High Court rules on limits of confidentiality clubs in context of fraud claims

05/03/15

On 26 February 2015 Mr Justice Hamblen ruled on the extent to which the identity of certain individuals alleged to have received the proceeds of misappropriated Libyan state funds ought to remain protected by a confidentiality club, and as to whether the claimant Libyan Investment Authority ought to have a client representative admitted to the club.

The issue arose in the context of a claim by the LIA to set aside 5 derivative transactions worth around US$2bn, which it entered into with Societe Generale between 2007 and 2009, on the basis that they had been procured by bribery and corruption.  The term sheets to the trades revealed that substantial payments (worth US$58 million) were made to an offshore Panamanian company, Leinada Inc, which it now transpires was owned and controlled by a Libyan national, Mr Giahmi.  Mr Giahmi is alleged by the LIA to have had connections both to the Gaddafi regime and employees within the LIA, at the time when the disputed transactions were entered into; and it is further alleged that the Leinada payments were part and parcel of a fraudulent and corrupt scheme, which were used unlawfully to influence the LIA’s decision to enter into the disputed trades.

Mr Giahmi alleged in his defence that all the Leinada payments had been transferred over to him, and had then been used by him for his own legitimate purposes. On an earlier application by the LIA, Mr Justice Eder had ruled that Mr Giahmi must provide advance disclosure of his books and records relating to the Leinada payments.  Mr Giahmi purported to have done so, but contended that a confidentiality club had to be put in place in order to protect the identity of various recipients of the Leinada payments from the risk of reprisals in Libya (on the basis that they were the unlawful recipients of Libyan state funds, and/or affiliated with the former Gaddafi regime). 

Following a thorough review of the case law both in relation to confidentiality clubs and Article 2 right to life, including the application of the test laid down by the Supreme Court in Re Officer L, the Judge found that there was insufficient evidence to justify the continued protection of the identity of ‘Person D’ and ‘Person R’. He considered however that there was a real and immediate risk to the life and limb of ‘Person L’ and ‘Person N’ that justified their continued protection.The Judge also held that the LIA was entitled to have a client representative admitted to the confidentiality club. That representative’s inclusion had been fiercely opposed including on the grounds that he had previously acted as a whistle-blower and leaked the existence of the Leinada payments to investigative journalists, and that he might also be subject to pressure from the Islamist Dawn Militia whose reach was said to extend to England. The Judge however held that there was no basis to suspect that the LIA’s representative might breach the Court’s order and that the previous leaking of confidential information was not at all comparable. Weight was placed on the fact that he was subject to the Court’s jurisdiction, had stated that he would comply with the Order and was aware of the personal consequences for him if he did not.

The judgment is here.