Ministry of Defence and Support of the Armed Forces for the Islamic Republic of Iran v Faz Aviation Ltd.& Anor [2007] EWHC 1042 (Comm)

[2007] EWHC 1042 (Comm)Case No 2006 FOLIO 731
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 09/05/2007
Before
THE HONOURABLE MR JUSTICE LANGLEY
Between
MINISTRY OF DEFENCE AND SUPPORT OF THE ARMED FORCES FOR THE ISLAMIC REPUBLIC OF IRANClaimant(1) FAZ AVIATION LIMITEDDefendants(2) FOUAD AL-ZAYATDefendant
Mr David Quest and Mr Rajesh Pillai (instructed by Norton Rose) for ClaimantMs Barbara Dohmann QC and Mr Andrew George (instructed by Bingham McCutchen (London) LLP) for First DefendantLord Dan Brennan QC and Ms Samantha Knights (instructed by H 2 O Law LLP) for Second DefendantHearing Hearing dates: 25 and 26 April 2007
Judgment
[1]The defendants (“Faz” and Mr Al-Zayat) challenge the jurisdiction of the English court to try this claim. The claimant (“MODSAF”) seeks worldwide freezing orders against Faz and Mr Al-Zayat. In the event, as I will explain, only the jurisdiction issues were addressed at the hearing and are the subject of this judgment.

MODSAF

[2]MODSAF is part of the government of the Islamic Republic of Iran. It is part of the Iranian military executive and answerable to the Supreme Commander of the Iranian Armed Forces.

Faz

[3]Faz was incorporated in Cyprus in February 2001. Its registered office is and has always been in Nicosia. Its principal business is said to be, or to have been, the brokering of aircraft sale and purchase transactions. Faz is beneficially owned by Mr Al-Zayat. Faz changed its name from FN Aviation Limited in August 2003.

Mr Al-Zayat

[4]It is common ground that Mr Al-Zayat is domiciled in Cyprus and not in England. He is the managing director of Faz and, to quote the claim, “exercised effective control over it”.

Jurisdiction

[5]MODSAF submits that this court has jurisdiction over Faz under Article 2 of EU Regulation No 44/2001 (“the Jurisdiction Regulation”) because Faz is said to be “domiciled” in England. Article 60 of the Jurisdiction Regulation provides that a company is domiciled at the place where it has its “statutory seat” or “central administration” or “principal place of business”. It is not in issue that the “statutory seat” of Faz is in Cyprus but MODSAF submits that the central administration and/or the principal place of business of the company is in England.[6]The date on which domicile must be established is the date on which the proceedings were issued: Canada Trust Co v Stolzenberg (No 2) [2002] 1 AC 1 (decided by reference to the materially identical provisions of the Lugano Convention). That date is 21 July 2006.[7]It is also not in dispute that if the Court has jurisdiction over Faz under Article 2, then it also has jurisdiction over Mr Al-Zayat under Article 6 of the Jurisdiction Regulation. That is because he would then be sued as a co-defendant in the court of domicile of Faz and the claims against them are so closely connected that it is clearly expedient for them to be heard and determined together. For this reason, the submissions on jurisdiction of Faz and Mr Al-Zayat were the same.

The Evidence

[8]There was a vast amount of material before the Court. Faz and Mr Al-Zayat have both given standard disclosure in relation to the jurisdiction issues as ordered by Toulson J on 8 December 2006.[9]MODSAF served a detailed affidavit from General Morteza Zahraei, a qualified Iranian lawyer, and legal adviser to the Deputy Minister of Defence, and a short reply statement. MODSAF also served a statement from Alecos Markides, a distinguished Cypriot lawyer.[10]Mr Al-Zayat has served a statement in response to General Zahraei and a statement from Jason McCue, a partner in his solicitors’ firm. Mr McCue served a further statement relating only to issues arising from sanctions against Iran which, as I shall also explain, were not addressed at this hearing.[11]Faz has served statements from: i) Kyriacos Koushos, a Cyprus lawyer acting for Faz; ii) Georgios Mavros, a Cyprus-based director of Faz; iii) William Davies, an England-based director of Faz; iv) Antonio Vitale, Mr Al-Zayat’s son-in-law and a director of Samata Enterprises Limited “a Cypriot company connected with” Mr Al-Zayat (“Samata Cyprus”); v) Neil Micklethwaite, the partner in Faz’ solicitors with conduct of this matter, whose statement relates to sanctions issues; vi) Andreas Ladas, a Cyprus lawyer, and the nominee shareholder in the parent company of Faz; vii) Sami Zayat, a son of Mr Al-Zayat and a director of Samata Cyprus.

