Kensington International Ltd. v Republic of the Congo

An injunction to restrain breach of an express negative covenant remains discretionary. The court must consider whether monetary relief is adequate, whether compliance can realistically be enforced against the defendant, and whether the order would cause hardship, oppression, disruption or unmanageable supervision. Relief is generally inappropriate where its practical effect would be to coerce third parties rather than the defendant, particularly where the defendant is a foreign sovereign and the order would operate beyond the jurisdiction. A judgment creditor should ordinarily use available execution procedures rather than obtain exceptional injunctive relief. Declaratory relief may also be refused where it serves no practical purpose or creates uncertainty.

Kensington International Limited, an assignee of debts under a 1984 sovereign loan agreement, obtained summary judgment for money owed by the Republic of the Congo before Cresswell J. It then sought injunctions and declarations concerning alleged breaches of negative pledge and pari passu provisions in the agreement. The Republic took no part in the proceedings, and an amicus was appointed to assist the court on issues including state immunity, service, assignment and the nature of the relief sought.

The central questions were whether the contractual provisions justified injunctive or declaratory relief, and whether such relief could properly be granted against a foreign sovereign where enforcement would operate principally through third parties.

1. Injunctions. The court declined to grant the requested injunctions. Although the negative pledge clause was clear and was intended to prevent the Republic from granting security or preferential interests over its assets, the remedy remained discretionary.
2. The relevant considerations included the adequacy of damages or other monetary relief, the practical prospect of securing compliance by direct action against the defendant, hardship and oppression, and the manageability and territorial reach of the proposed order. The court was not concerned only with whether the order might benefit the claimant.
3. The proposed orders would in practical terms be enforced by coercing banks, oil companies and other third parties. They would disrupt existing payment arrangements and potentially expose third parties to penal consequences which could not be imposed on the Republic. That made the relief inappropriate, especially given the sovereign status of the defendant and the absence of a sufficiently manageable supervisory mechanism.
4. The claimant’s lack of disclosure concerning the consideration paid for the assigned rights, the long period of alleged breaches, and the involvement of original lenders or assignors in apparent breaches meant that the court could not properly assess the equities. Even assuming substantial consideration had been paid, the court would still have refused relief because the claimant already held a money judgment and could pursue execution against available assets.
5. The court considered but did not decide the proper construction of the pari passu clause. That issue was better determined in proceedings between original contracting parties and in a case not affected by the claimant’s derivative title and the apparent conduct of original lenders.
6. Other issues. The court stated that the duty under section 1(2) of the State Immunity Act 1978 to give effect to state immunity exists even where the state does not appear. It also regarded the service-agent reasoning in AM International Bank plc v Republic of Zambia & Others as an approach it would be inclined to follow, though the point was not determinative.
7. The requested declarations were refused. They would add no utility to the existing money judgment, and might create uncertainty about third parties’ performance of existing contractual obligations. The claim for injunctive and declaratory relief was therefore dismissed.

High Court (Commercial Court): Cresswell J granted summary judgment on the money claim on 20 December 2002 and directed a speedy trial of the remaining claims. Tomlinson J refused the subsequent applications for injunctive and declaratory relief.