum monthly averages as low as about 65 RON. If the catalytic reforming units were actually operating at the refinery, they were in extremely poor operating condition. The Baiji refinery base gasoline averaged 75.7 RON. Mr Earnest concluded that because this refinery exhibited the greatest volatility in gasoline production volume, that indicated the refinery crude oil runs were not stable. Both the low absolute base gasoline octane and the degree of volatility in RON indicated to him that the reformers were performing poorly.

In 2003 and 2004, the base gasoline octane at the Daura refinery averaged 79.0 and 78.2, respectively. The monthly gasoline production volumes exhibit considerable volatility, which indicated again that refinery crude oil runs were not stable. The data available for 2005 suggests that TEL was not used at Daura so that an octane boosting additive was not required at all.

Accepting the conclusions of Mr Earnest as I do, it can be seen immediately that the RON of the base gasoline produced at Basra was never sufficient for MMT alone to provide the necessary octane boost to achieve production gasoline of 80-82 RON. The average RON of the base gasoline at Baiji was sufficient, but caution needs to be exercised in placing reliance on an average, rather than the range of figures. Mr Earnest’s Figure 21 shows that during this three year period there were eight or nine months when the monthly average RON of base gasoline was 74 or less, sometimes 72 or 73, suggesting that it would have been difficult during those periods to produce gasoline of the necessary RON level using MMT alone.

These figures would of course not have been available to the refineries in advance, but they are an indication of the range of RON of base gasoline with which the refineries had to cope at the time when the claimants assert that, but for the alleged bribery, a decision to replace TEL with MMT would have been implemented. Knowledge of that range and the volatility of RON of base gasoline must have influenced the decision making of the MOO and the individual refineries as to whether MMT was an appropriate replacement for TEL. What Mr Earnest’s figures show is that it was only at Daura (where, other than in mid-2004 when the production at the refinery may have been affected by a rocket attack and the RON of the base gasoline fell below 75, the RON of the base gasoline was in the range 77 to 80) that there could have been any confidence that MMT alone could consistently boost the RON to the required level of 80-82.

Furthermore, there is evidence, to which I refer in more detail in my findings of fact in the Chronological History section of the judgment below, that in 2008 and 2009, the RON of the pool gasoline at Baiji and Basra was lower still than in 2003-2005, as low as 66-67 for extensive periods and certainly so low that only TEL could provide the necessary octane boost to achieve the required level of 80-82.

Whilst TEL and MMT both boost the octane rating of gasoline, they have different technical capabilities. First, although it was agreed between the technical experts in their joint memorandum that the susceptibility curve at Figure 4 of Mr Earnest’s report (itself derived from Innospec’s susceptibility chart) reasonably represented the octane susceptibility of lead, in his oral evidence Dr Habeeb sought to row back from that agreed position and to suggest, by reference to supposed particular characteristics of Iraqi gasoline, that the octane susceptibility of lead might be different from and lower than that curve suggests. I found that evidence (upon the basis of which Mr Earnest was also cross-examined at some length) unimpressive and unconvincing. In the event, the attempt to go back on the agreed position was abandoned by the claimants in their closing submissions, in which it was accepted that the Innospec susceptibility chart provides the best guide to the octane susceptibility of lead, save at high levels. It follows that the only difference between the parties is whether the amount of lead needed to give a boost of 6 RON is the 0.14g which the claimants derive from the chart or the adjusted figure of 0.122g in Mr Earnest’s curve. Whatever quibbles the claimants had about the Innospec chart and Mr Earnest’s curve, the figure they give of about 0.84g of lead to give a boost of 20 RON is borne out by test results from the Daura refinery.

Second, MMT cannot provide as high an octane boost as TEL. At a dosage rate of 18mg of Manganese (Mn) per litre (essentially the maximum permitted in many countries, although in the European Union the maximum dosage was 6mg Mn/l) depending on the RON of the base stock fuel, MMT will provide a RON boost of between 1 and 3 RON. At a dosage rate of 54 mg Mn/l the maximum octane boost of MMT is 5-6 RON. This is common ground between the technical experts and was borne out by test results from Zerqa refinery in Jordan in June/July 2003 and the Daura refinery in August/September 2003 (with both of which I deal in more detail below). However, whilst those test results demonstrate that under laboratory conditions a RON boost of 5-6 could be achieved, it is far from clear whether that RON boost was consistently achievable in commercial production of gasoline. Although Daura refinery did use MMT as an additive from about August 2007 onwards, the evidence is far from clear as to whether MMT was being used alone or in a mixture with TEL (as to which see below).

Third, although the evidence about the RON of the base stock gasoline at each of the refineries in the time frame with which this case is concerned is complex and far from clear and I will need to deal with this in more detail below, in my judgment the calculations by Mr Earnest of the base gasoline RON in his Figure 21 are a reliable indication of the position. For the period October 2003-June 2004 (which is the period during which the claimants contend that, but for the corruption, a decision to switch to MMT and order 1,000 metric tons would have been implemented), what those calculations demonstrate is that at Daura the base stock RON ranged between 77 and 80 (except in May/June 2004 when it fell to 69 and 73 respectively, evidently due to a rocket attack on the refinery). By contrast, at Baiji, the base stock RON ranged between 72 and 76 and at Basra between 69 and 74.

Given the preponderance of evidence that the required RON of finished gasoline in Iraq at the relevant time in 2003 to 2008 was 81-82 RON, what is immediately apparent is that, whilst MMT would have provided the necessary octane boost at Daura (which may go a long way to explaining why, as set out in more detail below, Daura was more interested in MMT than the other refineries), MMT alone was never going to provide the necessary boost so far as gasoline produced at Basra was concerned. In relation to Baiji, the picture is more complicated but, at least in the period September to December 2003, the RON of the base stock gasoline was between 74 and 77, suggesting that, for at least some of the time, MMT alone might have provided the required boost to achieve finished gasoline of 81-82 RON.

Of course, in practical terms an important consideration, when the court has to assess whether or not the MOO had made a decision to switch to MMT in late 2003, is not simply what the octane number of the base stock actually was at that time, but what the perception was as to the probable octane number of base stock in the future. In circumstances where, as set out in the next sub-section of this judgment, the political and economic situation in late 2003 was adverse and conditions at the refineries were not improving, given the demand for production of gasoline and the absence of downtime for maintenance and repairs, it seems to me that the likely perception at the refineries in late 2003 (with the possible exception of Daura) was that there could be no certainty that MMT alone would provide the necessary boost to achieve the requisite finished level of 81-82 RON. In contrast, TEL alone would have and did provide the necessary boost to get to that finished level, however low the RON of the base gasoline.

Faced with that strong evidence that the perception was that MMT alone could not have provided sufficient octane boost to achieve the requisite level of 81-82 RON (other than in the case of Daura), the claimants in closing submissions focused on the use of a mixture of MMT and TEL to provide the requisite boost. It is certainly the case that tests were carried out at Daura in August/September 2003 in laboratory conditions which showed that various combinations of MMT and TEL could produce octane boosts in excess of 6 RON. This is an area of the technical case that I will examine in more detail below, but for the present, three points arise.

First, despite some contemporaneous attempts by Mr Al-Gaood to suggest the contrary, both Ethyl and the claimants recognised that MMT and TEL did not react synergistically in the sense that, if 0.14g/l of lead and 54mg/l of manganese were added together, they would not produce a boost of 12 RON. Ethyl recognised this at the time in January 2003 when they said: “we cannot say 1+1 = 2” and subsequently on 28 April 2010 when Mr Williams of Ethyl said: “higher lead content = lower additional response from mmt”. There were also concerns in some of the scientific literature, referred to by Mr Earnest in his evidence, about the environmental effects of this mixture of MMT and TEL.

Those concerns lead into the second point which is that, whilst the mixture may have worked in laboratory conditions, there is limited evidence that it would work on a commercial basis. Ethyl itself expressed concerns about this in the same internal email from Mr Williams on 28 April 2010:

“Nothing but anecdotal on the MMT + TEL in Iraq.

They did the testing themselves in house and we only heard of the resulting +5 or 6 from MMT.

This was far beyond our expectations, much more likely to see +1 or 2 RON at 54 mg with the TEL.

Not impossible to get an odd result as Assuit base fuel is not typical of a finished gasoline (ie 100% naphtha) but best not to bank on it.

The predictive equation for MMT + TEL is not much use. It appears to be bound by tight limits outside of which gives nonsense results (eg +100 octane). The big problem being those limits are not defined which leaves us guessing.”

There is some suggestion from the information obtained by the claimants from Daura in 2008 that, in about June 2008, Daura was producing gasoline using a mixture of MMT and TEL, because technical problems meant the RON of the base gasoline had fallen to a point where MMT alone could not provide the required boost. However, there is no real information as to how long that mixture was used or how successful it was in producing gasoline commercially. Furthermore, although at various stages the MOO were contemplating the addition of MMT to gasoline which already contained a substantial quantity of TEL, in order to provide a boost from 81 RON to 85 RON, there is no evidence that this was ever achieved on a commercial basis. The technical evidence (which I consider in more detail below) suggests that when MMT is added to gasoline which already contains a substantial amount of lead, the MMT provides a very limited additional octane boost.

The third point is perhaps the most important, given how the claimants have put their case, which is that, but for the bribery and corruption, a decision to switch from TEL to MMT would have been implemented in late 2003 and MMT would have been ordered thereafter as the primary additive with TEL only being used until stocks were exhausted. However, the fact that MMT alone could not provide sufficient octane boost for base gasoline produced at Basra and Baiji is wholly inconsistent with that case: in order to provide the boost required, TEL would still have been required for the foreseeable future. In those circumstances, the whole rationale alleged by the claimants for the switch, that Iraq wished to move to unleaded gasoline, would have been frustrated, at least as regards two of the refineries. That obviously calls into question whether the switch would ever in fact have taken place, irrespective of any bribery, particularly since, on any view, TEL was less expensive than MMT. One of the less impressive aspects of Mr Al-Gaood’s evidence and his conduct at the time was his attempt to assert that MMT was no more expensive than TEL or that the difference in cost was marginal. By the time of closing submissions, one inexorable consequence of the claimants’ acceptance that the Innospec susceptibility chart reasonably represented the octane susceptibility of lead was that any practical (as opposed to wholly theoretical) dosage of MMT (whether alone or in mixture with TEL) would be more expensive than achieving the equivalent octane boost by the use of TEL alone.

Furthermore, the minutes of the meeting of the benzene enhancer committee of 15 December 2003 (referred to in more detail below) which the claimants disclosed after the trial had concluded, demonstrate that, at that stage at the end of 2003, what was being recommended was not the replacement of TEL by MMT and the phasing out of TEL only using it until existing stocks were exhausted. Rather the committee recommended the purchase of 1,000 metric tons of MMT but in parallel or in addition to the entering into of a three year long term contract securing the supply of TEL for the three years 2004 to 2006. Mr Gourgey QC sought to address the difficulty that this posed for the claimants’ case by submitting that the MOO had made a decision (or been close to a decision) by early November 2003 to switch to MMT, but an official or officials were then corrupted and brought about an abrupt change of position in the MOO, reflected in the minutes of the benzene enhancer committee. For the reasons set out in detail in the Chronological History section of the judgment below, I consider that case to be unrealistic and not borne out by the contemporaneous evidence.

Very shortly after the invasion of Kuwait by Iraq, on or around 6 August 1990, the UN adopted Security Council Resolution 661 which prohibited UN members from transacting business with Iraq except for the purchase and sale of humanitarian supplies. In April 1995, the UN passed Security Council Resolution 986 which permitted Iraq to sell its oil and to use the proceeds of sale to purchase humanitarian supplies for the Iraqi people, including food and equipment to maintain and service Iraq’s oil sector. This limited exception to the sanctions regime was known as the Oil for Food Program (“OFFP”). The rules of the OFFP required the proceeds from all sales to be deposited into a UN-controlled escrow account from which the purchase of humanitarian goods would be made. The first Iraqi oil exports under the OFFP began in December 1996.

Beginning in approximately August 2000, the Iraqi government demanded that suppliers of humanitarian goods pay a “kickback” to the Iraqi government (usually 10% of the contract price) in order to be awarded a contract by the government. These kickbacks violated UN OFFP regulations and UN sanctions. These kickbacks are the so-called after sales service fees or ASSFs. Typically the ASSFs were included in the contract price submitted by the supplier to the UN without disclosing that the contract price included an extra 10% to be “kicked back” to the Iraqi government. The effect was to cause the UN unwittingly to pay the 10% kickback to the Iraqi government from the proceeds of sales of oil held by the UN.

On 19 March 2003, allied forces invaded Iraq and deposed Saddam Hussain and his Ba’athist regime. On 21 April 2003, the Coalition Provisional Authority (“the CPA”) was established by the western allies as a transitional government of Iraq. The CPA was vested with executive, legislative, and judicial authority over the Iraqi government from 21 April 2003 until its dissolution on 28 June 2004. On 22 May 2003, UN Security Council Resolution 1483 granted authority to the CPA to use Iraq's oil revenue. The OFFP was formally terminated on 21 November 2003 and its major functions were turned over to the CPA.

On June 28, 2004, the CPA ceased operations and, under UN Security Council Resolution 1546, limited sovereignty was transferred to a caretaker government which began the process of moving towards elections. Elections for the National Assembly of Iraq were held on 30 January 2005 in Iraq. A general election was held on 15 December 2005 to elect a permanent 275-member Iraqi Council of Representatives.

However, conditions in Iraq after the collapse of the Saddam regime were appreciably worse than they had been, even when the country was subject to UN sanctions. The bleakness of the situation can be demonstrated graphically by the agreed statement of the security experts, Mr Charles Richards and Mr Nick Doyle, which I propose to quote in full:

“1.1

The Iraqi government's control collapsed from 2003 onwards. Following the fall of the Saddam regime, administrations were unable to consistently and formally maintain law and order across the country.

1.2

Criminality motivated by profit increased significantly. Contributing factors across Iraq included a rise in unemployment, increased circulation of convicted criminals released from prison, and opportunism stemming from the post-Saddam governments' inability to impose law and order.

1.3

A major deterioration in security took place after 2003. Iraqi government and coalition forces were faced with civil war-like conditions. Large scale violence and population displacement occurred. Many areas fell under the control of militia forces. Security conditions were worst in 2006-8, particularly in central Iraq.

1.4

Security conditions were not uniform. Criminal gangs and non-governmental militias proliferated in all areas, but their impact on overall stability varied. Central Iraq experienced greater levels of violence than southern Iraq.

1.5

Security conditions adversely affected transportation. Delays in journeys were routine; traffic was also exposed to significant security risks. Security-related factors impacting traffic included delays at checkpoints, road closures, travel curfews and physical attacks. Highway 10 to Jordan was particularly dangerous. In conjunction with non-security issues such as bureaucracy relating to imported goods, these factors often caused delays. Such obstacles were a significant factor in transportation-related decisions.

1.6

Despite obstacles, the movement of goods and people by road still took place. Journeys often faced delays and/or added costs, but were nevertheless mostly able to be completed. The volume of goods and people in circulation was lower than if "normal" conditions had prevailed; security-related considerations often discouraged unnecessary travel by road.

1.7

Iraq's hydrocarbons infrastructure was in a poor condition. Poor infrastructure condition dramatically affected performance. Despite Iraq's level of crude oil production, the domestic market relied on imported refined products to make up the shortfall. Contributing factors were the low level of investment in infrastructure, in particular, as well as security conditions affecting refineries and pipelines.

1.8

Baiji, Daura, and Basra refineries all faced attack and threats of attack. Attacks took place on staff, supply of crude oil and raw materials, refinery facilities, and refined output. Security considerations combined with under-investment to affect refinery productivity.

1.9

Refineries continued to operate throughout 2003-2010. Refineries operated for the majority of the 2003-2010 period, albeit at a lower level of productivity than before 2003. Baiji refinery, in particular, did cease operating on a number of occasions, but functioned for the majority of the relevant period.

1.10

Iraqis endeavoured to "keep the system" going as best as possible. In most areas of political and commercial life, Iraqis endeavoured to "make do" and adapt to the restrictions of the operating environment.

1.11

Despite obstacles and disruptions, deliveries of consignments to and from refineries took place. However, the security environment incentivised refinery operators to restrict the volume of incoming cargo to a minimum.

That summary of the dire situation in which the Iraqis generally and, specifically, those working in the refinery industry, found themselves serves as an important “reality check” in relation to much of the claimants’ case that, but for alleged corruption, there would have been a smooth transition from TEL to MMT. In particular, the hand to mouth conditions in which the refineries found themselves and the need to maintain gasoline production in extremely testing conditions would have militated against making changes to the way the refineries operated, such as phasing out TEL and replacing it with MMT.

In assessing the witnesses who gave evidence at the trial, there is an important overall point. At least in the case of the claimants’ witnesses, the principal events about which they were giving evidence at a trial in 2014 occurred between 2000 and 2008, on any view many years ago. It follows that, perhaps even more than in other cases, much of their evidence was either reconstruction of events from documents (themselves incomplete) or inevitably vague and generalised recollection. Accordingly, where contemporaneous documentary evidence was available and the witness evidence was in conflict with the documents, I much preferred the documentary evidence.

This was particularly applicable to Mr Al-Gaood, who gave evidence over four days of the trial and was then recalled for further cross-examination when additional disclosure was given late by the claimants. He came across as an engaging man who has clearly been successful in business, but in many respects his evidence was unreliable. By that I do not mean (save in the specific instances referred to below) that he was being deliberately mendacious in his evidence or that all his evidence was unreliable. To that extent, I reject the submission of Mr Onions QC that I should not accept Mr Al-Gaood’s evidence at all unless it was corroborated by other evidence. Rather, it seems to me that the correct analysis is that, no doubt because he has lived with this case for so long, Mr Al-Gaood has convinced himself that anything which happened in Iraq which favoured the commercial interests of the defendants over those of the claimants was attributable to bribery.

It is quite clear from the criminal proceedings and the admissions made by the corporate and individual defendants in those proceedings that kickbacks were paid to the government of Iraq prior to the invasion and that, thereafter, Innospec paid or reimbursed Mr Naaman in respect of what they understood to be bribes paid or to be paid to MOO officials. Those were extremely serious criminal offences of conspiracy, as set out in the next section of the judgment. However, it does not automatically follow that Innospec are liable to the claimants in tort for a civil conspiracy. A much more rigorous and analytical approach than that adopted by Mr Al-Gaood needs to be adopted to the critical question of whether the 2004 LTPA was induced by bribery. I reject, in particular, the suggestion made by Mr Al-Gaood in his evidence that the payment of the kickbacks somehow evidenced a corrupt relationship between Innospec and officials in the MOO which persisted into the post-invasion period. If that had been true of Innospec, it must equally have been true of the claimants, who were also paying kickbacks to the government of Iraq in the pre-invasion period.

This was one area where I found Mr Al-Gaood’s evidence unimpressive and unconvincing. Whilst admitting that his company had paid ASSFs to the government of Iraq, he maintained that he had not appreciated that they were unlawful. He is an intelligent, sophisticated businessman who had been trading with Iraq for many years during the period of UN sanctions. It is inconceivable that he did not know that the kickbacks which the claimants were paying were contrary to the sanctions regime and hence unlawful. Indeed, it is striking that in these proceedings (until he corrected the position at the beginning of his evidence) he had characterised the payments Innospec made by way of ASSFs as “bribes”.

There were a number of other unimpressive aspects of his evidence. One example is his maintenance of the position that MMT was less expensive than TEL or, at least, that the difference in price was marginal. Contemporaneously he created a fictitious TEL curve (which Mr Knapton of Ethyl declined to use) with a view to demonstrating this. Although some time was taken at trial over this issue, ultimately the claimants abandoned any suggestion that MMT was more economic. This was always a hopeless point. Ethyl itself realised that MMT was not economic compared with TEL and that they would have to lower their price to compete, for example in an email from Mr Stan King in July 2008. Mr Al-Gaood was very evasive about that email in cross-examination.

Another example was his evidence about the MMT field test. It became apparent that, at the time that the Particulars of Claim were pleaded, the claimants had access to both the correct translation of the conclusions of the field test and the false translation created by Mr Naaman to give the impression that MMT had failed the field test, and yet the pleading relied upon the false translation in support of a case that the formulation and performance of the field test was essentially a charade induced by bribery. Mr Al-Gaood claimed in cross-examination that he had not appreciated that there was a difference between the translations, but I was not impressed by that explanation. He then sought to maintain in his oral evidence the case that the results of the field test were procured by bribery, in a manner which was wholly unrealistic. Contemporaneously, it appears that everyone (including Mr Al-Gaood himself who wrote to the MOO in February 2008 saying the results of the field test were good for material efficiency) thought that the field test had been a success. It seems to me that the claimants’ case about the field test and its results was something of an opportunistic construct, seizing on the admissions of Innospec and Dr Turner, but conveniently ignoring Mr Naaman’s admission that he had never in fact paid the U.S. $150,000 in bribes to MOO officials to fail the field test, but had simply pocketed the money himself.

Dr Al-Khayat had worked for the MOO for many years during the Saddam Hussein regime, ultimately as director-general of the technical directorate or department from August 2001. He remained for a few months after the invasion and overthrow of the regime in 2003 until he took extended leave and was then replaced as director-general by Mr Asaad in October of that year. It followed that, as he readily accepted in evidence, he could not give any direct evidence about events which took place after his departure. He was an impressive witness, with an engaging personality, but it was apparent that his views were influenced by a sense that, however bad Saddam’s regime was, conditions in Iraq, particularly in the oil industry, were better at that time and that the present government was worse and was responsible for the parlous state of the country. That view was one he articulated expressly at the end of his evidence. That view, together with the fact that his role in the MOO was very much one of overall strategy rather than day to day refinery operation, meant that he tended to exaggerate the extent to which at the time he left the MOO a decision had been made to switch from TEL to MMT. He was personally keen on replacing TEL with MMT and was recommending the adoption of that strategy, but it did not follow that that was something which had been decided by October 2003. In my judgment, the reality, particularly given the condition of the refineries and the practicalities of production at the time, was that the MOO was still some way from any definite decision to switch to MMT. The final decision would have been for the Minister to make and he had clearly not made that decision at the time that Dr Al-Khayat left. Dr Al-Khayat’s successor evidently took a more cautious view about MMT than he had. Whether that view was induced by bribery is one of the issues I have to decide, but Dr Al-Khayat could not assist about that in his evidence, because he had left the MOO.

Mr Nuri had worked for the MOO in the refineries and then for the claimants for a number of years. He is now retired and is nearly 80. He gave evidence by videolink from Jordan. Inevitably, as he candidly admitted, his recollection of events was hazy and generalised. He had difficulty pinning down events to dates, even to the correct year, which is perhaps not surprising: it would have been less convincing if he had been able to say after such a long time that a particular event occurred on a particular date. Although he was evidently trying to assist and was open and frank in his evidence, ultimately it did not really go to the critical issues. It is also the case that the full correspondence between him and Mr Al-Gaood in November 2003, about which he would no doubt have been cross-examined, was not disclosed until after he had given evidence.

In relation to the evidence called by Innospec, the first thing to note is that none of the witnesses called had been implicated in any way in the wrongdoing which led to the criminal prosecutions in the United States or the United Kingdom. The principal witness was Mr David Williams who is a U.S. attorney who is the General Counsel and Chief Compliance Officer of the second defendant. He joined Innospec in September 2009, at a time when a completely new management team had been put in place. His evidence was almost exclusively concerned with the dealings with the U.S. investigatory agencies, the DOJ and the SEC and the circumstances in which the guilty pleas were entered. He was a plainly honest and straightforward witness. Although, at various times in cross-examination, Mr Gourgey QC appeared to be suggesting that, through Mr Williams, Innospec were seeking to resile from the admissions they had made in the U.S. criminal proceedings, I had no sense of that from my assessment of his evidence. Rather he was seeking to explain, in careful and clear terms, the limits of what was admitted and specifically the fact that, in the light of the subsequent admissions made by Mr Naaman in the criminal proceedings against him, monies that Innospec had thought, at the time they pleaded to the DOJ allegations, had reimbursed Mr Naaman for bribes paid had been pocketed by Mr Naaman. Nonetheless, Mr Williams accepted that Innospec had committed the relevant criminal offences under the U.S. Foreign Corrupt Practices Act 1977, even though the monies they paid ostensibly as bribes had not in fact been paid as bribes. This has an important impact on the issue of causation.

Innospec called two further witnesses. Mr Alistair Thompson has worked for Innospec for some twenty five years, initially as a technical officer and later as a business analyst. He had conducted studies and analyses on the relative merits and demerits of TEL and its competitors, including MMT, but he had had no direct personal involvement whatsoever with the MOO in Iraq. He was cross-examined in particular about the Innospec susceptibility chart and the ability of TEL to boost the RON of Iraqi gasoline, but as set out below in relation to Dr Habeeb’s evidence, ultimately the various points on this were not pursued by the claimants. Mr Thompson was an entirely straightforward and honest witness.

Mr Simon Johnson was head of corporate development and a general manager at Innospec. He gave evidence mainly about Innospec refusing to supply TEL to the MOO under the 2008 LTPA and the circumstances in which Innospec came to supply TEL to the MOO again in 2010. He was cross-examined about whether there had been any discussion within Innospec as to whether the MOO were anxious to continue with supplies under the LTPA because of benefits officials would receive under it, but as I pointed out at the time, that was a matter for submissions and not really something on which Mr Johnson could give evidence.

Turning to the technical experts, Dr Habeeb, who gave evidence for the claimants, is clearly an eminent scientist with considerable refinery experience. He gave his evidence in a candid manner, but there was one particular aspect of it with which I was distinctly unimpressed. Despite the fact that, in the joint memorandum with Innospec’s expert, Mr Earnest, he had agreed that the octane susceptibility of lead was reasonably represented by Figure 4 in Mr Earnest’s report, he sought to resile from that somewhat in his oral evidence, contending that, whilst he accepted that as a general proposition, the particular characteristics of Iraqi gasoline, such as its aromatic content, meant that the actual octane susceptibility of lead in the case of Iraqi gasoline was significantly different from Figure 4. He expended much time and energy on that proposition in his evidence, but it was comprehensively demolished by Mr Earnest. Ultimately, the point was abandoned by the claimants, who only sought to challenge Mr Earnest’s evidence on one very narrow point as to whether the lead required to gain an octane boost of 6 RON should be taken from the Innospec chart on which Figure 4 was based or Mr Earnest’s slightly reworked Figure 4. I accepted Mr Earnest’s evidence on this point.

I am afraid that Dr Habeeb’s attempt to row back from the agreed position in the joint memorandum did lead me to question his independence and I was only prepared to accept his evidence where it coincided with that of Mr Earnest. Mr Earnest was a most impressive expert witness who gave his evidence very fairly, clearly mindful of his duties to the court. As I have said, where he and Dr Habeeb differed, I prefer and accept his evidence.

There was also expert evidence on two other areas. First, the security issues where there was a large measure of agreement between Mr Nick Doyle for Innospec and Mr Charles Richards for the claimants. They were both eminent in their field and were clearly doing their best to assist the court. Second, there was evidence on quantum issues from forensic accountants, Mr Howick for the claimants and Mr Hall for Innospec. They were both impressive witnesses. Mr Howick in particular was a very fair and candid witness who readily accepted that many of the assumptions made in his assessment of quantum might be open to question and require revision.

It is important to note significant limitations in relation to documentary evidence. Notwithstanding the substantial volume of material in the chronological bundles, it is clear that the documentary picture is incomplete. In particular, with the exception of those internal MOO documents which the claimants were given or have been able to procure, there is a complete dearth of internal documentation from the MOO. That is not a criticism: they were not a party to the litigation and there is no reason why they should disgorge from their files internal documents dating back many years, even assuming such documents have been retained. However, an inevitable consequence of the absence of such documentation is that the court has only a partial glimpse at best into the decision making process within the MOO. In my judgment, these gaps in the available documentation mean that the court should proceed cautiously in assessing what the reasons may have been for the MOO deciding not to order 1,000 metric tons of MMT as recommended and only ordering 120 metric tons in late 2004 and in assessing whether the decision to enter into the 2004 LTPA was induced or influenced by bribery.

Another area of the documentary evidence where caution is required is the correspondence between Innospec and its agent, Mr Naaman, in which Mr Naaman was very keen to emphasise the need to enter into long term contractual commitments for the supply of TEL because the MOO would otherwise switch to MMT and correspondence in which he talks in veiled terms about paying “our people” in Iraq, correspondence upon which the claimants placed great reliance as part of their case that, but for bribery, the MOO would have switched to MMT. In my judgment, given Mr Naaman’s admission to the US authorities that he had procured payments from Innospec by telling them that money was required to pay or to reimburse him for bribes promised to MOO officials, whereas in reality he had on occasions not paid money over to the officials but pocketed it himself, the court should be sceptical about accepting anything he was saying to Innospec at face value.

The initial investigations by the U.S. authorities into the question of whether Innospec had made corrupt payments in Iraq and Indonesia began in about July 2005. At that stage what was under investigation was payment of ASSFs or kickbacks to the Government of Iraq during the period of the OFFP. During the course of those investigations, a number of matters came to light relating to bribes or the promise of bribes in the period after the allied invasion of Iraq in March 2003. In due course, criminal proceedings ensued begun by the DOJ against the second defendant as well as civil enforcement proceedings by the SEC. Criminal proceedings were also commenced in the United Kingdom by the SFO against the first defendant in respect of the corruption in Indonesia, as well as proceedings against the directors, including Dr Turner and Mr Jennings, in respect of corruption in both Indonesia and Iraq. In the United States, criminal proceedings were also commenced against Innospec’s agent Mr Naaman.

The second defendant pleaded guilty on 5 March 2010 to charges set out in the Information laid by the DOJ in the United States District Court for the District of Columbia and, on the same day, entered a plea agreement incorporating an agreed statement of facts in relation to corruption both under the OFFP and in the post-invasion period. As explained by Mr Williams, in parallel with the U.S. criminal investigations, Innospec was being advised by Kirkland & Ellis LLP who carried out their own investigations and the decision to plead guilty was made on the basis of their advice.

Count One of the Information alleged unlawful conspiracy from March 2001 to June 2008 between the first and second defendants, Alcor, Mr Naaman and others to commit offences against the United States by knowingly devising a scheme to defraud the United Nations and the OFFP and by paying or promising to pay Iraqi officials bribes in order to assist the obtaining of business and by knowingly falsifying records. In relation to the ASSFs the Information alleged that the conspirators paid the kickbacks to the Government of Iraq but failed to disclose that the relevant contracts were inflated by 10% to cater for the kickbacks.

It was also alleged in the Information that part of the conspiracy was the payment by Mr Naaman on behalf of Innospec to Iraqi officials of U.S. $150,000 to ensure that MMT failed the field test and therefore would not be used as a replacement for TEL. It was then alleged that Innospec and Mr Naaman agreed and promised to pay money, gifts, travel and entertainment to Iraqi officials to obtain and retain contracts to purchase TEL.

In relation to the ASSFs, the overt acts in furtherance of the conspiracy were said to be that, in December 2001, Alcor agreed to increase Mr Naaman’s commission from 2% to 12% (the 10% difference amounting to the kickbacks). It is then said that Mr Naaman on behalf of Innospec paid the 10% ASSF or kickback to the Government of Iraq on five contracts under the OFFP. For present purposes, it is to be noted that, in relation to the latest two such contracts, it was alleged in the Information that the commission due to Mr Naaman on the basis that such kickbacks were being paid was not paid until July 2003 and late 2003/early 2004 respectively i.e. after the invasion. From other evidence, it is clear that, in the second half of 2003, Innospec were still negotiating with Mr Naaman over his “commission” in respect of these pre-invasion contracts.

In the “Overt Acts” section of the Information, it is then said that, in October 2005, there were discussions with Mr Naaman about increasing his commission from 3% to 5% in respect of orders under the 2004 LTPA, on the basis that the relevant letter of credit for the first shipment under the LTPA would be opened immediately if half the currency fluctuation rate was shared with Iraqi officials. It is then said that, in December 2005 or January 2006, Innospec paid Mr Naaman U.S. $195,912.78 to reimburse him for such payments to Iraqi officials. In February 2006, Mr Naaman then emailed Dr Turner saying that the letter of credit would be opened provided 2% was paid to the officials as before. This was approved by Dr Turner and in August/September 2006 some €210,000 was paid to Mr Naaman to reimburse him for such payments to Iraqi officials.

Although the Information does not state in terms by whom these officials were employed, it is clear from the contemporaneous documents, that Mr Naaman was talking about payments to officials of the Trade Bank of Iraq. In fact, it subsequently emerged in the admissions made by Mr Naaman in the criminal proceedings against him (but was unknown to Innospec at the time they admitted the allegations in the Information), that although Mr Naaman said he had paid officials of the Trade Bank of Iraq, he had not and had pocketed these monies.

In the Information it is then alleged that in about January 2007, Innospec paid Mr Naaman some U.S. $139,650 to reimburse him for payments to Iraqi officials. Although the Information against Innospec provides no further detail of those payments, it seems likely that they tie in with Mr Naaman’s admission that he paid U.S. $167,000 to a senior Iraqi official “in exchange” for two purchases under the 2004 LTPA, in other words to encourage the Iraqis to place orders under the LTPA, rather than seeking supplies elsewhere.

In relation to failure of the MMT field test, the Information then alleges that, in September 2006 Mr Naaman sent Dr Turner a letter enclosing a falsified invoice for U.S. $105,000 for “additional technical support” etc, then sent him a translation of the field test report on 28 February 2007, noting that MMT had failed the field test and that he had had to pay an additional U.S. $50,000 fee to ensure the report was to Innospec’s advantage. The Information alleges that in September 2006 and April 2007, Innospec paid Mr Naaman U.S. $155,000 to reimburse him for these payments to Iraqi officials. Of course, unbeknownst to Innospec at the time they admitted these allegations, Mr Naaman never in fact paid any of these monies to Iraqi officials, but notwithstanding that, Innospec had committed the relevant offence under the Foreign Corrupt Practices Act by making payments to him, believing they were reimbursing him for bribes paid, even though in truth they were not.

In relation to the 2008 LTPA, the Information alleges that from March 2007 onwards Mr Naaman was pressing for an increase in his commission to 7%, with 5% to be paid to Iraqi officials and that, in effect, this was agreed by Innospec. From Count Eleven in the Information, it is clear that what was being alleged was that, in about January 2008, Innospec had agreed with Mr Naaman that they would pay 5% of any orders under the 2008 LTPA to Iraqi officials as reward for awarding contracts to Innospec and that because a letter of credit for U.S. $17 million was opened in about January 2009, Count Eleven relates to the promise to pay 5% of that, i.e. U.S. $850,000, to MOO officials. In the event, no orders were ever fulfilled under the 2008 LTPA, but as Mr Williams explained in cross-examination, because Innospec had agreed to pay these bribes, they had committed the relevant offence under the Foreign Corrupt Practices Act, irrespective of whether any money was ever actually paid.

It is then alleged in the Information that various payments were made by Innospec in respect of what is euphemistically described as “travel”: (i) a payment in 2002 of travel expenses of some U.S. $36,000 including U.S. $9,000 “pocket money” to Iraqi officials in respect of a visit by a delegation to Alcor in Switzerland; (ii) agreement in early 2005 to pay “pocket money” to an Iraqi delegation visiting Innospec in the United Kingdom, in circumstances where some U.S. $29,755 was paid subsequently for travel expenses, U.S. $10,000 of it pocket money; (iii) reimbursement in March 2006 of U.S. $13,750 of travel expenses including pocket money for the visit of two officials (in fact Mr Luaibi and Mr Ghassab) to Dubai; (iv) payment of some U.S. $13,000 for the honeymoon in Thailand of Mr Ghassab. In addition to those payments, Mr Naaman invoiced Innospec some U.S. $34,500 in respect of the travel expenses to Beirut and pocket money of Iraqi officials who had met there to finalise the 2008 LTPA. Irrespective of whether Mr Naaman ever paid those officials, Innospec did not reimburse Mr Naaman, since the investigations intervened.

Counts Two to Six are allegations of wire fraud in relation to the contracts where ASSFs were paid. Counts Seven to Eleven then allege that Innospec wilfully and corruptly did acts outside the United States in furtherance of payments or promises to pay Iraqi officials to influence their decisions in their official capacity, induce them to act in violation of their lawful duty, secure an improper advantage and induce them to use their influence with the Government of Iraq to award contracts to Innospec and to cause MMT to fail the field test, thereby ensuring MMT would not be purchased instead of TEL. Count Seven relates to the U.S. $195,912.78 paid in October 2005, ostensibly to reimburse Mr Naaman for payments to officials in the Trade Bank of Iraq. Count Eight relates to payments of U.S. $407,900 in late 2006/early 2007, that sum evidently comprising €210,000 again to reimburse in respect of payments to officials in the Trade Bank of Iraq and U.S. $139,650 which seems to tie in with the U.S. $167,000 which Mr Naaman admitted paying to a senior official in the MOO. Counts Nine and Ten relate to the payments to Mr Naaman of U.S. $105,000 and U.S. $50,000 ostensibly as bribes to fail the field test. Count Eleven, as I have said, relates to the 5% of the letter of credit amount which Innospec had promised to pay on orders under the 2008 LTPA.

