Privy Council rejects claim that a State owned corporation is liable for the debts of the State

18/07/12

In its judgment in La Générale des Carrières et des Mines ("Gécamines")  v F.G. Hemisphere Associates LLC [2012] UKPC 27 delivered on 17 July 2012, the Judicial Committee of the Privy Council overruled the Royal Court and the majority of the Court of Appeal of Jersey, and  held that Gécamines, a large State owned mining corporation. was not liable to satisfy an arbitration award that had been obtained against the Democratic Republic of the Congo.   Lord Mance who delivered the Judgment of the Board said that the appeal raised important issues regarding the position of State-owned corporations and the circumstances, if any, in which they and their assets may be equated with the State.  The Board held that where a separate juridical entity is formed by the State for what are, on the face of it, commercial or industrial purposes, with its own management and budget, the strong presumption is that its separate corporate status should be respected, and that it and the State forming it should not have to bear each other's liabilities.  It would take quite extreme circumstances to displace this presumption.  The presumption would be displaced if in fact the entity has, despite its juridical personality, no effective separate existence.  On the facts of the case,  Gécamines was an entity clearly  distinct from the executive organs of the government of the DRC.   Nothing Gécamines did could be sensibly described in nature as involving the exercise of sovereign authority or as acta jure imperii.   There was no justification for deriving from instances where Gécamines' assets were used for the State's benefit a conclusion that the two should for all purposes be assimilated.

The judgment is here.