The Claim

[12]The claim arises out of the proposed acquisition by MODSAF of an Airbus A340 aircraft for use as a VIP aircraft by senior members of the Iranian Government. The aircraft was to be acquired by Faz from “HM Sultan’s Flight” (“HMSF”). It was located at Hamburg in Germany where it was to be fitted out. It was then to be delivered to Saffat Aviation Services (“Saffat”) an Iranian airline which would deliver it to MODSAF. “Saffat” was incorporated in Iran but had a subsidiary in Cyprus (“Safat Cyprus”).[13]The need for the involvement of Saffat and Faz as intermediaries, to quote Mr Quest’s skeleton argument on behalf of MODSAF, was “the result of issues raised by the US trade embargo of Iran” albeit it is not suggested that the proposed acquisition was or would have been illegal under any law, including US law. A consequence was that the proposed purchase of the aircraft was in the event the subject of three contracts.[14]On 2 August 2001, Saffat (Iran), represented by a Mr Saied, referred to in correspondence as the Managing Director, and Faz, represented by Mr Davies, met in Iran and signed a Memorandum of Understanding in relation to the (and other) aircraft. On 20 December 2001 HMSF and Faz entered into a contract of sale of the aircraft for a price of US$ 85 million. The agreement was subject to English law and the exclusive jurisdiction of this Court. The address of Faz for “notice and requests” was given as Larnaca in Cyprus where the company had recently leased what seems to have been some small office premises.[15]On 6 May 2002 a contract was entered into between Saffat Iran and Faz, again giving Faz’ Larnaca address. Saffat agreed to purchase the aircraft from Faz for US$ 135 million. Title was to be taken in the name of Safat Cyprus, and the aircraft was to be registered in Cyprus. Payment was to be made by Letter of Credit to a Cypriot bank. This contract was signed by Mr Saied for both Saffat Iran and Safat Cyprus and by Mr Davies for Faz. It was, at the insistence of Saffat, subject to Swiss law and the exclusive jurisdiction of the Swiss courts.[16]There is no need, in view of the restriction of the present hearing to jurisdiction issues, to give a detailed account of the subsequent progress of these contracts. Things did not go smoothly. Between August 2002 and March 2003 Saffat, funded by MODSAF, paid US$ 120 million (the finally agreed price for the aircraft) to Faz. But neither Saffat nor MODSAF ever got the aircraft; nor have they got their money back; nor did Faz ever acquire the aircraft. It is MODSAF’s case, and a case which is supported by written and witness testimony, that Mr Saied and a General Argani (who had control of the project for MODSAF) had been paid substantial bribes by Faz to secure the release of the purchase monies. The present claim is brought against Faz and Mr Al-Zayat in fraud, conspiracy and dishonest assistance. Mr Al-Zayat denies the allegations.