By the Plea Agreement, Innospec pleaded guilty and admitted the Statement of Facts attached, which replicated the allegations in the Information. Mr Williams signed an Officer’s Certificate stating that he had reviewed the Agreement with counsel and been advised of Innospec’s rights and of the consequences of entering the Agreement. As Mr Williams accepted in cross-examination, Innospec only agreed the Plea Agreement after the investigation by and advice from Kirkland & Ellis LLP as outside counsel.

By a document headed Statement of the Offense filed in the United States District Court for the District of Columbia on 25 June 2010, the United States and Mr Naaman agreed that the facts set out in that document detailing his commission of criminal offences were correct. The same day he agreed to plead guilty to a two Count Superseding Information, one count of conspiracy to violate the Foreign Corrupt Practices Act and the other count of actual violation of that Act.

The Superseding Information alleged that he had paid ASSFs or kickbacks to the Government of Iraq in respect of the same five pre-invasion contracts as had Innospec on the basis of the same facts as referred to in [64] above. In relation to the 2004 LTPA, it stated that between October 2005 and October 2007, Mr Naaman, Dr Turner, Mr Jennings and Mr Schack agreed to pay approximately U.S. $600,000 in bribes to Iraqi officials in exchange for purchases under the 2004 LTPA. This allegation corresponded with Counts Seven and Eight against Innospec. It was alleged that he received from Innospec the payments referred to in [65] and [67] above, paid U.S. $167,000 to a senior official in the MOO described in the Statement of the Offense as “in exchange for” two purchases and, in the Superseding Information, as “to secure purchases” under the 2004 LTPA. The Superseding Information also alleged that he paid officials in the Trade Bank of Iraq to secure favourable exchange rates under letters of credit.

It was alleged that he had received U.S. $155,000 from Innospec to reimburse him in respect of payments to Iraqi officials for MMT to fail the field test, that he had agreed with Dr Turner the commission under the 2008 LTPA at 7%, 5% to cover “my promise to these people for the loss of their remuneration from MMT” and that in late 2007 to early 2008, he negotiated with a senior MOO official, agreeing to pay him 2.5% of all sales under the 2008 LTPA which would have totalled approximately U.S. $2,679,600 “in exchange for the contract”. It stated that the letter of credit for U.S. $17 million was opened on about 24 February 2009. It then set out the same facts and matters as regards travel expenses and pocket money as had the Statement of Facts against Innospec, as summarised in [70] above.

On 13 January 2011, Mr Naaman’s attorneys filed a lengthy Memorandum in Aid of Sentencing with the District Court. That included a Statement of Facts which referred to Alcor and the MOO having executed the 2004 LTPA in October 2004 and then admits that “to facilitate the actual orders under [the] LTPA, on behalf of Alcor, Mr Naaman paid approximately U.S. $167,000 in bribes to various employees within the [MOO]”. He then admits providing them with small gifts such as a watch and paying their travel expenses, stating that these payments were authorised by Innospec and Alcor, who instructed him to submit fabricated invoices for expenses to disguise the true nature of the payments.

He refers to having travelled infrequently to Iraq some seven times between 2001 and 2007 at a time when it was dangerous and wanting reimbursement for security costs for his staff and other out of pocket expenses. Because Innospec refused to reimburse him, he was upset and believed they had violated their mutual understanding. He saw the field test on MMT as an opportunity to recoup those expenses and informed Innospec that he proposed bribing the Iraqi engineers to fail the field test. Innospec readily agreed and paid him some U.S. $150,000, expecting it would be used for bribes. He kept the funds himself, believing that MMT would fail the field test, but it passed the test and the MOO placed an order for 300 metric tons of MMT. On the material before the court, this was the first time it had emerged (some 10 months after Innospec signed the Plea Agreement) that money Innospec had paid to Mr Naaman believing he had paid or promised to pay bribes was not so paid but simply pocketed by him.

He then refers to having promised to pay bribes to certain officials in the MOO to “facilitate” the 2008 LTPA, conditioned on the amount of TEL purchased but that this had never occurred. He and Dr Turner had initialled the LTPA on 28 January 2008, but neither had authority to actually bind Alcor, so it was only an agreement in principle and on 8 February 2008, his agency for Innospec was suspended.

On 22 January 2011, the United States filed with the District Court its Sentencing Memorandum and Motion for Downward Departure from the sentence in the Guidelines of 120 months. On the basis that Mr Naaman had provided substantial assistance to the investigation, they proposed a reduction to 90 months. The memorandum refers to the fact that he had induced Innospec to pay U.S. $155,000 for bribes to keep MMT out of the market but never paid or intended to pay those bribes, but lied to Innospec and kept the money for himself. He also falsified the field test report to make it appear that the bribes had succeeded. Mr Naaman also acknowledged that of the additional U.S. $600,000 Innospec paid him to bribe officials at the Trade Bank of Iraq, he kept all but a few thousand dollars for himself, only paying a small amount to lower level officials.

The memorandum has attached to it at Appendix A a table with separate columns for “Kickbacks/Bribes Paid or Promised”, “Fake Bribes” “Naaman’s Commissions” and “Innospec’s Profits”. So far as the 2004 LTPA is concerned the only sum shown as “Paid or Promised” is the U.S. $167,000 in respect of the first shipment. The sums Mr Naaman alleged he paid to the Trade Bank of Iraq, U.S. $195,912.78 and U.S. $268,254 (equivalent to €210,000) and to the MOO to fail the field test, U.S. $155,000 are all shown as “Fake Bribes”. In respect of the 2008 LTPA, the sum of U.S. $2,679,600 is shown as an intended but not actual bribe.

In this jurisdiction, the investigation by the SFO began in May 2008. The first defendant was charged with conspiracy with its directors and others to make corrupt payments in Indonesia. On 18 March 2010, the first defendant pleaded guilty and on 26 March 2010, the company was sentenced to a fine of the sterling equivalent of U.S. $12.7 million by Thomas LJ (as he then was) sitting at Southwark Crown Court. Of that sum, U.S. $5 million was to be paid to the U.N. Development Fund for Iraq. In relation to the investigations by the DOJ and the SFO in relation to Iraq, Thomas LJ said in his Sentencing Remarks:

“The investigation by all these authorities included Innospec Inc's involvement in the UN Oil for Food Programme for Iraq (OFFP). The facts in relation to the OFFP as they emerged were that between 2001 and 2004 Innospec entered into five contracts under the OFFP with the Iraq Ministry of Oil to sell them TEL, paying approximately 10% of the contract price as a bribe. After the termination of the OFFP, Innospec agreed with the post Saddam Ministry further contracts under which further bribes were paid. The total paid or promised to be paid as bribes was $5.8m.”

In relation to the seriousness of corrupting the officials of foreign governments, Thomas LJ said this, which although directly applicable to Indonesia would be equally applicable to Iraq:

“There can be no doubt that corruption of foreign government officials or foreign government ministers is at the top end of serious corporate offending both in terms of culpability and harm. It is deliberate and intentional wrongdoing. It causes serious harm. In the foreword to the 2004 UN Convention against Corruption Kofi Annan, the Secretary General described its effects:

‘Corruption is an insidious plague that has a wide range of corrosive effects on societies. It undermines democracy and the rule of law, leads to violations of human rights, distorts markets, erodes the quality of life and allows organised crime, terrorism and other threats to human security to flourish. This evil phenomenon is found in all countries - big and small, rich and poor - but it is in the developing world that its effects are most destructive. Corruption hurts the poor disproportionately by diverting funds intended for development, undermining a government's ability to provide basic services, feeding inequality and injustice and discouraging foreign aid and investment. Corruption is a key element in economic underperformance and a major obstacle to poverty alleviation and development.’

It is no mitigation to say others do it or it is a way of doing business. The international community has taken its stand in the OECD Convention on Combating Bribery of Foreign Public Officials 1997 to which the UK is a party. Article 3.1 requires State parties to the Convention to apply criminal penalties which are ‘effective, proportionate and dissuasive’.”

Dr Turner was interviewed by the SFO and provided a 175 page witness statement dated 27 May 2011. He was charged on a three count indictment. Count 1 related to corrupt payments in Indonesia. Count 2 charged him with conspiracy to corrupt, the particulars of the offence being that between 1 January 2003 and 31 December 2008 he conspired together with Mr Jennings, Mr Schack, Mr Naaman and others to give or agree corrupt payments contrary to section 1 of the Prevention of Corruption Act 1906 to public officials and other agents of the Government of Iraq as inducements to secure, or as rewards for having secured contracts from the Government for the supply of TEL. Count 3 charged him with conspiracy with Mr Jennings and others to defraud Ethyl by making payments to public officials and other agents of the Government of Iraq as inducements to ensure that tests on MMT concluded with an unfavourable assessment. On 17 January 2012 before the Recorder of Westminster, His Honour Judge McCreath, at Southwark Crown Court, Dr Turner pleaded guilty to all three counts.

Mr Jennings, the former CEO of the first defendant, was also charged on a two count indictment in materially identical terms to Counts 1 and 2 and he pleaded guilty to both counts at Southwark Crown Court on 11 June 2012. Sentencing of both Dr Turner and Mr Jennings was adjourned until after the trial of Mr Dennis Kerrison, CEO before Mr Jennings and Mr Miltiades
Papachristos, another former employee, who were charged with one count of conspiring to make corrupt payments to officials of the Government of Indonesia and who pleaded not guilty. On 18 June 2014, they were both found guilty by a jury following a trial. All four defendants were sentenced by His Honour Judge Goymer on 4 August 2014, Mr Kerrison to 4 years imprisonment, Mr Jennings to 2 years imprisonment, Mr Papachristos to 18 months imprisonment and Dr Turner to a 16 month suspended sentence, to reflect his co-operation with the authorities.

The first contact between the claimants and the MOO about MMT seems to have been in November 2000 when Dr Wahab Al-Gaood, a cousin of Mr Al-Gaood’s who managed their Baghdad office was asked by the MOO whether they had MMT in production which was used instead of TEL. Mr Al-Gaood asked Mr Ghantous, who was the agent of Ethyl in Jordan whether Ethyl produced MMT and for a full technical specification and sample. On 22 November 2000, Mr Ghantous wrote to Mr Lecuyer, General Manager, France for Ethyl stating, inter alia:

“It is the client in Iraq who request from U.N. to include the additives required by them into the distribution plan. And since MMT was not used by client before, therefore, it was not requested to be included in the U.N. distribution list. Now, in order to include MMT on the U.N. list for phase 9, we must convince client that MMT is better alternative for T.E.L. Then, client will submit a request to U.N. representative for the distribution plan for phase 9 to include MMT in the list.”

The reference to phase 9 was to the next phase of the UN Oil for Food Program (“OFFP”). Dr Al-Khayat’s evidence was to the effect that whether or not a product was on the list of approved products under the OFFP was not determinative, because every contract under the OFFP would have to be approved by the UN 661 Committee, which monitored the sanctions regime and the OFFP. All contracts which the refineries wished to enter had to be submitted to the MOO and to the 661 Committee before a new phase of the OFFP commenced. The MOO did not submit a request for approval of MMT under phase 9 or indeed under any other phase thereafter including the last, phase 13, in early 2003.

The samples and technical details of MMT requested by the claimants were not received from Ethyl and were still awaited in mid-December. Notwithstanding that, it is striking that, on 19 November 2000, Mr Naaman wrote to Innospec informing them that Ethyl had already proposed MMT to the MOO and had meetings with them and that a sample had been sent to the MOO, who were considering MMT seriously. That letter is an early example of the extent to which Mr Naaman was prepared to exaggerate and lie about MMT, no doubt to serve his own ends.

The reality was that, following the enquiry from the MOO about MMT, rather than supplying samples and technical details, Ethyl asked the claimants to seek clarification from the MOO as to why it wished to move to MMT. Dr Al-Gaood wrote to the MOO on 30 December 2000 in these terms:

“This is in reference to our meeting about your request to find an alternative to the tetraethylene lead (TEL) substance.

Per the request prepared by the Ethyl Company, kindly clarify the reasons that led the Iraqi Ministry of Oil to convert from use of the TEL substance to the MMT substance.”

The reason for the request from Ethyl for such clarification is that there were marketing agreements between Innospec and Ethyl about marketing their products globally. Ethyl were anxious to ensure that they were being invited into Iraq rather than selling in competition with TEL and, to that end, they were seeking confirmation that the MOO had decided to replace TEL altogether with MMT, because otherwise their concern was that any entry by them into the Iraqi market whilst TEL was still being supplied and used would contravene their marketing agreements with Innospec. This was a constant theme from Ethyl throughout the period with which this case is concerned, but that confirmation from the MOO was never forthcoming. As Mr Al-Gaood accepted in cross-examination in answer to a question from me, it was critical for Ethyl that Iraq was moving away from TEL.

The response actually received from the MOO on 7 January 2001 was that they were studying the possibility of minimising environmental pollution from lead, keeping abreast with the global trend to minimise its use and considering suitable alternatives to TEL to provide the octane boost for gasoline. A table has been disclosed from an internal study by the Planning Directorate of the MOO in early 2001, showing comparative costs of alternatives to TEL: not just MMT but MMA, MTBE and Ferrocene. As Dr Al-Khayat said in cross-examination, this was the result of manufacturers’ literature and market research rather than practical field experience. What that table demonstrates is that even at this stage, the MOO was interested in the comparative economics of the various additives and that MMT was more than double the price of TEL. Mr Al-Gaood accepted in cross-examination that at this stage the MOO was simply carrying out a study and had requested the price per metric ton of MMT and a sample for testing and evaluation. The claimants did not provide an indication of price or a sample at this stage. As he said, a lot of homework needed to be done.

At the time of this initial approach by the MOO in November 2000, the claimants’ staff in Baghdad were suggesting that there should be a seminar in January 2001 between Ethyl and the MOO in relation to MMT. That did not take place. Mr Al-Gaood insisted in his evidence that the seminar had taken place in Dubai in January 2002. However, the email from the claimants to Mr Graham Knapton of Ethyl dated 29 December 2001 setting out the topics for discussion at the Ethyl seminar did not include MMT at all. Mr Al-Gaood said in his evidence that it was discussed. I consider if MMT was discussed at all at the Dubai seminar, it was only peripherally. It was certainly not a seminar organised to provide the MOO with background as to Ethyl and MMT, as Mr Al-Gaood had suggested in his witness statement. This was an example of Mr Al-Gaood trying in his evidence to suggest that matters were further advanced than they were. A strategy document was prepared by the MOO in October 2001 setting out the oil policy for the next five years. There is no mention in that document of MMT or of replacing TEL with MMT because, as Dr Al-Khayat accepted, at that time, there was no decision to replace TEL with MMT.

Following the Dubai seminar, on 5 February 2002 Mr Lecuyer emailed Mr Al-Gaood to thank him for his support at the seminar. He also refers to having been able to “move the MMT subject within Ethyl”. Mr Al-Gaood agreed in cross-examination that this was referring to the fact that Ethyl were concerned that the MOO should have made a decision to move away from TEL and that Ethyl were being invited into Iraq. At this stage Ethyl did not consider that they were in a position to supply MMT to the claimants. On 31 December 2002, Mr Al-Gaood was called to a meeting at the MOO to discuss MMT. It appeared that the MOO had received samples of MMT or its equivalent from two other companies, neither of them Ethyl, and were now looking for a 5 litre sample to carry out a field test on three cars. At this stage therefore, Ethyl had not yet supplied a sample to the MOO. At that meeting, Mr Al-Gaood explained to the MOO that for Ethyl to introduce MMT to Iraq the MOO had to “pull out of TEL”, in other words commit to replacing TEL with MMT, a yet further reference to Ethyl’s concern that they should not breach the marketing agreements with Innospec.

In his email of 31 December 2002 to Mr Knapton describing the result of the meeting, Mr Al-Gaood says: “Client has decided due to environmental reasons to move to MMT” but that is clearly an exaggeration, since elsewhere in the email he refers to the fact that the MOO were “seeking full details of field studies and any further information to enhance their knowledge of this product”. Obviously, if the MOO were still seeking that sort of information, they had not made a decision to replace TEL with MMT. To the extent that Mr Al-Gaood and Dr Al-Khayat sought to suggest in their evidence that a decision had been taken before the allied invasion of Iraq to replace TEL with MMT, I reject that evidence as being inconsistent with contemporaneous documentation such as this, which demonstrates that the MOO was still at stage B of the strategy for moving towards lead free fuel described by Dr Al-Khayat in his evidence, of requiring full details of field studies and further information about matters such as handling, storage and dosage of MMT.

The question of what octane boost MMT could provide was obviously a critical one. Mr Al-Gaood refers in his email of 31 December 2002 to the MOO having obtained a boost of 5 RON with a dose of 60 ppm on the samples from the other companies. He also refers to the MOO having two gasoline pools to treat, one of 67 RON and one of 72 RON. I suspect that the former is the RON of light naphtha prior to the introduction of reformate. That is consistent with other information from Iraq that the MOO were blending 80% of light naphtha with a RON of 67 with 20% of reformate with a RON of 98 to get a pool with a RON of 72. When Dr Al-Khayat was cross-examined about this he refused to accept either the 67 or the 72 figure, asserting the Iraqi pool gasoline at the time was 78 RON. In my judgment this was an example of Dr Al-Khayat trying to talk up the position pre-invasion in a manner which was not factually accurate.

In particular, his assertion that the pool had a RON of 78 does not tie in with the contemporaneous evidence. On 5 February 2003, Mr Nuri was told by the MOO that the average RON of the straight run naphtha was 65 and of the reformate 88 (in fact ranging from 86 to 93) which was “rather low due to many negative factors (catalytic inefficiency for example)”. Furthermore, when Mr Al-Gaood met with MOO officials in Baghdad in early March 2003, just before the invasion, he was told that, given the pool, they would need other materials than MMT to boost the RON to the required level. This all suggests that the pool average of 72 which Mr Al-Gaood was given at the meeting on 31 December 2002 was an accurate figure at the time. What that demonstrates is that given that, as he also said in his email of the same day, the pool needed to be boosted to 81 RON and the MOO were also looking for a further boost to 85 RON if possible, MMT alone could not provide the necessary octane boost.

Mr Al-Gaood must have appreciated this, since in his email to Mr Knapton of 31 December 2002 he asks: “Is it possible to use TEL to boost RON to certain level and then use MMT for further boost. Compatibility issue.” The response from Ethyl on that question was scarcely encouraging. Mr Knapton stated in an email of 6 January 2003: “Only to a very limited extent. There are no compatibility issues, but the response is not as good. It is not as simple as adding the octane boost from one on top of the octane boost from the other. Only a very low level of TEL could be added along with MMT to show any beneficial RON increase. MMT can add up to 5-6 RON (for fuel for vehicles without cat convertors) if further increase in RON is needed it should be achieved with MTBE or other oxygenate.” Likewise, in an email of 6 January 2003, Mr Lecuyer says to Mr Al-Gaood in answer to his query: “Very important is this issue of ‘incrementa1 RON’. Either you start additizing the gasoline pool with TEL and then the MMT response is (very) low in terms of RON/MON) or vice versa (if you add MMT first then the effect/response of TEL is low). It is a case when we cannot say 1 + 1 = 2 unfortunately.” This idea of using TEL to boost the RON to a certain level and then adding MMT to provide a further boost was one which the benzene enhancer committee subsequently recommended in May 2004 and this earlier response from Ethyl demonstrates that they would always have been sceptical as to whether this was technically feasible.

Thus, it is quite clear that from this early stage Mr Al-Gaood appreciated that TEL and MMT did not operate synergistically and Ethyl had doubts as to the technical feasibility of using TEL and MMT together. In his reply on 7 January 2003 Mr Al-Gaood told Mr Knapton that it was critical that he had clear information on the effect of using TEL and MMT and vice versa on RON. In cross-examination, he accepted that he never really received such information. He thought at the time that this was because Ethyl did not have experience of the effect, as he had not known that some years previously a pre-mix of TEL and MMT called AX33X was on the market. That was never on offer in Iraq. Given that Mr Al-Gaood never had the clear information he sought about the effect of using MMT and TEL together, he had nothing he could pass on to the MOO.

Furthermore, although the laboratory tests subsequently carried out by the Daura refinery in September 2003 show that a boost from 77 to 92 RON with a mixture of 0.411g Pb/l and 54mg Mn/l could be achieved, there is really no evidence of the extent to which a mixture of TEL and MMT could produce the required boost of a pool of gasoline from 72 to 81 RON over a sustained period on a commercial basis. There is some evidence that, for a short period in about June 2008, Daura produced gasoline using a mixture of TEL and MMT, but nothing about how successful that was. As already noted in the Background section at [33-34] above, Ethyl itself was evidently sceptical as to whether a mixture of TEL and MMT could produce an octane boost even of 6 RON.

In a letter of 9 January 2003, Mr Nuri informed Mr Al-Gaood that the MOO was seeking two one litre samples of pure MMT and four one litre samples of Hitec 3000 urgently for their laboratory testing and evaluation, together with data sheets and other technical reports from Ethyl. They were also seeking detailed information about matters such as storage, loading and injection into the gasoline system. On 11 January 2003, Mr Nuri wrote again with a series of questions about MMT raised by the MOO, one of which concerned the need for maximum flexibility in raising RON because the gasoline pool varied to a great extent between the refineries. On 13 January 2003, the MOO produced a further list of questions about MMT for Ethyl. I agree with Mr Onions QC that these were all basic questions about the product and hardly the sort of questions which would have been asked if a decision had already been taken to replace TEL with MMT.

On 19 January 2003, the Baiji refinery issued a tender for 400 metric tons of MMT with a closing date of 20 February 2003. They also made a request for a one litre sample of dilute material for testing and asked for a great deal of technical information. Mr Knapton recognised that by the closing date, Ethyl would have to develop answers to numerous technical questions. After the pricing had been agreed with Ethyl, on 20 February 2003, the claimants made what was described as a “technical offer” to supply 400 metric tons of MMT to Baiji. The offer referred in terms to a training session for the Baiji technical staff to be held at the Jordan Petroleum Company refinery in Amman in the next few weeks, followed by a full test procedure in the Baiji laboratories.

The reference to the training session at the Jordan Petroleum Company refinery was evidently to what Mr Al-Gaood said he was told by the head of the technical department of the MOO, that a testing and training programme for MMT would be required. In the event, although arrangements were put in place for MOO officials to travel to Jordan, by the time that was arranged in March 2003, the invasion was imminent and the testing and training programme did not proceed at that stage.

At around the same time as the Baiji tender, the Daura refinery issued a tender for 300 metric tons of MMT with a closing date of 25 February 2003. That tender also sought two samples, one a 50 kg sample of MMT concentrate for a field test and the other 5kg of dilute MMT for laboratory testing. Mr Al-Gaood sought to suggest in his evidence that Daura was only contemplating laboratory testing, but I found that evidence unimpressive. The tender speaks for itself and obviously contemplated that there would need to be a field test. This was confirmed by Mr Nuri in his evidence in cross-examination: “they wanted large samples to make production of gasoline with it and use it in a certain number of cars for field testing”. In March 2003 the Basra refinery issued a tender for 300 metric tons of MMT with a closing date of 26 March 2003. In the event, the allied invasion of Iraq took place on 20 March 2003 and the tenders were suspended.

The evidence of Dr Al-Khayat was that it was the technical directorate of the MOO which instructed the refineries to solicit MMT quotations from the manufacturers, leading to the three tenders and that this was part of the strategy of moving away from TEL. This is borne out by the paragraph on page 2 of the minutes of the meeting of the benzene enhancer committee of 15 December 2003 which states: “Approval has been obtained previously for the three refining companies to prepare purchase orders [in other words the tenders] for the product MMT as alternative to TEL”. However, whilst I accept his evidence that, before the invasion, a high level strategy was developed in the MOO to move towards lead free gasoline, that is not by any means the same thing as having made a decision to replace TEL with MMT. To the extent that he was saying in his evidence that that decision had been made by early 2003, I reject that evidence for a number of reasons.

First, whilst the tenders were issued for 1,000 metric tons of MMT in all, the MOO was still seeking detailed technical information about MMT from Ethyl, which is simply not consistent with having already made a decision to replace TEL with MMT. Second, on the basis of the evidence, which I accept, that the average RON of the base pool gasoline in Iraq was 72 RON, it is quite apparent that MMT alone could not provide the required boost to get to a production gasoline of 81 RON. This meant either that MMT would have to be used in mixture with TEL, as to the effect of which Mr Al-Gaood had no information to give the MOO, or some other additive than MMT would be required. There is evidence that, in January 2003, tenders were also issued by the MOO for MMA, a different type of fuel additive. This is borne out by what Mr Al-Gaood reported to Mr Knapton in an email of 10 March 2003 about his meeting with the MOO in Baghdad in early March 2003:

“The technical department at the Ministry is asking our help in making determination whether to use MMA or not, especially in light of our letters warning them of the side effects of using MMA both for Environment &human health. They have confirmed to us that their priority for RON increase will be through utilizing MMT as much as possible. However, given their pool they will need other materials to boost the RON to the required levels.”

This confirms that, at that time in early 2003 before the invasion, the MOO did not think it would be possible to use MMT alone to provide the necessary octane boost. Whilst the MOO may well have wanted to replace TEL, in the sense of moving towards lead free gasoline, the fact that MMT could not provide the required boost renders completely implausible the suggestion that a decision had been made at that stage to replace TEL with MMT.

In fact, the claimants had informed the MOO at the end of January 2003 that they had agreed with Ethyl that their technical personnel would carry out a study to determine the best RON boost that MMT could achieve on the straight run naphtha and reformate produced in the Iraqi refineries. Mr Al-Gaood would not accept in cross-examination that the MOO would not have made a decision to purchase large quantities of MMT until such an evaluation had been carried out, referring to the high level of trust the MOO had in Ethyl. I found that evidence unimpressive. It is inconceivable that the MOO would have embarked on a change as far reaching as replacing TEL with MMT simply on the basis of trust. The fact that these tests had not been carried out prior to the invasion is a further reason why I do not accept that a final decision had been made at that stage to replace TEL with MMT.

Also, despite all the attempts by Mr Al-Gaood and Dr Al-Khayat in their evidence to say that a field test on MMT was not necessary before that final decision was made, I simply do not accept that evidence. In my judgment it is inconceivable that the MOO would have decided to switch from TEL to MMT without having conducted a field test on vehicles using gasoline produced with MMT as an additive.

Finally, whatever strategic decision may have been adopted by Dr Al-Khayat or other senior personnel in the MOO, it is apparent that, at that time in early 2003, the refineries were reluctant to adopt MMT. Although in his witness statement Mr Nuri had said that all three refineries were ready to adopt MMT, in cross-examination a much more nuanced and equivocal position emerged. He said: “When I say [in the witness statement] ‘all three…refineries were ready’, they were ready. I didn’t say they wanted to use it.” He also referred to there being resistance to using a new additive. I agree with Mr Onions QC that what emerged was that Mr Nuri had to do a good deal of persuasion of technical people at the refineries. As he said: “in what form, how much, what dosage, with or without TEL, that’s important”. That evidence points to an appreciation by technical personnel at the refineries that MMT alone would not provide the required RON boost to get to production gasoline of 81 RON. Its effect when mixed with TEL was unknown and Ethyl and the claimants never provided any information about that and, in any event, whilst using a mixture of additives would reduce the lead in the gasoline, it would not eliminate it.

All this suggests that the technical personnel at the refineries would have much preferred the flexibility of using TEL, which not only provided whatever octane boost was required but was appreciably cheaper than MMT or than a mixture of the two. In my judgment, this evidence of Mr Nuri about the reluctance of the refineries in early 2003 to adopt MMT instead of TEL is important, since it cannot be suggested and is not suggested by the claimants that this reluctance was somehow induced by bribery. That is a strong pointer to the conclusion that subsequent reluctance at Baiji and Basra, where the RON of pool gasoline was such that use of MMT alone would have been impractical, was not induced by bribery either.

I find that, at the time of the allied invasion of Iraq on 20 March 2003, a final decision to replace TEL with MMT had not been made. Further technical information and further testing was required before any such decision could or would be made. It follows that I reject any suggestion by the claimants that a decision had been made before the invasion which was somehow interrupted by the invasion and then resuscitated afterwards, but thwarted by subsequent bribery of relevant MOO officials.

I agree with Mr Onions QC that the relevant events which occurred and the decision-making process within the MOO and the refineries have to be appreciated in the context of the security situation that prevailed following the invasion. I have already set out at [40] to [43] above the circumstances in which the allies invaded Iraq and toppled the Saddam Hussein regime, the setting up of the CPA and the collapse of law and order and security in the country in the wake of the collapse of the regime, which is agreed between the security experts in their joint memorandum.

For present purposes, what is important is what they agree about the position of the refineries: that all three main refineries faced attack and the threat of attack, not only on the facilities but on staff and on supply of crude oil and raw materials. That security threat combined with under-investment to affect refinery productivity, which was lower in the period 2003-2010 than it had been prior to the invasion. As Dr Al-Khayat accepted in cross-examination, the invasion drastically changed everything in Iraq, including changing fundamentally the position of the refineries.

The claimants’ security expert Mr Richards agreed with the defendants’ expert Mr Doyle that the deterioration in the security situation disrupted and adversely affected the operations of the MOO and impacted on the efficiency of the refineries in a number of ways. It was certainly not a normal operating environment. He also agreed that there were some temporary halts in the operation of the refineries caused by power outages, particularly at Baiji, where the capacity and operation were being adversely affected by the poor level of maintenance and the lack of investment. On occasion, Baiji fell under insurgent influence. It was also agreed between the security experts that Daura refinery was attacked at various times following the invasion. In particular, there was a rocket attack on 13 May 2004.

Following the invasion, the US authorities put Kellogg, Brown & Root (“KBR”) in charge of procurement for the requirements of the Iraqi refineries, effectively replacing the finance department within the MOO. All spending had to be approved by KBR which was the only entity which could actually conclude contracts and purchase products.

The seminar and laboratory test at the Zerqa refinery in Jordan which had been due to take place in March 2003 in fact took place between 28 June and 7 July 2003. It was attended by Mr Al-Gaood and Mr Nuri of the claimants, Mr Knapton and Mr King of Ethyl, together with Mr Ian Knowles, an independent fuels consultant. From the MOO, the attendees were Mr Luaibi from the technical department (whom Mr Al-Gaood agreed was a good friend and who is now the Minister of Oil, notwithstanding that in Mr Gourgey QC’s final submissions at the resumed hearing on 1 October 2014, he suggested that it was Mr Luaibi who was corrupted in November 2003), Mr Jawad, head of the studies department and the heads of the research and quality control departments of the Daura and Baiji refineries.

The MMT actually tested at Zerqa was Hitec 3000 dilute, not the commercial product Hitec 3062. Ten litres were provided by the MOO of each of the light naphtha and reformate produced in Iraq and two blends of gasoline were made up, one using 50% light naphtha and 50% reformate and the other 45% light naphtha and 55% reformate. For whatever reason, the MMT was only tested with the latter. Although Mr Onions QC sought to maintain that this blend of gasoline was not representative of that actually produced in Iraq, it strikes me as unlikely that the representatives of the MOO would have been interested in the results of testing on an untypical blend, particularly since as Mr Knowles says in his report, the light naphtha and reformate had been chosen as typical of current production in Iraq.

The results of the testing are set out in Mr Knowles’ report. The 45/55 blend produced a base gasoline with a RON of 77. With the addition of a dose of 36 mg Mn/l there was a RON boost of 3 to 80 RON, with 54mg Mn/l there was a RON boost of 5 to 82 RON and with 72mg Mn/l there was a RON boost of 6 to 83 RON. Thus, as Mr Knowles noted, using this blend of base gasoline, MMT with a dose of 54mg Mn/l could produce 82 RON production gasoline. However, I agree with Mr Onions QC that, whilst the results of this test were successful, in that they demonstrated that MMT could do “what it said on the tin”, the limitations of the test have to be recognised. It was a small scale laboratory test, not a field test or in any sense the equivalent of a field test. In cross-examination, the claimants’ own technical expert Dr Habeeb was surprised that tests were not done on other concentrations of gasoline than the 45/55 blend. Although he described this as the first important test, he said that there was not enough data from Zerqa to make a proper decision. To the extent that Mr Al-Gaood and Dr Al-Khayat sought to suggest in their evidence that once the Zerqa test had been successfully completed, no further testing, and in particular, no field test was required, before a decision was made to replace TEL with MMT, I reject that evidence, which is both unrealistic and inconsistent with the contemporaneous position, which was that the MOO wanted to and did carry out further testing, including a field test, after Zerqa. In any event, Dr Al-Khayat accepted in answer to questions from me in cross-examination that nothing was going to happen in terms of implementing the strategy for replacing TEL with MMT, until the results of a field test proved positive, an important concession which lies extremely uneasily with the claimants’ case that a decision to switch from TEL to MMT was made in October 2003, before any field test had taken place.

The claimants relied in particular upon a document dated 7 July 2003 which Mr Al-Gaood described as a “memorandum of understanding” signed after the Zerqa test by Mr Al-Gaood, Mr Knapton and Mr Jawad for the MOO. Mr Al-Gaood’s evidence was that this evidenced a concluded contract for the purchase by the MOO of 1,000 metric tons of MMT. However, in my judgment, it did not evidence any such commitment. What the document demonstrates at most is that Ethyl were offering to provide blending units for MMT free of charge, conditional upon an order being placed for 1,000 metric tons of MMT by the MOO, said to be half what was required for dosing the Iraqi gasoline production. This was thus another example of the approach being adopted by Ethyl, that it would only enter the Iraqi market if invited to do so and if the MOO was committed to replacing TEL. However, no decision had been taken immediately after Zerqa to replace TEL with MMT and no contract was agreed: apart from anything else, no price was agreed. Ultimately in cross-examination, Mr Al-Gaood agreed with me that immediately after the Zerqa test, there was no binding commitment. The suggestion in his witness statement that there was a binding contract was simply an incorrect overstatement of the position.

Furthermore, that the MOO was interested in whether it was viable to boost RON using a mixture of TEL and MMT (rather than replacing TEL with MMT), is apparent from Appendix C to Mr Knowles’ report which refers to the fact that, at the request of the Iraqi Petroleum Company, three evaluations were made of Hitec 3000D MMT in combination with samples of what was said to be diluted TEL. Mr Knowles records the lack of success of those tests in these terms:

“Unaccountably inconsistent results were achieved from these evaluations, without any obvious cause.

Subsequent examination and a trial calculation strongly suggest that the contents of the container were of a higher concentration than declared, possibly undiluted TEL B.

TEL and MMT have, historically, been tested in combination and blends containing low and equal metal contents have been found to give valuable contributions from each anti-knock. Economic reality and progress away from the use of TEL led to their early discontinuation for road gasoline.”

That the MOO wished to carry out further testing of MMT after the Zerqa test is demonstrated by a handwritten letter dated 10 July 2003 (a few days after the test concluded) from Mr Nuri to the MOO, accompanying the delivery of five pipettes and a sample of Hitec 3000D which was said to be “specifically prepared for laboratory testing and evaluation of MMT samples, as it was demonstrated to the Ministry of Oil’s delegation at Zerqa Refinery – Jordan last week.” That letter (in fact disclosed after Mr Al-Gaood’s original evidence and after Mr Nuri had given evidence) demonstrated that, contrary to the suggestion of Mr Al-Gaood in his evidence, the MOO did intend to carry out further testing on samples of MMT and the claimants were well aware of this.

At the time of the Zerqa test, it appears that KBR were supporting the replacement of TEL with MMT. Thus on 27 June 2003, Mr Maqsood Alam of KBR who was assigned to refinery operations emailed Mr Williams of Ethyl stating: “…The primary objective is to ensure proper & uninterrupted production and to suggest ways & means for improvement and phase out chemicals and additives dangerous to health and environment. One of the objectives is to phase out TEL. This includes all of the refineries in Iraq ….Basra refinery is the first site. I want to phase out TEL with MMT.” However, the figures he gives in that email for the RON of the reformate produced at Basra of 84-86 and of the straight run naphtha of 62-66 demonstrate that, whatever his wishes, the base gasoline produced at Basra was simply not of a sufficiently high octane that MMT alone could boost it to the required level for production gasoline, which he states was 80 RON.

On 23 July 2003 Mr Alam emailed Mr Knapton of Ethyl. He referred to various reservations which the US Corps of Engineers (“USCOE”) had about MMT including health and environment issues but continued: “…having said that, still MMT is the most favourable replacement of TEL. we are working on it, along with IOM (Iraqi Oil Ministry). I am also working on my end to resolve some of their concerns.” Two days later in an email to Mr Al-Gaood, Mr Knapton refers to a meeting with a KBR engineer (presumably Mr Alam) and the fact that he was trying to organise a meeting with KBR in Kuwait as soon as possible.

