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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Wilhelm Finance Inc v Ente Administrador Del Astillero Rio Santiago [2009] EWHC 1074 (Comm) (19 May 2009) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2009/1074.html Cite as: [2009] EWHC 1074 (Comm), [2009] 1 CLC 867 |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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WILHELM FINANCE INC |
Claimant |
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- and - |
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ENTE ADMINISTRADOR DEL ASTILLERO RIO SANTIAGO |
Defendant |
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Stewart Shackleton (solicitor advocate) of Eversheds LLP) for the Defendant
Hearing dates: 30 April 2009
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Crown Copyright ©
Mr. Justice Teare:
"include references to
a) the sovereign or other head of that State in his public capacity;
b) the government of that State;
c) any department of that government,
but not to any entity (hereinafter referred to as a separate entity) which is distinct from the executive organs of the government of the State and capable of suing and being sued."
a) The characterisation of a party to proceedings as a department of the government of a foreign sovereign State depends not on any single factor, but on a consideration of all relevant circumstances.
b) The status of the party under the law of its home state is one relevant factor but is not decisive. Nor is the presence of separate legal personality itself decisive against characterising a party as a department of government.
c) A detailed analysis of the constitution, function, powers and activities of the party and of its relationship with the state is likely to be essential. The existence of State control is not, however, a sufficient criterion.
d) The courts are likely to exercise caution before treating a party having separate legal personality as a department of government…".
"The authors go on to say that there should not be a 'judicial no-man's land'; the principles to be applied in determining whether an entity is a 'department of government' should mirror those for determining whether the entity is a 'separate entity'."
The evidence
"Article 1: The creation of Ente Administrador del Astillero Rio Santiago in the jurisdiction of the Province of Buenos Aires as a State-Owned Economically Independent Entity.
Article 2: The Entity created shall have sufficient power to act either in public or private areas, within the areas of competence defined by this Decree. The Entity shall be domiciled in the city of Ensenada and shall be responsible to the Executive Power through the Ministry of Production.
Article 3: The objects of the Entity will be: (a) the faithful observance of the National Agreement signed on 26 August 1993, by which the Government transferred to the Province of Buenos Aires the personnel and assets of ASTILLEROS Y FABRICAS NAVALES DEL ESTADO SA (AFNE SA); and (b) the development, exploitation and marketing of its activities and those connected with the shipping industry, as well as performing any other activity within the basic-metal industries and in general; machinery and equipments, and the respective complements related to the categories indicated above.
Article 4: The Administration of the Economically Independent Entity will be exercised by a Board of Directors which – as proposed by the Ministry of Production – will be nominated by the Executive Power, and will be made up as follows:
(a) A President whose remuneration will be equivalent to the pay of the Under-Secretary.
(b) Four (4) Directors whose remuneration will be equivalent to the pay of the Province Director.
Article 5: The Entity shall administer and exploit the assets transferred by the National State, until the time it is privatised.
For the fulfilment of its objectives, the Entity will have the following attributions:-
(a) To determine and carry out the commercial policy of the transferred Shipyard.
(b) To sign agreements with local, provincial, national, international companies, persons or public or private entities for the compliance of the objectives indicated in this decree, notwithstanding the observance of the measures required by the legislation in force in this respect.
(c) To contract the purchase of assets, construction of works or services, with adjustment to the provincial laws applicable in this subject.
(d) To practice and perform the General Inventory of each of the assets transferred by the National State, with adjustment of the general provisions in this subject.
(e) To administer the resources resulting from its activity, and apply them to the exploitation following the norms and subject to the Control Bodies.
(f) To request a complete health examination to the transferred personnel in order to determine the possible labour incapacity of workers.
Article 6: The Shipyard shall submit to the Executive Power a draft copy of the Functional Organisation Chart required for the fulfilment of the entrusted functions.
Article 7: On the basis of strategic and political aspects derived from the Executive Power, the Shipyard shall submit an annual report of management, without prejudice to the audit and management control tasks carried out by the Ministry of Production.
Article 8: Each contract by the Shipyard will be made in accordance with the Accountancy Law and its regulations.
Article 9: Create the PROVINCIAL FUND OF ASTILLERO RIO SANTIAGO to be administered by the Shipyard and used for the financing of the expenses required for the fulfilment of the basic objectives that this decree imposes upon the Shipyard.
The PROVINCIAL FUND OF ASTILLERO RIO SANTIAGO will be formed from the following resources:
(a) Those arising from the exercise of the attributions granted by this Decree.
(b) Those stated by special legal acts.
(c) Contributions and donations made by the Nation, the Province, municipalities and citizens.
(d) Those arising from the credit use in accordance with the laws applicable to each case.