Criminal Investigation in Iran

[17]A criminal investigation was begun in Iran in 2003 and is proceeding under the control of Judge Dalili Didar. In 2006, Judge Dalili obtained the assistance of the SFO to execute a search warrant at office premises at 4 Stanhope Gate and 1 Duchess Street in London. The premises were used by various companies connected to Mr Al-Zayat. 4 Stanhope Gate was (until it was sold) owned by Coeurhope Property Investment Company Ltd, a company in which Mr Al-Zayat’s daughter was the nominal shareholder.[18]On 22 June 2006, Judge Dalili, also with the assistance of the SFO, obtained on a without notice application to HHJ Elwen at Southwark Crown Court, a Restraint Order against (amongst others) Faz and Mr Al-Zayat. The effect of the Order may for present purposes be said to be the same as a civil worldwide Freezing Order. However, on 7 December 2006, HHJ Elwen discharged the Restraint Order on the basis that Judge Dalili had failed to disclose that the criminal investigation and proceedings in Iran against Mr Al-Zayat had been allocated to the Military Branch of the Judicial Organisation in Iran.[19]The SFO has, however, been granted permission by the Court of Appeal to appeal the discharge of the Order and the Order remains in force until the appeal has been finally determined. I was told the appeal is to be heard on 15 May.[20]On 8 December 2006 MODSAF’s application for a Freezing Order and the jurisdiction applications of Faz and Mr Al-Zayat came before Toulson J. Toulson J ordered that the applications should be heard together. He did so because, as he put it:
“I have not received any hint from the defendants that if they fail on their jurisdiction application they are likely to concede the application for continuation of the freezing injunction. On the contrary, the indications are that the freezing order application will be resisted come what may.”
[21]On 8 December, both FAZ and Mr Al-Zayat gave undertakings (in an amount of US$ 140 million) to the same effect as would have been required had a freezing order been made against them (save for the omission of any disclosure obligations). The undertakings were to be effective from such date as the Restraint Order granted by HHJ Elwen was discharged or varied and until MODSAF’s application for a freezing order was finally disposed of or security was provided or 14 days notice given to terminate the undertakings. MODSAF gave a cross-undertaking to compensate FAZ and Mr Al-Zayat in the usual terms.[22]The present hearing commenced with Ms Dohmann QC’s submissions on jurisdiction, followed by Lord Brennan QC. Mr Quest made his submissions and leading counsel for Mr Al-Zayat and Faz replied. The question then arose whether or not it was appropriate to follow the course ordered by Toulson J. Ms Dohmann and Lord Brennan said “No”; Mr Quest said “Yes”.[23]There is, to my mind, a significant change of circumstances. Neither Faz nor Mr Al-Zayat were, the court was told, now opposing the making or continuation of a Freezing Order on what may loosely be called the merits. That is not, of course, to say that it is conceded that there is a cause of action nor that there are good grounds for it, but it is accepted that MODSAF has made out a good arguable case in support of its claim and the required risk of dissipation. Further, should there be jurisdiction, the making of a Freezing Order is now opposed on a different ground which was not before Toulson J. Put shortly there is now in force both a European Regulation and a UK Order providing for sanctions against Iran, or, to be more accurate, certain designated persons and entities said to be associated with Iran’s nuclear and ballistic missile programmes. It is the case of Faz and Mr Al-Zayat that those provisions are such that the, or any, cross-undertaking given by MODSAF would be unenforceable and that the court could not make or enforce in favour of MODSAF any pecuniary order it might otherwise have made against Faz or Mr. Al-Zayat following a trial of this claim. MODSAF disputes that it is a designated person or entity to which the sanction Regulation and Order apply.[24]In these circumstances, and because if it is decided that this Court does not have jurisdiction the issues relating to sanctions will not arise, and MODSAF has the protection of the undertakings referred to in paragraph 21, I decided that the present hearing, and so this judgment, should be limited to jurisdiction issues.

Jurisdiction: Burden of Proof

[25]MODSAF must establish a good arguable case that Faz was domiciled in the United Kingdom either as the place of central administration or the principal place of business of the company. But, because a decision to take jurisdiction is final, that requires MODSAF to have “a much better argument on the material available” as the court must be “satisfied, or as satisfied as it can be having regard to the limitations which an interlocutory process imposes that factors exist which allow the court to take jurisdiction”: Canada Trust Co. v Stolzenberg (No 2) [1998] 1 WLR 547 at 555G, CA per Waller LJ affirmed [2002] 1 AC 13 HL; Bols Distilleries BV v Superior Yacht Services Ltd [2007] 1 WLR 12 at 22, PC; Benatti v WPP Holdings Italy SRL & Others [2007] EWCA Civ 263 at paras 37-44.