However, when Mr Knapton and Mr King of Ethyl did meet representatives of USCOE and KBR in Kuwait in August 2003, the position as regards any decision to switch to MMT was far from optimistic. As Mr Knapton reports in an internal email of 26 August 2003:

“Since the war the newly constructed Iraqi Min of Oil has confirmed the original decision to move to MMT and is now working with both the UN and The Coalition Provisional Authority to implement this change. The visit of Min of Oil personnel and Iraqi refinery representatives to Jordan to meet with Ethyl for a demonstration of MMT was part of this ongoing process.

From our meetings with USCOE's and KBR last week it became apparent that because of the contaminated state of the Iraqi refineries, the USCOE's had instructed KBR to find a suitable alternative to TEL and KBR identified MMT as the best alternative. This is a completely separate decision to that of the Min of Oil, there is no apparent co-ordination between the activities of USCOE's/KBR and the Min of Oil. However we did seem to have all 5 interested parties arriving at the same conclusion.

During our discussions last week, we were told by USCOE/KBR that USCOE had uncovered either a 2 year supply agreement for TEL or a strategic stock pile of TEL which would last 2 years. Although details remained very sketchy and neither Capt Kirkpatrick nor KBR had seen any documentary evidence of this agreement, never the less USCOE have instructed KBR to defer their MMT project for 2 years. Kirkpatrick will continue to press his superiors for more detail and we did suggest that moving forward with MMT at just one refinery whilst continuing with TEL at the others would be a better approach. At this moment there is no USCOE/KBR programme to introduce MMT to Iraq.”

Later in that email Mr Knapton reports information from the MOO on 21 August 2003, evidently received from the claimants:

“Min reports they have about 6 months supply of TEL.. 2 other companies (non Octel!) have signed agreements under the UN programme but the feeling in the Ministry is they will not deliver. The Min of Oil has recommended the Minister to establish a Task Force to implement MMT purchasing. This is on his desk and should be approved Saturday.

..The Min of Oil confirmed they have no knowledge of any USCOE/KBR purchasing deal for TEL, they will not accept such a deal and are continuing with their proposal to purchase MMT.

To support this they have organised an MMT training session for the major Iraqi refineries at Daura refinery for this (now last) weekend. Azad Nuri for Nass lubricants will attend to assist with the training.

From these reports it seems that the Min of Oil, supported by CPA and UN who will have to fund this venture, are pressing ahead with their plans to move to MMT. How they propose to do this whilst KBR are operating the refineries for USCOE is a little unclear to me, although USCOE and CPA must have an interface somewhere. Once the TEL supply position is clarified and these 5 groups come to realize they are all of the same mind we could be back on track very quickly. Assessing the USCOE's position I'm sure we would be tempted to wind down our own activity of looking at production levels, stock levels, delivery vessels, delivery routes etc but given the activity of the Iraqi Min of Oil, which must have the blessing of the CPA, I strongly recommend we continue with our programme, particularly of trying to build stock levels.”

This report suggests both some confusion within Iraq and a disparity of approach between the MOO on the one hand and the USCOE and KBR on the other, even assuming that one accepts at face value what the claimants were telling Ethyl about the attitude of the MOO, as to which I have considerable doubts, since what the claimants describe as the MMT committee or task force to implement MMT purchasing was in fact a committee with a more wide ranging remit, the benzene enhancer committee, which looked at a number of possible octane additives as alternatives to TEL.

Ironically, at the same time as the claimants were apparently informing Ethyl that the MOO were about to replace TEL with MMT, Mr Naaman was informing Innospec that it was KBR which was about to replace TEL with MMT and that his contacts in the MOO did not want Innospec to lose the opportunity to continue supplying TEL to Iraq. Thus, on 25 August 2003, Mr Naaman wrote to Innospec stating, inter alia:

“Accordingly, KBR advised the Ministry of Oil that they are able to change the TEL system in all refineries in Iraq within very short period (few months) to be able to use the MMT product, which is cheaper in price, feasible and is the future as they threaten if Alcor insisted on selling the TEL at higher price to take advantage of monopoly.

Our contacts at the Ministry of Oil advised us that they do not want Alcor to lose the opportunity and lose the market in Iraq for the benefit of all parties (including their benefit from Alcor contracts), as KBR is capable to change the system (this proposal is already submitted to Ministry of oil by KBR USA) and import the MMT, the decision is for CPA and US Administration, above the will and desire of the Ministry of Oil KBR have a lump sum contract for distributing of fuel inside Iraq and they are allowed to make any changes in the old systems of the Iraqi Refineries to perform their contract obligations, so we have to be careful”.

Dr Turner evidently decided to check this out for himself and spoke to Mr Niakaros, the senior purchaser for KBR. He records that conversation in an internal Innospec email of 27 August 2003:

“I have been following up on the MMT story in Iraq. I spoke to Chris Niakaros, the Senior Purchasing for Brown and Root based in Kuwait. He was aware of MMT and also "MME and MTBS?" as alternative octane enhancers. He said that they had no plans to use any of these products and mentioned that the blending facilities in Iraq were only geared up to handle TEL. He knew nothing of the offer to provide blending units for MMT as mentioned by Naaman and said that if they were to be used he would certainly be involved and no such requisition had been processed by him. Rather encouragingly he was aware of some of the technical shortcomings of MMT which obviously I took the chance to discuss in greater detail!”

That conversation between Innospec and KBR and the parallel discussions between Ethyl and KBR/USCOE demonstrate that Mr Naaman’s suggestion that KBR was trying to promote MMT at this time in August 2003 was simply untrue. In my judgment the attitude of the US authorities and KBR as their agents was sceptical towards MMT and, since KBR ultimately held the purse strings, even if the claimants were right in saying that the MOO was keen to switch from TEL to MMT, it seems highly unlikely that KBR would have agreed a purchase of 1,000 metric tons of MMT at a cost of some US$25 million, when there were still stocks of TEL available and further purchases of TEL could be made at a much lower cost. It seems to me that the claimants’ case overlooks the fact that any switch to MMT would have had to be approved by KBR, and the weight of the evidence at this time in August 2003 and thereafter is that KBR was not particularly enamoured of MMT, pointing strongly to the likelihood that, even if the claimants were right that there was a decision to continue with TEL and not to switch to MMT, which was in some way induced by bribery, the MOO may well have been driven to the same decision irrespective of bribery, because of the attitude of KBR.

There were further tests on MMT at the Daura refinery on about 25 August 2003 which were attended by representatives of the MOO, Baiji and Daura (but not Basra) together with Mr Nuri. Mr Al-Khashab, the General Manager of the Daura refinery, signed a report dated 30 August 2003 which referred to the pool gasoline used having a RON of 77 (with the reformate at 88 and the naphtha at 67). He sets out the results of adding doses of 36, 54 and 72 mg/l Mn of MMT as boosting that base gasoline to 80, 83 and 85 respectively.

He also expressed a concern in the report that MMT: “is unstable chemically due to the formation of precipitations when exposed to light”. This concern was one which re-emerged at the time of the field test in 2006 and, although the claimants sought to suggest that it was some sort of “non-point” which demonstrated that the field test was a charade, it was a legitimate concern, which Mr Knapton of Ethyl had expressed himself in his email to Mr Al-Gaood of 6 January 2003:

“MMT is very sensitive to light and decomposes to give a black sediment within a few hours of exposure. Blends containing MMT must therefore be stored in non transparent containers.”

During the course of the trial, the claimants disclosed a fuller report dated September 2003 of further tests with MMT at Daura. What that report shows is that the MOO was conducting a laboratory study to consider the economic feasibility of MMT. The target of that study is described as: “Studying the minimum and maximum dose from MMT and TEL in increasing the (Octane Number) for Gasoline mixture (Pool) formed from Light Naphtha and Reformate having Octane No. (RON 77) to achieve Octane No. (RON 92). Also to study the impact of both products on Light Naphtha and Reformate in terms of boosting ability of Octane Number separately first and using both products together in order to find out economic feasibility for both products and reduce environmental pollution.” The reason for the study was said to be that an octane booster was necessary, but production of TEL had stopped at many factories internationally, so they were looking at using MMT alone or with TEL.

The study was carried out on a pool of gasoline of 77 RON made from reformate of 88 RON and light run naphtha of 67 RON. The fact that the laboratory was looking at boosting the pool to 92 RON, the octane number for a premium gasoline rather than the regular gasoline produced in Iraq at the time which had a RON of 80-82, points to this being an economic feasibility study and essentially aspirational for the future, rather than a test of MMT with a view to its immediate adoption to boost the pool to the requisite level of 80-82 RON.

Using Hitec 3000D, the ideal dose of MMT was said to be 54 mg/l Mn which would boost the pool by 6 RON and which was a proven lubricator to prevent damage to valve seats of engines. The refinery carried out tests using different doses of TEL and then different doses of MMT and TEL together and calculated what the daily monthly and annual consumption of TEL and MMT would be at Daura using those doses. Specifically the dose of 54 mg/l Mn and of 0.411g/l Pb required to boost the pool from 77 RON to 92 RON would involve daily consumption rates of 0.7134 metric tons of MMT and 4.205 metric tons of TEL. The test results showed that a dose of 0.66g/l Pb of TEL alone could boost a pool of 77 RON to 92 RON. Thus, although the report does not set out specific results of economic feasibility, it is immediately apparent that the use of the mixed dose of MMT and TEL would be more expensive than using TEL alone.

The test results also show that MMT alone was simply not capable of boosting the pool of 77 RON to 92 RON. Even with a dose in the laboratory of 120 mg/l Mn (which is way beyond any recommended level of manganese and way beyond any strength of MMT dosage used elsewhere) MMT could only boost the pool to 86.5 RON. To get to 92 RON either a mixed dose of 36 mg/l Mn had to be used with 0.548g/l Pb of TEL or a mixed dose of 54 mg/l Mn had to be used with 0.411g/l Pb of TEL.

The conclusions of the study were stated as follows:

“1- The efficiency of MMT to increase the Octane Number does not exceed 7 Octane Numbers as RON; therefore it is preferred to add maximum 54 mg/L to the current Pool.

2- The efficiency of TEL is large with wide range in terms of capability of dosing or increase in Octane Number; it has been observed that the maximum dose of TEL is 3.6ml/400 is capable of boosting Light Naphtha RON 66 to RON 92; whereas adding MMT at the highest dose of 72 mg Mn/l increases the Octane Number to RON 85 from Pool of RON 77.

3- Sensitivity of MMT to light; as it precipitate heavy metal components when exposed to normal light (chemically unstable), therefore this product should be dealt with in specific manner in the units and laboratories.

4- It is observed from .consumption schedules that it is possible to reduce the consumption of TEL by 400 Ton/year when adding 54 mg Mn/l instead of 36 mg Mn/L which means an increase in consumption of 129 MT/year from MMT product. And from this it is possible to calculate the economical feasibility based on the price per ton for each product.

5- It is observed from the graph that the addition of 36 mg Mn/L behaves in a linear manner after which the line deflects to the dosage access. Whereas it is observed that the graph for TEL dosage more linear for a bigger range.

6- It is observed from the regular report that MMT product is less toxic than TEL and less pollutant to the environment and considered as a replacement to lead compounds.

7- No field test has been carried out on MMT to observe the consumption level of gasoline (km/L) and the stability of engine operation for limited period of times. Nor its effect on Valve Seat Recession (VSR) due to inability to perform that test at this time.”

The report goes on to say that additional equipment such as atomic absorption technology is needed by the laboratory to carry out the required tests, in other words it was contemplated that further testing on MMT was required and, as specifically noted in the conclusions, no field test on the effect on cars of gasoline manufactured using MMT had been carried out. What is striking from this study is that it contains no recommendation to use MMT, as Mr Al-Gaood accepted when he was recalled for cross-examination after the additional disclosure of this and other documents. It goes no further than suggesting that, if MMT were to be used, the MOO would prefer to add 54 mg/l Mn to the current pool. I agree with Mr Onions QC that this report indicates that the MOO were still in the process of considering the position in relation to MMT, in circumstances where it was recognised that further testing, including a field test, was required.

That no decision to switch from TEL to MMT had been taken by the MOO is borne out by the fact that, by a ministerial order dated 11 October 2003, the benzene enhancer committee was set up. The ministerial order itself has not been disclosed but it is referred to in the minutes of the meeting of that committee dated 15 December 2003 disclosed after the trial concluded, which state that it was formed: “for the purpose of putting a policy to purchase gasoline additives (TEL, MMT).” Likewise, the memorandum from Mr Asaad, director-general of the technical department dated 23 December 2003, also disclosed after the trial concluded, refers to the ministerial order relating to: “the formation of a work team to propose a policy for purchase of gasoline additives”. As Mr Onions QC pointed out in his submissions at the additional hearing on 1 October 2014, the Minister would hardly have set up a committee for the purpose of looking at gasoline additives including TEL and MMT if a decision had already been taken by 11 October 2003 to replace TEL with MMT.

The claimants also relied upon a series of communications between Mr Naaman and Innospec in the period August to October 2003 about giving the MOO information about TEL and MMT and entering an LTPA to “kill” or stop MMT. Whilst those communications demonstrate that Innospec was concerned about the competitive threat posed by MMT, in my judgment and contrary to the claimants’ submissions, they are not evidence of a corrupt relationship with the MOO or that Mr Naaman was bribing officials not to use MMT.

The claimants’ pleaded case is that by late October 2003, the MOO had decided to use MMT alongside TEL until the stocks of TEL in Iraq were exhausted, at which point there would be a transition to using MMT alone. The starting point for this case is said to be a letter of 25 October 2003 from Mr Nuri to Mr Al-Gaood which states as follows:

“Subject: MMT

The special committee on MMT Purchasing decided on submitting a recommendation to the Minister for purchasing 1000 tons of (H.3062).

We hope this will be accepted soon.

Meanwhile, they asked for the following (I sent a message on 24/8/2003 about these requests):

1-

Two samples of (H.3000) Dilute.

2- Three pipettes.

3- Electrodes and chemicals used in measuring amount of Manganese in Gasoline samples, by using Atomic Absorption (AA) Method.”

Mr Nuri accepted in cross-examination that the committee which had been set up was the benzene enhancer committee which was looking at various possible alternatives to TEL. As I have already held at [137] above, this is borne out by the ministerial order dated 11 October 2003 setting up the committee, as referred to in the minutes dated 15 December 2003 and the memorandum from Mr Asaad dated 23 December 2003. Mr Nuri also accepted in cross-examination that what he was passing on to Mr Al-Gaood in his letter of 25 October 2003 was not a decision of the whole committee, but what it was that the members of the committee based at Daura wanted to do. This is what he had been told by staff at Daura: it was not at a meeting of the committee, since Mr Luaibi was not there, nor were there any representatives from the MOO itself or from Baiji or Basra. In cross-examination, Mr Al-Gaood accepted that the materials that were being asked for, specifically samples of Hitec 3000 Dilute, showed that further laboratory testing was contemplated. The claimants asked Ethyl to supply these materials in an email of 27 October 2003.

Mr Al-Gaood purported to pass on the information he had received from Mr Nuri to Mr Knapton in an email of 27 October 2003 which stated:

“MMT:

The committee has met and a recommendation has been issued for the approval of the minister to purchase 1000 MT of MMT. We expect very soon a tender will be issued for this project.

Please obtain all the necessary information for available dosing Units that can be mobilized within the next few months.

They will proceed with the program of TEL-MMT dosing. Will keep you updated when the minister will approve the purchase, which is a matter of days.”

In cross-examination, Mr Al-Gaood accepted that in this email he had added the reference to the committee having met which was not in fact in the letter from Mr Nuri and, as Mr Nuri accepted, the committee had not in fact met. Accordingly, this was a gloss by Mr Al-Gaood which was not true. As Mr Al-Gaood also accepted, this was the first time Mr Knapton had heard about any proposal to use MMT and TEL together, as is apparent from his response on 28 October 2003:

“Incidentally, under item 1 you refer to TEL-MMT dosing programme, what does this mean?

Ethyl may be able to use existing TEL equipment for MMT but if we instal new kit it will not be able to handle TEL as the injection equipment will not work at the high treat rates required for TEL.

Is there a TEL project running alongside the MMT project or was this just an ‘expression’ on your part to describe the process?”

In response on the same day, Mr Al-Gaood stated as follows:

“Regarding TEL-MMT dosing program: Client seem to be convinced that MMT & TEL work synergetically. So, they will go with partial treatment with TEL along with MMT for the first year until they finish their stocks of TEL.

Today it has been confirmed by the deputy minister that the decision has been made absolutely to go fully to MMT.”

In his witness statement Mr Al-Gaood accepted that he had not received this information directly from the deputy minister himself, but referred to a meeting shortly before his email to Mr Knapton, at which he was given this information by one of his contacts at Daura, probably Mr Najib. However, as Mr Al-Gaood accepted in cross-examination, he was in Amman not in Iraq, so he cannot have been at a meeting with Daura personnel. He was reduced to saying that one of his people rather than himself may have been at the meeting. However, whilst he insisted that he would not have passed to Ethyl a piece of information which he did not receive, the claimants have produced no other evidence of this alleged decision by the deputy minister “absolutely to go fully with MMT”. In my judgment, this was a piece of invention on the part of Mr Al-Gaood, designed to provide Mr Knapton with the necessary assurance, given Ethyl’s evident concern that MMT should only be supplied to Iraq if the MOO was moving away from TEL altogether, because otherwise Ethyl would contravene its marketing agreements with Innospec.

The reference in the email to the MOO being convinced that MMT and TEL worked together synergetically is also contrary to Ethyl’s own technical opinion, conveyed to Mr Al-Gaood in January 2003, that they did not work together synergetically. At best any conviction on the part of the MOO seems only to have been based on the results of the laboratory tests at Daura on Hitec 3000D mixed with TEL recorded in the September 2003 report. It simply does not follow that a mixture of MMT and TEL would consistently provide the requisite octane boost to raise the RON to 80-82 in production conditions, the point Ethyl itself made later, on 28 April 2010, in the email quoted at [34] above.

The claimants rely upon the evidence of Dr Al-Khayat to the effect that he could see no reason why, if you were using TEL, MMT could not have been introduced in Iraq after the invasion, in support of their case that a decision had been taken in late October 2003 to use MMT in conjunction with TEL until stocks of TEL ran out, then to use MMT alone. However, there are obvious problems with that evidence. As the defendants point out, Dr Al-Khayat was not a refinery man, so that he could not speak from experience and, in any event, he had accepted earlier in his evidence that the strategy to switch from TEL to MMT was not going to be implemented until there had been a successful field test, which of course at this stage there had not been.

Despite the claimants’ attempt to suggest that there was some confusion in Dr Al-Khayat’s evidence, in my judgment, his evidence when I raised the point with him was quite clear, that the environment in Iraq after the invasion in 2003 was not conducive to replacing TEL with MMT. Furthermore, as the defendants rightly point out, his evidence was that a decision had been made prior to the invasion to switch from TEL to MMT (evidence which for the reasons set out above I have rejected) and he could not give evidence as to a decision having been made in late October 2003, because by that stage he had been replaced within the MOO. In cross-examination, he accepted that he had left the task of following up the recommendation of the Zerqa delegation with the refineries in Iraq to Mr Luaibi and had disengaged himself from that issue prior to his departure from the MOO, so that he did not know what decision was in fact taken after he made his recommendation.

I agree with the defendants that the furthest that Dr Al-Khayat’s evidence went as to the position before he left the MOO was that he was recommending to Mr Ghadban, the then chief executive within the MOO delegated by the allied authorities to run the MOO on the Iraqi side (so in effect the Minister which he duly became later in 2004), that a decision be taken to replace TEL with MMT. However, as I have already noted, Mr Ghadban had no spending authority and would need the approval of KBR for any decision to switch to MMT. Ultimately, as set out below, it was Mr Ghadban who approved the recommendation of MOO officials to enter into the 2004 LTPA and the claimants are unable to put forward any evidence that he was bribed or that what he did was induced by bribery.

The claimants rely upon a series of communications between Mr Naaman and Innospec between June and November 2003 in which he refers to “our people” and “our local partners”, evidently references to officials in the MOO who had either retained or regained their old jobs and in which he is apparently trying to negotiate an increase in his commission to pay 2 per cent to these “local partners”. However, on analysis those negotiations relate to old pre-invasion contracts and not to any decision to switch from TEL to MMT. Furthermore, as Mr Onions QC rightly pointed out, it was not alleged in the criminal proceedings in the United States, nor has it been alleged in the present proceedings, that Mr Naaman actually paid 2% commission to officials in the MOO over and above the 10% kickback of the ASSFs.

On 7 November 2003, as recorded in an internal email of 11 November 2003, there was an internal discussion within Ethyl about a series of steps for action concerning storage tanks and injection systems required for MMT. In fact, at that time, no definitive decision had been taken by the MOO to switch from TEL to MMT. On 10 November 2003, Mr Nuri wrote to Mr Al-Gaood stating as follows:

“2.

They plan to produce regular Gasoline with 83 RON for the time being, by using both TEL & MMT with their pool with an average RON of 77, according to the following program (tentative):

TEL 0.027 gm Pb/Litre

MMT (H.3062) 0.036 gm Mn/Litre

This means they require 1130 T/Y of MMT for all the refineries (total Gasoline Production 13,000 M3/Day).

3.

When they start producing Premium Gasoline (RON 92) their approximate plan is as follows:

TEL 0.411 gm Pb/Litre

MMT (H. 3062) 0.054 gm Mn/Litre

Thus they require about 1700 T/Y of MMT (H. 3062)

…

8.

The Ministry informed me that this tender will be based on single source with direct negotiations.

9.

A final decision should be forthcoming on this tender, together with more details on the dosing systems within two weeks from now.”

This document was not disclosed by the claimants until after Mr Nuri had given evidence, so that it was not possible for the defendants to cross-examine him about it, but it is tolerably clear that the figures set out were derived from the results of the study conducted at Daura in September 2003 and that, contrary to what Mr Al-Gaood was telling Ethyl, the MOO had not made any final decision as at 10 November 2003 to tender for 1,000 metric tons of MMT, let alone to switch from TEL to MMT. At most there were tentative proposals to use MMT in conjunction with TEL, dependant on which grade of gasoline was to be produced, on which a final decision had yet to be made.

On the following day, 11 November 2003, Mr Nuri wrote to Mr Al-Gaood in these terms:

“I discussed in the Ministry this morning the report sent by you with the message dated 10/11/2003:

1)

The ideas and principles listed in the report will be accepted by the Ministry, once the whole strategy is explained to the Ministry and the conditions of an agreement are set. Also, the commercial aspects of such an agreement must be fully discussed.

2)

A meeting in the Ministry and the three refineries can fill all the gaps and finalize the matter.

3)

Further to our message of yesterday, following are more details obtained from the Ministry:

a)

The Director General of the Technical Department has been replaced. So we expect some delay in making a final decision on the MMT Tender, as the new D.G. is not very familiar with the subject. But we hope things should start rolling soon.

b)

The dosages of Pb and Mn mentioned in our letter are based on actual tests carried out by the Refineries' Team last month at Daura Refinery.

c)

When producing only regular Gasoline (RON 83), a third alternative will also be considered, that is using MMT alone and this means: MMT (H. 3062): dosage = 0.054 gm Mn/Litre

Thus, for a total production of 13,000 M3/D, the amount of MMT required in this case will be: 1700 T/Y.”

No “report sent by [Mr Al-Gaood] with the message dated 10/11/2003” has been disclosed by the claimants. Although they suggested that this was in fact a reference to the letter to Mr Al-Gaood dated 10 November 2003 referred to above, this makes no sense since there would be no reason for Mr Nuri to have discussed this with the MOO and in any event the letter of 10 November 2003 is fairly obviously “our message of yesterday” referred to in paragraph 3.

At all events, what that email of 11 November 2003 demonstrates very clearly is that, because the director general [i.e Dr Al-Khayat] had been replaced, there was a delay in making any decision, so that, contrary to the claimants’ case, there had been no decision to replace TEL with MMT at that stage. Taking the two communications from Mr Nuri on 10 and 11 November 2003 together, it is evident that the MOO were considering three alternatives (a) TEL alone; (b) a mixture of TEL and MMT and (c) MMT alone, but that no decision had yet been made which to adopt.

However this information does not appear to have been conveyed by Mr Al-Gaood to Ethyl. The internal Ethyl email of 11 November 2003 refers to a teleconference being called in response to the latest update from the claimants. The email then sets out under the heading “Status” information that can only have been provided to Ethyl by Mr Al-Gaood, as he accepted in cross-examination, in these terms:

“MMT implementation Committee have reported back to Minister of Oil. Their brief was to determine how much MMT was required for the first order, when/how to start, and how to fund. The committee have asked that the initial order be for 1000 MT MMT as Hitec 3062. The plan, based on their octane study within Iraq, is to use MMT in combination with Lead until the contract expires and beyond that time to use MMT alone. (Estimated annual requirement based on 54mg Mn/litre is 1800MT H3062)

- the Minister has signed the letter of intent.

- a tender for 1000 MT H3062 is expected to issue in the next few weeks”

As Mr Onions QC correctly pointed out in cross-examining Mr Al-Gaood, that information is completely contradicted by the terms of Mr Nuri’s letter of 11 November 2003. No letter of intent has been disclosed by the claimants and it is fairly clear that there was no such letter and no decision had been made at this stage. Nor, on the basis that the “MMT implementation committee” which Mr Al-Gaood describes is the benzene enhancer committee (which seems likely) had that committee reported back to the Minister. It would appear there was no “report” until the minutes of 15 December 2003, a month later. This information given to Ethyl is another example of the claimants overstating the position.

In fact, it appears that, at the time Mr Al-Gaood received Mr Nuri’s two letters, he was in Dubai where he had various meetings including with Ethyl on 12 or 13 November 2003. He accepted in cross-examination that, if he had shared with Ethyl at that meeting the information that the MOO was proposing to use a mixture of TEL and MMT, it is likely that Ethyl would have told him what their experience was of using TEL with MMT. Their experience is reflected in the two emails at either end of this story, in January 2003 and in April 2010 which I have referred in [33] and [34] above. In other words, they would have been sceptical as to whether a mixture of MMT and TEL could in fact provide the octane boost the MOO required, on a regular commercial basis, as opposed to in the laboratory.

Although Mr Al-Gaood must have appreciated, upon receipt of the email from Mr Nuri of 11 November 2003, that no final decision had yet been taken by the MOO to replace TEL with MMT, he did not disabuse Ethyl of the more optimistic impression he had given them, as set out in the internal Ethyl email of 11 November 2003, that the Minister had signed a letter of intent. Nonetheless, given that Ethyl must have thought, on the basis of the misinformation they were getting from the claimants, that a decision had been made and a tender for 1,000 metric tons was imminent, it is striking that none of the series of “Actions” set out in the internal Ethyl email of 11 November 2003, which it had been agreed would be taken with a view to supplying MMT to Iraq, concerned with production and inventory levels, storage facilities and the like, was in fact actioned. All that happened is that on 19 November 2003, Mr Knapton forwarded to Mr King and Mr Mendel of Ethyl Mr Al-Gaood’s email of 28 October 2003 about the alleged decision of the deputy minister.

Although there has been no direct evidence in the case from Ethyl, it seems to me that it can be inferred that Ethyl were uneasy about the use of MMT in conjunction with TEL both because of technical concerns about the effectiveness of the mixture in boosting RON to the extent needed by the Iraqi refineries and because of the concern that the supply of MMT into Iraq whilst TEL was still being used might contravene the marketing agreements with Innospec.

The complete failure of Ethyl to follow up any of the “Actions” set out in the internal email of 11 November 2003 is an important piece of evidence because on the basis of what Mr Al-Gaood had told them, Ethyl must have thought that the MOO had made a decision to issue tenders for 1,000 metric tons of MMT. In my judgment, the significance of the inaction of Ethyl is that it casts doubt on the claimants’ counter-factual case (on which their whole claim for damages is based), that if the MOO had proceeded with a tender for 1,000 metric tons of MMT in early 2004, there would have been substantial supplies of MMT from early 2004 onwards. Instead, Ethyl might well have been reluctant to commit to its supply if it was going to be used in conjunction with TEL, for the reasons I have given.

No decision to proceed with MMT had been taken by the end of November 2003. As Mr Nuri informed Mr Al-Gaood in an email of 30 November 2003:

“MMT: Till now no decision has been taken, due to several changes in the Ministry's top ranking personnel. A new counsellor for refineries has been appointed, who will be involved in the MMT discussion.”

In fact, by November 2003, the MOO was considering an LTPA for the supply of TEL. Mr Naaman had been pressing the MOO to sign an LTPA since about September or October as recorded in his letter to Innospec of 14 October 2003. The MOO informed Mr Bill Tyson, the process manager of KBR about the proposed LTPA, and he passed on information to Mr Errol Martin of Innospec in an email of 20 November 2003:

“The Iraqi oil ministry chemicals personnel I have been working with are considering a 3 year TEL supply offer from Alcor. I had mentioned the Octel/Alcor association as best I remembered it to the ministry in the past. They inquired about a contact for Octel, so I have passed this information on to them. You may be contacted by phone by Ms. Fatin Estephen, Planning Directorate, or Mr Karim Al-Aibi, Technical Directorate, Chemicals Dept Manager, or both. They do not have email addresses, except for one common oil ministry address.”

In fact Mr Naaman had gone to Baghdad for a week on 14 November 2003 and had meetings at the MOO with Mr Ghadban (in effect the Minister), Mr Luaibi (head of the Chemical Department) and Dr Al Saadi (head of the Finance Department). At least one such meeting was also attended by American representatives of the CPA. Mr Naaman reported the results of these meetings in a trip report to Mr Schack dated 1 December 2003:

“We have discussed the LTPA with the acting President Mr. Thamir Al Ghadhban and Under Secretary for Economic Dept. Dr. Radwan Al Saadi and Head of Chemical Dept., Mr. Karim La'aybi.

They have agreed in principle to sign LTPA with us for the quantity conservative of 2,000 M. Tons/year up to 4,000 M. Tons/year depending on production capacity of the local refineries. To get a proper assessment of the quantity, they have floated a written enquiry to all refineries asking them to abide in writing with their requirement having in mind, the refinery expansion volume forecast duly approved so they can discuss with us on solid ground their demands.

I have met as well the American CPA (Coalition Provisional Authority) responsible for the Ministry of Oil for budgeting decision and day-to-day functioning of Ministry of Oil They are:

Mr. Gary Vogler Ex-Mobil

Mr. Bob Robert Mackee Ex Conoco

I met them on 16th Nov 03 at the Ministry of Oil in Baghdad. They approved the LTPA emphasising the fact that it is a good solution for both parties. The Ministry of Oil will have a steady flow of TEL with a fixed price for the coming 3-5 years and Alcor will have a steady demand for TEL from Iraq to build their production accordingly. So, in general, the meeting went well on this subject. We are waiting to receive their response in Dec 03 and I hope we can sign a contract by Jan 2004. What they are looking at is a price of €10,000 pmt to finalize such an agreement.”

The claimants’ case is that this amounted to a volte face on the part of the MOO from a decision in October 2003 to proceed with a contract for 1,000 metric tons of MMT to be used in conjunction with TEL until stocks of TEL ran out, to a decision in November 2003 to proceed with the LTPA for TEL, which was induced by bribery. In my judgment it does not amount to anything of the sort. To begin with, as I have already held, there was no decision by the MOO in October or November 2003 to proceed with MMT as a replacement for TEL. As further set out below, although a meeting of the benzene enhancer committee on 15 December 2003 recommended proceeding with the purchase of 1,000 metric tons of MMT, that was in parallel with a recommendation that the MOO should also enter into the LTPA for TEL for 2004 to 2006, in other words the MOO were intending to continue using TEL. That recommendation was approved by both Mr Asaad (director general of the technical department and Dr Al-Khayat’s replacement) and Mr Ghadban.

Furthermore, what emerges from Mr Naaman’s meetings in Iraq is an agreement in principle to enter into an LTPA, not a final decision; hence his reference to receiving a response in December 2003. As subsequent events demonstrate, it was only after further internal meetings and discussions within the MOO (including with the Americans) that the final decision to proceed towards an LTPA for TEL was made.

In his submissions at the additional hearing on 1 October 2014, Mr Gourgey QC reiterated his submission that MOO officials had been corrupted at the meeting with Mr Naaman in Baghdad in November 2003, but that seems extremely unlikely given the presence of Mr Vogler and Mr Mackee. Mr Gourgey QC submitted that there must have been a separate meeting with the Iraqi officials. When I asked him whether he was submitting that all three of Mr Ghadban, Mr Luaibi and Dr Al-Saadi had been corrupted by Mr Naaman at the meeting in Baghdad (given that the claimants had not previously alleged that Mr Ghadban was one of the people corrupted) he indicated that he was not submitting that and said that it was enough if one of them was corrupted (evidently Mr Luaibi) because he would then exert his corrupt influence to procure a change of position by others, specifically on this hypothesis, Mr Ghadban. In my judgment, this is all fanciful in the extreme. It is also striking that in the information he gave Ethyl for the Newmarket proceedings in 2011, Mr Al-Gaood described Mr Luaibi as having “a critical role but not influential, more administrative”, hardly the description of someone who, having been corrupted himself, would be capable of influencing the decision of the man who was in effect the Minister.

Even if there had been something of a shift of position within the MOO, there is no evidence from the contemporaneous documents that Mr Naaman had to bribe officials to get them to agree in principle to an LTPA. It is striking that (unlike on other occasions when Mr Naaman was hinting to the defendants that bribes would need to be paid) there is no suggestion of that in his trip report or other communications from him about the LTPA. For reasons set out in more detail later in this judgment, I reject Mr Gourgey QC’s submission that it should be inferred from all the circumstances that bribes were paid to MOO officials to procure the LTPA. Furthermore, even if bribes were paid or promised at that stage, it is clear that, as at mid-November 2003, there was at most agreement in principle and that the ultimate decision as to whether to enter the LTPA rested with Mr Ghadban, effectively the Minister of Oil, in conjunction with the coalition authorities and KBR. There is simply no evidence that either he or they were corrupted and it is not an inference I am prepared to draw.

Furthermore, as I have already held, the suggestion that only Mr Luaibi was corrupted, but he then persuaded Mr Ghadban to change his position is completely fanciful. There is no basis other than the bald assertion by the claimants for saying that Mr Ghadban was “persuaded” to change his position, for the simple reason that he had never made a decision before the meetings in Baghdad to switch from TEL to MMT. The suggestion that he had made any decision about the use of MMT is contradicted by the contemporaneous evidence, specifically the correspondence from Mr Nuri of 10, 11 and 30 November 2003, referred to above. The true position is that, as set out below, Mr Ghadban made a decision later, on 28 December 2003, to accept the recommendation of the benzene enhancer committee that the MOO should enter into an LTPA for TEL. That was a perfectly sensible commercial decision and there is no evidence that that decision was influenced by corruption of him or anyone else.

On 15 December 2003, there was the meeting of the benzene enhancer committee. At the time of the trial itself, the minutes of that meeting (and the memorandum of Mr Asaad dated 23 December 2003 referred to below) were not available, apparently because the MOO had not provided them to the claimants. Soon after the trial concluded, the claimants obtained copies of those documents from a source within the MOO. More recently in late September 2014, the claimants also obtained from their source a copy of the minutes of a further meeting of the benzene enhancer committee dated 19 May 2004. In due course the claimants applied to adduce these various documents in evidence even though the trial had concluded. Ultimately Innospec did not object and I allowed this material to be put in evidence. The current political and security position in Iraq has clearly made it difficult for the claimants to obtain documents from the MOO and I am satisfied these documents could not have been obtained earlier.

The claimants also produced a further, fourth, witness statement from Mr Al-Gaood, which gave an explanation as to how these documents came to be disclosed late, exhibited certain recent communications with Mr Al-Khashab and then made a series of assertions and submissions about the effect of this additional evidence. The claimants did not seek to put in evidence either that witness statement or the communications with Mr Al-Khashab. In those circumstances, it is not necessary to discuss what Mr Al-Khashab is saying in September 2014 any further, save to note that it is not always consistent with his contemporaneous position, which seems to me a more reliable indication of his attitude to TEL and MMT at the time.

The parties addressed submissions to the court on the significance of these new documents at a further hearing on 1 October 2014. In the event, Mr Gourgey QC put forward limited submissions, to the effect that the new documents supported the case he had put forward at trial that there had been an abrupt change of position at or following the meetings in Baghdad with Mr Naaman in November 2003, followed through in the meeting of the benzene enhancer committee. His submission was that having decided or been close to deciding to replace TEL with MMT, the MOO and the benzene enhancer committee changed their position, deciding to continue to use TEL for the needs of the three refineries for the next three years. He submitted that that change of position can only be explained on the grounds of corruption by Mr Naaman of one of more officials at the Baghdad meetings. Mr Gourgey QC eschewed on behalf of the claimants any wider case, such as appeared to be being put forward in Mr Al-Gaood’s fourth witness statement, that the decision ultimately made by the MOO in late 2004 not to purchase 1,000 metric tons of MMT, as recommended by the benzene enhancer committee, was induced by corruption during the course of 2004.

