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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> PetroSaudi Oil Services (Venezuela) Ltd v Clyde & Co LLP  EWHC 444 (Ch) (26 February 2021)
Cite as:  EWHC 444 (Ch)
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY, TRUSTS AND PROBATE LIST (Ch D)
Fetter Lane, London, EC4A 1NL
B e f o r e :
| PetroSaudi Oil Services (Venezuela) Limited
- and -
Clyde & Co LLP
Charles Dougherty QC and Luka Krsljanin (instructed by Clyde & Co LLP) for the Defendant
Hearing date: 5 February 2021
Written submissions: 16 and 22 February 2021
Crown Copyright ©
Covid-19 protocol: This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to Bailii. The date and time for hand-down is deemed to be 2.00pm on 26 February 2021.
Mr Justice Miles :
"[1.3] Clyde will hold and administer any escrow monies in the escrow account in accordance with this Order.
[5.11] Prior to giving any instructions to the bank for the transfer of any part of the balance of the escrow account, Clyde shall be entitled to be satisfied in connection with all applicable laws and regulations, including those relating to anti-money laundering, and require PDVSA and PetroSaudi to produce such documents and information as Clyde may reasonably require for such purpose or to satisfy the bank of the same.
[6.1] Clyde's duties are administrative only and limited to instructing the bank to hold and deal with the escrow monies in accordance with the orders of this tribunal.
[6.2] Clyde shall not, to the fullest extent permissible by law, be liable to PDVSA or PetroSaudi or any other person for any loss, damage or liability arising out of the operation of the escrow account, except to the extent that such loss, damage or liability is caused by the fraud or wilful misconduct of Clyde.
[6.3] Each of PDVSA and PetroSaudi waives all rights it may have or acquire against Clyde arising out of or in connection with any of the arrangements referred to in or contemplated by this Order and shall jointly and severally indemnify Clyde on demand and hold it harmless against any and all claims, proceedings, costs (including legal costs), losses, damages and liabilities which Clyde may suffer or incur, or which may be brought against it, arising out of or in connection with any of the arrangements referred to in or contemplated by this Order, save and except only for any direct costs incurred by PDVSA or PetroSaudi as a direct result of the fraud or wilful misconduct of Clyde. For the avoidance of doubt, this indemnity applies to claims, proceedings, cost (including legal costs), losses, damages and liabilities already actually or potentially incurred at the date of this Order. Clyde's right to indemnity also includes, without limitation, a right to withhold payment of escrow monies due to PDVSA, PetroSaudi or any other person, so as to ensure the retention of funds sufficient to satisfy any potential claims under the indemnity, and a right to pay to itself out of the escrow monies the amount of crystallised claims under the indemnity.
[6.11] If Clyde is uncertain as to any of its duties, obligations or rights, it may procure legal advice from lawyers of its own choice with regard to such matters and / or seek directions from the tribunal. Clyde will have no liability for, and shall be indemnified and held harmless by PDVSA and PetroSaudi jointly and severally in respect of, (i) the cost to Clyde of procuring such legal advice or directions and (ii) any act or omission by Clyde made in accordance with such legal advice or directions.
[6.12] Clyde shall not be required to take any action if it determines, in its sole discretion, that such action would or might:
(a) be contrary to the terms of this Order or any applicable law or regulation in any jurisdiction; or
(b) render Clyde liable to any other person.
However, should Clyde refuse to take action, it must inform the parties and the tribunal of its decision and the reasons for that decision. In such a case, either PDVSA or PetroSaudi will be free to request that a new escrow agent be appointed by the tribunal."
"By its Final Award and consequential Order the Tribunal instructed Clyde to transfer the balance currently remaining on the escrow account to POS. After delivering its Final Award and making that order giving effect to it the tribunal is (it is common ground) functus officio. There will be no further orders of the tribunal. […] The credit balance on the escrow account must be dealt with in accordance with that final order of the tribunal (as the parties have agreed it shall be) and the escrow account dependent upon a contingency has ceased to exist. The credit balance is confirmed as belonging to POS."
"In my judgment there is no argument with any real prospect of success that under PO62 and the Tripartite Agreement the escrow account survived the Final Award and can be dealt with otherwise than in accordance with the orders of the tribunal."
The US forfeiture proceedings and their legal status under English law
Evidence of US law and the risk of prosecution or claims
i) The in rem jurisdiction is the court's power to adjudicate rights over property.
ii) The court's in rem jurisdiction depends on the arrest of the property.
iii) Service of process is the mechanism by which the court acquires jurisdiction over the res.
iv) Under Rule G of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions, "[i]f executing a warrant on property outside the United States is required, the warrant may be transmitted to an appropriate authority for serving process where the property is located." In the present case the Warrant was served on Clyde by the NCA as the appropriate authority.
v) The subject matter jurisdiction of US federal courts over civil forfeiture proceedings is provided by 28 USC § 1355. This includes at § 1355(b) that federal district courts may adjudicate forfeiture claims over property located in foreign countries. An action may be brought in any district in which any of the acts or omissions giving rise to the forfeiture occurred.
vi) It follows that control of the funds, whether or actual constructive, is not necessary to a US Court's in rem jurisdiction. Mr Rivkin had suggested in his first report that this was a jurisdictional requirement. He relied on the decision of the Supreme Court case in Republic Nat'l Bank of Miami v United States, 506 US 80, 84 (1992). However that case was commenced in 1988, four years before Congress amended 28 USC § 1355 to provide for in rem jurisdiction based on acts or omissions occurring in the district, regardless of the location of the res.
vii) The constitutional limitations that attend the exercise of in personam or personal jurisdiction over individuals or other legal persons (such as minimum contacts with the jurisdiction) are therefore inapplicable (see the recent Ninth Circuit decision in United States v Obaid, 971 F.3d 1095 (2020)).
"Whoever, knowing that property is subject to the in rem jurisdiction of a United States court for purposes of civil forfeiture under Federal law, knowingly and without authority from that court, … disposes of, transfers, or otherwise takes any action, or knowingly attempts to … dispose of, transfer, or otherwise take any action, for the purpose of impairing or defeating the court's continuing in rem jurisdiction over the property, shall be fined under this title or imprisoned for not more than 5 years, or both."
The financial position of POS
The powers of the English Court: general considerations
The escrow agreement
The Court's powers to remove Clyde and order payment into Court