Article 10: The Executive Power will make all the modifications to the Budget and the budgetary system that are required for the fulfilment of this decree.
………………"
i) Autarchy or economic independence requires three elements to be satisfied: status, patrimony and public purpose.ii) The Defendant lacks status because it "continues to be hierarchically dependant on the Executive Power." That is because its functional organization chart or (pursuant to another translation) memorandum of association had not been approved, the board of directors was nominated or designated by the Executive Power (article 4 of the 1993 Decree) and subsequent decrees (nos. 1045/04 and 1987/04) stated that "matters pertinent to the President would come under the responsibility of the Minister of Government and later of the Chief of the Under-Secretary of Co-Ordination of Public Policy of the Chief of Cabinet of the Province".
iii) The Defendant also lacks patrimony because it lacks assets as indicated by statute 11.837 which required the Executive Power to act as guarantor of the Defendant in connection with bank guarantees issued in connection with the construction of vessels by the Defendant for export.
iv) It follows that the Defendant, although intended by the state to be autarchycal or economically independent, was not so in fact.
v) The Defendant was a decentralised body to which functions had been assigned but which was hierarchically subject to the "central organ".
Capacity to sue and be sued
i) It has been sued in two cases in Argentina in recent years.
ii) It enters into shipbuilding contracts in its own name which suggests that it is capable of being sued and being sued.
iii) The Defendant's constitution, function, powers and activities as revealed by the 1993 decree (but omitting the quality of autarchy or economic independence which it has been held to lack notwithstanding the terms of article 1) make it probable that the Defendant has the capacity to sue and be sued; see paragraph 20 of this judgment.
iv) It is improbable that an entity which, by the 1993 decree which created it, has a domicile (article 2) and is given power to sign agreements (article 5) lacks capacity to sue and be sued.
v) It is improbable that an entity which, in addition to contracting with government bodies such as the Argentine Navy, contracts with foreign shipowners such as the Claimant in this action and Milantic Trans SA does not have a capacity to sue and be sued.
"Distinct from the executive organs of the government"
"It is apparent from Lord Wilberforce's statement of principle that the ultimate test of what constitutes an act jure imperii is whether the act in question is of its own character a governmental act, as opposed to an act which any private citizen can perform. It follows that, in the case of acts done by a separate entity, it is not enough that the entity should have acted on the directions of the state, because such an act need not possess the character of a governmental act."
i) The Defendant was created with the object of managing the shipyard (or more accurately the assets transferred by the national to the provincial state) until the time when the shipyard was privatised.
ii) It determines and carries out the commercial policy of the shipyard (see article 5 of the 1993 decree).
iii) It has power "to act either in the public or private areas" (see article 2 of the 1993 decree) and does so.
iv) The Defendant is, as Professor Citara accepts (see paragraph 57 of his first statement), "an organisation aimed at the production of goods and services".
v) The work the Defendant does is not work of a type associated with the executive organs of government. It is on the contrary work such as a private company might do.
Conclusion as to separate entity
Non-disclosure
Note 1 The transcript of Propend Finance v Sing contains neither page numbers nor paragraph numbers. The passages to which I have referred are in the judgment of Leggatt LJ in the section headed State Immunity. They appear in the authorities bundle D2 between pages 675 and 677. [Back] Note 2 The two decrees were not available at the hearing but partial translations of them were provided after the hearing without objection from the Claimant. [Back] Note 3 After the hearing the Defendant applied to adduce in evidence a letter from Ms. Maduri, the Legal Affairs Manager of the Defendant. In so far as she expresses an opinion I do not consider that it should be admitted in evidence because the Defendant relied upon the expert opinion of Professor Citara. In so far as she gives evidence of fact, that the Defendant’s current accounts are fiscal accounts (which are used for funds belonging to the provincial public treasury) and that the Defendant still lacks a memorandum of association, I admit it. However, it does not seem to me that either matter leads necessarily to the conclusion that the Defendant lacks the capacity to sue or be sued. The lack of a memorandum of association (if it is that which is referred to by the court in Milantic as the functional organisational chart) may assist to show that the Defendant is hierarchically dependent on the state and the use of fiscal accounts may assist to show that the Defendant is owned by and financially dependent on the state but neither is sufficient to show that the Defendant lacks the capacity to sue or be sued. Professor Citara did not place any particular reliance on either the nature of the Defendant’s bank accounts or the lack of a memorandum of association as indicating that the Defendant lacked a capacity to sue or be sued. I therefore do not consider that it is necessary to delay giving judgment in this matter to enable the Claimant to make any further submissions with regard to the two matters of fact mentioned by Ms. Maduri. [Back] Note 4 I was, however, informed at the hearing that a president has now been appointed. [Back]