Central Administration/Principal Place of Business

[26]In The Rewia [1991] 2 Lloyd’s Rep 325, a one-ship company (also called Rewia) was incorporated in Liberia. The operation and management of the ship was delegated entirely to a Hong Kong company. The shareholders and officers of the company were German. A cargo claim was brought against Rewia in this country. The company was the third defendant. The jurisdiction clause of the relevant bills of lading provided that any dispute should be decided “in the country where the carrier has its principal place of business”. Rewia contended that the jurisdiction clause made the proceedings inappropriate for service out of this jurisdiction and that it was domiciled in Germany for the purposes of the Brussels Convention and so had to be sued there.[27]Sheen J held that the central management and control of Rewia was exercised in Germany but the principal place of business was Hong Kong because the ship was managed there. The Court of Appeal held that the principal place of business was also in Germany and not in Hong Kong. At page 334 Leggatt LJ addressed the plaintiff’s submissions in support of the Judge’s conclusion:
“In support of this conclusion the plaintiffs argue that “principal” means “main”
. I disagree: in my view it means, in this context as well as generally, “chief” or “most important”. The principal place of business is not necessarily the place where most of the business is carried out….The plaintiffs maintain that the third defendants’ business was really carried out in Hong Kong, and that the Judge was therefore right to conclude that that was where their principal place of business was. Rightly, in my judgment, the third defendants underscore the fact that the shareholders, directors and mortgagee banks were German; that the meetings of directors took place in Hamburg; that charters, including the relevant time charter of Jan. 8, 1988, had to be authorised specifically from Germany; that everything about the relevant charter was German except the fact that it was into the Hong Kong branch of a German bank that hire was to be paid; that by German law profits had to be repatriated to Germany; and that, as appears from the entries in the Lloyd’s registers, the third defendants’ brokers, C. F. Ahrenkiel of Hamburg, played an important role in their affairs. True it is that the day-to-day management of the vessel was conducted by Turbata under the management agreement, but the third defendant points out that the managers were always answerable, and subject to the control and direction of the German officers of the company. In Palmer v Caledonian Railway Co., [1892] 1 QB 823 Lord Esher said: I should have thought without any authority that the principal office of the company must be the place at which the business of the company is controlled and managed … in the sense that it is independently controlled or managed… …. So also in Daimler Co v Continental Tyre and Rubber Co. (Great Britain) 1 AC 307 Lord Atkinson at p. 319 indicated that a test of residence was the- … place where the real business centre from which the governing and directing minds of the company operated, regulating and controlling its important affairs. In The Polzeath this Court had to determine whether in wartime a ship owned by a British company, but in some respects directed from Germany, was forfeit to the Crown. Under s.1 of the Merchant Shipping Act, 1894 the question whether she was a British ship depended on whether the company had its “principal place of business” in this country. In the leading judgment Lord Justice Swinfen Eady considered the shareholding and directors of the company, the company’s financial control and banking, and the chartering and insurance of the vessel, as well as the day-to-day management which obviously had to be conducted in England. Lord Justice Swinfen Eady concluded, and the other Lords Justices agreed with him- …that both before and after the war, and at all material dates, the control and management of this company were in Hamburg. The test which he applied appears at p.245 when he said: … in considering what is the principal place of business of the company, one has to consider the centre from which instructions are given, and from which control is exercised on behalf of the company over the employees of and the business of the company, and the centre from which the company is managed without any further control except such control as every company or the directors of the company are liable to by the larger body which they represent, the shareholders of the company in general meeting [emphasis added]. The Court held that although the manager at King’s Lynn had always – … practically had a free hand as to chartering steamers, surveys, repairs, freights, arranging officers and crew, etc.… he had acted under the direction of the chairman at Hamburg, and that under those circumstances it was clear that both before and after the outbreak of war the principal place of business of the company had been Hamburg. In my judgment there is nothing uncommercial or inapposite about the conclusion that the principal place of business is in Hamburg of a company registered in Liberia owning a ship, the earnings of which would ultimately be remitted to Germany, and about which most important decisions would be taken in Germany. That is the conclusion to which the reasoning in The Polzeath inexorably leads, and it is applicable here. Although the Judge purported to apply the reasoning in that case, he never asked himself from which city the business of the third defendants was “independently controlled or managed”. Still less did he attempt to identify the centre from which the company was managed “without any further control”. Had he done so, he must have recognised that, although in practice Turbata had a free hand in the day-to-day management of the vessel from Hong Kong, all that they did was subject to the control of the directors in Hamburg. That was the centre from which instructions were given when necessary, and ultimate control exercised. I do not consider that the reference to the “principal place” of the third defendants’ business requires the identification of a particular building. For purposes of cl. 3 of the bills of lading it is sufficient that the principal business of the third defendants should have been conducted from West Germany. Had it been necessary to determine the matter at this stage, I would therefore have held that the third defendants’ principal place of business is in Hamburg where its central management and control is exercised.” I should have thought without any authority that the principal office of the company must be the place at which the business of the company is controlled and managed … in the sense that it is independently controlled or managed… … place where the real business centre from which the governing and directing minds of the company operated, regulating and controlling its important affairs. …that both before and after the war, and at all material dates, the control and management of this company were in Hamburg. … in considering what is the principal place of business of the company, one has to consider the centre from which instructions are given, and from which control is exercised on behalf of the company over the employees of and the business of the company, and the centre from which the company is managed without any further control except such control as every company or the directors of the company are liable to by the larger body which they represent, the shareholders of the company in general meeting [emphasis added]. … practically had a free hand as to chartering steamers, surveys, repairs, freights, arranging officers and crew, etc.…[28]Nicholls LJ agreed with Leggatt and Dillon L.JJ. Dillon LJ agreed with the reasons of Leggatt LJ that the principal place of Rewia’s business was in Germany and not Hong Kong. Hong Kong was the principal place of business of the managing agents.[29]This decision supports a number of perhaps obvious propositions: i) The central administration and principal place of business of a company may be, and I would add, frequently will be, in the same country; ii) The focus, in matters of jurisdiction, is on the country rather than any more particular location; iii) The principal place of business (if there is one) is likely to be the place where the corporate authority is to be found (shareholders and directors), and to be the place from where the company is controlled and managed; iv) The place where the day-to-day activities of the company are carried out may not be the principal place of business if those activities are subject to the control of senior management located elsewhere.[30]In King v Crown Energy Trading and Another [2003] EWHC 163 (Comm), HHJ Chambers QC concluded that the claimant had shown a good arguable case that one of the defendant companies had its central administration and principal place of business within this jurisdiction and so might be sued here in accordance with the Lugano Convention.[31]The decision was based on an application of the judgment of Leggatt LJ in The Rewia. The factual basis for the decision was findings that the company had substantial office premises in London compared to “the rather modest premises it occupied in Zug” and that the officers and employees of the company central to its administration were housed “within the London office when the relevant proceedings were issued”.[32]I would add that anyone brought up on the common law principles of domicile of an individual would immediately recognise that the “domicile” of a company provided for by the Jurisdiction Regulation is a different and autonomous concept. Not only does it offer three alternative “domiciles”, one of which (the statutory seat) is almost always going to exist and be relatively easy to identify, but all three may exist at the same time. I mention this only because it was one of Mr Quest’s submissions that if he could show a case that the central management or principal place of business of Faz had once been in England it could not cease to be so without some manifest abandonment or move to another location. Such concepts of the common law of individual domicile in my judgment have no place in the provisions under consideration. The Jurisdiction Regulation is concerned to provide for jurisdiction in a location with which the potential defendant has a real connection at the relevant time. A company can cease to have any principal place of business or that place could change as the business changes. The questions are simply: was there at 21 July 2006 a principal place of business of Faz or place where the central administration of Faz was to be found and, if so, was that or one of them in England.

