Compagnie De Bauxite Et D'Alumine De Dian-Dian S.A. v GTLK Europe Designated Activity Company

• Jurisdiction: Ireland
• Judge: Mr. Justice Twomey
• Judgment Date: 15 June 2023
• Neutral Citation: [2023] IEHC 324
• Court: High Court
• Docket Number: Record No. 2022/5277P

Between

Compagnie De Bauxite Et D'Alumine De Dian-Dian S.A.

Plaintiffs

and

GTLK Europe Designated Activity Company

Defendants

[2023] IEHC 324

Record No. 2022/5277P

THE HIGH COURT

COMMERCIAL

JUDGMENT OF Mr. Justice Twomey delivered on the 15 ^th day of June, 2023

INTRODUCTION

1 . This case concerns a dispute with a Russian-State controlled company (“ GTLK”), which is incorporated in Ireland and has had its assets in Ireland frozen on 8 ^th April, 2022 as a result of the sanctions imposed after the invasion of Ukraine pursuant to Council Regulation EU No. 269/2014 of 17 March 2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (“ Council Regulation EU No. 269/2014”).

2 . GTLK is being sued for $20 million by the plaintiff (“ Compagnie”), a company based in Guinea, under the terms of a guarantee dated 18 ^th May, 2021 (“ Guarantee”). The Guarantee relates to the delivery of bauxite from Guinea to an industrial site in Limerick.

3 . Even though under the terms of the Guarantee all disputes between the parties are subject to the ‘ exclusive jurisdiction’ of the English courts, Compagnie has issued proceedings for this payment in the Irish courts.

4 . Compagnie is doing so because it claims that, in light of the sanctions on GTLK, for it to get the $20 million dollars, to which it says it is entitled, it will have to obtain, not just a court order for its payment, but also a mandatory injunction which obliges GTLK to seek a derogation from the Central Bank of Ireland to allow the payment of the $20 million out of GTLK's frozen assets.

5 . On this basis, Compagnie claims that it would amount to a manifest injustice if it were obliged to issue these proceedings in the English courts. This is because it would be seeking in the English courts a mandatory injunction against an Irish company obliging it to seek a derogation from an Irish regulatory authority (the Central Bank). Furthermore, it would then have to enforce that English court order in an Irish court. Compagnie argues that this Court should instead bypass these requirements by permitting these proceedings to be taken in the Irish courts, notwithstanding the existence of the terms in the Guarantee that the English courts should have exclusive jurisdiction of disputes between the parties.

6 . This matter has come before this Court because GTLK has brought a motion (pursuant to Order 12, Rule 26 of the Rules of the Superior Courts) to have these proceedings struck out on the grounds that they should have been brought in the English courts.

7 . Prior to Brexit, the treatment of a clause granting exclusive jurisdiction to the English courts would have been determined under Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) (“ Brussels Recast Regulation”). However, the United Kingdom is no longer a member state of the EU and so the Brussels Recast Regulation no longer applies to this case. Instead, the resolution of this issue now falls to be determined by the Hague Convention on Choice of Court Agreements 2005 (“ Hague Convention”).

8 . For the reasons set out below, this Court does not think that it would amount to a ‘ manifest injustice’, as that term is used in the Hague Convention, to oblige Compagnie to honour the terms of its Guarantee with GTLK and have its disputes heard in the English courts.

9 . However, this judgment also considers whether there is a duty on all litigants, whether a Russian State controlled company or an Irish company, to avoid using scarce court resources unnecessarily. In this instance, it means considering whether GTLK, even though it has been ‘ entirely successful’ in the litigation, should be entitled to 100% of its legal costs, where it is arguable the case might have settled if it had taken a more ‘ responsible and efficient approach to litigation’. This is because of the Supreme Court's direction in Permanent TSB & ors v. Skoczylas & ors [2021] IESC 10 at para. 12, that the courts should use the award of costs to ‘ encourage a responsible and efficient approach to litigation’. In particular, consideration is given to whether it would have been more ‘ responsible and efficient’ of GTLK to have given an undertaking which it was not legally obliged to give, but which would not have prejudiced its position, and which might have obviated the need for a court hearing and saved considerable court resources for the benefit of other litigants waiting for their cases to be heard.

BACKGROUND

10 . Compagnie entered into a barging and transhipping agreement dated 15 ^th December, 2017 (the “ BAT Agreement”) with a company based in Cyprus called POLA Logistics Limited (“ POLA”). This provided for the transfer of bauxite by POLA from Guinea onto oceangoing vessels. This bauxite is primarily delivered to Limerick to Aughnish Alumina Limited for the production of alumina.

