Background
Soprim Construction SARL (‘Soprim’), a company linked to a former high-ranking Djibouti official, obtained arbitral awards exceeding US$100 million against the Republic of Djibouti (‘the Republic’). The awards stemmed from a campaign of “persecution” by the Republic that destroyed Soprim’s business. The Republic refused to pay. Separately, DP World Djibouti FZCO (‘DPW’) and Doraleh Container Terminal SA (‘DCT’) also held massive unpaid arbitral awards (c.US$650 million) against the Republic after it illegally seized control of the Doraleh Container Terminal, a highly profitable port facility operated by DCT.
The Terminal’s revenues were held in London bank accounts (the ‘SCB Accounts’) in the name of DCT, a joint venture company majority-owned by a Djibouti state entity but under the management control of DPW. After seizing the terminal, the Republic used its courts to appoint an administrator and later a liquidator over DCT, effectively taking control of the company. Soprim sought to enforce its unpaid awards by targeting approximately US$42 million in the SCB Accounts, arguing that the funds, despite being in DCT’s name, were beneficially owned by the Republic.
The Court’s Holding
The High Court denied Soprim’s application to enforce its arbitral awards against the funds held in DCT’s London bank accounts. The central issue was whether the money in the SCB Accounts, legally owned by DCT, could be treated as belonging to the Republic for enforcement purposes. Soprim’s primary case was that an arrangement or understanding existed for DCT to hold the funds on trust for the Republic. This was to be inferred from the Republic’s complete control over DCT following its seizure of the Terminal and its appointment of a hand-picked administrator and liquidator.
Mr Justice Picken rejected this argument. He framed the determinative question as a factual one: had Soprim proven that DCT, through its new state-appointed officers, had entered into an agreement to hold the funds for the Republic’s benefit? The court found that Soprim had not met the evidentiary burden to establish such a trust. Even though the Republic had effectively expropriated control of DCT through a series of hostile and legally dubious actions, this did not automatically transfer the beneficial ownership of DCT’s assets to the Republic. The court upheld the separate legal personality of DCT, finding its assets were not available to satisfy the debts of its ultimate shareholder, the Republic.
Key Takeaways
- A judgment creditor cannot enforce an award against a sovereign state by targeting assets legally owned by a state-affiliated corporate entity without proving the state has a direct beneficial interest in those specific assets.
- A state’s de facto control over a company, even when achieved through expropriation and the appointment of friendly liquidators via its own courts, does not automatically pierce the corporate veil under English law.
- The English courts will rigorously defend the principle of separate corporate personality, creating a high bar for creditors seeking to treat a company’s assets as belonging to its shareholders.
Why It Matters
This judgment reinforces the significant hurdles faced by creditors attempting to enforce judgments and arbitral awards against recalcitrant sovereign states. It demonstrates that states can effectively shield assets from creditors by holding them in separate corporate vehicles, even where the state exercises complete control over that vehicle. The ruling underscores the English courts’ strict adherence to the doctrine of separate corporate personality, refusing to treat a company as the mere “alter ego” of its state shareholder without clear, direct evidence of a trust or similar arrangement. The decision serves as a cautionary tale for those doing business with sovereign states and highlights the profound difficulties of asset recovery in international arbitration.