The credibility of the defendants’ witnesses

[33]Mr Quest submitted that no reliance should be placed on the evidence of Mr Al-Zayat, at least where there is no truly independent evidence to support it. He said Mr Al-Zayat had been demonstrably untruthful on a number of occasions, for example when faced with claims arising from his vast gambling debts for which he had received some notoriety. In Ritz Hotel Casino Limited v Al-Zayat, [2002] EWHC 888 (Comm), Mr Al-Zayat had said in a witness statement that companies, including Faz, were not owned by him but by others. That was a lie. Andrew Smith J concluded Mr Al-Zayat had been “untruthful both in writing and orally”. The evidence in this case relating to the payments to Faz and to those said to have been bribed remains substantially unexplained or the subject of assertions which, if true, should readily be supportable independently particularly by documents, but none have been produced. I accept Mr Quest’s submission.[34]Mr Quest also sought to extend this submission to Mr Davies. There was little, however, to support that. Whilst I think it right in this case to approach all the evidence with more caution than might usually be appropriate, I see no justification for going further, save in the case of Mr Al-Zayat himself.

The Evidence: Analysis

[35]It is the primary case of the Defendants that since 2004, or at the latest May 2005, Faz has been “dormant” and so has had no business to administer and no place, principal or otherwise, at which to operate. It is also the case of Faz that prior to those dates, insofar as there was a place of central administration it was in Cyprus where (I accept) the company’s registered office, bank, lawyers, accountants, company secretary, shareholders and Mr Al-Zayat and two of the other three directors were resident. It is not, of course, for Faz to establish that case, but for MODSAF to show a good arguable case, in the sense stated (paragraph 25) that Faz had its central administration and/or principal place of business in England at 21 July 2006. MODSAF submits that place was 4 Stanhope Gate in London where there was a floor and a half of office space as well as significant office facilities. The address was the “base” of certain companies incorporated in the United Kingdom owned or controlled by Mr Al-Zayat. There is no doubt that Mr Davies, who was engaged because of his experience in business in Iran, used the facilities at 4 Stanhope Gate to conduct some of the correspondence concerning the Iranian aircraft transaction. But Mr Davies says that he did not do “any work for or with Faz since late 2003” and he left after his “services were no longer required at the end of July 2004”. Although he was copied in on Mr Dunn’s letters (see paragraph 45) there is otherwise nothing to gainsay or cast doubt upon that evidence.[36]The parties addressed the evidence by reference to a number of further factors upon which each relied and I will therefore do the same.

