Four Convicted Cubans Are Defense Witnesses In London Bank Trial; One From Prison. Actual Bribery No Longer Defense Strategy; Allegation Of Bribery Remains. Skeletons Tell All?
/Four Cubans Convicted. One Will Testify From Prison.
Actual Bribery No Longer A Defense Strategy. Allegation Of Bribery, Perhaps.
Letters, Emails, Chasing Emails. A Handbook Takes Center Stage. What Do Titles Really Mean?
Skeletons Tell All?
On Monday, 23 January 2023, at 10:00 am in London, United Kingdom, an estimated eight-day Jurisdiction Trial will commence with pre-reading for two days, 18 January 2023 and 19 January 2023. The trial will be held at the High Court of Justice, City Court House, Rolls Building, 7 Rolls Buildings, Fetter Ln, London EC4A 1NL. Presiding: Mrs. Justice Sara Cockerill.
CRF I Limited (Cayman Islands), V. Banco Nacional de Cuba, The Republic of Cuba. High Court of Justice, Business And Property Courts Of England And Wales, Queen’s Bench Division, Commercial Court [Part 7 Claim- General Commercial Contracts], Royal Courts of Justice. [CL-2020-000092 Filed 18 February 2020; Court Filing Fee £10,000.00 (approximately US$13,000.00].
From Court Filing: “CRF is a company incorporated under the laws of the Cayman Islands. It was established to invest in defaulted Cuban sovereign debt. CRF gradually acquired a portfolio of Cuban sovereign debt which was valued in the total principal sum of EUR189 million by 31 March 2016, and EUR1,200 million by 26 November 2017. The majority of that portfolio, and the part that is relevant to these proceedings, was settled by way of risk participation at ICBC. That is a common arrangement in the sovereign debt market.”
Rosenblatt (plaintiff)
Memery Crystal (plaintiff- firm merged with Rosenblatt)
7 King’s Bench Walk (plaintiff)
Gibson, Dunn & Crutcher UK LLP (previously for plaintiff)
PCB Byrne LLP (defendant)
Essex Court Chambers (defendant)
Uria Menendez (defendant)
New Court Filings Links
4-Page Order (1/16/23)
6-Page Approved Judgement (12/9/22)
NOTE: One Defendant Court Filing Appears To Be Missing From Search Data Base In UK
From The Order: “The parties are permitted to serve skeleton arguments up to 75 pages in length (including any schedules).” Requests were made to legal counsel of Plaintiff and Defendants. The Plaintiff provided its skeleton arguments. The Defendants have not provided their skeleton arguments.
Excerpts From Plaintiff Skeleton
At its very highest level, the present dispute is about whether the Claimant, CRF I Limited (“CRF”), can enforce in its own name two pieces of Cuban sovereign debt dating from the mid-1980s. The First Defendant, Banco Nacional de Cuba (“BNC”), is the debtor. The Second Defendant, the Republic of Cuba (“Cuba”), guarantees one of the pieces of debt and is sued under its guarantee.
By a CPR Part 11 challenge issued on 26 May 2020, the Defendants have disputed the jurisdiction of this Court to try CRF’s claims on the following grounds:
2.1 Jurisdiction: The Defendants say that the Court has no jurisdiction to try the claims because the relevant debt agreements and guarantee were not validly assigned to CRF, such that CRF does not have the benefit of the submission to the jurisdiction of the English courts contained in those agreements.
2.2 Sovereign Immunity: The Defendants say they are immune from the jurisdiction of the Court pursuant to the State Immunity Act 1978 (the “SIA”) because the relevant debt agreements and guarantee were not validly assigned to CRF, such that CRF cannot take the benefit of the waivers of sovereign immunity contained in those agreements.
2.3 Service Out: The Defendants say that the conditions for the service of the Claim Form out of the jurisdiction have not been satisfied because the relevant debt agreements and guarantee were not validly assigned to CRF, such that CRF cannot take the benefit of the contractual service provisions contained in those agreements.
In an attempt to extricate themselves from the consequences of these assignments, the Defendants accused ICBC Standard Bank Plc (“ICBC”), the assignor, and CRF, the assignee, of bribing one of the senior officials at BNC as part of a corrupt scheme to procure (or at least expedite) BNC’s consent to the assignments. In particular, it was said that Mr Raúl Eugenio Olivera Lozano, who was at the time the Director of Operations at BNC (“Mr Lozano”), acted in return for a financial inducement promised by Mr Don Stevenson of ICBC (“Mr Stevenson”) and paid by Mr Jeetkumar Gordhandas, a consultant acting on behalf of CRF (“Mr Gordhandas”).