In my judgment, Mr Gourgey QC was wise not to adopt that wider case which Mr al-Gaood appeared to be advocating, not merely because it raised a new, unpleaded set of allegations, but because it gave rise to a counterfactual scenario different from the one addressed by the claimants’ quantum expert, Mr Howick, a different scenario which Mr Howick simply had not addressed. However, contrary to Mr Gourgey QC’s submissions that the documents disclosed after the trial strongly support the case the claimants had advanced at the trial, it seems to me, for the reasons set out in more detail below, that they completely contradict that case.

It emerges from the minutes of the committee meeting of 15 December 2003 that those in attendance included representatives of each of the refineries, including Mr Latif from Daura, together with Mr Luaibi from the technical department. In relation to TEL, the minutes record that, despite environmental pollution due to its use, the Iraqis’ need for TEL remained for three reasons: (i) the lack of equipment such as isomerisation units and catalyst cracking units capable of producing gasoline with a high octane number; (ii) operational problems being suffered by the current reforming units at the refineries which were in need of complete maintenance, affecting negatively the octane number of the reformate and (iii) that, to cover shortage in meeting market demand, natural gasoline produced at gas processing complexes was being added to the pool gasoline which was reducing the octane number of the pool. Against each of those reasons, someone has written “Yes”. It is not clear whether this was Mr Asaad, to whom the minutes seem to have been sent in the first place or Mr Ghadban, to whom Mr Asaad sent the minutes under cover of his memo of 23 December 2003, or someone else. Whoever it was, it amounts to an acknowledgment that conditions in the refineries were such that the MOO had a continuing need for substantial quantities of TEL.

The minutes then record that the available TEL in Iraq was 1,800 metric tons which would meet the needs for 9 months production. They then state that there was a continuing need for TEL for 2004, 2005 and 2006, which is the same time scale as for the installation of gasoline enhancement units at Basra, evidently a reference to the timescale for replacing the equipment at one of the refineries, a matter to which the MOO reverted at a later stage.

The recommendation of the committee was that to ensure continuing supply of TEL and to fix its price: (i) a long term agreement should be entered into with one of the approved suppliers, after full study of the draft contract prepared by the three refineries. A handwritten note against this says: “Yes, meetings were held, representative of the company will offer them next month”, evidently a reference to Innospec; (ii) each of the refineries must specify their needs for the next three years as per current consumption and on the assumption that the gasoline pool octane number will be 81 and 85; (iii) to demand from the company which is contracted that it build new dosing and blending units for TEL and (iv) the finance department should specify later on which entity is to sign the contract, either a central order or each refinery separately. Against each of those last three recommendations is the handwritten note “Yes”. Again it is unclear if that handwriting is Mr Asaad, Mr Ghadban or someone else.

The minutes then go on to deal with MMT. They refer to the previous approval for the three refineries to prepare purchase orders for MMT as an alternative to TEL, which was based on a study by the studies department in coordination with the technical department. Its use would be to reduce environmental pollution from TEL and due to decreasing production of TEL and to break away from monopoly. This was evidently a reference to the position reached prior to the invasion to which Dr Al-Khayat referred in his evidence. The minutes then refer to the report by the work team which attended the Zerqa test and the study previously referred to having found that a dosage of 54mg Mn/l (equivalent to 1,800 metric tons per year) boosted the regular gasoline pool by 5 RON. They then state that Ethyl was committed to supply technical assistance and was ready to supply blending and other equipment free of charge upon opening a letter of credit to cover 1,000 metric tons which represented the refineries’ requirements for six months. It is notable that the minutes do not suggest that any such letter of credit was ever opened or that there was any binding contractual commitment.

The minutes then refer to laboratory tests carried out by the refineries, evidently a reference to the September 2003 tests at Daura. They state that the results were that, using the maximum dose recommended by the manufacturer, 54mg Mn/l, an octane boost of 6 was obtained, which made it possible to use MMT to enhance regular gasoline produced at Daura and Baiji. A handwritten note against this reads “Good”. The minute then refers to a study (obviously that at Daura in September 2003) conducted using MMT and TEL together to boost octane for premium gasoline of 92 RON at Daura and Baiji and for regular gasoline at Basra (81-82) due to the inability of MMT alone to provide the required boost because of the low octane of the pool at below 71.

The recommendation was: (i) to [work to] (Footnote: ²) purchase 1,000 metric tons of MMT at that time, to be distributed between the three refineries: 500 metric tons at Baiji, 150 metric tons at Daura and 350 metric tons at Basra. The supply of all equipment for blending, unloading and storage with the supervision of Ethyl staff was to be guaranteed; (ii) that Ethyl must offer training for staff and (iii) that the refineries should continue lab tests on samples and tests in the field to learn the effect of MMT on cars. The minutes go on to consider MMA, an additive with an amino base, but conclude that, because of uncertainty about environmental damage, the committee considered further studies and evaluation were necessary. It will be recalled that the MOO had been investigating MMA early in 2003 before the invasion, and tenders had gone out.

As already noted above, after the trial concluded the claimants also obtained from the MOO a memorandum dated 23 December 2003 from Mr Asaad, director general of the technical department to Mr Ghadban, referring to the ministerial order of 11 October 2003 concerning the formation of a “work team” to propose a policy to purchase gasoline additives (evidently a reference to the benzene enhancer committee). The memorandum then attached the minutes of that committee of 15 December 2003 stating that they include the recommendations to purchase TEL and MMT. Mr Asaad requested Mr Ghadban to review and instruct the approval of those recommendations.

There are then handwritten notes by Mr Ghadban on the memorandum dated 28 December 2003 stating the recommendations are approved and are to be coordinated with the refineries and the finance department. As Mr Onions QC pointed out in further submissions at the hearing on 1 October 2014, it is not entirely clear whether Mr Ghadban was approving both the recommendations to enter into the LTPA for TEL and to work towards the purchase of 1,000 metric tons of MMT. If the handwritten notes on the minutes are his, there is no “yes” against any of the recommendations in relation to MMT, in contrast to those in relation to TEL. There is a note dated the following day from Mr Asaad to the chemical department asking for necessary action. Mr Asaad then sent a letter dated 3 January 2004 to all three refineries attaching the minutes of the committee with the instructions of Mr Ghadban and his approval of the recommendations. The letter asked the refineries to take the necessary actions. The letter was copied to the finance department to take the necessary action in relation to a long term agreement for TEL.

At this stage, the finance department does not seem to have been instructed to proceed with the purchase of MMT, which may be an indication that Mr Ghadban had not finally or fully approved that recommendation at that stage. The reliance now placed by the claimants on the minutes and the letter of 23 December 2003 with the notations on them, seems to me to overlook that the court still has a far from complete picture of the decision making process within the MOO and, specifically, whether Mr Ghadban had fully approved a decision to purchase 1,000 metric tons of MMT. The fact that the benzene enhancer committee repeated its recommendation in relation to the 1,000 metric tons of MMT at its further meeting on 19 May 2004 (as to which see below) suggests that he had not fully approved their earlier recommendation at the end of December 2003.

It is worth pausing at this point to take stock of the position as at the end of 2003, particularly since the minutes and the memorandum emerged after the trial. Although there is no direct evidence from anyone at the MOO as to the decision making process within the ministry, a number of matters seem tolerably clear from this material. First, Mr Ghadban, who was effectively the Minister, had approved the recommendation to enter into what became the LTPA for the purchase of TEL over a three year period. Although the recommendations of the committee suggest some sort of competitive tender, only Innospec could supply TEL in the requisite quantities and other evidence referred to below confirms that this was a decision to enter into a long term agreement with Innospec. As Mr Onions QC put it, the recommendation to enter the LTPA and Mr Ghadban’s approval of it demonstrate the clear and unambiguous need of the MOO for TEL.

Second and most importantly, in parallel with that recommendation, the committee recommended working towards the purchase of 1,000 metric tons of MMT. If, as the claimants submitted in their submissions at the further hearing on 1 October 2014, the correct interpretation of the notations on the letter of 23 December 2003 is that Mr Ghadban was approving both the recommendations for an LTPA for TEL and to purchase 1,000 metric tons of MMT, that seems to me to refute comprehensively the claimants’ suggestion either that (i) there was a decision (or that the MOO was close to a decision) in November 2003 to replace TEL with MMT and only use TEL until existing stocks were exhausted or that (ii) the entry of the LTPA prevented orders for MMT.

Even if, as seems to me to be more likely, Mr Ghadban did not approve the committee’s recommendation in relation to the purchase of MMT, it is clear that the committee was recommending the purchase of MMT in parallel with the entering of the LTPA for TEL. There can be no question of the committee having been suborned or corrupted into changing their minds, as the claimants suggested in closing submissions. There is simply no evidence that the committee ever recommended replacing TEL with MMT. Furthermore, the fact that the committee was recommending purchase or working towards the purchase of 1,000 metric tons of MMT gives the lie to the suggestion that they had been corrupted. If they (or just Mr Luaibi who was on the committee) were part of some corrupt scheme by Mr Naaman to “kill” MMT, they would hardly have been recommending such a substantial purchase of MMT.

What was evidently contemplated by the committee was that MMT would be used as well as TEL (which would continue to be purchased for at least another three years under the proposed LTPA), either on the basis that, where the RON of the base gasoline was such that MMT would provide the necessary boost, MMT alone would be used or that where MMT alone could not provide the necessary boost, either TEL alone would be used or a mixture of MMT and TEL. It must follow that, even if the 2004 LTPA was procured by bribery, which for the reasons set out hereafter I have concluded it was not, that was not causative of the loss claimed by the claimants, since whatever the reason for the MOO not having ultimately placed orders for 1,000 metric tons of MMT, which I deal with below, it had nothing to do with the entry into the 2004 LTPA.

Third, the recommendation that, as well as the entering into a three year LTPA for TEL, the MOO should purchase 1,000 metric tons of MMT, seems to have remained within the contemplation of the MOO until sometime in late 2004, when the decision was made simply to proceed with the purchase of 120 metric tons in the first instance, some of which would be used in the field test. I discuss below the making of that decision. The precise reason why, in late 2004, it was decided not to proceed with the purchase of 1,000 metric tons is not immediately evident from the documentary evidence, but it may be associated with the requirement for a field test and therefore a decision was taken not to commit to more purchases of MMT until a field test had been successfully conducted. In that context it is striking that the benzene enhancer committee in its minutes of 15 December 2003 recommended there should be a field test and does not appear to have considered that the Zerqa test fulfilled the requirement for a field test.

Equally, the reason for not proceeding with the purchase of 1,000 metric tons of MMT may have been the financial difficulties the MOO faced. It may be the case that KBR, which held the purse strings, was not prepared to finance both an LTPA for TEL and the purchase of 1,000 metric tons of MMT (at a cost of U.S.$25 million). As set out at [127-128] above, KBR does not seem to have been particularly enamoured of MMT. It is evident from the minutes of the meeting of the benzene enhancer committee of 19 May 2004 that the refineries did not have the funds to finance purchases under the LTPA, let alone purchases of MMT.

In any event, whatever the reason for not proceeding with the purchase of 1,000 metric tons of MMT, a number of things are clear: (i) there is no basis for saying that the decision of Mr Ghadban to approve the entering of an LTPA for TEL was induced by bribery, not just because there is no evidence of his having been corrupted, as I have already said, but because, if the claimants are right, at the stage that decision was made in December 2003, he was approving in parallel the purchase of 1,000 metric tons of MMT; (ii) delay seems to have occurred after December 2003 in advancing further the recommendation to purchase 1,000 metric tons of MMT. The recommendation was repeated in another meeting of the benzene enhancer committee in May 2004 and the issue of the purchase of 1,000 metric tons of MMT was raised again in discussions with the MOO in August and October 2004 (as to which see below). However, there are no grounds for supposing that the delay was attributable to bribery by Innospec. As the delay in finalising the 2004 LTPA between January and October 2004 demonstrates, there was often a lengthy delay between the MOO agreeing something in principle and actually putting it into effect, no doubt due to economic and bureaucratic constraints; (iii) as set out further below, there is no evidence (as opposed to assertion and speculation by Mr Al-Gaood) that, although later in 2004 the MOO decided to proceed with a trial order for 120 metric tons rather than orders for 1,000 metric tons of MMT, that decision was induced by bribery by Innospec.

That a decision had been made within the MOO by the second half of December 2003 to enter into the LTPA for TEL was confirmed by a report from Mr Naaman to Mr Schack of Alcor and Dr Turner dated 22 December 2003:

“The Ministry of Oil has taken the decision to adopt the resolution of signing the LTPA with Alcor Chemie. This is final as this has been adopted by Mr. Vogler and Mr. Mackee, the two American interlocutor[s] in the Ministry of Oil.”

That report also demonstrates that the decision to enter the LTPA had to be and was endorsed by the American authorities. Since there is no basis for saying that they were corrupted by the payment or promise of bribes, that is further demonstration that the LTPA was not procured by bribery.

Following the meeting of the committee on 15 December 2003, the three main refineries all provided details of their requirements for TEL and indicated their support for an LTPA. Mr Ghassab, the general manager at Baiji set out their position in a letter to the Technical Directorate of the MOO dated 28 December 2003:

“Reference to the offer and to the Benzene Enhancer Committee that agreed in your Dept. on 15/12/03, they have studied the Long Term Contract (LTC) proposal presented by the Alcor company, which is the only approved supplier to us today for the supply of TEL to our refinery and after the study of the LTC we confirm the following points: (1) In case we want to reach Octane Enhancer on Benzene to reach at 80 per cent as an assumption and the fact today we are reaching 73 per cent, we will need 1,500MT per year of TEL. (2) In case we need Octane Enhancer on Benzene to reach 85 per cent, having in mind as well the present level of 73 per cent, we need 2,500MT per year. (3) We recommend signing a long-term agreement for purchasing TEL to the fact that we will have a constant supply of this material at regular basis and with fixed price for the coming three years with the possibility of extension.”

It appears from this that, although the benzene enhancer committee had said in its minutes of 15 December 2003 that 54mg Mn/l of MMT would provide the necessary boost at Baiji, the reality on the ground was that the RON of the pool was lower than they supposed. In my judgment, what Mr Ghassab says is a perfectly sensible commercial decision, since the RON of the base gasoline, which he says is 73, was such that TEL was required to boost it even to the lowest required level for production gasoline of 80 RON. MMT at 54 mg Mn/l would not provide a boost of 7 RON.

Mr Al Khashab, the General Manager of Daura, replied to Mr Asaad’s letter of 3 January 2004 by a letter dated 8 January 2004, in these terms:

“We have no objection to sign long-term agreement with one of the producers and approved suppliers for the coming fiscal year (2004, 2005, and 2006) at fixed price so as of each refinery will have its own contract and study the terms of the contract in detail before final approval. (2): Stock of TEL in our refinery company is enough for one year production having in mind that we are reaching octane level at 81 per cent.”

The letter goes on to refer to a recommendation of the “working team” in relation to MMT in these terms: “As per the recommendation of the work team in regards to (MMT) product, our company committed to use quantity of (150 MT) of the mentioned material supplied to us on the condition guaranteeing the supply of all equipment and requirements for storage, unloading and mixing with presence of personal from manufacturing company to provide training opportunity to production workers.” This confirms agreement to the recommendation of the benzene enhancer committee (presumably the working team referred to) that 150 metric tons of MMT be purchased by Daura and that trials on MMT continue, which is what in fact happened later in 2004, as set out below. It seems to me that it was perfectly sensible in commercial terms to continue trials and testing on MMT, before any final decision was taken to purchase a large quantity of MMT or to switch from TEL to MMT. This also demonstrates that, contrary to the claimants’ case, there was no conspiracy between Innospec and officials in the MOO to “kill” MMT in Iraq or, if there was, it was ineffective.

The response of the Basra refinery to the recommendation to enter the 2004 LTPA was set out in a letter from Mr Jaber, the General Manager of Basra in these terms: “... the meeting of the working team assigned to implement the policy of purchasing the Benzene Enhancer (Improvers) dated 15/12/[2003]. After the study of the long-term agreement proposal submitted by Alcor ... (1) We have no objection to proceed with signing this contract with required quantity of 1800MT per year i.e. approx. 5,400 m tons for three years”.

On 14 January 2004, Mr Asaad then wrote to Alcor requesting the signature of an LTPA, setting out the annual requirements for TEL of each of the three refineries, amounting in total to 4,800 metric tons per year. The letter was copied to Mr Ghadban referring to his “letter of approval” and “approval on the TEL Purchasing Committee”, further evidence that the decision to approve and enter a long term contract for TEL was ultimately made by Mr Ghadban. As I have already said, there is simply no evidence whatsoever that this decision was induced by bribery. In any event it was a perfectly sensible commercial decision. The position of the refineries after the invasion was an extremely difficult one, as is common ground between the security experts (see the evidence I have summarised at [42] and [111]-[113] above). With the possible exception of Daura, the refineries needed a substantial octane boost, which varied from time to time and which was beyond the reach of MMT alone. It follows that, at that stage, Basra and Baiji at least still needed a constant supply of TEL, so that even if they had placed orders for MMT at that stage, as the benzene enhancer committee had recommended, they would still have required large quantities of TEL.

A good picture of the difficulties faced by the refineries is provided by an Innospec internal document headed “Gasoline Production and TEL Use in Iraq 2003 and 2004”. This is undated but was evidently written in early 2004. Citation of two passages from that document will suffice:

“The gasoline production in Iraq has deteriorated significantly in 2003 especially after the war, which started towards the middle of March of that year and the subsequent occupation of Iraq. The reasons for this deterioration were not only the general conditions of the refineries which was created by the years of sanctions on Iraq but also because of the conditions created by the war and its aftermath. All the refineries were unable to reach their intended production capacities due the lack of security, often-inadequate crude oil supply, lack of sufficient and stable power supply and the need for major maintenance and repairs. Such maintenance and repairs could not be done when market demand is so high and there was no longer sufficient inventory in the country to allow shutting down the plants and maintain them properly. The loss of materials after the war due to pillage and looting may have also contributed to this situation. To meet the demand, Iraq resorted to importing large amounts of gasoline and other petroleum products. Nevertheless shortages were noticed throughout the year and they are unlikely to disappear during 2004.

TEL use in the refineries went down in line with the reduction of the quantity of gasoline produced and the discontinuation of blending natural gasoline in the gasoline pool.

….

There are some indications that the Iraqis, faced with growing demand and the difficulties associated with gasoline imports, are likely to blend some natural gasoline in Baiji and Basra refineries. In this case the TEL use could go much higher. The blending with imported gasoline could encourage this operation though imported gasoline, which is much better in quality, does not normally go to the refineries. It is difficult to make an accurate assessment of TEL use in this case but an informed opinion would put it at not less than 1500 tons.

In conclusion, it is evident that TEL use in Iraq will continue to be higher than other countries, which are still using this material for octane boosting, as is evident by the analysis for 2003 and the estimates for 2004. There has been no additional production facilities or octane boosting process units in the last 20 years. Until this is done, Iraq will continue relying on TEL for that purpose.”

Although there has been no direct evidence of the decision making process within the MOO, it is a reasonable inference that the perception within the MOO at that time was that MMT alone could not consistently provide the required octane boost at all three refineries: it would always be necessary to use TEL as well some of the time (and in the case of Basra, all the time). This is borne out by the minutes of the meeting of the benzene enhancer committee of 15 December 2003 (and the minutes of the subsequent meeting of 19 May 2004 referred to below), which contemplate not use of MMT alone but use of MMT in combination with TEL. Given the demand on the refineries to produce gasoline and minimise expensive imports, the only additive which could ensure that, with a fluctuating and uncertain RON of the base stock, a gasoline of 81/82 RON could be regularly and consistently produced, was TEL. In those circumstances, the decision to ensure continued supplies of TEL by entering an LTPA made obvious commercial sense in late 2003 and early 2004.

Conditions at the refineries throughout 2004 up until the time the LTPA was finally signed in October did not improve, so that the commercial imperative for such an agreement increased rather than the reverse. The continued dire conditions at the refineries were confirmed by Mr Dathar Al Khashab, the general manager of Daura, at a meeting with Dr Turner of Innospec in Uxbridge in early October 2004. As Dr Turner reported in an internal email:

“ - the dire position of the Iraqi refining industry was confirmed; the three main refineries have averaged about 40% of normal throughput for the past 12 months. Operations in the last few months have deteriorated further. Power failure, maintenance problems but mainly the unreliability of crude supply due to terrorist activity all contribute to the on going problem.

- Daura refinery (commissioned in 1955) is serviced by three pipelines, mainly from Kirkuk and Basrah with additional supplies from a small field near the Iranian border and with many hundreds of miles of pipelines, interruptions to supply are unavoidable. Crude storage at the refinery amounts to only 300,000 barrels, or a maximum of three days usage at optimum operations.

- the Daura refinery has "a very good vacuum system for the offloading of containers but the TEL injection facility is rather primitive".

- Daura refinery produces RON 86/88 reformate and is blended with the naphtha to produce gasoline of RON 81. This requires a TEL usage of only 6 or 7 t/month.

- total TEL stock in the country is enough for about 6 months usage.

…

- problems at the largest refinery, Baiji are more severe. The reformer is operating poorly producing reformate of only RON 73. However, the compressors are not functioning properly and crude oil is contaminating the reformer catalyst. The refinery seems to be in something of a catch 22 situation, it desperately needs to shutdown for maintenance and to resolve this problem but due to the extreme shortage of refined products in the country the pressure is on to continue operations for fear of increasing the already enormous bill for imports ($200 million/month).

- Dathar was able to confirm what I reported at the LABT last week, before the war demand for gasoline was about 15 million l/d. The refineries were producing about 16 million l/d with the excess being put in strategic stock. Now the production from the refineries has fallen and demand has risen to about 18 million l/day. Most of this in Dathar's view is due not to the huge increase in consumption linked to the dramatic increase in the number of cars in the country (500,000 used cars imported in the last 12 months) but due more to the huge demand from small petrol driven generators which it will seem will reduce once normal electricity supply has been resumed.”

Although Mr Asaad had written to Alcor on 14 January 2004 requesting the signature of an LTPA, the agreement was not finally concluded until October 2004. There were protracted negotiations over the terms of the agreement. It was arranged for Mr Schack to visit Iraq in February 2004. Just before his visit, Mr Naaman wrote on 3 February 2004 stating that the Iraqis were imposing an ultimatum and that, if the LTPA was not signed on this trip, then Innospec would have to go to the Americans, with whom there would be a different scenario because other non-TEL products would be on the table, including MMT. In my judgment, this pressure from Mr Naaman has to be viewed sceptically for three reasons: (a) even if an ultimatum was threatened in negotiations, it was never in fact imposed; (b) as demonstrated by the endorsement by the U.S. authorities of a long-term contract for TEL and their scepticism about MMT to which I have referred above, it was unlikely to be the case that they were going to approve the replacement of TEL with MMT. On the contrary, their attitude appears to have been the reverse; (c) the context in which Mr Naaman was imposing this pressure was that he was pressing Innospec to agree to pay him 3% commission and stating that he needed confirmation of this in writing “to show to our local partners”. Ultimately this 3% commission was not agreed between Mr Naaman and Innospec until December 2004.

The claimants relied upon this reference to confirmation of the commission to be shown to the local partners and similar references in later correspondence, in support of their case that Mr Naaman was bribing officials in the MOO and that the 2004 LTPA was procured by bribery. However, this is a matter which has to be approached cautiously for several reasons. First, as I have set out in summarising the U.S. proceedings above, at a later stage in October 2005, as Mr Naaman admitted in the U.S. proceedings against him, he persuaded Innospec to pay him an additional 2% commission over and above the 3% to be paid to local officials in Iraq. Innospec did pay him two sums of U.S. $195,912.78 and U.S. $268,254 (€210,000) in relation to the first and second shipment respectively, but those payments seem to have been destined for officials in the Trade Bank of Iraq to procure the necessary letters of credit. More importantly, these were sums described in the U.S. proceedings as “fake bribes”, in other words they were sums he told Innospec he had to pay but did not in fact pay, but pocketed for himself.

The only payment he received from Innospec which, on his case, he actually paid to officials in the MOO was U.S. $167,000 which, according to the Statement of Offense in the United States, which he admitted, was paid from “in and around October 2005 to in or around mid-2007” to a senior MOO official “to secure purchases of TEL under the LTPA”. The claimants relied upon this payment as evidence that bribes had been promised at the time the LTPA was being negotiated to procure entry into the LTPA. For the reasons set out later in the judgment, I reject that submission.

For the present, two points should be noted. First, it was not alleged in the United States proceedings that this payment (or these payments since it is unclear whether they were paid in one or more tranches) was honouring some earlier promise and thus paid to procure entry into the LTPA. It is surprising, to put it at its lowest, if that was the true explanation for the payment, that the DOJ did not make that allegation, especially since that was indeed what they did allege in relation to the subsequent 2008 LTPA. Second, it was not alleged in the United States proceedings that the U.S. $167,000 tied in with or consisted of a proportion of Mr Naaman’s 3% commission, which again is surprising if that had been the case, given that the DOJ evidently carried out an extensive investigation. Aside from the references by Mr Naaman to the “local partners” requiring confirmation of the commission and statements by him to the effect that he was paying nearly all his profit to Iraqi officials, there is no evidence that, apart from the U.S. $167,000, any payments were made or promised to MOO officials in relation to the 2004 LTPA. In view of his admission to the United States authorities that he had extracted payments from Innospec on the basis that they were required to pay or honour promises of payment of bribes but he had pocketed the money, all such statements by Mr Naaman in correspondence with Innospec have to be treated with considerable circumspection. They are simply not a reliable basis upon which to conclude that the 2004 LTPA was procured by bribery.

Furthermore, since the recommendation of the benzene enhancer committee to enter into an LTPA for TEL was approved by Mr Ghadban, even if before the 2004 LTPA was entered Mr Naaman was bribing MOO officials, it seems that the LTPA would have been entered into in any event, irrespective of whether there was bribery. Also, since what the committee recommended was the parallel placing of orders for MMT, even if the 2004 LTPA was procured by bribery, that cannot have prevented orders for MMT as the claimants contend.

Returning to the chronological sequence, Mr Schack’s visit to the Iraqi refineries and the MOO in Baghdad took place between 5 and 11 February 2004. His internal report dated 18 February 2004 confirmed the production problems, particularly at Baiji and Basra: poor reformer operation, electrical and mechanical problems or equipment breakdown caused by poor maintenance, crude pipeline disruptions due to sabotage and power failures. Daura was reported as having fewer production problems. At the MOO he was told that all the unused funds, about U.S. $2.1 billion from the OFFP had been transferred to the CPA and that about U.S $70 million of authorised but unfulfilled TEL deliveries were being put at the disposal of the MOO at the Central Bank. It seems to me this is further confirmation that the American authorities were supporting the continuing use of TEL. In relation to the LTPA, he recorded that the responsible management in the MOO ratified the interest to subscribe to a three year TEL supply contract to cover their increased needs.

A more detailed report was produced by Mr Naaman, who accompanied Mr Schack, in a letter of 22 February 2004. He recorded that the MOO had met with Mr Vogler and Mr Mackee, (the two American advisers who Mr Naaman had met in Baghdad in November 2003 and who had approved entering an LTPA) and that Mr Ghadban was in total favour of such an arrangement. A copy of the draft LTPA had been given to Dr Al Saadi in the Finance Department who had explained details of how shipments under the LTPA would be paid for. From later documents it appears that, at the meeting with Mr Ghadban, the defendants’ draft contract of 17 pages was not acceptable to him and he insisted upon the MOO 4 page contract.

In his letter of 22 February 2004, Mr Naaman sets out details of meetings with Dr Al Saadi who had explained details of how shipments under the LTPA would be paid and with Mr Luaibi of the Technical Department who had explained the requirements for TEL of the refineries. Later in the letter, Mr Naaman returned to the theme that he and his “local partner” wanted to see a signed letter of confirmation of his remuneration and stated that he had given Mr Schack two original letters for signature. He does not identify his local partner and there is no suggestion in either report that any of the people Mr Schack met at the MOO had said that entry into an LTPA was conditional upon payment of bribes.

Mr Naaman continued to press for a signed letter of confirmation of commission and on 23 March 2004 he sent an email saying that that letter of confirmation was “a pre-requisite with my partners to proceed with the LTPA”. Mr Schack confirmed by return email that they would honour payment of 3% commission following receipt of payment for TEL shipments under the LTPA. In a further email which is undated but after Mr Schack’s email of 23 March 2004 (since it refers to that email) Mr Naaman continues to press for a signed “remuneration internal agreement as requested by our parties to proceed on a stable ground with LTPA finalisation”.

On 14 April 2004 Mr Naaman informed Mr Schack that Mr Ghassab, general manager of Baiji, was coming to Abu Dhabi on 17 April with the contract he was prepared to sign after he cleared it with the MOO. He requested that Mr Schack come to meet him. Mr Schack’s response was that he could not possibly go to Abu Dhabi at short notice and there were still a number of points which were not clear, such as where the MOO sat on contracts for all the refineries and a clear statement of minimum volume requirements. He said the situation was not yet ripe for conclusion of a serious contract but that Alcor were willing to continue supplying on a spot basis as long as needed.

On 22 April 2004 Mr Naaman reported to Mr Schack on a meeting in Abu Dhabi between Mr Ghassab and Mr Errol Martin of Innospec saying that there were no major differences on the overall look and understanding of the contract. He referred to showing “our Iraqi partner” Mr Schack’s email confirmation and said they preferred to see a written agreement on Alcor letterhead.

On 30 April 2004 Mr Schack wrote to Mr Naaman enclosing copies of the proposed LTPA for Baiji which had taken account of the reduced minimum volumes indicated by Baiji and penalties to be incurred by Alcor in case of major delays in supply (matters which Mr Ghassab had raised with Mr Martin). Mr Schack also stated:

“I must ask you (once again!) to refrain from any urge to "reengineer" the text of the agreement and to submit it as is to the customer. If any modification of the document is requested by the customer it must first be accepted by us in writing. We will then proceed to integrate any changes in the final document and send it back for approval in Iraq.

The rate of commission to Interact will be 3% based on the CIF Baiji Refinery price. This commission will be payable after collection of the proceeds from each shipment made under the terms of this agreement.”

It was after this proposed LTPA was sent to Iraq that a major disagreement emerged between the defendants and the MOO as to the terms of the agreement. On 9 May 2004 the MOO wrote to the defendants referring to the fact that at the meeting with Mr Schack on 9 February 2004, Mr Ghadban had insisted on the MOO form of 4 page contract and not the more complex 17 page document produced by the defendants, which the defendants had submitted again. The MOO was insisting on its short form contract. The major disagreement was that the Iraqis insisted on a three year contract with a fixed price and no escalation clause as set out in the defendants’ draft. The MOO said that failing a quick response within two days they would consider that the project was of no interest to the defendants.

This letter and a similar email from Mr Naaman of 8 May 2004 in which he said amongst other things that the price escalation provision was a deal breaker and that Mr Schack had agreed to fixed prices in Iraq evidently incensed Mr Schack who emailed Mr Naaman on 11 May 2004 stating, inter alia:

“ONE MAJOR POINT: I NEVER AGREED TO MAINTAIN A FIXED PRICE BEYOND 2005. This must be perfectly clear to you and if YOU have committed to obtain this it is your problem!”

On 17 May 2004, Mr Asaad wrote to Mr Schack raising the points upon which the MOO insisted, specifically that the price of TEL should be fixed for three years, without any escalation. He enclosed the MOO’s draft contract to which he sought a prompt response and also said they were investigating an alternative source of supply of TEL in case there was a shortage in supply, a scarcely veiled threat to go elsewhere if Innospec did not fall into line. Mr Namaan told a slightly different story in his email of 18 May 2004, reiterating that Mr Schack had agreed “fixed data” at the meeting in February 2004 and saying that the MOO was giving the defendants 48 hours to agree or disagree with their point of view, failing which they were threatening to go with MMT or buy finished benzene product from Kuwait.

In response the same day, Mr Schack remained irate, telling Mr Naaman to stop putting words in his mouth and saying that in front of Mr Naaman he had handed the Iraqis the Alcor draft contract and that he had never agreed anything about price and conditions. He said that during these negotiations he was not sure for which side Mr Naaman was working. Mr Naaman’s response was that the Iraqis had handed Mr Schack their suggested contract at the meeting in February 2004, Mr Schack had provided no response to them between February and May and then sent them “your famous old contract” which was a total disappointment to them.

At the same time as this correspondence, on 19 May 2004, there was another meeting of the benzene enhancer committee for which the minutes were produced by the claimants in late September 2014, after the trial had ended. The committee again included representatives of the three refineries including Mr Latif from Daura and also Mr Luaibi. The minutes state that the meeting was held: “to discuss and follow up the procedures taken to execute the recommendations…approved by [the letter] of 3 January 2004”. The minutes then deal with TEL, setting out the steps taken by the three refineries to review the draft LTPA and the requirements for TEL of Baiji and Basra to produce gasoline of 81 RON, which for the three years amounted to between 3,000 and 5,000 metric tons in the case of Baiji and between 3,900 and 5,400 metric tons in the case of Basra. The minutes record that Daura had considered postponing the signing of the LTPA that year due to lack of financial allocations (in fact the minutes record that all the refineries did not have the necessary funds to purchase their annual requirements of TEL if they did sign an LTPA) and to the fact that they had sufficient stock of TEL to continue producing gasoline of 81 RON in current operational conditions for at least a year. Notwithstanding this apparent difference of view on the part of Daura, the first recommendation of the committee at the end of the meeting was that all three refineries sign an LTPA to ensure continuity of supply and price. In due course, Daura did sign the LTPA on behalf of all three refineries.

The minutes then set out the reasons why the committee expected the required quantity of TEL to increase, evidently beyond the requirements of Baiji and Basra. First, they state that the need for TEL would increase because of how the gasoline was produced adding all gasoline from natural gas to the pool which would reduce the net octane number of the pool (a point which had also been made in the minutes of 15 December 2003) and because of the use of mixed naphtha from small refineries to which the maximum dosage of TEL was added to market it as gasoline. Second, they state that the refineries would be working on producing gasoline of 85 RON using the maximum dosage of TEL “as per the Ministry annual plan and back to the previous request of the Central Inspection Department”. As Mr Onions QC pointed out, the court does not know what the annual plan was, when it was produced or by whom, but it clearly required the use of TEL at the maximum dosage to produce gasoline of 85 RON. That is wholly inconsistent with the claimants’ case that in late 2003 the MOO had made a decision (or was close to a decision) to switch from TEL to MMT, which was altered because of corruption.

The minutes then refer to the storage tests carried out on MMT by all three refineries (which I refer to in more detail below) which showed stability of octane number when stored in dark containers as recommended by Ethyl. The minutes then state that: “all technical tests required to use this product were completed”. Mr Gourgey QC relied upon this and the fact that no requirement for a field test was mentioned (in contrast to the minutes of 15 December 2003) as demonstrating that the committee was no longer recommending that a field test was necessary. In my judgment, this is reading too much into this phrase and the fact that a field test was not mentioned. Contrary to the claimants’ submissions, the consistent position of the MOO was that a field test was required.

As already stated, the first recommendation of the committee is that the refineries sign an LTPA with Innospec to ensure continuity of supply of TEL and to fix the price, provided that the MOO provides support to obtain the necessary funds for the contract through the finance department. This is evidently a recommendation by the benzene enhancer committee that the MOO should sign the LTPA despite the financial difficulties, a reflection of how important they thought it was to secure supplies of TEL and to fix the price.

The second recommendation was that for the purpose of reducing the expected increase of TEL requirements to achieve 85 RON, an agreement had been made to produce gasoline of 81 RON using TEL, then increase the RON to 85-86 by using MMT at the maximum dosage recommended by Ethyl of 54 mg Mn/l. This proposition, that the octane of gasoline produced using TEL could be boosted further by using MMT, is one which the MOO seems to have repeated later, but there is no evidence that gasoline of 85 RON was ever produced on a commercial basis by these means and, as set out further below, I have considerable doubts as to whether it would have been technically feasible, as evidently did Ethyl when Mr Al-Gaood had asked about what was essentially the same idea, in January 2003.

