Jalal Bezee Mejel Al-Gaood & Partner & Anor v Innospec Ltd & Ors, Court of Appeal - Commercial Court, October 08, 2014, [2014] EWHC 3147 (Comm)

Resolution Date:October 08, 2014
Issuing Organization:Commercial Court
Actores:Jalal Bezee Mejel Al-Gaood & Partner & Anor v Innospec Ltd & Ors
 
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Case No: 2012 Folio 1201

Neutral Citation Number: [2014] EWHC 3147 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

The Rolls Building

Fetter Lane

London EC4A 1NL

Date: 8th October 2014

Before:

THE HONOURABLE MR JUSTICE FLAUX

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Between:

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Alan Gourgey QC and Max Mallin (instructed by Teacher Stern LLP) for the Claimants

Jeffery Onions QC and Derek Spitz (instructed by K &L Gates LLP) for the First and Second Defendants

Hearing dates: 14, 15, 19-22 May, 3, 6, 9-12, 16, 25, 26 June and 1 October 2014

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JudgmentThe Honourable Mr Justice Flaux:

Introduction

  1. The first claimant is a Jordanian registered company which traded at all material times as ``NUFT'' and/or ``NASS''. Its primary business was the supply of special chemicals such as lubricant additives and fuel additives to the oil refining industry. These additives were purchased during the period with which this case is concerned (2000 to 2011) from subsidiaries of Ethyl Corporation (now known as Newmarket Corporation) in the United States, including Ethyl Petroleum Additives Inc, now known as Afton Chemicals Corporation. I will refer to those companies compendiously as ``Ethyl''. The second claimant is an Iraqi registered company established for the purpose of carrying on the same business as the first claimant under a 2004 distribution agreement with Ethyl. However the second claimant is dormant and for all practical purposes the business in Iraq was carried on by the first claimant. Mr Jalal Al-Gaood owns 95% of the equity in the first claimant and 100% of the equity in the second claimant and is and was at all material times a director of both. He was clearly the driving force behind these proceedings and was the claimants' principal witness.

  2. The first defendant (formerly known as Associated Octel Corporation Limited) is an English company which manufactured and sold speciality chemicals including a lead based fuel additive called tetraethyl lead (``TEL''). The first defendant is a 100% subsidiary of the second defendant, formerly known as Octel Corporation, incorporated in Delaware but with its headquarters at the first defendant's plant in Ellesmere Port, Cheshire. The third defendant, Dr David Turner (with whom the claimants have settled their dispute) was employed by the first defendant as regional sales manager for TEL for Europe, Asia and Australasia from 1994 to 2006 then as business director of TEL from 2006, reporting directly to Mr Paul Jennings, the chief executive officer. Alcor Chemie Vertriebs GmbH (``Alcor'') is a Swiss company which manufactured and supplied fuel additives. It was acquired by the second defendant in 1999 and thereafter acted as a distributor for the defendants' additives, including TEL. Save where it is necessary to distinguish between these companies, I will refer to them compendiously as ``Innospec''. Innospec's agent for sales of TEL in Iraq was Ousama Naaman acting by his companies Interact and Tawam. The principal individuals who dealt with Mr Naaman were Dr Turner at the first defendant and Mr Norbert Schack at Alcor.

  3. TEL was widely used throughout the world between about 1925 and 1990 for the purpose of increasing the RON (Research Octane Number) of gasoline Although in the United Kingdom the fuel is referred to as petrol, I will refer to it as gasoline throughout the judgment. and increasing its antiknock quality. Its use has been phased out across the world over the last 25 years (other than in Iraq and a very small number of developing countries) following the US Environmental Protection Agency Order 1972 to eradicate leaded fuel, because of the well-known and widely reported detrimental effects of lead on people and the environment. Accordingly, during the period with which this case is concerned, it was what is described as a ``sunset product'' with no future once lead was phased out of gasoline in any given country.

  4. One of the products manufactured by Ethyl was methylcyclopentadienyl manganese tricarbonyl or ``MMT'' developed as a manganese based octane boosting and antiknock additive which was less toxic than TEL. It has been in use worldwide since the 1950s. Ethyl sells two different variants of MMT for use in refineries, HITEC 3000 which contains 24.4% manganese by weight and HITEC 3062, which contains 15.1% manganese by weight. This case is concerned with HITEC 3062, which was the product under consideration in Iraq during the period 2003 to 2010.