Faz’ Offshore Status

[37]Faz was, when it was incorporated, registered in Cyprus as an “offshore” company. That status gave the company significant tax benefits. It required that no business was carried out in Cyprus but also that the company had a suitable office there. That was reflected in the annual report and accounts for the period ended 31 December 2001 (dated 29 November 2002). These were the only accounts produced for Faz. It was there stated that “the objects of the Company are restricted to business carried on wholly outside Cyprus ….”[38]Mr Quest placed some considerable reliance on the offshore status of Faz. But I think it is of no real significance. The evidence of Mr Ladas (which is compelling) is that the restriction on carrying on business was only a restriction on actual trading within the internal market of Cyprus. It is the offshore sources of income that mattered. Nor does it follow, of course, that the restriction is any indication of another location of the business. The restriction is also, in context, historic. On the accession of Cyprus to the European Union on 1 May 2004 “offshore” status was abolished.

The role of Mr Davies

[39]Mr Davies undoubtedly played a significant role in the aircraft transaction. He signed the Saffat/FAZ contract and amendments to the HMSF/Faz contract. He was resident in and worked out of England. He held a general power of attorney from Faz. He was appointed a director of Faz in January 2002. He is still shown as a director of Faz and the Cyprus Company Register gives his address as 4 Stanhope Gate. HMSF’s solicitors were asked by Mr Davies to correspond with Faz at 4, Stanhope Gate; authorities in the USA were also given 4 Stanhope Gate as the contact address for Faz. There is also compelling evidence that the freehold of 4 Stanhope Gate was acquired in late 2002 using money derived from MODSAF’s payments to Faz. The purchaser was a British Virgin Islands company, Coeurhope: see paragraph 17.[40]Mr Davies said that it had been emphasised to him that, for UK tax reasons, all decisions in relation to the business of Faz must be taken outside the UK. More compelling, I think, is his evidence that at all times he worked under the direct supervision of Mr Al-Zayat “and everything I did was authorised by Mr Al-Zayat expressly from Cyprus”. He was paid from Cyprus. I accept (see paragraph 45) for the purposes of these proceedings that Mr Davies’ role came to an end at the latest in July 2004. That is two years before the relevant date. 4 Stanhope Gate: Other factors[41]When the premises were searched a significant number of “Faz” documents were found at 4 Stanhope Gate, albeit the number was only a small percentage of all the documents found there (and at 1, Duchess Street which was used from an unknown date). That is, of course, hardly surprising in view of the role of Mr Davies. It has not been possible to reconstitute the files found. MODSAF has produced a list containing 147 documents in all said to show correspondence to and meetings in England. But the documents cover a period of nearly 5 years and only 8 of them are dated later than May 2004. Correspondence was also sent to Cyprus. Meetings were held in various countries.

Directors and Managers

[42]Mr Al-Zayat is and was resident in Cyprus. Until after the issue of the Claim Form he gave his address in the Cyprus company register as Grosvenor House Flats, Park Lane in London. That is the address of serviced flats where he stays on his frequent visits to London. Mr Ladas has explained the use of this address or at least why an address in Cyprus could not be used. Formal board meetings did not take place.

