Taurus Petroleum Ltd v State Oil Marketing Company of the Ministry of Oil, Republic of Iraq

A third-party debt order may attach only a debt which is owed solely to the judgment debtor and within that debtor’s free disposition. A contractual obligation under a letter of credit may instead be owed jointly to the named beneficiary and a collecting bank. Property of a state’s central bank remains protected by State Immunity Act 1978, s 14(4), even where the underlying transaction is commercial. A state-owned company formed for commercial purposes is presumed to be a separate juridical entity; state control alone does not displace that presumption. Commercial sales and procurement of letters of credit are acts jure gestionis, not exercises of sovereign authority.

Taurus obtained permission to enforce an UNCITRAL award against SOMO and secured interim third-party debt orders against Crédit Agricole in respect of two letters of credit issued for Iraqi oil sales. A receiver by way of equitable execution was also appointed. SOMO applied to set aside the orders, arguing that the debts were outside the jurisdiction, were not owed to SOMO, were protected by state immunity, and were not within SOMO’s free disposition.

The central issues were whether the credits created enforceable promises to CBI as well as SOMO, where the debts were situated, whether SOMO was separate from Iraq, and whether CBI’s interest attracted statutory immunity.

1. Joint promisee. The letters of credit, construed under English law and the incorporated UCP 600, contained promises to CBI as well as SOMO. The reference to payment into CBI’s account and the express engagement with CBI created enforceable contractual rights for CBI, whether or not it confirmed the credits. A debt owed jointly to SOMO and CBI could not be attached under CPR Part 72, since payment to Taurus would cut out CBI’s interest. Equitable execution was likewise unavailable.
2. Situs. The credits fell within Article 4(2) of the Rome I Regulation. Their characteristic performance was Crédit Agricole’s taking steps in London to make payment through a New York intermediary. The debts were therefore situated in London and governed by English law. The jurisdictional objection based on Société Eram Shipping Co Ltd v HSBC was not determinative against attachment on that footing.
3. True promisee and state entity. The autonomy of letters of credit meant that Iraqi provisions concerning ownership of oil and its proceeds did not alter SOMO’s status as a promisee of Crédit Agricole’s obligation. Applying La Générale Des Carrières et Des Mines Sarl v Hemisphere Associates LLC (Jersey), SOMO was a separate juridical entity formed for commercial purposes. Its separate status was not displaced by ministerial supervision, funding, or control, and it was not acting as Iraq’s agent.
4. CBI immunity. The contractual promise to pay into CBI’s account was property of CBI for the purposes of s 14(4) of the State Immunity Act 1978. The commercial-purpose exception in s 13(4) did not apply to such central-bank property. This independently required the orders to be set aside.
5. Free disposition and sovereign authority. A third-party debt order cannot attach a debt outside the judgment debtor’s free disposition. Under English law, SOMO had no interest in CBI’s account and could never freely deal with the promises to pay into it. The sales and procurement of credits were commercial acts, not acts in the exercise of sovereign authority, so s 14(2) afforded no additional protection.
6. The interim third-party debt orders against Crédit Agricole and the receivership orders made on 11 and 12 March 2013 were discharged.