The third recommendation was for the promotion of purchase orders of MMT by sending a direct invitation to Ethyl for the quantity of 1,000 metric tons approved earlier, to be distributed to the refineries in the same quantities as set out in the 15 December minutes. The minutes then state: “Using this product creates competition with TEL product that has been decreased globally and it is expected to stop its production in the near future, in addition to the necessity of providing alternative products not being monopolised by one manufacturer only.” Reading the second and third recommendations together, it seems to me that the committee was not recommending the replacement of TEL with MMT, but rather supplementing TEL to produce gasoline with a higher RON, thereby reducing the otherwise contemplated increase in the use of TEL, in circumstances where there was a concern as to whether TEL would continue to be manufactured and as to the effect of Innospec’s monopoly. These recommendations have to be seen against the background of what was going on at the time, which was that Innospec were not agreeing the terms on which the MOO wished to contract for an LTPA and were still insisting on its own terms.

That position changed soon thereafter, as Innospec appear to have had something of a change of heart about agreeing the terms put forward by the MOO. On 26 May 2004 Mr Schack replied to Mr Asaad reconfirming the defendants’ strong desire to enter into a long-term agreement. He also confirmed that they were happy with the MOO’s proposed amendments as regards the Force Majeure and Penalty clauses but asked that in relation to any “shortfall amount” the amount equal to the price payable be remitted to the defendants at the end of each 12 months not left until the date of termination. If the MOO were able to agree this small amendment, the defendants were willing to sign the contract immediately. By letter dated 6 June 2004, Mr Naaman informed Mr Jennings of the defendants that Mr Ghadban (who had recently been appointed the Minister of Oil) had no problem with this amendment and had asked the director generals of the three refineries to meet him that week to finalise the matter and fix the exact quantity required by each refinery.

Thereafter, there seems to have been a period of delay within the MOO, probably due to budgetary and bureaucratic constraints. On 28 July 2004, Mr Naaman provided Dr Turner and Mr Schack with an update saying that the LTPA was to be discussed at a meeting in the MOO on 1 August 2004. One point to be raised in the meeting was said by him to be signing the LTPA whilst another point was said to be the suggestion to purchase 1,000 metric tons of MMT for a one year trial as a temporary alternative to TEL. Since the agenda for and minutes of that meeting have not been disclosed by the claimants, it is not possible to say whether what Mr Naaman was saying was correct or not. Although in December 2003 and again in May 2004 there had been a recommendation by the benzene enhancer committee to produce purchase orders for 1,000 metric tons of MMT, that was contemplated as being in parallel with and in addition to the 2004 LTPA not as a temporary alternative for a year. The continuing tests on MMT and dealings with the MOO about it are referred to below and they show that, by the end of November 2004, the MOO was contemplating the purchase of a much smaller quantity, between 100 and 300 metric tons (in the event 120 metric tons).

There is also reference to the purchase of 1,000 metric tons in an internal Ethyl email on 20 October 2004, where Mr Knapton informed Mr King that the previous day the MOO had instructed the three refineries to proceed with the purchase of 1,000 metric tons of MMT, information which must have come from Mr Al-Gaood. It appears from this information that the MOO was still considering in October 2004 the possibility of purchasing 1,000 metric tons of MMT in accordance with the recommendations of the benzene enhancer committee at their meetings of 15 December 2003 and 19 May 2004. In the event, it appears the MOO decided to purchase a lesser quantity and were looking to order between 100 and 300 metric tons, eventually ordering 120 metric tons of MMT.

However, since this was all at the same time as the MOO was signing the LTPA (the Daura LTPA was signed by Mr Khashab on 9 October 2004 and Mr Naaman confirmed to the defendants in an email on 25 October 2004 that the Director General of the Finance Department (i.e. Dr Al-Saadi) had signed the LTPA), if at that stage the MOO was still considering the purchase of 1,000 metric tons of MMT, it must have been to be used in conjunction or in parallel with TEL, as recommended by the benzene enhancer committee, not as a complete replacement for TEL. If this is right, it is a further indication that the signature of the LTPA by the MOO was not procured by bribery and was not part of some conspiracy to destroy MMT.

In fact, on 7 September 2004, Mr Naaman informed the defendants that the LTPA had been approved by the Minister of Oil (i.e. Mr Ghadban) who had sent his written approval to the refineries instructing them each to sign a contract with Alcor. In the event, as I have said, the contracts had all been signed by 25 October 2004. Since there is no evidence that Mr Ghadban was corrupted by the defendants, the fact that he approved and ordered the final signature of the LTPA is a further strong pointer to the LTPA not having been procured by bribery.

Turning to the specific position with MMT, during the protracted negotiations of the LTPA in 2004 the MOO had not ceased interest in MMT. On 28 January 2004, Mr Nuri reported to Mr Al-Gaood in relation to his visits to Baiji and Daura. He said that at the request of the Technical Department of the MOO, both refineries had been testing samples of gasoline with 54ppm of MMT for a 5 RON increase to check on the long term effect of storage on the stability of MMT and whether there was any decrease in RON. They had been informed of Ethyl’s recommendations that all containers should be opaque and samples should not be subjected to sunlight. The refineries claimed that after 33 days of storage, there had been a decrease in RON of 3. The matter was to be discussed by both Mr Nuri and the refineries with Dr Brefkani the head of refineries in the MOO.

Mr Al-Gaood communicated the results of these tests to Mr Knapton who said the drop in 3 RON after 33 days storage was quite understandable because opaque bottles do not fully eliminate light and the small amount of light which enters the bottle will degrade the MMT over an extended period of time. He recommended the use of sealed metal containers for longer term storage tests. Mr Al-Gaood suggested to the MOO further testing on this basis and in a report of 31 March 2004, Mr Nuri reported positive results of storage in metal containers of gasoline manufactured with MMT at Basra. After 21 days storage, the RON results were the same as at the outset from which it was concluded that samples containing MMT remain stable after long storage.

Further tests of gasoline manufactured with MMT took place at Daura using 54mg/l to boost the pool from 76 to 82 or 77 to 83 with samples being stored in both metal containers and plastic cans. The results were conveyed in an internal MOO report dated 27 April 2004. After 30 days storage in metal containers, the RON remained 82, whereas even after 15 days storage in plastic sealed cans the RON had dropped by 3. After 30 days it had dropped by a further 3 RON. It is to be noted that these tests were not carried out on gasoline made with a mixture of MMT and TEL. Mr Nuri had a meeting on 27 May 2004 with Dr Brefkani (deputy minister in the MOO) at which he reported about the testing of MMT, including its use in conjunction with TEL.

As already set out above, at a meeting on 19 May 2004, the benzene enhancer committee recommended using MMT by adding it to gasoline of 81 RON which already contained a substantial quantity of TEL with a view to the MMT providing a further boost to reach a RON of 85. This would reduce the otherwise contemplated increase in the use of TEL required to achieve 85 RON, in circumstances where there was a concern as to whether TEL would continue to be manufactured and as to the effect of Innospec’s monopoly. Leaving to one side whether this was technically feasible, it was not a recommendation to replace TEL with MMT, whether on a temporary basis or otherwise.

On 27 June 2004 Mr Al-Gaood informed Mr Knapton that the best estimate of when an order for MMT would arrive would be mid to end July and it would be for between 100 and 300 metric tons initial supply. This was reflected in an internal email that day from Mr Knapton to Mr King. In cross-examination when he was recalled, Mr Al-Gaood said this information must have come from his people in Baghdad. It was then put to him that on this basis, he knew the game had changed, that there was no possibility of MMT replacing TEL but that there had to be a smaller initial supply to enable the Iraqis to decide whether and to what extent to use MMT. Unconvincingly, he sought to avoid that conclusion by saying the 100 to 300 metric tons was probably Daura’s share of the 1,000 metric tons order which he anticipated. I simply do not accept that evidence: Mr Knapton would surely have said to Mr King that this was only part of the overall order. This all suggests that, at least at this stage, the MOO had in mind a smaller purchase than the 1,000 metric tons approved in December 2003. At all events, even if Mr Al-Gaood was right that this was part of the overall order, the subsequent documentary evidence indicates that the MOO had still not made a final decision in August or October 2004 whether to purchase 1,000 metric tons and that, contrary to Mr Al-Gaood’s assertions, however much MMT was to be purchased, it was in parallel with the LTPA for TEL and not in replacement of TEL.

On 8 July 2004, Mr Nuri had a meeting with Dr Brefkani at which the MOO agreed to purchase MMT soon and said that the subject should be finalised within two weeks. The claimants passed on to Mr Knapton a request for information about the countries where MMT was being used and in which refineries. Ethyl did not provide that information and, on 8 August 2004, Mr Al-Gaood sent Mr Knapton a chaser saying that the MOO insisted on having such information. Mr Knapton’s response was that they were reluctant to provide what they saw as commercially sensitive information but he did provide a list of countries where MMT was used and of oil companies which used it. What Ethyl was not asked directly and therefore did not provide was information as to in which countries MMT at a dosage of 54mg/l was being used. There is some limited evidence that MMT at a similar dosage had been used in Russia and Pakistan.

From an internal email within Ethyl of 13 July 2014, it appears that either Mr King or Mr Knapton had told Mr Bob Yondula that the order expected from Iraq might be for bulk quantities of 300-500 metric tons of Hitec 3062. Mr King replied on 15 July 2004, stating:

“Although I believe bulk will be the optimum approach long term I expect that the first order will need to be shipped by ISO. The agent is expecting the first order to be for a "trial quantity" and estimates this will be for between 100-300 MT.”

This suggests that, by this stage, Mr Al-Gaood did appreciate that, in the first instance, the MOO would order a much smaller trial quantity and not the 1,000 metric tons. That ties in with the MOO wanting to conduct a field test and market trial quantities of gasoline with MMT as an additive, before committing to further larger purchases.

In an internal email of 20 October 2004, Mr Knapton set out his understanding of the position in Iraq. He said more than U.S. $1 billion a year was being spent on importing unleaded 95 RON gasoline and Iraq had to reduce these imports but the car population had tripled in twelve months with imports of 1990s vehicles. However, 85% of the fuel on the market was 82 RON (77 plus TEL) not suitable for these imported vehicles.

So far as MMT was concerned his email stated:

“MMT was selected as the preferred alternative and subsequent testing (post war) of MMT confirmed this selection. MMT has completed all of the testing required by Iraq and is fully approved by the Ministry of Oil for use in gasoline.

In a separate, independent, evaluation engineering group KBR also selected MMT as the most suitable alternative to TEL for Iraq.

It is not possible for Iraq to eliminate TEL in one stroke and this has become a longer term objective as refineries/refining improves.

Initial proposals are to increase the 82 RON main volume fuel to 86-88 RON with 54mg manganese from MMT, making this fuel more suitable for use in second-hand imported vehicles.”

In all probability this information would have come from Mr Al-Gaood. The first two paragraphs are simply not accurate: MMT had not been either fully tested or fully approved by the MOO, not least because it was always contemplated that there would have to be a field test and, contrary to what was stated, KBR appear to have favoured continuing use of TEL. It is interesting that, as already noted above, Mr Al-Gaood also appears to have told Mr Knapton that the MOO had instructed the refineries to purchase 1,000 metric tons of MMT, as recorded on the second page of the email. If correct, that demonstrates again that the MOO was contemplating using MMT in parallel with TEL under the LTPA and that, whilst the MOO was prepared to order MMT, this was not on the basis it was replacing TEL and TEL would only be used until existing stocks were exhausted.

Mr Knapton refers to the financial difficulties faced, noting that a recent proposal from Daura to utilise funds from a PA contract had been rejected by the MOO and that there was a limited amount of funding available for the purchase of MMT. In an earlier internal email of 13 October 2004, Mr King of Ethyl had referred to discussions the claimants were having with the MOO as to how to fund the purchase of MMT and, specifically, whether it could be funded via the U.S. reconstruction fund. Mr Knapton’s email also recognises that it was not practically possible for Iraq to eliminate TEL immediately and replace it with MMT. That issue of what was or was not possible has clearly got nothing whatsoever to do with anyone within the MOO receiving bribes from Innospec. Rather, it is all to do with the need to boost the RON of the base gasoline to an extent that MMT could not achieve.

What appears to have been in contemplation, if the information Mr Knapton had received was correct, was that, after TEL had been used to boost the gasoline to 82 RON, 54 mg Mn/l would then be applied to increase the RON to 86-88, in other words separate applications of the two additives, not a mixture, essentially what the benzene enhancer committee had recommended at its meeting of 19 May 2004. However, there is no evidence to suggest that this was ever actually attempted or, if it was, what the results were or whether it was even technically feasible. As noted earlier, as long ago as 6 January 2003, Ethyl itself had expressed doubts as to the technical feasibility of such a proposal.

Mr Earnest’s opinion (which I see no reason to doubt) was that when manganese is added to gasoline that already contains lead, the manganese octane response is less than it would be if there was no lead in the gasoline. This suggests very strongly that, given the low octane levels of the pool gasoline at Basra and, at least for quite a lot of the time, at Baiji, a dosage of 54mg/l Mn of MMT added to gasoline which already contained a substantial dosage of TEL (what would be required to boost the pool gasoline to 81-82 RON) would not have been able to provide an additional octane boost of 4-6 RON.

That conclusion is borne out by the undated report (presumably emanating from Ethyl) headed “An Evaluation of MMT (Ethyl Hitec 3000) Response in Unleaded and Leaded Gasoline Blends.” MMT (albeit at the maximum limit in the United States of 0.018g Mn/l) was added to blends of gasoline which already contained lead in the range 0 to 0.8g Pb/l. The report states in the section headed “Discussion of Results” that:

“Only a fraction of the expected response from the MMT is obtained in the leaded blends. Taking into account the precision of the ASTM methods employed, there is no substantial effect upon the RON of the high octane leaded blends by manganese The average percentage loss in MMT response due to the addition of lead for each of the blends is shown below.

60 RON Blend 33% loss

70 RON Blend 15% loss

80 RON Blend 60% loss

90 RON Blend 95% loss

95 RON Blend 95% loss

These results demonstrate that MMT is more effective as an antiknock at low octane (below 80) and without the presence of lead alkyl compound. Upon the addition of lead, the ability of MMT to act as an octane enhancer is severely effected, especially at high octane, where the presence of MMT has no substantial additional effect on the RON of the gasoline.”

Those results suggest that if TEL had already been added to the pool gasoline to achieve a RON of 81-82 before the application of MMT, the percentage loss of MMT response would have been in the region of 60 per cent. The Conclusion in the report states:

“Overall MMT displays a degree of effectiveness as an antiknock, at its maximum recommended limit, but will not replace lost octane from the removal of lead. As a co-antiknock with lead a certain amount of octane gain can be expected in low octane gasolines. However there is not the observed synergistic octane effect with lead as has sometimes been claimed.”

That last sentence echoes the doubts Mr Lecuyer and Mr Knapton had expressed in their emails of 6 January 2003 about the effectiveness of MMT when combined with TEL and the similar concerns expressed by Mr Williams of Ethyl in his email of 28 April 2010 (referred to at [33] and [34] above). This all demonstrates that, to the extent that the claimants are now seeking to suggest that MMT could have been added to a gasoline which had already been boosted to 81 RON by the application of TEL, they are clutching at a straw which is technically unsound. To be fair to Mr Gourgey QC, he did not put the claimants’ case on this basis, although Mr Al-Gaood in his fourth witness statement did advocate such a case.

Returning to events in 2004, Mr Al-Gaood appears to have continued trying to persuade the MOO to purchase a substantial quantity of MMT, as for example in his letter of 8 November 2004. In late November or early December 2004, one of the claimants’ representatives in Baghdad, Dr Wahab informed him that the MOO had signed the LTPA for TEL and could not use such a large quantity of MMT as 3,600 metric tons (evidently what the claimants were seeking) in the next two years. However, the MOO was suggesting purchasing 50 metric tons as a trial or pilot to be used at Daura with Ethyl helping to install a blending unit, then they would start purchasing larger quantities for the other refineries. Mr Al-Gaood accepted in cross-examination that this suggestion came from the MOO. In other words this was not a case of the claimants persuading a reluctant MOO to accept some MMT but of the MOO requesting it, a further indication that entry into the LTPA did not prevent the MOO from purchasing MMT.

The obvious question which arises is why, if the benzene enhancer committee recommended placing orders for 1,000 metric tons of MMT and that was still a possibility at meetings in October 2004, the MOO only in fact wanted to order a much smaller quantity, ultimately 120 metric tons, in November 2004. In the absence of any direct evidence from the MOO about its decision making process, the court inevitably has to draw inferences from the other evidence. It seems to me that on the basis of all the contemporaneous evidence, the most likely explanations for the decision are one or more of the following: (i) the state of the refineries having deteriorated and the octane of pool gasoline having dropped at least at Baiji and Basra, it was appreciated within the MOO that MMT alone could not provide the necessary octane boost and that a mixture of MMT and TEL might not provide the necessary boost either; (ii) there was resistance from Baiji and Basra to using MMT. There is certainly some evidence of this later in 2007; (iii) financial constraints on the MOO meant that they simply could not afford to spend U.S. $25 million on purchasing 1,000 metric tons of MMT and no alternative source of funding was available; and (iv) a decision was taken at a high level in the MOO to conduct a field test, as the benzene enhancer committee had recommended, and, possibly, some test production of gasoline with MMT using a relatively small quantity, ultimately 120 metric tons, rather than proceeding, without more, to a purchase of 1,000 metric tons.

At all events, whatever the reason or reasons for the MOO deciding to proceed with the purchase of 120 rather than 1,000 metric tons, there is simply no evidence that that decision was induced by bribery on the part of Innospec, not least because it is clear that the decision to enter the 2004 LTPA had been made in any event, irrespective of how much MMT was purchased. The additional documents which emerged after the trial demonstrated that, contrary to the claimants’ case at trial, there never was a decision in October or November 2003 or at any other time, to replace TEL with MMT. What was recommended by the benzene enhancer committee was the purchase of 1,000 metric tons of MMT in addition to the LTPA for TEL. In my judgment, bribery is the least likely explanation for the decision of the MOO not to proceed with a purchase of that quantity. Far more likely is one or more of the explanations referred to in the previous paragraph.

Ethyl was prepared to provide a blending unit free of charge if the order was for 120 metric tons rather than 50 and this led to a letter of 16 March 2005 from Mr Asaad inviting the claimants to submit an offer for 120 metric tons of MMT. On 22 March 2005 Mr Al-Gaood informed Mr Knapton that “We know client has instructions from Minister to study the economics of shifting from TEL to MMT. Such a shift is desirable only when economics are reasonably close”. This is an important recognition that the MOO would only make the switch from TEL to MMT if it was economically viable to do so. Mr Al-Gaood clearly recognised that it was necessary to demonstrate that economic viability if he could. To that end he produced a calculation and response curve to show that the economics were reasonably close. However, Mr Knapton did not regard the curve as reliable and decided not to use it. In his response to Mr Al-Gaood, he recognised that on the basis of the information from the MOO about TEL usage, TEL was cheaper than MMT: “If the client is right and they only need 332 mt of TEL to gain 6 RON on 3MML/day then we will not be having this business at all as we could not price effectively.” In my judgment, this recognised the reality of the situation: TEL was not only more effective than MMT in providing the octane boost that the Iraqis required, but much cheaper.

Mr Al-Gaood responded to Mr Knapton: “We shall assume in our offer that basically client is in a position to change to MMT for environmental reasons, and therefore we shall proceed with presentation as such...” on the basis of a price of US$19,000 per metric ton CIP Baghdad. On 30 March 2005, Mr Knapton told Mr Lecuyer of Ethyl that he had persuaded Mr Al-Gaood “to remove a fictitious TEL response curve in Iraqi gasoline from our offer, in case a) Octel saw this as a breach of the alliance and b) Octel could have genuine data. Jalal will now submit our offer within the next few days”. In the event, the claimants submitted the offer to the MOO on 11 May 2005.

On 20 June 2005, Dr Al-Saaedi head of the finance department of the MOO wrote a memorandum to the Minister saying that the cost of the 120 metric tons of MMT was U.S. $2,964,000 and that the technical department considered that this should be financed from the income of the three refineries from exporting heavy fuel oil for the years 2004 and 2005, a further indication that an alternative source of funding was not available. Dr Al-Saaedi’s memorandum also states that testing of this MMT product was not just for Daura but for all three refineries and “shall reduce the required quantities of TEL later on”, confirming that TEL would still be required. Although this suggests that further testing was contemplated, it is clear that, contrary to the defendants’ suggestion, only a small quantity of the MMT would be used for testing (in the event 3 metric tons was used in the field trial) and the vast preponderance was to be used in some form of pilot scheme at Daura as proved to be the case.

In June 2005, a delegation from the MOO headed by Mr Luaibi visited Innospec’s premises in Ellesmere Port. In the U.S. proceedings, Innospec admitted that the delegation was paid travel expenses and pocket money, Mr Luaibi as head of the delegation receiving more than the others. It was admitted that some U.S. $19,000 was paid for travel and accommodation and U.S $10,000 in cash as pocket money. Although under the U.S. Foreign Corrupt Practices Act this amounted to paying bribes and constituted a criminal offence, as Innospec admitted, it is important to have two points well in mind. First, similar payments to MOO officials for travel and by way of “pocket money” were paid by Ethyl and/or the claimants, for example in relation to a seminar which took place in Dordrecht. Although Mr Al-Gaood sought to justify such payments on the basis that they were in accordance with the Iraqi travel expense law, there is little qualitative difference between those payments and the payments made by Innospec. They were both in breach of the Foreign Corrupt Practices Act. Second, the claimants have no direct evidence that these travel expenses and pocket money were paid to Mr Luaibi or others as bribes to stop purchasing MMT. To the extent that the claimants invite the court to draw that inference, I decline to do so, not least because the MOO did purchase 120 metric tons of MMT and because other evidence suggests that Mr Luaibi was pro-MMT, including his recommendation in December 2003, as a member of the benzene enhancer committee.

On 10 October 2005, Mr Naaman emailed Dr Turner concerning a shipment of 740 metric tons of TEL pursuant to the LTPA (evidently the first shipment under the LTPA almost a year after it was signed), indicating that officials at the Trade Bank of Iraq would proceed immediately to open the necessary letter of credit in favour of Innospec if he shared half the currency fluctuation rate with them, a maximum of 2%. Innospec admitted in the U.S. proceedings paying this amount, some U.S. $195,912.78 to Naaman for bribing officials. Although the claimants rely on this as evidence that the LTPA was procured by bribery, this would have course have been a bribe paid to officials of the Trade Bank of Iraq to smooth payment for TEL supplied, not a bribe paid to the MOO and, in any event, as Mr Naaman admitted in the U.S. proceedings, although he received that amount from Innospec, he did not pay it over to any Iraqi official at all but pocketed the money.

Furthermore, although the claimants rely on this email as indicating that the MOO was also being bribed since Mr Naaman refers to “sharing most of our profits with Iraqi officials”, it is important to see the context in which he was alleging that it was necessary to pay bribes, which was in fact nothing to do with “killing” or “stopping” MMT but with the fact that, according to him a rival faction within the MOO was making money out of importing unleaded gasoline rather than using TEL:

“The [MoO] is looking at this matter from a different point of view. Our people want to process L/C and TEL of fastest ways since they are getting their remuneration. Our adversaries don’t want this L/C to proceed since they are importing unleaded blended benzene from Kuwait and Turkey and making a lot of money. Sabotaging our business means the loss of both our companies. Alcor/Octel does not sell TEL since Iraq is importing unleaded blended benzene and we lose our interest with the Iraqi Ministry of Oil.”

It is unclear from the U.S. proceedings whether any part of the U.S. $167,000 which Mr Naaman admitted paying a senior MOO official in exchange for two purchases under the LTPA or as his own Sentencing Memorandum puts it: “to facilitate the actual orders under the LTPA” was paid in relation to that shipment in late 2005. In the event, even if bribes were paid at this stage, there is no evidence that they were being paid pursuant to some prior agreement or promise, in order to procure the LTPA itself, which had been entered a year previously and under negotiation for the best part of a year before that. This is an issue to which I will return later in the judgment. Furthermore, even if bribes were paid at this stage, they did not prevent the purchase of the 120 metric tons of MMT, which was delivered to the MOO in two tranches in December 2005 and March 2006. The blending unit was apparently not operational until April 2006.

On 5 February 2006, Mr Naaman emailed Dr Turner about a further shipment of 1,000 metric tons of TEL where the order was to be released to the Trade Bank of Iraq the following week. He indicated that they would open the necessary letter of credit in U.S. dollars promptly: “provided we add up the 2% like last time”. In other words, as Mr Naaman admitted in the U.S. proceedings, these were further bribes to officials in the Trade Bank of Iraq. Innospec admitted in the proceedings against them having paid him €210,000 in respect of these bribes. This is the equivalent of the U.S. $268,254 which is set out in the Schedule at Appendix A to the DOJ’s Sentencing Memorandum against Mr Naaman. As with the earlier amount Mr Naaman received from Innospec of U.S. $195,912.78 (and the U.S. $155,000 in respect of the Field Test which I deal with in more detail below) this figure is in the column “Fake Bribes” in that Schedule. In other words, as with the earlier payment, this is a further sum which Mr Naaman admitted that he induced Innospec to pay, ostensibly to reimburse him for bribes, but which he simply pocketed and did not pay over.

In early March 2006, an Iraqi delegation went to Dubai at Innospec’s expense, where there were meetings with Mr Naaman and Dr Turner. It would appear that those attending included Mr Luaibi and Mr Ghassab and possibly Dr Al Saadi. Once again, Innospec paid Mr Naaman some U.S.$13,750 in travel and other expenses for the officials, including some U.S.$3,000 pocket money. As recorded in an email from Mr Naaman to Dr Turner of 7 March 2006, during a discussion about MMT the Iraqis had expressed concern that Innospec would cease manufacture of TEL and received assurances, which they wanted confirmed in writing:

“As discussed during the meeting regarding MMT product in Iraq, the Ministry of Oil were scared that Alcor/Octel will intentionally shut down their TEL facilities due to governmental pressure and environmental reason. You confirmed to them that the UK factory will remain working for at least 15 years more. They asked you if you can provide them with this information in writing and you promised that you will send it on Monday (06/03/06) upon your return to your office in UK, so the Ministry of Oil will confirm to you in writing their willingness to buy TEL product from Alcor/Octel for the next ten years minimum. Also, we agreed that the next LTPA duration will be for five years instead of three years.”

As appears from that email, there was then some discussion about the purchase of the 120 metric tons of MMT from Ethyl “for testing” which evidently irritated Innospec since Dr Turner described this in an email of 8 March 2006 to Mr Jennings as: “Afton have been up to their old tricks again”. Mr Naaman’s email records what was agreed with the Iraqi officials in these terms: “our people promised you during the meeting that they will fail the fleet test of MMT after they receive your written confirmation on providing TEL blending unit and continuation of TEL production for the next 15 years minimum.” Dr Turner duly wrote to the MOO on 8 March 2006 confirming that it was their firm intention that Alcor would be able to supply the MOO with TEL for as long as they required it.

In his email to Mr Jennings on 8 March 2006, Dr Turner refers obliquely to the promise that “our people” would fail the field test when he says: “Importantly, as part of this agreement we will also have the support of some good people in Iraq to demonstrate the economic and financial drawbacks of using MMT in place of TEL.” On 16 March 2006, Mr Naaman referred again to what “our people” had promised: “that they will work to delay the consumption of this quantity [the 120 MT of MMT] to at least 14 months and to fail the field test of MMT.” The claimants seek to make much in their submissions of the fact that the issue of “failing” the field test was specifically discussed at the meeting in Dubai in support of their case that there was a conspiracy to cause the failure of the field test. However, I do not consider that any of this really assists the claimants, not just because it does not begin to support their case that the 2004 LTPA was procured by bribery, which is a critical aspect of their case overall, but because, in the event, whatever was promised and despite all Mr Al-Gaood’s efforts in his evidence to demonstrate the contrary, MMT did not fail the field test, as set out in more detail below.

The order for a field test came in an Administrative Order dated 31 (sic) June 2006 issued by Mr Al-Khashab, general manager of Daura. The purpose of the test was stated to be: “A team work to be established from the below listed employees, names and job titles are listed below, to carry out the field test for (MMT) as a substitute for Tetra Ethyl Lead (TEL) material that is used in production of Gasoline for cars used in Iraq and starting from the date of this Administrative Order.” A list of some twenty seven employees including senior chemists, physicists and engineers is then set out. It is striking that the Order for the field test came from Mr Al-Khashab, who was a proponent of MMT and, as his recent correspondence with Mr Al-Gaood demonstrates, friendly towards the claimants, scarcely consistent with his setting up some form of charade.

As the defendants rightly point out in their written closing submissions, they had nothing to do with how the test was formulated or what the test did. It is striking that although Mr Al-Gaood now asserts that this was all unnecessary and some sort of elaborate charade to delay production of gasoline using MMT, induced by bribery and as promised in Dubai, at the time there was no complaint from either the claimants or Ethyl that a field test was not necessary. I reject any suggestion that a field test was not necessary and to the extent that Dr Al-Khayat and Dr Habeeb gave evidence that it was not necessary, I cannot accept that evidence. It seems to me that if, as was the case, the MOO had not used MMT in production gasoline before, there is nothing unusual or untoward in their doing a field test to test the actual effect of gasoline containing MMT on car engines rather than simply how it performs in laboratory conditions, before they embarked on any sort of commercial use of MMT in gasoline production. In any event, it is apparent from the January 2003 tenders that the refineries had intended to carry out a field test and that was long before there could have been any corruption in relation to it. Furthermore, the recommendations of the benzene enhancer committee on 15 December 2003, which can hardly be said to have been procured by bribery, included a recommendation for a field test of MMT on cars. The suggestion that the whole field test was some sort of elaborate charade given the number of MOO employees involved in the test over a period of six months was frankly absurd and ultimately was not a point pressed hard by the claimants in their closing submissions.

The claimants sought to rely upon Dr Habeeb’s expert opinion that field tests are carefully designed and executed with a detailed set of procedures and that this field test did not comply with any of those procedures, so that as he reiterated in cross-examination the tests conducted were not valid. However, to the extent that the design and execution of the field test fell short of the criteria which one would expect to be followed in Europe or North America, in my judgment that is not to be attributed to some sinister motive or intention on the part of the Iraqis. I specifically reject Dr Habeeb’s conclusion that the field test was designed to reach negative conclusions and did not evaluate MMT.

Rather, it seems to me that any shortcomings in the procedures adopted were due to the financial constraints and security conditions in Iraq. This was well put by Mr Earnest in cross-examination:

“I think it is perfectly fair for the Iraqis to attempt to do a field test. I would observe that given their finite financial resources and security situation in Iraq, they may well not have been able to do an ideal field test consistent with European or North American standards. However, in my view, that doesn't mean they should not have tried…to do what they appear to be trying to do, which is monitoring the mechanical conditions of the test vehicles, measuring the vehicle emissions and performing medical testing on individuals who handled MMT”

As Mr Earnest confirmed by reference to the field test report, it appears that the Iraqis were measuring exhaust emissions in the field, using a portable gas monitor to measure carbon monoxide and hydrogen sulphide, testing the fuel filters and engine oil for iron, lead and manganese; and doing atomic absorption tests. He said in cross-examination that some of the results with the portable gas monitors and exhaust gases looked odd, which may well have been why they were not mentioned in the conclusions to the Field Trial report.

It is apparent that the medical tests were not actually complete. The report was described as the initial medical report and it referred to difficulties during the experiment in the context of tests to perform the manganese percentage in blood and urine. The specialised medical centre referred to the unavailability of equipment to complete the testing. As I said during the course of cross-examination of Mr Earnest, since neither Mr Earnest nor Dr Habeeb has any medical qualifications, there is simply no evidence (other than the claimants’ assertion, which is no evidence at all) that these incomplete medical tests were part of some elaborate charade. I agree with Mr Onions QC that whatever the shortcomings of the field test, there is no basis on which I could possibly conclude that it was an elaborate charade designed to fail, not least because at the time it was regarded as a success, a matter I return to in more detail below.

The field test report was apparently available towards the end of December 2006. Its conclusions can be summarised as follows:

Contrary to the claimants’ submissions, it does not seem to me that there is anything untoward in these conclusions or anything which supports the claimants’ suggestion that the whole test was designed to fail. The issue of light sensitivity had come up time and again, including at Zerqa and in the subsequent storage tests at Daura, which had shown a decrease in octane when MMT was stored in plastic containers. Given that it would appear that the practical reality of life in Iraq is that some gasoline is sold on the side of the road by men with large plastic containers, not just from pumps at garages, this was a valid concern to raise. The conclusions about the ability of MMT to boost the octane of the gasoline, its impact on health and the environment and its cost, are all borne out by other evidence. The caution noted about the absence of technical problems in the short period of the test seems to me perfectly reasonable.

Mr Gourgey QC suggested to Mr Earnest in cross-examination that you would expect a field test to be run on cars for many thousands of miles but, as Mr Earnest said, under the conditions and constraints subject to which the Iraqis were operating, this may have been the best they could do. In my judgment, any shortcomings in the field test are to be attributed to those conditions and constraints rather than this being some “put-up job”.

The recommendations of the team which had conducted the field test were set out at the end of the report in these terms:

“In the case of extreme necessity to use this MMT material at the present time, the committee recommends the following:

1.

Do the utmost to have all arrays, developed for preparation, storage, processing, and handling, tightly closed.

2.

Contract for limited quantities,

3.

Look for more cost-effective and efficient material than the said material above.

4.

Communicate with the company to provide us with a certificate indicating more accurately the validity of material so it can be used as an official document adopted if otherwise happened to take the legal necessary actions against the supplier company.”

Mr Gourgey QC sought to portray these as somehow deliberately negative recommendations but it seems to me that there are two answers to that point. First, Mr Earnest’s opinion, which I accept, was that the recommendations were all reasonable and sensible. In particular, I agree with him that, given that the state of the refineries was such that MMT could not simply replace TEL, it was sensible to recommend purchasing limited quantities of MMT and, given the relative expense of MMT as compared with TEL and the financial constraints under which the MOO was operating, a continued search for more economic alternatives to TEL obviously made sense. In my judgment, Mr Earnest’s conclusion in his Supplementary Report is correct:

“In summary, I find the recommendations of the MMT Field Trial report to be reasonable. My review of the MMT Field Trial report does not support a conclusion that it was designed to reach negative conclusions or was a farce, as alleged by Dr. Habeeb and Mr. Al-Gaood, respectively. Indeed, my overall impression of the MMT Field Trial report is that the Iraqis had no substantive technical objections to MMT, but were mostly concerned about its higher cost.”

The second answer to Mr Gourgey QC’s point is that, at the time, far from the result of the field test being one in which MMT was seen to have failed, it was regarded as a success. In particular, Mr Al-Khashab, who had ordered the test, thought it was a success. On 11 January 2007, Mr Lateef the leader of the Field Test team, sent him the report and on 20 January 2007 he wrote back in these terms:

“Research / Mr Lateef

Extraordinary efforts and close monitoring. Thus, please write to the Technical Department at the Ministry to inform them of the success of the experiment within the specifications of this substance. This is because, to date, it has been unable to find a better alternative to replace the TEL substance. Also write to obtain the approvals necessary to purchase quantities thereof and distribute them among the remaining refineries. This will allow for the gradual reduction of TEL consumption until such time as we are able to produce NAPHTHA at a high octane level, then REFORMATE at the highest levels. Use of both substances should be defined, in the future, once the new isomerization equipment and new benzene improvement units are organized.”

As contemplated by that instruction, on 18 February 2007 a letter signed by Mr Al-Khashab enclosing the report was sent to the MOO in Baghdad. That letter provided:

“Attached please find the report pertaining to the field experiment performed for the (MMT) substance intended for use as an alternative for tetraethyl lead (TEL) currently used with the benzene produced in Iraqi refineries. Therein, we affirm that, in the event of urgent need and due to lack of a better alternative at this time, we should defer to the conclusions and adopt the recommendations set forth in the aforementioned report. This should be done until such time as units for isomerization and for improvement of the benzene are established, etc. It will be possible to obtain (light Naphtha) and high octane (Reformate) substance and accordingly it will be possible to gradually get rid of the environment polluting tetraethyl lead (TEL).”

In an extraordinary piece of evidence in his witness statement (which he repeated in cross-examination) Mr Al-Gaood sought to suggest that Mr Lateef had failed to comply with Mr Al-Khashab’s instructions and had drafted a letter in far more neutral terms, which Mr Al-Khashab had signed without reading it through. This appears to be his rationalisation for what he, at least, thought was an incredible difference between Mr Al-Khashab’s note of 20 January 2007 and this letter. He said that this was an indication that Mr Lateef had been corrupted by Innospec. I was distinctly unimpressed by this evidence. To begin with, there is no “incredible difference” between the contents of the two documents. At most there is a slight difference of emphasis, but the theme of both is the phasing out of TEL over time as the ability of the refineries to produce higher octane base gasoline improved. There is no basis for the suggestion that Mr Lateef disobeyed Mr Al-Khashab’s instructions or that he did so because he had been corrupted. This evidence is an indication of the lengths to which Mr Al-Gaood was prepared to go in alleging a wide-ranging conspiracy to corrupt which is simply not borne out by the evidence.