Stewart & Stewart

[43]In 2003, Faz retained a Mr Dunn of the Washington DC law firm, Stewart & Stewart, to advise and represent Faz in relation to US regulations regarding exports to Iran. Mr Dunn visited England, Germany and Cyprus in connection with his instructions.[44]On 18 and 19 March 2004, Mr Dunn wrote substantial letters to the US Department of Commerce and Department of the Treasury in (so far as relevant) the same terms. The letters related to the aircraft transaction, sought advisory opinions, and described Faz as “… a UK headquartered corporation, organized under the laws of Cyprus. It is a privately held company that buys, sells, and leases aircraft in commercial markets around the world.”[45]The letters were copied to Mr Davies and stated that Faz had “offices in Cyprus and UK” giving 4 Stanhope Gate as the UK address and Mr Davies at that address as the “contact information” who would be responsible for the “applications”.[46]The Treasury Department replied on 23 July 2004. The reply repeated the reference to Faz being “headquartered in London”. A copy of the reply was sent by Mr Dunn to Mr Al-Zayat on 27 July.[47]There is no satisfactory explanation from Faz of these statements by Mr Dunn. Mr Davies and Mr Vitale have said Mr Dunn was mistaken. There is no evidence from Mr Dunn. Both Mr Davies and Mr Al-Zayat were aware of what had been said and did nothing to correct it. That was so whatever the tax status of Faz. It would indeed be surprising if Mr Al-Zayat had not approved the letters before they were sent.[48]Mr Quest understandably placed considerable reliance on these statements. But, again, they were made two years before the relevant date.

Events after May 2004

[49]Mr Al-Zayat’s evidence is that Faz had “effectively ceased trading” and been dormant since 2004. But negotiations in relation to the aircraft transaction continued until May 2005, including meetings at 4 Stanhope Gate.[50]A former employee of Lufthansa, Juergen Wilken, was engaged as an aviation consultant on a five year contract from 1 August 2003. Mr Wilken was resident in and worked from Germany. Although Mr Wilken’s written contract is drafted as a personal agreement between him and Mr Al-Zayat, it is Mr Koushos’ evidence that he was employed and paid by Faz “in relation to a series of airplane deals” including the Iranian transaction. Mr Sami Zayat says Mr Wilken ceased to be employed by Faz “as of mid-2004” but “continued doing some work as a consultant to my father”. Mr Sami Zayat also says Mr Wilken has not been paid anything by Faz in 2005 or 2006.[51]The documents show at least a sufficiently credible case that the parties apparently continued to make efforts to pursue the aircraft transaction until May 2005 and that Mr Wilken was involved in the exercise. The evidence also credibly suggests that it was the change of Government in Iran in June and probably the intransigence (contrived or not) of Mr Al-Zayat at meetings in May (to which General Zahraei refers in paragraphs 444 to 450 of his Affidavit) which brought all contacts to an abrupt close. Thereafter, the few letters there are from Mr Wilken are, I think, consistent with Mr Sami Zayat’s evidence. They relate largely to other aircraft or what might be described as general information on the industry. Faz is not referred to. The last meeting of Mr Wilken and Mr Al-Zayat in London appears to have been in June 2005. They appear to have met again in Geneva in January 2006 and to have planned meetings in Cyprus and Geneva in June and July but it is not clear whether or not those meetings took place.

CONCLUSION

[52]Had the questions been whether there was a central administration or principal place of business of Faz in 2002-4 and perhaps 2005, and, if so, where were they, I think MODSAF’s case that there were, and that they were in England, would have required a fine balance to be made on the evidence, viewing as I do the evidence of Faz with some scepticism. There is very little evidence that Faz had any other business to administer than the aircraft transaction. 4 Stanhope Gate and Mr Davies were the day-to-day centre for that business. Mr Dunn’s letters speak for themselves. On the other hand, in a real sense, the business was carried on and controlled by Mr Al-Zayat from wherever he was and that was largely in and from Cyprus, although he was also a frequent visitor to England.[53]But I am satisfied that MODSAF has failed to show a good arguable case that Faz had any real business either to administer or to operate after May 2005. Insofar as administration was required, by that time those who were at all active for Faz were substantially to be found in Cyprus: see paragraph 35. Mr Wilken’s connections with England were tenuous. I do not think there was “a principal place of business” anywhere else applying the words of Leggatt LJ in the Rewia which I have quoted in paragraph 27. At all times, of course, Faz (and Mr Al-Zayat) could have been proceeded against in Cyprus. That is still the case.[54]No doubt it was at least partly because of the risk of the court coming to the judgment I have just expressed that Mr Quest sought to engage the analogy, which I have rejected, with the common law of domicile of an individual: see paragraph 32.[55]It follows that this court does not in my judgment have jurisdiction over either defendant in respect of this claim and the defendants are entitled to orders accordingly. I will hear the parties on the terms of the orders to be made and any ancillary matters insofar as they cannot be agreed when this judgment is formally handed down. A draft of the judgment was sent to the parties on 1st May 2007.

Cited in 4 later judgments