Commercial Court declines to take step to bring to end Libyan Investment Authority receivership

07/11/16

The Libyan Investment Authority (“the LIA”) is the sovereign wealth fund of the Libyan state. It brought two major actions, one against Goldman Sachs, and one against Societe Generale (“SocGen”) claiming, in each case, over $1bn in damages arising from the LIA’s dealings with these banks. The Goldman Sachs action has now concluded and permission to appeal is now being sought from the judgment of Rose J [2016] EWHC 2530 (Ch). The SocGen action is due for trial in the Commercial Court in April 2017.

In April 2015, solicitors for the LIA came off the record because, in consequence of political problems in Libya, they could not be satisfied as to who had authority to give them instructions. In July 2015, Flaux J appointed a receiver and manager (“the R&M”), at the behest of the two persons who were (at that stage) claiming to be entitled to act for the LIA, to conduct the two actions pending determination of the issue as to who had authority to act for the LIA (“the Authority Dispute”) and ordered a trial of the Authority Dispute.

In December 2015, a political settlement was brokered in Libya under a Libyan Political Agreement (“the LPA”) and a new Government of National Accord (“GNA”) was established. In March 2016, the trial of the Authority Dispute came before Blair J, who adjourned it and ordered a stay, holding that, in the light of a letter to the Court from the Foreign and Commonwealth Office, and the changed political situation in Libya after the LPA, it was premature and inappropriate to make a ruling.

SocGen now applied to the Commercial Court for an order that the Authority Dispute be determined, contending that they were prejudiced by the continuation of the receivership order, and sought a direction that the Authority Dispute be determined before the SocGen trial takes place.

Flaux J dismissed the application. It would be inappropriate for the Court to interfere by determining the Authority Dispute in circumstances where this was likely to cut-across government policy. The prospect of a further candidate for the chairmanship of the LIA emerging in the near future was “remote and speculative in the extreme”.  The SocGen defendants said that they were prejudiced by the receivership order, but in fact it appeared to be to their benefit. In particular, the receivership order bound the LIA irrespective of who was the chairman and even if none of them was. The SocGen defendants argued that the receivership order deprived them of a potential breach of warranty of authority claim, but considering the ingredients of that cause of action such a claim would be hopeless: P&P Property Ltd v Owen White and Catlin LLP [2016] EWHC 2279 (Ch) considered. Any attempt to determine the Authority Dispute before the SocGen trial would be likely to lead to an adjournment of the trial. The receivership order would in all probability need to remain in place in any event pending any appeals from the determination of the Authority Dispute. In those circumstances, it was difficult to see what would be gained by making the order sought by SocGen.