Tekron Resources Ltd v Guinea Investment Company Ltd

A contract governed by English law will not be enforced where its performance is unlawful in the country of performance. An agreement to pay for genuine intermediary, advisory and negotiating services is not necessarily contrary to public policy merely because the intermediary has a relationship of trust, confidence or respect with government officials.

The court must examine the substance of the transaction, the services actually contemplated and performed, and whether payment was made for improper influence or for legitimate services. Public policy against the sale of influence does not automatically extend to ordinary commercial negotiation and representation.

Tekron claimed sums due under a representation agreement with Guinea Investment Company. The agreement provided fees for developing and procuring a lease-management agreement for a Guinean alumina refinery, and for continuing services. The defendant counterclaimed for sums already paid.

The defendant alleged that the agreement was unenforceable because Tekron had used its principals’ relationships with Guinean officials to procure governmental benefits. The issues were whether the agreement infringed Article 195 of the Guinean Criminal Code, whether it was contrary to English public policy, and whether it could be enforced in England.

1. Claim and counterclaim. The representation agreement was enforceable. Tekron’s claim for sums due succeeded and the defendant’s counterclaim for repayment failed.
2. Construction. The agreement covered Tekron’s development of the lease-management concept, its negotiations with the Guinean Government leading to the lease-management agreement, and its continuing services under clause 4. Tekron had provided real and substantial services as agent for the investors.
3. Foreign illegality. Under the principles stated in Isphani v Bank Melli Iran [1998] Lloyds Rep. Bank. 133, an English court will not enforce a contract where performance is unlawful in the country of performance. The relevant enquiry concerned the legality of Tekron’s performance in Guinea.
4. Article 195. Article 195 of the Guinean Criminal Code addressed the sale of influence involving an abuse of real or perceived influence. The court had to examine the substance of the transaction, the genuine and proper services performed, whether those services were the real object of the contract, and whether payment was made for influence or for legitimate services. An abuse would be indicated where influence was intended to secure a contract, or terms, contrary to the awarding authority’s interests or without proper consideration of them.
5. Application of Guinean law. Tekron’s services consisted of developing the project, negotiating with the Government and assisting GIC thereafter. The prior relationship between Tekron’s principals and government officials made negotiations easier, but there was no intention to obtain an unjustified advantage or to abuse influence. The agreement therefore did not infringe Article 195 or Guinean public policy.
6. English public policy. Montefiore v Menday Components Company Limited [1918] 2 K.B. 241 and Lemenda v African Middle East Co [1998] 1 Q B 448 concerned the sale of influence, or influence divorced from proper services, and did not require the proposed extension of public policy to legitimate commercial intermediaries. The risks of compromised decision-making, lack of transparency and conflicts of interest were relevant considerations, but did not create an automatic prohibition.
7. Final result. There was no bar to enforcement. GIC also accepted that the agreement covered hydrate shipments and required information about shipments of alumina and hydrate.

First-instance decision. No prior appellate decision is stated in the judgment.