It appears that it was not only Mr Al-Khashab who thought that the field test had been successful, but also Mr Naaman. When he informed Dr Turner on 13 September 2006 that the field test was taking place, he said if it was successful the MOO would place an order for 350 metric tons of MMT. This concerned Dr Turner as it could have a very damaging impact on TEL sales. Mr Naaman wrote: “My advise (sic) is to follow my plan on the testing of the MMT as per my letter of 23/8/06 and to move forward immediately on the implementation to make the test fail, so there will be no more MMT order.” This was evidently a veiled reference to paying bribes to MOO officials. As set out in the Statement of Facts in the Plea Offer from the DOJ to Innospec, which was admitted by Innospec, on 16 September 2006 Mr Naaman sent Dr Turner a letter enclosing a false invoice for U.S. $105,000, to cover “payment for additional technical support and security operations required to nurture and protect the ongoing TEL business in Iraq.” In a handwritten note on the letter, Dr Turner approved this for payment, stating: “Best to allocate to agents commissions.” No doubt Dr Turner thought he was paying bribes to MOO officials for MMT to fail the field test, but, as Mr Naaman admitted in the U.S. proceedings against him, he never paid this sum of U.S. $105,000 over to officials in Iraq but pocketed the money. Any suggestion that Mr Naaman promised bribes then reneged on his promise is patently absurd: nothing would be more likely to turn the MOO officials to whom he had made promises against him and Innospec. The reality is he had never made any promises at all. It must follow that the payment by Innospec cannot have had any causative effect on the field test.

On 28 February 2007, Mr Naaman sent Dr Turner a letter enclosing what purported to be an English translation of the MMT Field Test report. The letter stated:

“As you will find out from reading the enclosed official report, the (MMT) field trial test has failed, or we made it to fail against all odds. The recommendation is to use the present stock of 120 tons inside the refinery (in a restricted place and environment) that they have already bought, as they can do nothing else with it (they paid for it), but to use it under a very special circumstances, i.e., in a closed system, otherwise, they would have fires and abrupt explosions. They want to finish with this 120 tons as they have paid for it, but there is no recommendation to buy any other quantity of MMT.

1- Accordingly, the purchase order of 350 tons of (MMT) has been cancelled.

2- (MMT) failed as octane enhancer vs. (TEL).

3- (MMT) failed financially vs. (TEL).

4- (MMT) is not a good replacement to (TEL), even on environmental and health reasons.”

The letter also enclosed a further false invoice for U.S. $50,000 which Mr Naaman said he had had to pay as an additional fee to ensure the report came out to Innospec’s advantage. That invoice was also approved and paid by Innospec, Dr Turner no doubt believing he was reimbursing Mr Naaman for bribes paid to MOO officials for MMT to fail the field test. However, once again, Mr Naaman did not pay any of that money over to officials in Iraq, but pocketed it, nor can he have promised it, so that payment also had no causative effect.

In fact, the translation enclosed with the letter was false. In particular, it included a completely different and false second recommendation which read, so far as relevant:

“In the extreme case of using the (MMT) with the present stock that has been ordered for 120tons, the committee recommendations are as follows:

2.

We don't recommend to buy additional quantity to the 120 tons ordered.”

The translation was evidently doctored by Mr Naaman to make it appear that MMT had failed the field test and to support his assertion that no more MMT beyond the 120 metric tons would be ordered by the MOO. It was no doubt because Mr Naaman appreciated that the recommendations in the actual field test report did not demonstrate that it had been a failure, that he created the false translation.

The significance of all this is that, whatever may have been promised at the meeting with Dr Turner in Dubai in March 2006, MMT did not fail the field test, nor were bribes actually paid or promised by Mr Naaman to MOO officials for it to fail. It is striking in this context that in the Newmarket proceedings in the United States in 2011, Newmarket/Ethyl did not allege that bribes had been paid for MMT to fail the field test.

In cross-examination, Mr Al-Gaood was asked about when the claimants had first come into possession of both the genuine translation and the false translation. After protracted to-ing and fro-ing, it emerged that the claimants had both the genuine and the false translation at the time the present proceedings commenced in September 2012. Mr Al-Gaood claimed that he had not appreciated there was a difference. I was not frightfully convinced by that explanation. Given the seriousness of the allegations made by the claimants in this case, even giving Mr Al-Gaood the benefit of the doubt, he should have appreciated before he signed the statement of truth in the Particulars of Claim that the case in paragraph 61.5 of that pleading, based on the false translation, that MMT had failed the field test, was unsustainable.

Faced with the evidence that Mr Naaman admitted in the U.S. proceedings that he had not paid bribes for MMT to fail the field test, in their closing submissions, the claimants shifted their position somewhat to allege that even if these bribes were not paid, the negative recommendations and conclusions in the field test report were the result of the corrupted influence of MOO officials. I consider this case is no more sustainable than the original pleaded case. To begin with the recommendations and conclusions were not negative: by and large they were realistic and reasonable, as set out above. Furthermore, generalised allegations of “corrupted influence of MOO officials” simply will not do in a case as serious as this. The obvious question is which officials and how were they corrupted? Mr Al-Gaood had a tendency in his evidence to accuse whoever he regarded as “negative” to MMT of having been corrupted, without any evidence to support his accusation. The reality is that, although Mr Naaman said he was paying bribes to MOO officials and Dr Turner paid money to him on that basis, the evidence is that the only money he actually paid to MOO officials after the end of the OFFP was the U.S. $167,000 in respect of two shipments under the 2004 LTPA. However, that sum was paid, as he admitted in the U.S. proceedings, to facilitate orders under the LTPA, not in any sense to “kill” MMT or to ensure it failed the field test.

Mr Al-Gaood says in his statement that, following the circulation of the MMT field test report, he had discussions with Mr Al-Khashab about the fact that the report was confused and had not been interpreted properly, particularly the point about the need for a “closed system” which he says was plainly wrong. Although the point about degradation of MMT in direct light was one which Mr Al-Gaood sought to disparage, such degradation is a fact, as both technical experts accepted and, as Mr Earnest pointed out, the conditions on the ground in Iraq with gasoline being stored and sold in plastic containers meant that this was a real problem, as Ethyl themselves had recognised at the time of the Zerqa test.

A meeting took place between the field test team, including Mr Lateef, and Mr Saleh, a representative of the claimants in Baghdad, in which Mr Saleh went through the conclusions in the report, providing explanations and clarification and offered the MOO the opportunity of a meeting with representatives of Ethyl in Amman. On 8 April 2007, a ministerial order was issued for three representatives of the field test team, including Mr Lateef to go to Amman. That meeting took place on 23 and 24 April 2007. Although in his witness statement Mr Al-Gaood says he was extremely critical of the field test report, that is not reflected in the report of the Iraqi delegation to the MOO. That simply refers to Ethyl experts making a detailed presentation about MMT and there being extensive discussion about the conclusions and recommendations in the report, it being agreed that Ethyl would provide a detailed response.

On 25 April 2007, Mr Knapton sent that written response which addressed each of the conclusions and recommendations in the field test report. Although the claimants characterise this as explaining why the negative conclusions are wrong, it is in fact far more nuanced. For example, it states in terms that MMT is light sensitive and should be stored in sealed metal containers, whilst making the point that Ethyl’s experience over many years is that there is no problem with gasoline containing MMT being exposed to light between the pump at the garage and the car gasoline tank.

In relation to the price differential, Mr Knapton does not suggest that the conclusion in the report is wrong. Indeed, he had recognised that differential in his own internal email referred to earlier. Rather, he seeks to sidestep the point by saying that the benefits of MMT are not based on price alone, but on environmental benefits and that if the price of TEL rose from U.S. $10,000 to U.S. $16,500, the cost would be equal. On the ability of MMT to boost the octane of gasoline, he does not suggest that a dosage of 54mg Mn/l could provide a greater boost than 6 RON, which, as he says, was the result of the tests at Daura.

At all events, following the meeting in Amman, the Iraqi delegation, including Mr Lateef, made recommendations in their report of the meeting that the MOO should contract with the claimants to purchase MMT, hardly consistent with Mr Lateef having been corrupted by Innospec. Their recommendations were as follows:

“Recommendations:

l-Comply with the clause (1) of the recommendations conducted by the midland co.

2-Ministry of oil shall design a wide promotional campaign explaining the MMT compound.

3-The Ministry of Oil departments shall take the required action to contract with the NAAS Co to purchase MMT compound with quantities cover the production of the main three refineries.

4-In case of orders to produce benzene of octane rating exceeding the current product 81 and to keep the momentum of production quantity until finding alternative options as isomerization etc. A certain proportions [sic] of TEL shall be sued [used] with MMT.”

In other words, following the field test and the meeting in Amman, far from MMT having failed, the recommendation was to purchase limited quantities of MMT. In my judgment, the claimants’ case about MMT having failed the field test as a result of bribes is an ex post facto construct with no foundation in reality. It is striking that in February 2008 Mr Al-Gaood wrote to the MOO saying that the results of the field test were good for material efficiency. Furthermore, in answer to a specific question from me in cross-examination, Mr Al-Gaood accepted that the effect of the meeting in Amman was to rectify the position. It follows that, whatever the shortcomings of the field test and even if it was somehow procured or tainted by bribery, any shortcomings were effectively corrected by the discussions between MOO officials and Ethyl after the field test. It should also be borne in mind that, even if the field test was tainted by bribery, that was not causative of the loss which the claimants claim, which is firmly tied to the 2004 LTPA having been procured by bribery.

On 27 May 2007, Mr Al-Khashab wrote to the Technical Department of the MOO enclosing the report from the delegation to Amman and asking them about the possibility of producing gasoline using the remaining 117 metric tons of MMT not used in the field test for marketing purposes. On 26 June 2007, Mr Asaad, director general of the Technical Department, wrote to the under-secretary in the MOO supporting the recommendations of the field test team and Mr Al-Khashab and recommending that the remaining 117 metric tons at Daura be used to make gasoline containing MMT and that MMT be used at all three refineries. The letter continued that, in view of the low octane of the reformate and low efficiency of the units at Basra and Baiji, it would be preferable to use specified proportions of TEL and MMT to minimise the disadvantages of TEL and use up the current inventory and what had been contracted for. He recommended purchasing the required quantities of MMT.

From an Ethyl internal report headed “MMT in Iraq Summary Status August 2007” it appears that their information (presumably derived from the claimants) was that Daura was now producing and marketing gasoline containing MMT and the MOO had instructed Daura to issue a tender for a further 300 metric tons of MMT. It is unclear where the claimants had got that information from and there is no other evidence of the MOO approving the purchase of a further 300 metric tons of MMT at that time. Although it is not entirely clear from the letter which Mr Asaad wrote to Daura on 2 August 2007 precisely what approval was given by the Deputy Minister at that time, it seems to me that what is most likely is that the Deputy Minister was approving the use of the existing 117 metric tons of MMT in the production of gasoline at Daura and for that product to be tested in the market. It is inherently unlikely that the Minister or Deputy Minister would have approved the purchase of substantial further quantities of MMT until that Daura product had been marketed and successfully tested in the market.

Despite Mr Asaad’s recommendation in his letter of 26 June 2007, the desire of Daura to use MMT was not shared by Baiji. On 13 November 2007, the director-general of Baiji, Mr Al Obeidi, wrote rejecting the use of MMT on the grounds that it degraded in light, cost far more than TEL and could not provide an octane boost of more than 5-6 RON. In their closing submissions the claimants refer to the reaction of Mr Salah, the claimants’ representative in Baghdad, to this as a “bizarre bias towards TEL at a time when its use has been reduced to the lowest level due to its toxic effect on the environment and its elements.” and that “the motives behind this bias are unclear.” To the extent that the claimants are alleging that this demonstrates that Mr Al Obeidi was one of the MOO officials being corrupted (and he is one of the many people who Mr Al-Gaood has previously alleged was corrupted) I reject that allegation. Far from the approach taken by Mr Al Obeidi being bizarre, it seems to me that his reasons for rejecting MMT for Baiji are perfectly sensible and logical and reflect the reality on the ground at his refinery. Furthermore, as Mr Onions QC points out, it was the appointment of Mr Al Obeidi as director-general at Baiji which led to improvements at that refinery, as the claimants own security expert Mr Richards said in his evidence.

In fact it appears from other documentary evidence that Baiji were seeking to use a non-metallic hydrocarbon booster called AF162. Although the MOO rejected that proposal in January 2008, it is clear that, at around this time, with the assistance of the U.S. embassy, the MOO was conducting a comparative study of octane enhancers to be used in any future TEL phase-out programme, including MTBE. It is a demonstration of the extent to which Mr Al-Gaood had convinced himself that Innospec were interfering that he suggested in an email to Mr Knapton on 3 September 2007 that Innospec had interfered with someone at the U.S. embassy in Baghdad.

At the same time as the MOO was considering the results of the field test, it was considering the use of MTBE to boost the octane of the base gasoline and that someone in the MOO was recommending that importation of MTBE should commence. Accordingly, the MOO was not just considering TEL and MMT but other possible octane boosters. Any suggestion that this consideration of other octane boosters was induced or influenced by bribery by Innospec would be frankly ridiculous, since TEL would be as much a loser as MMT if the MOO decided to use MTBE. What this does demonstrate is that the strategic decisions at the top of the MOO as to which octane booster to use were not influenced by bribery.

It is also clear that, although the MOO was conducting this comparative study in the second half of 2007, no TEL phase-out programme had been adopted by the MOO. To make good this point, it is necessary to backtrack chronologically. In the second half of 2006 Innospec commenced arbitration proceedings against Ethyl before the LCIA in London alleging that, in breach of the marketing agreements between them, Ethyl had introduced MMT into Iraq. It was with a view to obtaining the assistance of Mr Ghassab (one of the Iraqi delegation who met Dr Turner in Dubai in March 2006) in this arbitration that Innospec paid some U.S. $13,000 for his honeymoon in Thailand in August 2006. Although that amounted to a bribe, as Innospec admitted in the U.S. proceedings, as with other such “travel expenses” and pocket money, it was not causative of the loss claimed by the claimants.

On 24 November 2006 Mr Knapton wrote to Mr Al-Gaood saying he was defending the arbitration on the basis that Iraq had invited Ethyl in because they wanted to remove TEL. This is telling, since, unless Mr Knapton was being disingenuous (and there is absolutely no evidence to support any such suggestion), he does seem to have thought that the MOO had purchased MMT with a view to it replacing TEL, whereas the reality was that the MOO were still using TEL in substantial quantities. Mr Knapton asked Mr Al-Gaood to provide a witness statement. Mr Al-Gaood offered to try to obtain a letter from the Technical Department of the MOO saying that they had made the decision to move away from TEL and had requested Ethyl and the claimants to present MMT to them. Accordingly on 9 January 2007, Mr Al-Gaood wrote to Mr Asaad, the director-general of the Technical Department in these terms:

“Reference to the studies and tests conducted with respect to use of MMT as a gasoline booster, we would like to inform you that the manufacturing company, Afton chemical, is fully ready to support your Ministry's efforts to start using MMT as an alternative to TEL. In order for the company to be able to do so, it asks the Ministry of Oil for official confirmation of its willingness to abstain from using TEL and transform its procedures to use alternative gasoline octane boosters, especially as TEL is now monopolised by one company and offered at a very high price, in addition to the significant environmental reservations over its usage.”

The response from Mr Asaad on 6 February 2007 was as follows:

“Kindly note the following: 1. We are in process of issuing a detailed report for the performance of MMT in improving the octane number. 2. We have bought the 120MT of MMT for testing this product as an alternative of TEL in case TEL product is no more produced or sold.”

The “detailed report” referred to was evidently a reference to the field test, as Mr Al-Gaood accepted in cross-examination.

Mr Al-Gaood passed this on to Mr Knapton on 19 February 2007 stating: “We know this letter won’t work, therefore we have sent again a reply letter to Ministry of Oil trying to change the content as required.” Understandably, in view of the letter Mr Knapton was seeking, he was not satisfied with the letter from the MOO, saying: “I really don't like this letter, it sounds as though they will only buy MMT if TEL is no longer available. Is this correct?” Mr Al-Gaood responded: “You are right, let's wait until we get their reply to our latest letter requesting clarifications.”

Mr Al-Gaood wrote again to Mr Asaad on 19 February 2007, seeking confirmation that the MOO had taken a strategic decision to shift away from the use of TEL, in these terms:

“We would like to inform you that your letter dated 6th February does not explain that your decision to shift toward finding an alternative for TEL is only because of your concern that the manufacturer of the substance will stop.

Accordingly, this means that if Octel company, the sole manufacturer of the substance gave you the necessary guarantees of their commitment to manufacture the substance especially for Iraq for the next ten years, does this mean that the Ministry in this case will not find an alternative for the substance, because practically, this is in the context of the discussion taking place between Afton company, the marketer and Octel the manufacturer, as what Afton company needs in order to be able to continue supplying Iraq's future needs of MMT is to have a strategic decision from the Iraqi Ministry of Oil regarding its desire to shift from the use of TEL as a gasoline booster to other substances that are less harmful to the environment and to people.

We hope you will reformulate your letter if you are convinced, and issue such an explicit letter so we could continue to support your efforts in substituting the gasoline booster.”

As Mr Al-Gaood accepted in cross-examination, there was no response from the MOO to this letter. The fact that the MOO was unwilling to provide the clarification which Ethyl was seeking (and which it had in fact first sought in December 2000) that it had decided to move away from TEL is clear evidence that, at that stage in February 2007, no strategic decision had been made to replace TEL with MMT, any more than it had at the end of 2003. That it remained the position of the MOO throughout the rest of 2007 and into 2008, that no strategic decision to switch to MMT had been taken, is apparent from a number of other pieces of evidence.

First there is the unchallenged evidence of Mr Thompson of Innospec in his witness statement: “To the best of my recollection, no indication of a planned, or even a contemplated Iraqi phase-out was given, either to me, or to anybody else in Innospec by any of the Ethyl personnel who were party to the TEL Marketing Agreements.” Then there is the fact that the PhD thesis by Ms Sheet dated May 2008 on which Dr Habeeb relied in his expert evidence was a study to establish how best to phase out use of TEL in gasoline in Iraq, a fair indication that as at that date, no strategic decision to do so had been taken by the MOO. A further indication that no TEL phase-out programme had been decided upon by the MOO is the fact that, notwithstanding that Daura was producing gasoline using MMT as the octane booster, in September 2007 Mr Al-Khashab was requesting the MOO to enter into another LTPA for TEL.

In September and October 2007 there was an exchange between Mr Al-Khashab and Mr Asaad. Mr Al-Khashab apparently told Mr Asaad that the daily consumption of MMT at Daura was 1 metric ton per day. As a result, on 30 September 2007, Mr Asaad wrote back saying this consumption was very high and the stock of MMT at Daura would only last 4 months not the 25 months envisaged by Mr Asaad, that since the RON of the pool at Daura fluctuated between 78 and 80 RON it was not necessary to use that much MMT and that MMT was an alternative to TEL in case of shortage of TEL.

Mr Al-Khashab responded on 4 October 2007 confirming that the actual consumption of MMT at Daura would indeed be 1 metric ton a day or 360 metric tons a year. He noted that the octane of the pool at Daura ranged between 73 and 78 RON when the hydrogenation units were operating, suggesting that even at Daura, for at least some of the time, MMT alone could not provide the octane boost required to produce gasoline of 80-82 RON. Mr Al-Khashab also states that the minimum dose of MMT should be 36mg/l to ensure lubrication of the valves of car engines. This is a point which the claimants latched onto in formulating the quantum of their claim, although it did not receive any support from the technical expert evidence and was not a point of view which Mr Asaad, head of the Technical Department, shared.

Mr Al-Khashab also makes the point that there is no better alternative to TEL from an environmental and economic point of view than MMT and that it would be preferable to reduce the use of TEL and to stop importing it if they favoured the environmental perspective. On 8 October 2007, Mr Asaad responded stating that laboratory analysis had revealed that a full dose of MMT was being added at Daura to produce gasoline of 84 RON, twice as much MMT as was necessary. 0.042g/l of sediment was also found in the gasoline tested. This would undermine trust in the gasoline and cause operating problems in cars. He instructed Mr Al-Khashab to add only 0.1788mg/l of MMT (equivalent to 27mg Mn/l) which should be sufficient to provide the necessary octane boost at Daura. The discovery of sediment or deposits in gasoline manufactured using MMT became an issue at around this time, as set out below.

The claimants contend that this represented a complete shift of position by Mr Asaad from his earlier support of MMT in his letter of 26 June 2007, which could only sensibly be explained by his having been one of the MOO officials corrupted by Innospec to prevent or delay the introduction of MMT. I reject that submission. It seems to me that Mr Asaad’s position throughout was consistent. What he was saying in October 2007, that MMT was an alternative to TEL in the event that TEL became scarce was essentially what he had said in February 2007 in response to Mr Al-Gaood’s attempt to extract a letter from the MOO saying that a strategic decision had been made to move away from TEL, namely that MMT would be an alternative to TEL in the event that TEL was no longer available. It also seems to me that the claimants are reading too much into his letter of 26 June 2007 since that letter was also making the point that MMT was an alternative to TEL in the event that TEL became unavailable (see the first paragraph of the letter).

Furthermore, as I have already found, it seems to me that in all probability, all the Minister or Deputy Minister had approved at the beginning of August 2007 was the use of the existing 117 metric tons of MMT to produce and market gasoline containing that additive and that the senior personnel in the MOO were not prepared to approve further purchases of MMT unless and until that marketing exercise had been successful. Whilst it may well be right that Mr Asaad was more enthusiastic about MMT in his letter of 26 June 2007 (in that he recommended its use at the other refineries and purchases of further quantities), his enthusiasm is likely to have been tempered by the fact that those senior to him in the MOO were not prepared at this stage to go beyond manufacture at Daura using the existing supply of MMT and marketing of that gasoline. That, rather than his having been corrupted, is a much more likely explanation of his appearing more circumspect at a later stage about MMT.

At around the same time as this correspondence between Mr Asaad and Mr Al-Khashab, Mr Salah, the claimants’ representative in Baghdad, held meetings with officials in the MOO. On 1 October 2007 he met Ms Nadia Kanaan, director of the Chemicals Section (someone else Mr Al-Gaood alleges was corrupted by Innospec) with a view to promoting a further order for MMT at Daura. Her position was that the gasoline which was being manufactured with MMT was being marketed and testing consumer reactions might take a year from the commencement of marketing. In the meantime, the stocks of MMT at Daura, 110 metric tons, were sufficient. Again the claimants seek to characterise this as a change of approach from the recommendations from Mr Al-Khashab for the use of MMT in all three refineries, initially supported by Mr Asaad, for which the explanation is that MOO officials, including Ms Kanaan, were being corrupted.

It seems to me that this overlooks the fact that, whatever recommendations were being made, the ultimate decision as to whether to purchase MMT in large quantities and move away from TEL to MMT was a strategic decision for the most senior people in the MOO, specifically the Minister and Deputy Minister and, as I have set out above, it is clear that at this stage in late 2007, that strategic decision had not been made and that, in all probability, further purchases of MMT would not be approved, unless and until the marketing exercise in relation to gasoline produced at Daura using the existing supply of MMT proved successful. The claimants seek to characterise this attitude of Ms Kanaan as indicative of an “anti-MMT faction” within the MOO, but in my judgment that is no more than assertion on their part, unsupported by any convincing evidence. It seems to me that Mr Onions QC is right that, having done the field test, the MOO would want to market gasoline made using MMT and test consumer reactions before committing themselves further to MMT. What Ms Kanaan said was no more than a reflection of that perfectly sensible commercial approach.

On 10 October 2007, Mr Salah met Mr Luaibi (then the Inspector-General of the MOO, now the Minister). In his note of the meeting, Mr Salah summarises Mr Luaibi’s position as follows:

“He is in agreement with the Technical Directorate I Ministry of Oil and the Director of the Chemicals Section Ms. Nadia, and refuses to make any negative remarks about their position. Their position is the position agreed upon by the Committee, specifically the decision to purchase 120 tonnes of MMT for a long-term trial and as a backup for TEL in the event its supply is suspended.

TEL is still being amply supplied, is easy to get, and the laboratories that produce it are still in business. TEL is also still the best because it is the cheapest and can increase the octane number by a large amount. This is particularly true when we learn that the octane number for the gasoline from the South and North Refineries is 68-70. TEL orders have been announced because there are contracts for it ... The environment issue ranks second!!”

The claimants submit that the final comment about the environment ranking second is Mr Salah’s own comment rather than something said by Mr Luaibi. I consider there is no justification for that interpretation. Mr Salah is summarising Mr Luaibi’s position and this is recorded as part of his position, so that, whilst the exclamation marks may be Mr Salah’s comment on the point being made, it seems to me that Mr Luaibi did say that the environmental effect of TEL did rank second, behind its availability, cheapness and ability to provide whatever octane boost the Iraqi refineries required.

The claimants characterise this as an important piece of evidence bringing together three of the individuals actually corrupted by Innospec, Mr Asaad, Ms Kanaan and Mr Luaibi. They submit that no impartial person could seriously offer unqualified support for TEL without regard to its environmental impact. I agree with Mr Onions QC that the suggestion that this was somehow unqualified support for TEL is nonsense. As I have found, it was Mr Luaibi who indicated that environmental considerations ranked second. Thus he clearly recognised that TEL does have an adverse effect on the environment. He was not giving it his unqualified support, simply recognising the position in which the refineries found themselves: environmental considerations were secondary to the production of gasoline, the refineries being under pressure to produce as much as possible, to reduce expensive imports.

In Mr Salah’s note of his meeting with Mr Luaibi, Mr Luaibi also referred to blaming Daura for sometimes marketing gasoline containing MMT and sometimes gasoline containing TEL. Daura was supposed to have transferred its stocks of TEL to the other refineries. He also said that the production of gasoline at Daura was no more than 1,500 cubic metres a day and that the quantity of MMT they had was sufficient. He added that if production continued to decline and was accompanied by a decline in the amount of additive used, there might be a loss of shelf life of MMT and a failure to consume the entire stock. He said there was no need to increase the stock and the reaction of consumers should be awaited, a further indication that the senior personnel in the MOO were not prepared to approve further purchases of MMT unless and until the gasoline manufactured at Daura using the 117 metric tons had been successfully marketed. Mr Luaibi also raised the complaint about deposits in the gasoline.

Far from this series of comments being indicative of Mr Luaibi being part of an “anti-MMT faction”, it seems to me they reflect a perfectly sensible commercial approach. I deal in more detail below with the evidence as to actual manufacture of gasoline using MMT at Daura, but a letter from Mr Salah to Mr Al-Gaood of 16 July 2008 bears out first that, as Mr Luaibi had complained, Daura was producing both gasoline with MMT and gasoline with TEL at least in the first six months of 2008, second that production of gasoline had reduced and did not increase again until November/December 2007 and third that, even with that increase, as at 8 July 2008 Daura still had 29.5 metric tons of the 117 metric tons of MMT in stock, vindicating Mr Luaibi’s view that further stocks were not needed.

On 18 October 2007, Mr Salah had a meeting with Mr Asaad. Mr Asaad called Ms Kanaan and Mr Rajab, head of quality control, into the meeting. Mr Rajab referred to the fact that there had been deposits in a sample taken from Daura of gasoline manufactured using MMT. Although Mr Salah denied this and said there had been no tests to determine what the deposits were, it is clear that there were genuine concerns at the time about sediment or deposits in the gasoline manufactured using MMT. Whilst there were such concerns, an unwillingness on the part of Mr Asaad and others in the MOO to commit to further purchases of MMT was perfectly understandable.

On 23 October 2007, Mr Salah wrote to Dr Wahab saying: “The situation at Daura Refinery is that, to date, MMT has been positive, this is evidenced by the suggestion to issue a new purchase order. However, I suspect that the Technical Directorate/Chemicals section with support from the (Director of the Quality Control Section) has placed some obstacles in front of MMT use, including specifying a dose of 27 milligrams of manganese/litre…” Although the claimants rely upon this as indicative of obstruction from the anti-MMT faction, Mr Salah goes on in his email to note that gasoline production was only 1,500-2,000 cubic metres a day, as against maximum production of 3,000 cubic metres per day and that the current stock of MMT of 110 metric tons would suffice for 11-15 months. He referred again to deposits found in samples, but noted that more recent samples taken by the MOO did not contain deposits.

In the circumstances, it seems to me that the decision within the MOO not to order more MMT for Daura was not indicative of an anti-MMT faction, but was an understandable commercial decision. Furthermore, the instruction from Mr Asaad to Mr Al-Khashab to limit the dosage to 27mg Mn/l was not some sort of deliberate obstacle to MMT use, but reflected how much MMT was actually needed to provide the necessary octane boost at Daura at that time. It also reflected a concern that the deposits found in the gasoline were caused by too high a MMT dosage.

On 28 October 2007, Mr Salah attended a meeting between the Technical Department and the Daura refinery to determine the dosage of MMT to be added to the gasoline. It was decided that a minimum of 0.1788g/l equivalent to 27mg Mn/l would be added, even if the octane number of the pool was more than 81. It was also decided that it would be possible to add 54mg Mn/l if the octane number of the pool was 75 or below. The same day, clean samples of gasoline containing MMT were taken from Daura. Although Mr Salah’s email to Dr Wahab says; “The Technical [Department] has leaned and moved towards TEL!!” it is unclear what the basis for this comment was. The fact that, as he recorded, the Technical Department would allow Daura to increase the dosage to 54mg Mn/l if the base gasoline was 75 RON or less suggests a relaxation of Mr Asaad’s previous instruction to Mr Al-Khashab to use no more than the equivalent of 27mg Mn/l.

On 30 October 2007 Mr Salah visited Daura and met Mr Al-Khashab. His email to Dr Wahab records Mr Al-Khashab’s views:

“On 30/10, I visited Daura Refinery and met with the Director General, as a start to follow up the two samples of the gasoline blends containing (MMT). He acknowledged the status and efficacy of TEL in raising the octane number and of course the need to increase the amount thereof added to low octane number gasoline. However, he also acknowledged, at the same time, that it is a dangerous environmental pollutant and a highly toxic substance, and that most countries no longer use it. I suggested that Daura Refinery to continue using (MMT) in order to increase the octane number to (85) for gasoline marketed in the first phase. However, he expressed his reservations because low octane gasoline is produced in the remaining refineries ... (it is just important to cover the market)...”

In other words, Mr Al-Khashab shared Mr Luaibi’s views both that the low octane of the base gasoline at the other refineries meant that only TEL could provide the necessary octane boost and that the primary concern was to produce enough gasoline to limit the expensive importation of gasoline (which is how I would interpret the phrase “it is just important to cover the market”). As recorded by Mr Salah, Mr Al-Khashab also referred to the F162 booster. The translation of this email from the Arabic rather oddly refers to Mr Salah initiating a dialogue about placing an order for 2,000 metric tons of TEL. I agree with Mr Al-Gaood that this is probably a mistranslation or confusion and that what is being referred to is a discussion about the purchase by the MOO of 2,000 metric tons of TEL, in other words either the outstanding amount under the 2004 LTPA (see further below as to what Mr Knapton was told at the Amman seminar) or what was to become the 2008 LTPA. This would be consistent with the fact that, as recorded above, in September 2007, Mr Al-Khashab had been requesting that a further LTPA be entered into.

The significance of this is that it demonstrates that the views of Mr Asaad and Mr Luaibi (and for that matter Ms Kanaan) were shared by Mr Al-Khashab, who was in favour of MMT at least so far as Daura was concerned and who the claimants have not alleged was corrupted by Innospec. At the time, these MOO officials all recognised that, whilst gasoline could be manufactured at Daura using MMT alone, the octane of the base gasoline at the other refineries was too low for MMT to provide the necessary boost. This approach was not a consequence of corruption but a reflection of the commercial and economic reality. At least so far as Baiji and Basra were concerned, only TEL provided the flexibility to produce as much gasoline as possible with an octane of 80-82 RON and it was cheaper than MMT. Despite attempts in his evidence to suggest the contrary, at the time Mr Al-Gaood recognised that TEL was cheaper. In his letter to the MOO of 21 February 2008 he stated as much and said that MMT cost 40% more than TEL.

Between 25 and 29 November 2007, a seminar took place in Amman attended by an Iraqi delegation, including Ms Kanaan, at which Mr Knapton and Mr King of Ethyl made detailed presentations about MMT and other Ethyl lubricants. The seminar was paid for by Ethyl and the claimants. Ethyl covered the cost of accommodation and flights and the claimants paid other costs, including pocket money paid to the delegation. There was a discussion about the black deposits seen at Daura, but it was said they could not analyse for manganese. Ethyl offered to conduct an analysis. According to Mr Knapton’s note of the seminar, it was said that Daura had completely removed TEL from the refinery and cleaned the stock tanks, which were to be used for MMT storage. The refinery was operating at about 50% of capacity so only 0.5 metric tons of MMT per day were being used. He recorded that the re-order stock level was 12 months supply so there should be a tender for MMT in the first quarter of 2008. He also recorded that the MOO informed him about the 2004 LTPA for 3,000 metric tons of TEL, but said only 1,000 metric tons had been taken, with 2,000 metric tons still to come and that under normal circumstances, the other refineries would use that material in less than a year.

In fact, it was at around this time, in November 2007, that negotiations for what became the 2008 LTPA commenced in earnest. However, the possibility of a second LTPA had been under discussion between Mr Naaman and Dr Turner earlier in 2007. Following a meeting between them in Paris, Mr Naaman sent an email on 21 March 2007 referring to an outstanding invoice for U.S. $50,000 (the balance of the sum he claimed he had paid for MMT failing the field test, but which he pocketed himself once it was paid). He continued:

“As I discussed in our meeting, this fee was not the real cost of rejecting MMT and MTBE. The real cost should be the increase of our remuneration on TEL for future business, i.e., the remaining 2000 tons of fiscal year 2007 and the new LTPA will be 5%. This additional money will cover my promise to these people for the loss of their remuneration from MMT, which is a very small price we are paying versus the loss of my money and your money if MMT were admitted in. I trust that you will approve this. As I have already promised them rather than pay a hefty amount up front, which I was sure that you will refuse to pay, but I trusted that you will be willing to pay from future order TEL business. They agreed, I agreed, and I hope that you will agree as well, so we can put this story behind us and move in with our orders and shipments.”

As the defendants submit, the context in which Mr Naaman was alleging that promises had been made was, as he admitted in the U.S. proceedings, that he had lied about having paid the U.S. $50,000 as bribes to fail the field test. I agree that his assertion about having made promises in relation to the remaining 2,000 metric tons under the 2004 LTPA or a new LTPA is inherently unreliable. Contrary to what he said, there was no “remuneration from MMT” which Iraqi officials would be losing if they remained with TEL. It seems to me that, in all probability, this was no more than a ploy on his part to increase his commission. Of course, there is no doubt that Innospec, and specifically, Dr Turner, did agree following a meeting in Nice in July 2007 that his commission would be increased to a minimum of 5% rising to 10%, depending upon the volume of sales achieved and that Dr Turner at least believed that this increase in commission was to cover bribes that Mr Naaman had promised to pay. However, as with the alleged bribes for failing the field test, it simply does not follow that he had made such promises or that he would in fact have used any increased commission to pay such bribes.

Innospec had written to the MOO on 26 June 2007 indicating a willingness to enter into a new LTPA. The matter resurfaced in November of that year when Mr Naaman apparently had a meeting with an Iraqi delegation in Beirut. Before that meeting there was an email exchange about “revised remuneration” for the LTPA which Dr Turner preferred to discuss on the phone or in person, again suggesting a belief on his part that this was to be used to pay bribes.

In a further email on 20 November 2007, Mr Naaman sent Dr Turner information he must have obtained from the MOO concerning the bids for a competitive tender for TEL, stating: “Please keep this information extremely confidential as nobody have [sic] yet leaked this information in public. It is only with the Minister of Oil and key personnel from the Ministry of Oil...” This is relied upon by the claimants as evidence of a continuing corrupt relationship between Mr Naaman and officials in the MOO and it is certainly true that this email is relied upon by the DOJ in the Plea Offer to Innospec. However, in itself, it does not seem to me this advances the claimants’ case much. After all, the claimants themselves have been able to obtain a large number of internal documents from the MOO, indicating that they too have friends in the MOO, as Mr Al-Gaood effectively admitted, but it does not follow that anyone was being bribed.

In the same email, Mr Naaman said that his remuneration would have to be raised “to keep everybody on board, happy and satisfied” and asked for it to be set at 7% if he could achieve a target price of U.S. $18,000 plus. Dr Turner agreed to pay that rate of commission on a price of U.S. $17,500 with sales of 2,000 metric tons. On 29 November 2007 he was prepared to offer 7½% on an LTPA of 2,000 metric tons per year at prices of U.S. $17,000, $18,275 and $19,645 for 2008, 2009 and 2010 respectively. Dr Turner no doubt believed that a proportion of this additional commission was to be paid away in bribes. In the event, no bribes were in fact paid.