11 . Under the terms of the BAT Agreement (as varied by a Deed of Variation dated 21 ^st June, 2019), POLA was obliged to procure a guarantee of $20 million as security for its obligations to Compagnie under the BAT Agreement. In discharge of this obligation, POLA procured GTLK to enter the Guarantee in favour of Compagnie.

12 . This Guarantee states, inter alia, that:

“This Guarantee and any contractual obligations arising out of or in connection with it shall be governed and construed in accordance with English law and the courts of England shall have exclusive jurisdiction to settle any dispute arising out of or in connection with this Guarantee or such non-contractual obligations. The Guarantor [GTLK] also undertakes to instruct a process agent in England to accept service of any such process, within a reasonable time following a request to do so.” (Emphasis added)

13 . Compagnie claims that POLA has breached its obligations under the BAT Agreement and, on this basis, Compagnie claims to be entitled to enforce the Guarantee against GTLK. By letter dated 16 ^th June, 2022, Compagnie demanded payment of the full amount of the $20 million guarantee from GTLK.

14 . By letter dated 24 ^th June, 2022, GTLK replied to Compagnie stating it ‘ is not clear to us why [Compagnie] demands payment of the full amount of the Guarantee’. It also stated that:

“[….] please be informed that on 8 April 2022 the European Union amended Annex 1 to Regulation (EU) No 269/2014 (the “EU Regulation”) to include, inter alia, the Guarantor [GTLK] as an entity subject to EU asset freezing provisions implemented pursuant to the EU Regulation. Due to the imposed restrictions the Guarantor [ GTLK] is unable to perform any payments under the Guarantee until such restrictions are lifted.” (Emphasis added)

15 . In these circumstances, and notwithstanding the existence of the exclusive jurisdiction clause, Compagnie issued a Plenary Summons in Ireland on 17 ^th October, 2022, seeking the $20 million and a mandatory injunction compelling GTLK to seek the authorisation of the Central Bank under Council Regulation EU No. 269/2014 for the release of frozen funds in order to pay that sum.

16 . By letter dated 27 ^th October, 2022, POLA wrote to GTLK about the dispute over the Guarantee stating, inter alia, that Compagnie ‘ was not entitled to commence proceedings against you in the Irish courts’. POLA also complained in this letter to GTLK that it failed to seek a derogation from the Central Bank for the payment of sums due under the Guarantee. Insofar as relevant, the letter stated that:

“It is noted that you applied to the Central Bank of Ireland a few weeks ago and were granted nine derogations from EU sanctions in three months to allow you to pay millions of euro in wages, bond repayments, legal fees, rent and IT services. It is not understood why you failed to do so in this matter.” (Emphasis added)

17 . In support of Compagnie's entitlement to issue proceedings in Ireland, despite the exclusive jurisdiction clause, Mr. Hugh Kennedy, solicitor for Compagnie, has sworn an affidavit dated 24 ^th April, 2023, in which he refers to this letter and he avers that:

“However, it also appears from that [letter of 27 ^th October, 2022] that [GTLK] had not sought a derogation from the Central Bank of Ireland in order to be in a position to deal with the within proceedings.” (Emphasis added)

18 . After the proceedings were issued by Compagnie against GTLK on 17 ^th October, 2022, no appearance was initially entered by GTLK within seven days of it being served with the Plenary Summons.

19 . By letter dated 27 ^th October, 2022 to GTLK, solicitors for Compagnie requested the filing of an appearance within 28 days of that letter, failing which it stated it would seek judgment in default of appearance.

20 . By letter dated 4 ^th November, 2022 to Compagnie, GTLK replied by stating, inter alia, that:

“Please be advised that to date we have been unable to obtain legal representation to adequately defend the within proceedings despite continued efforts to do so.

We hope to be in a position to enter an Appearance in advance of the expiry of 28 days from the date of your letter of the 27 October 2022.” (Emphasis added)

21 . On the 29 ^th November, 2022 POLA issued a Notice of Motion seeking to be joined as a defendant to the proceedings. (This application was subsequently denied by Quinn J. on 21 ^st December, 2022.)

22 . After the expiry of the 28 days without any appearance on the part of GTLK, Compagnie issued a motion on 5 ^th December, 2022 seeking judgment in default of appearance against GTLK.

23 . On the 9 ^th December, 2022, GTLK entered a conditional appearance (i.e. solely to contest the jurisdiction of the Irish courts to deal with the proceedings). However, this appearance...