Background
Mohamed Abdel Moshen Al-Kharafi et fils obtained a March 22, 2013 arbitral award requiring Libya to pay it money. After the award was declared enforceable in France and the enforcement order was served on Libya, Al-Kharafi attached funds held at Société Générale in the name of the Libyan Investment Authority (LIA), a separate Libyan legal entity, on August 13, 2013. The attachment was notified to Libya, but not personally to the LIA.
In September 2021, the LIA challenged the attachment and sought its release. The Paris enforcement judge initially held that challenge inadmissible, but the Paris Court of Appeal reversed, found the challenge timely, and ordered the attachment released. Al-Kharafi appealed to the Court of Cassation, arguing principally that notice to Libya also bound the LIA as an emanation of the state and that EU Regulation No. 2016/44 did not require prior authorization merely to validate an attachment of frozen assets.
The Court’s Holding
The Court of Cassation dismissed the appeal. It held that although an attachment directed against a foreign state and reaching property held by an alleged state emanation must be notified to the state debtor, such notice does not start the LIA’s one-month period for challenging the attachment. Because the LIA is a legally distinct entity, preservation of its right to judicial recourse required that it itself learn of the attachment so that it could dispute matters including its characterization as a state emanation and the attachability of its frozen funds. As the attachment had not been notified to the LIA, its challenge remained admissible.
The Court also held that EU Regulation No. 2016/44 barred the attachment without prior authorization from France’s competent authority, the Directorate-General of the Treasury. An enforcement measure affecting frozen funds cannot proceed without that authorization if it would either remove assets from the debtor’s estate or merely give the pursuing creditor priority over them. Because an attachment of receivables immediately assigns the attached claim to the creditor up to the amount seized, an enforcement judge cannot authorize or validate such an attachment against frozen assets without prior Treasury approval. Al-Kharafi had obtained no approval, so the Court of Appeal correctly declared the attachment void and ordered its release.
Key Takeaways
- Notice of an attachment to a foreign state does not start the challenge period for a legally distinct entity whose funds were attached; that entity must itself receive notice.
- A purported state emanation may contest both its classification as such and whether its property is immune from or otherwise unavailable for execution.
- Under EU Regulation No. 2016/44, prior authorization from France’s Directorate-General of the Treasury is required before an attachment may be authorized or validated against frozen Libyan assets, even if the measure would only confer priority rather than immediately produce payment.
Why It Matters
The ruling distinguishes between notice sufficient to make enforcement measures opposable to an alleged state emanation and notice sufficient to trigger that entity’s deadline for seeking judicial review. Creditors therefore cannot rely solely on service upon the foreign state to time-bar a challenge by the separate entity whose assets were seized.
It also confirms that EU asset-freezing rules constrain the attachment itself, not merely the later transfer or payment of funds. Creditors seeking to enforce awards against frozen Libyan assets in France must secure Treasury authorization before obtaining or validating a priority interest in those assets.