Dr Turner travelled to Beirut with Mr Naaman in January 2008 to finalise the 2008 LTPA which was initialled on 24 January 2008, although according to Mr Naaman (in his Memorandum in Aid of Sentencing) neither of them had authority to bind Innospec, so that it was only an agreement in principle. No TEL was ever delivered under that contract. By February 2008, the investigations by the U.S. authorities into the payments to Iraq in relation to the OFFP had commenced. Dr Turner was suspended from employment and on 8 February 2008, Mr Naaman’s agency was suspended.

On 21 February 2008, Mr Al-Gaood, having become frustrated by continuing delays, wrote to the Minister of Oil direct seeking his assistance, setting out the history of MMT with MOO as he saw it, with a view to persuading the Minister to take action. His letter was evidently passed to Mr Asaad for comment and Mr Asaad wrote to the Minister on 6 March 2008. He referred to the fact that the undersecretary for refineries in the MOO had approved the purchase of 120 metric tons of MMT in March 2005 and the installation of a blending unit at Daura. He referred also to the fact that use at Daura had been continuous. However at the other two refineries, since the octane of the pool was less than 71, MMT alone could not be used to boost the RON to 81 but would have to be used in a mixture with TEL. He concluded by reiterating what he had said previously, that MMT was to be used as a reserve material in case production of TEL ceased. The response of the Minister on 9 March 2008 written on the letter was: “it is necessary to expedite construction of the gasoline boosting units at the refineries”. The obvious purpose of that instruction was to enhance the octane of the base gasoline which would in due course mean that gasoline could be produced without additives or at least without TEL.

However, as matters stood in March 2008, that was no more than a pious hope for the future. In the meantime, TEL was required to boost the octane of the base gasoline. The LTPA received the approval of the Minister on 10 March 2008, apparently on the basis that the first shipment would be in June 2008, although in the event no TEL was ever delivered under the LTPA, which was not formally signed by Innospec and which Innospec subsequently indicated they would not proceed with.

The claimants submit that the letter of 6 March 2008 is indicative of Mr Asaad or someone under him receiving or being promised bribes to promote TEL, because, once he had become aware that existing stocks of MMT would only last 4 months, he downgraded his previous approval of MMT to limit its use to being an alternative to TEL if the latter ceased to be available. In my judgment, this submission is fanciful. To begin with, what Mr Asaad was saying in March 2008 was essentially what he had been saying since January 2007, namely that MMT was an alternative to TEL in the event the latter was scarce or unavailable, in circumstances where no strategic decision had been taken by the MOO to move away from TEL. The claimants throughout their submissions on this part of the case place great reliance on Mr Asaad’s letter of 26 June 2007, where he was recommending the use of MMT mixed with TEL at the other refineries and further purchases of MMT and submit that he had now changed his position. However, as I said earlier, if he was now more circumspect about the use of MMT and was not recommending further purchases, the most likely explanation for that is not that he had been corrupted or that some anti-MMT faction within the MOO had won the day, but that the decision by the senior personnel in the MOO was not to approve any further purchases, unless and until the gasoline manufactured at Daura using the existing stock of MMT had been successfully marketed.

Furthermore, by this stage it would have been apparent that although Mr Al-Khashab had previously indicated that MMT would be used at a rate of 1 metric ton per day, actual consumption at Daura was much less because refinery productivity had fallen. So far as the position at Baiji and Basra is concerned, Mr Asaad was doing no more than recording the reality: the RON of the pool at those refineries was such that MMT alone could not provide the necessary boost, so that until such time as the condition of the equipment at those refineries improved sufficiently to produce a pool gasoline of 75 RON or more, supplies of TEL at those refineries were essential. In fact the information the claimants had from Mr Salah, their representative in Baghdad, in a report on 16 March 2008 was that the base gasoline being produced at Baiji and Basra was so low that a boost of 12 RON was required, which of course only TEL and not MMT could achieve. Mr Salah referred to the fact that the Technical Department was convinced the octane number would remain low for some time and that this was why they had entered another LTPA. He also said they preferred not to use TEL and MMT together because of complications of mixing them together. It is unclear from the available evidence what those complications were and whether the MOO had tried using a mixture of MMT and TEL but run into problems.

It appears that Mr Al-Gaood had also spoken to the Technical Department, since in an email to Mr Knapton of 17 March 2008 he gave an even more pessimistic picture as regards the RON of the base gasoline at Baiji and Basra. Although Mr Al-Gaood sought in his evidence to dismiss this information as “very much in favour of TEL”, it seems to me it reflects the reality in the refineries at the time:

“Baiji Refinery & Basrah Refinery are in such a bad situation that their pools are around 67 - 68 RONS and for that they have to boost 16-17 RONs to get it 83 level. The technical depart is arguing that it is not possible for MMT to do this. Therefore, their strategy is to implement upgrading of the refinery in which they will eventually no longer in need to boost more than 3-5 RONs; at that stage MMT would be good candidate to be used in North and South refineries. We have to concentrate on Daura Refinery and we should support their efforts to maintain their utilization of MMT (they have now around 68 MT of MMT). We are coordinating with Daura refinery to insist on the Ministry to maintain their production of Lead-free Gasoline as per their current situation...”

Evidently pursuant to that coordination, on 4 May 2008 Mr Al-Khashab wrote a letter headed “MMT Use Intensification” to the Undersecretary for Refinery Affairs in the MOO referring to the field test and to the fact that gasoline had been produced at Daura for the last 7 months without complaint. He sought permission to use the remaining inventory of 60 metric tons to continue this production and asked the Undersecretary to promote orders for the purchase of MMT. The reply to this letter is not available, but since Daura continued to produce gasoline using the existing inventory of MMT, one may assume that, to the extent that permission was necessary, it was given.

The claimants rely upon the letter which Mr Asaad wrote to Daura in May 2008 as evidence of him pressing for the continuation of the “procedures for signing the [LTPA]”. This is an unfair interpretation of that letter. The letter enclosed his earlier letter of 6 March 2008 on which the Minister had written the instruction to expedite the construction of gasoline boosting units in the refineries. That was evidently with a view to enhancing the octane number of the base gasoline. Even at Daura the unit was some fifty years old. It seems to me that Mr Asaad is asking Daura to comply with that instruction which would be an essential step towards the production of unleaded gasoline, but recognising that in the meantime TEL is still needed.

The Minister’s instruction and this letter demonstrate that the strategic decision by the Minister himself at this stage was to promote the construction of new gasoline boosting and isomerisation units (which might take a few years) which once built would enable Iraq to produce unleaded gasoline without any additive, using TEL in the meantime to continue boosting the octane of the gasoline produced by the old units. Although Mr Salah was critical of this in his report of 16 March 2008, saying the Technical Department had changed the Minister’s thinking away from MMT whilst not telling him new units would take 3-5 years to install, that assumes the Minister was not told about or did not appreciate the time scale for installation of new units, which seems unlikely. In any event, in my judgment, the move towards installation of new units, which would provide Iraq with a permanent solution in the quest for unleaded gasoline, whilst using the additive which was known to them and provided the octane boost required in view of the low octane of the base gasoline produced by the old units, at least at Baiji and Basra, is a perfectly sensible commercial decision. The suggestion that advice to the Minister to follow that course can only be explained by the relevant officials in the MOO having been corrupted is frankly fanciful and, in any event, corrupted or not, the advice as I say was perfectly sensible.

On 30 May 2008, Mr Phil Boon of Innospec wrote to Daura indicating that they would forward the new LTPA and asking Daura to contact him in relation to the new LTPA and any TEL purchases. Mr Asaad responded to this letter saying:

“We were surprised however with your reply, because for the last fifteen years, we have been working with Mr. Ousama Naaman, your ALCOR Middle East Office representative, and with Mr. David Turner, your Innospec Commercial Director, with whom we have met in Lebanon in January this year, and we have agreed and signed the terms and conditions of the new LTPA contract. With all our due respect to you, we prefer to keep the same old channels with your company, for logistical reasons and to avoid shipping complications, which is for the best interest of our two organisations.”

The claimants submit that the most likely explanation for this desire to continue contact with Messrs Naaman and Turner was that it was from those individuals that bribes or the promise of bribes had always come. There is obviously some force in that point, although equally there would be non-sinister reasons for wishing to continue dealing with the same people as you had always dealt with.

The response received from Innospec on 25 June 2008 was that Mr Naaman was no longer their agent and that Dr Turner was no longer involved with octane additives, but the rest of the team remained unchanged. In the event, it was not until February 2009 that the MOO opened a letter of credit for U.S. $17 million in favour of Innospec. On 5 March 2009 Daura wrote to Innospec asking them to validate the LTPA by signature, failing which the contract would not proceed. On 12 March 2009, Innospec responded referring to the investigation by the DOJ and SEC which was ongoing and accepting “your suggestion not to go forward with the contract”. Innospec indicated a willingness to supply TEL under a new contract to be negotiated. I deal with the subsequent position in relation to TEL below. For the present, the important point is that no orders were ever placed under the LTPA, nor did the MOO seek to place any orders until February/March 2009.

The claimants rely upon the sequence of events from about November 2007 onwards to submit that in effect Mr Asaad and others (presumably Ms Kanaan and Mr Luaibi) opposed the previous recommendation to purchase significant quantities of MMT once it became apparent that this would jeopardise the signing of the 2008 LTPA and with it, bribes that would be paid on orders under that contract. In my judgment, the evidence available simply will not bear that interpretation. There is no evidence of anyone senior in the MOO recommending the purchase of significant quantities of MMT whilst the gasoline manufactured with MMT at Daura was being marketed and customer reactions assessed. For the reasons which both Mr Salah and Mr Al-Gaood identified in March 2008 as set out above, conditions at Baiji and Basra were such that only TEL could provide the octane boost required. In those circumstances, the claimants simply cannot establish (even if Mr Asaad and others were being bribed) that, but for that corruption, substantial quantities of MMT would have been ordered in early 2008.

In considering to what extent bribery was taking place, it is important to have regard to the allegations and admissions in the criminal proceedings. In relation to the 2008 LTPA, Innospec were charged by the DOJ on the basis that a letter of credit was opened by the MOO in their favour for U.S.$17 million and that had orders been placed under the LTPA, 5% of that sum, U.S. $850,000 would have been paid as bribes to Iraqi officials. Count Eleven in the Information laid against Innospec related to the 2008 LTPA. As Mr Williams explained in his evidence, Innospec pleaded guilty to that Count on the basis that they had agreed with Mr Naaman that they would pay him this increased commission on orders placed under the 2008 LTPA, 5% of which would be used to pay bribes. In the event, of course, no orders were placed under the 2008 LTPA.

In the U.S. proceedings against Mr Naaman, it was alleged that between late 2007 and early 2008, he agreed with a senior MOO official (not identified) to pay him 2.5% of all sales under the 2008 LTPA, which the DOJ calculated would have been U.S. $2,679,600 over the three years. Reference was also made to the same U.S. $850,000 as in the criminal proceedings against Innospec. These allegations were admitted by Mr Naaman. In his Memorandum in Aid of Sentencing, Mr Naaman admits that, in order to facilitate the 2008 LTPA and with the direction and approval of Innospec, he promised to pay future bribes to certain MOO officials (again unidentified) which were conditioned by the amount of TEL which would be taken up under that agreement, but that nothing was ever paid.

Mr Onions QC submits that, since Mr Naaman was lying to Innospec about having paid or promised bribes to MOO officials in respect of the field test, the court should conclude that he was lying about having promised to pay bribes to MOO officials in order to facilitate the 2008 LTPA. The counter-argument is that if he was lying to Innospec and was intending to pocket all the increased commission on sales under the 2008 LTPA for himself, then one might have expected him to disclose that to the DOJ, as he disclosed the fact that he had pocketed the U.S. $155,000 fake bribes in respect of the field test. It might be said that the difference is that he had actually received the U.S. $155,000 which must have been something the investigations by the DOJ and SEC either did unearth or there was always a risk they would do so. In circumstances where no orders were ever placed under the 2008 LTPA, he never actually received any money. However, given that he was being charged with offences of promising bribes, if the truth was that he had never made any promises to MOO officials of payments in respect of the 2008 LTPA and he had simply invented the story of promising bribes to extract more commission from Innospec, it seems to me he would have said so to the U.S. authorities. Whilst his conduct would still have been dishonest in the sense that he was proposing to defraud his principals, he would have had a complete or at least a partial defence to the criminal offence with which he was charged in respect of the 2008 LTPA.

Accordingly, whilst I have been very tempted to accept Mr Onions QC’s submission, since it seems to me Mr Naaman was thoroughly untrustworthy and unreliable, lying to Innospec and exaggerating throughout, particularly as to the extent to which MMT ever posed a real risk to TEL, it seems to me on balance that he did bribe one or more MOO officials to facilitate the 2008 LTPA. However, it does not follow from this that the claimants’ case that Mr Asaad, Ms Kanaan and Mr Luaibi were corrupted into a change of position in relation to MMT in the second half of 2008 is made out.

As I have already indicated above, in my judgment, the reason why further orders for MMT did not eventuate in the second half of 2007 or first half of 2008 was nothing to do with the relevant senior officials in the MOO having been corrupted by Innospec, but attributable in essence to two matters. First, so far as Daura was concerned, the initial stock of 117 metric tons of MMT was being used in the production of gasoline which was being marketed and the MOO was reluctant to commit itself to other purchases of MMT until sufficient time had elapsed to gauge consumer reactions. Furthermore, there was still a substantial quantity of that stock left. Even in July 2008 some 29.5 metric tons of the 117 metric tons remained. Second, so far as Baiji and Basra were concerned, the RON of their base gasoline was so low that an octane boost was required which only TEL could provide and which was beyond MMT. The refineries were also apparently reluctant to use a mixture of TEL and MMT because of perceived complications.

In other words, whilst I accept that bribes were promised to unidentified MOO officials to facilitate the 2008 LTPA, I do not accept that Mr Asaad, Ms Kanaan and Mr Luaibi were being corrupted systematically by Mr Naaman, to persuade them not to support further purchases of MMT or that there was some anti-MMT faction in the MOO. The reasons for further purchases of MMT not taking place at that time were the genuine ones referred to in the previous paragraph, not concocted reasons induced by the promise of bribes. The bribes which were promised were essentially the sort of “oiling the wheels” to ensure a contract was performed smoothly which seems to have been endemic in Iraq, if what was said on behalf of Mr Naaman in his Memorandum in Aid of Sentencing is to be believed.

Even if there had been corruption of MOO officials to persuade them not to support MMT, it is important to bear in mind that that corruption was not causative of the loss claimed. As Mr Gourgey QC accepted in closing submissions, there is no separate claim that loss was caused by corruption in relation to the 2008 LTPA. The whole claim depends upon showing that the 2004 LTPA was induced by bribery or the promise of bribes. Corruption in relation to the 2008 LTPA is relied upon by the claimants as part of a continuing course of corruption. However, to the extent that the claimants seek to say that, because the 2008 LTPA was procured by the promise of bribes, the court should infer that the 2004 LTPA must also have been, that seems to me to be a logical non-sequitur and a step too far.

In any event, I am far from convinced that the claimants could ever establish that, but for the entering of the 2008 LTPA, the MOO would have ordered substantial quantities of MMT. As I have already held, it is perfectly clear that senior personnel in the MOO were not prepared to order any more MMT until the results of the marketing exercise of the gasoline produced at Daura were known and it is striking that when, in 2009, Innospec indicated that the 2008 LTPA would not be performed, the MOO did not immediately switch to MMT as an alternative to TEL, but purchased TEL elsewhere. At that stage, their approach was obviously not induced by bribery, since Mr Naaman, Dr Turner and, indeed, Innospec itself, were off the scene, but rather by the fact that Iraq still needed TEL to boost the octane of the gasoline to the required level.

Some details of the production of gasoline using MMT at Daura between August 2007 and July 2008 (a small amount was also produced in May 2007) are provided in reports from Mr Salah to Mr Al-Gaood of 8 and 16 July 2008. The production figures showed that the refinery was operating at well under full capacity, as Mr Salah said, in the best case at about 60-65% of capacity, producing 1,500 to 1,700 cubic metres of gasoline a day. This was due to lack of base gasoline, power outages and other matters. Over the whole period to the end of June 2008, 296,454 cubic metres of gasoline were produced using 84,234kg of MMT. Mr Salah says the dosage rate was 43mg Mn/l (presumably an average), the RON of the pool was 76-77 and the RON of the marketed gasoline after the addition of MMT was 81, suggesting that the RON boost achieved by MMT was 4-5 RON. He records that in the period from 1 January 2008 to 1 July 2008, Daura also produced 65,500 cubic metres of gasoline using TEL alone, consuming 15,750kg of TEL. This seems to bear out Mr Luaibi’s complaint that some of the time Daura was still producing gasoline using TEL when it was supposed to be using MMT alone. It also casts some doubt about the accuracy of what Mr Knapton was told at the Amman seminar at the end of November 2007 about only MMT being used and tanks being cleaned out for MMT storage.

Mr Salah also records that from 25 June to 7 July 2008, the main gasoline boosting unit was stopped, so the RON of the base gasoline fell to 72-74, although confusingly he also says it was 74-75. Either way, during that short period Daura produced gasoline using a mixture of TEL and MMT (the only period so far as the evidence reveals when there was any commercial production of gasoline in Iraq using a mixture of additives). Mr Salah sets out the consumption of MMT and TEL for the period 1 to 7 July 2008 as 2,490kg and 3,650kg respectively and the gasoline produced as 16,600 cubic metres. He says the RON of the marketed gasoline was 81 so the boost provided was 6 RON. He makes a mathematical calculation, which it seems to me must be of doubtful validity given the technical evidence about lack of synergy, of the boost provided by each additive of 2.5 RON from MMT and 3.5 RON from TEL. He then sets out in tabular form the figures for TEL used on 10 and 15 July 2008 and for MMT used on 12 and 13 July 2008, with in each case the RON achieved. He also records that as at 8 July 2008, the stock of MMT at Daura was 29.5 metric tons. He had mentioned whilst at Daura the possibility of supplying 120 metric tons of MMT on an emergency basis.

Mr Al-Gaood passed the table of TEL and MMT use on to Mr Knapton on 17 July 2008 and suggested offering to supply 100 metric tons of MMT at U.S.$21,000 per metric ton CIF Baghdad. Mr King of Ethyl then calculated that since 0.363g/l of TEL and 0.331g/l of MMT each achieved a 5.5 RON boost and TEL sold at U.S. $17,000 per metric ton and MMT at U.S. $24,000 per metric ton, to achieve an equal treat cost, Ethyl would have to offer MMT to the MOO at U.S. $18,700 per metric ton, which they might do for a 1,000 metric ton order, in other words a price reduction of U.S. $5,300 per metric ton. This is a clear indication of the economic advantage TEL had over MMT.

Mr Al-Gaood then tried to get Ethyl to speak to the U.S. Government to see if anything could be done about the MMT position, but this seems to have backfired. The U.S. embassy in Baghdad passed on to Ethyl details of a meeting between Mr Al-Khashab, Director General of Daura and the energy attaché Mr Ed Parks in which Mr Al-Khashab is reported as saying:

“Neither Daura nor Iraq's other refineries produce now (or have produced) unleaded gasoline. This is because their facilities (reformer units, etc.) can't produce high enough octane gasoline to meet MOO's marketing minimum of 81 octane without adding quantities of tetra-ethyl-lead (TEL), thereby making the product leaded gas. Daura (MOO's most efficient refinery) has, over the past 12 months, mixed the additives TEL and some MMT together with the raw product but it cannot reach the 81 octane minimum using MMT alone.

Dathar appreciates the environmental benefit from using MMT instead of TEL. But he noted that if MOO did that no gasoline would be for sale in Iraq presently in light of the min. 81 octane standard. Raw product coming out of Basrah is 71 octane, with Baiji and Daura producing 75 octane on average.

Daura is awaiting final GOI OK on its proposed contract for a installed Isomerization Unit which will produce naphtha at 82-85 octane. The work under this turnkey Contract with Italian Co., STP will take 3 years to complete. Similar projects are currently being designed by SCOP for the Basrah and Baiji Refineries. Once this Unit is operating Dathar thinks Daura won't need to use TEL. Dathar also said he's trying to get GOI OK to install a new reformer unit at Daura thereby increasing the quantity of higher octane naphtha than is presently possible with Daura's existing reformer.

Additive costs are currently $24,000 MT for MMT and $17,000 MT for TEL Dathar does not consider comparative costs a factor in MOO's continuing the use of TEL.”

This confirms that the Iraqi Government seems to have made a strategic decision to install new isomerisation units, with a view to moving over to unleaded gasoline, removing the need for TEL. Furthermore, if Mr Al-Khashab is to be believed (and he is one of the senior MOO officials the claimants do not assert was bribed), then the production of gasoline at Daura using MMT had not been an unqualified success, despite what Mr Salah had said in his reports, because it could not provide a sufficient octane boost to get to the required 81 RON. There was no suggestion at that time in 2008 that the solution lay in boosting the base gasoline with TEL first, then adding MMT separately afterwards, a further indication that the MOO had not carried out any tests as to how feasible this would be.

Notwithstanding this report, Mr Al-Gaood seems to have remained optimistic that the MOO would order MMT, referring in an email to Mr Knapton on 2 September 2008 to the possibility of an order for 150 metric tons soon. Mr Knapton’s response suggests there was a problem with production of MMT because of a shortage of raw materials. In due course there was a tender for 150 metric tons of MMT from Daura on 6 November 2008. The claimants responded on 25 November 2008 at a price of U.S. $25,500 per metric ton CIF Baghdad with delivery within five months of receipt of a letter of credit. Nothing further happened until March 2009.

On 11 March 2009, Mr Al-Gaood informed Mr Knapton that both Baiji and Basra were still suffering from low octane pools and needed a boost of 10 RON. He said new construction projects which would be completed in two years would allow 100% use of MMT but, in the meantime, he was trying to get the MOO to use MMT partially with TEL. On 17 March 2009 Mr Al-Gaood passed on to Mr Knapton that the Minister had approved the purchase of MMT and the same day, the amount to be purchased was increased from 150 to 300 metric tons. On 25 March 2009, the purchase order from Daura signed by Mr Al-Khashab was received.

In the meantime, as set out above, on 5 March 2009, Mr Al-Khashab on behalf of Daura had requested confirmation from Innospec of the 2008 LTPA for 2,000 metric tons of TEL within 7 days. On 12 March 2009, Innospec “accepted” the suggestion not to go ahead with the 2008 LTPA. It appears that the intention was that TEL would still be used at all three refineries, since on 31 March 2009 Mr Al-Khashab invited Innospec to tender for the supply of 2,000 metric tons of TEL, 400 metric tons for Daura and 800 metric tons each for Baiji and Basra. Given the low octane of the pools at Baiji and Basra as reported by Mr Al-Gaood, the continued need for TEL was inevitable. Innospec responded on 17 April 2009 offering to supply 2,000 metric tons at U.S. $17,000 per metric ton but under a new contract, on the basis that the 2008 LTPA had been terminated by mutual agreement. The MOO then disputed the termination of the LTPA to which Innospec responded again that they were willing to supply TEL but not under the 2008 LTPA. The result was that on 1 July 2009, Innospec were informed by Mr Al-Khashab that the tender had been awarded to a third party.

On 6 July 2009 Mr Al-Gaood informed Mr Knapton that the MOO had had deliveries of 200 metric tons of TEL from China. Baiji, where the pool was 66-67 RON was consuming 100 metric tons per month and Basra, where the pool was still low, was consuming 75 metric tons per month. At Daura no TEL was being used, just MMT. He postulated that the TEL stocks were low and asked if Ethyl was in a position to supply TEL. In an internal email passing on this information, Mr Knapton commented on the parlous state of Basra refinery and recognised that only TEL could provide the necessary octane boost:

“Basrah refinery TEL injection unit is not working and additions are made by hand from drums into buckets. I don't think MMT would survive the rigours of this process! Given the poor RON of pool gasoline at Basrah and Baiji refineries TEL is really the only route to provide sufficient RON lift to meet their local spec of 80.”

On 24 December 2009 a further tender for 500 metric tons of MMT was issued by Daura, which it appears was then reissued in February 2010. An Iraqi delegation visited Ethyl in Bracknell in March 2010 and the tender was awarded to the claimants. However, the MOO then received an allegation of corruption against the claimants and the delegation and the contract was cancelled. Later in 2010, Daura reissued the tender and Baiji and Basra issued tenders for 200 and 500 metric tons respectively for MMT, but none of these was awarded to the claimants, apparently because lower prices were offered by producers of MMT in China.

In the meantime, there were negotiations at the end of 2009 and beginning of 2010 between the MOO and Innospec which led to the resumption of supply of TEL by Innospec, the first shipment taking place in June 2010, with further shipments in 2011 and 2012, the last being in December 2012. As Innospec submits, this demonstrates that Iraq needed TEL and continued to order it from Innospec long after there could be any suggestion of bribery. However, no TEL was ever supplied pursuant to the 2008 LTPA.

In about July 2011, Ethyl learnt, apparently through Mr Al-Gaood himself, that the claimants had made ASSF payments to the Government of Iraq under the OFFP. Ethyl terminated the distributorship agreement with the claimants with immediate effect by letter dated 21 July 2011, no doubt for fear that continued dealings with the claimants might expose Ethyl to prosecution in the United States under the Foreign Corrupt Practices Act 1977. It is quite obvious that, if Ethyl had discovered at an earlier date that the claimants had made ASSF payments, they would have terminated the distributorship agreement sooner, immediately upon such discovery.

Since 2008, Iraq has been part of the United Nations Environmental Program (“UNEP”) which is concerned, inter alia, with the phase out of leaded gasoline worldwide. In 2011 and 2012 UNEP held conferences to address plans and timescale for a phase out. It is clear that at the time of those conferences, there had been no indication of any decision, or even intention, on the part of Iraq, to move to unleaded gasoline. A December 2012 report by UNEP entitled “Global Strategy for Phase-out of Leaded Gasoline of the Partnership for Clean Fuels and Vehicles” reported on progress to date in the Middle East in relation to the phase out of lead. The report stated in relation to Iraq:

“Understandably, Iraq has other priorities and no interest has been shown on the phase-out of leaded gasoline. As follow-up, the CH will support a representative of the Iraq Oil/Environment Ministry to attend the leaded gasoline phase-out workshop in Jordan this year.”

In August 2013, the MoO informed Innospec that it had decided to end the addition of chemical additives and to increase the RON of gasoline by enhanced refining processes and that in the meantime Iraq would use stocks of TEL to obtain the required RON for the gasoline. Albeit five years on, this strategy seems to reflect what the then Minister was advocating in 2008. As I said in relation to that strategic decision, so in relation to what the MOO are now proposing to do, it is a perfectly sensible commercial decision to seek to enhance refining equipment in order to eliminate additives altogether, but to continue to use TEL to boost RON in the meantime. This is a commercial decision that cannot be said to have been tainted by bribery in 2013, any more than it was in 2008.

Returning to the three critical matters which the claimants have to establish on a balance of probabilities for their claim to succeed (as set out in [13] above), from the findings I have already made, particularly at [137] to [188] above, it is quite clear that, contrary to the claimants’ case, there was no decision by the MOO in October or November 2003 (or indeed at any other material time) to replace TEL with MMT and only continue using TEL until the stocks of TEL were exhausted. In my judgment, the claimants’ case that there was such a decision is completely contradicted by the documents produced by them after the trial ended, which show that the recommendation of the benzene enhancer committee at the end of December 2003, was for the entering of a three year LTPA for TEL and, in parallel, the purchase of 1,000 metric tons of MMT, not for the replacement of TEL by MMT. The suggestion that there was some decision to replace TEL with MMT which was abruptly reversed as a consequence of corruption by Mr Naaman at the meetings in Baghdad in mid-November 2003 is simply not borne out by any of the evidence for the reasons given above.

Ultimately, although the MOO still seems to have been considering this possibility in October 2004, the decision made was to purchase 120 metric tons and conduct a field test before any more substantial purchases were made. Despite Mr Al-Gaood’s assertions to the contrary in his fourth witness statement, there is no evidence that that decision was procured by bribery, nor did Mr Gourgey QC submit that it was.

It is because no decision was ever made by the MOO to replace TEL with MMT that Ethyl never received the assurance they sought on a number of occasions that the MOO had made a strategic decision to replace TEL with MMT. The reality is that it was not until 2013 that the MOO decided to move away from TEL and then only when the refineries have been upgraded, not by adopting MMT as the alternative octane booster. On this ground alone, the claim fails.

The second matter which the claimants have to establish is that the decision to replace TEL with MMT was not implemented because the promise of bribes by Mr Naaman procured the MOO to enter into the 2004 LTPA and prevented sales of MMT. In my judgment, the claimants’ case that the 2004 LTPA was induced by bribery of officials in the MOO fails for a number of reasons. First, given that the DOJ and other U.S. authorities investigated the activities of the defendants and Mr Naaman and collected evidence that the defendants had paid Mr Naaman for him to bribe officials to ensure the field test failed and to enter the 2008 LTPA, it is surprising, to say the least, that if the 2004 LTPA was also induced by bribery, the U.S. authorities did not find evidence to that effect. Given that (unlike the 2008 LTPA) the 2004 LTPA was effective, such bribery, if it had taken place, would have been particularly egregious.

Furthermore, since the defendants did admit the commission of a series of criminal offences involving bribery, not to have admitted paying or agreeing to pay bribes to procure the 2004 LTPA would have made no sense. It would also have been particularly dangerous not to admit such bribery if it had taken place, since this would have run the risk of the U.S. authorities seeking to reopen the various plea agreements and impose even more stringent penalties.

Contrary to the claimants’ submissions, it does not seem to me possible to infer from the fact that bribery did take place later, that there had been bribery to induce the 2004 LTPA. Notwithstanding that the Zerqa test was successful and notwithstanding Dr Al-Khayat’s evidence, as I have already held above, there was no decision in October or November 2003 to switch from TEL to MMT. The true position at that time was that, whilst he was recommending that the MOO should proceed on the basis of entering a contract for the purchase of 1,000 metric tons of MMT, this was always subject to the approval of the Minister and of KBR who held the purse strings and the USCOE which stood behind them. A new director general of the technical department was appointed in place of Dr Al-Khayat and it would appear there was a review of strategy going forward.

In my judgment, a number of factors militated against a complete switch over from TEL to MMT: all the refineries were in a parlous state after the invasion, facing threats to stable production of gasoline from cuts in crude oil supplies, power cuts and attacks by insurgents. This meant that even Daura, the one refinery whose base gasoline had an average RON of around 75 so that 54mg Mn/l of MMT could theoretically boost the RON to the required level, could not be sure of attaining that average all the time. In those circumstances, the decision to ensure continued supplies of TEL by entering the 2004 LTPA made obvious commercial sense and reflected the clear need of all three refineries for TEL.

As I have already found above, the documents produced after the trial ended reveal that what actually happened is that on 15 December 2003, the benzene enhancer committee recommended both the entering of a three year LTPA for TEL and the purchase of 1,000 metric tons of TEL, a clear indication that they were not recommending that a decision be taken to replace TEL with MMT, but that they be used in parallel, so that where TEL was needed to provide the necessary octane boost, it would continue to be used in the three refineries, either alone or in combination with MMT.

The recommendation to enter an LTPA was approved by Mr Ghadban on 28 December 2003, so the ultimate decision to proceed with the LTPA was made by Mr Ghadban. That decision was endorsed by the American authorities. Mr Gourgey QC relied on the various communications from Mr Naaman to Innospec to submit that a decision had been made earlier in November 2003, at the time of Mr Naaman’s visit to Iraq. From this he submitted that it could and should be inferred that Mr Naaman had bribed officials in the MOO to change the earlier decision to proceed with MMT in replacement of TEL and that the LTPA eventually entered was procured by bribery. Quite apart from the fact that the submission that such a decision had been taken in November 2003 is belied by the contemporaneous communications from Mr Nuri, as I stated earlier, it is striking that in the report from Mr Naaman of his visit to Baghdad, there is no hint from him that he was paying or promising bribes, in contrast with other occasions where he hinted bribes would have to be paid. However, even if bribes were promised or paid at the time of his November visit, at that stage there was no more than an agreement in principle. The ultimate decision as to whether to enter the LTPA rested with Mr Ghadban, effectively the Minister, and had to be endorsed by the American authorities. There is no evidence any of them was corrupted or that they made a decision they would not have made, had they not been bribed or, if not bribed themselves, that they were persuaded to make that decision by Mr Luaibi or someone else who had been bribed. It follows that the claimants cannot show that the decision to enter the LTPA was procured by bribery

Furthermore, the fact that protracted and sometimes acrimonious negotiations took place between MOO officials and the defendants before the LTPA was actually entered into in October 2004 militates strongly against the agreement having been procured by bribery. The defendants were seeking to impose their terms and conditions, including a price review provision which would have entitled them to increase the price periodically. The Iraqis were not happy with this: they wanted a straightforward agreement with a fixed price. At various times during 2004, the indications were that, if the defendants would not agree this, the deal would be off and the Iraqis would seek to source TEL from elsewhere. Whilst that might have proved difficult in practice, Mr Gourgey QC was not in a position to suggest that this negotiating stance of the MOO was not a genuine one. This was hardly the stance of officials who had been bribed or promised bribes to enter the agreement.

The LTPA as eventually signed was approved by Mr Ghadban (by now in fact the Minister) and it was he who instructed the refineries to sign. Since the claimants cannot demonstrate that he was corrupted or influenced by others who were corrupted, that is a further strong indication that the LTPA was not procured by bribery. It is also noteworthy that, at the same time as the LTPA was being finalised, the MOO was still discussing the possibility of purchasing 1,000 metric tons of MMT. Although, for whatever reason, the MOO decided not to purchase such a substantial quantity, Mr Assad was inviting tenders for the supply of what transpired to be 120 metric tons of MMT, hardly indicative of a conspiracy to destroy MMT.

Mr Gourgey QC relied upon the admission by the defendants of payment(s) of U.S. $167,000 to Mr Naaman, which he admitted in the United States proceedings having paid to a senior MOO official to secure two purchases under the LTPA. He submitted that since it was a “take or pay” agreement with a requirement for a minimum uptake, the defendants and Mr Naaman would hardly have been bribing MOO officials to accept those purchases or shipments unless they had been promised bribes at the outset. That is a point with some force and I have considered very carefully whether that admission should lead me to conclude that the LTPA must have been procured by bribes or the promise of bribes. Ultimately however, I consider it is essential to consider the totality of the evidence and I have concluded that it would not be safe to conclude from that admission that the 2004 LTPA was procured by bribes or the promise of bribes.

As Mr Onions QC submitted, the MOO did from time to time put out tenders for the supply of TEL by others than the defendants, even after the 2004 LTPA had been concluded. An example was a tender from Basra for 800 metric tons, with a closing date of 14 December 2004 which Mr Al-Gaood accepted in cross-examination was indicative of the MOO wanting and needing TEL, not of some conspiracy against MMT. It is equally possible that the bribe of U.S. $167,000 was paid to ensure that the MOO did perform the LTPA after it was entered, rather than being the honouring of some previous promise of a bribe at the negotiation stage. This is also consistent with what is said on Mr Naaman’s behalf in his Memorandum in Aid of Sentencing that the U.S. $167,000 was paid as bribes to facilitate the actual orders under the LTPA.

Mr Gourgey QC also relied upon the various references by Mr Naaman to his “local partners” requiring written confirmation of his 3% commission and the like and his statements that he was paying away most of his profits to officials as evidence that the 2004 LTPA had been procured by bribery. However, given his admission in the United States proceedings that he had procured payments from Innospec on the basis they were required for bribes but pocketed the money himself, all such statements by Mr Naaman have to be treated with considerable circumspection. There is simply no reliable evidence from which the court could conclude that he used part of his commission to bribe MOO officials to enter the 2004 LTPA.

The claimants invite the court to draw the inference that there was in effect a continuum of corruption and that because there was corruption in relation to the field test and the 2008 LTPA, there must have been corruption in relation to the 2004 LTPA. Quite apart from the fact that no bribes appear to have been promised, let alone paid for MMT to fail the field test (which, of course, it did not fail) and even though, as I have found, bribes were promised by Mr Naaman to one or more unidentified officials to “facilitate” the 2008 LTPA, it simply does not follow that the 2004 LTPA was procured by the promise of bribes. There is no evidence from which the court could conclude that the same officials were being bribed or promised bribes over a four to five year period, apart from what Mr Naaman was saying in correspondence about having paid or promised bribes to “our people” in Iraq or similar, which in my judgment was inherently unreliable.

On his own admission, this is a man who misled Innospec into thinking that he had paid or promised bribes to MOO officials and officials of the Trade Bank of Iraq and created the false translation of the test results. He consistently exaggerated the extent to which MMT was about to be adopted in Iraq. It cannot be said with any degree of reliability that he was telling the truth about anything else. Overall, in my judgment, the fact that bribes were promised in relation to the 2008 LTPA would be an unsafe basis for inferring that bribes must also have been promised in relation to the 2004 LTPA.

