Supreme Court rules on third party debt and receivership orders (Taurus Petroleum Ltd v State Oil Marketing Company)

Supreme Court rules on third party debt and receivership orders (Taurus Petroleum Ltd v State Oil Marketing Company)

Guy Blackwood QC, of Quadrant Chambers, examines the Supreme Court’s judgment in Taurus Petroleum Ltd v State Oil Marketing Company (SOMO) and what the principles are for enforcing international arbitral awards by intercepting funds payable under letters of credit.

Original news

Taurus Petroleum Ltd v State Oil Marketing Company of the Ministry of Oil, Republic of Iraq [2017] UKSC 64, [2017] All ER (D) 132 (Oct)

The Supreme Court has allowed an appeal by petroleum company Taurus Petroleum Ltd against SOMO. The appellant had attempted to enforce an arbitration award against SOMO by means of a combination of third party debt and receivership orders. SOMO contended that the debts created by letters of credit were situated in New York and the High Court therefore had no jurisdiction to make third party debt orders (TPDOs) in respect of them, and that the debts were immune from execution as they were the property of the Republic of Iraq.

Enforcing an arbitral award—Supreme Court rules on third party debt and receivership orders, LNB News 25/10/2017 78

What was the background to the case?

The appellant had entered contracts with the respondent for the sale of crude oil and liquid petroleum gas. After disputes arose, the appellant obtained an international arbitration award against the respondent.

The respondent failed to honour the award, and so the appellant applied without notice to the High Court for leave to enforce the award as a judgment of the court and for interim third-party debt orders and the appointment of a receiver by way of equitable execution to bring in funds receivable under the unconfirmed letters of credit issued by the London branch of Crédit Agricole at the request of a customer which had bought crude oil from the respondent.

Although the letters of credit named the respondent as beneficiary, they also contained an obligation owed to both the respondent and to the Central Bank of Iraq to make payment into

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About the author:
Eleanor Stephens
Eleanor qualified in 1998 into the insolvency team at ASB law. She became a partner in 2005, and went on to head up the Recovery & Insolvency team. Whilst traditionally specialising mainly in contentious corporate insolvency matters, in recent years she has moved into the non contentious arena, in particular specialising in company administrations.