In a letter from Byrne and Partners LLP dated 23 November 2020 [J/733/1], by which the Defendants declined a fresh (without prejudice) request for their consent to the assignment of the relevant debt agreements and guarantee to CRF (which request had been made by letter dated 18 September 2020 [J/718/1 at 3]), the Defendants suggested that the consent given to the earlier assignments in November 2019 had been “attended by the bribery of” Mr Lozano. The Defendants suggested that: “a. In late October 2019, Jeetkumar Gordhandas, a representative of CRF, had a meeting with Mr Lozano in connection with the assignment. b. At that meeting, Mr Gordhandas gave Mr Lozano a cash sum (in Cuban convertible pesos) and promised to deliver a further, larger sum (in sterling) for his (Mr Lozano’s) help in securing the assignment. c. This was done with the apparent knowledge of Don Stevenson, a representative of ICBC, with whom the essential elements of the scheme had been pre-agreed earlier in 2019. d. Mr Lozano did not disclose these matters to his employer, the BNC, and kept them secret until the present criminal investigation.”
In what some might regard as a transparent attempt to bolster the Defendants’ position in the foregoing regards for the purposes of this very hearing, criminal proceedings were brought against all the senior officials at BNC who happened to be involved with the assignment of the relevant debt agreements and guarantee to CRF, and all were convicted.
7.1 Mr Lozano was convicted of receiving a bribe from Mr Gordhandas in exchange for facilitating the assignment of the relevant debt agreements and guarantee to CRF, and of acts detrimental to the economic activity of Cuba. He was sentenced to 13 years imprisonment and is currently in prison serving out that sentence.4
7.2 Ms Londa Caridad Martí, who was at the time the Head of the Foreign Debt Department at BNC (“Ms Martí”), Ms María Teresa Compte Zubeldia, who was at the time the ‘Secretary’ of BNC (“Ms Zubeldia”), 5 and Mr René Lazo Fernández, who was at the time the President of BNC (“Mr Fernandez”), were each convicted of acts detrimental to the economic activity of Cuba and sentenced to between one year and 5 years imprisonment, all apparently suspended.
On the eve of this trial, the Defendants withdrew all allegations of criminal wrongdoing: see the Re-Amended Defence at [A/5]. It no longer forms any part of the Defendants’ case that Mr Lozano was bribed in exchange for facilitating the assignment of the relevant debt agreements and guarantee to CRF in November 2019. 12. The Defendants’ eleventh-hour abandonment of their bribery allegations is a belated recognition that the extremely serious allegations made against Mr Gordhandas and Mr Stevenson were baseless and should never have been made. To put matters at their lowest, it casts doubt over the treatment and convictions of Mr Lozano, Ms Martí, Ms Zubeldia and Mr Fernandez, 8 and calls into question the reliability of the evidence to be given by Mr Lozano in these proceedings. 13. The sorry tale, however, also highlights the fact that the Defendants have been willing to fabricate pretexts (regardless of consequences) in order to seek to avoid their obligations to CRF, and to seek to persist in them until they have become simply untenable. That is a highly relevant factor when it comes to considering the remaining strands of the Defendants’ case: they should be approached with a healthy degree of caution and scepticism.
The Defendants’ case appears to be that BNC has for many years misinterpreted and significantly overreached its powers by consenting to assignments without reference to the Ministry of Finance and the Council of Ministers. Whilst it is just about possible that all concerned – BNC, the Ministry of Finance and the Council of Ministers – have been labouring under a misapprehension as to what the relevant laws meant or required, it is vanishingly unlikely.
The express terms of the first special provision of DL 172/1999, which provided that, notwithstanding the creation of BCC and its replacing of BNC as the Central Bank of Cuba, BNC continued to register, control, service and deal with the foreign debt which Cuba (as well as BNC) had contracted with foreign creditors prior to 1997.
If BNC and Cuba did not consent to the assignment of the Agreements and the Guarantee for any reason, their consent was unreasonably withheld. 149. Pursuant to clause 17 of the Agreements [H/69/9] [H/70/12], which is quoted in full at paragraph 19 above: “The bank may transfer all or part of its obligations under this letter … to any other person with the prior consent of the Borrower, such consent not to be unreasonably withheld.
BNC and Cuba assert that it was not unreasonable for them to withhold consent in 2019 because CRF was a “vulture fund” which, it is said, “invests in distressed Cuban 131 Bromley Park Gardens Ltd v Moss [1982] 1 W.L.R. 1019 at 1034, per Slade LJ. 132 Pimms Ltd v The Master, Wardens and Commonalty of the Mystery of Tallow Chandlers In the City of London [1964] 2 Q.B. 547 at 564, per Danckwerts LJ. -56- sovereign debt for enforcement purposes”. 133 The assertion that CRF was a “vulture fund” is an entirely false one. The fact that CRF invests in distressed Cuban sovereign debt does not make it such a fund, nor does that fact amount to a reasonable reason for withholding consent. Furthermore, it was never any part of CRF’s investment strategy to invest in the Cuban sovereign debt “for enforcement purposes”, as is explained in full below.