The claimants also rely upon the fact that Dr Turner pleaded guilty to a count on the indictment against him in the English criminal proceedings of conspiracy to corrupt by giving or agreeing to give corrupt payments to public officials of the Government of Iraq between 1 January 2003 and 31 December 2008 as inducement to secure or as rewards for having secured contracts for the supply of Innospec’s products including TEL. Mr Gourgey QC submits that, since this period begins in January 2003, Dr Turner was admitting agreeing to pay bribes in 2003 and that can only relate to the procuring of the 2004 LTPA. In my judgment, that is a particularly weak point. Unlike in the U.S. criminal proceedings, there is no statement of detailed facts in the English proceedings to which Dr Turner was required to stipulate, only an indictment containing a range of dates between which the conspiracy is said to have taken place. This is an approach to drafting indictments often adopted when the prosecution do not know exactly when an offence was committed, only that it was at some stage between two dates. That point is demonstrated here, because the end date was 31 December 2008 and yet, on any view, any conspiracy must have ceased many months before then, either when the LTPA was agreed in principle in January 2008 or when Dr Turner was suspended from employment. Reliance on the 1 January 2003 start date would be a very uncertain and unsafe basis upon which to conclude that by pleading guilty he was admitting having agreed to pay bribes to procure the 2004 LTPA and I decline to do so.

Furthermore, it is striking that in the 175 page witness statement which Dr Turner provided to the Serious Fraud Office dated 27 May 2011, there is no suggestion that bribes were paid or promised to MOO officials during the course of 2003 (or for that matter 2004) to enter into the 2004 LTPA. Although Dr Turner does say that Mr Schack was responsible for negotiating the LTPA and visiting Iraq, it seems to me that, if bribes had been paid or promised, Dr Turner would have known about it and not to have disclosed that to the SFO would have been a high risk strategy if they subsequently unearthed evidence of such bribery. Dr Turner does discuss a meeting with Mr Naaman at the latter’s apartment in Nice in September 2003, where outstanding issues about commission were discussed, but makes it clear that this was commission from old contracts.

This second matter which the claimants would have to establish for their claim to succeed involves not only establishing that there was a decision to replace TEL with MMT, which was not implemented because the promise of bribes by Mr Naaman procured the MOO to enter into the 2004 LTPA, but also that the bribery in question prevented sales of MMT. In one sense this point is also an aspect of causation, with which I deal in the next section of the judgment.

Once the claimants’ case that there was a decision in October/November 2003 to replace TEL with MMT fails, as I have held it does, then this necessary part of the claimants’ case is equally hard to establish. It is difficult to see how the entry into the 2004 LTPA (even if procured by bribery) prevented purchases of MMT. It is quite clear that, with the possible exception of Daura some of the time, the condition of the refining equipment at the refineries was such that the pool of the base gasoline was low and only TEL could provide the octane boost needed to achieve the required RON for finished gasoline of 80-82. It follows that, if the MOO had not entered into the 2004 LTPA, they would still have had to purchase the TEL they needed from somewhere, if not from Innospec, from other sources, such as China.

Furthermore, the entry into the 2004 LTPA did not prevent sales of MMT. This is demonstrated by the fact that the recommendation of the benzene enhancer committee was that, in addition to the LTPA for three years supply of TEL, the MOO should make purchases of 1,000 metric tons of MMT. That seems to have remained under consideration until August and October 2004, although ultimately the MOO decided not to make such a substantial purchase and sought delivery of a smaller quantity, the 120 metric tons for which an order was placed in 2005. That quantity was delivered in December 2005 and March 2006. The intention was to conduct a field test and thereafter the balance of the stock of MMT was used at Daura in the production of gasoline initially in May 2007 then from August 2007 onwards. In all the circumstances, it seems to me that the contention that the LTPA prevented sales of MMT was simply not borne out by the contemporaneous evidence.

After the late disclosure of the minutes of the benzene enhancer committee and the memorandum of 23 December 2003 revealed that, in so far as there was a decision at the end of 2003, it was not to replace TEL with MMT, but to enter into an LTPA for TEL, with a recommendation (which may or may not have been approved by Mr Ghadban at that stage), the case that the 2004 LTPA prevented the purchases of MMT became completely unsustainable. In the event, Mr Gourgey QC on behalf of the claimants did not seek to put forward the case advocated in Mr Al-Gaood’s fourth witness statement, that Innospec had bribed officials in the MOO during the course of 2004 to impede the progress of MMT. For the avoidance of doubt any case that, during the course of 2004, there was bribery of MOO officials to impede the progress of MMT is unsupported by any evidence and is dependent upon assertions by Mr Al-Gaood which I simply do not accept. For the reasons given earlier in the judgment, it seems to me far more likely that the decision to proceed only with the purchase of a “trial quantity” of 120 metric tons, not 1,000 metric tons was based upon the commercial and logistic considerations I identified above. Accordingly, on that ground as well, the claimants’ claim must fail.

Even if, contrary to the conclusions I have reached on the first two matters the claimants would have to establish for their claim to succeed, (i) that there was a decision to switch from TEL to MMT in October or November 2003 and (ii) that the 2004 LTPA was procured by bribery, the claimants still have to establish the third matter, namely that, but for bribes or the promise of bribes, the decision would have been implemented and the MOO would have replaced TEL with MMT from early 2004 onwards, so that the counterfactual scenario upon which the claim is founded would have occurred. This is the issue of causation.

One immediate and, as I see it, insuperable difficulty which the claimants face as a matter of causation is that the actual recommendation by the benzene enhancer committee at the end of December 2003 was not to replace TEL with MMT, but to purchase 1,000 metric tons of MMT, in addition to entering the LTPA for three years supply of TEL. Whatever the reasons for the MOO not ultimately taking that course, but purchasing the smaller quantity of 120 metric tons, there is simply no evidence that that decision was procured by bribes or the promise of bribes by Innospec of officials of the MOO.

Furthermore, despite the recommendation, so far as two of the three refineries are concerned, Baiji and Basra, for much of the time with which the claim is concerned, the RON of the base gasoline was such that even a 6 RON boost with a dosage of 54mg Mn/l of MMT alone would not produce gasoline of the required octane of 80-82. In those circumstances, if MMT was to be used at all, it could only be used in combination or mixture with TEL. There is also evidence that the same was true at Daura for some of the time. I agree with Mr Earnest that the operational condition of at least Baiji and Basra and the security situation in Iraq would have inhibited the use of MMT in those refineries and that, had the MOO proposed immediately replacing TEL with MMT with effect from early 2004, the likely reaction of the management in all three major refineries would have been one of considerable resistance. Although there is no direct evidence on the point, it seems to me likely that Baiji and Basra were resistant to using MMT (as Baiji was subsequently in 2007) and that may be one reason why the MOO did not proceed with the purchase of 1,000 metric tons of MMT.

Mr Al-Gaood’s position when confronted with the evidence that MMT alone could not provide the necessary octane boost was to suggest that a combination was the obvious solution and that the failure of the MOO to adopt that approach in late 2003/early 2004 meant that the LTPA had been procured by bribery. I reject that suggestion and in my judgment, the question of the use of a combination of TEL and MMT has to be approached very cautiously. It is certainly correct that, during the course of 2003, the MOO was considering using a mixture of TEL and MMT. It was evidently at their request that tests on a mixture were conducted at Zerqa. Those tests were not successful and were abandoned, Mr Knowles thought because the TEL was the wrong specification, being too concentrated. That may well be correct but was hardly an auspicious start.

Mr Gourgey QC placed great emphasis on the tests conducted at Daura in September 2003 of which the claimants produced the report during the trial. The results of those tests showed that in laboratory conditions, 54mg Mn/l of MMT with 0.27g Pb/l of TEL boosted the pool from 78 to 90 RON and with 0.411g Pb/l of TEL could boost the pool from 77 RON to 92 RON. However, as I have already held earlier in the judgment, those results have to be approached with caution and there is considerable doubt as to the practicality of using a mixture of MMT with those levels of lead to produce commercial gasoline. As appears from the email in April 2010 which I quoted in [34] above, Ethyl themselves were sceptical as to whether, when 54mg Mn/l of MMT was mixed with TEL, a RON boost of 5 or 6 RON could be consistently achieved. They would have expected a boost of 2 RON at most.

The concerns expressed by Ethyl are reflected in the expert evidence of Mr Earnest who said this in cross-examination about the laboratory tests at Daura in September 2003:

“I would further add that using manganese at this kind of addition level, 54mg per litre, and using lead at these kinds of levels, so 0.4 or 0.2, in my knowledge it has never been done anywhere in the world. I mean, you are in virgin territory in terms of understanding how well this is going to perform in the field, in the engines. Indeed, the paper by Gibbs that I attach as an exhibit to my first expert report expresses concern about using high levels of manganese in gasolines that simultaneously include high levels of lead.”

Mr Earnest was referring to a paper headed “Gasoline Additives When and Why” produced by L.M. Gibbs of the Chevron Research and Technology Co in October 1990 which dealt with the use of MMT in combination with TEL in these terms:

“As lead content began to be phased down in the late 1970s as a result of federal regulations, the use of MMT in combination with lead increased. To ensure satisfactory exhaust valve seat wear and spark plug life, it was recommended that the use level of manganese decrease with increasing lead content. Thus, if 2.0g Pb/gal was present, a maximum of 0.05 grams of manganese per U.S. gallon (Mn/gal.) was recommended. If only 0.1g Pb/gal was used, then 0.1 g Mn/gal was recommended. In 1986, as lead was phased down to 0.10 g Pb/gal averaged by refinery for the leaded pool, MMT in a mixture with TEL became a widely used antiknock. It was added to gasoline to provide 0.10 g Mn/gal with 0.10 g Pb/gal. This combination is still being used by many refiners in regular-grade leaded gasoline in the U.S. The combination of the MMT and TEL helps prevent exhaust valve seat recession, which can be a problem for older engines designed to use leaded gasoline.”

As Mr Earnest pointed out, these quantities of additive are in grams per U.S. gallon and converting to litres 0.05g Mn per gallon is equivalent to 13.2 mg Mn per litre and 2g Pb per gallon equates to 0.053g Pb per litre. In each case the quantities of additive are far lower than those being contemplated by the claimants’ case. Mr Earnest concluded as follows about what the claimants’ case was suggesting:

“We now find ourselves in this matter in the unusual circumstances where it is suggested that using manganese in high concentrations and lead in significant concentrations may be appropriate. My technical observation is I would urge caution with that, based on the recommendations or these observations made by Mr Gibbs of Chevron Research and Technology.”

I accept Mr Earnest’s evidence (which was essentially not contradicted by Dr Habeeb, but to the extent it was I prefer Mr Earnest) that there is no experience commercially of using the sort of levels of MMT and TEL in combination which would have been required to boost the base gasoline (at least at Basra and Baiji) to 82 RON and that use of the two in such high concentrations would be likely to have had a deleterious effect on car engines.

Apart from the abandoned test at Zerqa and the laboratory tests at Daura in September 2003, the only firm evidence of the Iraqis having manufactured gasoline using a mixture of TEL and MMT is the evidence from Mr Salah’s report of 16 July 2008 that for a short period from 25 June to 7 July 2008, gasoline was produced at Daura using a mixture of MMT and TEL. This was due to stoppage of the main gasoline boosting unit which meant that the RON of the base gasoline was 74 or 75. The RON of the gasoline marketed was 81. Mr Salah had the figures for TEL and MMT used for part of that period, from 1 to 7 July 2008, 2,490kg of MMT and 3,650kg of TEL used in 16,600 cubic metres of gasoline produced. He calculated the RON boost of each of the MMT and the TEL by a simple mathematical equation as 2.5 from MMT and 3.5 from TEL but that must be of doubtful validity.

Nothing is known about how the mixture was blended or how easy or difficult the refinery found the exercise, nor about whether the gasoline produced was used successfully in cars. It is striking that this mixture was not used at the other refineries, even though, by that stage in July 2008, there could be no question of any bribery affecting the use of MMT. In my judgment, this evidence of the production of gasoline for a limited period using a mixture of MMT and TEL is a very uncertain and unsafe platform for any case that the Iraqis would have used a mixture of MMT and TEL at all three refineries from early 2004 onwards had it not been for the alleged corruption and I decline to reach that conclusion.

It can of course be said that the benzene enhancer committee appears to have thought that it was feasible to use MMT in mixture with TEL, but that view was based on the Daura laboratory tests, which, as I have said, have to be approached with caution. Even if the MOO had purchased 1,000 metric tons of MMT in early 2004, it would have had to be used in combination with TEL at Basra and, for much of the time, at Baiji, to achieve the necessary octane boost. Whether it would have been possible to produce large quantities of gasoline on a commercial basis with a mixture of TEL and a dosage of 54mg Mn/l of MMT is highly debatable for the reasons given by Mr Earnest.

Furthermore, Ethyl were evidently concerned about the use of a mixture of TEL and MMT (as opposed to a decision by the MOO to switch from TEL to MMT) being perceived by Innospec as a breach of the marketing agreements. That this remained a continuing concern is demonstrated by the fact that in the context of the arbitration between Ethyl and Innospec in 2006, Ethyl sought from the MOO a letter to the effect that they had invited Ethyl into Iraq because they wished to switch from TEL to MMT, in order to negative the suggestion that Ethyl had sought to act in competition with the defendants. In my judgment, if in early 2004, the MOO had proposed the purchase of substantial quantities of MMT to be used at all three refineries in a mixture with TEL, but without any firm commitment to phase out TEL and indeed in circumstances where they were going to enter an LTPA for TEL, it is highly questionable whether Ethyl would have been prepared to contract on that basis.

A related point which it seems to me inevitably arises once what is postulated by the claimants is the purchase of 1,000 metric tons of MMT in parallel with an LTPA for TEL, is the extent to which Innospec would have objected to this on the basis that it was a breach of the marketing agreements. This was not explored in the evidence at trial, because the minutes of the meetings of the benzene enhancer committee at which the recommendations were actually made, on which the claimants now place reliance, were not disclosed until after the trial ended. However, it seems to me likely that Innospec would have been livid about this proposed supply of 1,000 metric tons of MMT and the reaction Dr Turner had in March 2006 when he learnt about the sale of 120 metric tons of MMT: “Afton have been up to their old tricks again” would have been somewhat more extreme. I suspect Innospec might well have tried to prevent sales of MMT on this basis by commencing arbitration proceedings. Irrespective of whether those arbitration proceedings would have ultimately been successful, they may well have disrupted the sales and may have made Ethyl reluctant to supply MMT in substantial quantities whilst TEL was still being used.

Because the claimants now recognise that their claim can only succeed if they can establish that the 2004 LTPA was procured by bribery and only rely upon any subsequent corruption as evidence of a continuum of corruption, from which the court should infer that the 2004 LTPA was procured by bribery, it is not strictly necessary to consider whether that subsequent corruption caused the claimants loss, in the sense that it prevented orders for MMT. However, I will deal briefly with the difficulties of causation which the wider case (no longer pursued) faced.

In the U.S. proceedings, Innospec admitted that between December 2005 and January 2007 they made payments of some U.S. $600,000 to Mr Naaman which they believed were reimbursement for bribes paid to Iraqi officials (U.S. $195,912.78 in December 2005/January 2006 in respect of the opening of a letter of credit with the Trade Bank of Iraq, €210,000 in August/September 2006 also in respect of the opening of a letter of credit and U.S. $139,650 in January 2007 in respect of payments to Iraqi officials). The first two of those payments were fake bribes where the money was pocketed by Mr Naaman himself. It cannot sensibly be suggested that Mr Naaman had made promises of bribes but then did not pay them, since that would have surely led to Iraqi officials acting against Innospec’s interest rather than in their favour. It follows that he must simply have invented the story that he had promised bribes. Accordingly, those first two payments to Mr Naaman cannot have had any causative effect so far as the claim is concerned. In any event, even if they had been paid as bribes, they would have been paid to officials in the Trade Bank of Iraq not the MOO. It is difficult to see how any such bribes could be said to have prevented orders for MMT.

Of the U.S. $600,000 or so paid by Innospec to Mr Naaman, the evidence (from his own admissions) is that only U.S. $167,000 was ever actually paid to a senior MOO official to secure two purchases under the LTPA. It is difficult to see how such payment(s) to ensure that orders for TEL were placed under the LTPA rather than requirements being satisfied elsewhere could be said to have prevented sales of MMT. To the extent that the payment(s) were made before March 2006, the MOO had already placed an order for 120 metric tons of MMT and deliveries of that quantity were not completed until March 2006. No further orders for MMT would have been placed until delivery of that quantity had occurred. To the extent that the payment(s) were made between April 2006 and January 2007, the MOO was conducting the MMT field test and awaiting its results and again, they would not have ordered any more MMT until they had conducted that test and were satisfied with its results. In the Chronological History above I have rejected any suggestion that the field test was a charade or that the results were procured by bribery or that MMT failed the test.

Of course, Innospec also admitted in the U.S. proceedings against them that they paid U.S. $155,000 to Mr Naaman believing that they were reimbursing him for bribes paid to MOO officials for MMT to fail the field test. However, subsequent to those admissions, Mr Naaman himself admitted that he had paid no such bribes to the MOO, but had pocketed the money himself because he was disgruntled with Innospec about the size of his commission. Accordingly, although in making those payments, Innospec committed a criminal offence under the Foreign Corrupt Practices Act 1977, that wrongdoing did not and could not have prevented any sales of MMT and was thus not causative of the claimants’ alleged loss.

In relation to the 2008 LTPA, Innospec pleaded guilty to Count 11 on the basis that they had agreed to pay Mr Naaman an increased commission on actual orders under the LTPA which was to be paid away in bribes and, as Mr Naaman admitted, he promised such bribes to one or more MOO officials to facilitate the LTPA. However, no orders were ever placed under the LTPA, since the investigations by the U.S. authorities intervened. The MOO did not immediately place orders for MMT, although an order for 300 metric tons was fulfilled in 2009 and, but for allegations of corruption, a further order would have been placed in 2010. However, thereafter, although the MOO purchased MMT, they did not purchase it from the claimants, because they were able to purchase it more cheaply from Chinese competitors. In the circumstances, the bribery which facilitated the 2008 LTPA did not prevent sales of MMT by the claimants.

In the U.S. criminal proceedings against them Innospec also admitted paying travel expenses and pocket money to officials of the MOO in breach of the Foreign Corrupt Practices Act. Whilst such payments thus constituted a criminal offence, I agree with Mr Onions QC that these payments were essentially made to maintain goodwill and that it cannot be credibly suggested that their effect was to prevent orders for MMT.

Overall, although there clearly was criminal wrongdoing by Innospec and Dr Turner and, as is accepted on their behalf, their conduct was reprehensible, that wrongdoing did not prevent sales of MMT and was not causative of any loss. Even if, contrary to my earlier findings, the 2004 LTPA was procured by bribery, I consider the MOO would always have followed the course they did, of continuing to use TEL given the octane boost they needed and of purchasing MMT for testing and possible use as an alternative to TEL in the event that TEL became unavailable or scarce. Whilst the original recommendation of the benzene enhancer committee was to purchase 1,000 metric tons of MMT, ultimately the MOO did not proceed on that basis and only bought 120 metric tons pending the field test, probably for one or more of the reasons set out at [242] above, not because of bribery. It is also striking that when the 2008 LTPA was in effect suspended or terminated during the investigations into Innospec’s conduct, the MOO did not immediately replace TEL with MMT. Rather, they placed other orders for TEL, initially with other suppliers and then with Innospec later in 2010. There is no suggestion that MOO officials were bribed to place those orders: they were placed because the MOO needed TEL and, at least until refining equipment was replaced, the strategic decision within the MOO was to carry on using TEL, at least at Baiji and Basra.

In the circumstances, the claimants have failed to establish that the wrongdoing alleged against Innospec caused them loss and the claim fails on that basis as well.

In one sense, since I have concluded that the claim fails on the issues of liability, it is unnecessary to consider the quantum of the claimants’ claim in any detail. Nonetheless, since it was the subject of expert evidence and detailed submissions, I propose to set out my conclusions on quantum, albeit not in as much detail as I would have done if I had held that the claim succeeded.

As is already apparent from the common ground to which I referred at the outset of the judgment, the only counterfactual scenario on the basis of which the claim is advanced is that had the 2004 LTPA not been procured by bribes, the decision to replace TEL with MMT and only use TEL so long as stocks remained would have been implemented in late 2003, with substantial orders for MMT from early 2004 onwards. No other counterfactual scenario (such as that but for bribery in 2004, orders for the purchase of 1,000 metric tons of MMT would have been placed in parallel with the LTPA or that, but for bribery in 2006 and 2007, substantial orders would have been placed from mid-2007 onwards) is put forward as the basis for the claim.

In those circumstances, the claimants’ claim is for the loss of the profit they would have made in the period from early 2004 until the final deliveries were made in September 2011 following termination of the distributorship agreement in July 2011. On that basis the claimants’ expert Mr Howick has calculated the loss as U.S. $ 26,572,603 taking the MOO annual production figures. As noted at [5] above, the claim for somewhat higher quantum based on production figures made available by various international bodies is no longer pursued, so that it is not necessary to determine which set of production figures is most accurate, a matter which occupied some time with the experts at trial.

Nonetheless, the quantum as calculated by Mr Howick is put forward on the basis of a number of inputs and assumptions, as to matters such as the period of the loss, the amount of stock the MOO would have held and so forth. It is accepted by Mr Gourgey QC that none of those matters is necessarily certain and that if the court considered that a particular input was incorrect or uncertain, the court could discount the claim. To that extent, Mr Gourgey QC accepts that there is an element of loss of opportunity to the quantum of the claim.

Two of the major assumptions made by Mr Howick which have been input into his calculations concern the period of the loss and the amount of MMT that would have been purchased. These both require critical examination, particularly in the light of the evidence which emerged after the trial. It seems to me that the assumptions he makes are unrealistic. Those assumptions are of the purchase of 1,800 metric tons of MMT in 2004 and of the purchase of MMT in subsequent years in line with the gasoline production in Iraq, on the assumption that MMT alone would have been used.

So far as the timing of the first year’s purchases of MMT is concerned, it is clear from the fact that the MOO was still considering the purchase of the 1,000 metric tons of MMT in August and October 2004, notwithstanding the recommendation of the benzene enhancer committee in December 2003, that the MOO did not move swiftly (as is evident from the time it took between the approval of the 2004 LTPA in December 2003 and its actual signature in October 2004) no doubt for bureaucratic and possibly financial reasons. It seems to me that, even if the MOO had proceeded with the purchase of 1,000 metric tons of MMT as recommended, the likelihood is that orders would not have been placed until some time in early 2005 and then only for 1,000 metric tons in the first instance.

So far as the end point of the claim is concerned, Mr Howick’s assessment is predicated upon the loss continuing until deliveries were completed under orders outstanding when the distributorship agreement was terminated with immediate effect in July 2011, when Ethyl discovered that the claimants had made ASSF payments to the Government of Iraq. Mr Onions QC made two submissions about that end point. First he submitted that, since any bribery ended in early 2008, the claim should only run to that date. Although I see the force of that point, it seems to me that the answer to it is that, in the counterfactual scenario which I am asked to assume, substantial deliveries of MMT would have been taking place after early 2008, in other words on this hypothesis, the effect of Innospec’s wrongdoing continued after the wrongdoing itself ceased. However, how long Innospec’s wrongdoing remained the cause of any loss of MMT sales (as opposed to undercutting by foreign competition) is a matter to which I return below.

Mr Onions QC’s second point is a much more compelling one and presents the claimants with a substantial obstacle. This is the so called “Sword of Damocles” that, since the claimants had engaged in corrupt practices themselves in paying ASSFs to the Government of Iraq, if Ethyl had found that out earlier than when they did discover it in July 2011, they would have terminated the distributorship agreement immediately at that earlier date. At its most extreme, Mr Onions QC’s submission is that the fact that Ethyl would have refused to do further business with the claimants if they had known about the ASSFs earlier breaks any causal link between the wrongdoing of Innospec and the loss claimed. That submission seems to me to be too extreme, but Mr Onions QC submitted that, even if that is wrong, this risk to the relationship between Ethyl and the claimants introduces a considerable element of uncertainty into the claim which should be reflected in a substantial discount.

Mr Howick, the claimants’ own expert, accepted that this risk introduced considerable uncertainty over the claim for projected profits. In cross-examination he said:

“If I had knowledge of this, then that would be a concern. If I was advising them, I would say: what are the potential outcomes of this? If it is that basically the only option would be for the arrangements to be terminated and no further business to be conducted, then I would say, well, that would make the expectations of future income from this uncertain, very uncertain.”

Mr Gourgey QC sought to downplay this element of uncertainty, by submitting that Ethyl had only discovered about the ASSF payments by the claimants in the context of the deposition taken from Mr Al-Gaood in the Newmarket proceedings, that had it not been for the corrupt practices of Innospec those proceedings would not have taken place and there is no reason why Ethyl would have discovered about what were in effect the claimants’ own corrupt practices any earlier than they did or, indeed, at all. This was a singularly unattractive point, but it does have a certain brutal logic.

However, it seems to me that, despite Mr Gourgey QC’s submission, there would always have been a substantial risk, even in the counterfactual scenario of no corruption by Innospec, that Ethyl would find out about the ASSF payments made by the claimants. Indeed it is surprising that they did not find out earlier, for example when the Volcker Commission was investigating in 2005. In the circumstances, there would have to be a substantial discount from any claim to reflect the risk that Ethyl would have discovered the claimants’ corruption earlier. If I had to set that discount, I would do so at 30%.

In relation to the amount of MMT which would have been purchased, there are two aspects of the assumptions that were made by Mr Howick which give rise to uncertainty. One is the question of how much stock of MMT the MOO would have held. Mr Howick has assumed that in the first year that substantial purchases were made, which he has taken as 2004, but for the reasons set out above, I consider would have been 2005, the MOO would have purchased 1,800 metric tons of MMT, which on his estimate of the annual consumption, would have left the MOO with 10 months of stock. Thereafter, in subsequent years, as I have said, he has assessed the quantity of MMT that would have been purchased by reference to the gasoline production figures.

There is no evidence as to what levels of stock of MMT the MOO would have wished to carry. Mr Gourgey QC makes the perfectly valid point that, given the security situation in Iraq, the MOO would have been concerned about delays in delivery and would have wanted to carry substantial stock to ensure that there was no interruption to production due to lack of stock. Also, as he says, the MOO does seem to have carried substantial stocks of TEL. It appears to have had sufficient stocks of TEL in 2007 to continue production without placing any orders in 2008. Nevertheless, I am not convinced that the MOO would have wanted or needed to carry the sort of stock levels for which Mr Gourgey QC contends. Indeed I suspect that even if they had purchased 1,000 metric tons of MMT in 2005, they may well not have purchased any more MMT until after the field test had been successfully conducted. Accordingly, I consider that in all probability, no further purchases would have been made in 2005. Thereafter, I do not consider the MOO would have carried any more than 6 months stock of MMT and that may be generous to the claimants, given that, even if the MOO had proceeded with the purchase of the 1,000 metric tons, they were also entering a three year LTPA to purchase 2,000 metric tons of TEL per year.

In subsequent years, Mr Howick’s assumptions as to the quantities of MMT required are all of course predicated upon the claimants’ case at trial that a decision would have been made to replace TEL with MMT and TEL would only have continued to be used until the stocks were exhausted. However, what has now emerged is that the MOO was proposing to continue using TEL, either on its own or in conjunction with MMT, at least for a further three years. Even if the claimants had any sustainable case, the calculation of how much MMT would have been required, at least in 2006 and 2007 would need to take account of continued TEL use and the figures for MMT would have to be reduced considerably.

Then there is the question of MMT treat rate. In his calculations Mr Howick has assumed that the maximum dosage was 54mg Mn/l and the minimum dosage 36mg Mn/l. The only basis for taking that minimum figure appears to be a solitary piece of evidence, the letter of Mr Al-Khashab to Mr Asaad, Director-General of the Technical Department of 4 October 2007 saying that a minimum dose of 36mg Mn/l was required to ensure lubrication of the valves of car engines. However, Mr Asaad, who as head of the Technical Department might be thought to have some expertise, clearly did not share that view and instructed Mr Al-Khashab to continue dosing at the equivalent of 27mg Mn/l. Furthermore, Dr Habeeb in his evidence was not suggesting that there was a minimum dosage of 36mg Mn/l. As I pointed out during his cross-examination, had he been doing so, that would have raised issues, for example why when MMT was used in the United States in gasoline some years ago, the maximum dosage was 18mg Mn/l without apparently that low a dosage having any deleterious effect on car engines. In my judgment there was no minimum dosage rate for MMT, whether 36mg Mn/l or any other figure.

In relation to the dosage at Daura, Mr Howick assumed that the MOO would have used that so-called minimum dosage of 36mg Mn/l between 2004 and 2007 then the maximum dosage of 54mg Mn/l between 2008 and 2011, apparently irrespective of the actual need for or amount of any octane boost. It seems to me that all these figures overstate the dosage rates which would have been required. To begin with, the data produced by Mr Earnest referred to in [21] above suggests that in 2005, Daura did not use any TEL at all, suggesting that no octane boost was required, whether from TEL or MMT. There were other occasions, from the data he collected, when the RON of the base gasoline at Daura approached 80, suggesting that at most the 27mg Mn/l would have been required.

In the later period of 2007 and 2008, if Mr Salah’s 16 July 2008 report is accepted, the average dosage of MMT actually used at Daura was 43mg Mn/l rather than 54. Without having details of the RON of the base gasoline for the period 2008 to 2011, it is impossible to assess how much MMT would have been required, but I consider that a more conservative figure than 54mg Mn/l would be appropriate, possibly the 43mg Mn/l average figure.

So far as the other two refineries are concerned, Mr Howick assumed that the maximum dosage of 54mg Mn/l would have been used to produce a RON increase of 6, except in 2004 at Baiji when he assumed it would be 36mg Mn/l. As Mr Onions QC pointed out, there is a great deal of evidence in relation to these two refineries that MMT alone could never have provided the octane boost required, which was consistently more than 6 RON. The necessary boost could only have been provided by TEL alone or, at least according to laboratory tests and a few days production at Daura in July 2008, by a combination of TEL and MMT.

However, the use of MMT and TEL together gives rise to the issues about how much MMT can really be used with TEL and the lack of a synergetic reaction to which I have referred above in the Causation section of the judgment, with specific reference to Mr Earnest’s evidence and the concerns expressed by Ethyl. I do not consider that Mr Howick’s estimates of dosage rates at the other two refineries or the claimants’ quantum case generally, grapple with these potential complications of the use of a combination of MMT and TEL. I certainly consider that Mr Howick’s assumption that either 36 or 54mg Mn/l dosages would have been employed at Baiji and Basra over a six year period is wholly unrealistic. In my judgment, the claimants have simply not made out a case that, on a balance of probabilities, a particular dosage or dosages of MMT would have been used at those two refineries. To that extent, it seems to me that the claimants have not made out their claim in respect of those refineries.

The issues of sale and purchase prices and potential competition are important ones since the volume of sales and the margin which the claimants would have made on purchasing from Ethyl and selling to the MOO have a considerable impact on the calculation of damages. Actual figures achieved are available in respect of the two transactions in 2005 and 2009, the 120 metric tons and the 300 metric tons respectively. In the case of the former, the claimants sold to Daura at U.S. $24,700 per metric ton, having purchased from Ethyl at U.S. $21,025 per metric ton. In the case of the latter, the claimants sold to the MOO at U.S. $25,000 per metric ton, having purchased from Ethyl at U.S. $20,000 per metric ton. This gave a profit margin of 13.2% and 21.6% respectively.

Mr Howick has assessed the purchase and sale prices which would have been achieved in those two years on the basis of those figures. For 2006 to 2008, he has assessed the profit margin as increasing exponentially between the two years 2005 and 2009, 15.3% in 2006, 17.5% in 2007 and 19.5% in 2008. The view of Mr Hall, Innospec’s quantum expert is that the profit margin in 2009 was exceptional and exceeded what Ethyl would normally have been prepared to agree by way of commission or profit margin for sales agents or distributors. Mr Howick disagrees, pointing out that the same margin was apparently envisaged for the order in 2010, which would have been for 500 metric tons, but which was cancelled on the basis of alleged corruption by the claimants and the delegation.

In the absence of any evidence from Ethyl themselves, it is very difficult to assess whether the profit margin in 2009 was exceptional or not. However, whatever the answer to that question, it has to be borne in mind that these were profit margins on relatively small quantities of MMT. In the claimants’ counterfactual scenario, there would have been an increase in sales of over 500% in the period, amounting to over U.S. $200 million of sales by the claimants. It seems to me that it is a reasonable assumption that Ethyl would have sought to negotiate the claimants’ profit margin downwards. Also, on the claimants’ case their fixed costs in the relevant period would only have increased to a negligible extent. Accepting that hypothesis (although I am somewhat sceptical about it) the claimants would not have been in a position to argue with Ethyl that their gross profit margin should increase and, given the volume of sales they would have achieved, it seems to me likely that Ethyl would have succeeded in keeping down the claimants’ profit margin, which would not have exceeded 15% in any of the years from 2006 onwards.

For 2010, Mr Howick has assumed that the claimants would have supplied 50% of Iraq’s MMT requirements because the Chinese competition emerged in that year. His assessment is that for the period January to March (before the competition emerged) the claimants would have supplied 25% of the annual requirement at U.S. $25,500 per metric ton, the same price as was charged for the 300 metric ton order in 2009 and which, until the alleged corruption emerged, the MOO were prepared to pay for the 500 metric tons for which the claimants responded to the tender. He assumes that in the six month period to October 2010, the Chinese competitor would have supplied the MMT but that the claimants would then have supplied the 25% annual requirement for the last quarter of 2010, but, because of the competition, at the reduced price of U.S. $21,000 with the purchase price by the claimants from Ethyl as U.S. $16,000 as stated by Mr Al-Gaood in his witness statement. Mr Howick then assumes that in 2011 the claimants would have supplied 50% of the annual requirement, at the same purchase and sale prices as in the last quarter of 2010. I have already noted above, in relation to the purchase price from Ethyl that I consider that Ethyl would have limited the claimants’ profit margins to no more than 15%.

Mr Gourgey QC submits that these reduced quantities and sale prices for the period from April 2010 to September 2011 sufficiently reflect the risk of competition which the claimants would have faced. On the other hand, Mr Onions QC submits that, in the claimants’ counterfactual scenario, where the claimants had established a stable market in Iraq for MMT, this might reasonably have been expected to encourage Chinese competition much earlier than was actually the case, as Mr Howick fairly agreed in cross-examination was a possibility. It seems to me that the Chinese might well have tried to break into the MMT market in Iraq in 2008 or 2009 if the claimants had been making substantial sales and the claimants’ quantum should be discounted to reflect that possibility, so that any claim should be on the basis that the claimants would only have supplied 50% of the MMT in each of those years and on the basis that the sale price was U.S. $21,000 to reflect that competition.

There are issues between the parties about the potential additional costs which the claimants would have faced and about whether the claimants would have been able to raise sufficient working capital to finance purchases of MMT from Ethyl. Mr Howick’s calculations assumed a very small increase in fixed costs of only U.S. $13,000 about which I am sceptical. It seems to me that some allowance should be made for increased staff costs, particularly since Mr Al-Gaood said he would have paid them bonuses if this substantial MMT business had gone ahead. In view of the substantial increase in orders, some allowance should also have been made for additional storage and logistical costs, as Mr Howick agreed.

Innospec’s expert Mr Hall was concerned about the reliability of the claimants’ financial statements and the extent to which they would have been able to raise additional finance from banks. Although much was made of this in cross-examination of Mr Al-Gaood, particularly in relation to the position in 2010 when Ethyl were concerned that he was trying to use credit from them to finance his business, ultimately I was not convinced by these concerns. As Mr Gourgey QC said, there was an increase in facilities in December 2004 which was readily granted by the claimants’ bank and the reduction in facilities in February 2007 was at the claimants’ request because they were not using the full extent of their facilities and wanted to reduce their costs. I consider that in the counterfactual scenario, they would not have sought that reduction and, if they needed additional facilities, these would have been available.

It follows from the above analysis, that had I thought that the claim succeeded in principle, the quantum advanced is clearly excessive and would have been subject to substantial discounting. Because I have found that the claim fails, there is no need to calculate the precise amount that would have been recoverable. Should it ever become relevant, I would invite the parties to agree quantum on the reduced basis and failing such agreement, order an assessment of damages.

The claimants have failed to establish any of the three matters which they would need to establish for the claim to succeed. They have failed to establish that there was any decision by the MOO in October or November 2003 to replace TEL with MMT or that the 2004 LTPA was procured by the promise of bribes or that, but for that bribery, substantial sales of MMT would have been made, commencing in early 2004. In all the circumstances, the claimants’ claim is dismissed.