  5. It is the claimants' case that, during the period 2003 to 2008, Innospec conspired to injure the claimants by engaging in corrupt practices, in particular the bribery of officials within the Iraqi Ministry of Oil (``the MOO'') with the intention of inducing its refineries to buy TEL rather than MMT manufactured by Ethyl and sold by the claimants. The parties to the conspiracy are said to have been not only the first and second defendants (acting by Dr Turner and Mr Jennings) but Mr Schack of Alcor and Mr Naaman. The claimants claim damages for the losses they allege they have suffered as a consequence of the conspiracy on the basis that, but for the bribery and corruption, the MOO would have started to purchase MMT for its annual additive requirements and phased out TEL use from late 2003/early 2004 onwards. The loss is quantified by the claimants' quantum expert Adrian Howick at US$26,572,603, based on the annual production figures provided by the MOO. Alternative formulations of higher damages claims based upon different production figures produced by various international organisations are no longer pursued, as it is accepted that those alternative production figures are not reliable.

  6. It is a striking feature of the case and one on which the claimants place particular reliance, that the second defendant and Mr Naaman have been variously charged by the United States Department of Justice (``the DOJ'') with and have pleaded guilty to criminal offences (principally under the Foreign Corrupt Practices Act 1977) in relation to bribery and corruption in Iraq and Indonesia. The offences alleged in relation to Iraq were concerned with (i) the payment of after sales service fees (or ASSFs) to the Government of Iraq before the allied invasion in 2003, contrary to the terms of the Oil for Food Programme (``OFFP'') operated by the United Nations at a time when the Saddam Hussein regime was subject to UN sanctions and with (ii) the payment or promise of bribes to officials of the MOO and the Trade Bank of Iraq. Both the second defendant and Mr Naaman admitted the commission of offences and entered into plea agreements with the United States authorities. Civil proceedings were also brought by the Securities and Exchange Commission (``SEC'') against the second defendant, Dr Turner, Mr Jennings and Mr Naaman. Criminal proceedings were also brought in England by the Serious Fraud Office (``SFO'') against the first defendant and against Mr Jennings, Dr Turner and another director Mr Kerrison. The first defendant, Dr Turner and Mr Jennings all pleaded guilty and Mr Kerrison was recently convicted after a jury trial. The criminal proceedings and the admissions made are of importance in the case and I therefore propose to summarise the position in the criminal proceedings early in this judgment.

  7. In addition, Ethyl commenced civil proceedings against Innospec in the District Court of the Eastern District of Virginia (``the Newmarket proceedings'') claiming damages for loss suffered as a consequence of corrupt practices by Innospec in Iraq and Indonesia. The claim was for some U.S. $123 million, of which U.S. $102 million related to Iraq and the balance to Indonesia. The allegations in relation to Iraq were broadly similar to the allegations made by the claimants in the present proceedings. Those proceedings were settled in September 2011 by Innospec agreeing to pay Ethyl U.S. $45 million. The settlement was described by Mr Williams, the current General Counsel of Innospec, who gave evidence, as a ``black box'' settlement, where that sum was not apportioned between the Iraq claims and the Indonesia claims, so that it was impossible to say what proportion of the settlement sum related to Iraq. A large number of the documents disclosed by Ethyl in the Newmarket proceedings have been made available in the present proceedings, but on terms designed to preserve the confidentiality of sensitive commercial and confidential information.

  8. In summary, in the present proceedings the claimants allege that Innospec is liable to them for the tort of unlawful means conspiracy. Although there was originally an issue as to whether any tort was governed by Iraqi or English law, by the time of the trial it was common ground that the question of whether a tort was committed was governed by English law.

  9. The claimants' case is that, by October 2003, a decision had been made by the MOO to switch from TEL to MMT and to place an order for 1,000 metric tons of MMT. Notwithstanding that decision, no order was placed and it was not until late in 2004 that the MOO indicated that it wished to purchase a small quantity of 50 metric tons of MMT for trial purposes. In the event, an order was placed for 120 metric tons in May 2005. In the meantime, during the course of 2004, the MOO negotiated with Innospec for the supply of TEL pursuant to a three year ``take or pay'' agreement and a long term purchase agreement was entered between Alcor and the MOO on 15 October 2004 (``the 2004 LTPA''). It is the claimants' case that the decision to continue using TEL rather than switching to MMT and the entry of the 2004 LTPA were induced by bribes or the promise of bribes to MOO officials in late 2003 and that Innospec is liable in tort for unlawful means conspiracy. The court is invited to infer this...

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