Even if BNC’s employees had believed in 2019 that CRF was a “vulture fund”, a reasonable man would not have reached that conclusion then or at all. 159. As BNC and Cuba say in their skeleton, it is the “hallmark of a responsible creditor” (i.e. one that is the opposite of a “vulture fund”) to negotiate rollovers and restructurings, through the Paris Club or the London Club. But that is precisely what CRF had sought to do over many years, only to be thwarted at every turn by Cuba’s steadfast refusal to engage. 160.
The truth of the matter is that this is not a tale of CRF acting as irresponsible creditor, but of Cuba and BNC acting as a delinquent debtors. They have shown themselves to be unwilling to engage with CRF and the other members of the London Club steering committee, until there was no other option open to them, after these proceedings had been commenced. That engagement, however, has been limited to fighting the claim using every means. Cuba and BNC have ignored an open offer to negotiate a settlement made by letter dated 18 March 2021 [H/586/1], and a standing offer to mediate.
The terms proposed were approximately 25% better on a Net Present Value basis than what Cuba had ultimately agreed with the Paris Club in late 2015.148
171. It was only after this approach was ignored that CRF began to consider litigation; 149 but even then, CRF did not seek to litigate its entire portfolio but only a small fraction of it. That is because it was CRF’s objective to encourage Cuba to the negotiating table and not to enforce. It sent a letter before action inviting Cuba to renegotiate, backed by a threat of litigation. To CRF’s disappointment, Cuba chose litigation. Even then, CRF has made an offer to negotiate [H/586/1] and there is a standing offer in these proceedings to mediate, but none of that has been taken up by Cuba.
172. For the reasons set out above, a reasonable man would not in 2019 (or thereafter) have considered that CRF was a “vulture fund” intent on buying up distressed Cuban debt and enforcing it by litigation. On the contrary, it tried at every turn to negotiate with Cuba and commenced this litigation only as a last resort.
The Defendants’ English lawyers considered themselves unable to plead the allegations as originally set out in Byrne & Partners’ letter refusing consent [J/773/1]. That letter alleged that Mr Stevenson of ICBC was involved in bribing Mr Lozano, but such allegation was not advanced in the Defence. 152 This was no oversight. In response to a Part 18 Request for Further Information, which asked “do the Defendants allege that Mr Don Stevenson was involved in the alleged bribery and corruption”, the response given was that [A/4/1]: “The Defendants do not, in their pleaded case, allege that Mr Don Stevenson was involved in bribery and corruption. The Defendants reserve their right to amend their pleaded case following disclosure and/or witness evidence.”
Accordingly, even if BNC and Cuba did not in fact consent to the assignment of the Agreements and the Guarantee from ICBC to CRF, the assignments were nonetheless effective in circumstances where BNC and Cuba unreasonably withheld their consent to the same. To the extent necessary, CRF asks for a declaration to that effect.
LINKS TO RELATED ANALYSES
China-Owned Bank In London Sues Cuba Central Bank And Government Of Cuba. Either Sue For Custodian Account Holders Or Be Sued By Them? Embarrassing For Cuba To Be Sued By "Good Friend." December 21, 2021
NOTE: On 28 May 2021, London, United Kingdom-based ICBC Standard Bank Plc filed a lawsuit against Banco Nacional de Cuba and the Government of the Republic of Cuba. The lawsuit (CL-2021-000343) was filed in the High Court of Justice, Commercial Court, Part 7 Claim, Central Commercial Contracts and Arrangements. ICBC Standard Bank Plc is represented by London, United Kingdom-based Herbert Smith Freehills LLP. The defendants have no counsel listed. The last update to the lawsuit was 22 November 2021. The claim document has been completed, but has not been served. No documents have been filed- and no documents could be filed for months. LINK Total amount of claim by ICBC Standard Bank Plc against Banco National de Cuba and Government of the Republic of Cuba is approximately 200 Million Euros (approximately US$224.8 million). Total amount of interest is approximately 1 Billion Euros (approximately US$1.12 billion).
Gibson Dunn & Crutcher (London) Represented Plaintiff In US$100 Million Lawsuit Against Cuba. Firm Represents Plaintiff In Libertad Act Lawsuits In Florida, New Jersey, Texas. China A Defendant. December 07, 2021
UK Lawsuit Seeks US$100+ Million From Central Bank Of Cuba & Government Of Cuba. Four Countries. Three Banks. Questions- Defining A "Loan" And Capacity To Contract. Read The 14 Court Filings. December 06, 2021
